RBC Likes Disney Despite Economic Risk

| About: The Walt (DIS)
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Shares of The Walt Disney Co. (NYSE:DIS) have risen 11% since mid-August as investors seem to like the entertainment company’s push to reinvigorate its creative franchise. The stock is off roughly US$1.50 from its 52-week high achieved this past spring.

Better earnings don’t hurt either, so look for more of them when Disney reports fourth quarter results on November 8.

RBC Captial Markets analyst David Bank is expecting the company, which has its hands in television, radio, Internet, parks and resorts, movies, consumer products and more, to meet or beat the consensus earnings estimate of US41¢ per share.

However, he suggests that economic uncertainty, particularly for its parks division, could dampen investor sentiment. This is despite the company’s solid near-term fundamentals.

“We think current levels reflect expectations for economic weakness (though not a recession) and see compelling risk/reward,” Mr. Bank wrote in a note to clients.

He maintained an “outperform” rating and US$39 price target on Disney, while his new earnings per share estimate for the fourth quarter was cut by a penny to US41¢.

DIS 1-yr chart: