Sly - From CBS Marketwatch
BURBANK, Calif. (CBS.MW) -- Walt Disney shares advanced slightly
Thursday after Morgan Stanley upgraded the issue to "strong buy" from
outperform."
The stock (DIS), a component of the Dow Jones Industrial Average, rose
9/16 to 33 1/2.
Analyst Richard Bilotti also raised his 12-month
price target on the shares to $42 from $33.
The positive revision comes a day after Disney
issued disappointing fiscal first-quarter results. It
reported profits of $470 million, or 23 cents a
share, down from $755 million, or 37 cents, a year
earlier. Disney was expected to earn 24 cents a
share, according to analysts surveyed by First Call.
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In a research note, Bilotti said he's confident that
Disney's at the end of a "stretch of weak quarterly
earnings growth." For several quarters, the
entertainment titan has been plagued by weakness
in its home video and broadcasting divisions, and
the theatrical film division hasn't been able to match
prior-year results.
But Bilotti now asserts that there are three catalysts
that will boost Disney's cash flow beginning in the
September quarter and continuing into fiscal 2000.
The analyst says the company's ESPN cable network will probably raise
its monthly fee for cable operators by another 20 cents per-subscriber
very soon. That increase should boost revenue in fiscal 2000 by $180
million to $190 million, he said.
If ESPN can also lift its advertising revenue by $120 million, Bilotti
estimates that the network "should be able to produce at least $100
million of additional profits" in fiscal 2000, which begins in October 1999.
Another business that should help Disney in the
coming months is its line of cruise ships, Bilotti said.
He thinks the ships can add $100 million in income
over the next two fiscal years, and that the division
can "average 13-15 percent" cash flow growth
through fiscal 2002.
Further, Bilotti is bullish on the company's live
action films.
During the just-concluded period, "Enemy of the
State," "The Waterboy," "A Bug's Life" and "A Civil
Action" posted strong box office results.
Bilotti notes that the studio has been more conscious of cost overruns,
which bodes well for future productions. He predicts "that with fewer
movies and tighter cost controls, the live action film slate can improve its
annual profitability by $100-200 million over the next six to eight
quarters."
Regards
Neil |
