Source: PaxForex Premium Analytics Portal, Fundamental Insight
Walt Disney shares have stayed below the triple-digit mark for over four months, last surpassing $100 in late June. Now, they’re edging closer to this milestone again. The stock’s momentum is positive, marking gains for three straight months. Disney's shares recently reached intraday highs above $99 for the last three trading days of the previous week, nearly reaching $100. What’s needed now is a final catalyst to propel it forward, which might arrive with an upcoming financial update.
Disney typically reports earnings toward the end of the season, with its fiscal fourth-quarter results set to release on Wednesday afternoon. While revenue expectations are modest, analysts have higher hopes for Disney’s bottom line.
Revenue for the summertime quarter, which concluded in September, is expected to rise nearly 6%, reaching $22.4 billion. Although modest, this represents a quicker pace than the previous quarters’ 4% and 2% year-over-year increases.
Interestingly, this revenue acceleration doesn’t stem from the segments that originally boosted Disney’s growth. Theme parks, a big driver of recovery post-pandemic, have recently plateaued. Domestic park revenue grew 4% in the third quarter but was partially offset by lower international performance, leading to a decline in operating income. Disney cautioned this summer that demand might stay moderate for the coming quarters, and for this fourth quarter, the company expects operating income from the parks to fall by mid-single digits.
Meanwhile, the linear media networks segment, which provided stability during lockdowns, is now experiencing setbacks as cord-cutting erodes its viewership and ad reach.
Fortunately, Disney's streaming segment has been filling in the gaps. Its streaming division has grown consistently, and for the first time, it’s profitable. Disney projects a slight increase in its core Disney+ subscribers for the fiscal fourth quarter. After mixed theatrical results in 2023, Disney bounced back this summer with hits like Inside Out 2 and Deadpool & Wolverine.
Disney’s earnings could be the real turning point. Analysts predict a 34% increase in earnings per share to $1.10, aligning with Disney's annual guidance of 30% adjusted earnings growth. Since his return as CEO nearly two years ago, Bob Iger has focused on cost-cutting without sacrificing the brand’s core appeal, successfully bolstering the bottom line. Now, the focus shifts to restoring Disney’s stock standing on Wall Street.
The immediate outlook is positive, despite a recent five-month downturn. With streaming now profitable, it can balance out gradual declines in the legacy media networks. In theaters, Disney holds two of the top films of 2024 and expects to add two more by year’s end with Moana 2 and Mufasa: The Lion King. Though the theme parks might need more time to regain momentum, Disney has outlined a strategy for growth with new experiences arriving in the coming years.
Adding to its portfolio, Disney plans to double its cruise ship capacity within the next few years. A strong report this week could push Disney stock back above $100. To keep it there, Disney will need to sustain growth and lay the groundwork for Iger’s succession.
As long as the price is above 94.00, follow the recommendations below:
- Time frame: D1
- Recommendation: long position
- Entry point: 100.54
- Take Profit 1: 102.00
- Take Profit 2: 104.00
Alternative scenario:
If the level of 94.00 is broken-out, follow the recommendations below:
- Time frame: D1
- Recommendation: short position
- Entry point: 94.00
- Take Profit 1: 92.00
- Take Profit 2: 90.00
