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​​Disney struggles to sell its story

​​Investors remain unconvinced that Disney is a promising long-term play, even though the stock looks cheap on an earnings basis.

Walt Disney Source: Bloomberg

​​​Disney struggles to sell its story

​Despite efforts to recover from the impact of the pandemic, shareholders of Disney continue to express disappointment. One key concern is that the company's net income has not yet returned to pre-pandemic levels. This lack of recovery has been a cause for concern among investors.

​Furthermore, the losses incurred by Disney+ and Hulu have only added to the negative sentiment surrounding the company. These streaming platforms, which were expected to be growth drivers for Disney, have not performed as well as anticipated.

​However, there is a glimmer of hope as Disney recently announced the restoration of its dividend, albeit at a small scale. This move is seen as a step in the right direction and may help improve investor sentiment.

​Despite these challenges, the stock price of Disney remains relatively cheap, trading at around 19 times earnings, which is similar to its valuation in 2020. This could present an opportunity for investors looking for a bargain.

​Nevertheless, what the company lacks is a positive catalyst that could drive the stock price higher. Without a clear growth strategy or a significant development, it may be difficult for Disney to regain the confidence of shareholders in the near term.

​Analyst ratings for Disney

Disney analyst Source: Refinitiv
Disney analyst Source: Refinitiv

​Refinitiv data shows a consensus analyst rating of between ‘buy’ for Disney – 8 strong buy, 16 buy, 6 hold and 2 sell - with the mean of estimates suggesting a long-term price target of $104 for the share, 14% above its current value as of 7 December 2023.

​Technical outlook on the Disney’s share price

​The Disney share price, which has risen by less than 3% year-to-date, remains in a long-term downtrend and currently trades around its 55-week simple moving average (SMA) at $92.33.

​Disney Weekly Candlestick Chart

Disney Weekly Candlestick Chart Source: TradingView
Disney Weekly Candlestick Chart Source: TradingView

​The good news for the bulls is that in line with rapidly rising US stocks in November the Disney share price has risen by around 22% from its October low at $78.73.

​For the recent bullish reversal to gain traction, a rise above the 2021-to-2023 downtrend line at $95.26 and, more importantly, the November peak at $95.61 would need to be seen on a daily chart closing basis. Such a move would confirm a medium-term bullish reversal.

​Disney Daily Candlestick Chart

Disney Daily Candlestick Chart Source: TradingView
Disney Daily Candlestick Chart Source: TradingView

​In this scenario, the May earnings price gap to the 10 May low at $100.40 should get filled and the May peak at $103.91 be reached.

​At present the 200-day SMA at $90.27 is being revisited, though, around which the Disney share price may linger for a few days. Below it good support can be spotted at the positive November earnings price gap seen between $86.94 and $84.92. This area also incorporates the July and early August lows as well as the September and October highs, making it technically significant.

This information has been prepared by IG, a trading name of IG Australia Pty Ltd. In addition to the disclaimer below, the material on this page does not contain a record of our trading prices, or an offer of, or solicitation for, a transaction in any financial instrument. IG accepts no responsibility for any use that may be made of these comments and for any consequences that result. No representation or warranty is given as to the accuracy or completeness of this information. Consequently any person acting on it does so entirely at their own risk. Any research provided does not have regard to the specific investment objectives, financial situation and needs of any specific person who may receive it. It has not been prepared in accordance with legal requirements designed to promote the independence of investment research and as such is considered to be a marketing communication. Although we are not specifically constrained from dealing ahead of our recommendations we do not seek to take advantage of them before they are provided to our clients.

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