- Wednesday, October 16, 2024
Disney is undergoing a restructuring process led by CEO Bob Iger, and as part of this, ESPN will become an independent entity. The move to break out ESPN's financials from Disney's broader entertainment business comes as the company seeks external investors to support the sports broadcaster's future in streaming.
Analyst Brandon Nispel from KeyBanc suggests that the upcoming details about ESPN's financials may disappoint investors. Nispel compares the value of ESPN to a "melting iceberg," expressing concern that the broadcaster might struggle with the transition to primarily being a streaming service.
Based on his calculations, Nispel estimates ESPN's current value to be around $30 billion. He predicts the annual revenue to be approximately $16 billion, with a low-single-digit growth rate. Nispel also forecasts ESPN's operating income margin to be in the low 20s percentage range, with annual earnings before interest, taxes, depreciation, and amortization at around $3.79 billion.
Although Nispel's valuation is likely lower than consensus estimates, it is worth noting that analysts at Wedbush recently suggested that Apple should consider acquiring ESPN for around $50 billion, enhancing its streaming service. However, Nispel believes the likelihood of Apple acquiring ESPN in the future is low, particularly if valuations decline.
Nispel also points out that ESPN's outlook could face further challenges if Disney's dispute with Charter Communications continues.
KeyBanc maintains a Sector Weight rating on Disney stock without specifying a price rating. As of now, Disney shares remain flat in premarket trading at $81.64 and have declined by 6% this year.
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