How To Trade Disney Stock Ahead Of Q4 Earnings: Has Disney+ Kept Pace With Netflix Subscribers?

Walt Disney Company DIS is set to print its fourth-quarter financial results after the market closes Tuesday. The stock was trading slightly lower heading into the event.

When the entertainment giant printed its third-quarter results on Aug. 10, the stock gapped up 8.7% before giving back about half the gains. The stock then rallied 7.47% over the three trading days that followed before topping out at $126.48 on Aug. 16 and entering a subsequent downtrend.

For the third quarter, Disney reported adjusted EPS of $1.09 on revenue of $21.5 billion. The company beat the EPS estimate of $1 and revenues of $20.5 billion.

For the fourth quarter, analysts estimate Disney will print earnings per share of 56 cents on revenues of $21.25 billion. Traders and investors will be watching closely to see whether Disney has been able to continue growing Disney+ subscribers in the wake of Netflix, Inc NFLX reporting new subscriber figures that came in ahead of analyst estimates.

On Oct. 26, Keybanc analyst Brandon Nispel maintained an Overweight rating on Disney and lowered the price target from $154 to $143. The new price target suggests a 43% upside for Disney.

From a technical analysis perspective, Disney’s stock looks set to trade lower over the coming days because the stock has settled into a bear flag pattern on the daily chart. It should be noted that holding stocks or options over an earnings print is akin to gambling because stocks can react bullishly to an earnings miss and bearishly to an earnings beat.

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The Disney Chart: Disney’s bear flag pattern was formed between Nov. 1 and Tuesday, with the downward sloping pole created over the first three days of the range and the flag printing over the trading days that have followed. If Disney breaks down from the lower ascending trendline of the flag on higher-than-average volume, the measured move is about 10%, which indicates Disney could fall toward $91.

• Although Disney negated its most recent uptrend on Nov. 2, by printing a lower low under the most recent higher low of $103.53, which was printed on Oct. 28, the stock hasn’t yet confirmed a new downtrend. If Disney breaks down below $98.11 following the earnings print, a downtrend will be confirmed, and Tuesday’s high-of-day will act as a lower high.
• If Disney enjoys a bullish reaction to its earnings print and rises above the eight-day exponential moving average, the bear flag will be negated. Bullish traders would like to see the stock regain support at the 50-day simple moving average, which would indicate longer-term sentiment has turned bullish.
• Disney has resistance above at $100.90 and $108.50 and support below at $92.71 and at the 52-week low of $90.23.

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