photo of castle during daytime

On Wednesday, we get the latest quarter results for Walt Disney Co (NYSE:DIS). Technically it is the fiscal Q3 earnings, for those that thought there was a typo in the title! We think that there is some bullish upside potential for a few reasons, that could cause Disney share to jump. Here’s what we are looking for.

Bounce back in retail park revenue

Over the course of the pandemic, revenue from parks and experiences slumped. This appears to have bottomed out in Q3 2020, with the previous two quarterly results showing much better growth in this area. The growth was shown with Q2 revenue doubling from the same quarter last year.

We think that Q3 earnings will show further growth in this revenue segment for Disney. With the seasonality element in play, along with a lack of any restrictions, consumer demand should have been strong.

There is the risk that the business flags up some concern going forward, given the squeeze on consumers income. The potential for a fall in real wages could negatively impact the propensity to consume later this year, and is a risk we note.

Growth in media

The media and entertainment arm (which houses Disney+) has split analysts recently on the performance. In Q2, revenue grew by 9% year-on-year, but operating income was down 32%.

There is some concern that this area could stall, in a similar situation that Netflix is experiencing. We disagree on this. Netflix has a larger and more stagnant consumer base, which has seen slowing subscriber numbers for a while now. ON the other hand, Disney is still seeing material growth in subscriber numbers.

The fact that the overall number is still below Netflix’s shows that further growth is obtainable before reaching a possible plateau.

Further, the division has strong brands such as Marvel and Star Wars which is can leverage on in a unique way. The recent success of Obi-One Kenobi as a streaming series highlights this.

Trend breakout for Disney shares

We think that investors are already feeling more optimistic around Disney shares. As the below chart shows, on the daily candlesticks we have seen a break of the downward trend channel that the share price has spent most of this year in.

The break higher leads us to conclude that further upside is in store. Therefore, the bias should be to buy Disney shares on any results next week that are in line or beat expectations, as the technicals support a larger catch-up move.


Leave a Reply