Disney (NYSE:DIS) may be known for creating the “happiest place on earth,” but it hasn’t been a happy year for any investors who still hold DIS stock. When the Covid-19 pandemic closed theme parks around the world, the entertainment and media giant was forced to depend on its streaming service Disney+ to keep it alive. Despite a successful launch, the momentum generated by Disney+ has faded. And yesterday brought even more bad news for the company and its shareholders. An analyst has downgraded the company for the first time in three years, and Disney stock price predictions are not looking good.
Disney Stock Price Predictions: What Happened
Yesterday afternoon Kannan Venkateshwar, an analyst with Barclays, downgraded DIS stock from “0verweight” to “equal weight,” citing problems with the company’s subscriber-centric plans for long-term growth. In addition, he slashed his price target for the stock by roughly 17%. As he stated in the report:
“The roll out of Disney+ has been the most successful streaming launch ever, which is remarkable given that the company achieved this with very little new content. This year however, Disney+ growth has slowed significantly, despite launching new franchise titles, day and date movie releases and Star+. Part of this slowdown could be a function of growth pull forward into 2020 and promo roll offs, but we believe it could be due to structural factors capping growth.”
The news was quick to pose a negative effect for DIS stock, which immediately fell in pre-market trading today and is down 0.39% as of this writing. It’s also declined by almost 2% over the past week and is down 7% for the month. With numbers like these, it’s not hard to see Venkateshwar’s reasoning.
But Hold On, Here’s Cramer
This announcement was followed by what might be good news for Disney stock price predictions. Jim Cramer of Mad Money responded by describing himself as “steadfast owner” of DIS stock even in the face of the historic downgrade, adding that he thinks this can be “great long-term story.”
Cramer added that he has faith in Disney+ to create new content that will help it rise above its current situation and pull itself back into the green. Cramer cited concerns that some voiced last year regarding Netflix’s (NASDAQ:NFLX) long-term future as a reason not to write off Disney.
What Comes Next for DIS Stock?
Not all experts have as much faith in Disney as Cramer. Yahoo Finance’s Brian Sozzi responded to the news by stating that Disney stock had been “dead money for months.”
There’s no denying that competition is fierce and as it stands, all major competitors such as Netflix, Amazon (NASDAQ:AMZN) and Apple (NASDAQ:AAPL) are beating Disney+ when it comes to generating original content. Netflix has recently managed to shock the streaming world with the success of Squid Game, which, it has been reported, is worth $900 million to the company.
Venkateshwar is correct that the Disney+ launch was impressive in the sense that it included little original content. That said, this aspect of the site has come around to haunt the company as Halloween draws near. The streaming service was reliant on the nostalgia factor, but now appears to be struggling to keep up.
Although Disney certainly carries with it a sense of magic, investors would be wise to brace themselves for more negative Disney stock price predictions.
On the date of publication, Samuel O’Brient did not have (either directly or indirectly) any positions in the securities mentioned in this article. The opinions expressed in this article are those of the writer, subject to the InvestorPlace.com Publishing Guidelines.
