Is Disney’s Chart Forming a Bullish Pattern Ahead of Earnings? Walt Disney Co. NYSE:DIS is set to report fiscal Q2 results next Wednesday (May 7) at a time when the entertainment giant’s shares have shed more than 20% since February and some 55% from their 2021 peak. What does the company’s technical and fundamental analysis tell us?
Let’s see:
Disney’s Fundamental Analysis
Looking for earnings growth? Investors might not find much here.
The Street is currently looking for DIS to report $1.21 in adjusted earnings per share and $1.05 of GAAP EPS on roughly $23.15 billion of revenues for the quarter, which ran through late March.
That would compare to an identical $1.21 in adjusted EPS in the year-ago period on $22.1 billion of revenues (representing sales growth of less than 5% year over year).
Meanwhile, investors will want to see if a recent slide in Disney+ subscribers has continued, or even expanded. Management reported in February reported that Disney+’s customer base sank by roughly 700,000 in fiscal Q1 to 125 million users.
On the bright side, the company also said that combined Disney+ and Hulu subscriptions increased by 900,000 to 178 million during the same period.
Direct-to-consumer advertising (excluding India’s Hotstar streaming service) also rose 16% year over year fiscal Q1. But when including Hotstar, advertising contracted by 2%. So, this is a metric that investors will closely watch as well.
Of course, with forward-looking economic activity in some doubt both domestically and globally, Disney’s “Experiences” segment (theme parks, cruises, etc.) will be key to the firm's ability to traverse the future environment.
This segment has been an absolute driver of corporate performance for several years now, but last quarter, Disney’s domestic parks and experiences finally showed some slowing down.
The unit’s operating income contracted 5% year over year overall, although non-U.S. parks and experiences did better, growing 28%. y/y. However, the non-U.S. segment is a smaller business.
Will families be willing to splurge on a Disney vacation or cruise in a tougher economic climate? Disney could soon find out.
Elsewhere, the company’s Entertainment division will also be in focus when Disney reports its latest results.
Disney’s linear cable-TV networks continue to lose market share, while the recent live-action-movie version of "Snow White" was an absolute embarrassment in terms of dreadful financial performance. Forward guidance for this segment will be crucial.
Disney’s Technical Analysis
Now let’s look at Disney’s chart going back to last fall:
Readers will first see the well-developed “double-top” pattern of bearish reversal that spanned from November through early March, as denoted by the “Top 1” and “Top 2” boxes above. This pattern led to a sell-off for Disney that bottomed out in early April.
Now, I might be getting ahead of myself, but I think I also see a partly developed “inverse-head-and-shoulders” pattern under construction at the moment.
Readers will see what looks like a “left shoulder” and “head” pattern in the chart above denoted by purple curving lines at right.
Now Disney was struggling to retake and hold its 21-day Exponential Moving Average (or “EMA,” denoted by the green line above) as I wrote this. A hold above the line could bring some swing traders over to the long side.
And if DIS does hold its 21-day EMA, the stock would next aim technically to make a run at its 50-day Simple Moving Average (or “SMA,” denoted by the blue line at $97.30 in the chart above).
After that, reaching the 200-day SMA (the red line above) would complete an inverse-head-and-shoulders pattern and serve as a bullish sign.
This would put the pattern’s “pivot” or “neckline” almost precisely where Disney’s 200-day SMA currently sits, adding more gravity to the seriousness of retaking or failing at that level.
Meanwhile, Disney’s Relative Strength Index (the gray line at the chart’s top) is currently neutral and literally hints at nothing right now.
That said, the stock's daily Moving Average Convergence Divergence indication (or “MACD,” marked with gold and black lines and blue bars at the chart’s bottom) is improving.
The histogram of Disney’s 9-day EMA (marked with blue bars) moved above zero on April 2 and has remained positive ever since. That’s usually a good sign, but not yet bullish on its own.
Bullish investors would also want to see the 12-day EMA (the black line at the chart’s bottom) move above the 26-day EMA (the gold line), with both above zero.
The 12-day EMA is , in fact, above the 26-day EMA in the chart above. However, both lines must be above zero (as must be the 9-day EMA) to represent a truly bullish signal in historical terms.
Right now, the 12- and 26-day indicators are both below zero, but are moving in a northerly direction.
Am I saying that this is a bullish chart? Not necessarily; we might still be early.
But this chart seems to have great potential. A bullish set-up looks close to being in place. The rest might be up to Disney’s earnings release and guidance next week.
(Moomoo Technologies Inc. Markets Commentator Stephen “Sarge” Guilfoyle had no position in DIS at the time of writing this column.)
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