The Walt Disney Company (DIS)

The Walt Disney Company is a diversified international family entertainment and media enterprise. It operates through a few different segments: Media Networks, Parks, Experiences and Products, Studio Entertainment and Direct-to-Consumer and International (DTCI). Founded back in 1923 by Walt and Roy Disney, the company has got almost 100 years of history in producing quality content and making families and children happy all around the globe. Walt Disney’s products include: television, publishing, films, music, video games, amusement parks, broadcasting, and radio and web portals. The company has become a global leader in the sector it operates through the continuous releases of top-quality content as well as through its highly successful acquisitions completed in recent years. Including brands like Pixar (2006), Hulu (2009), Marvel (2009), Lucasfilm (2012), 21st Century Fox (2019) into the Walt Disney family has greatly increased the company’s reach and influence.

Investors treated the company very favorably in the 2016-2020 period, as we saw Disney’s stock (DIS) move up from the $86 level all the way up to the latest all-time high of $202 per share in Q1 of 2021. This represented a phenomenal 137% increase in a matter of just 5 years. However, after topping out in March of 2021, the stock has been in a relatively strong downward corrective phase, losing over 36% of its market capitalization, which many could even qualify as a clear bear market activity. At any rate, we believe that unexpected global macro economic events, major shifts in the monetary and fiscal policy stances of leading central banks and governments around the world, together with a rapidly rising inflation levels have all contributed in drastically weakening the US equity markets, which has been one of the major reasons for the decline in Disney’s stock. Of course, DIS is not immune to the volatility in the market, which in our view investors should be really thankful for as it gives them a phenomenal opportunity to buy into the stock at a great discount.

While the stock has dropped more than 30% from its all-time highs, the company recently reported a very strong fiscal Q1 performance beating analysts’ expectations across the board, thus showing that the underlying business continues to grow and expand at an impressive rate.

Earnings per share: $1.06 adj. vs 63 cents expected = 68% beat

Revenue: $21.82 billion vs $20.91 billion expected = 4.17% beat

Disney+ total subscriptions: 129.8 million vs 125.75 million expected = 3.12% beat

The company added nearly 12 million Disney + subscribers in the last quarter while

Disney’s parks, experiences and consumer products division saw revenues reaching $7.2 billion during the quarter, which was double the $3.6 billion it generated in the prior-year quarter.

What was even more impressive was that Disney’s blowout results came shortly after one of their biggest competitors in the streaming space, Netflix, disappointed investors with reporting a slowing subscriber growth and missed analysts expectations across the board. In contrast, Disney’s CEO, Bob Chapek, gave a strong forward guidance for the rest of the year, stating that he expects the strong momentum to continue and even further improve in the 2nd part of the year.

With an incredibly strong pipeline of new releases scheduled for 2022, including “Doctor Strange in the Multiverse of Madness” (May 6th); Black Panter: Wakanda Forever (Nov. 11); Avatar 2 (Dec. 16) we can easily see where Bob Chapek’s confidence comes from.

Technical Analysis

The stock has managed to stage an impressive rebound together with the rest of the market from the lows of around $130 per share set at the end of January. However, the stock is still in a downtrend and is currently facing strong resistance from the diagonal downward sloping resistance line (black line), the 20-week moving average (middle Bollinger band in orange) and the horizontal resistance line lying at $151 per share (horizontal black line). We are seeing a material loss of the upward momentum in the stock with lower volumes. The weekly RSI is also showing signs of weakness, suggesting that it might very well continue its downward trend as well. Thus, we expect the stock to revisit the $134-138 region in the coming days as tensions in the Russia-Ukraine conflict continue to rise. The stock is expected to find strong support around the $132 level as that’s where we see the multi-year upward sloping diagonal support (purple line), which has supported the price since all the way back in 2008. We believe that opening a LONG position in Disney’s stock anywhere around the above-stated range would be a great opportunity to establish a position in one of the most beloved companies in the world. In case the price breaks the multi-year support line and drops below the $130 per share level on a daily closing basis, then investors should be ready for a much larger decline, which could take the stock all the way down to $105 area. Even though we do not see such a scenario as a likely development, we need to give you guys a clear understanding of all major levels for the stock, so that you could be well-equipped to react in any situation.

Sincerely,

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