Shares of Walt Disney (DIS) are slipping after Pivotal Research analyst Brian Wieser downgraded the stock to Sell, as he believes a higher price paid for Fox's (FOXA) entertainment assets would reduce the value of the company to Disney shareholders. However, if the company misses out on the deal, it will not realize the synergies it expects to produce from the transaction, Wieser contended.

ANALYST SAYS SELL DISNEY: In a research note to investors, Pivotal Research's Wieser downgraded Disney to Sell from Hold, with an unchanged price target of $93. The analyst argued that the recent rally in the shares is unwarranted and fails to reflect that a higher price paid for Fox's entertainment assets would reduce the value of Disney to its shareholders. Alternately, the absence of completion of the transaction would also be negative for Disney as it would mean the company would be unable to "realize the synergies" it expects to produce from the deal, he contended, adding that the strategic position of Disney would "further be weakened" relative to what would otherwise be possible without the transaction. At a strategic level, Wieser thinks Disney is "fine without the Fox business." However, he thinks the company and its investors have bought into the idea that a direct-to-consumer orientation is a positive focus for the company. Disney can still prioritize direct-to-consumer initiatives without Fox, but its propositions to consumers and creators of content would be stronger with Fox and weaker without those businesses, he argued.

DISNEY MAY ADD CASH TO FOX ASSET BID: Citing sources, CNBC's David Faber said that Disney is expected to add cash to its offer for 21st Century Fox's assets, a move that comes days after Comcast (CMCSA) launched a $65B cash offer for the assets that Disney has agreed to buy. These include movie studios, Fox's Sky (SKYAY) stake, Hulu, regional sports networks and national networks National Geographic and FX. Disney had previously reached a deal with Fox to buy the assets for $52.4B. On Friday, Bloomberg had reported that Rupert Murdoch and the board of 21st Century Fox have a regularly scheduled board meeting for this coming Wednesday, at which they will consider how to proceed regarding Comcast's improved offer and the existing deal the company accepted from Disney.

PRICE ACTION: In morning trading, shares of Disney have dropped 2% to $106.68.