We have maintained our long-term Neutral recommendation on
The Walt Disney Company
) with a target price of $69.00. Moreover, shares of Disney carry
a Zacks Rank #2 (Buy).
Why the Reiteration?
Disney remains well positioned to drive revenue growth through
its strategic initiatives as the company continues to invest in
its core businesses while expanding its operating margins.
Further, strong performance by the Media Networks and Parks and
Resorts division continues to boost the top and bottom line
results of the company.
In the long run, the outlook seems healthy for the company as
Disney entered into several content distribution agreements with
), Cox Communications and Charter Communications, which
strengthen Disney's multichannel subscription model by adding
more platforms to deliver its content.
Moreover, we believe that strong performance by ESPN is likely
to boost the results of the segment as it remains the favorite
destination of sports lovers and has the right mix of exclusive
sporting licenses with top sporting leagues.
However, we believe that the stock is likely to remain under
pressure in the near term on account of numerous challenges that
will negatively impact its financials in the upcoming
The company stated that its third-quarter results at the Parks
and Resorts business will be negatively impacted by $35 million
owing to the shift in timing of the Easter holiday. Further, the
company's Studio results are expected to be adversely impacted by
the pre-release marketing expenses for
The Lone Ranger
Moreover, the company's Interactive business is projected to
report a loss, reflecting shift in the release date of Infinity
game to the fourth quarter. In the Broadcasting division, the
company expects programming expenses to be $40 million higher in
the third quarter compared with the year-ago quarter.
Other Stock to Consider
The other stock in the media & entertainment universe
worth considering is
), which holds a Zacks Rank #2 (Buy).
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