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Disney’s Force Majeure

Not even Luke Skywalker and Han Solo could rescue The Walt Disney Co. from BTIG analyst Richard Greenfield, who did his best Darth Vader impression by downgrading the stock to “sell” Friday, lowering his 12-month price target to $90 per share and claiming the company won’t be able to recover soon from overpaying for sports rights.

The long-awaited latest installment of the Star Wars saga – Star Wars: The Force Awakens – opened nationwide in more than 4,100 theaters Friday, and with more than $100 million in advanced ticket sales is expected to break box office records. But Greenfield, in a blog posting Friday, said a blockbuster movie wouldn’t be enough to right past wrongs.

In his posting, Greenfield wrote that Disney overpaid for sports rights based on too aggressive subscriber projections. Earlier Disney said it lost about 3 million pay TV subscribers in fiscal 2015.

“Not only did Disney overpay for individual sports rights packages, they also acquired too many sports rights in an effort to prevent new competitors such as Fox Sports 1 and NBC Sports from growing stronger,” Greenfield wrote.

He continued that as a result he expects Disney to “meaningfully underperform investor expectations” given that cable networks represent about 44% of Disney operating income. He predicted that Disney’s fiscal 2017 operating income will be down and total OI will be flat.

Not surprisingly, Disney stock was down on the news, dropping as much as 3.5% ($4.09 each) in early trading Friday to $108.12 per share. The stock was trading at $108.88 each, down 2.8% ($3.13 per share) at 10.25 a.m.