Disney hit another all time high on Mar. 11 of $57.66 so that it now trades at a 14.86 forward P/E with a 1.30% yield. With a current PEG of 1.35, Disney may be getting too big for Goofy’s britches and the median analyst price target of $62.50 leaves only 10% upside.
Another reason the Street may cool on Disney is that Iger plans to leave in 2016. If it performs like McDonald’s did after their long time CEO left DIsney’s stock price glory days may be halted. In the last month three analysts have moved from hold to buy for 13 buys while strong buys remain virtually unchanged at 6 analysts and there are no underperforms or sell recommendations.
What about the other contenders?
The Walt Disney Company (NYSE:DIS)’s closest diversified entertainment rival in size is News Corp (NASDAQ:NWSA), which just announced a challenge to valuable asset Disney’s ESPN with a new Fox sports network. A Motley Fool roundtable video clarifies how much of a threat this is to Disney. News Corp does not have the parks or resorts nor the branded merchandise kicker.
Like Disney’s other rival, Time Warner Inc. (NYSE:TWX), all three sport similar P/Es of 18 and change. Time Warner Inc. (NYSE:TWX) hit a 52-week high itself on Mar. 11 as did News Corp. All three are benefiting from the content is king trend that is also raising the share prices of CBS and Comcast. Time Warner has one advantage over Disney and that is it yields 2.00%. News Corp (NASDAQ:NWSA) yields barely 0.50%. But analysts expect slightly better EPS growth of 12.28% over the next five years for Disney than Time Warner at 12.19%. Time Warner Inc. (NYSE:TWX) is almost half the size of Disney with a market cap of $53.53 billion to Disney’s $104.10 billion.
With News Corp (NASDAQ:NWSA) currently involved with its spinoff of its publishing division, earnings estimates are hard to come by as well as market sentiment. The British phone hacking scandal plods on interminably and the most bullish catalyst seems to be the Fox 1 sports network.
News Corp (NASDAQ:NWSA) CEO Rupert Murdoch still plans to have a hand in both News Corp and the spun off Fox Group where he will be CEO as well as keeping his 40% of class B of the common shares. Depending on how you feel about Murdoch this may be a deal breaker right there. I would much rather bet on Iger, at least until 2016. The hits just keep on coming from Disney with last weekend’s smash at the box office of “Oz-The Great and Powerful.”
Miss Congeniality accept your prize!
I think the two biggest risks to The Walt Disney Company (NYSE:DIS) going forward are simply that it has run so far for good reason and Iger’s eventual departure. However, the many friends this most congenial company has in high (and low) places will likely stay loyal as these partnerships are mutually beneficial and no one does them better than Disney.
The article The Miss Congeniality of the Dow originally appeared on Fool.com and is written by AnnaLisa Kraft.
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