Disney Stock Down After 'Cars' Debut

In this photo provided by Disney/Pixar, (left to right) Chick Hicks (Michael Keaton), Lightning McQueen (Owen Wilson), and The King (Richard Petty), fight for the lead during the big race in 'Cars.' The animated comedy raced to first place at the weekend box office with a $62.8 million debut. (AP Photo/Disney/Pixar) (AP)

LOS ANGELES -- Shares of The Walt Disney Co. dipped slightly Monday, then rebounded, reflecting lower than expected ticket sales during the opening weekend of the Pixar animated film "Cars."

Shares closed down 43 cents, or 1.5 percent, to $28.90 on the New York Stock Exchange, but had dropped as low as 85 cents, or 3 percent, earlier in the day.

While its first film since Disney bought Pixar Animation Studios for $7.4 billion brought in an estimated $62.8 million, making it the top movie at the weekend box office, actual figures released Monday put ticket sales lower at $60.1 million.

That was even less than the $70 million or so that some financial analysts had expected, based on the performance of Pixar's last two films, "The Incredibles and "Finding Nemo."

But the opening was more closely watched because it was seen partly as an indication of how the expensive deal Disney made to acquire Pixar would play out. Disney chief executive Robert Iger has made restoring the company's animation efforts his top priority.

"We think the expectations for 'Cars' were heightened by Disney's acquisition of Pixar, and that investors could perceive the film's performance as an early indicator of the benefits of the purchase," Vijay Jayant, an analyst with Lehman Brothers, wrote Monday.

Jayant didn't change his $31 price target or "Equal Weight" rating.

Jason Bazinet, an analyst at Citigroup, downgraded Disney's stock from a "buy" to "hold" late Friday, but said his decision had nothing to do with the performance of "Cars."

Disney's stock recently hit a 52-week high of $30.62. Bazinet thinks the stock could go as high as $32 over the next 12 months, but said Disney might have trouble meeting ambitious earnings projections in 2007.

As far as "Cars" goes, Bazinet said Monday he still expects the film to earn as much as $650 million worldwide.

Analyst David Miller of the brokerage firm Sanders Morris Harris also did not change his estimate of $600 million worldwide, despite the fact that "Cars" opened lower than the $75 million to $80 million he had expected.

Miller said "Cars" earned less than "The Incredibles" and "Finding Nemo" because it was the longest Pixar film at a full two hours. That limited its run at theaters to five screenings per day, where shorter animated films can usually be shown six times per day.

Miller also said only 55 percent of schools were out for the summer this past weekend. In two weeks, that number will rise to 90 percent, which should benefit "Cars," especially on weekdays.

"The second and third weekend are more important than the first weekend," Miller said.

That sentiment was echoed by Doug Mitchelson, an analyst at Deutsche Bank Securities.

"The movie has little competition most of the rest of the summer and could continue to see revenue through the end of August," Mitchelson wrote Monday.

Anthony Noto, an analyst with Goldman Sachs, wrote in a Sunday note to clients that he still expects the movie to be "highly profitable" and reaffirmed a rating of "Outperform/Neutral" and a target price of $34.

"While the film was slightly below a very high bar of expectations ... we still believe the film will still be highly profitable," wrote Noto. "If the shares are weak on this mild underperformance, investors should add to positions."