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Disney Stock: Next Stop, $138?

By Rick Munarriz - Apr 12, 2017 at 8:06AM

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Goldman places the media giant on its "Americas Conviction Buy" list, nearly sending the stock to another 52-week high.

Shares of Disney (DIS 3.30%) hit a fresh 52-week high last week and came within a penny of repeating the feat on Tuesday. The stock still has a long way to go to take out its all-time high of $122.08 set two summers ago, but at least one Wall Street pro thinks Disney stock will keep moving higher. 

Goldman Sachs analyst Drew Borst is reiterating his "buy" rating on the stock and his $138 price target, but on Tuesday he also added the media giant's stock to his firm's Americas Conviction Buy list. Borst is identifying Disney as a top stock for Goldman, encouraged by growth catalysts across most of its businesses. 

A Halloween show with fireworks at Disney's Magic Kingdom.

Image source: Disney.

Oh, Mickey, you're so fine

Goldman's Borst is feeling good about Disney's prospects at the corner multiplex, something that may not seem like much of a stretch, given how the House of Mouse has dominated at the box office in recent years. Disney was the studio behind all three of last year's highest-grossing films and three of four the top draws in 2015. Beauty and the Beast currently stands as this calendar year's top dog, and it has now generated more than double the domestic receipts of the current silver medalist. 

Borst believes that its near-term dominance at the movie house isn't going away anytime soon. He thinks Disney's fiscal 2017, ending in September, will turn in another strong showing. It's hard to argue against that conviction, with Guardians of the Galaxy and Pirates of the Caribbean sequels coming next month. However, the real prize in Borst's eyes will be fiscal 2018. That year will be highlighted by the eighth installment in the Star Wars saga, which hits the big screen in December, and we're also getting a Han Solo origin flick as well as four Marvel movies, and three animated releases, including sequels for Wreck-It Ralph and The Incredibles

Goldman's love doesn't end at a film's rolling credits, as Borst is also eyeing record results at Disney's iconic theme parks. This isn't a risky suggestion, of course. Disney's been able to grow that segment's revenue and operating profit even as attendance has slipped in three of the past four quarters.

Borst even has some kind things to say about ESPN, the business that's often the sticking point for bulls and bears alike. Disney's sports network may not be able to escape the cord-cutting phenomenon, but Borst thinks normalizing costs with its prohibitive NBA contract and other factors could result in accelerating profit growth at ESPN. 

A price target of $138 may have seemed aggressive last year, when the stock was sputtering in the double digits, but it represents a reasonable 22% of upside based on Tuesday's close. Borst won't have to be right about most of these potential catalysts for the stock to get there, and we'll be celebrating new highs even before we get halfway there. Disney's in a good place now, but the future seems even brighter. 

Rick Munarriz owns shares of Walt Disney. The Motley Fool owns shares of and recommends Walt Disney. The Motley Fool has a disclosure policy.

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