Does Netflix’s Issues Spell Trouble for Disney?

DIS Stock - Does Netflix’s Issues Spell Trouble for Disney?

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Disney (NYSE:DIS) has been in the house of pain lately, as investors continue to sell it lower. The latest earnings report from Netflix (NASDAQ:NFLX) didn’t help, as it showed a serious slowdown in growth. Travel trends have been called into question due to Covid too, leaving DIS stock to flounder.

Currently, shares are down 41% from the highs made in March 2021. Despite not being a tech growth stock, it topped out around the same time as this group. At some point though, there has to be value in this long-term blue chip holding.

When Netflix reported earnings, it was expecting a 2.5 million net increase in subscribers. Instead, it reported a loss of 200,000. Revenue guidance for next quarter was disappointing too, as was its subscriber outlook, as it expects to lose 2 million subscribers.

It has investors worrying about the streaming space as a whole. Naturally, streaming stocks — including Disney — sold off on the news. In fact, DIS stock is trading at a 52-week low.

However, a few days later we heard from AT&T (NYSE:T), which recently spun off Warner Bros Discovery (NASDAQ:WBD). The company’s HBO and HBO Max units added 3 million subscribers in the quarter, boosting its total to 76.8 million. That’s up 12.8 million subscribers year over year.

Perhaps it is a Netflix problem and not a streaming problem in general.

For Disney though, streaming is only one part of its business. It relies heavily on parks, studio and cable revenue too. Fortunately, we’re getting good news here as well.

United Airlines (NASDAQ:UAL) just issued its strongest second-quarter outlook ever. CEO Scott Kirby said, “The demand environment is the strongest it’s been in my 30 years in the industry.” American Airlines (NASDAQ:AAL) was also bullish when it reported its outlook.

Given Disney’s prominence in travel, these trends bode well for the entertainment juggernaut. That said, DIS stock hasn’t been trading well.

Weekly chart of DIS stock
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Source: Chart courtesy of TrendSpider

Long-term investors can certainly find some value in the stock as it’s down nearly 40% from the highs.

For those that follow the technicals, it’s not very encouraging to see the stock knife through the $125 to $128 area. Again, long-term investors can find value in the stock at current levels. However, those inclined to wait for potentially better prices may consider initiating a position in the $100 to $106 region.

If that fails — and if the markets are really getting roiled — the $80 area is back in play. There DIS stock would find the 200-month moving average and the Covid lows from March 2020.

On the date of publication, Bret Kenwell did not have (either directly or indirectly) any positions in the securities mentioned in this article. The opinions expressed in this article are those of the writer, subject to the InvestorPlace.com Publishing Guidelines.

Bret Kenwell is the manager and author of Future Blue Chips and is on Twitter @BretKenwell.


Article printed from InvestorPlace Media, https://investorplace.com/2022/04/does-netflixs-issues-spell-trouble-for-dis-stock/.

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