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Walt Disney's In A Mouse Trap

It may be obscured by the overall market volatility and stunning declines in the financials – but right now, there is a horror show in shares of The Walt Disney Company

Mickey Mouse
Getty Images
Mickey Mouse

Disappointing earnings have sent shares of the world's biggest entertainment company to its worst single-day decline since the Flash Crash in May of 2010.

And now some investors are asking if the Magic Kingdom is losing its magic pixie dust.

"The move today is not about earnings headlines," said David Bank, RBC's media analyst (OVERWEIGHT). "It's about the right multiple."

Over the last five years, Disney's stock traded at a 15% to 20% premium to its peers, as investors considered it best in breed in the media space. But after last night's earnings, some are questioning that valuation.

Advertising growth at ESPN was below expectations, as were margins at the theme parks. And management pointed to tough comps at the movie studio, with Cars 2 failing to live up to Toy Story 3. But as some analyst point out, Cars is one of Disney's biggest franchises, so one has to wonder how much harder comps will be when Pixar’s Brave is released later next year.

Said Barclay's Anthony DiClemente about the quarter (Overweight). "People are wondering if the stock deserves such a premium."

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