Imperial Capital Upgrades Disney On 'Distinct' 2020 Catalysts

After Walt Disney Co. DIS's strong fourth-quarter earnings report earlier this month, Imperial Capital said it expects that next year will be a transitional one for the entertainment conglomerate. 

The Analyst

Analyst David W. Miller upgraded Walt Disney from In-Line to Outperform and increased the price target from $113 to $129.

The Thesis

Walt Disney shares have shown conservative gains given the impact of its purchase of Twenty-First Century Fox Inc. FOXA assets, Miller said in a Tuesday note. (See his track record here.) 

“We believe the reason for the tepid performance was/is due to questions from investors about the transaction, both structural and strategic, which DIS management either could not or would not answer at the time.”

Miller said he anticipates 2019 to be a transitional year as Disney seeks regulatory approvals tied to the Fox merger; continues its suspension of the buyback program; refinances existing merger debt; and hosts an upcoming analyst day.

"However, in 2020, we see shareholders benefiting from four distinct catalysts, and since DIS is a highly visible name and a Dow component, it would not surprise us to see the market price in these catalysts fairly quickly.”

The four catalysts are as follows, the analyst said: 

• The company’s 2019 film slate, including titles such as "Wreck-It Ralph 2," "Mary Poppins," "Captain Marvel," "Dumbo," "Avengers," "Toy Story 4" and "The Lion King." 2020 will also feature sequels to "Kingsman," "X-Men," "Deadpool," "Fantastic Four" and "Avatar."
• The opening of two "Star Wars" attractions. 
• Pricing power in new over-the-top services.
• Buybacks. 

Price Action

Walt Disney shares were trading 1 percent higher at $113.68 at the time of publication Tuesday.

Related Links:

Barclays Upgrades Disney On Streaming Service Optimism

How Disney Shares Trade After Earnings