Macquarie Remains Bullish On Disney, Notes 3 Near-Term Catalysts

Walt Disney CoDISthird quarter report which contained cautious commentary and forward looking guidance guidance, a bearish sector-wide downgrade note from analysts at Bernstein along with the overall market volatility and macro-economic uncertainty. However, Tim Nollen, Macquarie Capital's Senior Media Analyst, reiterated an Outperform rating and $122 price target on shares of Disney in a note on Monday. The analyst stated that investors face an "interesting entry point" to a stock with three "major" near-term catalysts. Nollen's first catalyst is the return of both college footbal and NFL Monday Night Football beginning September 14. The analyst noted that the start of 2014's football season resulted in a two percent increase in live-same day ratings for ESPN last year. In addition, ESPN is one of the "very few" basic cable networks that could succeed at a direct-to-consumer type of business, which should ease concerns over ongoing "cord cutting" fears. The analyst's second catalyst is the upcoming Star Wars release which is projected to generate $5 billion in consumer merchandise sales in the first year and "easily" net Disney approximately $500 million in licensing and retail revenue. Moreover, Nollen is projecting the movie to gross roughly $2 billion worldwide, resulting in $1.2 billion in revenue for the company. Finally, the analyst stated the opening of Disney's Shanghai park next year could add $300 million in revenue in fiscal 2016, and break even within two years. After that, the new park will contribute a "small but rising" percentage to earnings per share each year moving forward. Bottom line, the stock is "much more attractive" today than it was a month ago and the upside potential "more than offsets" the risks.