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The mouse ears are losing their luster on Wall Street.
Disney (DIS-4.47%) stock has slid from $113.80 to $98.44 in less than two weeks, a 13.5% drop. A drop that steep, that quickly hasn’t occurred since November 2021.
What’s behind the drop? Alice Kassens, professor of economics and director of the Center for Economic Freedom at Roanoke College, blames a shift in consumer confidence.
“It does appear that the current selloff is due to concerns about future consumer spending,” Kasssens says, adding that consumer worries over prices are showing up in reduced consumer sentiment.
“This measure is important because it is an indicator of current and future consumer spending, which makes up 70% of total spending in the economy,” Kassens says, noting that if consumers continue to cut back, vacations and travel will likely take a hit since those are easier to pull back on than food or necessities. Kassns says the same sentiments are acting as a drag on stock sectors like airlines and hospitality.
Disney’s business faces unique challenges because of its sprawling nature, encompassing theme parks, cruise lines, streaming services, and movies. Despite the slide, though, Fitch Ratings gave Disney a stable A- rating and said in its January analysis: “Fitch expects the company’s Experiences segment, comprising multiple industry leading theme parks, resorts and cruise lines, to continue to grow and benefit from substantial capital investment over the next ten years.”
On Disney’s most recent earnings call, the company pointed to income at its U.S. theme parks declining 5%, reflecting a 9 percentage-point adverse impact year over year. The company blamed the slump largely on hurricanes Milton and Helene, which pummeled the southeastern U.S. last summer.
But Albert Williams, associate professor of finance at Nova Southeastern University in Fort Lauderdale, says Disney’s prolonged slide can be pegged to multiple factors. Williams pointed to Disney’s peak $188.06 in February 2021 to its current price below $100.
“The high prices in 2021 are likely to be related to checks provided by the government during the COVID period. Presently, the ripple effects of these checks have disappeared,” Williams says.
“Also, the traffic to Disney, especially in the summer, has reduced significantly due to the high temperatures,” Williams says, attributing hotter Florida summers to climate change.
And now Disney, which depends on discretionary income more than many businesses, is being buffeted by overall economic uncertainty.
“The impact of the present environment due to the uncertainties of the outcome of the tariff war heating up will have an impact on entertainment. People will save more due to the high level of uncertainty and cut back on vacation,” Williams says, noting that Disney had also cut back some basic services after COVID.
“This is also negatively impacting consumer satisfaction,” he adds. “To turn around the situation, Disney should consider a reduction in ticket prices, with no limit on Florida residence, and re-strategize the use of Genie, the Lightning Lane, and the Fast Passes.”