Disney Earnings and Attendance Projections Decline

[Ian]

Who's to say these analysts don't release these reports and then make a ton of money selling short on Disney stock?

I'm pretty certain that goes on quite a bit.

That's my other issue ... with so much information out there, it's become really easy for people to manipulate the market for their own benefit.

[Polynesian Dweller]

That's not really true. The only time an inability to sell stock would affect a corporation's capital funding would be if they were issuing new stock to try and raise capital.

I'm not going to try to get into economics 101 here, but a analyst lowering the rating also impacts on how all financial dealings with a company work. The value of your company is evaluated in almost every deal and relation with other companies and in dealings with banks. If your business is seen as being in decline it is much harder to get funding and cut deals.

Its about confidence in the company and its profitability that influences other companies (and banks) in their dealings with the company. A lowered rating means less confidence and that in turn means more rigid terms when dealing with that company.

Besides, a company makes money off its stock without issuing new stock. Companies have a quantity of its own stock on hand that they can sell at any time, subject to rules and limits of course. They can also buy their own stock and sell it later at a higher price if they choose, again with rules and limits. The rules and limits are designed to prevent manipulation but it is allowed.

[Polynesian Dweller]

I'm pretty certain that goes on quite a bit.

That's my other issue ... with so much information out there, it's become really easy for people to manipulate the market for their own benefit.

That's why you have to pay attention to the source. When it comes from a recognized analyst with a reputation to protect (as is the case here) then its reliable. This is not coming from shorters in the market. Besides, there are at least 3 separate analysts saying the same thing over the last few weeks.

The other way you know that this is not just manipulation is to look at Disney's own actions. Think of what their recent promotions mean. Disney is effectively giving a 43% discount. Think of how drastic that is and what it means to the bottom line. Disney is advertising to the investment community that it is going to have significant decline in its revenue. It isn't a leap for analysts to make these projections.

[JRocker]

I gotta be honest here.

After the year I've had with my own job, and the company I worked for (Anhueser-Busch), and looking around at the rest of the economy.

I don't care what anybody from Wall Street has to say. When they open their greedy little mouths; I run.

hard

and really really fast

the other direction

[lockedoutlogic]

I gotta be honest here.

After the year I've had with my own job, and the company I worked for (Anhueser-Busch), and looking around at the rest of the economy.

I don't care what anybody from Wall Street has to say. When they open their greedy little mouths; I run.

hard

and really really fast

the other direction

Sounds like you could use a Heineken...

[Ian]

I'm not going to try to get into economics 101 here, but a analyst lowering the rating also impacts on how all financial dealings with a company work. The value of your company is evaluated in almost every deal and relation with other companies and in dealings with banks. If your business is seen as being in decline it is much harder to get funding and cut deals.

Right, and if you had bothered to quote the rest of my post, you'd see that I addressed that very issue.

Now a reduction of their credit rating (which I don't believe has occurred yet) could make their cost-to-borrow higher. That could be a possible issue.

If a company's bond or credit rating is lowered, then yes ... their cost to access funds will go up. That hasn't happened. This analyst was just lowering an earnings forecast.

Look I don't need "economics 101" ... I spent the last 6 years working in the mortgage industry. Ratings agency action, cost to borrow, and all that was basically my entire life during 2007 and 2008. I get how it works.

This isn't like when Moody's or S&P lowers your rating. This guy just adjusted his earnings forecast for Disney. It's not at all the same thing and, frankly, should have a very, very limited impact on their cost to borrow.

In fact, less than a month ago Disney put forth a $1 billion bond offering that received an 'A' rating from S&P.

[DryCreek]

In fact, less than a month ago Disney put forth a $1 billion bond offering that received an 'A' rating from S&P.

Not that I disagree with your position, like I said - consider the source.
How much credence does Fitch, Moodys or S&P have any more after their rubber-stamping of the derivatives issued (a.k.a. "Toxic Debt") from Subprime Tranches?

Disney is still a solid company, they may find borrowing terms are not favorable right now though. Just last year I read a very interesting interview with Mr. Eisner. One quote from it still sticks in my head. He said that a family will put off the purchase of a new refrigerator in order to attend a Disney vacation. I wonder if that will hold true in 2009?

[LarryBoy]

I just hope all of this means more discounts for us working schmoes who want to still plan a WDW visit, especially for the second half of the year. They've got some great discounts for the first half of the year, how about something for those of us wanting to go in late July.

[thrillme]

I wonder if any of these Analysts were in Epcot October 10, 2008? If they were perhaps they'd have a "different" view. Because it was pretty much body to body, all the hotels were booked solid.

Alas...my fantasy of an empty park was blown to bits.

[lockedoutlogic]

Right, and if you had bothered to quote the rest of my post, you'd see that I addressed that very issue.



If a company's bond or credit rating is lowered, then yes ... their cost to access funds will go up. That hasn't happened. This analyst was just lowering an earnings forecast.

Look I don't need "economics 101" ... I spent the last 6 years working in the mortgage industry. Ratings agency action, cost to borrow, and all that was basically my entire life during 2007 and 2008. I get how it works.

This isn't like when Moody's or S&P lowers your rating. This guy just adjusted his earnings forecast for Disney. It's not at all the same thing and, frankly, should have a very, very limited impact on their cost to borrow.

In fact, less than a month ago Disney put forth a $1 billion bond offering that received an 'A' rating from S&P.

you guys did a heck of a job....

[Ian]

you guys did a heck of a job....

LOL!

Hey, I didn't make the calls, believe me. I just cleaned up the messes from the guys who did.

Not surprisingly, they all took huge golden parachutes and "retired" right before things fell apart.

Go figure!

[Dsnygirl]

I just hope all of this means more discounts for us working schmoes who want to still plan a WDW visit, especially for the second half of the year. They've got some great discounts for the first half of the year, how about something for those of us wanting to go in late July.

You know what, that's what I've been saying all along, as well. Disney will always be a sound company, a sound investment -- they'll get through this downturn just like they've gotten through all the others. Sure, we may have a few less new attractions to visit and a few less CM's around, but that's fine by me.... it'll still be Disney.

On the other hand, my pocketbook would surely enjoy some benefit from their "downturn"!! I'm sure there are quite a few of us waiting to see what the fall specials will hold before we commit... they'll have to at least be as good as the spring ones to get many of us down there this year....

[lockedoutlogic]

LOL!

Hey, I didn't make the calls, believe me. I just cleaned up the messes from the guys who did.

Not surprisingly, they all took huge golden parachutes and "retired" right before things fell apart.

Go figure!

shocking....

[magicman]

Executives at every publicly traded company like Disney do care a great deal what analysts say.
(1) If Morgan Stanley (or other large brokerage firms') clients don't buy Disney stock, Disney stock goes down.
(2) Other shareholders (the true owners of the company) get mad when their shares go down.
(3) If they get mad enough, they demand cutbacks in spending
(4) If they get really mad, shareholders vote out company executives (which brings me back to...executives at every publicly traded company like Disney do care what analysts say.)

[mjstaceyuofm]

Sure, we may have a few less new attractions to visit and a few less CM's around, but that's fine by me.... it'll still be Disney.

Do you remember what a mess the parks were in the latter part of the 90's and into the 2000s? Less cast members and capital = deferred maintenance and poor customer service. It takes WDW time to dig out from the holes it creates. WDW has made some nice strides as of late, and I'd hate to see that trend reversed. This kind of economy and kowtowing to Wall Street will force Disney to do just that if things don't turn around soon enough.

On another note, we're going down for 4 days next week and we also had a hard time getting into any other DVC resort other than OKW for a 2 BR unit.... That did seem odd to us, going at such a low demand time. Sad the weather won't by 80 and sunny, but I'll take 71 and sunny any day over -10.

[lockedoutlogic]

Do you remember what a mess the parks were in the latter part of the 90's and into the 2000s? Less cast members and capital = deferred maintenance and poor customer service. It takes WDW time to dig out from the holes it creates. WDW has made some nice strides as of late, and I'd hate to see that trend reversed. This kind of economy and kowtowing to Wall Street will force Disney to do just that if things don't turn around soon enough.

On another note, we're going down for 4 days next week and we also had a hard time getting into any other DVC resort other than OKW for a 2 BR unit.... That did seem odd to us, going at such a low demand time. Sad the weather won't by 80 and sunny, but I'll take 71 and sunny any day over -10.

as i stated in another thread the other day....

one of the member services drones at DVC told my wife last weekend that their demand for rooms was WAY above the projections that had been passed through the halls at DVC...

That's odd.....i think that if the economy sinks further...almost an inevitability.....you will all of a sudden, see a sharp decline in DVC reservations as well...

My theory is that alot of the newer (past 5 years) owners bought on credit they shouldn't have had and are now attempting to "ride the pony" until it collapses before sell off....

If the DVC spending patterns were like every other sector of the economy (which would be logical)...then that would be the case....

but it's just a theory

[WDWNut02]

LOL, us too. We have a trip planned for April, so lighter crowds would be nice even if it means shorter hours.

Also WDWNut02
to Intercot!

Thanks for the warm welcome! I think I am headin down from Michigan this March (although i have some convincing to do with the wife)

[CaptainSad]

I hate to say this, but it is only going to get worse. I expect it will be real bad by the end of the year and well into 2010. I still have a planned vacation at WDW December 27th-January 4th. With all the hopes of the new President, I don't think he is going to get all the things he wants done. We are just to far into the down turn to right the ship over night. I think you will see a lot of cancelled reservations this year. I think you could see a 25% drop in attendence this year also. It will not make any difference if you give people free rooms for their stay. If the unemployment rate keeps climbing the chances of some of them that have reservations will cancel. I know of four families in my area that have already cancelled. I think the parks will cut back even more in the upcoming months. Don't be surprised if they don't have as many MNSSHP or MVMCP's this year. So don't get your hopes to high.
I for one don't want any of things to come to past. But just be prepared.....

[Cinderelley]

Who's to say these analysts don't release these reports and then make a ton of money selling short on Disney stock?

I haven't taken economics 101. Can someone tell me what this means? An easy to understand answer please. I'm just curious.

My theory is that alot of the newer (past 5 years) owners bought on credit they shouldn't have had and are now attempting to "ride the pony" until it collapses before sell off....

If the DVC spending patterns were like every other sector of the economy (which would be logical)...then that would be the case....

but it's just a theory

So from what I understand, Disney has the right to void any resale that they deem is below their perceived value. Do you think they'll say "no" to all these resales or do you think they'll allow lower prices?

[Ian]

I haven't taken economics 101. Can someone tell me what this means? An easy to understand answer please. I'm just curious.

Short selling is sort of the opposite of what you normally think of when you think of buying stock.

Instead of "going long" whereby you buy a stock at price x and hope to someday be able to sell that stock at x plus some percentage increase, with short selling you sell a stock you don't actually own with the hopes of buying it later at a cheaper price.

It's kind of complicated and one of those things you sort of have to wonder, "Why is anyone allowed to do this?"