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The analysts told investors in a note on Tuesday that the firm remains Sector Weight on Disney shares and sees a neutral risk/reward for the stock.
“Two notable events are upcoming: 1) DIS re-segmenting and breaking out ESPN from Disney Entertainment; and 2) DIS’s Investor Summit focused on DPEP (September 18-20 at WDW),” said the analysts, adding that they see neither event as a positive catalyst for shares.
“ESPN’s fundamental outlook is negative and could materially worsen should CHTR’s distribution agreement not be renewed,” they stated. “The opportunity for ESPN in streaming means price increases are coming, which will challenge scale.”
The analysts concluded that while they believe ESPN “should be valued at $30 billion today,” they view it as a melting iceberg.
“We view the value of ESPN as likely below consensus, which is just one of the five reasons we are cautious on DIS,” concluded the analysts.
