Merrill Analyst Bullish on Disney

Influential Merrill Lynch media analyst Jessica Reif Cohen raised her 12-month price target on The Walt Disney Co. to $38 per share, based on what she believes to be strong growth potential for the media giant’s movie studio and broadcast and cable-television units.

In a research report, Reif Cohen wrote that at 20 times estimated calendar year 2007 earnings, Disney stock is trading at a discount to peers News Corp. and Time Warner, and below its historical average multiple of 25 times earnings.

“Given the strength of its global franchises and robust long-term growth prospects we believe that further upside in the stock is likely in the coming year,” Reif Cohen wrote.

Reif Cohen expects that robust growth to mainly come from Disney’s Filmed Entertainment unit and its broadcast and cable networks.

Reif Cohen doubled her growth estimates for fiscal first-quarter segment operating income to 17% from 8%, fueled mainly by expected increases in those two segments. She estimates that Filmed Entertainment will end the quarter with operating income of $345 million, a 170% increase over the $128 million the unit generated in the first quarter of 2006. At the broadcast network, operating income is expected to rise 11% in the period to $260 million fueled by a strong scatter market. At the cable networks, operating income should decline about 5% to $252 million. Cable revenue should rise about 10% during the period, offset by an expected deferral of $80 million in revenue from its ESPN unit. Minus that, cable revenue would have risen 13%.