Disney earnings preview: what to expect from Q4

IGTV’s Jeremy Naylor looks at the risks for shares considering the theme park’s business, studios, and streaming.

Can the company pull a rabbit out of the hat or is the risk to the downside for shares?

(Video Transcript)

Risk event: Disney earnings

Welcome, let's take a look at a Risk Event now for the week starting Monday 7th November.

I want to focus in on earnings from Disney after the closing bell on Tuesday. It’s an all-sessions stock so you can trade this on the IG platform.

Let's take a look at the numbers as, despite the fact we've got lots of moving parts here, the broad sweep of analysts are saying that we're going to get earnings per share at $0.59 on revenues just shy of $21.4 billion.

Now, theme parks, have been hit by zero-COVID recently, but we're hearing from China that the zero-COVID policy may now be over and we're moving to a more tolerant environment, which could help theme parks.

The studios, the Marvel acquisition, continues to provide a lot of opportunities. But the big question is about inflation and how Disney Studios are going to control inflation, control base costs, because that is going to be a big issue outlook from here in terms of wages, in terms of cost for sets and so forth.

And then of course, the third aspect is, I think the most important one, is the streaming, hit by Netflix's attempts to steal the low line subscription.

Disney share price chart

Let's take a look at the share price chart because I think this says a lot. From the Covid lows we had here down at $79 back in March 2020, we saw a 160% rise, almost, in that.

During that period, we saw Disney bring streaming to the masses. And of course, a lot of people used streaming as a way to entertain themselves while they were being locked down. But since the highs we saw at $205 back in March, we've seen a lot of downside as people gave up some of the streaming.

It became obvious that it was more difficult, perhaps maybe, to keep subscribers going and, indeed, get more subscribers. And, of course, there are a lot of streaming companies now, which are vying for this.

And, most recently, we've seen Netflix in its attempts to steal the low line subscriptions with a new cut price, discounted, advertisement-driven policy, and that undercuts Disney. And this is going to be a problem for Disney.

Disney shares trade all-sessions on the IG platform. You can trade this when the numbers come out after the closing bell on Tuesday.

On Friday’s all-session stock, we're currently trading just shy of the $100 level. If you are short on this, which I think is my base case, that I think that Disney’s going to produce something which could well be a bit of a disappointment. I think you put your stop above this area up here to round about the $109 level with a view to taking this lower down and possibly passing the $90.20 level if we do get a dire outlook from the company.

But this is fiscal fourth quarter numbers out after closing bell on Tuesday. Could be an interesting point to watch out for as we look towards the new trading week and a Risk Event to consider.