Walt Disney Co DIS reached an agreement to acquire Twenty-First Century Fox Inc FOXA's movie and TV studios, most of its cable networks and international assets for $52.4 billion. Here's how some of Wall Street's most notable entertainment and media analysts are reacting.
Bernstein: A Trading Opportunity In Fox
Disney's acquisition of most of Fox's entertainment assets creates an attractive trading opportunity for Fox's stock, Bernstein's Todd Juenger said in a research report. The market is implying that Fox's "stub" assets are worth just $4.53 per share, but a fair value is at least twice that amount, he said.
"Our quick-and-dirty analysis suggests there may be an attractive trading opportunity to capture underpriced value in the future Fox stub," Juenger said.
Numerous fundamental, valuation, and regulatory concerns exist with the deal, Juenger said, noting that the Bernstein report is an early take without the benefit of all numbers.
Argus: Pricey, But Positive
Disney's acquisition of Fox's assets may be on the pricey side, but it offers various strategic opportunities, Argus' Joe Bonner said in a research report. With the deal, Disney gains a new source of high-quality branded content that it can "feed" to its direct-to-consumer streaming video platform in the coming years, Bonner said.
Disney will be better-positioned if the traditional cable bundle is "no longer viable" in the coming years, the analyst said. And Disney will benefit from synergies, as the two businesses are very similar, he said.
Bank Of America: Industry Reshaping
Disney's tie-up with Fox is a "compelling next step in the reshaping of the media and entertainment industry," Bank of America's Jessica Reif Cohen said in a research report. The merger will generate an "unparalleled scale" in high-quality content, which may be what is needed as the direct-to-consumer option continues to grow, the analyst said.
Similar to Bernstein's Juenger, Reif Cohen said she thinks that the "New Fox" stock is worth at least $9 to $12 versus the current implied value of close to $4.50.
Rosenblatt: Applaud The Deal, Not The Stock
Disney's deal should be applauded by investors, but this isn't reason enough to be a buyer of Disney's stock, Rosenblatt Securities' Alan Gould said in a research report.
The acquisition better positions Disney to compete in the shift to streaming TV and will be accretive to earnings, Gould said. But at the same time, the entire internet TV space will likely be stuck in a "heavy investment" phase for years that could impact media earnings, the analyst said.
Investors pointing to Disney's healthy theme park unit as a potential buffer for earnings should consider that the domestic parks are likely "at or close to peak margins," Gould said.
Loop Capital: Three Big Question Marks
There are at least three notable question marks that Disney's management must address relative to its acquisition, Loop Capital's David Miller said in a research report.
Miller's first question: As Disney assumes managerial control of Hulu, will the company use it as a platform to compete against Netflix, Inc. NFLX — or will the content be bundled with its DTC offering?
Second: Disney's acquisition implies it will own 100 percent of Sky TV in the UK, but Fox is in the process of acquiring the other 61 percent it doesn't already own, Miller said. If UK regulators don't approve the transaction, Disney could buy Sky on its own, restarting the approval clock all over again, the analyst said.
Third: Miller asks what kind of content will Disney place on its ESPN linear network; on the regional sports networks; and on its ESPN over-the-top-product when it launches next spring.
Photo by Coolcaesar/Wikimedia.
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