Grrr! Disney Bears Are On The Prowl

One of the Street's former darlings, Walt Disney, has been a source of nothing but disappointments so far this year. No wonder its stock has headed south, to 38 a share from 48 at the beginning of 1993.

Investors hoping for a bottom will have to wait longer, say some big money pros who have been bailing out of the stock. One New York investment manager who has joined the crowd shorting the stock says that "things will get worse before they get better." He sees the stock hitting 30 before it can rebound.

Many analysts agree. They believe the fourth quarter will show continued disappointing results and have been scaling back their estimates for this year and next. Even some Disney bulls have had to pare down their estimates. Warns David Londoner, veteran entertainment analyst at Wertheim Schroder: "Nobody knows how long Disney will be in the doldrums."

DWARF-SIZE PLAY? Attendance at Disney's theme parks has been flat to down, the company's films haven't been so hot, and consumer-product sales haven't picked up enough to make a difference. Worst of all, EuroDisney has bombed as attendance has skidded. Warns one pro: If EuroDisney continues to show poor results through early next year, "watch out." He adds that the stock's decline will accelerate.

One analyst who remains high on Disney is Oppenheimer's Jessica Reif. She has cut her estimate but is exhorting clients to use the stock's drop as an opportunity to buy more shares "aggressively." She thinks the sentiment on EuroDisney "is now at a low point and should improve in the coming year."

Analyst Lisbeth Barron at S.G. Warburg strongly disagrees. "The weak fundamentals over the near-to-medium term make an upgrade to a buy premature," she cautions. Barron adds that continued weak attendance at Disney's Orlando park "has caused us to lower our 1993 fourth-quarter estimate from 40 a share to 30 ." That puts her 1993 estimate at $1.67, down from an earlier $1.77. For the fiscal year ending Sept. 30, 1994, Barron cut her estimate to $1.95 from $2.10. Her estimates are among the lowest on the Street.

Barron thinks it will be some time before theme park revenues will rebound to a normalized rate of growth. Weak competition in the past had shielded Disney's high price structure, notes Barron. But stepped-up promotion and capital spending at theme parks operated by Time Warner and MCA, among others, have all contributed to the attendance decline at the Orlando resort.