Disney Earnings and Attendance Projections Decline

[Ed]

Analyst cuts earnings projections for Disney, estimates attendance declineJason Garcia
Sentinel Staff Writer
3:06 PM EST, January 14, 2009

Morgan Stanley today lowered its projected earnings for The Walt Disney Co., in part because of concerns that the company's resorts could suffer worse than previously thought amid the global recession.

In a research note to investors, Morgan Stanley analyst Benjamin Swinburne cuts his projected earnings at Disney from $2.05 per share to $1.92 per share. Swinburne cites slowing DVD sales and declining advertising growth at profit-powerhouse ESPN, which Swinburne notes already commands premium ad rates and has heavy exposure to the beleaguered auto industry.

But Swinburne also warns that he expects further downward pressure in Disney's Parks and Resorts division, particularly at Walt Disney World and Disneyland. Morgan Stanley was already projecting a 7 percent combined attendance decline at Disney's two domestic resorts, but now fears that revenues from the resort's hotels will slump even further given Disney's recent "buy four nights, get three free" promotion.

The "swing factor" for Disney's Parks and Resorts division, Swinburne writes, is Disney Vacation Club, the company's Celebration-based time-share arm, which has been a big driver of earnings growth for Disney in recent years.

"There is a significant amount of new inventory available in [Fiscal Year] 2009, however it is uncertain how the macroeconomy may affect sales," Swinburne writes. Morgan Stanley is currently projecting a "small increase" in DVC sales for the year, compared with an estimated 18 percent growth last year.

[Ian]

You know, the more I read these things ... with all their talk of "drivers for economic growth" and the "macroeconomy" ... the more I realize that I hate bean counters and Wall Street types.

This garbage means so little. So what if their revenues are down in 2009? Whose aren't??

They say this like it's breaking news and no one has figured it out yet.

Annoying little trolls ... :shake:

[Dsnygirl]

Annoying little trolls ... :shake:
:funny: I couldn't agree more... DH and I were just talking about this tonight!! They just have to create more news.... like anybody's surprised... :confused:

[princessgirls]

They say this like it's breaking news and no one has figured it out yet.

QUOTE]

Gee, it would seem that us, the savy Disney CONSUMER had this figured out MONTHS ago. DUH....
But, it takes a MBA on Wall Street to make headlines. BLAH,BLAH, BLAH...

Hello, smart people. Your average family is NOT going to travel if Daddy loses his job and has no available credit.

Just got the dreaded e-mail from our CFO, you know the one that reads our investment portfolio and year-end donations were signifigantly down and we are going to have to tighten the belt across the board...
In other words... no raises.

Julie:mickey:

[WDWNut02]

That means shorter lines and smaller crowds. I'm B lineing for Orlando!:thumbsup:

[Briansmom]

They say this like it's breaking news and no one has figured it out yet.

QUOTE]

Just got the dreaded e-mail from our CFO, you know the one that reads our investment portfolio and year-end donations were signifigantly down and we are going to have to tighten the belt across the board...
In other words... no raises.

Julie:mickey:

Yeah, we got that email a couple of weeks ago.....

[Polynesian Dweller]

Disney has been seeing their numbers going down for some time and that's why they are promoting so hard. This article isn't about news so much as it is about rating Disney in terms of whether it is a good place for investors to put their money. When a stock analyst puts out this kind of analysis it can have a major effect on a stock price and consequently on a company's ability to raise capital.

This in turn can have a big impact on the company being able to do capital projects (new rides, ride refurbishments,etc.) and maintaining its current activities (parades, entertainment, number of CM's etc.).

So this is news from an analyst company that is anything but something from an annoying troll. Its doing what an analyst has to do after studying the situation for a while. Disney had undoubtedly hoped to avoid this by doing enough cutbacks to maintain its standing but this analysis report means that things have deteriorated enough that the agency was compelled to warn investors.

This will impact on Disney's business and one would now anticipate more cutbacks at WDW. Anybody remember the thread about Disney looking at possible staff cutbacks across its businesses? Think they'll do that now?

[princessgirls]

Disney has been seeing their numbers going down for some time and that's why they are promoting so hard. This article isn't about news so much as it is about rating Disney in terms of whether it is a good place for investors to put their money. When a stock analyst puts out this kind of analysis it can have a major effect on a stock price and consequently on a company's ability to raise capital.

This in turn can have a big impact on the company being able to do capital projects (new rides, ride refurbishments,etc.) and maintaining its current activities (parades, entertainment, number of CM's etc.).

So this is news from an analyst company that is anything but something from an annoying troll. Its doing what an analyst has to do after studying the situation for a while. Disney had undoubtedly hoped to avoid this by doing enough cutbacks to maintain its standing but this analysis report means that things have deteriorated enough that the agency was compelled to warn investors.

This will impact on Disney's business and one would now anticipate more cutbacks at WDW. Anybody remember the thread about Disney looking at possible staff cutbacks across its businesses? Think they'll do that now?

I never thought about it in those terms.
Thanks for enlightening me. Those are things that I really do not want to see happen, as us regulars keep going back for the new and exciting additions to the World.
Julie:mickey:

[Mickey91]

Great. Just more fuel for the chain saw slicing away at all the "little extras" that make Disney "Disney".

[Polynesian Dweller]

Great. Just more fuel for the chain saw slicing away at all the "little extras" that make Disney "Disney".

True. And this is the third analyst report I've seen warning about Disney so this is becoming a consensus feeling in the investment community. Disney will have to do what it can to protect its bottom line so that investors will be willing to buy its stock. Without investors buying its stock it will have some issues with capital funding at the least.

So, yep, it will be looking at what it has to do. However, remember, the opposite is also true. When the company starts to grow its bottom line its rating will go up and it will find it easier to access funds and it can grow its business. Its a cyclical thing and at present we are in the down part of a business cycle and this is now in it second year.

It will reverse and Disney will start adding again when the economy improves. That's what is meant by business cycles. There are times of growth and increased staffing and services followed by times of decline, decreased staffing and services ultimately followed again by times of growth and so on.

[WDWFanatic]

That means shorter lines and smaller crowds. I'm B lineing for Orlando!:thumbsup:

LOL, us too. We have a trip planned for April, so lighter crowds would be nice even if it means shorter hours.

Also WDWNut02 :welcome:
to Intercot!

[BMan62]

I would be afraid to see what the numbers would be if they decided to break out the DVC attendance versus non-DVC attendance. I believe number would be much greater than 7% for non-DVC attendance.

DVC is a major bonus for park attendance in that members are pretty much assured of making at least one visit per year (or renting their points out, which equates to basically the same thing.)

[Ian]

Disney will have to do what it can to protect its bottom line so that investors will be willing to buy its stock. Without investors buying its stock it will have some issues with capital funding at the least.That's not really true. The only time an inability to sell stock would affect a corporation's capital funding would be if they were issuing new stock to try and raise capital.

To the best of my knowledge, Disney isn't doing that.

Now a reduction of their credit rating (which I don't believe has occurred yet) could make their cost-to-borrow higher. That could be a possible issue.

And my original post was sort of tongue in cheek ... I don't really think the guy is annoying troll. He's just doing his job.

However, I'm not a big fan of today's Wall Street analysts. I think they tend to rely too heavily on their modeling programs and not enough on gut instinct and common sense.

[Ian]

I would be afraid to see what the numbers would be if they decided to break out the DVC attendance versus non-DVC attendance. I believe number would be much greater than 7% for non-DVC attendance.

DVC is a major bonus for park attendance in that members are pretty much assured of making at least one visit per year (or renting their points out, which equates to basically the same thing.)Very true and one of the main reasons it was a genius move on Disney's part. You've basically guaranteed yourself a built in guest presence, as most people don't want to waste their points.

[Tekneek]

This is only news for people who don't understand the business. The only people who should be influenced by this, in the slightest, are speculators (aka "traders"). People who understand the business, and bought stock because they wanted to be an owner, already knew this information and were in it for the long haul anyway.

People who are trying to build their retirement shouldn't care about these kinds of reports because they are (or should be) invested in index funds where the performance of a single company is balanced against the rest of the index (therefore not having much of an impact at all, generally).

[Tekneek]

However, I'm not a big fan of today's Wall Street analysts. I think they tend to rely too heavily on their modeling programs and not enough on gut instinct and common sense.

Worse than that are the kind of people "playing the market" these days. The market seems to be driven by hedge fund managers (the biggest speculators of them all) with a whole bunch of do-it-yourself discount-brokerage speculators/traders hoping to make it big by trying to time the market (a fool's game). This is the only explanation for the influence these analysts have. If you see a significant move in the price of a stock after an announcement from an analyst, you can be sure that there is way too much speculation in that stock.

[Ian]

Very true, Tek. Clearly you can tell that the vast majority of investors aren't in it for the long haul, otherwise stocks wouldn't move so dramatically on things like a single earnings statement that doesn't meet estimates.

[Tekneek]

Clearly you can tell that the vast majority of investors aren't in it for the long haul, otherwise stocks wouldn't move so dramatically on things like a single earnings statement that doesn't meet estimates.

I don't even bother to call them investors when they do things like that. They are speculators/traders, since they weren't really looking to invest their money in that company. They were just looking to make money off of a trade.

[lockedoutlogic]

Occasionally, you actually get an honest, uninhibited disney CM on the phone who will speak ye the truth....as opposed to company talking points....

My wife had one such individual on the DVC line last weekend when we were changing our reservation from this week to the beginning of february....a very wise move considering the weather this week:mickey:

Anyway....my wife made some quip about how the DVC rooms are booked solid....and in a momentary outburst of complete honesty....the MS rep said that they have had meetings to discuss how there has basically been a run on reservations for DVC in 2009....

Now i don't know if that's an indication of incredible management on Disney's part....or...perhaps....that many are squeezing their DVC to the last drop in anticipation of having to dump it.....but the fact that the DVC rooms are packed full while the normal rooms are vacating like <snip> probably means something is going on....

Just thought it was interesting...

And Bman is correct: if they separated the DVC ressies from the Non-DVC bookings.....the numbers for 2009 would be much, much worse.
Another advantage of DVC: if fools wall street analysts

[cgriff]

Who's to say these analysts don't release these reports and then make a ton of money selling short on Disney stock?

[Ian]

Who's to say these analysts don't release these reports and then make a ton of money selling short on Disney stock?I'm pretty certain that goes on quite a bit.

That's my other issue ... with so much information out there, it's become really easy for people to manipulate the market for their own benefit.

[Polynesian Dweller]

That's not really true. The only time an inability to sell stock would affect a corporation's capital funding would be if they were issuing new stock to try and raise capital.

I'm not going to try to get into economics 101 here, but a analyst lowering the rating also impacts on how all financial dealings with a company work. The value of your company is evaluated in almost every deal and relation with other companies and in dealings with banks. If your business is seen as being in decline it is much harder to get funding and cut deals.

Its about confidence in the company and its profitability that influences other companies (and banks) in their dealings with the company. A lowered rating means less confidence and that in turn means more rigid terms when dealing with that company.

Besides, a company makes money off its stock without issuing new stock. Companies have a quantity of its own stock on hand that they can sell at any time, subject to rules and limits of course. They can also buy their own stock and sell it later at a higher price if they choose, again with rules and limits. The rules and limits are designed to prevent manipulation but it is allowed.

[Polynesian Dweller]

I'm pretty certain that goes on quite a bit.

That's my other issue ... with so much information out there, it's become really easy for people to manipulate the market for their own benefit.

That's why you have to pay attention to the source. When it comes from a recognized analyst with a reputation to protect (as is the case here) then its reliable. This is not coming from shorters in the market. Besides, there are at least 3 separate analysts saying the same thing over the last few weeks.

The other way you know that this is not just manipulation is to look at Disney's own actions. Think of what their recent promotions mean. Disney is effectively giving a 43% discount. Think of how drastic that is and what it means to the bottom line. Disney is advertising to the investment community that it is going to have significant decline in its revenue. It isn't a leap for analysts to make these projections.

[JRocker]

I gotta be honest here.

After the year I've had with my own job, and the company I worked for (Anhueser-Busch), and looking around at the rest of the economy.

I don't care what anybody from Wall Street has to say. When they open their greedy little mouths; I run.

hard

and really really fast

the other direction

[lockedoutlogic]

I gotta be honest here.

After the year I've had with my own job, and the company I worked for (Anhueser-Busch), and looking around at the rest of the economy.

I don't care what anybody from Wall Street has to say. When they open their greedy little mouths; I run.

hard

and really really fast

the other direction

Sounds like you could use a Heineken:thumbsup:...

[Ian]

I'm not going to try to get into economics 101 here, but a analyst lowering the rating also impacts on how all financial dealings with a company work. The value of your company is evaluated in almost every deal and relation with other companies and in dealings with banks. If your business is seen as being in decline it is much harder to get funding and cut deals.Right, and if you had bothered to quote the rest of my post, you'd see that I addressed that very issue.


Now a reduction of their credit rating (which I don't believe has occurred yet) could make their cost-to-borrow higher. That could be a possible issue.

If a company's bond or credit rating is lowered, then yes ... their cost to access funds will go up. That hasn't happened. This analyst was just lowering an earnings forecast.

Look I don't need "economics 101" ... I spent the last 6 years working in the mortgage industry. Ratings agency action, cost to borrow, and all that was basically my entire life during 2007 and 2008. I get how it works.

This isn't like when Moody's or S&P lowers your rating. This guy just adjusted his earnings forecast for Disney. It's not at all the same thing and, frankly, should have a very, very limited impact on their cost to borrow.

In fact, less than a month ago Disney put forth a $1 billion bond offering that received an 'A' rating from S&P.

[DryCreek]

In fact, less than a month ago Disney put forth a $1 billion bond offering that received an 'A' rating from S&P.

Not that I disagree with your position, like I said - consider the source.
How much credence does Fitch, Moodys or S&P have any more after their rubber-stamping of the derivatives issued (a.k.a. "Toxic Debt") from Subprime Tranches?

Disney is still a solid company, they may find borrowing terms are not favorable right now though. Just last year I read a very interesting interview with Mr. Eisner. One quote from it still sticks in my head. He said that a family will put off the purchase of a new refrigerator in order to attend a Disney vacation. I wonder if that will hold true in 2009?

[LarryBoy]

:scratch: I just hope all of this means more discounts for us working schmoes who want to still plan a WDW visit, especially for the second half of the year. They've got some great discounts for the first half of the year, how about something for those of us wanting to go in late July. :fingers:

[thrillme]

I wonder if any of these Analysts were in Epcot October 10, 2008? If they were perhaps they'd have a "different" view. Because it was pretty much body to body, all the hotels were booked solid.

Alas...my fantasy of an empty park was blown to bits.

[lockedoutlogic]

Right, and if you had bothered to quote the rest of my post, you'd see that I addressed that very issue.



If a company's bond or credit rating is lowered, then yes ... their cost to access funds will go up. That hasn't happened. This analyst was just lowering an earnings forecast.

Look I don't need "economics 101" ... I spent the last 6 years working in the mortgage industry. Ratings agency action, cost to borrow, and all that was basically my entire life during 2007 and 2008. I get how it works.

This isn't like when Moody's or S&P lowers your rating. This guy just adjusted his earnings forecast for Disney. It's not at all the same thing and, frankly, should have a very, very limited impact on their cost to borrow.

In fact, less than a month ago Disney put forth a $1 billion bond offering that received an 'A' rating from S&P.

you guys did a heck of a job....

[Ian]

you guys did a heck of a job....LOL!

Hey, I didn't make the calls, believe me. I just cleaned up the messes from the guys who did.

Not surprisingly, they all took huge golden parachutes and "retired" right before things fell apart.

Go figure! :shrug:

[Dsnygirl]

:scratch: I just hope all of this means more discounts for us working schmoes who want to still plan a WDW visit, especially for the second half of the year. They've got some great discounts for the first half of the year, how about something for those of us wanting to go in late July. :fingers:
:D You know what, that's what I've been saying all along, as well. Disney will always be a sound company, a sound investment -- they'll get through this downturn just like they've gotten through all the others. Sure, we may have a few less new attractions to visit and a few less CM's around, but that's fine by me.... it'll still be Disney.

On the other hand, my pocketbook would surely enjoy some benefit from their "downturn"!! I'm sure there are quite a few of us waiting to see what the fall specials will hold before we commit... they'll have to at least be as good as the spring ones to get many of us down there this year.... :fingers:

[lockedoutlogic]

LOL!

Hey, I didn't make the calls, believe me. I just cleaned up the messes from the guys who did.

Not surprisingly, they all took huge golden parachutes and "retired" right before things fell apart.

Go figure! :shrug:

shocking....:ack:

[magicman]

Executives at every publicly traded company like Disney do care a great deal what analysts say.
(1) If Morgan Stanley (or other large brokerage firms') clients don't buy Disney stock, Disney stock goes down.
(2) Other shareholders (the true owners of the company) get mad when their shares go down.
(3) If they get mad enough, they demand cutbacks in spending
(4) If they get really mad, shareholders vote out company executives (which brings me back to...executives at every publicly traded company like Disney do care what analysts say.)

[mjstaceyuofm]

Sure, we may have a few less new attractions to visit and a few less CM's around, but that's fine by me.... it'll still be Disney.
Do you remember what a mess the parks were in the latter part of the 90's and into the 2000s? Less cast members and capital = deferred maintenance and poor customer service. It takes WDW time to dig out from the holes it creates. WDW has made some nice strides as of late, and I'd hate to see that trend reversed. This kind of economy and kowtowing to Wall Street will force Disney to do just that if things don't turn around soon enough.

On another note, we're going down for 4 days next week and we also had a hard time getting into any other DVC resort other than OKW for a 2 BR unit.... That did seem odd to us, going at such a low demand time. Sad the weather won't by 80 and sunny, but I'll take 71 and sunny any day over -10.

[lockedoutlogic]

Do you remember what a mess the parks were in the latter part of the 90's and into the 2000s? Less cast members and capital = deferred maintenance and poor customer service. It takes WDW time to dig out from the holes it creates. WDW has made some nice strides as of late, and I'd hate to see that trend reversed. This kind of economy and kowtowing to Wall Street will force Disney to do just that if things don't turn around soon enough.

On another note, we're going down for 4 days next week and we also had a hard time getting into any other DVC resort other than OKW for a 2 BR unit.... That did seem odd to us, going at such a low demand time. Sad the weather won't by 80 and sunny, but I'll take 71 and sunny any day over -10.

as i stated in another thread the other day....

one of the member services drones at DVC told my wife last weekend that their demand for rooms was WAY above the projections that had been passed through the halls at DVC...

That's odd.....i think that if the economy sinks further...almost an inevitability.....you will all of a sudden, see a sharp decline in DVC reservations as well...

My theory is that alot of the newer (past 5 years) owners bought on credit they shouldn't have had and are now attempting to "ride the pony" until it collapses before sell off....

If the DVC spending patterns were like every other sector of the economy (which would be logical)...then that would be the case....

but it's just a theory

[WDWNut02]

LOL, us too. We have a trip planned for April, so lighter crowds would be nice even if it means shorter hours.

Also WDWNut02 :welcome:
to Intercot!

Thanks for the warm welcome!:cloud9: I think I am headin down from Michigan this March (although i have some convincing to do with the wife)

[CaptainSad]

I hate to say this, but it is only going to get worse. I expect it will be real bad by the end of the year and well into 2010. I still have a planned vacation at WDW December 27th-January 4th. With all the hopes of the new President, I don't think he is going to get all the things he wants done. We are just to far into the down turn to right the ship over night. I think you will see a lot of cancelled reservations this year. I think you could see a 25% drop in attendence this year also. It will not make any difference if you give people free rooms for their stay. If the unemployment rate keeps climbing the chances of some of them that have reservations will cancel. I know of four families in my area that have already cancelled. I think the parks will cut back even more in the upcoming months. Don't be surprised if they don't have as many MNSSHP or MVMCP's this year. So don't get your hopes to high.
I for one don't want any of things to come to past. But just be prepared.....

[Cinderelley]

Who's to say these analysts don't release these reports and then make a ton of money selling short on Disney stock?

I haven't taken economics 101. Can someone tell me what this means? An easy to understand answer please. I'm just curious.



My theory is that alot of the newer (past 5 years) owners bought on credit they shouldn't have had and are now attempting to "ride the pony" until it collapses before sell off....

If the DVC spending patterns were like every other sector of the economy (which would be logical)...then that would be the case....

but it's just a theory

So from what I understand, Disney has the right to void any resale that they deem is below their perceived value. Do you think they'll say "no" to all these resales or do you think they'll allow lower prices?

[Ian]

I haven't taken economics 101. Can someone tell me what this means? An easy to understand answer please. I'm just curious.Short selling is sort of the opposite of what you normally think of when you think of buying stock.

Instead of "going long" whereby you buy a stock at price x and hope to someday be able to sell that stock at x plus some percentage increase, with short selling you sell a stock you don't actually own with the hopes of buying it later at a cheaper price.

It's kind of complicated and one of those things you sort of have to wonder, "Why is anyone allowed to do this?" :confused:

[DizneyRox]

So from what I understand, Disney has the right to void any resale that they deem is below their perceived value. Do you think they'll say "no" to all these resales or do you think they'll allow lower prices?
Actually, unless I'm completely off (it does happen) Disney can't VOID the sale. ROFR (Right of first refusal) just gives Disney the option of picking up the property at the agreed upon selling price. The sale still goes through, they can't FORCE me to own the property, it's just to keep prices around where they want them by making people make reasonable offers if they really want to buy.

Now, if DVC sales really tank, so will the resale market, and since DIsney isn't able to sell what they already have to offer, they would be reluctant to pick up additional contracts as well (since they can't unload those either). At least to some extent.

DVC resales have already dropped significantly in the past 6 months, so Disney doesn't seem to be very concerned with the resle price right now. Which could indicate a decline in DVC interest. Just a guess...

[Ian]

There's no doubt the price of resales (especially at SSR and AKL) has dropped lately. It's supply and demand, though. There are a ton of contracts for sale out there and obviously not enough buyers to soak them all up.

Which isn't really surprising when you consider it's basically just real estate and the entire real estate market is in shambles right now. I would fully expect DVC to take a hit in this economy.

More interesting, though, is the fact that Disney doesn't seem to be looking at this as an opportunity to snatch up some cheap contracts and hold them for eventual resale at a higher price.

That's a little concerning, because it leads me to believe they think there's no upside to them.

[lockedoutlogic]

There's no doubt the price of resales (especially at SSR and AKL) has dropped lately. It's supply and demand, though. There are a ton of contracts for sale out there and obviously not enough buyers to soak them all up.

Which isn't really surprising when you consider it's basically just real estate and the entire real estate market is in shambles right now. I would fully expect DVC to take a hit in this economy.

More interesting, though, is the fact that Disney doesn't seem to be looking at this as an opportunity to snatch up some cheap contracts and hold them for eventual resale at a higher price.

That's a little concerning, because it leads me to believe they think there's no upside to them.


what do you mean by "there's no upside to them"?:confused:

[Ian]

Simple ... Disney is selling/has recently sold new SSR contracts at $95 - $100 per point.

But yet at the Timeshare Store I could go buy one for as low as $68 per point.

So if I'm Disney, why would I not ROFR those contracts and then hold on to them for when the economy recovers. I mean if you can buy at $68 per point and eventually sell for $100 per point ... seems like a no-brainer, right?

What it shows me is that Disney doesn't think SSR contracts (and to some extent AKV contracts) will ever be worth $100 per point again.

In other words ... it points to the fact that you're on to something with your opinions about SSR. :(

[DizneyRox]

Remember though, someone ELSE needs to first buy the SSR contract at $68 before Disney will even think of exercizing ROFR. Why would they want to hold onto the property and assume the dues, etc. Wait until someone else buys it and then grab it at the offered price. Judging by the amount of offerings, people aren't clamoring to buy them so the opportunity to ROFR isn't there either.

So,it could be that Disney IS doing this and we're not hearing it. I doubt anyone would just offer up that info though. TTS does seem to direct people to proper listing prices though.

That doesn't mean he's not right about SSR either... :D

[lockedoutlogic]

Simple ... Disney is selling/has recently sold new SSR contracts at $95 - $100 per point.

But yet at the Timeshare Store I could go buy one for as low as $68 per point.

So if I'm Disney, why would I not ROFR those contracts and then hold on to them for when the economy recovers. I mean if you can buy at $68 per point and eventually sell for $100 per point ... seems like a no-brainer, right?

What it shows me is that Disney doesn't think SSR contracts (and to some extent AKV contracts) will ever be worth $100 per point again.

In other words ... it points to the fact that you're on to something with your opinions about SSR. :(


Alright....that's what i thought you meant....

and the answer is NO there is no chance of those contracts ever selling for that much again...

WHAT ON EARTH DO YOU THINK I'VE BEEN GOING NUTS ABOUT FOR 2 YEARS!?!?!?!?

Saratoga...and to a lesser extent Animal Kingdom....are a hoax....

they threw these places up to capitalize on the US economy in a time that non-existent money was free flowing and everyone was spending borrowed monopoly money....

65 a point is the right price for Saratoga....that's a fact.

All of us who payed more (I think ours were 84) should now realize that the value wasn't there.

The resale value.....adjusted for inflation....may never get back to the purchase price for those units....

Maybe a place like WL....who only has 104 units and is a boatride away from the Magic Kingdom....is an intelligent place for resale....

But 900 units next to Hotel Plaza Boulevard? The demand and availability will never be on levels so an owner can make their money back on a resale....

Knowing what Disney travelers prefer.....it's not gonna happen.

[Cinderelley]

Short selling is sort of the opposite of what you normally think of when you think of buying stock.

Instead of "going long" whereby you buy a stock at price x and hope to someday be able to sell that stock at x plus some percentage increase, with short selling you sell a stock you don't actually own with the hopes of buying it later at a cheaper price.

It's kind of complicated and one of those things you sort of have to wonder, "Why is anyone allowed to do this?" :confused:

So, if I'm understanding you right, they want everyone to think that Disney's stock is not that good in order for the price to drop. Then they'll buy a lot of it and turn around and sell it when the economy gets better and the price goes up? Is that right? If it is, that's not very honset of them. :nono:

[Tekneek]

So, if I'm understanding you right, they want everyone to think that Disney's stock is not that good in order for the price to drop. Then they'll buy a lot of it and turn around and sell it when the economy gets better and the price goes up? Is that right? If it is, that's not very honset of them. :nono:

No, no. Short selling Disney stock means you sell a share of Disney stock (that you do not currently own) at the current price (typically borrowed from a broker or other entity) with the hope that the price will drop by the time you have to replace that share (thus pocketing the difference in price). The danger is that the price could go up after the short sell causing you to buy the replacement at a higher price and therefore lose money on the deal.

[Cinderelley]

No, no. Short selling Disney stock means you sell a share of Disney stock (that you do not currently own) at the current price (typically borrowed from a broker or other entity) with the hope that the price will drop by the time you have to replace that share (thus pocketing the difference in price). The danger is that the price could go up after the short sell causing you to buy the replacement at a higher price and therefore lose money on the deal.

Hmmm, I guess I don't understand how you could sell a stock that you don't own, but it kind've sounds like when my husband talks about a company wanting to hold your money for you so that they can keep the interest. If whoever owns the stock is willing to loan it to these people to do this, I don't see what is bad about it.

My husband rolls his eyes at the way I pick my stock, but it sounds much easier than any of this. If I like the name or what the company does, I buy it. If not, I don't. I really have no desire to get rid of it based on price, since I bought because I like the company.

[Tekneek]

Hmmm, I guess I don't understand how you could sell a stock that you don't own, but it kind've sounds like when my husband talks about a company wanting to hold your money for you so that they can keep the interest. If whoever owns the stock is willing to loan it to these people to do this, I don't see what is bad about it.

What is wrong with it, is that it can really drive down the price if there is a lot of it going on. Then it will appear to bounce back up a bit when they all buy new shares to cover their shorts... Somewhat complicated stuff that the average person will rarely, if ever, do. Hedge funds do it all the time, though. You can read a decent description of the process over at Wikipedia.

If you're going to buy shares of individual companies, I strongly urge you to either do it because you really want to own a piece of that company, or because you're having fun. It's not the kind of thing that is going to build up a retirement for the average person. If you're trying to build up for retirement, you will have better odds of making more money by going with index funds through someone like Vanguard. The returns aren't sexy, and you don't have the roulette wheel casino type experience that trading specific shares can provide. However, it just keeps churning away tending to provide steady returns decade after decade.

[Cinderelley]

What is wrong with it, is that it can really drive down the price if there is a lot of it going on. Then it will appear to bounce back up a bit when they all buy new shares to cover their shorts... Somewhat complicated stuff that the average person will rarely, if ever, do. Hedge funds do it all the time, though. You can read a decent description of the process over at Wikipedia.

If you're going to buy shares of individual companies, I strongly urge you to either do it because you really want to own a piece of that company, or because you're having fun. It's not the kind of thing that is going to build up a retirement for the average person. If you're trying to build up for retirement, you will have better odds of making more money by going with index funds through someone like Vanguard. The returns aren't sexy, and you don't have the roulette wheel casino type experience that trading specific shares can provide. However, it just keeps churning away tending to provide steady returns decade after decade.

I have a retirement plan through work. I just buy them for myself or as gifts. I bought my DS a Nintendo stock for Christmas. I know he won't get rich off of it, but he was pretty excited to have it. I understood the feeling. That was how I felt when I bought my first Disney stock. I am buying Royal Caribbean stock just for the shareholder benefits though.

[russk42]

So if I'm Disney, why would I not ROFR those contracts and then hold on to them for when the economy recovers. I mean if you can buy at $68 per point and eventually sell for $100 per point ... seems like a no-brainer, right?

What it shows me is that Disney doesn't think SSR contracts (and to some extent AKV contracts) will ever be worth $100 per point again.


That may be true, but more likely is that Disney accountants weighed the net present value of [WDW purchasing] those contracts, and concluded that
1.WDW has some cash flow from someone else owning those contracts (paying fees, buying tickets, etc..)
2. the admin & legal costs involved in buying those contracts are likely to be significant, reducing the effective value to WDW of those contracts
Conclusion: poor use of WDW cash.

[Ian]

Yeah, that's probably true.

Even if the upside is $30 per point and they're buying an average 200 point contract, that's only $6,000 profit per contract.

By the time you factor in lost revenue, expenses, etc. you're right ... there's very little upside there and certainly better uses for their cash.

[Tekneek]

So now is a good time to get some good deals on DVC, because Disney may be less likely to exercise their ROFR? Hmmm...

[lockedoutlogic]

So now is a good time to get some good deals on DVC, because Disney may be less likely to exercise their ROFR? Hmmm...

Hold on there, Chief....

It's still the first quarter....the game isn't decided until the fourth....

[Ian]

He's right ... it might look like a good deal now, but wait six months and then see.

Honestly, I would definitely hold off and just keep an eye on the market. Even if you want and prices creep up a few dollars before you buy, you're still getting a great deal.

[DryCreek]

Hold on there, Chief....

It's still the first quarter....the game isn't decided until the fourth....

Says maybe wait until the end of the 3rd quarter and float an offer to purchase 100 points in the $40 to $50 range?

That is what I see as their real value. After putting the pencil to points at $68 or above, I can save money by booking specials!

[DizneyRox]

Says maybe wait until the end of the 3rd quarter and float an offer to purchase 100 points in the $40 to $50 range?

That is what I see as their real value. After putting the pencil to points at $68 or above, I can save money by booking specials!
I believe Disney's fiscal 4th quarter ends in October. Buy you get the idea...

[Ian]

You very well might be able to find some OKW points in that range, although bear in mind that unless the owner bought the 10 year extension they expire a whole lot sooner than new points do.