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Disney (DIS) Considers Content for Amazon, Google, or Netflix

NEW YORK (TheStreet) - Disney (DIS) is considering producing original content for streaming platforms Amazon (AMZN), Google (GOOG) or Netflix (NFLX), according to CEO Bob Iger.

"We are a content creator," said Iger on Fox Business yesterday. "These new platforms are voracious in terms of their appetite for good content and we can make it."

"There are some interesting opportunities for us to monetize not just our brands, but our ability to create high-quality branded intellectual property," he said.

The suggestion is in line with a recent reconfiguration of Disney's film strategy. The company has decided to shift its focus from tentpole films - such as The Lone Ranger which accrued $89 million at the US box office against its estimated $250 million budget - to franchise films from Disney-owned Lucasfilm and Marvel Entertainment.

Earlier this week, Disney ended its partnership with longtime producer Jerry Bruckheimer, a move it says was unrelated to the box-office failure of Bruckheimer-produced The Lone Ranger.

Though Iger did not mention which of the three platforms Disney would sign with, Netflix has held an exclusive multi-year contract with Disney for the rights to host its catalog of animated and live-action films since late 2012.

On the recent 'Mad Money', Jim Cramer said while analysts are concerned with Disney's growth prospects, he believes it is "poised for solid, long-term growth".

Disney shares were up 0.11% as of 9:50 a.m. EST, after closing yesterday at $64.32. Overall, Disney is leading the S&P 500 which is down 0.15%.

TheStreet Ratings team rates Disney as a Buy with a ratings score of A-. TheStreet Ratings Team has this to say about their recommendation:
"We rate Disney a BUY. This is based on the convergence of positive investment measures, which should help this stock outperform the majority of stocks that we rate. The company's strengths can be seen in multiple areas, such as its revenue growth, good cash flow from operations, largely solid financial position with reasonable debt levels by most measures, notable return on equity and increase in net income. We feel these strengths outweigh the fact that the company shows low profit margins."

Highlights from the analysis by TheStreet Ratings Team goes as follows:

  • DIS's revenue growth has slightly outpaced the industry average of 0.5%. Since the same quarter one year prior, revenues slightly increased by 4.4%. This growth in revenue does not appear to have trickled down to the company's bottom line, displaying stagnant earnings per share.
  • Net operating cash flow has increased to $3,413 million or 18.3% when compared to the same quarter last year. The firm also exceeded the industry average cash flow growth rate of -15.59%.
  • Disney reported flat earnings per share in the most recent quarter. This company has reported somewhat volatile earnings recently. But, we feel it is poised for EPS growth in the coming year. During the past fiscal year, Disney increased its bottom line by earning $3.12 versus $2.52 in the prior year. This year, the market expects an improvement in earnings ($3.37 vs. $3.12).
  • The current debt-to-equity ratio, 0.34, is low and is below the industry average, implying that there has been successful management of debt levels. Although the company had a strong debt-to-equity ratio, its quick ratio of 0.93 is somewhat weak and could be cause for future problems.
  • The company's current return on equity has slightly decreased from the same quarter one year prior. This implies a minor weakness in the organization. In comparison to the other companies in the Media industry and the overall market, Disney's return on equity significantly exceeds that of the industry average and is above that of the S&P 500.

Written by Keris Alison Lahiff.

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