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Concerns Mount for Walt Disney Co.


Macquarie analyst Tim Nollen is growing increasingly worried about the future prospects of the entertainment giant, Walt Disney Co. The ongoing cost-cutting efforts at Disney may only provide limited relief, according to Nollen. He has identified several “concerning” revenue trends that could potentially impact Disney’s narrative going forward.

Back in May, Nollen downgraded Disney’s stock from outperform to neutral due to a range of concerns that seemed to strike at the core of Disney’s identity. One particular issue he highlighted was the challenging path ahead for Disney when it inevitably tries to transform ESPN into a standalone streaming service.

Moreover, Nollen is also concerned about certain near-term revenue trends. While he had previously anticipated a slowdown in parks growth, a recent Wall Street Journal report has confirmed his worries. It revealed that Walt Disney World experienced one of its slowest July 4 weekends in nearly a decade.

This parks dynamic is particularly worrisome for the current quarter, notes Nollen. Although the July 4 period will not impact the financial results that Disney is scheduled to report on August 9, it may hint at similarly softening trends preceding that timeframe.

Nollen additionally pointed out the weak box-office performance of “Elemental” and the modest debut of the new “Indiana Jones” movie as further causes for concern.

Content Production Halted due to Strikes

The production of content has come to a halt as the Writers Guild of America (WGA) and the Screen Actors Guild-American Federation of Television and Radio Artists (SAG-AFTRA) are on strike. This unfortunate situation poses a threat to production plans until a resolution is reached.

Challenges in Legacy Media

Apart from the strike, Disney is also facing challenges in the realm of legacy media. The company’s traditional pay-television business is being weighed down by the significant rise in cord-cutting.

A Decline in Linear TV Ad Sales

According to the latest report, it appears that linear TV ad sales are not improving in the United States or internationally. Additionally, ABC experienced a decrease in the number of NBA Finals game this year compared to the previous year.

Disney’s Expense-Reduction Efforts and Concerns

While Disney’s expense-reduction efforts might provide some relief to its profits, there are concerns related to its top-line issues. Moreover, the unexpected leave of absence announced by the well-regarded longtime Chief Financial Officer, Christine McCarthy, in June raises questions about succession planning at Disney.

Extension of CEO Bob Iger’s Term

It is worth noting that CEO Bob Iger’s two-year term has been extended through 2026. This extension raises further questions about the future leadership of Disney. As a result, the price target for Disney’s stock has been reduced to $94 from $103.

Opinion: More Time Needed for Repairs at Disney’s Crumbling Castle

In my opinion, Bob Iger’s efforts to repair Disney’s crumbling castle require more time and attention. The current challenges faced by the company demand careful planning and execution to maintain its position within the industry.


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