Pali Downgrades Disney After Three Month Decline

Mar.11.09 | About: The Walt (DIS)

Pali analyst Richard Greenfield downgraded The Walt Disney Company (NYSE:DIS) to Sell from Neutral after the stock declined 38% in the past three months versus a 24% decline in the S&P 500.

His change was premised on what he believes is: (1) struggling content compared to the past few years and he believes 2009 will be a challenging year, citing disappointing results for Bolt; (2) 2009 will not be a trough year for theme parks given the possibility of a delayed economic recovery; (3) the strengthening dollar will result in less foreign travel to Orlando - this revenue stream is higher margin; and (4) management has less flexibility with share repurchases given increasing capital expenditures and falling EBITDA - share repurchases had driven earnigns growth over the years.

He places a $12.50 price target on the stock based on 4.4x 2010 EV/EBITDA and 8.6x P/E. The shares are currently trading at 5.4x 2010 EV/EBITDA and 11x P/E.