EDITOR’S NOTE: Sam Collins will return on Feb. 21.
The House of Mouse disappointed investors after the close on Tuesday: Walt Disney Co (NYSE:DIS) reported mixed results with earnings of $1.55 per share beating estimates of $1.48 but revenues of $14.8 billion missed the $15.3 billion analysts were expecting.
ESPN subscriptions remained a sore spot, with network revenue down 2% from last year. Its movie studio and products group also posted weak results — as the Frozen phenomena fades along with Star Wars hype — posting revenue declines of 7% and 23% respectively. Management talked up the upcoming Episode VIII movie — Luke Skywalker! — but traders didn’t seem to care.
Shares fell 0.6% in after-hours trading and are poised to open below uptrend support at the 20-day moving average. A close below this level would be the first since early November and mark the end of a powerful four-month uptrend that’s seen shares rise some 24%.
Management was quick to talk up the prospects for ESPN, as it has been a point of concern — along with the broader media space — since cord-cutting became a worry and knocked DIS off its pedestal in 2015. The focus now is on enabling a direct-to-consumer product (not unlike HBO’s over-the-top service) for ESPN, at the risk of cannibalizing its traditional cable/satellite subscriptions.
Watch for a pullback to the 50-day moving average near $105.50 for a decline of about 4% from here. A drop all the way to the 200-day moving average, near $98, would be worth a 10%-plus decline.
Anthony Mirhaydari is founder of the Edge and Edge Pro investment advisory newsletters. A two-week and four-week free trial offer has been extended to InvestorPlace readers.
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