Is Disney The Apple Of Media And Entertainment?

Walt Disney Co (NYSE: DIS) fell sharply Wednesday after the company reported mixed earnings results Tuesday afternoon.

Shares of Disney were down more than 8 percent as of 2:56 p.m. EST. Some analysts are blaming ESPN and its reported cost-cutting measures. Are investors justified, or has Disney become the Apple Inc. (NASDAQ: AAPL) of the entertainment industry?

"Apple trades very, very cheaply," Sean Udall, CIO of Quantum Trading Strategies and author of The TechStrat Report, told Benzinga. "What's weird about Apple is, given how premier of a global brand and dominant they are, they don't get the valuation premium to the market."

Udall said that on a forward P/E basis, Disney trades at a 15 percent (if not a 20 percent) premium to the market.

"I could make a case that they probably should trade there given they're the premier global brand in what they do, versus Apple, [which] trades at almost a 30 percent discount to market," Udall added.

Related Link: How Cinderella's $70M Opening Could Be Worth Twice As Much For Disney

Global Equities Research analyst Trip Chowdhry said that Disney and Apple couldn't really be compared because their businesses are so vastly different. Udall, however, thinks the comparison provides a good point/counterpoint.

"I haven't liked Disney for a while," said Udall, a staunch Apple supporter. "If there are certain names I can buy at a pretty notable discount to the market, why do I want to chase Disney?"

ESPN Might Still Be A Concern

Udall made the case for Disney without being sold on the stock himself, but he also has concerns about its future with ESPN.

"They're a very traditional [entertainment company]," he said. "In other words, they need to keep [releasing] lots of hits. They should be able to do it, they should have the system to do it. [But] ESPN is, for example, a huge part of the Disney numbers. What happens if the unbundling thing keeps gaining steam?"

Udall doesn't expect consumers to unbundle everything and leave cable or satellite behind. He said that a cable bill is a "pretty good deal in many ways."

"But if that were to happen and Disney can't garner the huge fees they get from a lot of the properties to all the cable distribution networks…" Udall continued. "Put it this way: as much of an idiotic concern as there is about, 'Can Apple keep producing more iPhones and is China gonna be a problem,' you can almost take every single Apple thing that the stock has been hit on and apply it to Disney, just in a different way."

Disclosure: At the time of this writing, Louis Bedigian had no position in the equities mentioned in this report.

Image credit: Denis Dervisevic, Flickr