Media and entertainment giant The Walt Disney Company (NYSE:DIS) stocks have seen better days as stocks slipped below the $90.71 double bottom during the weak Q4 2022 release. Since the pandemic, Disney has been identified as a video streaming company and rated based on its Disney+ subscriber base since the pandemic. The market ignores his legacy theme parks, cruises and merchandising companies rely solely on their streaming content wars with competitors Netflix (NASDAQ: NFLX), Amazon Prime (NASDAQ: AMZN), Warner Brothers Discovery (NASDAQ:WBD), Peacock (NASDAQ: CMCSA) and Paramount Global (NASDAQ:PARA). Listed under the direct-to-consumer (DTC) segment, the streaming company continues to grow with a total of 230 million subscribers across the three services. The arrival of his ad-supported layer from December 8, 2022, growth and share price should help strengthen, as it did with competitor Netflix. Its theme parks are performing surprisingly well despite economic headwinds, including inflationary pressures, strong US dollarand declining consumer spending.
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Competition is getting tougher
Disney faces threats from all angles in the direct-to-consumer (DTC) segment. Following Amazon’s lead, Netflix is encroaching on Disney’s ESPN space because it plans to broadcast live sports programming. Warner Brother Discovery has used Disney’s template to announce a 10-year plan for its DC Universe (DCU) that will mirror Disney’s Marvel Cinematic Universe (MCU), including hiring a team like Disney did with Kevin Feige, the brain behind the MCU. They will focus on the most popular IPs including Superman, Batman, Wonder Woman and Aquaman. The team is led by director James Gunn and product Peter Safran. James Gunn was the director of Marvel’s wildly popular ‘Guardians of the Galaxy’ movies.
Layoffs and freezes are all the rage
With the US Federal Reserve looking for a drop in CPI and employment to curb interest rate hikes, the market is hungry for bad news. What is normally considered bad news for the workforce is apparently good news for the stock. Layoffs and freezes are the new buzzwords that can trigger an extended rally in the underlying stock. This was proven by Meta Platforms (NASDAQ: META) massive layoff announcement that pushed stocks up more than 15%. Amazon implemented employee freezes and began layoffs, including its entire Robotics division, which was made up of more than 3,700 people. This propelled its shares further on its 14% rally. Lyft (NASDAQ: LYFT) joined the firefight when it announced layoffs, sending the stock skyrocketing 12%. Disney’s claimed “targeted hiring freeze” helped its stock bounce back above the critical support level of $90.71. An internal memo quoting CEO Chapek stated that Disney limited staffing through a targeted staff freeze, but hiring “the small subset for the most critical, corporate functions will continue.” Rather than any formal announcement of job cuts, they do anticipate staff cuts as part of the assessment process.
Descending Triangle Breakdown Attempt
The weekly candlestick charts illustrate a descending triangle breakdown pattern. This pattern is formed by lower highs on bounces, while lows are flat, peaking at $90.71 before the breakdown. Eventually each bounce gets smaller due to increasing selling pressure, but buyers remain steadfast on the lows until the bottom finally falls out. DIS broke the apex of the triangle on the fiscal 2022 earnings release, when stocks plunged to a low of $86.28 at extremely high volume. However, the combination of weaker-than-expected CPI report signaling and a perceived “targeted hire freeze” propelled the stock back up from the all-time high. The weekly market structure low (MSL) triggers above $102.30 which will overlap with the declining 20-period exponential moving average (MA) at $104.89 and followed by the weekly 50-period MA at $120.52. From here, the stock will break through the weekly 20-period EMA at $105 or break through the apex support at $90.71. The massive weekly volume may indicate a capitulation point in the sell-off. Pullback support levels to watch are the $95.71 falling triangle resistance, $86.28 post-profit low, $79.07 pandemic low, $69.85 and $60.41.
Income Shortage and Streaming Stats
On November 8, 2022, Disney released its fourth quarter 2022 results for the quarter ended September 2022. The company reported adjusted earnings per share (EPS) earnings of $0.30 excluding one-time items versus consensus analyst estimates of $0.56, a (-$0.26) miss. Revenues were up 8.7% year-over-year (year-on-year) to $20.15 billion, which was below analyst consensus estimates of $21.44 billion. The DTC streaming company’s revenues grew 8% year-over-year to $4.9 billion. Operating losses were $1.5 billion due to higher losses at Disney+, slowdown in HULU subscriptions, but an increase in ESPN+ subscriptions. Disney+ subscriptions grow 39% year over year at 164.2 million, HULU grow 8% to 47.2 million, and ESPN+ grow 42% to 24.3 million.
Disney parks are still going strong
The pent-up demand continued to drive Disney Parks, Experiences and Products revenues to $7.4 billion, up from $5.5 billion in the same period a year ago. Operating income for the segment increased $900 million to $1.5 billion, compared to $600 million in the same period a year ago. Increase in both domestic and international volumes, guest spending offset cost inflation and higher support costs. The growth of international parks and resorts was fueled by Disneyland Paris, but was offset by a decline in Shanghai Disney Resort, which made headlines for bringing in visitors who did not give a negative COVID result under China’s zero-COVID policy.
CEO comments
Disney+ CEO Bob Chapek commented: “Disney+’s rapid growth in just three years since launch is a direct result of our strategic decision to invest heavily in creating incredible content and rolling out the service internationally, and we expect our DTC operating losses to continue to shrink and Disney+ will still be profitable in fiscal 2024, assuming we don’t see a meaningful shift in the economic environment By realigning our costs and realizing the benefits From price increases and our Disney+ ad-supported tier coming December 8, we believe we will be on the road to delivering a profitable streaming business that will drive continued growth and generate shareholder value well into the future .”
