Good and bad news push Disney higher

Exchange: NYSE

Sector: Services

Industry: Entertainment — Diversified

Entry strategy

Price: $110–118

Stop-loss: under $102.4

Take profit: $148

Investment horizon: until the end of 2019

Company details

    Walt Disney Co. is an international entertainment and media company. It operates in four business segments:

  • media networks,
  • parks and resorts,
  • studio entertainment — films, cartoons and shows production,
  • consumer products and interactive media.

Some of the company's assets are Marvel, Lucasfilm, ABC, Pixar. Famous brands: Star Wars, The Marvel Cinematic Universe and many others.

The issuer's capitalization is more than $170 billion (group +Large).

Analysis of news concerning the issuer

Creating a streaming media platform. Since 2012, Netflix has been streaming products made by Disney. In August 2017, Disney announced plans to end this cooperation — the corporation will launch its own platform.

Recently, the company has specified the timing of the streaming service creation — it will start working at the end of 2019. Subscribers will be able to watch movies, series and cartoons based on Disney franchises. Among the new products that the corporation will release on the platform are a series about the Marvel universe anti-hero Loki, an animated series based on the Monsters, Inc. and a film Lady and the Tramp

We expect that the redistribution of the streaming services market is a promising solution for Disney. Its successful implementation will have a positive effect on the company's future financial results and its capitalization.

#interesting Based on this news, the idea of pair trading is relevant — the purchase of Disney stock and the sale of Netflix stock

The recent death of Stan Lee, the author of The Marvel Cinematic Universe comic books. This sad event may trigger a wave of hype around Marvel products owned by Disney. We believe that the likelihood of such a scenario is quite high. If it comes true, it will be a driver for the growth of Disney’s shares price.

Company financial performance

Since 2014, the corporation has shown a steady increase in revenue and earnings per share (see Table 1).

Table 1. Annual financial results of Walt Disney Co. ($DIS) for 2014–2018. Source: MarketWatchOpen original image

The third quarter of 2018 also turned out to be quite good for Disney. Earnings per share for the period exceeded analysts' expectations by 16.4% and the result for the third quarter of 2017 — by 38%.

Table 2. Quarterly financial results of Walt Disney Co. ($DIS) for September 30, 2017 – September 30, 2018 г. Source: MarketWatchOpen original image

Technical analysis (trading plan)

Graph 1. Technical analysis of The Walt Disney Company ($DIS). Source: TradingViewOpen original image

Published on the 14th of November, 2018