Disney Stock Beyond the Post-Earnings Plunge

The Walt Disney Company had announced its quarterly financial results for Q4 FY 2021 a week ago and markets were highly disappointed, causing the stock to collapse.

Post-Earnings Reaction

The report had revealed a slowdown in subscriber growth for Disney+, the firm's streaming service that had supported it during the pandemic era, since only 2.1 million users were added during that period.

As a result, DIS.us shed more than $10 in the first trading day (Thursday November 11) after the earnings release, registering 2021 lows and its worst day of the year.

Fresh lows ensued this week (157.49), which have exposed the stock to an important technical level - the 38.2% Fibonacci of the rally from the 2020 multi-year lows to the 2021 record highs at 155.79.

Significant damage has been done, creating high risk for further weakness and daily closes below 155.79, would open the door towards the 50% Fibonacci (141.14). We are also on the verge of a Death Cross formation - DMA50 (orange line) moving below DMA200 (black line) – that would only add to the downside, if it materializes indeed.


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Potential for Recovery

The stock managed to show its first signs of life yesterday, pausing its 5-day losing streak, to end Tuesday with profits. DIS.us is in a very precarious position and the risk is on the downside, but the RSI points to oversold levels. As long as it can stay above 38.2% Fibonacci, the post 2021 high drop would constitute a shallow correction, that could give it the ability to recover back towards these levels.

The first noteworthy resistance is located at 166.92, but it would need to move above the DMA200 (currently at around 172.00) to add credibility in such a recovery effort.

Market reaction to last week's earning may have been excessive, since the subscriber growth slowdown was in line with Disney's CEO prior warning [1]. Furthermore, the firm has a slew of top-notch content and if it manages to find the right balance between the novel streaming services and its legacy business, it could move towards a better future.

On the bright side of the Q4 FY2021 results, was the "Disney Parks, Experiences and Products" segment which was profitable for second quarter in a row, continuing the recovery from the pandemic blow.

The current quarter will likely be significant for the company, as it contains the holiday season that has the ability to increase demand for pretty much every aspect of Disney's business, so we will be looking forward to see how the stock will perform.

Nikos Tzabouras

Senior Market Specialist

Nikos Tzabouras is a graduate of the Department of International & European Economic Studies at the Athens University of Economics and Business. He has a long time presence at FXCM, as he joined the company in 2011. He has served from multiple positions, but specializes in financial market analysis and commentary.

With his educational background in international relations, he emphasizes not only on Technical Analysis but also in Fundamental Analysis and Geopolitics – which have been having increasing impact on financial markets. He has longtime experience in market analysis and as a host of educational trading courses via online and in-person sessions and conferences.

References

1

Retrieved 29 Nov 2021 https://thewaltdisneycompany.com/app/uploads/2021/09/bc-gs-transcript-092121.pdf

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