Jefferies Say Walt Disney Co (NYSE:DIS) Is More Than Star Wars


As much as Star Wars: Force Awakens can be seen living up box office expectations, Jefferies notes that there is more to Walt Disney Co (NYSE:DIS) than Star Wars. According to the firm, increases in the cost of sports rights over the next several years are likely to limit Walt Disney’s earnings. As such, the firm has assigned lower earnings expectations for the company compared to average Street estimate.

Jefferies maintains Hold rating on Walt Disney Co (NYSE:DIS) and has a 12-month price target of $112 on the stock.

Star Wars opening impresses

Star Wars: Force Awakens openings in the U.S. and globally impressed with opening revenues coming at the high end of the estimates.  The film generated $238 million in domestic box office on the opening weekend, exceeding the $206 million that Jurassic World generated in the same period. Globally, the movie generated $517 million on the opening weekend, not far from Jurassic World’s $525 million. It is worth noting that Force Awakens’ global launch didn’t capture China where the movie will open in early January.

According to Jefferies, Force Awakens could generate $2 billion at the global box office.

Although movies tend to lose their box office revenue strength in the second week of release, Jefferies notes that Force Awakens continues to show impressive strength.

Major movie titles have seen their box office revenues fall by between 50 and 60% in the second week compared to the first week.

Media pressure

While Jefferies remains constructive on the prospects of Star Wars: Force Awakens, the firm notes that Walt Disney Co (NYSE:DIS)’s media business is not in great shape. The company is set to face higher sports rights acquisition costs, which are likely to pressure its margins, albeit in the near-term.

As such, Jefferies is taking more cautious outlook of the Walt Disney Co (NYSE:DIS)’s future. The firm predicts fiscal 2016, 2017 and 2018 EPS of $5.52, $5.97 and $6.60, respectively. The estimates are below the consensus EPS targets of $5.65, $6.22 and $6.81 for 2016, 2017 and 2018, respectively.

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