Arguments By Disney Bulls And Bears Each Have Merit

Shares of Walt Disney Co DIS have rallied since the U.S. Presidential election, as have most media stocks, on expectations of tax reform and reflation.

The stock is currently trading near its 52-week high, and further movement would depend on fundamentals, Bernstein’s Todd Juenger said in a report.

While reiterating a Market Perform rating and price target of $107 for Disney, Juenger commented, “Our opinion remains what we describe as "aggressively neutral".”

Bulls May Win Near Term, Bears In Longer Term

“Both bull/bear arguments have merit,” the analyst commented.

Bulls are more likely to win in the near-term, possibly around six months. Juenger cited the reason as “hopes of tax and OTT bundles.”

He added, however, that bears could win in the longer term of 12 to 18 months, “perhaps resulting in another "oh no" moment for the sector like we saw in 2H15.”

Related Link: Wall Street Has Absolutely No Idea What To Make Of Disney

View Remains Neutral

“Some investors who liked the stock at $95 are not so sure at $113, and vice-versa,” Juenger mentioned. He expects the Parks, Studios, and Consumer Products to exhibit solid “earnings power, durability, and ROIC.”

The analyst noted, however, that Media Networks generates almost half of the net income, and troubled ESPN is “especially vulnerable to cord-cutting and cord-shaving.” Acceleration in the other businesses could be offset by a deterioration in Media Networks, “netting out to a neutral result.”