Disney, Time Warner Downgraded At Bernstein On Uncertainty About The Outlook For TV

Shares of The Walt Disney Co. and Time Warner Inc. were downgraded to market perform from outperform at Bernstein on Thursday with analysts calling for a whole new framework to evaluate where the media sector should be trading. "Where the stocks/sector have traded historically is irrelevant," analysts led by Todd Juenger wrote in a note. "The world has changed too much." The note comes after steep selling of media stocks in the wake of some disappointing quarterly earnings, in which analysts focused heavily on the effects of cord cutting and affiliate fee revenue streams. Disney stock was hit hard after the company said it was losing more subscribers to its ESPN network than expected. "On a recent sleepless night, we had this epiphany: the market is now valuing U.S. ad-supported TV businesses as structurally impaired assets. We believe this is fair and warranted, because: a) we believe TV advertising is undeniably in secular decline; and b) affiliate fees are now also being put at increased risk," said Juenger. Disney shares were last down about 5%, while Time Warner was down 4%.