Walt Disney Co’s (DIS) Soggy Outlook Tests Investors Patience; Credit Suisse Weighs in

Credit Suisse remains bullish on Walt Disney despite earnings warning.


During a Bank of America media conference on Thursday, Walt Disney Co (NYSE:DIS) CEO Bob Iger said the company’s earnings per share for this year would be roughly in line with the $5.72 generated in fiscal 2016. This is a problem considering analysts expected the media giant to hit $5.88.

However, Credit Suisse analyst Omar Sheikh believes the downside should be minimized as the stock price is already depressed. Sheikh noted, “DIS will invest more in its Disney-branded direct to consumer movie/TV service that previously expected, and has highlighted a modest near term EPS impact from Hurricane Irma. Full details of the Disney and ESPN-branded services are still forthcoming – which is likely to mean ongoing uncertainty on future earnings – but with the stock trading at 8.5x 2018 EV/EBITDA, the valuation is looking excessively depressed.”

“We note that Hurricane Matthew impacted Parks profit by $40 million in 2016 (when Orlando was closed for 1½ days); and that disruption to 5 cruises could impact the segment’s profit by a similar amount. This could negatively impact Q4 Parks operating income by ~10%, but group FY17 EPS by less than 1%,” the analyst added.

As such, Sheikh reiterates an Outperform rating on DIS with a price target of $120, which represents a potential upside of 24% from where the stock is currently trading. (To watch Sheikh’s track record, click here)

Out of the 16 analysts polled in the past 3 months, 8 are bullish on Walt Disney stock, 6 are sidelined, while only two are bearish on the stock. With a return potential of 14%, the stock’s consensus target price stands at $110.85.