Why Bank Of America Thinks Disney Is A Perfect Storm (Trooper)

• Walt Disney Co DIS shares are down 7 percent in the last three months, having slid from a high of $121.69 on August 4.
• BofA Merrill Lynch’s Jessica Reif Cohen maintained a Buy rating on the company, with a price objective of $130.
• 3Q15 results reported by Hasbro, Inc. HAS are “highly encouraging” for the performance of Disney’s Consumer Products segment, Reif Cohen mentioned.

Anticipation is building around Disney’s first Star Wars film release on December 18. Against this backdrop, the Hasbro’s 3Q15 results proved to be “highly encouraging” for Disney’s Consumer Products, analyst Jessica Reif Cohen said.

Hasbro reported 24 percent revenue growth in its Boys product line. Reif Cohen noted that the results were driven by initial Star Wars Force Friday shipments on September 4, which commenced the global retail launch of Star Wars: The Force Awakens, as well as continued contributed from Universal’s Jurassic World.

Hasbro’s results inspire confidence in the performance of Disney’s Consumer Product segment, especially since international markets are exhibiting strength with a 50/50 split between domestic and international sales.

Moreover, Hasbro indicated that Star Wars and Jurassic World helped achieved 17 percent revenue growth in its Preschool category.

In the report BofA Merrill Lynch noted, “Given Hasbro’s positive commentary and results, we are comfortable that DIS will at least achieve our F4Q15 Consumer Product revenue and OI estimates of $1,238mn and $557mn, respectively (+15% Y/Y).”

Although Star Wars: The Force Awakens is scheduled for release after 2 months, Disney has already released advanced ticket sales. Reif Cohen mentioned that reports have indicated extremely robust pre-sales in the US and the UK.