Pali Research Cuts Disney (DIS) To Neutral, Citing Valuation Gap

Pali Research took the bold step of downgrading the Mouse-House, The Walt Disney Company (NYSE: DIS), to Neutral saying the valuation gap with its large cap media peers cannot be ignored.

Pali notes that Disney trades at 13.1x their 2009 estimates, versus 8x for Viacom (NYSE: VIA.b), 9x for News Corp (NYSE: NWS.a). Pali said Disney deserve a premium given its superior asset mix, but they can no longer rate the stock a Buy.

Pali downgraded Disney from Buy to Neutral and entirely removed its price target. The firm also cut 2009 EPS from $2.20 to $1.90, which is considerably below the Wall Street consensus of $2.12.

Pali also listed some key questions management needs to address today: Why Did WDW Start Room-Only Discounting, Programming Cost Impact on ESPN? How Badly Does the Studio Need a Hit?

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