Nomura reaffirmed its Buy rating on Walt Disney Co DIS following reports of ESPN laying off about 1,000 on-air talent and reporters between now and June, a move that may boost operating margins of Cable Networks unit.
The rumored layoffs reflect change in content consumption habits of consumers that impacted ESPN subscribers as well as ratings.
“Given the sizeable NBA rights fee step-up for ESPN in the current fiscal year, we are not surprised that ESPN would be offsetting this margin pressure with cost cutting initiatives,” analyst Anthony DiClemente wrote in a note.
“Though we model 8 percent YoY growth in programming and production cost for FY17 (in line with guidance), we think the new ESPN cost cuts should provide some support for Cable Networks OI for FY18 and beyond,” DiClemente added.
At last check, shares of Disney were down 0.03 percent to $110.80. DiClemente has a target price of $120.
Related Link: Disney Misses Q1 Sales, Consumer Products Down 23%
Related Link: What Do Tesla, Netflix And Disney Have In Common? There's Talk Apple Could Buy Any One Of Them
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