Join        Login             Stock Quote

Walt Disney: 5-Star Buy In Entertainment

 February 06, 2013 10:43 AM

by Tuna Amobi, S&P Capital IQ equity analyst, S&P The Outlook

Our latest Focus Stock is Walt Disney (DIS), which carries S&P Capital IQ's highest investment recommendation of 5-STARS, or "strong buy."

We expect the company, as a cyclical bellwether, to be a major beneficiary of a global macroeconomic rebound, with improving fundamentals across virtually all of its core businesses.

Disney, we believe, offers a relatively balanced asset mix that typically performs well ahead of a cyclical economic upturn, while leaving it relatively exposed to an economic downturn.

[Related -Will The Dividend And Buyback Frenzy Continue?]

Our investment opinion reflects what we see as Disney's execution of a proven, multi-platform strategy for content exploitation that strikes a balance between organic growth and acquisitions.

Over the years, Disney has grown internally and acquired a stable of lucrative content franchises including Mickey Mouse, Disney Princess, Toy Story, Lion King, Pirates of the Caribbean, Cars, Avengers, Star Wars, and several others.

Under a management team led by Chief Executive Robert Iger, Disney has been at the forefront of embracing newer digital outlets, most recently in a film output deal with Netflix.

Also, concerted efforts are under way to expand into emerging markets such as India, Russia, Latin America, and China, which recently eased its film restrictions. Disney is planning to open its new Shanghai theme park, a joint venture with the Chinese government, in 2015.

[Related -How To Supply Your Portfolio With Outperforming Stocks]

With a recent stabilization in key operating metrics at the worldwide theme parks, we expect a substantially completed multi-year cycle of capital upgrades at the parks — including new attractions at Disney California Adventure, Disney World and Hong Kong Disneyland, as well as two new cruise ships — to sustain double-digit returns on invested capital.

We believe the media networks businesses will remain the primary near-term catalyst for the company's financial performance, mainly driven by relatively healthy advertising trends for ESPN and ABC networks and stations, as well as higher affiliate rates for ESPN and Disney Channels (on multi-year renewals of pay TV carriage deals).

We forecast about 6% and 7% growth in fiscal 2013 and 2014 consolidated revenues, respectively, to about $44.8 billion and $47.8 billion.

Further margin expansion should reflect improved operating leverage from recent restructuring actions, increased exploitation of worldwide licensing opportunities, and further theme parks cost savings (including employee benefit expenses).

Results should also benefit from a ramp-up of higher-margin (and relatively nascent) revenue streams — including digital streaming deals with subscriptions video-on-demand providers.

iOnTheMarket Premium


Post Comment -- Login is required to post message
Alert for new comments:
Your email:
Your Website:

rss feed

Latest Stories

article imageThe $7 Billion Reason To Short Retail

After nine months of fruitless negotiations, the International Longshore and Warehouse Union and the read on...

article imageWhy There Won't Be An Interest Rate Increase Anytime Soon

A market trend reversal due to rising interest rates won’t happen anytime soon because the Fed won’t act in read on...

article imageThe ECB Would Gladly Pay You Tuesday for a Hamburger Today

Will the ECB find enough bonds to meet its quantitative easing read on...

article imageThe Taylor Rule Conundrum

Back in February 2005 Alan Greenspan referred to the abnormal (low) level of US long-term interest rates as read on...

Popular Articles

Daily Sector Scan
Partner Center

Fundamental data is provided by Zacks Investment Research, and Commentary, news and Press Releases provided by YellowBrix and Quotemedia.
All information provided "as is" for informational purposes only, not intended for trading purposes or advice. iStockAnalyst.com is not an investment adviser and does not provide, endorse or review any information or data contained herein.
The blog articles are opinions by respective blogger. By using this site you are agreeing to terms and conditions posted on respective bloggers' website.
The postings/comments on the site may or may not be from reliable sources. Neither iStockAnalyst nor any of its independent providers is liable for any informational errors, incompleteness, or delays, or for any actions taken in reliance on information contained herein. You are solely responsible for the investment decisions made by you and the consequences resulting therefrom. By accessing the iStockAnalyst.com site, you agree not to redistribute the information found therein.
The sector scan is based on 15-30 minutes delayed data. The Pattern scan is based on EOD data.