BUY OR SELL-Disney's TV arm: reason for worry?

* Analysts cite strength in studio and weakness at ABC

* Disney shares fall 1.76 pct day after earnings report

By Alex Dobuzinskis

LOS ANGELES, May 12 (Reuters) - Shares in Walt Disney Co (DIS.N), which is coming off a better-than-expected quarter, may have room to climb further on the back of blockbuster films and a steady recovery in theme park spending, but some analysts warn that weakness in TV may hurt in the near term.

Many analysts on Wednesday maintained positive outlooks for Disney a day after the company reported a 55 percent rise in net income, beating Wall Street expectations. [nN11225225]

STUNNING FILM PIPELINE...

Disney's hit movies helped drive results, and some analysts expect that trend to continue with several films from proven franchises -- "Toy Story 3" and "Prince of Persia" among them -- set to bolster its coming quarters.

"The studio pipeline is just absolutely outstanding," said David Miller, analyst with Caris & Company.

Disney's upcoming films also include "TRON: Legacy" in December and "Pirates of the Caribbean: On Stranger Tides" in summer 2011, and analysts view all those releases as having strong box office potential.

The company is already riding high with "Iron Man 2," which has made nearly $333 million at worldwide box offices since it opened two weeks ago.

Miller, who rates Disney "above average" with a share price target of $39, also singled out the company's ESPN sports cable television unit as driving growth.

Live sports is largely immune from viewers taping a telecast on their DVR devices and skipping through advertisements -- known as zipping -- a phenomenon other broadcasters struggle to avoid, he argued.

Anthony DiClemente, an analyst with Barclays Capital, rates Disney "overweight" and expects the company's theme parks and resorts division to post 15 percent growth in operating income next fiscal year.

...BUT WILTING TV BUSINESS

On Tuesday, shares in Disney slid more than 3 percent in after hours trade as investors were wary about lower-than-expected revenue at ABC due to slipping ratings and ad revenue. The media division, which includes ESPN, is the largest in terms of revenue and profit.

While revenue in the TV and broadcasting division rose 6 percent in the fiscal second quarter, operating income was flat at $1.3 billion -- lagging expectations for about $1.43 billion.

In terms of broadcasting alone -- which excludes cable businesses such as ESPN -- operating income fell $39 million to $123 million as costs at ABC whittled down margins.

Hamilton Faber, an analyst with Atlantic Equities, rates Disney as underweight. He said that with cable subscribers paying a hefty $4 a month for ESPN, that solidly performing unit nonetheless has little room for more subscriber price increases.

Other analysts say the figure is closer to $3 a month.

"They're having to find a new stable of hits to replace the ones that are beginning to mature like 'Grey's Anatomy,' 'Desperate Housewives' and 'Lost,'" he said.

Disney shares closed down 1.8 percent at $35.13 on Wednesday on the New York Stock Exchange. (Reporting by Alex Dobuzinskis: Editing by Edwin Chan, Bernard Orr)