BMO Says Sell Disney, Wall Street Is Too Excited For 2018 Films

Sentiment for Walt Disney Co DIS shares has turned positive on management commentary of ESPN subscriber trends and a robust 2018 film slate, BMO Capital Markets’ Daniel Salmon said in a report. He downgraded the rating on the company from Market Perform to Underperform, while reducing the price target from $90 to $88.

Walt Disney shares rose 14 percent after management’s positive commentary, suggesting easing headwinds for ESPN traditional subscriber trends and the launch of strong skinny bundle products. “We think it is more likely that DIS shares test the low end (~$90) of their recent trading range than it is that they break out and head back toward all-time highs above $120,” Salmon commented.

Expectations For Fiscal 2017 And 2018

The company delivered strong results from Star Wars' "The Force Awakens" and "Rogue One," while Marvel and Pixar also witnessed strength in 2016. These precedents have raised expectations to “the high end of a range of possible box office success,” Salmon mentioned. He added that Disney’s studio segment could report declines in fiscal 2017, having faced tough 2016 comps.

Disney’s F2018 film slate has eleven releases scheduled, including "Thor: Ragnarok," "Star Wars: Episode VIII," an untitled Han Solo Star Wars anthology film and "The Incredibles 2." The analyst believes “it is too early to own DIS shares for the robust F2018 slate” and that there is potential downside to estimates in case the company is unable to generate “greater theatrical revenue per film.”

In Wednesday's pre-market session, shares of Disney were seen down 0.9 percent at $107.