Walt Disney share price tests breakout level after Q4 results

Key Takeaways:

1. The Walt Disney Company reported a 5% increase in revenues for the fourth quarter and a 7% increase for the full fiscal year, compared to the previous year.
2. While Disney's diluted earnings per share (EPS) from continuing operations increased in the fourth quarter, it decreased for the full fiscal year.
3. Disney's streaming platform, Disney+, continues to expand its subscriber base, adding nearly 7 million core subscribers in the fourth quarter.
4. Disney's domestic ESPN revenue and operating income grew year over year, highlighting the strength of the ESPN brand and the value of sports content.
5. Disney has been proactive in managing its cost base, increasing its annualized efficiency target.

Disney’s Q4 and full year results

The Walt Disney Company (DIS) has recently announced its financial results for the fourth quarter and the full fiscal year ending September 30, 2023. The company reported a 5% and 7% growth in revenues for the quarter and the year respectively, compared to the previous year. This growth demonstrates the company's resilience and ability to adapt to market changes, making it a potentially reliable choice for traders.

Disney's diluted earnings per share (EPS) from continuing operations for the quarter increased from $0.09 in the prior year’s comparative period to $0.14 in Q4 2023. However, for the year, the EPS decreased from $1.75 to $0.29.

Disney+ continues to expand its subscriber base, adding nearly 7 million core subscribers in the fourth quarter. This growth was driven by popular theatrical titles such as Elemental, Little Mermaid, and Guardians of the Galaxy Vol. 3, and original series like Ahsoka and the Korean original series Moving. The company anticipates its combined streaming businesses will reach profitability in Q4 of FY24.

The company's domestic ESPN revenue and operating income grew year over year in both fiscal year 2022 and fiscal year 2023, demonstrating the power of the ESPN brand and the value of sports content. Additionally, the Experiences operating income increased by over 30% compared to the prior-year quarter, with growth seen across all international sites, Disney Cruise Line, Disney Vacation Club, and Disneyland Resort.

Disney has also been proactive in managing its cost base, increasing its annualized efficiency target to $7.5bn from $5.5 billion. This cost management strategy is expected to contribute to the company's bottom-line growth.

In summary

Looking ahead to fiscal 2024, Disney expects to grow its free cash flow significantly, approaching levels last seen pre-pandemic.

Overall, Disney's strong revenue growth, the growth of its streaming platform, and its success in ESPN and experiential offerings position the company well for the future. However, the mixed earnings performance and the need for cost management highlight challenges that the company needs to address to maintain long-term profitability.

Disney – trading view

The share price of Disney has rallied in after hours trade following the release of its Q4 2023 results. The price is now testing range resistance at the 89.00.

A close above the 89.00 level would suggest a range breakout with 92.60 and 94.80 possible upside resistance targets from the move. In this scenario traders will need to assess the risk relative to reward metric for the trade. One such risk consideration might be to implement a stop loss on a close below a one or two day low.

Should the price not manage to break resistance and instead from a bearish price reversal off the level, short considerations might target a move towards support at 83.25. In this scenario a close above the reversal high may be used as a stop loss indication for the trade.