This Just In: Upgrades and Downgrades
At The Motley Fool, we poke plenty of fun at Wall Street analysts, and their endless cycle of upgrades, downgrades, and "initiating coverage at neutral." While the pinstripe-and-wingtip crowd is entitled to its opinions, down here on Main Street, we've got some pretty sharp stock pickers, too. (And we're not always impressed with how Wall Street does its job.)
Given that, perhaps we shouldn't be giving virtual ink to "news" of analyst upgrades and downgrades. And we wouldn't -- if that were all we were doing. Fortunately, in "This Just In," we don't simply tell you what the analysts said. We also show you whether they know what they're talking about. To help, we've enlisted Motley Fool CAPS, our tool for rating stocks and analysts alike. With CAPS, we track the long-term performance of Wall Street's best and brightest -- and its worst and sorriest, too.
Word on the Street
This morning, Wells Fargo analyst Marci Ryvicker raised Walt Disney (NYS: DIS) from a modest "market perform" rating to an outright "buy." That's why the House of Mouse's shares are trading up a little bit on an otherwise dark and gloomy market day.
Disney is setting all-time highs on a weekly basis and has crushed the market in 2012 thanks to the stellar performance of superhero epics The Avengers and The Amazing Spider-Man. Shares of the media giant have soared 26% while the Dow Jones Industrial Average (INDEX: ^DJI) , of which Disney is a longtime member, gained just 3%. The only major media stock I can find that has beaten Disney this year is Lions Gate Entertainment (NYS: LGF) , which is riding The Hunger Games and some deft deal-making to a 72% jump.
But Ryvicker doesn't think that's good enough. In her view, Street estimates of Disney's performance look too conservative and the earnings call in early August could break the stock out of its recent $45 to $50 trading range. Ryvicker's price target for the stock is roughly $57, leaving room for a 20% boost from today's prices.
In particular, the Avengers tentpole should support a very profitable tent for years to come and widely reported worries about weak children's programming are overblown. Ryvicker is so bullish about this stock that even if Disney misses estimates this quarter, the resulting price drop would just make her buy even more shares. It would be "a great entry point given our increased confidence in the long-term story."
Grading the graders
When Wells Fargo speaks up about a media stock, you'd better listen. The firm is an overall All-Star in our CAPS system -- and media happens to be one of its strongest suits. Moreover, the firm likes to pick stocks in this sector with a long-term thesis in mind. Liberty Media (NAS: LMCA) is Wells Fargo's biggest winner in this industry, outscoring the S&P 500 by 330 points since 2007. Only two of the firm's 18 calls in the media sector have come in the last two years -- and that includes this morning's Disney pick.
On top of that brilliant track record, this call also makes sense.
Disney's $4 billion buyout of Marvelis looking smarter every year. The superhero comics publisher was already building the framework for today's massive megahits when Disney pulled out the big, bad checkbook, and it's paying off in spades now. There's no doubt that the Avengers machine will churn out billion-dollar blockbusters for a very long time, and that doesn't even include the impact Marvel will have on Disney's theme parks, DVD sales, pajama designs, and lunchbox bonanzas.
So far, The Avengers has parlayed a $220 million production budget into a staggering $1.4 billion in global ticket sales. And Sony (NYS: SNE) might reap all the rewards from Spider-Man's box office success -- but Disney owns the rights to all of that franchise's merchandise.
Marvel is a big reason why I agree that Disney is a great own-forever stock right now -- even as the shares are exploring new highs. I'm backing up my words with a bullish CAPScall on Disney that has helped me destroy the market since 2009. This stock will help you retire rich.
At the time this article was published Fool contributor AndersBylund holds no position in any of the companies mentioned. Check out Anders'holdingsandbio, or follow him on Twitter and Google+. The Motley Fool owns shares of Walt Disney. The Motley Fool has sold shares of Sony short. Motley Fool newsletter services have recommended buying shares of Walt Disney. The Motley Fool has a disclosurepolicy. We Fools may not all hold the same opinion, but we all believe that considering a diverse range of insights makes us better investors. Try any of our Foolish newsletter services freefor30days.
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