Walt Disney (DIS) fairy tales always offer happy endings, even if they terrify six-year olds along the way. And Walt Disney shares might provide their own happy ending for investors, according to Guggenheim analysts.
Guggenheim’s Michael Morris and Currey Baker upgraded Walt Disney today to Buy from Neutral. To hear them tell it, it’s all about the content:
Enthusiasm for the company’s 2015/16 catalysts (Marvel/Pixar/Star Wars films and products, Shanghai park) has grown earlier than we anticipated in our 10/23/13 initiation, but we see no reason it will slow. Both Frozen and Thor 2 have performed well in F1Q, supporting the strengthening content story.
We see upward consensus estimate revision potential at several segments: Studio on a stronger slate and Netflix (NFLX) revenue (Marvel programming and film output); Consumer Products and Interactive on new characters and international growth; and Broadcasting on retrans/reverse compensation.
Better yet, Morris and Baker note, Disney trades at 15.5 times 2015 earnings estimates, putting it near the middle of the pack of S&P 500 stocks–”a bargain” in their opinion. They believe it should trade at 18 times 2015 earnings–or $87 dollars a share.
Shares of Disney have gained 2.7% to $76.33 today at 10:31 a.m., while Netflix has dropped 2% to $360.35.
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