Analyst cites weather disruptions, higher prices, and new competition as challenges for Disney parks
Walt Disney Co.'s parks division is facing challenges that have weakened its near and medium-term outlook, according to an analyst who recently downgraded the company’s stock, as reported by BNN Bloomberg.
Ric Prentiss, managing director of tech, media, and telecom research at Raymond James, explained in an interview that Disney’s parks are a key part of its stock valuation, but the business is under pressure from several external factors.
Prentiss pointed out that extreme weather events have impacted travel to Disney’s parks in Asia and Florida. Additionally, Disneyland Paris saw decreased attendance this summer, as the nearby Olympic Games drew visitors away.
On Tuesday, Raymond James lowered its rating for Disney to “market perform” from “outperform,” with a price target of US$101. Disney shares were trading around $94 by midafternoon on Wednesday in New York.
Prentiss also noted that demand for Disney parks is flattening as the surge in post-pandemic travel slows. “That demand is moderating after that pent-up demand came in,” he said.
He added that consumers are still adjusting to higher prices at the parks, commenting that Disney vacations have become “a very expensive vacation now.”
Prices have risen over the last four years, which has sparked concerns about the strength of consumer spending.
Prentiss also highlighted growing competition as a challenge for Disney. “You’ve got a major competitor getting ready to launch; Universal Epic Universe in Orlando is going to open this coming summer, which we think could add extra pressure in the short term,” he said.
Despite these immediate challenges, Prentiss expressed optimism about Disney’s long-term plans. He praised the company’s capital spending on its parks, which includes adding new lands, rides, and attractions to “freshen up” existing locations.
However, he acknowledged that it will take time for Disney to see returns on these investments.
Regarding pricing at Disney’s parks, Prentiss said he does not expect a decrease. “We don’t think prices are coming down… we do think attendance can go up as well,” he said.
However, he added that the challenge will be how much growth Disney can realistically achieve, stating, “It’s not that we think it’s going to be a reduction in the pricing, it’s just that there’ll be pressure in how much growth can you actually achieve.”
