Why Walt Disney Shares Are Poised to Keep Popping

While Fools should generally take the opinion of Wall Street with a grain of salt, it's not a bad idea to take a look at particularly stock-shaking analyst upgrades and downgrades -- just in case their reasoning behind the call makes sense.

What: Shares of Walt Disney  (NYSE: DIS  ) gained slightly this morning after Topeka Capital upgraded the entertainment giant from hold to buy.

So what: Along with the upgrade, analyst David Miller planted a price target of $91 on the stock, representing about 13% worth of upside to Friday's close. So while contrarian traders might be turned off by Disney's strong rally over the past six months, Miller's call could reflect a sense on Wall Street that the company's earnings call tomorrow will fuel further gains.

Now what: According to Topeka, Disney's risk/reward trade-off is pretty favorable at this point. "While we have held out for quite some time for a lower price, we think now is the time to get constructive, as the stock trades at 14.6x our F2016 non-GAAP EPS estimate of $5.40/share, a 16.4% growth clip over F2015, and a reasonable multiple in our view as DIS has essentially been a "PE/G of 1" type of name ever since the 1996 Cap-Cities deal," said Miller. "With that, putting new money to work at a multiple of F2016 prospects, while not exactly super-juicy, is compelling enough for us to improve our rating." Given Disney's high-quality assets and strong cash flows, it's tough to disagree with Topeka's upgrade.

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