Wall Street's Post-Quarter Commentary On ESPN

Walt Disney Co DIS’s ESPN is hemorrhaging subscribers, but the stock is up more than 7.5 percent in the past month. The market certainly doesn’t seem to be too concerned about ESPN’s record one-month loss of 621,000 subscribers in October. Here’s what Wall Street is saying about ESPN.

Goldman Sachs

Goldman points out that ESPN ad revenue in Q3 declined 13 percent, but Disney’s weakness in the cable networks segment was more about costs than revenue.

“The miss in Cable Networks was driven by higher-than-expected opex, which included costs for Olympics programming internationally and the World Cup of Hockey rights,” Goldman said.

The firm believes ESPN’s Q3 revenue decline was driven mostly by falling Daily Fantasy Sports advertising and competition from the Olympics.

Barclays

Barclays believes that ESPN will continue to struggle with secular challenges, but Disney shareholders shouldn’t be too concerned. The firm said the emergence of over-the-top (OTT) bundles will allow ESPN to offset some of its declining subscription numbers.

“With more visibility at least over the next year, we believe the drag from this factor on the stock is likely to moderate,” Barclays concluded.

Bank Of America

Bank of America recently lowered its fiscal 2017 EPS estimate for Disney stock from $6.37 to $6.06. However, the $600 million NBA step-up at ESPN came as no surprise.

“Looking into F1Q, ABC scatter is +24 percent vs. the upfront and ESPN adv. is pacing down due to the timings of F1Q College Bowl games (3 vs. 6 last year),” the firm noted.

Much like the Olympics weighed on Q3 revenues, the timing of the NCAA bowl schedule could be a drag on Q4 earnings for ESPN.