Disney shares remain in a bull market supported by Q1 results

By: Stanko Iliev
Stanko Iliev
Stanko dedicates himself to providing investors with relevant information they can use to make investment decisions. He loves the… read more.
on Mar 6, 2021
  • Disney shares continue to trade near record levels
  • Disney reported better than expected earnings for Q1
  • If the price falls below $160, it would be a firm "sell" signal, and the next target could be around $140

Disney (NYSE: DIS) shares continue to trade near record levels, but the risk/reward ratio is not good for long-term investors.

Fundamental analysis: Disney’s business will be affected by the pandemic certainly the next several months

The Walt Disney Company is an American diversified multinational mass media and entertainment conglomerate which trades on the New York Stock Exchange (NYSE) under the DIS stock symbol. Disney reported better than expected earnings for Q1 this February, and shares of this company have been moving in an uptrend last several months.

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Total revenue has decreased -22.1% Y/Y to $16.25B while Q1 GAAP EPS was $0.02 (beats by $0.73). First-quarter earnings topped profit expectations, and the positive information is that revenues didn’t decline as much as feared.

Disney Media and Entertainment Distribution revenue fell 5% to $12.66B, but Disney Parks, Experiences and Products revenue fell more than 50%. The company had a divisional reorganization which clearly shows that softer declines in the media segment helped mitigate a huge drop in the parks/products business.

“We’re confident that, with our robust pipeline of exceptional, high-quality content and the upcoming launch of our new Star-branded international general entertainment offering, we are well-positioned to achieve even greater success going forward,” said CEO Bob Chapek.

Disney CEO Bob Chapek also said that he expects demand to rebound for parks/products business but recovery will depend on “travel readiness” from guests. Disney’s business will be affected by the pandemic certainly the next several months, and it is important to mention that the company will close at least 20% of its stores in North America as it shifts focus to e-commerce.

According to the latest news, theme parks, ballparks and stadiums will be open again in California from April 01. That new guidance is far sooner than expected, but as more people get vaccinated, economic activities will be able to reopen in many other cities.

Walt Disney’s size will always attract potential investors; still, the stock’s current price does not reflect the company’s fundamental background.

Technical analysis: Bullish trend remains intact

Disney stock is trading near record levels, and the first sign of the trend reversal could be if the price falls below the $160 support level. Technically looking, Disney shares could advance even more, but the risk/reward ratio is not good enough for “value” investors.

Data source: tradingview.com

The important support levels are $180 and $160; $200 and $220 represent the resistance levels. If the price jumps above $200 resistance, it would be a signal to buy Disney shares, and the next target could be around $210.

On the other side, if the price falls below $160, it would be a firm “sell” signal, and the next target could be around $140.

Summary

Disney reported better than expected earnings for Q1 this February, and shares of this company have been moving in an uptrend last several months. Technically looking, Disney shares could advance even more, but the risk/reward ratio is not good enough for “value” investors.

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