Pixar: New Magic for Disney?

02/24/2006 12:00 am EST

Focus:

Jamie Dlugosch

Editor, The Rational Investor

Two top advisors Jamie Dlugosch and Ian Wyattin independent reports both see some new "magic" for Disney following the announced acquisition of Pixar, which brings the talents of Steve Jobs, CEO of both Pixar and Apple. Here are their reviews.

"I think this will be a great year for stocks," says Jamie Dlugosch, editor of The Rational Investor. "One story that I am a big fan of at the moment is Disney (DIS NYSE). This venerable entertainment and Dow component has struggled over the last few years. Corporate infighting and succession planning has hurt the company's growth. As a result, Disney has been a lackluster performer and now trades for a very reasonable multiple to its earnings.

"Disney’s recent acquisition of Pixar will be the catalyst for the future. Aside from the creative benefits generated from the deal, DIS will gain the services of Steve Jobs. He is probably one of the few sure things in corporate management. That alone makes DIS one of my favorite stocks to own at the moment. Jobs has a long history of success, and, more importantly, he understands growth drivers. He is just what conservative DIS needs. I want to own that future growth today at what I feel is a discounted price.

"The announced sale of Disney's radio assets will help support its acquisition of Pixar. Going forward, it may take some time to recover some of the old Walt Disney magic, but over the long haul investors will be rewarded. Meanwhile, given this latest news, I’m raising my buy limit for the stock as well as my price target I'm lifting my target for DIS to $50 per share and my new buy below price to $30."

Ian Wyatt, along with analyst Peter Henig, at the Growth Report, adds, "Though some analysts think it’s paying too much, Disney’s acquisition of Pixar still gets two thumbs up from investors. Former Disney CEO Michael Eisner was not a big fan of Steve Jobs; and vice-versa. In fact, Jobsin his dual role as head of Apple and Pixar pretty much refused to deal with Eisner, threatening to look elsewhere after their film distribution deal expired.

"Now, Eisner is gone and Bob Iger, his successor, is doing an admirable job of mending fences and restoring innovation under Disney’s roof once again. Moreover, Iger and Jobs have allowed common sense to replace ego, agreeing to bring Pixar’s expertise and creativity back to where animation once began. Pixar’s track record has indeed been impressive, with all six of the company’s films having each generated at least $350 million worldwide.

"Yet, the single greatest asset of this new marriage has to be Jobs himself. He is a creative thinker, who understands how technology, digital media, and content are evolving. At Disney, Jobs can hopefully help steer the company forward with that in mind creating exciting Pixar-like content in-house, guiding it through all new forms of technology channels, and then understanding how each either furthers the Disney brand or adds cash to the bottom line. It’s a compelling opportunity for Disney and an interesting opportunity for investors."

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