Why Disney Shares May Be Headed Up to $100, With or Without Star Wars

Media

Published: June 28, 2014 10:00 am

Last Updated: June 28, 2014 10:01 am

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Walt Disney Co. (NYSE: DIS) was a beneficiary of the anti-Aereo ruling from the Supreme Court last week, but the media and entertainment giant keeps chugging ahead and firing on all cylinders. Shares recently hit an all-time high of $85.86, but the trend is for the stock to keep going.

The consensus price target among all Wall Street analysts is $89.54, versus an $85.30 close on Friday. The prior street-high target was $97, but one analyst is now calling for $100. Jefferies’ John Janedis started coverage on Disney with a Buy rating and assigned the street-high target of $100. Disney had a great week as the stock was down at $82.68 prior to the report being issued.

The analyst note suggests Disney is only at the early stages of a multiyear run higher. Janedis also sees growth coming from all segments of the company. Pricing power is another solid advantage of the company boosting margins at parks, and of course Disney has high barriers to entry for would-be competitors (even in a new digital age). Jefferies sees earnings power of $4.71 per share in 2015 and $5.57 per share in 2016, higher than the consensus estimate of $4.63 per share in 2015 and $5.30 in 2016.

Keep in mind that the boost from Star Wars is still 18 months or so out in December of 2015. That $4 billion purchase price for Star Wars will likely prove to be one of Disney’s greatest acquisitions ever. Our own latest take on the matter is that the Star Wars franchise value will surge, and this gives Disney a couple decades of massive earnings power. Disney may even turn the $4 billion into another $30 billion.

ALSO READ: The Top Seven DJIA Stocks of 2014 Expected to Keep Rising

At the start of 2014, 24/7 Wall St. ran a bull and bear case for the Dow Jones Industrial Average in 2014 on a component by component basis. The expected gain was just over 3% plus dividends for the DJIA, but the upside at the time that was projected for Disney was a mere 0.03%. Keep in mind that Disney’s 55% gain in 2013 blew out even the 26.5% DJIA gain. When we ran the bull and bear 2014 outlook for Disney, its price was closer to $76.50 and the consensus price target was $76.43 at the time.

Now Disney shares are at $85.30, versus a consensus price target of $89.54. If Jefferies is correct, Disney is going a lot higher. The analyst’s EPS target implies that investors should be willing to pay just over 15 times 2016 earnings.

This also fits in with the theme of our 10 stocks that will take the DJIA up to 20,000. While Disney was not selected as one of those stocks, perhaps it should have been.

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