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Media Analyst Turns Bullish On Disney Due To 'Strategic Positioning'

Media Analyst Turns Bullish On Disney Due To 'Strategic Positioning'
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Walt Disney Co (NYSE: DIS)'s stock has some investors and Wall Street analysts concerned, but its proposed acquisition of most of Twenty-First Century Fox Inc (NASDAQ: FOXA)'s media and entertainment assets is one of the few reasons to turn bullish.

The Analyst

Rosenblatt Securities' Alan Gould upgraded Disney's stock from Neutral to Buy with a price target boosted from $115 to $130.

The Thesis

Disney's proposed acquisition of most of Fox's assets is an excellent deal that will give the company a favorable "strategic positioning," Gould said in a note. Specifically, Disney will become a much bigger player in the global streaming video business although in the near-term there are some question marks, including what Disney will due with its Hulu stake and will it focus on the traditional family-friendly brand or expand its entertainment offering with Fox's content.

Disney is paying a 34 percent estimated tax rate and around 75 percent of its domestic (pre-Fox) revenue base will benefit from President Donald Trump's corporate tax cut, the analyst said.

The Street will value Disney's stock anywhere between a 7 percent premium to the overall market to a 5 percent discount, according to Gould. This has been the historical range of Disney's stock in the 12 years since Disney's CEO Bob Iger assumed the top ranks at the company. This would derive a valuation range of anywhere from $115 to $130.

Price Action

Shares of Disney were trading higher by around 0.6 percent at $112.50 early Wednesday morning.

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Latest Ratings for DIS

Mar 2018Loop CapitalInitiates Coverage OnBuy
Feb 2018BMO CapitalMaintainsUnderperformUnderperform
Jan 2018Morgan StanleyMaintainsOverweightOverweight

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