" Disney tries to regain pizzazz
By Jon Friedman, CBS MarketWatch
Last Update: 5:37 PM ET Sep 26, 1999
NewsWatch
NEW YORK (CBS.MW) -- Walt Disney, the company that Wall Street wants to love, is getting a better reception by some investors.
Disney (DIS: news, msgs), the entertainment and media company sporting one of the most enviable brand names in the world, has a big opportunity to win back good will this week. The company is expected to make a presentation to securities analysts and investors during Merrill Lynch & Co.'s MER: news, msgs) entertainment conference in
Los Angeles.
If Disney makes a good showing, the stock could show signs of life after remaining in the doldrums this year. It has languished in the $26-$30 range lately, at a time when rivals Time Warner (TWX: news, msgs) and CBS (CBS: news, msgs) have become the entertainment/media darlings of Wall Street. (CBS owns a significant stake in CBSMarketwatch, publisher of this Web site).
Few respected companies have prompted such teeth-gnashing lately as the Burbank, Calif.-based entertainment giant. Disney has disappointed analysts in failing to realize the potential of its array of properties, ranging from ESPN and ABC-TV to its self-titled theme parks all over the world.
Wall Street lately has been cutting Disney some slack. Investors nod favorably at everything from Disney's sales of non-core properties and the vitality of such Disney movies as "The Sixth Sense" to the prospects for its Super Bowl broadcast in January and ABC's good ratings early in
the new fall season.
"Everyone wants to like the Disney story," said Joe Kinnison, media and entertainment analyst at American Express Financial Advisors in Minneapolis, which owns more than 6 million shares of Disney and has been accumulating the shares lately.
Favorite stock
How much does American Express Financial Advisors like Disney now? It's Kinnison's favorite stock -- "by a mile," he said.
To be sure, Disney is attractive partly because its shares are regarded as being undervalued, putting it in the unlikely position of being a growth-oriented company that is now wooing value fund managers.
The surest path back to respectability is for Disney to meet analysts' earnings projections. Disney, whose fiscal year ends on Thursday, is expected to earn 11 cents this quarter, according to securities analysts. Investment professionals gripe that Disney seems to have a tendency to give lofty pledges, which for a time restores Wall Street's favor, then the company invariably fails to deliver on the promises.
"The company wasn't delivering on its earnings forecasts," said Kinnison of American Express. "Oh gosh, what was it? Six quarters (when this happened)?" Kinnison said.
For that reason, much of Wall Street isn't quite ready to sign onto the Mickey Mouse brigade. "It's still regarded as a show-me stock by a lot of investors," said Angela Auchey, entertainment analyst at Federated Investors in Pittsburgh, which owns about 1.4 million Disney shares
Auchey reflects Wall Street's reservations when she says: "I like it better as a long-term play than in the short term. ABC has continued to slip up and the theme parks aren't knocking anyone's socks off."
Brand name
Nevertheless, Disney has a brand name awareness that makes rival executives drool. "If Seagram (VO: news, msgs), for example, owned the same assets, they wouldn't be worth as much because of Disney's clout," Auchey said.
Disney needs a shot of glamour, and ABC, which shows the network powerhouse "NYPD Blue," has the potential to provide it.
ABC could sorely use a break-out hit -- and soon. Auchey noted that in the week of Sept. 6-12, ABC's highest-rated show was its news magazine "20/20," not a situation-comedy or a drama, and it didn't crack the top 5. ABC, determined to give maximum exposure to its television stars, isn't shy about promoting them seemingly all the time.
On one morning, ESPN and ABC football expert Chris Berman appeared on the "Live with Regis and Kathie Lee" talk show to prop up interest in ABC's "Monday Night Football" broadcasts. Only an hour later, Heather Locklear, who has left "Melrose Place" to join Michael J. Fox on ABC's "Spin City" bantered on "The View."
"ABC does like to do a lot of cross-promoting," Kinnison said wryly.
If ABC's new fall lineup goes on a roll, it will probably get a big boost early next year. ABC has the rights to broadcast the Super Bowl from Atlanta in January. The big football game is traditionally one of the most-watched programs of any year and an extravaganza for cross-marketing possibilities.
In addition, ABC spokesmen aren't denying speculation that ABC has already sold out most of its 30-second Super Bowl time slots to advertisers, who are shelling out a record $2 million for a half-minute of air time When Fox Sports aired the Denver Broncos' victory over the Atlanta Falcons last January, it got $1.6 million for a 30-second slot.
For now, many investors seem to need a reason to embrace Disney. "I don't own it but I'm watching it," said Scott Schoelzel, manager of the Janus 20 fund in Denver, which has assets of $26 billion. "Disney has good properties but its management hasn't been able to extract top value.''
Jon Friedman is an online reporter for CBS MarketWatch." |
