Walt Disney: Color on Quarter -- >DIS -1.4% premarket testing support near $95.
- Macquarie upgraded to Outperform.
- RBC: Disney's overall results were incrementally positive but structurally neutral. Solid (but not leading) EPS growth + sentiment overhang = Sector Perform as they maintain their $103 price target. Disney is now trading at a P/E discount to the S&P500, which arguably reflects ongoing negative sentiment around cord-cutting, which has resulted in Media being largely left behind in the market rally. Disney is near the bottom end of their expected range of $95-105. They have an upward bias for now, as they think $95 is a support level and Parks fears should abate. They maintain their price target of $103, as they have yet to see the EPS acceleration that would make them structurally more positive.
- Pivotal Research Group lowers their DIS tgt to $118 from $122. Results were punctuated by soft growth in cable affiliate revenues alongside news that the co would be investing in the technology division of MLBAM (BAM Tech) for $1bn. Concurrently, ESPN announced it will launch an OTT service. Incorporating slightly lighter long-term affiliate fee growth trends vs. prior expectations among other changes, they continue to see long-term value in Disney and recognize that investor sentiment is still too negative on the stock.
- FBR & Co notes Disney paired F3Q16 earnings with the announcement of the oft-reported plan to take a 33% stake in Major League Baseball Advanced Media (MLBAM) for $1B. Disney coupled this with news of plans for an over-the-top version of ESPN later this year, meant to complement (not replace) the TV channel, and the disclosure that Disney's main channels will be part of DirecTV's planned over-the-top offer. Otherwise, segment profits topped their estimate, mainly because of margin upside at parks.
- Needham notes pofits were driven primarily by the film segment, which offset underdelivery in TV and Consumer Products. What they liked most about FY3Q included: 1) the purchase of a 33% stake for $1B in BAMTech (slightly dilutive) 2) ESPN will be in DirecTV's skinny bundle; 3) the Sony Vue skinny bundle originally launched without ESPN. After mediocre adoption, they added ESPN and now have 100,000 subs. What they worry most about is: 1) Film and Parks strength (capital intensive, hit-driven) are offsetting weakness at TV and Consumer Products profits (high margin, lower risk), which suggests falling ROICs; and 2) Frozen comps suggest y/y declines in consumer products throughout FY16; Hold.