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Wednesday, August 09, 2006

Disney's Best Will Get Better

Stocks: (DIS)

Disney suffered several analyst downgrades a couple months back. The theory of these bankers was that Disney would have a good second half, but that 2007 would not be able to stack up. Therefore, the stock was too expensive and it was time to take a little profit. One can see the little dip in Disney's cahrt as it dropped from about $31 to $28.50 on Wall St.'s pessimism.

Well, Disney confounded investors by posting better than expected numbers as its net for the third quarter hit $1.13 billion, up from $811 million last year. There were some surprises, all of the good. The company's studio did better to some extent because of the success of "Cars". The network division did better because of the strength of ESPN. The theme parts did better because gas prices are not keeping people away.

The analysts who downgraded Disney were wrong. Not because this quarter was good, but because the positive trends have legs. Things are not going to get worse at ESPN. With baseball in full swing and football on the way, ESPN may well do better. The studio has the next "Pirates" franchise comes out next year. And, the worry about gas hitting the theme parks was overplayed.

Disney may get downgraded again as its stock rushes up on the good news. But, that would be a mistake.

Douglas A. McIntyre can be reached at He does not own securities in companies he writes about.

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