Is December a good month for buying Disney shares?

Disney (NYSE: DIS) shares have advanced from $120 above $154 in less than three months, and the current price stands around $153. The stock price is trading near record levels, but the risk/reward ratio is not good for long-term investors.

Fundamental analysis: Disney announced 32,000 worker layoffs

The Walt Disney Company is an American diversified multinational mass media and entertainment conglomerate which trades on the New York Stock Exchange (NYSE) under DIS stock symbol. Disney shares are trading in an uptrend since April 2020, and for now, there is no signal of the trend reversal.

Despite this, the current price of the stock does not reflect the fundamental background of the company. Disney reported a 23% Y/Y decrease in revenues in Q4, and Q4 GAAP EPS came in at -$0.39.

Revenues have decreased mainly due to the Covid-19 pandemic, there has been some positive data regarding a COVID-19 vaccine, but no one still doesn't know what will happen with the virus. Disney's business will be affected by the COVID-19 pandemic certainly next several months, and people will visit Disneyland once they feel comfortable among crowds.

According to the latest news, Disney announced 32,000 worker layoffs, primarily at its theme parks business, starting in the first half of 2021.

Disney also announced that it would shut down Radio Disney and make cuts at its television division. The company will lay off a low single-digit percentage of its 1,400 staffers at ABC News to adopt changes in the business and its organizational structure.

"The pandemic accelerated the audience's interest in streaming, including in news and information, and generated significant challenges across all our businesses, including ABC News, that have lasted far longer than anyone could have predicted," said ABC News president James Goldston.

Coronavirus cases are surging in many parts of the world; the company will have a further drop in revenues and could face liquidity problems. At the current price, this stock remains expensive, and there are some obvious risks when it comes to buying Disney shares.

Technical analysis: Disney shares continue to trade in a bull market

According to technical analysis, Disney shares could reach the $160 price target this December, but this stock is too expensive with a $278B market capitalization.

The current support levels are $140 and $120; $ 160 and $170 represent the resistance levels. If the price jumps above $160 resistance, the next target could be around $165, but if the price falls below $120, it would be a firm "sell" signal and maybe a sign of the trend reversal.

Summary

Disney reported a 23% Y/Y decrease in revenues in Q4, and the current price of the stock does not reflect the real fundamental value. Disney shares continue to trade near record levels, but the risk/reward ratio is not good for long-term investors. According to the latest news, Disney announced 32,000 worker layoffs, primarily at its theme parks business, starting in the first half of 2021.