Disney Stock Forecast: Disney Can Weather The Dark Cloud Over ESPN

motek 1The article was written by Motek Moyen Research Seeking Alpha’s #1 Writer on Long Ideas and #2 in Technology  – Senior Analyst at I Know First

Disney Stock Forecast


  • The obvious trend favoring cord-cutters is a dark cloud over cable channels like ESPN.
  • However, Disney has other assets with growing business to offset the emerging troubles of ESPN.
  • ESPN is still the second-most valuable sports brand. It will lose subscribers but it will remain a long-term accretive business for Disney.
  • I expect Disney to beat street estimates when it reports its Q3 2017 ER this coming August 8.
  • I Know First still has positive near and long-term algorithmic forecasts for Disney.

The revenue from ESPN is a big chunk of Disney’s (DIS) biggest division, Media Networks. The rising trend of cord cutting in America definitely hurts the long-term prospect of cable star ESPN. Disney/ESPN has contracted multi-year rights fees to broadcast sports events. Content licensing costs will remain constant or worse, growing. ESPN will be vying for exclusive high-profile sports broadcast rights with online vide streamers like Facebook (FB), Netflix (NFLX), and Amazon (AMZN).

Unfortunately, ESPN is facing a notable exodus of its paying subscribers. From a peak of 100 million subscribers in 2011, ESPN now only touts 88 million subscribers. Pundits are betting that as more people shift to online streaming, ESPN will likely continue to lose subscribers, dragging down Disney’s topline and bottomeline. This dark cloud over ESPN is why many investors are gloomy over DIS.

The chart below illustrates that DIS is being greatly outperformed by its peers under the Entertainment – Diversified industry category. Disney’s YTD performance is only 3.33%. This is in spite of its new hit movies and theme parks.

Disney Stock Forecast

(Source: Finviz)

ESPN’s Troubles Could Be Offset By Other Business Segments

I am not giving in to this market pessimism over ESPN. I believe the Mickey Mouse empire has other more lucrative segments that can offset further decline in ESPN’s subscribers. The Media Networks segment (where ESPN belongs to) generates the most revenue and operating profits for Disney. However, the combined revenue of Disney’s other business units are greater than that of. Media Networks.

Disney’s other three segments, Parks & Resorts, Studio Entertainment, and Consumer Products & Interactive Media could minimize the impact of the declining subscribers of ESPN. Based on FY 2016 results, these three segments generate more operating income together than Media Networks, $7.97 billion vs. Media Network’s $7.76 billion.

Disney Stock Forecast

(Source: Statista)

Losing 2 or 3 million ESPN subscribers this year is not going to adversely affect the future growth prospects of Disney. Yes, it will give the sell-side a good excuse to short DIS. But in the end, Disney’s long-term prosperity is unlikely to waver. Cable channels’ woes are not reason enough to dismiss Disney’s other outstanding business operations.

The theme parks and movie assets of Disney will continue to generate enough revenue and profit to offset continuing decline of Media Networks assets like ESPN and Disney Channel. Licensing the original content library of Disney’s movie, TV shows, and Marvel/Star Wars assets can also generate enough money to offset ESPN’s decline.

Licensing and royalty revenue from Disney-licensed assets like Marvel, Star Wars heroes can also help offset the problems caused by cord-cutting. We should never forget that the economic potential of Marvel and Star Wars doesn’t end in movies and TV shows.

There’s more money in licensing/selling Marvel-related toys, clothes, accessories, and sponsorships. Sony (SNE) did well with its new Spider-Man movie. Spider-man Homecoming’s worldwide gross is $644.83 million. However, Sony only has film/TV rights of Spider-Man. Disney still owns the merchandising rights and IP of Spider-man. My fearless forecast is that Disney netted more money from Spider-man licensed goods than Sony’s net income from Spider-man: Homecoming.


 I am not dismissive of ESPN’s troubles. I am just not too bothered about it. Disney’s empire can weather the dark cloud of cord-cutting. Disney has a bottomless content library which it could license out to third-parties to generate enough annual easy money to offset the decline of paid cable television.

A beat or miss on ER estimates come August 8, I will still rate DIS as a buy. Quarterly numbers should not be the sole basis of our investing choices. We should always bet for the long-term. I will still hold on to my DIS shares even if ESPN is sold. My point is that Disney’s future is not dependent on ESPN’s performance. It has other large assets like theme parks and golden geese movie franchises that can generate enough revenue/profit to make up for further weakness of its cable TV business.

My bullish outlook for Disney is again backed by its positive near, intermediate, and long-term algorithmic forecasts. I Know First’s chart below should boost confidence among investors who like using Artificial Intelligence to predict stock movements.

disney stock forecast

Analysis of technical indicators and moving averages also support my buy rating for Disney.

disney stock forecast

Past I Know First Forecast Success with DIS

On September 20th, 2017, I Know First made an accurate prediction on DIS published in the form of a bullish article. In the article, it explains that Disney’s investment on BamTech was going to offset ESPN’s losses, and that they also agreed on a contract extension that would give them the Oscars for years to come. During the eleven month time period, DIS  shares increased by 15.86% in line with the I Know First algorithm’s forecast. See chart below.

dINSEY stock forecast

(Source: Yahoo! Finance: DIS)

This bullish forecast for DIS was sent to I Know First subscribers on May 7th, 2017. To subscribe today click here.

I Know First Algorithm Heatmap Explanation

The sign of the signal tells in which direction the asset price is expected to go (positive = to go up = Long, negative = to drop = Short position), the signal strength is related to the magnitude of the expected return and is used for ranking purposes of the investment opportunities.

Predictability is the actual fitness function being optimized every day, and can be simplified explained as the correlation based quality measure of the signal. This is a unique indicator of the I Know First algorithm. This allows users to separate and focus on the most predictable assets according to the algorithm. Ranging between -1 and 1, one should focus on predictability levels significantly above 0 in order to fill confident about/trust the signal.

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