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Disney stung by analyst downgrade citing concerns over ESPN subscriber losses

UPDATED, 4:05 p.m. ET: Shares of major media companies fell sharply Friday, dragged down by declines in the broader market fueled by investors’ macroeconomic worries.

Disney was among the hardest-hit media congloms: Mouse House shares were off more than 5% in midday trading; they closed down 5.3% to $93.90 per share. The drop came after a Wall Street analyst downgraded the company’s stock, citing concerns about future subscriber losses at ESPN.

The Dow Jones Industrial Average dropped 390.97 points, down 2.4% for the day to 15,988.08, its lowest point in nearly five months. The Dow plummeted as much as 536 points Friday. The tech-focused Nasdaq closed down 2.7% to 4,488.42, after falling as much as 196 points during trading.

Analysts said the widespread stock sell-off stemmed from the falling price of oil, to less than $30 per barrel, as well as the release of disappointing U.S. economic data indicating a slowdown and a drop earlier Friday in Chinese stock markets.

Media and technology stocks taking a punch included Twitter, which closed down 5.6%, Lionsgate (-3.4%), AMC Networks (-3.4%), Facebook (-3.4%), Tribune Media (-3.1%), Viacom (-2.9%), Netflix (-2.8%), Liberty Media (-2.8%), Apple (-2.5%), DreamWorks Animation (-2.3%) and 21st Century Fox (-2.3%).

Also hit were CBS (-1.8%), Discovery Communications (-1.6%) and Time Warner (-1.3%).

Disney shares in particular were under pressure after Barclays’ Kannan Venkateshwar downgraded the stock from “equal weight” to “underweight.” The analyst said in a research note that ESPN, which accounts for a disproportionate share of Disney’s cash flow, is exposed to potential cord-cutting declines among pay-TV subscribers in a “secularly fragmenting media environment.” He also wrote that Disney’s studio business “implicitly trades at a premium” but that its continued box-office success was not a given.

The bloodletting ahead of the three-day weekend (markets are closed Jan. 18 for MLK Day) was the worst turmoil media stocks have seen since last August, when markets were similarly roiled by global economic factors alongside fears the pay-TV biz will continue to shrink.

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