Despite Star Wars Hype, Morgan Stanley Cools On Disney's Stellar Value
Stellar results from Walt Disney Co (NYSE: DIS)'s upcoming episode in the Star Wars film franchise will be offset by pressure on its ESPN sports television business, an analyst said Wednesday.
Morgan Stanley's Benjamin Swinburne reaffirmed his Equal-Weight rating and $117 target on the media and entertainment conglomerate.
Disney has gained nearly 21 percent year-to-date and changed hands recently at $113.97, off $0.44.
The shares hit a 52-week high Tuesday of $114.56.
But the expected Star Wars success is already priced into Disney shares, which currently trade at a six-year high relative to its peers, according to Swinburne.
Swinburne's target implies Disney shares will gain just 2.7 percent in the coming 12 months.
The analyst raised his estimated box office receipts for Star Wars nearly 22 percent to $1.95 billion, and said Disney's consumer products sales will rise to $5 billion following release of the film, from $3 billion currently.
"We expect Star Wars will be wildly profitable," Swinburne said of the film slated for release late this year.
Swinburne forecast that Disney's ESPN segment will produce lower-than-expected growth in earnings before interest and taxes.
Swinburne predicts EBIT growth in the segment of 6 percent, versus Disney's forecast of high, middle-digit growth.
Prospects for weaker results at Disney's international theme parks as well as an eventual "reversion to the mean" at its studio operations also help keep Swinburne on the fence.
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