We told you so! Disney stocks drops to its lowest point in 7 months since Aug. 9th's third-quarter earnings call

Updated 9/05/16:

This year has not been very kind to The Walt Disney Company (NYSE: DIS), and so far, the only reliable news media outlet who has been able to accurately predict Disney's stock slide has been us.

Disney stock prices has been completely underwater since its third-quarter
earnings call back after the closing bell of August 9, 2016
As of last Friday, while the rest of the Dow Jones Index has risen 7.27% this year to 18,395.40, which puts it near its all-time high, only five Dow stocks have posted a share price decline for the year to date with Disney being the most prominent and biggest loser among that very small group of faltering companies.

Disney's stock price has dropped 10% as of last Friday's closing bell with a closing price of $95.21 per share for the year to date, making it by far the worst performing Dow Jones Industrial Average stock thus far this year. As of end of the closing bell today, the stock price has dropped even lower to a 7-month low of $94.26 per share.

Not so long ago, Disney's traditional media mix of theme parks, movie studios, TV networks, consumer products, and ESPN in its portfolio made it the financial darling among many Wall Street investors.

But lately, it seems traditional media companies dealing in the old-fashioned TV, cable, movies, newspapers, and radio are most definitely on the decline, especially in the face of a fast-changing digital landscape which has uprooted, disrupted and in some cases completely supplanted the traditional means of distribution and exhibition for various mass media shows, ad revenue streams, products, and services.



Many experts now see Disney's business model as being too slow to react and overly reliant on its cable ESPN Networks as its major cash-cow, which in turn has mostly relied upon an outdated cable TV bundle subscription fee model to generate the majority of its revenues.

The goose that laid the golden eggs for Disney has been ESPN, but that goose
may have been cooked in 2015 when Wall Street investors got wind of the fact
that cord-cutters have been eating into ESPN's revenues for years
In today's digital media landscape, the consumer is king, and anyone failing to meet the demands of the consumers have met with a backlash.

As a result of the fast changing digital landscape, we have seen Disney's revenue growth turn decisively sluggish in the last two fiscal quarters.

Net revenue in its media networks segment, which includes Disney's single largest cash-cow ESPN, was essentially flat at $2.371 billion.

And Disney's biggest cash-cow, ESPN, is reported to have lost over 7 million cable subscribers and about $1.3 billion in revenues between 2013 and 2105, according to Sports Illustrated.

With few other promising catalysts for future growth, investors have begun to turn away from the House of Mouse as a long-term investment that has little potential for much future growth. There's just simply nothing in the pipeline at Disney to justify seeing revenues grow much in the foreseeable future.


Disney's billion-dollar investment in an on-demand sports video streaming company like BAMTech is not poised to embrace cord-cutters who are turning away from their expensive cable bundle subscriptions.

Are the days of Disney's cash-cow in ESPN from cable-bundle subscription fees over?
ESPN will always protect its rights to exhibit its premium sporting events exclusively on its cable channels by limiting access to premium live sporting events on on-demand digital streaming services.

That's because online fees from on-demand streaming services could never make up the kind of money that cable bundle subscriber-based carrier fees can make for a cable sports channel included in a cable lineup where the major of subscribers don't even watch the channel but still have to pay for it.

Thus, Disney's foray into digital on-demand video services is at best a disingenuous attempt to dip their toes into the digital waters to soothe fears from investors who still worry about ESPN's revenues dipping from cable subscriber losses.


In essence, Disney will likely never again have the kind of unchecked cash-cow it has had with ESPN in the past when expensive multi-channel cable TV bundled packages were king, and many Wall Street investors are now beginning to fully comprehend the impact that ESPN had on the fortunes of the Disney empire over the years.

There's no doubt that Disney's main rival in mainland China, Dalian Wanda, is in
the fight for China's tourism dollars to crush Disney. Their founder, Wang Jianlin,
announced plans to build a new entertainment complex in Jinan that costly nearly
double that of Shanghai Disneyland.
As for Shanghai Disneyland, it's very clear now that Disney's main rival in mainland China for Chinese tourism Yuan, Dalian Wanda Group Co. is in it to win it in the Middle Kingdom, and that has Disney executives very concerned.

The founder of the group and China's richest man announced he's intent on trouncing Disney at its own game by announcing his intent on building a $9.5 billion tourism and sport complex, complete with hotels and a theme park, in the eastern China city of Jinan.

The proposed entertainment complex nearly doubles the price of Shanghai Disneyland, which in comparison costs merely $5.5 billion, and will thus position Dalian Wanda to cover more theme parks in China, both by number and variety, which cover both more affordable and more opulent entertainment offerings for Chinese tourists than Disney. This appears to be a winning formula.


And finally the problems of the Zika virus outbreak in Florida have even Disney executives worried about losing a significant number of tourists to Central Florida who are worried about contracting the disease from locally-infected mosquitoes.

The spread of the Zika virus from Aedes mosquitoes in Florida has become a
major headache for Disney World executives as the outbreak is about to hit
Orlando, Florida by this fall and will likely decimate tourism to theme parks
With the latest news of a non-travel transmission of the virus in Pinellas County, not more than 100 miles from Orlando, Disney World is now offering guests free bug repellant in anticipation of the Zika outbreak reaching Orlando, which at this point is inevitable.

Disney World has already suffered a significant drop in visitors this year for a number of reasons, but it seems the Zika scare is by far the biggest threat to tourism to Florida.

Without a way to stop the outbreak of the virus from reaching the local mosquito populations, it may be years before any solution can stop the virus from becoming a major endemic pandemic in the entire southern Gulf state region.

So thus, even now bargain hunters are starting to shy away from buying Disney stock as an impending deep selloff may soon be under way. No one knows how low the floor will be for Disney stocks when the sell-off begins, however.


The recent slide in Disney stocks after the third-quarter earning call at the end of the closing bell on August 9th is just too ominous to ignore. Buying now is just not prudent for any investor if the potential for the stock to drop much lower tomorrow is a very real possibility.



And Disney's very low 1.48% dividend yield, the third stingiest among all 30 Dow Jones stocks, is just another reason long-term investors are taking a pass on buying Disney stocks.


The stock has been steadily sliding ever since the mixed revenue report from Disney management in the third quarter, and many bargain hunters have been burned because there is no indication that Disney stocks will bounce back anytime soon for any sustained stretch of time.


Articles published after our article: 


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