Disney (DIS): Earnings Preview, Hotel Bookings Critical - UBS

UBS analyst Doug Mitchelson, reiterated his Buy rating on shares of Walt Disney (NYSE: DIS) ahead of what is expected to be in-line earnings.

The focus will remain on U.S. cable network affiliate revenue, in line with F1Q & F2Q. Regarding Theme Parks, the Shanghai launch was strong and F4Q hotel bookings will be critical. Consumer F2Q16 disappointed but F3Q should be reasonable, and F4Q commentary is facing tough comps.

Bulls believe that an unprecedented FY18/19 film lineup and parks build-out will continue to drive growth at Disney's consumer facing businesses into the next decade while Media Networks will still see modest growth, Hulu losses improving, cost cutting initiatives, international growth (Disney Channels and ESPN), stable ESPN affiliate revenue growth of 3.5% until new renewals kick in (CVC in '17, TWC in '19), and low cable programming cost increases from FY18-FY21 (no meaningful renewals), all while capital returns remain reasonable given balance sheet flexibility and the stock looks cheap relative to consumer stocks.

Bears believe that DIS no longer deserves a premium due to skinny bundle risk to high fixed-cost ESPN and Disney's record content success being unsustainable, along with a strongly-held belief FY17 street EPS remains too high (at $6.17 vs. bear case $5.75).

No change to the price target of $116.

For an analyst ratings summary and ratings history on Walt Disney click here. For more ratings news on Walt Disney click here.

Shares of Walt Disney closed at $95.95 yesterday.

You May Also Be Interested In

• Gilead Sciences (GILD) Misses Q1 EPS by 288c
• MarineMax (HZO) PT Lowered to $35 at Stifel
• Alphabet (GOOG) Tops Q1 EPS by 38c