Report: Three Words Mean Bad News For Cable

Walt Disney Co. shares were down as much as 9% on Wednesday and were poised to suffer their biggest-ever one-day price drop after the company reported fiscal third-quarter earnings after Tuesday’s close.

Marketwatch reports profit rose a better-than-expected 11%, buoyed by the success of the company’s film studio division, but revenue fell short amid slower growth at TV networks and theme parks. The company revised the outlook for its cable business slightly lower, blaming cord-cutting as well as dollar strength.

When CNBC's Jim Cramer saw the volatile action of Disney's stock on Wednesday, he knew that in order to determine what happened, he had to be clinical and unemotional. After all, he doesn't consider this just any ordinary stock. It's the one that he has always told investors to buy for their kids and then put away.

"You have to ask yourself, has that much changed with one quarterly report? To figure that out, you have to analyze not just Disney's fundamentals, but the stock itself," the "Mad Money" host said.

When he looked at the stock, Cramer found that it all came down to just three words used by Disney's CEO Bob Iger. He used three words on the company's earnings conference call that Cramer thinks wrecked the stock: he said Disney experienced "some subscriber loss."


When Cramer hears the word subscriber, he thinks of bundle. Meaning, the cable bundles that include all of those ESPN stations that are lucrative for Disney. And when Cramer hears the word loss, he concludes that either customers are not buying the product like they used to, or they are cutting the cord.

This is bad news for Disney, and all of cable, which is why almost every entertainment stock was down on Wednesday.