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

When is Disney’s results date?

Disney, the diversified media conglomerate, is set to release its fiscal first quarter (Q1) figures on Wednesday, 7 February, after the market close.

Disney’s previous results

Investors are eagerly anticipating the results, hoping for an improvement over the last quarter's mixed performance. The previous quarter saw an earnings beat at 82 cents, surpassing the expected 70 cents, but a slight miss in revenue at $21.24 billion. However, the increase in core subscribers to over 150 million was a welcome development.

Despite the mixed results, Disney’s share price surged post-release, laying a new foundation for the company for much of the previous year. Yet, Disney has shown clear underperformance compared to the general stock market, and notably against its rival, Netflix, especially after Netflix’s recent earnings announcement, which exceeded expectations with an addition of 13.1 million new subscribers.

Acquisition, succession, merger, and activist drama

The past quarter has been eventful for Disney, with various challenges and strategic moves. One notable event was the copyright expiration of the original 1928 version of Mickey Mouse in Steamboat Willie, leading to potential challenges. Disney resolved a strike with writers at the quarter's start, and about a month later, reached an agreement with the actors' union SAG-AFTRA. The quarter also witnessed the launch of ESPN BET, the announcement of a deal with Comcast for full acquisition of Hulu, another box office setback, and the initiation of a potential merger with Reliance Industries.

Investors are keen for more details on these developments, as well as updates on succession plans from CEO Bob Iger, and clarity on strategic initiatives involving ESPN, legacy TV networks, and asset sales. A key focus will be on subscriber growth and the company's strategy to turn its streaming business profitable by the fiscal year-end. Equally crucial is the approach Disney will take in cost-cutting and reducing content expenditure while increasing consumer demands.

Activist drama over strategic direction and succession

A significant disagreement over the company's strategic direction and succession plans has led to activist drama. Disney's Board has rejected candidates nominated by activist investors, including those from Nelson Peltz’s Trian and Blackwells Capital. This rejection sets the stage for a potentially contentious three-way battle at the upcoming 2024 annual meeting of shareholders.

Disney’s share price: forecasts from Q1 results

Looking at Disney’s fiscal first quarter, which concluded last year, there's an expectation for the earnings per share (EPS) to hit one dollar, mirroring the $0.99 achieved a year earlier. This figure, revised downwards over recent months, reflects cautious market sentiment. Revenue forecasts, sourced from LSEG, suggest a modest year-on-year increase for the same quarter, with projections around $23.71 billion. Growth across all three segments - entertainment, experience, and sports - is anticipated, although advertising revenue may see further weakening, offset by a general reduction in expenses.

Analyst recommendations currently show a stable number of six holds, two suggesting a sell, but interestingly, no strong sell positions. In contrast, there are 15 buys and eight strong buys, indicating a majority buy bias. The average price target hovers over $103, suggesting a potential upside given the current share price (source: LSEG). On the IG platform, the 'smart score' from TipRanks stands at nine, indicating an 'outperform' status, with an average analyst recommendation above $107, pointing to a potentially larger upside.

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

In the shorter-term daily timeframe, there’s a growing positive technical bias in Disney's stock, indicated by several key technical indicators. However, this sentiment shifts to a more neutral stance when we examine the weekly timeframe, as illustrated in the chart below. The stock price is currently above all its main short-term weekly moving averages (MAs), but only surpasses one of its long-term MAs, with the 100-week MA within reach and a considerable distance to the 200-week MA. The Bollinger Bands have slightly expanded, with the price nearing the upper band. The Relative Strength Index (RSI) remains below overbought territory, albeit above 50, while the Average Directional Movement Index (ADX) is not yet in a trending zone, and the Directional Movement Index (DMI) shows the DI+ above the DI-.

This overview suggests a cautious approach at this stage. Despite the oscillations in a higher price zone contributing to a positive technical bias in the short term, the broader picture remains tentative. A key strategic point to note is the increase in intraweek volatility, particularly when combined with fundamental events such as company earnings. It's important to remember that technical analysis becomes less relevant in the face of significant events, with company earnings being a major fundamental factor that can influence share prices.

During volatile events like earnings announcements, trading strategies often diverge between conformist and contrarian approaches. Under the current ‘cautious consolidation’ scenario, a cautious buy or a sell-after-significant reversal strategy might be preferred, particularly when moving opposite to a trend at the first or even second levels, due to the anticipated increase in volatility. On the other hand, contrarian traders might opt for breakout strategies, anticipating fundamental momentum to carry the stock beyond technical levels.

Disney weekly chart with key technical indicators

IG Client sentiment* and short interest for Disney shares

For traders and investors alike, the past quarter’s share price gains have been a relief given the low base prior (which wasn’t far off pandemic lows), but from where a portion have initiated has meant they’re still left waiting and wanting more. Traders on our end have been holding an extreme buy bias at 97% and little changed from roughly two weeks ago (image below).

Short interest is at highs unseen since June of 2020, rising to over 27m shares, and as a percentage of the total stands at 1.48% (source: LSEG).

• _{*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 January 16, 2024.}