Will Disney (DIS) Stock be Affected by $1 Billion Theme Park Investment?

NEW YORK (TheStreet) -- The Walt Disney Co. (DIS) is said to be considering a plan to invest $1 billion in its Anaheim, CA.-based Disneyland resort in exchange for extending a deal with the city that protects the company from an entertainment tax, Bloomberg reports.

Disney would have until the end of 2024 to use the investment money to create new attractions at the theme park and make road improvements that would improve local traffic flow, the city of Anaheim said in a statement on its website.

The current deal between Disney and Anaheim began in 1996 and is to be replaced by a new deal that would run 30 years.

The proposal is to be considered at the city council's July 7 meeting. The company would be granted a tax relief for another 15 years following an "additional, substantial investment by Disney beyond the $1 billion," the city said in a statement.

Shares of Disney are up by 0.31% to $114.80 in late morning trading on Friday morning.

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, growth in earnings per share, increase in net income, notable return on equity and good cash flow from operations. We feel its 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 3.9%. Since the same quarter one year prior, revenues slightly increased by 7.0%. Growth in the company's revenue appears to have helped boost the earnings per share.
  • DISNEY (WALT) CO has improved earnings per share by 13.9% 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 $4.25 versus $3.38 in the prior year. This year, the market expects an improvement in earnings ($5.07 versus $4.25).
  • The company, on the basis of net income growth from the same quarter one year ago, has significantly outperformed against the S&P 500 and exceeded that of the Media industry average. The net income increased by 10.0% when compared to the same quarter one year prior, going from $1,917.00 million to $2,108.00 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.
  • Net operating cash flow has increased to $2,918.00 million or 15.47% 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 15.14%.
  • You can view the full analysis from the report here: DIS Ratings Report

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