Disney Trading Lower After Barclays Downgrade

Dow component Walt Disney Co. (DIS) is trading lower by nearly 2% in Monday’s pre-market after Barclays downgraded the entertainment giant to ‘Equal Weight’ and lowered the price target to $175. The stock has struggled since topping out in March, losing about 15% of its value while posting a negative annual return of 5%. More importantly, price action has been testing the 200-day moving average for five months, raising odds for a breakdown that ends the long-term uptrend.

Cautious Business Commentary

The Mouse is ‘running into roadblocks’ to China film releases according to the Wall Street Journal, with the broad appeal of ‘Shang-Chi’, ‘Mulan’, and ‘Eternals’ running to political opposition that’s impacting box office receipts. Meanwhile, attendance at California Disneyland has reached just 85% of 2019 levels while foreign venues are posting even greater reductions. Adding to bearish sentiment, Variety is reporting that subscriber turnover a.k.a. ‘churn’ for the Disney+ streaming service reached the highest level in a year in August.

The stock dropped like a rock in September after Disney issued a cautious business outlook, warning the Delta variant had caused production delays while confirming that dividends and share buybacks would not be reinstated anytime in the near future. It also warned that Disney+ subs would increase by just low single-digits in the quarter after torrid growth in 2020. Emerging markets are also waving red flags, with the company noting “headwinds in Latin America trying to mobilize partners.”

Wall Street and Technical Outlook

Wall Street consensus makes little sense, yielding a ‘Buy’ rating based upon 21 ‘Buy’, 2 ‘Overweight’, and 6 ‘Hold’ recommendations. No analysts are recommending that shareholders close positions despite 2021’s negative return. Price targets currently range from a low of $147 to a Street-high $263 while the stock will open Monday’s session more than $35 below the median $210 target. This low placement suggests that starry-eyed analysts have failed to consider Delta headwinds.

Disney sold off to a 6-year low in March 2020 and returned to the December 2019 peak at 153.41 in November, ahead of an immediate breakout that posted an all-time high at 203.02 in March 2021. It sold off to 167.10 in May, rounding out a trading range that’s contained price action into the fourth quarter.  Range support has narrowly aligned with the 50-week moving average, marking a line-in-the-sand that bulls must hold at all costs to continue the uptrend.

For a look at today’s economic events, check out our economic calendar.

Disclosure: the author held no positions in aforementioned securities at the time of publication. 

Biden Enlists Disney, Microsoft CEOs In Push For Vaccine Mandates

Participants in the meeting included the chief executives of Walt Disney Co, Microsoft Corp and Walgreens Boots Alliance Inc .

Biden last week announced vaccine mandates for nearly all federal employees, federal contractors, and larger companies as the number of U.S. infections continued to rise, hospital beds in some parts of the country filled up and mask requirements returned. After months of trying to persuade Americans to get free vaccinations, the White House is pushing state and local governments, companies and schools to adopt mandates requiring them instead.

Biden said at the beginning of the meeting that it would take some time to get the new requirements in place.

“It’s about beating this virus and saving lives,” he said.

Some Republican-led states and a sizable minority of Americans have defied vaccine recommendations from health officials, citing economic or freedom-of-choice arguments. With just 63% of the population having received at least one dose, the U.S. vaccination rate now lags  developed economies.

Opinion polls have shown a majority of Americans support some form of vaccine mandate.

Biden told reporters on Tuesday that he had seen “positive support for mandates, by and large,” although he conceded that there would always be a small percentage of people who would refuse to get inoculated.

The White House hopes Wednesday’s meeting will serve “as a rallying cry for more businesses across the country to step up and institute similar measures,” an official said, speaking on condition of anonymity.

The meeting involves business leaders and chief executives who have instituted vaccine requirements or are working to implement the new rules, the person said.

The policies announced last week require nearly all federal workers and federal contractors to get COVID-19 vaccinations and push large employers to have workers inoculated or tested weekly. The new measures would apply to businesses with more than 100 employees, about two-thirds of all U.S. workers.

Also among those meeting with Biden were the CEOs of the Kaiser Permanente healthcare system, the Children’s Hospital of Philadelphia and Molly Moon’s Homemade Ice Cream.

Josh Bolten, president of the Business Roundtable representing employers of 20 million workers, also attended. The Business Roundtable has welcomed Biden’s announcement on mandates. Bolten was a chief of staff to Republican former President George W. Bush.

The fast-spreading Delta variant of the coronavirus has sparked a new wave of sickness and death, posing increased risk not just to the country but to a president who as a candidate promised to get control of the pandemic.

Some small employers have voiced frustration with the mandate. Large employers like U.S. automakers General Motors Co and Ford Motor Co and rare-earths producer MP Materials Corp said they are encouraging employees to get the vaccine, but they were quiet about Biden’s executive order.

Raytheon Technologies Corp, a weapons maker and aerospace company that does extensive business with the U.S. government, said on Wednesday that it expects Biden’s vaccine mandate will strengthen their business outlook heading into the fourth quarter.

For a look at all of today’s economic events, check out our economic calendar.

(Reporting by Trevor Hunnicutt, Doina Chiacu and Jeff Mason; Editing by Nick Zieminski and Jonathan Oatis)

Stock Index Futures Pull Back Ahead of Monday’s Open

Stocks ended last week on a high note, with the S&P 500 and the Dow Jones Industrial Average both setting fresh all-time highs. The S&P 500 is now hovering at 4,468 while the Dow is now above 35,515. For its part, the Dow was buoyed by gains in Disney, which rallied on the heels of its quarterly earnings results. The Nasdaq also climbed higher.

Investors pushed stocks into record territory despite data that reveals consumer sentiment is dropping. According to the University of Michigan’s preliminary data, the consumer sentiment index fell to 70.2 in August, its weakest point in about a decade and down from a reading of higher than 81 last month. Wells Fargo economists described the results as “disastrous.” Economists are blaming the rise of the delta variant for the dampened mood.

So far, investors have managed to see the glass half full thanks to largely better than expected second-quarter earnings out of corporate America. While valuations are lofty, Yardeni Research President Ed Yardeni on CNBC likened the current environment to that of the “roaring twenties on Wall Street,” suggesting that investors “buy a little bit of everything.” 

On Sunday evening, stock index futures are retreating across the board amid global unrest as Afghanistan falls to the Taliban. The U.S. Afghan embassy has since been relocated.

Stocks to Watch

  • SoFi Technologies sank 14% on Friday after the fintech company reported a wider-than-expected Q2 loss despite a doubling of net revenue. A lockup period on the stock for select shareholders is reportedly coming to a close in the coming days, which could have pressured the stock. SoFi has been bolstering its crypto trading offering.
  • ContextLogic, which runs the e-commerce platform Wish, tumbled nearly 20% on Friday. Wish is being hit by a one-two punch weaker demand and rising costs.

Look Ahead

Earnings season is winding down with just over 10% of companies in the S&P 500 still waiting to report their results. Separately, the bitcoin price is perched above the USD 47K level once again, so investors might want to keep an eye on the cryptocurrency.

On Tuesday, retail sales for the month of July will be released.  Wells Fargo economists are predicting a slowdown in sales growth, not least due to the delta variant, which has thrown a wrench into plans for the economy to reopen more fully.

Meanwhile, industrial production and housing starts for July come out on Tuesday and Thursday, respectively.

Dow, S&P Close at Records as Disney Offsets Drop in Sentiment

Walt Disney rose 1.00% as one of the biggest boosts to both the Dow and benchmark S&P index after its profit topped market expectations as its streaming services added more customers than expected and its pandemic-hit U.S. theme parks returned to profitability.

But a report from the University of Michigan dented optimism after it showed the university’s preliminary consumer sentiment index fell to 70.2, its lowest level in a decade, suggesting that the Delta variant of the coronavirus was impacting consumers.

“That is concerning, the consumer is by all accounts in an extremely strong position but there is this kind of COVID fatigue that is really starting to wear on people’s sentiment,” said Ross Mayfield, investment strategist at Baird in Louisville, Kentucky.

“Regardless of lockdown or full reopen, the consumer is healthy enough to spend and kind of keep the economy afloat, it will be different names and different sectors that become the beneficiaries of it.”

The report sent the yield on the 10-year U.S. Treasury note lower and in turn helped lift mega-cap growth names, such as Microsoft Corp, up 1.05%, while online retail giant Amazon slipped 0.29%.

The Dow Jones Industrial Average rose 15.53 points, or 0.04%, to 35,515.38, the S&P 500 gained 7.17 points, or 0.16%, to 4,468 and the Nasdaq Composite added 6.64 points, or 0.04%, to 14,822.90.

For the week, the Dow gained 0.87%, the S&P 500 advanced 0.71% and the Nasdaq slipped 0.09%.

U.S. stocks have managed to slowly grind to new highs over the past few sessions as investor confidence in economic recovery was bolstered by a strong earnings season, the passage of a large infrastructure bill and data showing inflation may be increasing at a slower pace than feared.

In the wake of new data from earlier this week that showed consumer price increases slowed in July, while producer prices posted their biggest annual rise in more than a decade, investors are now looking ahead to the meeting of central bankers in Jackson Hole, Wyoming, later this month for cues on policy.

In recent days, several Fed officials said it is nearly time for the central bank to begin pulling back on its monetary support, including the tapering of its asset purchases.

DoorDash Inc rose 3.50% in choppy trading after the food-delivery firm’s loss widened more than expected in the second quarter.

Airbnb Inc gained 1.07% as it recovered from earlier declines, after it flagged a hit to its current-quarter bookings by the Delta variant and a slowing pace of U.S. vaccination.

Volume on U.S. exchanges was 7.99 billion shares, compared with the 9.42 billion average for the full session over the last 20 trading days.

The S&P 500 posted 60 new 52-week highs and no new lows; the Nasdaq Composite recorded 87 new highs and 159 new lows.

For a look at all of today’s economic events, check out our economic calendar.

(Reporting by Chuck Mikolajczak; Editing by Aurora Ellis)

Why Disney Stock Rallied To Multi-Week Highs Today

Disney Stock Gains Ground As Quarterly Results Beat Analyst Estimates

Disney stock opened with a gap up and tested multi-week highs after the company released its quarterly results. Disney reported revenue of $17.02 billion and GAAP earnings of $0.50 per share, easily beating analyst estimates on both earnings and revenue.

Several positive developments provided additional support to Disney stock. First, Disney’s parks were profitable for the first time during the coronavirus pandemic. The company’s business got a boost from reopening of parks and resorts, which immediately supported financial results.

Second, the number of Disney+ subscribers reached 116 million, exceeding analyst expectations. A year ago, Disney+ subscribers totaled 57.5 million, so the number of subscribers has doubled in just one year.

What’s Next For Disney Stock?

Analysts expect that Disney will report earnings of $2.35 per share this year and $5.00 per share in the next year, so the stock is trading at 37 forward P/E. Analyst estimates have moved a bit lower in recent weeks but the previous upside trend may be resumed after the release of the strong quarterly report.

It should be noted that current valuation levels look pricey even in the current market environment, but traders are ready to look beyond the next year and focus on Disney’s long-term earnings power.

The growth of Disney+ is strong, while the company’s parks’ segment will gradually improve its financial performance as restrictions are lifted around the world. It’s hard to expect big progress on this front in the upcoming months as the world is concerned about the spread of the Delta variant of coronavirus, but the outlook for the next year looks better.

It remains to be seen whether positive developments highlighted by the report will be sufficient enough to push Disney shares towards yearly highs near the $200 level that were reached back in March. However, the market loves growth, and is ready to tolerate rich multiples if a company has solid earnings potential in the future. In this light, Disney stock has decent chances to develop additional upside momentum in the upcoming weeks.

For a look at all of today’s economic events, check out our economic calendar.

Today’s Market Wrap Up and a Glimpse Into Friday

Stocks rallied on the heels of improving labor market data that suggests the economy is making progress on the road to recovery. The S&P 500 and Dow Jones Industrial Average both closed at fresh record highs, while the tech-heavy Nasdaq also posted gains.

Corporate America has been fueling optimism in the stock market amid a trend of better-than-expected quarterly results. The looming delta variant threatens to derail that momentum, but for the time being, investors are able to see the glass half full.

The other threat is inflation further rearing its head in the economy, but these worries are beginning to fade based on the pace at which prices are rising.  The latest CPI data suggests that the worst may be over for now.

Stocks to Watch

  • Airbnb shares are tumbling nearly 5% in after-hours trading on the heels of the company’s latest quarterly report. Airbnb was able to narrow its loss YoY, and revenue skyrocketed almost 300% to USD 1.3 billion, surpassing Wall Street estimates. Nonetheless, the threat of the delta variant is clouding the forecast due to the possibility of governments once again shutting down travel.
  • DoorDash shares were also under pressure in extended-hours trading. The food-delivery company experienced an 83% jump in revenue to USD 1.2 billion. DoorDash, however, is facing rising costs after expanding its footprint and improving its service to keep pace with demand. Those investments are expected to persist for the rest of the year.
  • Disney is a winner in the after-hours session. Shares are rallying more than 5% after the company demonstrated that it is doing something right. Disney is benefiting from robust demand for its streaming content, where it is winning more subscribers as it goes head-to-head with the likes of Netflix. Even Disney’s theme parks are on the road to recovery as consumers flocked back to the parks as the economy has reopened.

Look Ahead

The University of Michigan Consumer Sentiment’s preliminary data for the month of August will be released on Friday. Wells Fargo economists say the results will reveal how investors are coping with signs of inflation and another wave of COVID cases. Wells Fargo economists have lowered their GDP estimates for the rest of this year as well as for 2022 out of caution due to the threat of the delta variant.

Walt Disney Accumulation Drops to 8-Month Low

Dow component Walt Disney Co. (DIS) reports Q3 2021 earnings after Thursday’s closing bell, with analysts looking for a profit of $0.55 per-share on $16.76 billion in revenue. If met, earnings-per-share (EPS) will mark a 687% profit increase compared to the same quarter in 2020 when movie production, theme parks, and cruise ships were shut down. The stock fell 2.6% in May after missing Q2 revenue estimates and has failed to recoup those losses in the last quarter.

Over-Optimism and Renewed Headwinds

Shareholders are growing nervous with the stock’s lackluster performance, dropping accumulation readings to 8-month lows. Disney is down 3% so far in 2021, highlighting overly-optimistic post-COVID expectations. The Delta variant isn’t helping matters, with nervous folks pulling back from movie attendance and reconsidering trips to theme parks. Weaker-than-expected The Suicide Squad box office last weekend may reflect this growing caution.

Similarly, MKM Partners analyst Eric Handler noted the initially strong box office for Black Widow in July but admitted that “we are also a bit disappointed with how box office expectations for Black Widow seemed to taper off a bit as the weekend progressed, much of which we would attribute to cannibalization from Disney+ Premier Access also showing the film and taking in a solid $60mn (a global number but one which heavily skewed towards North America)”.

Wall Street and Technical Outlook

Wall Street consensus stands at an ‘Overweight’ rating, based upon 21 ‘Buy’, 2 ‘Overweight’, 5 ‘Hold’, and 1 ‘Underweight’ recommendation. Price targets currently range from a low of $147 to a Street-high $230 while the stock is set to open Tuesday’s session more than $50 below the median $212 target. This disconnect with Main Street investors highlights the growing impact of the Delta variant and deceleration of Disney+ subscription growth noted in the Q2 report.

Disney topped out at 153.41 after the launch of Disney+ in November 2019 and fell to a 6-year low in March 2020. The subsequent recovery wave mounted the 2019 peak in December, setting off a strong uptrend that posted an all-time high at 203.02 in March. A selloff into May found support in the 160s but the stock has failed to capitalize on that bounce, treading water while investors await the impact of renewed headwinds and the latest streaming numbers.

For a look at all of today’s economic events, check out our economic calendar.

Disclosure: the author held no positions in aforementioned securities at the time of publication. 

Earnings to Watch Next Week: Cable One, BioNTech, eBay, Walt Disney and Baidu in Focus

Earnings Calendar For The Week Of August 9

Monday (August 9)

IN THE SPOTLIGHT: CABLE ONE, BIONTECH

CABLE ONE: The U.S.-based broadband communications provider is expected to report earnings of $11.19 per share for the second quarter, representing a year-on-year increase of over 5% from a year earlier, up from 10.63 per share seen in the same period a year ago.

The Phoenix-based company would post revenue growth of over 17% to $385 million, up from $328.3 million posted a year ago. The company has beaten earnings per share (EPS) estimates in three of the last four quarters, according to ZACKS Research.

BIONTECH: The biotechnology company BioNTech is expected to report earnings of $8.35 per share for the second quarter, representing a year-on-year increase of over 2,000% from a year earlier.

TAKE A LOOK AT OUR EARNINGS CALENDAR FOR THE FULL RELEASES FOR THE AUGUST 9

Ticker Company EPS Forecast
DRNA Dicerna Pharmaceuticals $0.41
APD Air Products & Chemicals $2.36
SGMS Scientific Games $0.01
TGNA Tegna $0.49
DISH Dish Network $0.89
AMC AMC Entertainment -$0.94
OSH Oak Street Health -$0.33
CHGG Chegg $0.37
CABO Cable One Inc $11.19
CF CF Industries $1.56
ACM AECOM $0.72
WES Western Gas Partners $0.57
HALO Halozyme Therapeutics $0.43
QLYS Qualys $0.68
DDD 3D Systems $0.05
CBT Cabot $1.18
NHI National Health Investors $0.84
DOOR Masonite International $2.12
ESE ESCO Technologies $0.82
IPAR Inter Parfums $0.40
STE Steris $1.49
RCKT Rocket Pharma -$0.66
ITCI Intra Cellular Therapies -$0.79
ELY Callaway Golf $0.01
BNTX BioNTech SE $7.54
TSN Tyson Foods $1.60
HE Hawaiian Electric Industries $0.49
ENR Energizer $0.67
SYKE Sykess $0.58
RDNT RadNet $0.14
HBM HudBay Minerals Ord Shs $0.09
ACKAY Arcelik ADR $0.46

Tuesday (August 10)

Ticker Company EPS Forecast
JHX James Hardie Industries $0.28
SYY Sysco $0.60
IHG Intercontinental Hotels $0.46
ARMK Aramark $0.02
TAC TransAlta USA -$0.01
VSH Vishay Intertechnology $0.59
IIVI Ii Vi $0.75
YPF YPF $0.39
PAAS Pan American Silver USA $0.34
PAY VeriFone Systems $0.01
JAMF Jamf $0.05
COKE Coca Cola Bottlingconsolidated $5.78
DAR Darling Ingredients $0.86
TDG TransDigm $2.97

Wednesday (August 11)

IN THE SPOTLIGHT: EBAY

The e-commerce leader for physical and digital merchandise eBay is expected to report its second-quarter earnings of $0.96 per share, which represents a year-over-year decline of over 11% from $1.08 per share seen in the same quarter a year ago.

The San Jose, California-based e-commerce giant would post revenue growth of about 4% to $2.97 billion. The company has beaten earnings per share (EPS) estimates all times in the last four quarters, according to ZACKS Research.

TAKE A LOOK AT OUR EARNINGS CALENDAR FOR THE FULL RELEASES FOR THE AUGUST 11

Ticker Company EPS Forecast
CIB Bancolombia $0.53
DM Dominion Midstream Partners -$0.09
ELP Companhia Paranaense De Energia $0.63
CAE Cae USA $0.14
ENS Enersys $1.20
PRGO Perrigo $0.60
HAE Haemonetics $0.45
AIT Applied Industrial Technologies $1.17
RPRX Repros Therapeutics $0.70
VERX Vertex Inc. Cl A $0.05
WIX WIX -$0.43
WEN Wendy’s $0.18
GOCO Gocompare.Com -$0.03
AZPN Aspen Technology $1.47
FNV Franco Nevada $0.93
RGLD Royal Gold Usa) $0.90
CACI Caci International $5.56
RXT Rackspace $0.18
AVT Avnet $0.79
UGP Ultrapar Participacoes $0.06
EBR Centrais Eletricas Brasileiras $0.28
EBAY eBay $0.96

Thursday (August 12)

IN THE SPOTLIGHT: WALT DISNEY, BAIDU

WALT DISNEY: The world’s leading producers and providers of entertainment and information is expected to report its fiscal third-quarter earnings of $0.55 per share, which represents year-over-year growth of over 580% from $0.08 per share seen in the same quarter a year ago.

The family entertainment company would post over 42% to $16.82 billion. The company has beaten earnings per share (EPS) estimates all times in last four quarters, according to ZACKS Research.

Disney is building content assets that enable it to take advantage of the significant direct-to-consumer streaming opportunity ahead. Disney’s underlying IP remains best-in-class, supporting long term content monetization opportunities,” noted Benjamin Swinburne, equity analyst at Morgan Stanley.

“During this period of FCF pressure from Parks closures, ESPN’s FCF generation is key to driving down leverage. Historical cycles suggest a potential return to above prior peak US Parks revenues in FY23”

BAIDU: The leader in the Chinese search industry in terms of user market share is expected to report its second-quarter earnings of $1.93 per share, which represents a year-over-year decline of over 7% from $2.08 per share seen in the same quarter a year ago.

The Chinese tech giant will report full-year earnings of $8.60 per share for the current financial year, with EPS estimates ranging from $8.28 to $9.09, according to ZACKS Research.

Baidu has provided better disclosure and has struck a constructive tone on its AI initiatives. We find it well-positioned in certain industrial applications. We also like its rich cash position and strategic investments,” noted Gary Yu, equity analyst at Morgan Stanley.

“Our price target reflects materialization of AI investments, but we highlight milder near-term growth vs. peers amid risks from competition. The company appears well-positioned to ride the next Internet wave, but patience is needed. Our price target implies 16x 2022e non-GAAP P/E, vs. the 10-30x trading band since 2018.”

TAKE A LOOK AT OUR EARNINGS CALENDAR FOR THE FULL RELEASES FOR THE AUGUST 12

Ticker Company EPS Forecast
BR Broadridge Financial Solutions $2.19
AEG Aegon $0.15
BAM Brookfield Asset Management USA $0.72
PLTR Palantir Technologies Inc. $0.03
FLO Flowers Foods $0.28
BAP Credicorp USA $9.65
PVG Pretium Resources $0.13
DIS Walt Disney $0.55
BRFS BRF $0.07
SBS Companhia De Saneamento Basico $0.24
AEBZY Anadolu Efes ADR $0.00
MIDD Middleby $2.07
TKC Turkcell $0.16
BIDU Baidu $13.18

Friday (August 13)

There are no major earnings scheduled.

Today’s Market Wrap Up and a Glimpse Into Tuesday

The S&P 500 notched another all-time high today as stocks extended Friday’s gains. Tesla was a big winner as CEO Elon Musk took the spotlight. Investors are also optimistic about the second-quarter earnings season, which will feature a couple of big banks on Tuesday.

The Dow Jones Industrial Average tacked on more than 100 points in the session, closing just below the 35,000 threshold, while the tech-heavy Nasdaq was fractionally higher.

Stocks to Watch

Financial stocks JPMorgan and Goldman Sachs will both report their quarterly results on Tuesday before the bell. Investors sent both stocks higher on Monday, with JPMorgan and Goldman up more than 1% and 2%, respectively. Banks have been flexing their strong balance sheets this year and the second quarter is unlikely to be any different.

Disney was a big gainer on the day, advancing by 4%. Investors cheered the fact that the company will raise the price for ESPN+ monthly subscriptions by USD 1 to USD 6.99, effective in August. The price increase bolsters the annual subscription rate to USD 69.99 while the price for the bundle that includes ESPN+, Disney + and Hulu will stay the same. Disney’s ESPN+ boasts nearly 14 million subscribers.

Tesla similarly gained more than 4% in the trading session. Elon Musk was in court to stick up for the electric vehicle company’s decision to scoop up SolarCity in a USD 2.6 billion deal half-a-decade ago. Shareholders allege in a lawsuit that the deal was a bailout of the solar company, which Musk vehemently denies. If things don’t go Musk’s way in court, he could be on the hook for USD 2 billion.

Virgin Galactic on Sunday had a successful spaceflight with founder Richard Branson on board, but the stock took it on the chin today. The company revealed its plans to issue as much as USD 500 million in stock, which sent shares tumbling more than 17% to barely holding onto USD 40.

Look Ahead

If anything can cause the stock market rally to stumble, it could be further signs of inflation. That’s why investors will be paying close attention to the Consumer Price Index data for June that will be released on Tuesday morning. Wells Fargo is predicting a 0.6% increase.

On the earnings front, in addition to financial stocks, consumer staple company PepsiCo will also be reporting second-quarter earnings on Tuesday.

Tesla Lifts Wall Street to Close at Record Highs

The S&P 500 financials, communication services and real estate sector indexes each gained more than 0.8%.

Tesla rallied over 4% and was the top contributor to gains in the S&P 500 and Nasdaq. CEO Elon Musk insisted in court on Monday he does not control Tesla, and he said he did not enjoy being the electric vehicle company’s chief executive as he took the stand to defend the company’s 2016 acquisition of SolarCity.

The S&P 500 banks index climbed 1.3% ahead of quarterly earnings reports this week from major banks, including Goldman Sachs and JPMorgan on Tuesday. JPMorgan Chase rose over 1% and Goldman Sachs rallied more than 2%, fueling the Dow’s gains.

Investors will closely watch quarterly reports for early clues on the how long the U.S. economic recovery may last, with June-quarter earnings per share for S&P 500 companies expected to rise 66%, according to IBES data from Refinitiv.

The S&P 500 has rallied about 17% so far this year, with some investors questioning how long Wall Street’s rally may last and concerned about a potential downturn.

“Earnings season is going to be warmly greeted as an opportunity for existing biases to be confirmed,” warned Mike Zigmont, head of trading and research at Harvest Volatility Management in New York. “Even if forecasts are not as rosy as what the most bullish had hoped, it’s all going to get rationalized away.”

Focus this week will also be on a series of economic reports, including headline U.S. inflation data and retail sales. As well, Federal Reserve Chair Jerome Powell is due to appear before Congress on Wednesday and Thursday for views on inflation.

Investors have been concerned about higher inflation and the spread of the Delta coronavirus variant in the past few sessions, with traders seesawing between a preference for economy linked-value stocks and tech-heavy growth names.

The Dow Jones Industrial Average rose 0.36% to end at 34,996.18 points, while the S&P 500 gained 0.35% to 4,384.63.

The Nasdaq Composite climbed 0.21% to 14,733.24.

All three closed at their highest levels ever.

Walt Disney jumped over 4% to a two-month high after it and Marvel’s “Black Widow” superhero movie took in $80 million in its first weekend. And the entertainment company plans to raise prices for its ESPN Plus streaming service.

Didi Global Inc dropped about 7% after it confirmed China’s cyberspace administration notified app stores to remove the ride-hailing company’s 25 apps and said the move could impact its revenue in the region.

Virgin Galactic Holdings tumbled 17% after the space tourism company said it may sell up to $500 million worth of shares, a day after the company completed its first fully crewed test flight into space with billionaire founder Richard Branson on board.

Volume on U.S. exchanges was 8.3 billion shares, compared with the 10.5 billion average for the full session over the last 20 trading days.

Advancing issues outnumbered declining ones on the NYSE by a 1.43-to-1 ratio; on Nasdaq, a 1.11-to-1 ratio favored advancers.

The S&P 500 posted 66 new 52-week highs and no new lows; the Nasdaq Composite recorded 85 new highs and 38 new lows.

For a look at all of today’s economic events, check out our economic calendar.

(Additional reporting by Devik Jain and Shreyashi Sanyal in Bengaluru; Editing by Maju Samuel and Cynthia Osterman)

Has Walt Disney Topped Out?

Dow component Walt Disney Co. (DIS) topped out just above 200 in March following a historic 257% advance off March 2020’s 6-year low. The stock has lost altitude since that time, despite the reopening of California Disneyland, moviegoers flocking back to multiplexes, and the success of highly-touted Disney+ entries “Loki” and “WandaVision”. Q2 2021 earnings in May failed to stop the slide, missing revenue expectations with a 13.4% year-over-year decline.

Slowing Disney+ Subscriber Growth

The entertainment giant’s cruise ships remain landlocked until at least Aug. 6 despite relaunching by Floridian rivals, further impacting 2021 income. “Black Widow” and other Disney films should do relatively well, as evidenced by the solid “F9” box office in the last two weeks. However, the slate of entries includes the next generation of Marvel films that could fall flat with an audience seeking raw entertainment, rather than Hollywood’s usual dose of heavy-handed political messaging.

Worse yet, The Information reported last week that Disney+ U.S. growth slowed sharply in the first half of 2021, following a similar shortfall at Netflix Inc. (NFLX). Its common knowledge the pandemic pulled future demand forward due to endless lockdowns, reducing 2021’s pool of available subscribers. As that publication notes “The slowdown in growth at Disney+ reinforces long-standing questions about Disney’s ability to expand the streaming service to its target of 230 million to 260 million subscribers globally by the end of the 2024 fiscal year.”

Wall Street and Technical Outlook

Wall Street consensus now stands at an ‘Overweight’ rating based upon 21 ‘Buy’, 2 ‘Overweight’, 6 ‘Hold’, and 1 ‘Underweight’ recommendation. Price targets currently range from a low of $147 to a Street-high $230 while the stock closed Friday’s session more than $30 below the median $212 target. This humble placement supports higher prices if recently-reported metrics are inaccurate and the company reports higher-than-expected subscriber growth in the Aug. 12 release.

Disney failed a breakout above the 2015 high at 122 during the pandemic decline and rallied to a new high in December. The subsequent uptick stalled after mounting 200 in March, giving way to a persistent slide that broke 50-day moving average support in April. The failure to remount that barrier in the last three months raises a red flag, highlighting continued weakness. In addition, the pullback has flipped long-term relative strength readings into an active sell cycle that project continued weakness into the fourth quarter.

For a look at all of today’s economic events, check out our economic calendar.

Disclosure: the author held no positions in the aforementioned securities at the time of publication. 

Why Shares Of Disney Are Down By 4% Today?

Disney Video 14.05.21.

Disney Stock Falls As Disney Plus Subscriber Growth Misses Estimates

Shares of Disney found themselves under significant pressure after the company released its quarterly results.

Disney reported revenue of $15.6 billion and GAAP earnings of $0.50 per share, beating analyst estimates on earnings and missing them on revenue.

The market decided to focus on the revenue miss which was triggered by slower-than-expected growth in Disney Plus subscribers. Disney Plus subscribers totaled 103.6 million compared to analyst consensus which was closer to the 110 million mark.

Before the report, many analysts believed that the strong growth of Disney Plus will somewhat offset problems in the theme parks and resorts segment which remains under pressure due to the pandemic.

While the situation is improving in the U.S., it remains to be seen whether Disney’s parks will be able to quickly get to their previous performance. Meanwhile, the weaker-than-expected growth of Disney Plus may continue to serve as a bearish catalyst.

What’s Next For Disney?

Analysts expect that Disney will report earnings of $4.9 per share in 2022 so the stock is trading at 35 forward P/E. While such valuation levels are often seen in today’s market, they require strong growth to support the upside momentum.

For Disney, the key pillars of the bullish thesis were the fast return of demand for parks and resorts when the economy reopens and fast growth of Disney Plus. The growth of Disney Plus missed estimates, and it’s not surprising to see the stock fall after the report.

At the same time, it should be noted that Netflix has also missed subscriber growth estimates in the first quarter of this year, which means that streaming companies may have faced a market-wide slowdown of demand.

In this light, it looks that it’s too early to make conclusions, and investors will need to monitor the numbers for the next few quarters to see if streaming services manage to get back on the path of fast growth. Meanwhile, Disney shares may attract bargain hunters who waited for a pullback to buy the company’s shares.

For a look at all of today’s economic events, check out our economic calendar.

Walt Disney Shares Slump as Quarterly Revenue Disappoints

Walt Disney, a family entertainment company, reported better-than-expected earnings in the fiscal second quarter but missed analysts’ expectations for revenue and new subscribers, sending its shares down about 4% in extended trading on Thursday.

The world’s leading producers and providers of entertainment and information said its adjusted earnings-per-share rose $0.79, beating the Wall Street consensus estimates of $0.27. But Walt Disney’s overall revenue slumped 13% to $15.61 billion, missing the market expectations of $15.85 billion.

Results for the quarter and six months ended April 3, 2021 were adversely impacted by the COVID-19 pandemic. The company said its subscribers for Disney+ came in at 103.6 million, missing analysts estimates of 109.3 million.

Following this, Walt Disney shares fell about 4% to $171.40 in after trading hours on Thursday.

Analyst Comments

“F2Q results – earnings well ahead on lower expenses across the board: Revenues were modestly ahead of our expectations, although below consensus and down 13% YoY, with lower than expected advertising revenues offset by Content Licensing, Parks, and Consumer Products ahead. Disney’s adjusted OI of $2.5bn compared to our estimate of roughly $1bn, and adjusted EPS of roughly $0.80 actually grew YoY by over 30%,” noted Benjamin Swinburne, equity analyst at Morgan Stanley.

“Looking ahead, COVID-related pressures in India are likely to weigh on F3Q/F4Q net Disney Plus Hotstar additions particularly if the IPL tournament is not able to resume. Disney also opted to push the launch of its Star Plus sports offering in Latin America to August from June.”

Walt Disney Stock Price Forecast

Sixteen analysts who offered stock ratings for Walt Disney in the last three months forecast the average price in 12 months of $215.31 with a high forecast of $230.00 and a low forecast of $167.00.

The average price target represents a 20.73% increase from the last price of $178.34. Of those 16 analysts, 14 rated “Buy”, two rated “Hold” while none rated “Sell”, according to Tipranks.

Morgan Stanley gave the base target price to $210 with a high of $250 under a bull scenario and $135 under the worst-case scenario. The firm gave an “Overweight” rating on the family entertainment company’s stock.

Several other analysts have also updated their stock outlook. Walt Disney had its price target upped by equities research analysts at Wells Fargo & Company to $219 from $201. The firm currently has an “overweight” rating on the entertainment giant’s stock. Evercore ISI boosted their price objective to $210 from $200. Citigroup boosted their price objective to $230 from $205 and gave the company a “buy” rating. Bank of America reiterated a “buy” rating and issued a $223 price objective.

Disney reported a mixed fiscal 2021 second quarter as revenue fell short of FactSet consensus and operating income came in well ahead of Street expectations. Disney+ added over 8 million customers to end the quarter of 104 million subscribers, well below the 21 million new subscribers added in the fiscal first quarter,” noted Neil Macker, senior equity analyst at Morningstar.

“While subscriber growth has slowed down, we still expect robust long-term growth for the service. The parks and theatrical businesses were hammered again by the pandemic as revenue collapsed by 68% and 93%, respectively, versus a year ago. We are maintaining our wide moat and our $154 fair value estimate.”

Check out FX Empire’s earnings calendar

Why is “Bad News” is “Good News” for SP500?

Investors start this week still digesting the April Employment Report which delivered a big miss on Friday, showing a gain of just +266,000 jobs versus expectations for close to +1 million. The unemployment rate ticked up slightly to +6.1% while average wages and workweek saw unexpected increases.

Again, this was a moment on Wall Street when “bad news” was digested as “good news” as it keeps the Fed from raising rates.

Fundamental analysis

There is a lot of debate as to why the April jobs data was so sluggish with many blaming enhanced unemployment benefits. The report also showed leisure and hospitality added some +331,000 jobs while manufacturing payrolls actually fell, led by a decline in autoworkers. Economists believe those declines are probably related to the global chip shortage. ISM data last week indicated that some losses in April are related to other various supply chain constraints that are curbing manufacturing output and has forced companies to cut both hours and workers.

Employers also continue pointing to a skills mismatch, a problem many faced well before the pandemic. Bottom line, there are about -8 million fewer Americans in the workforce now versus February 2020. There seem to be a lot fewer women coming back and a lot fewer over the age of 55. Over the last five months total employment is only up by +1.5 million workers. So the Fed seems somewhat correct in their statement and forecast that it’s going to take time to get the U.S. workforce back to pre-pandemic levels and a big reason they are not going to rush to raise rates.

Despite the weaker than expected employment numbers, bears still believe inflationary price pressures are a mounting threat to the recovery, and signs of rising wages, particularly for low-skilled jobs, continue to fan the flames on inflation worries.

That will put a spotlight on inflation gauges due this week, with the Consumer Price Index on Wednesday followed by the Producer Price Index on Thursday. There is no major economic data today.

The height of earnings season is behind us with 88% and 86% topping estimates by an average of more than +22%.

The leading sectors have been Consumer Discretionary, Financials, Materials, and Communication Services, while Utilities and Industrials are the only two sectors reporting year-over-year declines.

Earnings this week include Tyson (TYSN) Roblox (RBLX), Palantir (PLTR), Electronic Arts (EA), Disney (DIS), Airbnb (ABNB). Other earnings results today are due from Affirm, Duke Energy, Marriott International, Novavax, Occidental Petroleum, Simon Properties, and Virgin Galactic. Other big names this week will include Compass, Sonos, Tencent, and Wendy’s on Wednesday; Alibaba, Applied Materials, Coinbase, DoorDash, Luminar, and Yeti on Thursday; and Siemens on Friday. Another area of increasing interest this week will be in the crypto space… Bitcoin, Ethereum, Doge, and Maker are all in my daily mix of things I track and trade. What a crazy ride!

Technical analysis

SP500 is close to weekly resistance at 4250. We talked about this number for a few weeks. On an intraday basis, the neutral zone is 4200 – 4265. Middle-strength level within this range – 4232.50, weak levels – 4248.75 and 4216.25.

Break up above 4265, will bring the price to 4281, 4298. If price sustains below 4200, look for 4184 and 4168. Note, mentioned levels should offer support/resistance before you consider entering the trade.

For a look at all of today’s economic events, check out our economic calendar.

Earnings to Watch Next Week: Marriott, Electronic Arts, Alibaba and Walt Disney in Focus

Earnings Calendar For The Week Of May 10

Monday (May 10)

IN THE SPOTLIGHT: MARRIOTT

Marriott International, an American multinational diversified hospitality company, is expected to report its first-quarter earnings of $0.03 per share, which represents a year-over-year decline of over 88% from $0.26 per share seen in the same quarter a year ago.

The U.S. hotel operator’s revenue would slump about 50% to $2.36 billion. However, in the last quarter, the company has delivered an earnings surprise of over 20%.

“Largest hotel brand company globally creates economies of scale, but the spread of COVID-19 will pressure unit growth. With the stock trading near its historical average multiple, we see too wide a risk-reward to justify recommending, with upside/downside driven by how severe and quick business trends return to normal post-COVID-19,” noted Thomas Allen, equity analyst at Morgan Stanley.

Tuesday (May 11)

IN THE SPOTLIGHT: ELECTRONIC ARTS

Electronic Arts, one of the world’s largest video game publishers, is expected to report its fiscal fourth-quarter earnings of $1.04 per share, which represents a year-over-year decline of over 3% from $1.08 per share seen in the same quarter a year ago.

The world’s largest video game publishers would post revenue growth of about 15% to around $1.39 billion. However, in the last four quarters, the company has delivered an earnings surprise of over 500%.

“For the fourth quarter of fiscal 2021, EA expects GAAP revenues of $1.317 billion, cost of revenues to be $302 million, and operating expenses of $837 million. EA anticipates a loss per share of 7 cents for the fourth quarter. Net bookings are expected to be $1.375 billion, which indicates an increase of $75 million over the prior guidance. For fiscal 2021, EA expects revenues of $5.6 billion, cost of revenues to be $1.477 billion, and earnings per share of $2.54,” noted analysts at ZACKS Research.

Wednesday (May 12)

Ticker Company EPS Forecast
WEN Wendy’s $0.15
WIX WIX -$0.68
DT Dynatrace Holdings $0.14
WWW Wolverine World Wide $0.40
LITE Lumentum Holdings Inc $1.42
DOX Amdocs $1.13
JACK Jack In The Box $1.29
GOCO Gocompare.Com $0.00
SONO Sonos Inc -$0.22
PAAS Pan American Silver USA $0.30
MAURY Marui ADR $0.15
TM Toyota Motor $3.67
AEG Aegon $0.17
BRFS BRF $0.02
EBR Centrais Eletricas Brasileiras $0.27
BAYRY Bayer AG PK $0.73
TCEHY Tencent $0.53
DM Dominion Midstream Partners -$0.13
FLO Flowers Foods $0.37

Thursday (May 13)

IN THE SPOTLIGHT: ALIBABA, WALT DISNEY

ALIBABA: China’s Alibaba Group Holding, the largest online and mobile e-commerce company in the world, is expected to report its fiscal fourth-quarter earnings of $1.82 per share, up over 40% from the same quarter a year ago. China’s biggest online commerce company’s revenue to surge more than 70% to $27.7 billion.

“Heightened investments in Taobao Deal and Grocery for user acquisition in less-affluent regions in China, should support long-term growth in core e-commerce business. Merchants’ marketing budgets will continue to shift online given rising reliance on e-commerce and better conversion. Alibaba’s ad resources remain under-monetized,” noted Gary Yu, equity analyst at Morgan Stanley.

“Digitalization trend in China will also sustain AliCloud’s growth potential. Gradual margin expansion will be a long-term profit driver. We see limited near-term catalysts but F22e P/E valuation remains attractive. We also see further downside support from additional disclosure to separate losses from new investments from profitable core e-commerce businesses.”

WALT DISNEY: The world’s leading producers and providers of entertainment and information is expected to report its fiscal second-quarter earnings of $0.27 per share, which represents a year-over-year decline of over 50%. The Chicago, Illinois-based family entertainment company’s revenue would slump over 10% to $ 16.1 billion.

Disney is building content assets that enable it to take advantage of the significant direct-to-consumer streaming opportunity ahead. Disney’s underlying IP remains best-in-class, supporting long-term content monetization opportunities,” noted Benjamin Swinburne, equity analyst at Morgan Stanley.

“During this period of FCF pressure from Parks closures, ESPN’s FCF generation is key to driving down leverage. Historical cycles suggest a potential return to above prior peak US Parks revenues in FY23.”

TAKE A LOOK AT OUR EARNINGS CALENDAR FOR THE FULL RELEASES FOR THE MAY 13

Ticker Company EPS Forecast
CELH Celsius $0.00
HAE Haemonetics $0.69
BABA Alibaba $11.80
BAM Brookfield Asset Management USA $0.87
TAC TransAlta USA $0.06
UTZ Utz Brands $0.15
VERX Vertex Inc. Cl A $0.05
FTCH Farfetch -$0.28
DIS Walt Disney $0.27
AMAT Applied Materials $1.50
DDS Dillards $1.20
VNET 21Vianet -$0.02
TEF Telefonica $0.16
PBR Petroleo Brasileiro Petrobras $0.12
NICE Nice Systems $1.50
TYOYY Taiyo Yuden ADR $2.09
IX Orix $1.97
SGAMY Sega Sammy ADR -$0.02
SOMLY Secom ADR $0.27
OJIPY Oji ADR $1.57
SBS Companhia De Saneamento Basico $0.15

Friday (May 14)

Ticker Company EPS Forecast
MFG Mizuho Financial $0.06
CIG Companhia Energetica Minas Gerais $0.08
HMC Honda Motor $0.41
SMFG Sumitomo Mitsui Financial $0.12
RDY Drreddys Laboratories $0.52

 

Disney Slumps to Support Ahead of Earnings

Dow component Walt Disney Co. (DIS) reports Q2 2021 earnings next week, with analysts looking for a profit of just $0.27 per-share on $16.0 billion in revenue. If met, earnings-per-share (EPS) will mark a 55% reduction in profit compared to the same quarter in 2020, when the pandemic forced shutdowns in most divisions. The stock sold off nearly 2% in February after beating Q1 top and bottom line estimates but posted an all-time high less than one month later.

California Disneyland Reopens

California Disneyland reopened this week after a 14-month closure, raising hopes that Parks revenue will return to pre-pandemic levels. However, persistent infections in other parts of the world could delay that recovery by months or longer, forcing the entertainment giant to rely more heavily on film production and streaming service income. There’s no doubt that Disney+ will continue to perform like gangbusters but no one knows what to expect with box office receipts, given the uneven recovery and continued fears of closed spaces.

Truist analyst Matthew Thornton raised his price target to $205 in April, marking one of the few Wall Street calls so far in 2021. He noted “We continue to view DIS as very well positioned in global Media and Entertainment (and the shift to DTC) on account of its franchises/brands/assets (Marvel, Star Wars, Pixar, National Geographic, Disney/Disney+, ESPN/ ESPN+, Hulu/HLTV, Hotstar, others) and competencies (merchandising, advertising, M&A)”.

Wall Street and Technical Outlook

Wall Street consensus has deteriorated after outsized 2020 returns, with an ‘Overweight’ rating based upon 18 ‘Buy’, 1 ‘Overweight’, 7 ‘Hold’, and 1 ‘Underweight’ recommendation. Price targets currently range from a low of $147 to a Street-high $230 while the stock is set to open Wednesday’s session more than $30 below the median $218 target. This placement suggests that Main Street investors are worried that Disney won’t resume its growth trajectory until more countries emerge from the pandemic.

Walt Disney failed a breakout above the 2015 high at 120 during 2020’s pandemic decline, ahead of a vertical recovery wave that reached new highs in November. It posted an all-time high at 203.02 in March 2021, ending a 124-point price swing off the March 2020 low. The stock carved just a single basing pattern during the torrid advance, exposing price action to an extended correction that could easily last into the fourth quarter.

For a look at all of today’s economic events, check out our economic calendar.

Disclosure: the author held no positions in aforementioned securities at the time of publication. 

How Might NFLX Share Price React to Q1 Earnings?

Recall that the pandemic prompted a massive front-loading of Netflix subscriptions, as households starved for entertainment amid lockdowns drove the company’s global customer base past the 200 million mark by the end of last year.

For Q1 2021, Netflix has guided for an additional 6 million subscribers, while Wall Street expects that tally to be closer to 6.3 million. That’s still a pretty healthy figure, even though it pales in comparison to the 15.77 million new paying members who signed on during the same period a year ago.

Sauntering subscriber and share price growth

Looking ahead, shareholders appear cognizant that Netflix would find it tough to replicate the growth spurts it experienced last year. The same can be said for its share price.

After surging by 67.1% in 2020, Netflix has only managed a gain of 2.54% so far this year. That’s slower in comparison to the year-to-date performances of:

Netflix has clearly been a laggard within the famed FAANG group, with the streaming company now languishing 5.44% below its record high, set on 20 January 2021, which was also the day after its last quarterly earnings announcement.

From a technical perspective, Netflix’s share prices found support at its 200-day simple moving average (SMA) in March, using it as a platform to launch back above its 50-SMA this month. However, with the bullish momentum in the stock plateauing, while a close above the $555 mark having proved hard to come by since mid-February, Netflix could do with a positive catalyst to catch up with the rest of its peers.

Perhaps that catalyst may arrive at the company’s earnings release later today.

What are markets expecting for Netflix’s Q1 financial results?

Three words: record setting quarter.

Wall Street expects Netflix to post its highest-ever revenue and net profit for a single financial quarter. The top line is expected to breach the $7 billion mark for the first time in the company’s history, thanks to price hikes in the US, Germany, UK and Ireland. Meanwhile, the company’s adjusted net profit is slated to come in at $1.45 billion, and that should translate into an adjusted earnings per share of $3.18.

However, look beyond the historic numbers and the broader industry harbors troubling signs for Netflix.

Streaming wars eroding Netflix’s advantage

According to a report by Parrot Analytics, just over half (50.2%) of the original series that viewers worldwide wanted to watch online over the past three months were by Netflix. While that figure still dwarves second-placed Amazon Prime’s share of 12.2% for the same period (January-March 2021), Netflix’s market share has clearly dropped from the near-65% share it enjoyed some two years ago.

Within the US alone, the decline in Netflix’s market share is even more obvious. According to Bloomberg Intelligence data, Netflix’s share of the US streaming pie has gone from near-total dominance of 96.04% in Q1 2018 to just 44.43% as of Q4 2020.

As the competition for eyeballs intensifies, Netflix is set to find it harder to gain more subscribers.

Netflix not taking things lying down

That doesn’t spell the end of Netflix. This year alone, the world’s largest streaming platform aims to release over 70 movies. The streaming giant earlier this month also announced a deal with Sony, which is reportedly worth over $1 billion. The agreement gives Netflix the rights to exclusively show Sony movies released from 2022 onwards after they’ve completed their theatrical runs.

That should keep their 210 million subscribers (estimated as of end-March) and counting, entertained with popular franchises such as “Jumanji” and “Spider Man” over the coming years, even with the potential prices hikes looming.

Armed with customer loyalty while flexing its pricing power, Netflix still has a lot within its arsenal to withstand the heightened competition for viewers’ attention.

How might Netflix’s share price react after Tuesday’s earnings?

Markets are pricing in a 7.2% move for Netflix’s share price when markets reopen on Wednesday. Although NFLX could go either way, it’s notable that shareholders typically sought to use these announcements as selling opportunities. The stock declined the day after 8 of the past 11 earnings.

Still, a 7.2% move to the upside would set a new record high for Netflix’s share price, while a similar-sized move to the downside could see the stock looking for support around its 200-SMA once more.

How exactly will this NFLX stock react this week? We’ll just have to stay tuned and watch the drama unfold.

Written on 20/04/2021 02:00 GMT by Han Tan, Market Analyst at FXTM

For more information, please visit: FXTM

Disclaimer: This written/visual material is comprised of personal opinions and ideas. The content should not be construed as containing any type of investment advice and/or a solicitation for any transactions. It does not imply an obligation to purchase investment services, nor does it guarantee or predict future performance. FXTM, its affiliates, agents, directors, officers or employees do not guarantee the accuracy, validity, timeliness or completeness of any information or data made available and assume no liability for any loss arising from any investment based on the same.

Risk Warning: CFDs are complex instruments and come with a high risk of losing money rapidly due to leverage. 81% of retail investor accounts lose money when trading CFDs with this provider. You should consider whether you understand how CFDs work and whether you can afford to take the high risk of losing your money.

AMC Entertainment Projects Most Cinemas to Reopen by March 26 – Shares Pop

AMC Entertainment Holdings, Inc. (AMC) shares added to Wednesday’s gains in extended-hours trade after the movie theater operator said that most of its U.S. cinemas will reopen by March 26. The announcement comes just hours after the Walt Disney Company (DIS) said it plans to open its California theme parks to a limited capacity on April 30.

Throughout the pandemic, movie theater chains have not only had to contend with shutting cinemas but also with filmmakers moving releases to video on demand or streaming services. During the fourth quarter, Disney decided to move its highly anticipated film “Soul,” produced through its Pixar animation studio, to its streaming service, Disney+.

However, in a much-needed boost for cinemas, the reopening of AMC theaters coincides with the release of the latest James Bond movie “No Time To Die,” which hits the big screen on April 2. The maker of Bond films – EON Productions Limited – delayed the release date several times over the past year to allow the film to be seen by a worldwide theatrical audience.

Through Wednesday’s close, AMC stock has a market capitalization of $6.81 billion and trades 539% higher since the start of the year – in part, due to a social media-induced speculation rally. In the past five days alone, the shares have gained nearly 40%.

Wall Street View

Riley Securities analyst Eric Wold raised the firm’s price target on AMC Entertainment to $7 from $5.50 and kept his ‘Neutral’ rating on the stock. Wold told investors in a research note that the company’s fourth-quarter sales came in ahead of expectations thanks to a stronger than anticipated performance at theaters and ongoing expense controls. The analyst also believes the movie operator sits well positioned to benefit from a box office rebound in 2022.

Coverage elsewhere on Wall Street remains thin, given the stock’s recent volatility. It currently receives five ‘Hold’ ratings and four ‘Sell’ ratings. Price targets range from a high of $7 to a low of just $1, with the average target pegged at $3.44.

Technical Outlook and Trading Tactics

AMC shares broke above an extended downtrend line in late January, rocketing up to $20.36 on social media trading speculation. However, the rally was short-lived, with the price subsequently retracing back to the downtrend line. More recently, the stock flipped resistance into support at that level and has continued to trend sharply higher.

Active traders who want to play short-term momentum should target a move back to the all-time high (ATH) while managing risk with a stop-loss order placed under the March 15 low at $11.85. Longer-term investors should look to buy the stock near an uptrend line connecting the January and February swing lows.

For a look at today’s earnings schedule, check out our earnings calendar.

U.S. Market Wrap and Forecast for Tuesday

Major index benchmarks traded above Wednesday’s highs at the close of Friday’s U.S. session while market players waited for Congress to wrap up the second Trump impeachment trial and get back to handing Americans the greenbacks needed to bankroll struggling Robinhood accounts.  Crude oil futures posted another round of new highs while the WTI contract closed in on 60 and bonds rolled over, testing 11-month lows.

Disney Lower After Earnings Pop

Dow component Walt Disney Co. (DIS) reversed after spiking above 195 in Thursday’s post-market, drifting into the red when analysts struggled to understand why collapsed movie, theme park, resort, and cruise ship revenue hasn’t weighed more on results. Disney+ added over 20 million subscribers during the quarter but a sweet Indian deal lowered average income per user more than 20%, suggesting the mouse is using the majority of free capital to hire accountants.

Tesla Inc. (TSLA) sold off within five points of range resistance and bounced back over 800 but this support test may continue next week. Many analysts believe the stock is over-priced at current levels and weak performance so far in 2021 could signal an intermediate correction that drops into strong support near 500. Whatever happens in coming weeks, the first quarter’s risk-free market probably won’t define the ‘2021 market’ by the end of December.

Holiday Weekend

U.S. markets are closed on Monday for President’s Day. That means mid-quarter options expiration will evolve over four sessions, instead of five. Small cap short interest plays that went crazy during Gamestop’s ramp are finding some buying interest, suggesting higher volatility than usual into next Friday’s closing bell. Congress will interrogate Robinhood, Melvin, and Reddit executives on Feb 18, ensuring the topic will impact trading through end of the 1st quarter.

Beyond the democratization of world financial markets, traders are squarely focused on free money in the form of $1,400 stimulus checks. The bar has been set so high by Democrats that any disappointment could drop major benchmarks 5% to 10%, despite the complacency you’re feeling right now. Smart money is not only pressing momentum plays at the moment but they’re also hedging bets, waiting to capitalize on the sheer stupidity of the immature trading crowd.

For a look at next week’s economic events, check out our economic calendar.

Disclosure: the author held no positions in aforementioned securities at the time of publication. 

Walt Disney Shares Move Lower As Traders Take Profits After Quarterly Report

Walt Disney Video 12.02.21.

Disney+ Continues To Grow At A Healthy Pace

Shares of Walt Disney moved lower after hitting all-time highs after the release of the quarterly earnings report.

Walt Disney reported revenue of $16.25 billion and GAAP earnings of $0.02 per share, beating analyst estimates on both earnings and revenue. The company’s Parks, Experiences and Products segment remained under significant pressure as Disney’s parks and resorts remained closed or operated at reduced capacity while cruises were suspended.

Meanwhile, the number of Disney+ subscribers increased to 94.9 million which was above analyst forecasts. ESPN+ and Hulu also showed strong growth as consumers spent more time at home due to pandemic and remote work.

The growth of streaming services has clearly supported the stock’s growth in recent months. While many of the company’s parks are not even opened, investors want to prepare for the time when virus-related restrictions are cancelled and people flood Disney’s parks after many months of waiting. In this light, the market is ready to ignore the company’s near-term performance and stays focused on the outlook for the future.

What’s Next For Walt Disney?

At this point, it is not clear when Disney parks will be opened and cruise ships will be allowed to sail, but it is clear that customers will quickly get back to Disney once restrictions are lifted, which will immediately boost Disney’s financial performance.

At the same time, the stock has become pricey after the recent rally and trades at about 40 forward P/E. However, rich valuations are often seen in today’s markets if the company has a strong growth story. In Disney’s case, investors are betting on the potential strength of Disney+ which is already showing strong results.

The stock’s rich valuation is likely serving as the main driver for today’s sell-off. Disney’s quarterly results exceeded expectations, and some traders decided that it was the time to “sell the news” and take profits near all-time high levels. Once this move is over, the stock will have decent chances to continue its upside trend.

For a look at all of today’s economic events, check out our economic calendar.