The Drag From ESPN On Disney Shares Likely To Moderate

Walt Disney Co DIS reported a Q4 earnings miss. With the company quantifying the impact of ESPN's new NBA contract, there is increased visibility at least over the next year, which should lower the pressure on Walt Disney’s shares from this factor, Barclays’ Kannan Venkateshwar said in a report.

Venkateshwar upgraded the rating on the company from Underweight to Equal Weight, while maintaining the price target at $89.

ESPN De-Risked

There are continued concerns around ESPN's fixed cost and variable revenue business. “While this issue is likely secular, Disney eliminated uncertainty around this factor by quantifying the impact of ESPN's new NBA contract,” Venkateshwar wrote.

Moreover, newer OTT [Over-the-Top] bundles are emerging, which should help ESPN lower “some of the impact of legacy MVPD [Multichannel Video Programming Distributor] declines,” the analyst noted.

Shanghai

Walt Disney indicated that its park in China would likely break even next year, which is a positive surprise and “removes some uncertainty with respect to the potential for Disney's parks outside the US given the relative struggle at the other two parks operated by Disney, Paris and Hong Kong,” Venkateshwar commented.

Moreover, the company’s 2018 box office slate would likely provide a floor for multiples in the near term.

At last check in Friday's pre-market session, Disney was up 2.67 percent at $97.50.