NEW YORK (TheStreet) -- Shares of Walt Disney Co. (DIS) - Get Report were down in early-afternoon trading on Tuesday as Nomura analysts said they believe there are other ways to generate shareholder value than bidding for Twitter (TWTR).
"We simply do not think that the potential combination is likely to provide enough meaningful industrial or strategic logic to offset what promises to be a very high price tag for Disney and its shareholders...," the firm said in an analyst note, according to Barron's. "For a number of important reasons we contend Disney could find more shareholder-friendly uses for its capital than this."
Nomura noted that a Twitter acquisition could result in at least 11% dilution to Disney's 2017 earnings, even if it paid a 25% premium with 60% equity.
Disney would also be limited in its ability to stream NFL programming on the social media site, as its current agreements only permit digital distribution through third party platforms, the firm added.
Additionally, Nomura said the Burbank, CA-based media company faces a steep challenge in reaccelerating Twitter's slowing growth, which has only grown by 9 million since 2015.
The acquisition brings to mind other unsuccessful takeover attempts by News Corp. (NWSA) for MySpace or Time Warner's (TWX) acquisition of Bebo, Nomura added.
As such, relatively large scale digital/Internet acquisitions don't have a "stellar" track record, the firm said.
Separately, TheStreet Ratings objectively rated this stock according to its "risk-adjusted" total return prospect over a 12-month investment horizon. Not based on the news in any given day, the rating may differ from Jim Cramer's view or that of this articles's author. TheStreet Ratings has this to say about the recommendation:
TheStreet Ratings team rates Disney as a Buy with a ratings score of B. This is driven by several positive factors, which it believes should have a greater impact than any weaknesses, and should give investors a better performance opportunity than most stocks it covers. The company's strengths can be seen in multiple areas, such as its growth in earnings per share, revenue growth, notable return on equity, expanding profit margins and good cash flow from operations. The team feels its strengths outweigh the fact that the company has had lackluster performance in the stock itself.
You can view the full analysis from the report here: DIS