2019-11-11 • Updated
The Walt Disney Company will report its financial results for the fiscal Q2 on Wednesday, May 8. Notice that fiscal year for Disney starts in October, so its fiscal Q2 reflects the company’s performance during the first 3 months of 2019. What to expect from the earnings report and how it will influence the stock?
Disney’s life has been quite eventful so far and these are the positive events. The company launches a new streaming video service, enjoys strong results of Captain Marvel and Avengers: Endgame at the box office and opens new attractions at its parks and resorts. Disney's linear-TV business should generate decent returns.
On the downside, Disney has been doing so good that investors’ expectations are now very high. In particular, Black Panther made the second-quarter fiscal results of 2018 hard to surpass. As a result, according to the consensus forecast, Disney’s EPS will drop from $1.84 a year ago to $1.57. Revenue is expected to increase only slightly to $14.48 billion.
Another factor is that the company is making huge investments in direct-to-consumer (DTC) businesses. In Q2, it spent $200 million. These expenses will naturally have a negative impact on the company’s profit. In addition, about $45 million of fiscal Q2 operating income may be shifted to fiscal Q3 because of the timing of the Easter holiday period. The reported income from parks, experiences and consumer products may also disappoint as Disney now uses a new revenue standard. There are many more factors that hurt the company’s results that we don’t list here.
Looking ahead, the upcoming launch of Disney+ is a serious challenge: it’s vitally important for Disney to impress the market and the users right away. Still, if all goes well, the company will be able to create a tough competition for Netflix. Moreover, in the upcoming months, Disney will be incorporating $50 billion of content and theatrical production assets from 21st Century Fox. That will increase Disney's size and strength.
Technical picture
Last week Disney stock made a big slump after reaching an all-time high at 142.30. A “dark cloud cover” pattern was formed on the weekly chart. This is a bearish sign. There’s a technical need for further correction to the downside. The levels to watch are 130.00 and 126.50. The long-term support is at 120.00. As long as the price is above this point, the long-term uptrend remains in place.
Conclusion
The earnings report may give a reason for investors to take profit, so the stock may revisit lower levels. The prospects of interesting developments that will take place later this year can make investors look for buy opportunities at 126 or 120.
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Hello again my friends, it’s time for another episode of “What to Trade,” this time, for the month of April. As usual, I present to you some of my most anticipated trade ideas for the month of April, according to my technical analysis style. I therefore encourage you to do your due diligence, as always, and manage your risks appropriately.
Bearish scenario: Sell below 1.0820 / 1.0841... Bullish scenario: Buy above 1.0827...
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