All posts from Andreas
Andreas in Gainers & Losers,

Investment idea - Disney

We are upbeat about shares of Walt Disney (DIS), one of the largest financial conglomerates in the entertainment industry. The company continues to deliver double-digit growth. According to the recently released report for 3Q15, quarterly revenue rose 5.1% y-o-y to USD 13.10 bn. Studio Entertainment (+12.9% y-o-y) became a revenue growth driver due to the successful premiere of The Avengers: Age of Ultron and Tomorrowland. Adjusted EPS reached USD 1.45 (+13.3% y-o-y), outpacing the consensus by 2.7%.

The company generates a significant cash flow, which totaled USD 7,581 mn (+13.6% y-o-y) over nine month of FY15. Disney spent USD 2,823 mn for buyback and USD 1,948 mn on dividends. Semi-annual dividend amounted to USD 0.66 (+15% y-o-y), yielding 1.3%. The company’s management plans to continue share buyback and is ready to spend USD 6-8 bn for this purpose in 2016.

We believe the company will continue to grow rapidly in the coming quarters owing to the release of new films. The 7th episode of Star Wars, The Force Awakens, is scheduled to premiere around year end. The 8th episode of Star Wars and a Star Wars spin-off film, Rogue One, will premiere in December 2016. Cars 3 and Toy Story 4 will be released in June 2017. The premiere of Captain Marvel (motion picture about a comic character) is scheduled for March 2018. The successful release of new films will boost the company's sales in other segments, such as toys sales and theme parks, which, coupled with higher dividend and share buyback, will support growth of Disney’s market capitalization in the medium term.

We left our mid-term fundamental valuation of the company unchanged at USD 122 and recommend the name as a Buy. The short-term technical target is USD 111.