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Lazard Upgrades Disney, Discovery Communications to ‘Buy’
30 Mar 2012 EDT - CNBC.com
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In separate research notes on Friday, Lazard Capital Markets turned more bullish on two media companies when it upgradedDiscovery Communications and Walt Disney to “buy” ratings.

Lazard upped its rating on Disney to “buy” from “neutral,” and placed a $53 price target on the company’s shares.

“Because of ESPN’s dominant position in sports and Disney’s momentum in kids’ content, we see less reason to worry about ratings issues than conglomerate peers, making Disney a cleaner call on the secular positive of program fee growth,” the report said.

Several of the company’s peers, including Viacom, News Corp., and Time Warner, have experienced ratings volatility. In contrast, the audience from Disney’s ESPN branded-networks has been fairly steady year-to-year. The report added that “sports content also has the virtue of being largely DVR-proof and less subject to Internet disintermediation.”

Analysts added the company’s untapped cash capacity was larger than at its peers and could be used to boost earnings through either share repurchases or acquisitions. The company’s cash capacity consists of free cash plus borrowing capacity and excess cash over the next three years.

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