Dow component Walt Disney Co. (DIS) reports Q2 2022 results next week, with analysts looking for a profit of $1.19 per-share on $20.04 billion in revenue. If met, earnings-per-share (EPS) will mark a 51% profit increase compared to the same quarter last year, when renewed Covid restrictions delayed reopening plans. The stock rallied to 157 after beating Q1 estimates in February but that buying spike marked the highest high in the last three months, ahead of a major decline that’s relinquished 25% of its value.
Politics vs. Profits
The Mouse has lost nearly 45% in two months since posting an all-time high above 200 in March, close to repeating 2020’s 49% somersault. Worse yet, the company is entangled in hot-button social justice issues, practically ensuring that half of its diverse customer base is angry with its actions. That’s no way to protect an American brand that’s defined wholesome family entertainment since “Steamboat Willie” was released in 1928.
Disney rallied in 2020 on the rapid growth of its streaming service but recent subscriber numbers have been mixed, for the same reason that Netflix Inc. (NFLX) recently warned about subscriber losses in the second quarter. Many who were stuck at home with kids in the first year of the pandemic subscribed to Disney+ to keep them engaged between Zoom school sessions. That phenomenon ’pulled forward’ future sales, generating a classic saturated market for streamers.
Wall Street and Technical Outlook
Wall Street has been asleep at the wheel during the Disney decline, generating an ‘Overweight’ consensus based upon 21 ‘Buy’, 2 ‘Overweight’, and 8 ‘Hold’ recommendations. Worse yet, price targets currently range between a low of $130 and a Street-high $229 but the stock will trade on Friday more than $20 below the low target. This huge disconnect highlights the failure of analysts to measure the financial impact of the Netflix warning and social justice controversy.
Walt Disney finally cleared 2015 resistance at 122 in December 2020, entering a brief uptrend that hit an all-time high at 203.02 in March 2021. The subsequent decline sliced through the 2019 high in January 2022, signaling a failed breakout that’s dropped the stock to levels first struck in April 2015. Disney pays no dividend so that horrific performance translates into a zero seven-year return, making it one of the Dow’s worst performers. Accumulation has dropped to a 10-year low at the same time, further darkening the long-term outlook.
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Disclosure: the author held no positions in aforementioned securities at the time of publication.
This article was originally posted on FX Empire