Less than a year ago, the Walt Disney Co. was up against the wall with a surge of executive defections, shareholders jumping ship and unexpectedly poor showings from once-reliable divisions. Market analysts were pessimistic about the company’s future and its stock price.

But in the always-mercurial entertainment business, memories are short. Analysts who once panned Disney are now rapidly upgrading their recommendations on the company’s stock, which closed at $40.06 on March 22, up from a 52-week low of $23.38 on Nov. 8, 1999.

Considering Disney’s enormous size, it comes as something of a surprise that analysts attribute much of the turnaround to a single television program: the hit game show “Who Wants to Be a Millionaire?” on ABC.

“The ABC turnaround is the primary growth factor for Disney,” said Christopher Dixon, an analyst with PaineWebber. “Also, its ad (revenues from ABC and its cable networks are) going very well.”

Analysts are high on Disney despite the fact that its earnings continue to decline. In its first fiscal quarter ended Dec. 31, 1999, net income fell to $315 million (17 cents per share) from $622 million (30 cents) in the like year-earlier quarter. The downturn was largely attributed to expenses associated with the revamping of the Web site Go.com and Disney’s acquisition of Infoseek Corp.

Analysts are encouraged by the fact that revenues rose to $6.9 billion for the quarter, up from $6.6 billion the year before. And first-quarter net income, while down sharply from the year-earlier period, was considerably higher than the $85 million (4 cents a share) in earnings in the fiscal fourth quarter ended Sept. 30.

The uptick was credited largely to the “Millionaire” show on ABC, strong performances by the films “The Sixth Sense” and “Toy Story 2,” and increased demand for ads on ESPN and other cable networks. Disney has also been working to increase overall profits by cutting costs.

The company also is focusing on selling off non-core businesses, like Fairchild Publications, which it had acquired as part of its 1996 acquisition of ABC Inc. Disney sold the magazine unit for $650 million to Conde Nast Publications Inc. in November.

On March 20, Schroder & Co. analyst David J. Londoner upgraded the entertainment company to “outperform significantly” from “outperform.” Londoner also returned the stock to the firm’s “recommended list” after a two-year absence and bumped his 12-month price target to $47. In the same report, Londoner forecast earnings of 77 cents a share for Disney for fiscal 2000 and $1 per share for fiscal 2001.

Londoner said he believes the fiscal fourth quarter was the first of several that will result in upward revisions to estimates.

Several analysts have upgraded their ratings on Disney stock in recent months. Morgan Stanley Dean Witter’s Richard Bilotti raised his rating earlier this month to “strong buy” from “outperform.” And in January, Seidler Cos. analyst Jeffrey Logsdon raised his rating to “strong buy” from “buy,” while Merrill Lynch Global Securities’ Jessica Reif-Cohen upgraded hers to “near-term accumulate” from “neutral.”

Of the 28 analysts who issue recommendations on Disney, according to Zacks Investment Services, seven rate it a “strong buy,” 11 a “moderate buy,” and 10 a “hold.” This is a big improvement from three months ago, when of 26 analysts, only two recommended a “strong buy,” 11 a “moderate buy” and 14 a “hold.”

Besides the earnings gains, another aspect of Disney that analysts like is its new strategy for classic video releases. Disney was famous for turning its videos into collectors’ items by releasing classic animated titles only about once every seven to eight years, then pulling them back off the market. Now the studio plans to release 26 of its 36 classic animated films permanently on video and DVD, a move that’s expected to boost sales in its video division beginning in fiscal 2001.

“We think this will be a better way to deliver value from the video (division),” said Thomas Staggs, Disney’s chief financial officer who doesn’t think the move will take any spark out of Disney videos, particularly with the emerging prevalence of DVD players. “Now most of the videos will be available constantly, which in no way will affect their magic,” he said. “‘Dumbo’ has been available continually in the marketplace for a number of years, and it hasn’t lost its specialness by being available.”