Disney Beats On The Top And Bottom Lines

The Walt Disney Company (Ticker Symbol: DIS) reported quarterly earnings and revenue that were better than expected.  The multinational mass media and entertainment conglomerate reported an earnings beat of $1.07 per share vs. Wall Street analysts’ estimates of $.95 cents per share. Additionally, Disney reported a revenue beat of $19.10 billion vs. Wall Street analysts’ estimates of $19.04 billion. Disney’s media networks brought in $6.5 billion in revenue, Disney’s parks and resorts division brought in $6.7 billion, its studio entertainment division brought in $3.3 billion and direct-to-consumer brought in $3.4 billion.

The solid earnings and revenue report comes just days before the launch of its new highly anticipated Disney+ streaming service that is set to launch on November 12th.  Disney+ will cost $6.99 per month or $69.99 per year, will have content from Disney, Pixar, Marvel, Star Wars, and National Geographic. Disney announced that Disney+ will now be available on Amazon’s Fire TV along with Samsung and LG smart TVs.  Disney+ will also be available on most Apple devices, Roku, and Android.

The above image is a longer-term weekly chart of Disney’s stock over the past 20 years.  Disney survived the dotcom crash in the early 2000s and remained stuck in a 14-year long horizontal trading channel.  Horizontal channels are areas of indecisiveness between buyers and sellers and the stock is a point at which supply and demand are relatively balanced. Some traders use what’s called a “measured move” to try and project where the stock might go in the future based on breakouts from technical formations.

In Disney’s case, one would take the price from the bottom of the channel (roughly $15.00) and the price of the top of the channel (roughly $45.00) then subtract them to get the difference ($30). The difference is then projected from the breakout point in the direction of the breakout to project the price of the measured move (topline from channel + Difference = Measured Move). In Disney’s case, the projected price target from the horizontal channel was $75.00, which the stock achieved roughly a year after breaking out.

The stock proceeded to rally over 150% over the course of the next three and a half years before finding some price resistance right around the $120.00 price level.  Over the next four years, the stock began to trade in a consolidation wedge pattern, which markets do oftentimes after large and fast moves. The stock broke from that pattern to the upside at the beginning of 2019 and went on to trade to an all-time high of $147.15 on July 29th, 2019.  Currently, the stock is trading above both its 100- and 200-week moving averages and is sitting just over 6% away from its all-time high.

(Chart above courtesy of ​www.tipranks.com​)

Based on a survey of 12 analysts offering 12-month price targets, the average price target for Disney’s stock is $150.11. According to that number, the stock is priced at a discount relative to Wall Street’s analysts and could be considered undervalued around current levels near $137.29.

Investors in Disney should look to their next earnings release on February 6th for fresh news within the company.


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