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 Comcast Corp , Netflix Inc. , 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 quarters.
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 CBS Corporation , which holds a Zacks Rank #2 (Buy).