What is going on with Walt Disney Co (NYSE:DIS)? The company has reported some very good news recently, yet Disney’s stock price has actually declined. Do shareholders have a reason to be concerned? Or is Disney still in top-form?
Marvel’s Avengers: Endgame is now the highest grossing movie of all-time with revenues that are over $2.79 billion. The Lion King was a tremendous success as well, and it just had a record-making $185 million July opening weekend.
Further, the highly anticipated Disney+ streaming service will be released in November. Many analysts believe that this service will take a big part of market share from Netflix (NASDAQ:NFLX).
But despite all of this good news, the price of Disney stock has drifted lower. I do not own any DIS stock but if I did this would concern me.
Wall Street Still Loves Disney
Most analyst houses on Wall Street love Disney. According to MarketWatch, 25 firms follow the company. Seventeen analysts rate Disney stock as a buy while seven have hold ratings. JPMorgan reiterated its “outperform” rating and Morgan Stanley thinks earnings could double in just 5 years.
In Tuesday’s note, Morgan Stanley analyst Benjamin Swinburne states, “An immense execution challenge awaits Disney and its streaming ambitions, but its brands and content position give it a strong chance of success.” Yet, over the past 3 months, DIS has stagnated, rising just 2.4%. And since July 15, Disney’s stock declined 1.25%.
My experience has been that when a company reports good news and stock doesn’t react well, it is a bearish indicator. It is entirely possible that investors are concerned Disney will miss earnings estimates when it reports third-quarter results on Aug. 6.
Analysts are looking for Disney to report earnings of $1.75 per share on $21.49 billion in revenue. If Disney can’t connect, following a trend of blue-chip stocks missing earnings, then expect profit-takers to move on the stock.
If DIS stock does head lower, look for support around the $131 level. This level acted as support in May, and will be a critical juncture to watch going forward.
As of this writing, Mark Putrino did not hold a position in any of the aforementioned securities.