Stock analysts say Disney stock too expensive

By Georg Szalai

NEW YORK (Hollywood Reporter) - The Magic Kingdom has lost some of its Wall Street magic.

Shares of Walt Disney Co have held up better in this turbulent year than any of its peers. Investors have lauded a strong management team and solid business strategies and execution for keeping the company shielded from recession woes longer than other media biggies.

But now, a growing chorus of Wall Street observers argues that Disney's stock trades at too much of a premium to its sector peers, especially amid recent reductions to earnings estimates.

In other words, it might be too expensive compared with its sector rivals, especially in a recession economy.

Last week, for example, Pali Research analyst Rich Greenfield downgraded shares from "buy" to "neutral."

"While Disney has long traded at premium earnings and free-cash-flow multiples to its large-cap media peers, its valuation gap has meaningfully widened over the past month to a level that we can't ignore," he said in a report.

Greenfield reduced his earnings estimates for Disney on November 18, when the conglomerate's stock traded at a 2009 price/earnings multiple of 10.4 times and a free-cash-flow multiple of 11.7 times.

In issuing his downgrade, the Pali analyst highlighted that Disney was trading at a price/earnings multiple of 13.1 times, compared with Viacom's eight times and News Corp.'s nine times multiples. Meanwhile, Disney's free-cash-flow multiple had ballooned to 15 times, well ahead of Viacom's seven and News Corp.'s eight. ;
http://ca.reuters.com/article/entertain ... 3Q20081217

 

Walt Disney launches $1 bln, 5-yr bond sale - IFR

YORK, Dec 17 (Reuters) - The Walt Disney Co (DIS.N: Quote, Profile, Research, Stock Buzz) launched a $1 billion, five-year debt sale on Wednesday, which is expected to price at around 337.5 basis points over comparable U.S. treasuries, said IFR.

Citigroup, Deutsche Bank and JPMorgan are co-managing the sale, said IFR, a Thomson Reuters publication.

(Reporting by Karen Brettell; Editing by Chizu Nomiyama)

http://www.reuters.com/article/marketsN ... 0620081217

 

U.S. Stocks Gain on Obama Plan; Disney, Citigroup Shares Climb

U.S. Stocks Gain on Obama Plan; Disney, Citigroup Shares Climb
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By Lynn Thomasson

Jan. 6 (Bloomberg) -- U.S. stocks gained, recovering yesterday’s losses, on speculation President-elect Barack Obama’s $775 billion package of tax cuts and government spending will revive the economy.

Walt Disney Co., Hewlett-Packard Co. and Citigroup Inc. rose more than 3 percent on expectations consumer spending will be bolstered by Obama’s plan to propose tax breaks worth $500 for individuals. Ciena Corp. rallied 19 percent, the most since 2004, and led technology shares higher after the maker of network equipment was upgraded at Barclays Plc on growth prospects.

“It creates short-term benefits because consumers will spend more,” Ron Sweet, vice president of equity investments at USAA Investment Management Co., which oversees about $100 billion in San Antonio, said of Obama’s plan. “There’s relief that the government isn’t just going to let everything fall apart.”

The Standard & Poor’s 500 Index rose 1 percent to 936.26 at 1:01 p.m. in New York, rebounding from yesterday’s 0.5 percent drop. The index is up 3.7 percent in 2009 after sliding 38 percent in 2008, its worst yearly loss since 1937. The Dow Jones Industrial Average increased 64.52 points, or 0.7 percent, to 9,017.41. The Russell 2000 Index advanced 1.5 percent.

The S&P 500 has risen 24 percent from an 11-year low on Nov. 20 amid optimism that Obama will boost the world’s biggest economy with tax cuts and the largest infrastructure investment since the 1950s. The Federal Reserve has slashed interest rates to as low as zero percent, while the European Central Bank also has scope to reduce borrowing costs further after the region’s inflation rate fell to the lowest in more than two years.

Disney, the largest theme-park operator, increased 3.1 percent to $24.23. Hewlett-Packard climbed 4.4 percent to $37.91. Citigroup added 5.4 percent to $7.46 for the top gain in the Dow.

Ciena, Dow Chemical Rally

Ciena advanced $1.33 to $8.41 and led a group of technology shares to a 2.9 percent gain, the most in the S&P 500. Barclays analysts lifted their recommendation on the stock to “overweight” from “equal weight” because it offers “healthy long term growth potential” at “modest valuation.”

Dow Chemical Co. rallied 82 cents, or 5.5 percent, to $15.87. The largest U.S. chemical maker said it plans to seek more than $2.5 billion from Kuwait for canceling a joint venture agreement and will consider a new partner to invest in its basic- plastics business.

Stocks rose even after government data showed orders placed with U.S. factories in November fell twice as much as forecast, signaling businesses are cutting back on investments as the recession deepens. Demand fell 4.6 percent after a revised 6 percent decrease in October that was larger than previously estimated, the Commerce Department said.

Economy Watch

Purchases at U.S. retail stores open at least a year dropped 0.8 percent in the seven days through Jan. 3, the International Council of Shopping Centers and Goldman Sachs Group Inc. said. November-December sales declined as much as 2 percent, ICSC Chief Economist Michael Niemira said.

The gain in stocks came after Obama told House Speaker Nancy Pelosi he favors a price tag of about $775 billion for the U.S. economic stimulus plan, according to a Democratic aide.

U.S. construction companies and investment banks will be among the prime beneficiaries of business tax cuts proposed by Obama, the Wall Street Journal said. Proposals being drafted by congressional Democrats and the incoming administration would allow companies to use tax losses to reduce taxable U.S. profit earned in the last five years, the newspaper said.

‘Hard Not to Be Positive’

“It’s hard not to be positive given how much stimulus is coming through the pipe,” Jason Pride, research director for Haverford Trust Co., which oversees $5.5 billion in Haverford, Pennsylvania, told Bloomberg Television. “In the back half of ‘09, we do expect some form of recovery.”

Investors should favor U.S. companies that generate most of their revenue at home rather than in Western Europe, Goldman Sachs Group Inc. said in a note. The brokerage has an “overweight” recommendation on the consumer-staples and health- care industries.

“The S&P 500 will begin to trade meaningfully higher once we pass four critical milestones,” Goldman Sach’s New York-based strategist David Kostin wrote. “Passage of a fiscal stimulus plan in the first quarter, improved access to credit for corporations and consumers, home price stabilization and declines in financial writedowns.”

‘Very Right’

Fed officials are focused on driving down the spreads between Treasury yields and consumer and corporate loans in order to reinvigorate credit markets.

Byron Wien, the strategist who correctly predicted a recession would drive stocks lower last year, said the market hit a bottom in the fourth quarter and government efforts to bolster the economy should help spur a 33 percent rebound in the S&P 500 in 2009.

“Everybody compares this period to the 1930s,” said Wien, chief investment strategist at Westport, Connecticut-based hedge fund firm Pequot Capital Management Inc. and former strategist at Morgan Stanley. “But in the 1930s the policy responses were almost invariably wrong. And here the policy responses, at least as they appear, look like they’re very right to me.”

Still, the rally in the S&P 500 since its November low hasn’t brought some of the most successful investors into the equity market. Paolo Pellegrini, the former Paulson & Co. hedge- fund manager who helped make more than $3 billion with bets on a U.S. housing crash, said he will avoid stocks in 2009 after the S&P 500’s 38 percent loss last year.

ICE Slumps

Intercontinental Exchange Inc. fell the most in the S&P 500, losing 14 percent to $62.58. The second-largest U.S. futures market was downgraded to “neutral” from “buy” at UBS AG and Goldman Sachs Group Inc. after reporting weaker-than-expected volumes for the fourth quarter.

Nucor Corp. slid 4.5 percent to $45.19. UBS lowered its recommendation on the largest U.S.-based steel producer to “neutral” from “buy” and predicted falling demand and prices for the metal.

Garmin Ltd. dropped 5.7 percent to $20.75. Goldman Sachs added the largest U.S. maker of car-navigation devices to its “conviction sell” list, downgrading it from “neutral.”

Europe’s Dow Jones Stoxx 600 Index rose for a sixth day, adding 2 percent as forecasts from U.K. retailers reassured investors. More than five shares rose for every four that fell in the MSCI Asia Pacific Index, which slipped 0.2 percent.

To contact the reporter on this story: Lynn Thomasson in New York at lthomasson@bloomberg.net.

Last Updated: January 6, 2009 13:04 EST
http://www.bloomberg.com/apps/news?pid= ... k&refer=us

 

Morgan Stanley lowers forecast on Disney

Morgan Stanley Research today lowered its 2009 earnings forecast for the Walt Disney Co., citing slowing consumer spending on home entertainment, declining advertising growth at ESPN and concerns about the theme parks.

Analyst Benjamin Swinburne shaved his projections of Disney's earnings per share to $1.92, from $2.05, because of the company's bearish prospect in the recession and how it will pinch consumer spending.

Home entertainment revenues for the entire industry will decline this year, Swinburne wrote, as DVD sales continue to decline and purchases of the Blu-ray discs and downloads of online movies fail to pick up the slack. Although he expects consumers increasingly to gravitate to the new high-definition movie discs, home entertainment won't return to growth until 2011, he wrote.

The bigger concern is the recession's effect on Disney's cable sports powerhouse, ESPN. Swinburne wrote that the network may be more vulnerable because it relies heavily on automakers, and extracts premium advertising rates in a softening market. General Motors decided it would not run commercials during the Super Bowl this year, demonstrating that sports is not immune.

Disney's films also had a mixed holiday reception, Swinburne noted, as Adam Sandler's "Bedtime Stories" generated more than $100 million in ticket sales worldwide in just three weeks, but the 3-D animated release "Bolt" -- which was supposed to herald the comeback of Disney's animation division -- was "slightly disappointing" at only $172 million in global box office to date.

Swinburne, however, said he remained "positively biased" toward Disney in the long term and restated the company's equal-weight rating. Disney's stock traded at $21.13, down 74 cents in midday trading.

-- Dawn C. Chmielewski

Photo: Disney Animation building. Credit: Francine Orr / For The Times

http://latimesblogs.latimes.com/enterta ... anley.html

 

Anybody want to trade me some Disney stocks for some Nortel?????????? ; :-X

 

no thanks - I have enough in my RRSP to "do" - holy suffering yikes!