Advertisement
Share

Media stocks falter on Disney warnings of lower cable profits

Disney shares sank Wednesday after the company warned Wall Street that it might not achieve earlier profit estimates for its cable television group, which includes ESPN.

Disney shares sank Wednesday after the company warned Wall Street that it might not achieve earlier profit estimates for its cable television group, which includes ESPN.

(Reed Saxon / Associated Press)

Walt Disney Co. shares tumbled more than 9% on Wednesday on investor worries that cable cord-cutting and cord-shaving could slice into corporate profits.

Disney’s shares plunged $11.16, to $110.53 a share, on Wednesday, which led a larger sell-off of media stocks, including Time Warner Inc., Viacom Inc., Discovery Communications, Charter Communications and CBS Corp.

Investors appeared spooked after top Disney executives warned that the company’s cable networks group, anchored by the sports juggernaut ESPN, probably would not achieve earlier profit estimates for next year.

The Burbank entertainment giant’s revised guidance came during its fiscal third-quarter earnings call, which occurred after the markets closed Tuesday.

Stunning photos, celebrity homes: Get the free weekly Hot Property newsletter >>

Advertisement

Wall Street has been watching for signs that technology’s disruption of traditional media -- which has ravaged the publishing and music industries -- also will touch the largest and strongest media companies.

If Disney is not immune, then smaller television companies won’t be either, the thinking goes.

Cable subscriber fees are significant drivers for such major programming companies as Disney, Viacom, Time Warner, Discovery Communications, NBCUniversal and Rupert Murdoch’s 21st Century Fox.

Time Warner, which reported stronger second-quarter earnings Wednesday, nonetheless took it on the chin. Time Warner stock fell nearly 9%, or $7.85, to $79.80 a share on Wednesday.

Discovery Communications stock dropped 12.1%, or $3.99, to $28.87 a share. CBS, which reported lower earnings after the markets closed, slipped 4.5%, or $2.38, to $50.49 a share during regular trading.

Cable operator Charter Communications, which earlier in the week reported mixed second-quarter earnings and the loss of 33,000 cable TV customers, also traded lower but recovered somewhat in the afternoon.

Charter shares closed down 1.5%, or $2.56, to $188.55 a share.

Cable television programmer Viacom, which reports its earnings Thursday, declined 7.5%, or $4.19, to $51.41 a share. Viacom’s shares have plunged more than 25% during the last year.

Streaming giant Netflix, meanwhile, reached a new all-time high for the second straight trading day.

Netflix shares closed up 2.1%, or $2.56, to $123.71 a share.

Twitter: @MegJamesLAT

MORE:

Disney earnings soar 11%, but changes in TV industry pose risks

Walt Disney Co. earnings: 5 things to know

DreamWorks Animation loses $38.6 million in second quarter


Advertisement