Gains From Disney Operations May Aid Stock

NEW YORK – The Walt Disney Co.’s varied entertainment operations are expected to post profit gains in 2006, which should help the company’s shares overcome negative market sentiment toward media stocks.

Several years of under performance and an uncertain macroeconomic outlook have driven “excessive bearishness” toward the media group, Merrill Lynch analyst Jessica Reif Cohen said in a research note.

Shares of Burbank, Calif.-based Disney reached a 52-week high of $29.99 on Feb. 8 but fell to a low of $22.89 on Oct. 20. On Wednesday, the stock slipped 41 cents, or 1.7 percent, to close at $23.99 on the New York Stock Exchange.

Traditional media stocks continue to trade at low valuations but earnings growth should drive stock gains, Reif Cohen said. As for Disney, earnings and share price momentum from the company’s multi-year recovery should continue across its operating segments, said Reif Cohen, who has a $31 a share price target on the stock and called it “the most attractively valued stock in the group.”

Disney’s movie slate looks pretty good, featuring a sequel to the hit “Pirates of the Caribbean” and the last scheduled movie with Pixar, “Cars,” said AIM Funds portfolio manager Mark Greenberg.

Also, “Chronicles of Narnia” has raked in over $200 million of domestic box-office since debuting about three weeks ago, which bodes well for the film’s DVD release.

The biggest question mark on the film studio side is whether Disney can sign a new distribution agreement with Pixar