Star Wars hits new Ticket Sales, Stock not so Much

Star Wars 7 Trailer new Stormtroopers

Massive ticket sales equals a drop in Disney shares?

"Star Wars: The Force Awakens" is on track to become the biggest movie ever. It raked in $517 million in its opening weekend worldwide. Yet it's parent company Walt Disney (DIS) continues to watch its shares decline. All blamed at ESPN cord cutting. Could be the stock you are looking for, or is it just a Jedi Mind trick?

THE PROBLEM

A few analysts are pissing on the Star Wars parade. That would be Jefferies analyst John Janedis, Morgan Stanley analyst Benjamin Swinburne and BTIG analyst Richard Greenfield.  

Janedis said Monday that the success of the new “Star Wars’ doesn’t change his core thesis that slowing media-industry growth and rising sports-rights costs at ESPN will limit further upward earnings revisions.

Morgan Stanley analyst Benjamin Swinburne on Thursday estimated the movie would ultimately gross $2.25 billion, a high but still achievable total, and said that would raise operating income for Disney’s movie studio in the current fiscal year by about $200 million. However, that growth, he said, “is fully offset by lower ESPN growth,” as well as tough comparisons for the company’s consumer-products business to its massive success with “Frozen” last year.


Greenfield was most negative, downgrading Disney’s stock as he said it may exceed investor expectations for its current fiscal year thanks to “Star Wars” but will underperform after that due to problems with its cable-television segment.

ESPN is Disney’s biggest single business and Wall Street has been sensitive to any signs that its growth rate is slowing as fewer customers pay for cable-television bundles. Its stock is down 12% since an August earnings report in which the company lowered earnings-growth estimates for its cable business.

Wall Street agrees with the negative analysts, Disney shares fell 1% yesterday and are flat this Tuesday morning. In the past month Disney shares are down 11% and the consensus is for the stock to fall lower.  

Will ESPN continue to drag on Disney? It feels like ESPN is the financial services part of the old General Electric (GE) which is finally almost gone. ESPN will most likely find a bottom with subscribers. It's not clear if streaming packages like Sling TV which carries ESPN can help the huge dent by cable cord cutters.  

Bottom line: Disney is out of favor with Wall Street despite the biggest movie ever all thanks to ESPN. How much longer until Disney figures out how to deal with ESPN? It's a question of faith for DIS longs.