is about to give investors a clearer picture of ESPN’s financial situation. KeyBanc analyst Brandon Nispel said the details could be a disappointment.
(ticker: DIS) restructures under CEO Bob Iger and ESPN becomes a standalone entity. For the first time, the entire finances of Disney’s broader entertainment business will be disconnected, just as the company seeks outside investors to prepare for the sports channel’s streaming future.
KeyBanc’s Nispel did the math, currently estimating ESPN’s value at around $30 billion, but likened it to a “melting iceberg” as he argued the broadcaster is poised to grapple with an eventual transition to a primary streaming service .
The valuation is based on a forecast of ESPN’s annual revenue of approximately $16 billion, with a single-digit growth rate. Nispel estimates ESPN’s operating profit margin in the low percentage of the 1920s and predicts that annual earnings before interest, taxes, depreciation and amortization will currently be around $3.79 billion.
The valuation is likely below current consensus estimates, Nispel noted. Analysts at Wedbush recently suggested
(AAPL) would need to acquire ESPN with a price tag of around $50 billion to boost its own streaming service.
“We do not consider this likely
will take over the company should valuations potentially decline in the future,” KeyBanc’s Nispel wrote.
Nispel also said ESPN’s prospects could be further deteriorated if Disney fell out with
He maintained a Sector Weight rating for Disney stock with no price rating. Disney shares remained flat at $81.64 in premarket trading and are down 6% year-to-date.
Write to Adam Clark at [email protected]