Free Trial

Walt Disney Stock Looks Marvelous Down

→ The 1,000X Crypto Playbook (From True Market Insiders) (Ad)

Walt Disney Stock Looks Marvelous Down

Key Points

  • The Marvel Cinematic Universe (MCU) Phase 5 Will Commence in 2023.
  • Bob Iger has returned as CEO under a two-year contract and replacing Bob Chapek.
  • Iger has stated profitability is top priority, no longer growth for its Disney+ and DTC segment.
  • DIS stock is trading at 20X forward earnings and has returned to pre-COVID and pre-Disney+ levels.
  • 5 stocks we like better than Walt Disney

Media and entertainment giant The Walt Disney Company NYSE: DIS enters 2023 under new but familiar leadership with the return of Bob Iger as its CEO. Iger was the previous CEO for 15 years until his departure in 2020, moving on to the role as Executive Chairman of the Board. Its newly crowned CEO Bob Chapek, was unlucky as the COVID-19 pandemic struck just a month into his tenure.

Things went downhill fast due to the lockdowns as it had to shut down its parks and cruises. Even its movie theater distribution channel and production slate were shut down due to the social distancing and lockdown mandates.

So it concentrated on bolstering its digital entertainment and streaming content, known as its direct-to-consumer (DTC) segment, as it grew its subscriber numbers dramatically, led by Disney+. It also launched its ad-supported tier on Dec. 8, 2022.

Streaming Wars

The market had given Disney shares a 40% premium because of the streaming wars heating up with Netflix Inc. NASDAQ: NFLX, Amazon.com Inc. Prime NASDAQ: AMZN, Warner Bros. Discovery Inc. NASDAQ: WBD, Comcast Co. NASDAQ: CMCSA Peacock and Paramount Global NASDAQ: PARA. It surpassed its estimates of hitting 100 million users early and continued to grow its DTC segment, including ESPN and Hulu.


The rollout of the Marvel Cinematic Universe (MCU) Phase 3 and 4 and the expansion of the Star Wars franchise with new shows have contributed to its wildfire growth. It also didn’t hurt that Verizon Communications Inc. NYSE: VZ users were getting free trials to try Disney+.

It reached its heyday when shares peaked at $203.02, firing on all cylinders during the reopening on March 11, 2021, and then shares slid despite rising subscriptions. In its fiscal Q4 2022 earnings report, the Company reported subscriptions for Disney+ grew 39% YoY 164.2 million, HULU grew 8% to 47.2 million, and ESPN+ grew 42% to 24.3 million. Combined, its total DTC segment has over 230 million users worldwide.

Parks to the Rescue

Its Parks and Experiences segment has been carrying the profitability for the Company as pent-up demand exploded during the reopening. It made a profit of $1.5 billion to offset the (-$1.5 billion) losses from the DTC segment. However, many complaints have been about excessively high ticket prices due to inflationary and strong U.S. dollar headwinds.

Disney shares have fallen back to pre-pandemic and pre-Disney+ levels giving back its premium from the streaming wars. This may present opportunities for patient investors waiting for a deep pullback in shares.

A Very Public Execution

In an Apple Inc. NASDAQ: AAPL Steve Jobs-like return to the helm, Iger has been temporarily contracted for two years, moving back into the CEO position to implement a restructuring to return the Company and shares back to profitability. Over the course of his original tenure, DIS stock climbed 4X.

The reasons for the unexpected and inconceivable replacement of CEO Bob Chapek over the course of a weekend are still unclear. Even more puzzling is that it happened less than six months after the Board renewed his contract for another three years. Perhaps some major behind-the-scenes politics was happening that warranted a shockingly quick and humiliating replacement of Bob Chapek.

Why Was Chapek Fired?

A major concern was the continuing operating losses for the DTC segment that led to missing analyst estimates for three of the past five quarters. Operating losses in its DTC segment doubled to $1.5 billion YoY in fiscal Q4 2022. Additionally, his political rhetoric and P.R. nightmare embracing a ‘woke’ agenda alienated board members, shareholders and customers.

His public battle with FL. Governor Rick DeSantis over the Parental Rights in Education Act resulted in the stripping of its independent self-governing status by repealing the Reedy Creek Improvement Act of 1967. There have also been allegations of deceptive account practices to hide the actual losses of its streaming services but nothing public.

What’s Next?

Iger was the early architect of Disney+, launching it before he left in 2020. He was also responsible for acquiring Pixar, Marvel, Fox, and Lucasfilm during his tenure. He has made profitability at Disney+ a top priority as the measurement of success has shifted from growth to profitability by Wall Street.

He will adjust the cost structure to put it on the path to profitability with less emphasis on growth and more on operating profits. Iger has kept the hiring freeze in place as he looks to restructure the Company. He is a dealmaker by heart-based on his history of acquisitions and may predict more acquisitions or a possible sale in his latest tenure. Its Avatar: The Way of the Water movie passed the $1 billion mark at worldwide box office in two weeks, making it the sixth movie to do so, which Disney produced four of.

Walt Disney Stock Looks Marvelous Down

Weekly Inverted Cup and Handle

DIS stock has been falling toward its pandemic lows after peaking out at $202.02 in March 2021. The stock formed a bounce off $90.23 on July 11, 2022, to form the lip as it bounced back up to $125.48 near the 0.382 Fibonacci level on the return of Bob Iger news to form the handle. Shares fell back to retest and broke through the lip at $90.23, falling to $84.69.

The weekly 20-period exponential moving average (EMA) resistance is falling at $112.17 followed by the 50-period MA at $98.38. The weekly stochastic lost its momentum to the upside and is falling back to the 20-band. If shares can’t bounce through the falling 20-period EMA, the inverted cup and handle breakdown can send them through their pandemic lows. Pullback supports sit at $84.69, $79.07 pandemic lows, $69.85, $60.52, and $46.96.

 

→ The 1,000X Crypto Playbook (From True Market Insiders) (Ad)

Should you invest $1,000 in Walt Disney right now?

Before you consider Walt Disney, you'll want to hear this.

MarketBeat keeps track of Wall Street's top-rated and best performing research analysts and the stocks they recommend to their clients on a daily basis. MarketBeat has identified the five stocks that top analysts are quietly whispering to their clients to buy now before the broader market catches on... and Walt Disney wasn't on the list.

While Walt Disney currently has a "Moderate Buy" rating among analysts, top-rated analysts believe these five stocks are better buys.

View The Five Stocks Here

7 Stocks That Could Be Bigger Than Tesla, Nvidia, and Google Cover

Growth stocks offer a lot of bang for your buck, and we've got the next upcoming superstars to strongly consider for your portfolio.

Get This Free Report

Companies Mentioned in This Article

CompanyMarketRank™Current PricePrice ChangeDividend YieldP/E RatioConsensus RatingConsensus Price Target
Walt Disney (DIS)
4.8528 of 5 stars
$103.03+0.0%0.29%111.98Moderate Buy$125.52
Netflix (NFLX)
4.0212 of 5 stars
$640.47-1.6%N/A44.45Moderate Buy$630.53
Amazon.com (AMZN)
4.952 of 5 stars
$183.130.0%N/A51.30Buy$211.62
Warner Bros. Discovery (WBD)
3.8335 of 5 stars
$8.06+2.2%N/A-6.50Moderate Buy$13.32
Paramount Global (PARA)
3.4865 of 5 stars
$12.20+0.8%1.64%-81.33Reduce$13.58
Comcast (CMCSA)
4.9802 of 5 stars
$38.89-0.8%3.19%10.29Moderate Buy$49.33
Verizon Communications (VZ)
4.9272 of 5 stars
$39.81+0.5%6.68%14.85Moderate Buy$44.36
Compare These Stocks  Add These Stocks to My Watchlist 

Jea Yu

About Jea Yu

  • JeaYu21@gmail.com

Contributing Author

Trading Strategies

Experience

Jea Yu has been a contributing writer for MarketBeat since 2018.

Areas of Expertise

Equities, options, ETFs and futures; fundamental, qualitative, quantitative and technical analysis and pattern identification; active and swing trading; trading systems and methodology development

Education

Bachelor of Arts, University of Maryland, College Park

Past Experience

U.S. equity markets trader, writer and analyst for over 25 years. Published four books by publishers McGraw-Hill, John Wiley & Sons, Marketplace Books and Bloomberg Press. Speaker at various expos and seminars and has been quoted and featured in USA Today, The Wall Street Journal, Traders Magazine, The Financial Times and various trade publications, including Stocks & Commodities, Active Trader and Online Investor.


Featured Articles and Offers

Home Depot: Earnings Mixed, Wait to Buy the Dip

Home Depot: Earnings Mixed, Wait to Buy the Dip

Home Depot had a mixed quarter, with top and bottom line results diverging from consensus.

Search Headlines: