Disney’s share price: what to expect from Q1 results

When is Disney’s results date?

The argument over streaming saturation gets more clarity on Wednesday, May 11, after the market close as that’s when The Walt Disney Company will release its figures.

Disney share price: forecasts from Q1 results

The 35% plunge in Netflix’s share price (and the losses it suffered thereafter) is very much fresh on the minds of investors and traders alike, and even though Disney is the more diversified media conglomerate, it doesn’t mean they won’t go into the event holding their breath. More so than the fourth-quarter earnings of last year, the risks seem to be higher with market reaction being more punishing as of late to those who miss even in the slightest.

Disney managed to beat estimates last time around sending its share price higher back in February, but it has yet to regain losses suffered post-November when they released fiscal fourth-quarter readings that were a miss.

With saturation risks in the streaming sector, rate hike expectations hurting growth stock valuations, and relocation likelihoods following the revoking of its special status in Florida, neither are positives when it comes to valuations. This has thus far translated into further drops in its share price, the technicals of which we’ll go through in the next section.

Forecasts are for an increase in earnings per share (EPS) of $1.06, similar to what it reported for its fiscal first quarter, but for revenue to drop to $18.64bn. It’s relatively diversified compared to Netflix and means investors will be noting how its theme parks, which captured a third of revenue, have been faring and will fare considering recent domestic events, any updates on its 'own Disney metaverse', and the costs associated with pausing its business in Russia.

All that seems to matter less these days when compared to subscriber additions, Netflix’s contraction is noteworthy (even if it would have been an increase had it not been for Russia) and lower guidance is a scare for the streaming sector. Disney+ added nearly 12m subscribers in the first quarter and blew past estimates therefore where they landed at the end of the past quarter and where they expect to be in this and coming quarters will be the most talked-about aspect of its release.

Analyst recommendations are far less optimistic this month with a majority opting for a ‘hold’, and a few venturing into underperforming and sell territory. Net, however, it’s still majority buy amongst them, and the average target is above the current share price.

Trading Disney’s Q1 results: weekly technical overview and trading strategies

It has been difficult finding the share price of a company that isn’t facing weakened technicals. With a glance at the Disney weekly chart, prices are at the lower end of what has been a revised bear trend channel, walking the lower end of the band, beneath all its main short and long-term weekly moving averages. An RSI (Relative Strength Index) has now dipped into oversold territory, with a DMI (Directional Movement Index) that’s negative (i.e., a large enough margin of the DI- over the DI+), and an ADX (Average Directional Movement Index) reading that roughly within trending territory. A similar conclusion can be drawn when zooming into the daily time frame as well.

Trying to classify its technical overview in such a state seems relatively straightforward, a bear trend albeit stalling in the sense that most weeks have offered little follow-through beyond weekly levels, with last week an obvious exception when Netflix’s results took the streaming sector down with it. There’s also the matter of whether its bear trend channel will hold, as should that be the case and a move to the upper end of the channel as witnessed at the beginning of December and the end of January could put contrarian strategies into play, even if it’s a move to the middle of the band.

As always, key fundamental events as crucial as this one at a time when investors have started doing their homework as opposed to chasing momentum means technicals will be at its mercy, with any major difference between expected and actual easily capable of blowing a hole well past even longer-term monthly levels.

Disney weekly chart with key technical indicators

IG Client sentiment* and short interest for Disney shares

Retail trader bias last time around in the fourth quarter earnings preview was an extreme buy 98%, and since then there hasn’t been a real noticeable drop, opting to remain above 90% and tested for long positions initiated at a higher price level.

As for short interest, it was over 20m shares representing over 1% of the total shares floated a few months back, the latest figures showing a slight drop to around 19.75m keeping the overall percentage little changed, and where shorts have recently increased.

*The percentage of IG client accounts with positions in this market that are currently long or short. Calculated to the nearest 1%, as of the start of the week for the outer circle. Inner circle is from the previous earnings preview on February 4, 2022.

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