Analysts Issue Bullish Reports on Disney After 'Cars 2' Opening Weekend
Some Wall Street observers on Monday highlighted the sequel's better-than-expected theatrical performance, while another lowered his target price on the conglomerate's stock, but recommended investors buy it due to 20 percent upside.
NEW YORK - Several analysts on Monday expressed support for Walt Disney's stock, with some highlighting the better-than-expected box office performance of Cars 2.
"Walt Disney Co.’s Cars 2 release fared better than critics’ reviews would have suggested," said Miller Tabak analyst David Joyce who has a "buy" rating and short-term price target of $48 on the stock. "The CinemaScore audience reaction report at A- showed potentially much better legs for future box office receipts for the film."
In some negative news for the film industry, however, "another weak data point for 3D moviegoers was evident here at 40 percent of ticket sales."
Wunderlich Securities analyst Matthew Harrigan echoed Joyce's take on the Cars sequel. While it is still early, "Cars 2 [is] amazingly pacing slightly ahead of Toy Story 3 overseas," he said. On a comparable territory basis, Cars 2 is 4 percent ahead of last year's Toy Story 3.
Harrigan also rates Disney shares a "buy" with a target price of $50. On Monday, he highlighted "potential stock upside relative to the ad market, park attendance/pricing and affiliate fees.
Meanwhile, Nomura analyst Michael Nathanson, who also has a "buy" on the stock, in his Disney report on Monday cut his target price by $2 to $45 and addressed what he called three core concerns of investors. His report's title: "Looking to Regain the Magic."
"Since reporting earnings on May 10, Disney shares have traded down 14 percent versus the market decline of only 6.5 percent," Nathanson said. "No doubt some of the downward pressure was fueled by Disney’s unlikely [quarterly] earnings miss."
Investors top concern now are that the current quarter will be "another messy quarter, theme park trends "may not hold up in the face of a somewhat weaker economy," and park capital expenditures will continue to be a drag.
Despite some real challenges, Nathanson concluded that the recent stock decline provides a buying opportunity. "Given the pullback (even with our reduced target price), Disney offers 20 percent potential upside," he said.
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