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Theatrical woes. Layoffs at ESPN. Soft attendance at theme parks.
“This is shaping up as a difficult period for Disney,” Rosenblatt Securities analyst Barton Crockett wrote in a note to clients Tuesday, as he lowered his price target on the media giant’s stock
DIS,
to $111 from $118.
But Crockett said he still has hope for the shares, and he reiterated his buy rating on them in his latest report, writing that “asset value is meaningful, and seems likely to be realized, one way or another.”
Don’t miss: Disney’s ‘lifeblood’ is under pressure. These analysts see a few possible fixes.
Crockett, for his part, assumed Disney can improve in the face of some current hiccups, and he was not particularly spooked by reports of smaller crowds at Disney’s Orlando parks, noting that the company already warned about tough comparisons to a year-ago period that contained promotions related to Walt Disney World’s 50th anniversary.
See also: ‘Indiana Jones’ sequel opens with lukewarm $60 million at box office
That said, he’s also encouraged by his sum-of-the-parts analysis, which he said offers a “base case” for the shares. If Disney can’t turn things around quickly, “the breakup value is a hedge.” Shares of Disney have sagged 13% over the past three months as the S&P 500
SPX,
has charged 7% higher.
Crockett said he sees various potential breakup scenarios, including a spinoff of the company’s parks business or of its TV networks. Those networks could be separated out “at a low multiple to a financially driven buyer who would milk them for cash flow, akin to how AT&T exited DirecTV,” he commented, or perhaps the company could opt to let go of just ESPN.
He also acknowledged that potential suitors would see value in Disney’s content engine and streaming enterprise.
These “could trade on their own as a valuable content library with a streaming service attached—something a lot of buyers would have interest in, akin to the split/sale process Lions Gate is going [through],” Crockett wrote. “Or the library
could be sold to a tech giant looking for iconic content, like Apple.”
Read: Disney’s streaming opportunity might be misunderstood. Here’s why.
While numerous other media companies have dual-class share structures, Disney doesn’t, “making it more responsive to shareholder desires for a breakup, should that emerge,” Crockett wrote.
Needham’s Laura Martin is less upbeat about the shares, which she rated at hold, though she flagged the company’s shareholder setup as compelling as well.
The company “has no controlling shareholder to block a takeover,” Martin wrote Tuesday — one reason why she thinks the company will be purchased over the next three years.
“Takeover premiums have historically been 30-40% above the public trading price for media companies with AAA libraries,” Martin noted, and Disney has “the best assets in the media business” along with “no permanent CEO or CFO that has a conflicting agenda vs public shareholders.”
More from MarketWatch: Apple buying Disney? Analyst explains why they’re ‘worth more together’
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