Posted Tuesday, February 5, 2008 9:41 AM | Contributed by Jeff
The world's biggest theme-park operator may post a 6.7 percent drop in resort-unit operating profit to $1.6 billion this fiscal year, estimates Citigroup Inc. analyst Jason Bazinet. He anticipates the stock, down 10 percent to $30.90 since Sept. 30, may fall 16 percent more to $26. Analysts' average forecast is $38.56. Iger has defied Disney's historical sensitivity to U.S. GDP, lifting resort profit 45 percent in his first two years as CEO with promotions and higher ticket prices. Last year he began overhauling the California Adventure theme park next to Disneyland, ordered two cruise ships and bought 21 acres in Oahu for an 800-room beachfront Hawaiian resort. Investors will comb first-quarter results today to gauge impact from the slowdown.
Read more from Bloomberg.
Tuesday, February 5, 2008 9:43 AM
I find it a little odd that analysts are making headlines before any results are announced, let alone results for next year.
Tuesday, February 5, 2008 10:30 AM
I think the headline is "this guy is bucking the trend." Consensus seems rosier.
We'll see what happens later today, but it at least sounds as though P&R is going to be ahead of last year's Q1, based on the Disney employee quotes.
Tuesday, February 5, 2008 12:53 PM
This analyst is an idiot! First off I would not give credit to any analyst, since they are usually wrong and I would defiantly not give any credit to anyone from Citigroup! Sure attendance could suffer from the recession, DUH! but I dont think it will be a large impact since it can easily be offset by increase in visitors from overseas due to the ridiculously low value of the dollar. Since Disney parks attract a great amount of visitors from overseas I see the net effect to be a minor decline in attendance, if any.
Also I do not see the stock of Disney declining anywhere near that low level. I believe the analyst assumptions are WAY off! Disney has a great diversity in business, and with the possibility of a writer's strike ending soon I forecast strong performance in the other sectors of Disney business, My conclusion is that the stock may decline in value a bit, but not to the extent of $26 (I believe the stock is undervalued)! Maybe the analyst was discussing Citigroup's stock? It's almost down to $26 and I believe it to be overvalued! But this is just my 2 cents worth, I am only a Finance major.
Tuesday, February 5, 2008 2:50 PM
I would think that if the economy continues to struggle, regional park operators like Six Flags and Cedar Fair will be hurt more than Disney. Many people that visit Disney come from overseas. With theUS dollar being so weak, this would be a perfect time for foreign visitors to come to Disney. However a weak US economy would hurt SF and CF, which draw more from within the US. If people are afraid of losing their jobs, this may not be a good year to buy a SF or CF season pass. Disney is such a huge company that encompasses many different business areas. Their theme parks are just one small component of the company. Six Flags are the ones that should be nervous. They are in the final year of their proposed three-year turn around. Not a good time to be dealing with a struggling US economy. I can almost see the SF ad blitz: "Turn your tax refund into SF season passes, sponsored by (insert 12 corporate sponsor names here)."
Tuesday, February 5, 2008 2:59 PM
Shapiro seems to think just the opposite - that a weak ecomony helps the regional park because of people staying close to home (less willing to pay to travel very far) to visit entertainment attractions.
Tuesday, February 5, 2008 3:15 PM
Of course Shapiro has to think like that. His job may be on the line. I would think that if the economy is struggling and people are losing their jobs, they have to make cuts in their personal budgets somewhere. Disposable income for entertainment would have to suffer. It would be interesting to look back and see how SF and CF did during the last US recession.
Tuesday, February 5, 2008 4:41 PM
That's the funny thing about Disney though... their business is well diversified, and so is the customer base of the theme park business. A weak dollar is surprisingly good for tourism from overseas.
I think the local operators get squeezed by the pricing pressure to make themselves affordable to their local audiences. Pricing pressure is something Six Flags in particular can't afford.
Tuesday, February 5, 2008 9:32 PM
I agree that focus should be directed on the companies that are not as diversified as Disney, especially Six Flags. I beleive this year is do or die for Six Flags as they cannot afford to continue to make negative net income and carry the debt load they have accumilated. I think Shapiro is correct in his orginal focus on families, but I just dont think Six Flags has the capital required to redevelop the parks they have to attract the families. The current economical situation will most likely have a negative impact on the regional parks as most of the customer base for destination parks are not the same as the customer base of regional parks. This could increase the difficulty of Six Flags survival. I beleive Cedar Fair will chug along just fine, sure there attendance may be lower, and net income, but there short term outlook is okay, I worry more about there long-term outlook, but that is a discussion for another day.