Box office disaster hurts Disney’s stock price


DisneyHigh hopes for the science fiction movie “John Carter” were dashed as the film opened to poor ticket sales. The big-budget release is the worst flop in the history of The Walt Disney Company and the company’s stock has taken a hit.

John Carter cost more than $300 million to make and market. Worldwide ticket sales thus far have been a mere $184 million (with a dismal $30 million opening in the US) and Disney is expected to take a loss of around $200 million on the film in the current quarter.

“Following the failure of the film, Disney now expects studio division to register an operating loss of $80 million to $120 million in the current quarter,” said a report from the Wall Street research firm Zacks. “Studio Entertainment revenue marked a sharp decline of 16% year over year to $1,618 million in the prior quarter, reflecting few Disney branded titles in theatrical release coupled with lower DVD volumes. However, operating income increased 10% to $413 million, reflecting increased worldwide theatrical revenues and lower film cost write-downs, partly offset by decreases in television distribution and worldwide home entertainment results.”

However, Zacks added that “Disney has some of the biggest movies slated to be released this year, including the much awaited film – ‘The Avengers’ from Marvel and Pixar’s ‘Brave’. According to Disney, these films carry enormous prospects and expect to generate significant amount of revenues for the company.” Zacks remains “neutral” on Disney’s stock.

Disney shares dropped 44 cents from the previous day at the opening bell on Tuesday to an even 43 bucks. That’s a drop of 1%. Despite the hit for the movie studio, Disney still has lots of other operations feeding cash flow to the company.

At Wells Fargo Securities analyst Marci Ryvicker said the write-down was expected, but the magnitude was a surprise. “After applying the impact from this write-down into our model, our estimated FQ2 2012 operating income in Studio Entertainment drops from a PROFIT of $96MM to a LOSS of $104MM, which falls within management’s expected range, but results in a $0.08 hit to our EPS estimates. As a result, we are lowering our FQ2 2012 and FY2012 EPS estimates to $0.55 and $2.94, from $0.63 and $3.02, respectively. Our valuation range of $42-44 remains unchanged and we reiterate our Market Perform rating,” she told clients.