Imperial Capital Trims Outlook on Disney

Football season to pinch ESPN revenues.

On Tuesday, Imperial Capital cut its price target on The Walt Disney Company (DIS) to $140 from $147, citing a tougher college football schedule.

The company’s ESPN division, a key revenue driver for a firm better known for a cartoon mouse and theme parks, has been a source of concern over the years as revenue has declined. Imperial Capital also sees further declines in Disney’s direct-to-consumer business.

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  • Shares of Disney have also traded weakly in the past few days as a whistleblower report indicated that the company was overstating revenues at its theme park division—a claim the company was quick to deny.

    Action to take: We like the company, but not at current prices, where shares trade at over 23 times earnings.

    While Disney has been good at growing its revenues in recent years, it has mostly done so through acquisitions. The company’s rising debt over the past few years has been a concern, and shares have rallied heavily on the yet-unreleased Disney+ streaming service, which may not play out as market bulls intend.

    Shares are a buy under $125, well below the current $133, based on the various issues the company faces right now. Speculators may want to look at short-term put options to trade on further market weakness.