Piper Jaffray Likes Disney's Five-Year Film Slate; Upgrades Stock And Moves Target To $120

Piper Jaffray’s Stan Meyers upgraded the rating for Walt Disney Co DIS from Neutral to Overweight, while raising the price target from $105 to $120. He said that the company’s forthcoming film slate could generate significant value over the next five years, despite the deceleration in growth at ESPN.

Walt Disney appears strongly positioned in the “current fragmented media landscape” to leverage its content “across a growing number of distribution channels, its global theme park footprint and its merchandising network,” analyst Stan Meyers said.

The upcoming 24 titles over the next three years could drive growth at a CAGR of 12.6 percent, as compared to 8.1 percent over the past three years, Meyers mentioned, while adding, “Disney's tentpole strategy should also drive margins higher by 200bps over the next three years.”

The analyst expects Consumer Products to become Disney’s second fastest growing segment. He forecasted several years of expansion in merchandising as a result of:

1. Disney's concentrated tentpole film slate
2. Improved coordinated marketing efforts with manufacturers and retailers
3. Toy innovations and the expansion of licensing categories

Meyers believes that Theme Parks would become “a lot more attractive,” due to:

1. Shanghai Disney Parks opening in June
2. Ongoing transformation of the broader consumer spending away from retail and into experiential categories
3. The ability to reach new demos with upcoming Star Wars and Marvel attractions that are being introduced over the next few years

“While the ESPN network remains an overhang, we believe the growth in fee/sub will continue to outpace the decline in number of subscribers,” the Piper Jaffray report noted. Meyers added that the recent pullback in Disney’s shares offers an attractive entry point.