Shares of Walt Disney (DIS) are up 17 cents, or half a percent, at $35.93 after Citigroup analyst Jason Bazinet upgraded the stock to “Hold” from “Sell” and raised his target price to $37 from $31, following last night’s better-than-expected fiscal Q2 results.
The shares had sold off after the results on some perceived weakness in cable networks.
Bazinet raised his estimate for this year’s profit to $2.05 from $1.98, based on the strength of studio revenue and the operating margin, which improved with lower distribution costs.
The cable networks business is a mixed bag: Bazinet raised his revenue estimate thanks to a brightened outlook at ESPN and with TV ad sales rising, though he notes higher costs for distributing ESPN.
Bazinet raised his pre-tax operating profit margin on the studio business to 11.4% this year from a prior expectation of 6%, which he now says was “too cautious.” For next year, he sees that rising to 13.8%.
Bazinet’s price target of $37 represents a 14.5 multiple of next year’s projected $2.53 per share in earnings, which he notes is below the stock’s 5-year average of 16 times.
To get to “Buy,” Bazinet needs to see a stronger line-up, some sense that studio profit margin will persist, or lower costs for ESPN, he writes.
No comments:
Post a Comment