Barclays analyst drops Disney stock to hold

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It’s not that Anthony DiClemente dislikes The Walt Disney Company, but the Barclays Capital analyst notes that the shares have gone up in price by over 25% in the past three months, while the S&P 500 has gained only 11%. Thus, he has changed his overweight (buy) rating to equal weight (hold).


Disney now trades at a wider-than-normal premium to its peers, DiClemente noted in a research report. “Given this recent upward move, a plateau in positive EPS revisions, and a deceleration in growth, we believe risk/ reward in DIS shares is less attractive, and as such, we are downgrading shares to 2-Equal Weight,” he wrote. “Soft TV ratings trends at ESPN/ ABC, moderated future growth at the Parks, and an uncertain forward year film slate contribute to our hesitation at these levels,” the analyst added.

For the TV/cable side in particular, DiClemente had this to say to clients: “ESPN ratings ended the 4Q down -15%, following -14% in 3Q. We believe this ratings weakness, tough comps in 1H12, and moderated demand in the scatter market could pressure ad revenues; we are lowering our quarterly estimate for ESPN to flat growth (from +2%) accordingly. ABC ratings have also been soft as they are -8% in the season-to-date for the 18-49 demo.

DiClemente is sticking with his target price of $44 per share, which was further above the actual price when he first made that the target. The stock closed Monday (1/10) at $39.75.


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