Disney stocks may move 6% on Thursday

Disney is set to unveil its earnings for its fiscal Q4 and full fiscal year after US markets close today (Wednesday, November 8th).

Markets are eager to find out how well Disney’s ongoing transition into a digital company is coming along.

This shift away from traditional TV channels is apparently being funded by its cash cows, i.e. parks and experiences.

Here are some key considerations for markets going into today’s earnings announcements:

1) New subscribers at Disney+

Disney’s loss-making streaming platform is forecasted to add another 3.1 million subscribers – its first subscriber growth in four quarters.

Note that its prices had been hiked, and also introduced an ad-version of the streaming platform, as Disney puts profits ahead of subscriber growth.

2) Hulu purchase

Earlier this month, Disney said it intends to buy up the remaining one-third it doesn’t own of the Hulu streaming service from Comcast sometime in 2024.

But how will Disney pay for it, given that its cash pile has grown smaller every year since 2022?

Disney’s cash and equivalents stood at US$11.6 billion in its fiscal 2022 period, compared to US$17.9 billion in its fiscal 2020 year.

3) ESPN’s future

Disney plans to transform this sports cable channel into an online product.

Also, Disney will today be carving out ESPN’s earnings for the first time in its overall earnings report.

4) TV sale?

Back in July, CEO Bob Iger said that Disney’s linear TV assets are no longer “core” to the company. This includes its ABC TV network, cable channels such as FX and National Geographic, as well as local stations.

Shareholders want to know how soon Disney can get rid of such deadweight assets, amid the ongoing decline in linear TV.

Key figures: Disney’s Q4 FY23 (July-September 2023) earnings

Here are the analysts’ forecasts for some of Disney’s key metrics due later today:

• Total Disney+ subscribers: 147.35 million
   
• Revenue: US$ 21.43 billion
   
• Earnings per share (EPS): 69c

While noting that the above numbers are for the past, they still hold plenty of potential to move the stock, as much as the forward-looking statements surrounding the key points cited at the top of this report.

What do Wall Street analysts currently think of Disney’s stocks?

As things stand, Disney has:

• 29 “buy” calls
   
• 8 “holds”
   
• 2 “sells”

The median forecast among these analysts also predict this stock could rise by 25.7% to hit $106.37 in 12 months.

Disney’s announcement later today would help determine just how much of those potential profits will become a reality for investors, and how soon.

How might Disney’s stocks react after today’s earnings?

Markets currently forecast that this stock will move by 6%, either upwards or downwards, once US markets reopen on Thursday, November 9th (the day after Disney releases its earnings).

• This stock could move higher if Disney can make further meaningful strides in its digital offerings, while shedding away its legacy business.
   
• If Disney appears to still be struggling with its digital ambitions, even as its legacy business weighs down the company’s overall financial standing, that should drag this stock lower.

To underscore how much of an impact these earnings announcement can have on the stock price, consider how Disney’s shares have reacted to its recent earnings reports:

• 10 August 2023: Disney jumped by 4.88% after better-than-expected FYQ3 results, but have since struggled to emulate that $92.52 post-earnings peak.
   
• 11 May 2023: Disney gapped down and lost 8.7% the day after its FYQ2 earnings release.

Technical Analysis: Disney still mired in downtrend

This stock has only managed a series of lower highs and lower lows since March 8th, 2021 when it posted its sole daily close above $200.

Disney still remains some 58% below that record high.

In a couple of episodes over the past one month, Disney has struggled to break above its 100-day simple moving average (SMA) – a widely-followed technical indicator.

Yet, this stock has found strong demand among buyers since September 2023 every time its dipped below the psychologically-important $80 line and reached its pandemic lows.

• A 6% move to the downside on Thursday could see this stock dipping below $80 yet again (depending on how this stock fares today ahead of its earnings), retesting the “buy the dip” mantra.
   
• A 6% move to the upside on better-than-expected results could see this stock punching well above its 100-day SMA and beating the mid-October cycle high of $86.28.
  
  Still, the psychologically-important $90 region may resist attempts to push this stock higher, with the 200-day SMA lying further north to potentially exert stronger resistance.

Such a rebound would still lay bare the long road back to $200.

And judging by Wall Street’s projections, the best this stock can do is only $106.37 by November 2024 (analysts forecasts prior to today’s earnings release).

And that assumes Disney can indeed shore up its business fundamentals and future proof itself along the way.

Today’s earnings announcement could mark a major step in bulls’ quest to return Disney shares back to triple digits.