Disney magic

Fiscal Q1 results keep bears at bay

Last week, Citi Investment Research analyst Jason Bazinet downgraded shares of Disney to "sell," making him the most bearish of 21 analysts who cover the stock, according to Yahoo Finance. His thesis was that a weak economy was harming Disney's travel and theme park businesses.

Give him kudos for being a contrarian, but Disney blew past earnings expectations this week, and Bazinet had to acknowledge that every division, including theme parks, beat his expectations.

As of Thursday, the stock is up 8% since Bazinet issued his sell call and slashed his price target by a whopping $10 to $26.

"Frankly, that downgrade looks pretty silly in light of Disney's" fiscal first-quarter results, he admitted.

Still, he's a bear, convinced that his negative call on Disney wasn't as much wrong as it was early, based on his assumption that hotel pricing at the theme parks will be down 10% in the January-March period.

While Bazinet sees a 18% decline on Disney's horizon, the most bullish analyst, David Miller of SMH Capital, predicts a 39% gain this year to $44 a share.

"Now is the right time for the accumulation of Disney shares by investors who want to play the big-cap, vertically integrated media space with a bias toward franchise value and a sustained competitive advantage, which Disney clearly has," Miller said.

His thesis is partially based on a stock price that is 14.1 times Disney's presumed earnings per share of $2.13 this fiscal year. That, says Miller, is "a mere 2.9% premium to the S&P 500, which is notable because Disney usually trades at a 10% to 15% premium."

Goldman Sachs analyst Ingrid Chung similarly asserts that "shares currently trade near trough multiples relative to the S&P."

She also addresses Bazinet's concerns of a weak economy, saying that Disney shares "have already priced in a macro slowdown."

She even uses "recession-level estimates" in predicting a 3% decline this year in theme park attendance.

On the plus side, she likes the way Disney is leveraging its content across several platforms, specifically noting the usual suspects: "Hannah Montana," "High School Musical" and "Pirates of the Caribbean."

Also, she's bullish on Disney's "growing exposure to secular growth areas including the Internet, video games and international."

She rates Disney a "buy" with a $39 target, suggesting 23% upside for the stock this year.