- It's "too early to own" Walt Disney (DIS -0.5%), says BMO Capital's Daniel Salmon in a downgrade to Underperform, and one key reason won't surprise followers of the company: ESPN.
- But BMO's also cautious on the studio's ambitious film slate after Disney turned in a record 2016.
- "Sentiment and stock performance has turned positive as investors: 1) feel better about ESPN sub trends after positive comments from management on the last earnings call; and 2) look ahead to a robust F2018 film slate," he writes.
- "We think this positive turn comes too early and the risk/reward skews negatively (our target is $88, upside scenario $110, downside is $70) ... We still see more negative data points than positive for ESPN and believe consensus Studio estimates embed better performance per film, which is a key risk, in our opinion."
- The target of $88 implies 18% downside from today's price.