Wall Street is reviewing its financial estimates for Walt Disney Co. after the weekend’s record box office take for “Pirates of the Caribbean: Dead Man’s Chest,” with at least one analyst raising his forecast Monday.
The film, a sequel to the successful 2003 film starring Johnny Depp as quirky pirate captain Jack Sparrow, broke the opening day and opening weekend box office records, taking $132 million in ticket sales — well above Wall Street forecasts that ranged from $47 million to $100 million.
Goldman Sachs analyst Anthony Noto doubled his estimate for ultimate domestic box office results for the film from an early forecast of $250 million to $300 million and predicted it could help boost Disney’s earnings by 3 cents per share in fiscal 2007.
“Based on ‘Pirates II’s’ opening weekend, we now believe there could be an additional 3 cents of upside on top of the 9 cents we laid out previously for a total of 12 cents per share or 7 percent upside potential,” Noto wrote in a note to clients Monday.
Noto reiterated his “buy” rating on Disney shares and said he saw about 14 percent upside to his six-month price target of $34 per share. The stock was trading 7 cents higher at $29.90 in late Monday trade on the New York Stock Exchange, or about 20 times the company’s estimated fiscal 2007 earnings.
Since June 13, Disney’s shares have risen about 6 percent, partly in anticipation of a successful debut for the sequel. Shares in other major entertainment companies, including Time Warner Inc. and Viacom Inc., are down over the same period. Time Warner is trading at 19 times forecast earnings per share.
Strong box office results for “Dead Man’s Chest” would point toward a good performance for its expected pre-holiday DVD release, which would boost Disney’s studio division revenue in the first half of fiscal 2007, analysts say.
The third sequel, starring Depp and castmates Orlando Bloom and Keira Knightley, is set for release in May 2007, and will complete what Noto hailed as “a positive content cycle” for Disney that will continue to drive growth.
But Bernstein Research analyst Michael Nathanson said Disney’s fiscal 2006 revenues may fall short of his estimated $34.7 billion because any outperformance by “Pirates” was likely to be offset by an underperformance in Disney/Pixar’s animated film “Cars.”
“While ‘Pirates 2’ is likely to beat out ‘Pirates 1,’ ‘Cars’ looks like it will fall short of ‘Finding Nemo’,” Nathanson wrote in a note to clients. “In total, we may be off by $26 million in revenue or a penny per Disney share.”
Nathanson assumed that the opening weekend represents 30 percent of total gross receipts domestically. He forecast Disney shares to perform in line with the market, with a target price of $33.
Sanders Morris Harris analyst David Miller said that although the latest “Pirates” box office plunder “shatters all kinds of records”, it was too early to tell how the film would ultimately perform.
“As an analyst you want to make sure it’s not a flash in the pan,” Miller said. “We modeled what the first one did ... and we are still well shy of that. I am very comfortable with my numbers for the fourth quarter.”
