DISNEY SHARES SLIDE 14%; BEARISH FORECAST PROMPTS SELL-OFF.
Wall Street pounded Mickey Mouse on Friday, taking out pent-up frustration with the inability of The Walt Disney Co. to turn around its massive entertainment business.
Shares slid 14 percent by falling $3.875 to $24.25 after Disney warned that it does not expect profits to rise until 2001. Trading was heavy with more than 25.6 million shares changing hands, more than four times the three-month average.
Disney's forecast, issued after the market closed Thursday, included an expected 37 percent decline in quarterly earnings. But investors sold off the stock in response to a bearish forecast by Chairman Michael Eisner that profits won't rebound in the year 2000, as many hoped.
``People were very disappointed that Eisner gave such a sour outlook,'' said analyst Barry Hyman of Ehrenkrantz King Nussbaum. ``People had gotten excited that the turnaround was coming, but it's clear that the gains are going to come later rather than sooner.''
The stock began rising two weeks ago from the $24 range in anticipation that Disney's cost-cutting programs would start to push profits upward. But Eisner indicated Thursday that ongoing softness in video and consumer products will hold down profits to roughly the same as 1999. Earnings for the year ended Sept. 30 fell 30 percent to $1.3 billion, or 62 cents a share.
Friday's decline leaves Burbank-based Disney down 42 percent from its all-time high of over $42, reached only 18 months ago. Still, no downgrades were issued Friday, indicating many trackers believe Disney eventually will rebound.
``Disney's valuation, which is typically never inexpensive, even today still reflects some built-in expectation that the company will successfully turn its business around,'' said Salomon Smith Barney analyst Jill Krutick, who maintained her ``outperform'' rating with a $37 price target. ``Nevertheless, the valuation is attractive for long-term-oriented investors with the stock's 31 percent pullback from its 52-week high representing an opportunity for investors to take part in a blue-chip name.''
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|Publication:||Daily News (Los Angeles, CA)|
|Date:||Nov 6, 1999|
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