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Why Imperial Capital Downgraded Disney Stock

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Jun. 24 2019, Published 11:19 a.m. ET

Disney stock downgraded on record valuation

Last week, Imperial Capital (June 17) downgraded Walt Disney (DIS) stock to “in-line” or “hold” from “outperform” as the stock attained record valuation. It has risen ~30% this year. Imperial’s price target for Disney stock is $147, and the stock is currently trading at $142.

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Imperial cites troubled media business

Imperial also noted that Disney’s media business is declining as the traditional pay-TV market shrinks amid cord cutting. Some 33 million Americans had stopped paying for regular pay-TV subscriptions as of the end of 2018, and eMarketer expects more than 55 million to do so by 2022.

In response to cord cutting, Disney is gearing up to launch a Netflix-like online video service, Disney Plus+, in the coming months. AT&T (T) and Dish Network (DISH) have responded similarly, launching Internet-based television services DIRECTV Now and SlingTV, respectively. Comcast (CMCSA), another victim of cord cutting, is also planning to launch an online video service next year, but for free with commercials instead of requiring paid subscriptions. Viacom (VIAB) also runs an ad-supported online video business, Pluto TV. Despite Imperial’s downgrade, most of Wall Street is positive on Disney, with 14 of the analysts covering the stock recommending “buy” and four recommending “hold.”

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