Why Jim Cramer Would Buy Disney (DIS) Stock Right Now

NEW YORK (TheStreet) -- TheStreet's Jim Cramer says he believes in Disney  (DIS) CEO Bob Iger because he decided to create brands. Wall Street wants hit after hit when it comes to franchises, and Disney has Marvel, the upcoming Star Wars movies and Pixar under its umbrella.

The unexpected boost was Frozen, which Cramer says is "the biggest thing that's happened in a long time" for anyone with children. Iger now has a new franchise on his hands with the sixth-highest grossing movie of all-time, so Cramer expects to hear about a Frozen 2 for release in 2017, which would give a road map for Disney's future.

Cramer points out ESPN is still performing well and Disney has increased resort spending in Shanghai, China. He also expects share buyback to be very aggressive and knows Iger would be willing to pay up to $80 a share without a problem. He is also not worried about attendance at theme parks.

Must Watch: Cramer: 'Frozen' Is Just One of the Reasons Disney Is Hot

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Cramer notes Disney reported a strong quarter two quarters ago, but the stock immediately dropped four points into the $60 range and then bounced back after the conference call. Last quarter was so outstanding that the stock gapped up. Cramer says the stock is inconsistent in how it reacts, but he wants to buy it at its current level.

Investors tend to sell the stock when Disney makes an acquisition, and Cramer says Iger has played his cards close to the vest about any upcoming acquisitions. Cramer does not think Disney needs another one yet because they still have untapped properties in their current brands.

Finally, Cramer says this is Disney's time and the company is outperforming CBS  (CBS), Time Warner  (TWX) and Viacom  (VIAB).

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Separately, 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, impressive record of earnings per share growth, compelling growth in net income, notable return on equity and good cash flow from operations. 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 5.1%. 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.
  • 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 ($4.05 versus $3.38).
  • The net income growth from the same quarter one year ago has exceeded that of the S&P 500 and 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. Compared to other companies in the Media industry and the overall market, DISNEY (WALT) CO's return on equity exceeds that of both the industry average and the S&P 500.
  • Net operating cash flow has slightly increased to $1,212.00 million or 5.94% when compared to the same quarter last year. In addition, DISNEY (WALT) CO has also modestly surpassed the industry average cash flow growth rate of 3.44%.
  • You can view the full analysis from the report here: DIS Ratings Report

STOCKS TO BUY: TheStreet's Stocks Under $10 has identified a handful of stocks that can potentially TRIPLE in the next 12-months. Learn more.

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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