Disney's Stock Falls On Downgrade, Cowen Says Parks Won't Fully Recover Until 2025

The recent surge of COVID-19 cases has put reopening targets on hold for many U.S. companies, such as Walt Disney Co DIS. On Thursday, one Disney analyst ran out of patience.

The Disney Analyst: Cowen analyst Doug Creutz downgraded Disney from Outperform to Market Perform and cut his price target from $101 to $97.

The Disney Thesis: Creutz said Disney’s Parks and Film segments will likely be shut down longer than previously anticipated based on the latest coronavirus trends. Disney has a large Park presence in Florida, and its movie business is in California, two of the hardest-hit states by the recent second wave of cases.

Creutz previously forecast an easing of social distancing restrictions by the end of 2020, but he now expects social distancing requirements will be extended until at least mid-2021.

Even after restrictions are lifted, Creutz said Disney’s Parks business will likely be slow to recover. He projects Disney’s domestic parks business will not return to 2019-level profitability into fiscal 2025.

At the same time, Cowen projects Disney will not release any movies in theaters until mid-2021 and will have only a modest slate of releases in fiscal 2021.

Cowen cut its fiscal 2020 and 2021 EPS estimates from $2.17 and $3.97 to $1.82 and $1.86, respectively.

“In aggregate, we are reducing expected FY20-FY23 FCF by $6.9B (a 27% haircut), and we are far from certain that this estimate cut represents the last downward revision to our model,” Creutz wrote in the note.

Benzinga’s Take: The silver lining for Disney investors is that the company’s diversified business will help it weather the storm. Social distancing has helped drive robust Disney+ subscriber growth, which the company has the opportunity to further monetize for years ahead.

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