Disney share price: Q4 earnings preview

Coronavirus related lockdowns and social distancing requirements are expected to weigh on Walt Disney results this quarter, primarily through the group’s Theme Park operations.

Walt Disney Q4 earnings preview

Coronavirus related lockdowns and social distancing requirements are expected to weigh on Walt Disney results this quarter, primarily through the group’s Theme Park operations.

When is Disney’s earnings date?

Walt Disney, listed on the New York Stock Exchange (NYSE), is the largest media and broadcasting company in the world. The company is set to report its fourth quarter (Q4) earnings for 2020 on Wednesday 12 November.

Walt Disney Q4 2020 earnings: what to expect?

2020 has produced its fair share of surprises, most notably the onset of COVID-19 and the resultant global lockdowns which have disrupted economies and changed the landscape in which businesses operate permanently.

For Walt Disney the effects of these events are guided to have impacted the performance of the company’s theatrical and home entertainment releases, the advertising market for broadcast and cable television programming, demand for products and services, as well as the performance of some company businesses either directly or through their impact on those who distribute their products.

Bloomberg research on Walt Disney arrives at the following consensus estimates for the Q4 2020 results:

  • Revenue of $14.14 billion for the quarter
  • Revenue to have declined by 25% (from the prior year’s comparative period)
  • Loss per share $0.62 (vs earnings per share of $1.07 in the prior year’ comparative period)

The parks, experiences and theme parks experiences division is likely to produce the largest drawdown on revenue and earnings, with key parks in California and Florida closed over the reporting period, while other parks around the world operated on reduced capacity due to coronavirus restrictions and hurdles.

Disney+ as well as the group’s bundle offering which combines ESPN and Hulu is likely to have been an outperformer for the group. DTC & International/Consumer Products could see revenue having increased by as much as 30% (year on year) over the quarter.

How to trade Walt Disney results

The below two graphics provide traders with both a retail short term view on the stock, as well as an institutional longer-term view on the company, as to how market participants are positioning themselves on Walt Disney ahead of the results release.

A Thompsons Reuters poll of 25 analysts maintain a long-term average rating of buy for Walt Disney (as of 9 November 2020), with nine of these analysts recommending a strong buy, 8 recommending a buy, 7 hold, 1 sell and 0 strong sell recommendations on the stock.

From a retail trader perspective (as of 9 November 2020), 94% of IG clients with open positions on Walt Disney expect the price to rise over the near term, while 6% of IG Clients with open positions expect the Amazon price to fall.

Disney earnings: technical analysis

Over the last four months or so we see that the share price of Walt Disney has been trading in a broad range between levels 117.25 (support) and 137.20 (resistance).

However, a positive reaction in equity markets to election proceedings and hopes of progress in a coronavirus vaccine has seen Disney one of the broad-based equity beneficiaries.

The share price now looks to be breaking out of the medium term range. A close above 137.20 would confirm the upside breakout. With the move higher the stochastic is also starting to move closer to overbought territory.

Breakout traders might prefer to wait for the breakout to confirm (with a close), looking to the first pullback from the move higher for long entry. The height of the range (roughly $20) would provide a proportionate upside target at around 157.20, while a move back past the mid-point of the range would consider the breakout to have failed.

What to expect:

  • Q4 results are expected to produce a loss per share and 25% drop in revenue from the prior year’s comparative quarter
  • The Parks, Experiences and Theme Park experiences operations are expected to be a draw on revenue and earnings
  • DTC & International/Consumer Products Disney+ future) are expected to show significant revenue growth for the business
  • An aggregate of broker ratings (by Thomsons Reuters) suggest Walt Disney is an investment buy
  • Client sentiment suggests that short term traders are predominantly long the stock
  • A technical analysis view suggests the company to be testing resistance of the medium term range for an upside breakout

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