Major media stocks took another hit Thursday on renewed concerns about the state of the television business and broader market declines, two weeks after comments from the Walt Disney Co. set off a widespread sell-off.
Disney's stock fell $6.43, or 6%, to $100.02 by the close of trading on Wall Street, its biggest drop since Aug. 5.
The Burbank-based entertainment giant's shares are still up about 11% during the last 12 months.
The dip followed a downgrade of the stock to "market-perform" from "outperform" by Bernstein Research analyst Todd Juenger, who cited declines in pay-TV subscriptions and TV advertising revenues.
Investors fear that traditional media companies will continue to grapple with changing viewer habits as the unraveling of the pay-TV bundle accelerates, and so-called cord-cutting and cord-shaving increases.
Juenger gave a similar downgrade to Time Warner Inc., which owns the Turner cable networks including CNN, TBS and TNT. Time Warner's shares were down $3.92, or 5%, to $73.90 at the closing bell.
"When an industry is undergoing a massive structural upheaval [...] investors won't wait for final conclusive evidence to reevaluate how much they are willing to pay for the existing status quo cash flow streams," Juenger wrote in a research report.
Financial markets generally took a beating Thursday.
The S&P 500, Dow Jones industrial average and Nasdaq indexes all fell more than 2%. Even Netflix, which is well positioned for the migration of viewers away from long-standing pay-TV providers, fell nearly 8% for the day.
Major media stocks, in particular, struggled on the down day.
Viacom Inc. ended the day down 6%, 21st Century Fox fell more than 4%, Lionsgate finished almost 4% lower and Comcast Corp. slipped 2.5%.
Long-simmering concerns about declining pay-TV subscriptions came to a boil earlier this month when Disney warned investors that profit from ESPN and other cable channels would not be as robust as initially thought.
The comments triggered a wider decline among top media stocks that wiped out more than $50 billion in market value in two days.
"We understand, and in fact agree, with the market's decision to fast-forward to the inevitable conclusion and start valuing these businesses as if they are declining assets," Juenger said. "In practice, this means increasing the risk applied to an increased cord-cutting scenario."
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