Analysts Project Big Disney ‘Lone Ranger’ Loss, But Investors Take Dismal Opening In Stride

Disney‘s stock price is up 1% in mid-day trading — even as the Street begins to speculate how much the studio will have to write down on the updated Western starring Armie Hammer and Johnny Depp. The Lone Ranger only generated $48.9M in domestic box office sales — putting it on a trajectory that’s far too low to cover its $250M estimated production cost plus additional marketing expenses. The film “could be pacing for a $190M write-off,” Lazard Capital’s Barton Crockett says. That is far higher than the $113M loss he had anticipated, and would slice 3 cents a share from his estimated earnings for Disney in the quarter that ends in September. B. Riley’s David Miller figures the write-down will be closer to $100M for what he calls “a massive disappointment relative to the film’s net negative cost.” He expects Disney will announce the actual write-down over the next two weeks. Yet he and other Disney analysts say that they can look past the box office blemish. Credit Suisse’s Michael Senno today forecast a roughly $100M write-down for Lone Ranger, even as he reiterated his “outperform” recommendation for Disney shares and raised his target price for the stock by $1 to $74. He’s upbeat about ESPN and the new parade of Star Wars films due beginning in 2015. (He estimates that Star Wars: Episode VII will wind up adding $733M to Disney’s cash flow after beginning its run generating $1.2B in global theatrical receipts.) Miller also notes that “what really drives the shares are the flagship businesses of ESPN and the Parks.” UBS Securities’ John Janedis has a similar view, observing that while Lone Ranger was disappointing, “the going forward slate has less risk and more importantly, pricing at WDW hotels remains healthy.”

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