Back in August, Walt Disney Co (NYSE:DIS) took a crucial step toward solving its biggest problem. The company invested $1.58 billion in a majority stake in BAMTech — the firm that handles Major League Baseball’s online streaming service. You see, Disney’s biggest problem is cord-cutting. More specifically, ESPN is hemorrhaging subscribers, and the trend has been devastating to DIS stock.
Despite strong box office revenue, driven by the reboot of the Star Wars franchise, and continually improving theme park attendance, Disney stock has fallen more than 14.5% since the beginning of May. And ESPN is the millstone.
So, when Disney steps into the earnings confessional after the close on Nov. 9, investors will likely give the company’s top- and bottom-line figures a once-over. After all, Disney has topped Wall Street’s targets in the past three quarters. The bigger focus next month will be on any news regarding Disney’s online streaming plans and what it plans to do about ESPN.
For those interested in the numbers, the consensus is looking for a fourth-quarter profit of $1.15 per share from Disney, with revenue expected to come in at $13.34 billion.
On the sentiment front, opinions are mixed as to whether Disney can salvage its ESPN unit. According to Thomson/First Call, 14 of the 32 analysts following Disney stock rate the shares a “hold” or worse, and the 12-month consensus price target of $110.32 represents a modest premium of just 11.4% to yesterday’s close.
Click to Enlarge DIS stock options traders are considerably more bearish heading into the company’s quarterly report. For instance, the November put/call open interest ratio has risen to an annual high of 1.9, with puts nearly doubling calls among options most affected by Disney’s quarterly report.