Disney Stock Downgraded on Concerns over its.....theme parks?

[miles1]

My thought was that park attendance may increase this year. When (if?) the tax rebate program comes to fruition, a family of four will get a check from the government for about $1800, which would pay for a fairly nice week at WDW. I guess we'll have to wait and see.

 

[TestTrack]

I don't see why they wouldn't downgrade Disney's stock. The economy is looking grim, they are laying out a huge sum to fix DCA, and the attendance at HKDL was much lower than Disney hoped. Just think about how much money Disney has tied up in DVC properties right now. People probably aren't going to be interested in the villas at AKL or the Contemporary when they have to worry about losing their job and not having enough money for neccesities, let alone future Disney vacations.

Because a lot of people don't realize how insignificant the parks are to Disney's overall buisness. They obviously have TV networks, movies buisness and even now a cell phone buisness in Japan.

Just because one market is weak does not mean the stock deserves being sold. Which seems to be their claim.

 

[TestTrack]

New article added to OP. More detail given.

 

[coasterphil]

Because a lot of people don't realize how insignificant the parks are to Disney's overall buisness. They obviously have TV networks, movies buisness and even now a cell phone buisness in Japan.

Just because one market is weak does not mean the stock deserves being sold. Which seems to be their claim.

A part of your company that accounts for 20-25% of the operating profit is hardly insignificant.

 

[TestTrack]

A part of your company that accounts for 20-25% of the operating profit is hardly insignificant.

Thanks for the correction. I thought I rememebered the parks being 10-15% of their profit but I went back and looked at the numbers and you are correct. Still, strength in other sections can make up for loss of profit in any other.

 

[bfbulldog]

The parks are far from insignificant, parks represent about a third of Disney’s income and 25% of the profits in any given year, of the 35 billion Disney made in 07, 10.5+billion was from the parks, remember the parks are the physical face of Disney and bear the Disney name. How many people do you think know Disney owns, ABC/ESPN/SOAPnet/Lifetime/A&E? Analysts are typically more concerned with the parks performance because it is far more subject to economic slowdowns than the media segment is.

With that said, the makeover of DCA had nothing to do with the stock downgrade. An expense of 1+ billion spread out over several years for a company regularly making a profit of 3-5 billion per year is literally a drop in the bucket.

No, the main reason for the downgrade is concern over future room fill rates, which have declined sharply at Disney across the board over the last two quarters. This is forcing Disney to adjust room pricing downward in order to fill rooms. There's also concern Disney won't be able to sustain the profit margins of the last several years because the across the board price increases they've been instituting several times per year for the last several years are likely either at an end or will be greatly reduced. Just as in the housing market, there is a limit to what people will spend to go on vacation, even a Disney one. So, don't be surprised if Disney issues some pretty good vacation promotions several times in the next year or so to ensure fill rates remain high. You may even see some heavy ticket promotions as well.