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Here's Why The BAMTech Acquisition Is An Important Step For Disney

Walt Disney Co DIS marginally topped revenue expectations, backed by strength in Studio and Parks and has plans to acquire a minority stake in video streaming company BAMTech, Citi’s Jason Bazinet said in a report. He maintained a Buy rating on Walt Disney, with a price target of $120.

Walt Disney reported its quarterly revenue at $14.3 billion, representing 9 percent growth and beating the Citi estimate of $13.9 billion and Street expectation of $14.2 billion. Adj. EBIT came in at $4.5 billion, up 8.2 percent, ahead of the Citi estimate of $4.4 billion and the Street expectation of $4.2 billion.

Studio and Parks Strong

Studio revenue was recorded at $2.8 billion, representing 39.6 percent growth, and beating the Citi estimate by 16.2 percent. EBIT was up 62.3 percent to $766 million, ahead of the Citi forecast by 11.9 percent.

Parks revenue came in at $4.4 billion, up 6 percent and ahead of the Citi estimate by 2.6 percent. EBIT grew 7.8 percent to $994 million, 14.8 percent higher than the Citi forecast.

Why The BAMTech Investment?

Bazinet mentioned that Walt Disney had confirmed the acquisition of a 33 percent stake in BAMTech for $1 billion. Management also announced a direct-to-consumer service that would include MLB and NHL content that BAMTech has already licensed as well as additional content licensed by ESPN. Walt Disney expects to roll out the service by yearend 2016.

“We view today’s BAMTech announcement as an important first step in Disney’s next phase of growth,” Bazine commented.

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DateFirmActionFromTo
Aug 2016MacquarieUpgradesNeutralOutperform
Jul 2016FBR CapitalDowngradesOutperformMarket Perform
Jul 2016Stifel NicolausDowngradesBuyHold

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