To The Moon

$Walt Disney(DIS)$ 

🪤🪤🪤 Dismal DIS? Navigating Disney's Stock Challenges 🪤🪤🪤

Disney's recent surge in stock performance warrants careful consideration for potential investors, as Nikolaos Sismanis advises. While the company has made notable strides in strategic evolution, evidenced by enhanced streaming earnings, growth in Parks and Experiences, and widespread cost reductions, lingering concerns persist.

Specifically, the legacy TV sector continues to grapple with substantial challenges, counteracting advancements in the Direct-to-Consumer (DTC) segment. Despite a 15% increase in DTC revenues, overall Entertainment revenues experienced a 7% decline to nearly $10 billion, compounded by a $138 million operating loss in the DTC sector.

Moreover, the perceived strength of Disney+, although showing revenue growth and a narrowed operating loss, faces headwinds such as declining subscriber numbers and increasing competition, particularly from Netflix. This poses challenges for Disney's long-term profitability in the DTC domain. The number of Disney+ subscribers was 146.6 million for the quarter, down from 150.2 million in the previous quarter and even lower from 161.1 million in the prior year period.

On a more positive note, the Experiences segment has witnessed commendable revenue and earnings growth, attributed to successful attractions such as the World of Frozen and Zootopia Land. However, there's a cautionary tone regarding potential growth plateaus, given the post-pandemic travel rebound and escalating prices. The segment’s revenues and operating profits grew by 7% and 8% to $9.1 billion and $3.1 billion, respectively.

Disney's strategic transformation efforts, exemplified by significant cost-saving measures, are noteworthy. Yet, achieving Wall Street's ambitious earnings growth projections beyond the current fiscal year remains uncertain. Challenges in legacy TV persist, and the gradual decline of Linear Networks poses additional hurdles. Disney realized over $500 million in SG&A (selling, general, and administrative) and other operating expense savings in Q1, with a $7.5 billion savings target by the end of the fiscal year.

Despite a Strong Buy consensus rating on Wall Street, concerns linger regarding the sustainability of Disney's recent performance, particularly with ongoing issues in legacy TV and the DTC segment. Caution is advised for investors, especially following recent share price rebounds, given the complexity of Disney's operational landscape and the uncertainties surrounding future earnings growth. Post market trading closed $113.52. The price has fallen in 6 of the last 10 days and is down by -3.17% for this period. Volume has increased on the last day by 111 thousand shares but on falling prices. Further fall is indicated until a new bottom pivot has been found. Furthermore, there is currently a sell signal from the 3 month Moving Average Convergence Divergence (MACD).

Disney might need a touch of fairy sprinkle magic for some financial enchantment, straight out of Walt’s playbook. What are your thoughts?

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