Disney Analysts Peg 'Lone Ranger' Loss at up to $190 Million, Remain Bullish on Stock

Johnny Depp in "The Lone Ranger."
Johnny Depp in "The Lone Ranger."
 Disney Enterprises, Inc.

Wall Street analysts on Monday updated their predictions for the size of an expected write-down for Disney box-office flop The Lone Ranger and discussed the entertainment conglomerate's broader stock outlook.

While the Jerry Bruckheimer-produced, Gore Verbinski-directed movie starring Johnny Depp and Armie Hammer brought in less than $50 million during its opening weekend, Disney's stock closed up 1.4 percent at $64.71 on Monday.

Box-office experts and rival-studio insiders had told The Hollywood Reporter that the loss for the film could approach or even surpass $150 million based on final opening numbers, though they emphasized that Disney likely would weather the storm thanks to summer box office hits Iron Man 3 and Monsters University.

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Wunderlich Securities analyst Matthew Harrigan predicted a write-off in that same range, highlighting that it would come in below the company's big loss on John Carter last year.

"The Lone Ranger opened to only $48.9 million for the full period, versus the $60 million vicinity that had been expected prior to this week," he wrote in a report. "Even with some benefit from Johnny Depp overseas, the Jerry Bruckheimer-produced film is now apt to generate a $150 million vicinity write-off for Disney -- still less than John Carter's $200 million."

Lazard Capital Markets analyst Barton Crockett in his investor update used the headline "Lonely Ranger" and predicted a possible write-down closer to John Carter's.

"Many investors had been skeptical about Disney's Lone Ranger reboot. They were right," Crockett said. "It was the weekend's lone misfire, and based on our math, could be pacing for a $190 million write-off." He had previously predicted a loss of $113 million on the film. That could mean an additional 3 cents per share downside to Disney's earnings, he said.

Still, Crockett continues to rate Disney's stock a "buy," saying that "Disney is an investment in the resilience of ESPN, execution in one of the world’s leading parks and resorts operations, and Disney’s recurring ability to create and monetize family content globally."

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Meanwhile, Riley & Co. analyst David Miller said the film's box office had exceeded his very low forecast, "beating our estimate of $40 million, but still a massive disappointment relative to the film's net negative cost, which was never formally disclosed by Disney, but which we believe was well in excess of $200 million."

But Miller said the bigger impact on Disney will be limited. "If indeed Disney takes a $100 million write-down on the film, that would equate to a charge to earnings of approximately 4 cents per share, bringing our quarterly core earnings per share estimate from 84 cents to 80 cents."

He maintained his "buy" rating on Disney shares with a $73 price target.

Credit Suisse analyst Michael Senno on Monday focused most of his attention on Disney's overall stock outlook in a report entitled "Strong Setup for the Long Term."

Addressing longer-term investor concerns about ESPN, the outlook for ESPN affiliate fees, the benefits of the Lucasfilm acquisition, Shanghai Disney and more, he concluded: "Near-term drivers include continued affiliate revenue acceleration and capital returns, particularly another solid dividend increase later this year. Longer-term, we expect solid growth in fiscal year 2015 with the release of Star Wars, The Avengers 2 and continued margin expansion at [theme] parks."

As a result, Senno reiterated his "outperform" rating on Disney's stock and even raised his price target by $1 to $74.

But he also lowered his earnings per share estimate for the current fiscal year by 3 cents "due to expected losses on The Lone Ranger" of around $100 million.

E-mail: Georg.Szalai@THR.com
Twitter: @georgszalai

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