(MONEY Magazine) – THIS MONTH:

How to buy blue chips at a discount A spin-off at Sprint and other reasons to buy the stock Don't dare open a margin account until you read this.

WHEN NEWS THAT WALT DISNEY CO. WAS purchasing Capital Cities/ABC went across the wire in late July, virtually everyone on Wall Street began saying the new Disney, with estimated 1996 combined sales of $21 billion, now dwarfs all other media and entertainment outfits.

Not only will Disney (ticker symbol: dis; trading on the New York Stock Exchange at $59.25 on Aug. 3; 0.6% yield) own the dominant U.S. broadcast network, but it will also control stakes in cable networks such as ESPN. This new access to American living rooms--and millions abroad--will provide yet another way for CEO Michael Eisner to market Disney's ubiquitous characters and products. "Disney will have every base covered," says Smith Barney analyst Jill Krutick, "what people watch, where they watch it and where they go when they're not watching."

Yet corporate history is littered with so-called synergy stories that turned into grim fairy tales. Given that sorry track record and the fact that Wall Street expects more deals to come, Money decided to look at the universe of mega media stocks and evaluate their prospects in the post-Disney era, with the help of more than two dozen security analysts and knowledgeable professional investors. Should you buy? Sell? Or hold?

One thing seems sure. "I think we'll see a feeding frenzy of mergers as companies scramble to catch up with Disney," says Brian Stansky, entertainment industries analyst at mutual fund company T. Rowe Price. Indeed, the day after the Disney announcement, Westinghouse finally agreed to acquire CBS for $5.4 billion. Also, there's renewed speculation that General Electric will sell NBC. Among the likely bidders are the companies listed below.

On Disney, there is a strong consensus that it is a buy because of such potential synergies as the announcement in August that Disney would take over ABC's Saturday morning programming.

Timothy Miller, manager of Invesco Dynamics and Invesco Strategic Leisure mutual funds, adds that Disney will thrive even if such crossover opportunities fail to deliver their expected punch. "You'd have double-digit earnings growth over the next five years for both companies even if they were on their own," says Miller, whose funds own 180,000 Disney shares in total. He thinks the firm's stock price will rise in line with earnings growth, for an 18% gain to $70 within a year.

As for Disney's rivals, here are the details. The six are listed by size.

Time Warner (twx; NYSE, $43.50; 0.8% yield)--BUY. Time Warner with $15.9 billion in revenues has been dethroned by Disney as the world's largest media company. But Stansky and other analysts believe Time Warner, whose Time Inc. magazine division publishes Money, is well positioned to thrive in an increasingly global marketplace. Primarily through music and film, it has already established the strong foreign foothold that Disney is seeking with Capital Cities/ABC.

There are problems, however. With competitors devouring networks and gaining control of air time, Time Warner may have trouble finding a home for the prime-time programs it produces. Thus CEO Gerald Levin may want to resume the merger talks with GE's NBC that fell apart last year. Also hanging over Time Warner is nearly $18 billion in debt, plus uncertainty about what Seagram will do with its 14.9% stake in the company. Nevertheless, Michael Kupinski, media analyst at A.G. Edwards, calls Time Warner a buy. He expects the growing cash flow from its attractive group of media properties plus Washington's cable deregulation moves to propel the share price to $55 within 12 months, for a 26% gain.

News Corp. (nsw; NYSE, American Depositary Receipts, $24.25; 0.2% yield)--BUY. With his $8 billion News Corp., Rupert Murdoch already has a home-grown version of what Eisner went shopping to put together--a movie studio and a TV network all in one company. Though it still sticks to nighttime and weekend programming, News Corp.'s Fox network outbid CBS last year for the rights to televise the NFL games, and its ratings, helped along by youth-oriented shows like Melrose Place, now top those of CBS. Says Steven Barlow of Smith Barney: "News Corp. already has better global distribution than any of its competitors." He and other analysts anticipate that the stock will rise to at least $30 within 12 to 18 months for a 24% gain. At that level, Barlow would reassess the stock.

Viacom (via; American Stock Exchange, $50; no dividend)--BUY. One of the world's top providers of entertainment "content," Viacom (revenues: $7.4 billion) has vast holdings that include Showtime, Nickelodeon and MTV, plus Paramount Studios and Blockbuster Entertainment. But in light of the Disney deal, some analysts believe Viacom's 72-year-old CEO Sumner Redstone may bid for a broadcast network.

Another big plus for Viacom is MTV's strong international presence: The network has relationships with foreign stations to whom Viacom can sell other shows. Smith Barney's John Reidy expects Viacom to expand its cash flow at a 25% annual pace over the next two years. That growth, he reckons, will push the shares to $60 within 12 to 18 months.

Seagram (vo; NYSE, $36.75; 1.6% yield)--HOLD. Just four months ago, this huge beverage company ($5.5 billion in annual revenues) suddenly transformed itself into a high-flying media stock with its $5.7 billion acquisition of MCA, the music and movie company. With debt at only 34% of total capitalization, CEO Edgar Bronfman Jr. can keep on acquiring. But Irene Nattel of BZW Canada in Montreal concludes that the company's future is too uncertain to buy the stock right now, though she might recommend it in six months if it is still at today's price.

Tele-Communications (tcoma; NASDAQ, $25.50; no yield)--HOLD. Analysts don't expect the Disney deal to have much impact on TCI, the nation's largest cable-TV operator with $4.9 billion in revenues. In the past year and a half, CEO John Malone has bought a 43% stake in QVC, 41% of Home Shopping Network and 20% of Microsoft's new on-line service; joined a venture with Sprint, Cox Cable and Comcast (see below) to operate wireless services; and is reorganizing TCI into four separate operating units. That's why analysts at Value Line say it's difficult to tell right now what TCI will look like in three to five years.

Turner Broadcasting (tbsb; ASE, $23; 0.3% yield)--HOLD. Despite acquiring two small movie studios and expanding its CNN on cable, Ted Turner badly needs a conventional TV network like NBC or CBS to fill out his $2.8 billion Turner Broadcasting, analysts say. But with debt at 88% of total capital value, Turner does not appear to have the financial muscle to buy one. Analysts believe that should he try, he would only boost company debt and depress the stock. Says analyst Dennis McAlpine of New York-based brokerage Josephthal Lyon & Ross: "This is no time to buy Turner."