Why Disney Stock Is Worth $120

In a report published Monday, Credit Suisse analyst Omar Sheikh maintained an Outperform rating on

, while reducing the price target from $130 to $120, citing "skinny bundles." "Given MVPD video subscriber data from the quarter, and commentary from other programmers, Disney's cable network subscriber losses are unlikely to be due to customers disconnecting from cable/DBS/telco providers (cord cutting), but to choosing smaller packages which exclude ESPN (skinny bundles)," analyst Omar Sheikh wrote. One of the several possibilities is for Walt Disney to "progress plans to take ESPN over the top – which, as our work on other OTT services (including HBO NOW and Sky's NOW TV) suggests, is likely to deliver better unit economics and incremental growth," Sheikh said. The adjusted EPS estimates for 2015, 2016 and 2017 have been reduced from $5.00 to $4.88, from $6.06 to $5.58 and from $6.50 to 6.00, respectively, to reflect "more cautious" assumptions on cable network subscribers as well as a $500m currency headwind in 2016. Sheikh added that while disruption to the traditional ecosystem was spreading, it was likely to "play out at a slow pace." Moreover, Disney appeared poised to generate "superior growth over the long term." Sheikh believes that Walt Disney was "on track" to generate 13 percent EPS CAGR during 2014-2020, which is higher than peers.