Walt Disney (DIS) Hits One-Year High Despite Disney Interactive Job Cuts

NEW YORK (TheStreet) -- Walt Disney  (DIS) hit a one-year high of $83.42 as of 1:26 p.m. on Thursday despite the report that Disney Interactive, the company's video game and Internet division, would cut more jobs than previously expected, according to The New York Times.

The unit laid off 26% of its workforce, or approximately 700 jobs, as a result of Disney's strategy change, particularly with regard to its advertising strategy for Disney.com. 

"These are large-scale changes as we focus not just on getting to profitability but sustained profitability and scalability," said Disney Interactive president James A. Pitaro, according to The New York Times.

The company decided to merge prospering mobile games, like those played on iPads and smartphones, and struggling social games, such as those played on websites like Facebook. Disney has also decided to pursue more outside licensing opportunities and new partnerships rather than in-house game development. Disney Interactive plans to slash annual game production by up to 50%.

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TheStreet Ratings team rates DISNEY (WALT) CO as a "buy" with a ratings score of A+. TheStreet Ratings Team has this to say about their recommendation:

"We rate DISNEY (WALT) CO (DIS) 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, solid stock price performance, impressive record of earnings per share growth, compelling growth in net income and notable return on equity. 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 4.4%. Since the same quarter one year prior, revenues slightly increased by 8.5%. Growth in the company's revenue appears to have helped boost the earnings per share.
  • Powered by its strong earnings growth of 33.76% and other important driving factors, this stock has surged by 47.72% over the past year, outperforming the rise in the S&P 500 Index during the same period. Regarding the stock's future course, although almost any stock can fall in a broad market decline, DIS should continue to move higher despite the fact that it has already enjoyed a very nice gain in the past year.
  • DISNEY (WALT) CO has improved earnings per share by 33.8% in the most recent quarter compared to the same quarter a year ago. The company has demonstrated a pattern of positive earnings per share growth over the past two years. We feel that this trend should continue. During the past fiscal year, DISNEY (WALT) CO increased its bottom line by earning $3.38 versus $3.12 in the prior year. This year, the market expects an improvement in earnings ($4.02 versus $3.38).
  • The net income growth from the same quarter one year ago has exceeded that of the S&P 500 and greatly outperformed compared to the Media industry average. The net income increased by 33.1% when compared to the same quarter one year prior, rising from $1,382.00 million to $1,840.00 million.
  • The return on equity has improved slightly when compared to the same quarter one year prior. This can be construed as a modest strength in the organization. In comparison to the other companies in the Media industry and the overall market, DISNEY (WALT) CO's return on equity significantly exceeds that of the industry average and is above that of the S&P 500.
  • You can view the full analysis from the report here: DIS Ratings Report

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Editor's Note: Any reference to TheStreet Ratings and its underlying recommendation does not reflect the opinion of TheStreet, Inc. or any of its contributors including Jim Cramer or Stephanie Link.

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