Despite 5-Day Run Of New Highs, Disney's ESPN Slowdown And Cord-Cutting Merit Downgrade

Shares of Walt Disney Co (NYSE: DIS) hit its fifth consecutive new 52-week high of $115.12 on Friday and the stock is now higher by nearly 10 percent since the start of 2017 and 170 percent over the past five years versus a 70 percent gain in the S&P 500 index and 58 percent in the Dow Jones Index.

Disney's outperformance versus the broader market and its Dow Jones peers has many investors now wondering at what point has the stock reached its peak. Disney's shareholders have several reasons to be concerned, most notably a slowdown at its ESPN unit as more consumers are "cutting the cord" and getting rid of their cable options, which includes the sports channels.

David Miller, the managing director at Loop Capital, believes Disney's stock is worth $118 per share, which prompted the firm to lower its rating on the stock from Buy to Neutral rating.

"With the stock up substantially over the past nine months, and with the stock now trading only 3.1 percent shy of our price target of $118, we see no reason to elevate our target any further."

What About All The Catalysts?

Disney's investors and analysts are quick to point out that the company faces multiple catalysts in the years to come, including an impressive slate of films from its many franchises and contributions from theme parks.

According to Miller, these factors are already "built into the stock" and these positive developments have been well understood by investors for quite some time since Disney is a "pretty communicative" about its outlook.

Bottom line, Miller believes that Disney's stock should trade within its historical multiple and reflect its mid-high teens earnings per share growth profile dating all the way back to its 1996 acquisition of ABC/Cap-Cities.

Specifically, the analyst is valuing the stock at 10.0x EV/EBITDA on the out-year and 17.0x on an expected 2018 earnings per share of $6.93.

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