Walt Disney Company DIS was trading flat Wednesday heading into its third-quarter financial report after the market closes.
When the company printed its second-quarter results on May 10, the stock gapped down about 6% the following day and continued to fall intraday, closing the session 8.73% lower. After the steep sell-off, the stock continued within a downtrend, which brought Disney to a recent low of $85.19.
For that quarter, Disney reported adjusted earnings of 93 cents per share on revenue of $21.82 billion. The company's EPS estimate was in line with estimates and Disney beat the revenue expectation of $21.79 billion.
For the third quarter, analysts estimate Disney will print earnings per share of 97 cents on revenues of $22.48 billion.
Traders and investors will be watching closely to see if the company has increased its Disney+ subscribers in the wake of its rivals reporting subscription growth and whether Florida Gov. Ron DeSantis' ongoing fight against the company has hurt its amusement park revenue. Read more here.
On July 26, Morgan Stanley analyst Benjamin Swinburne maintained an Overweight rating on Disney and lowered the price target from $110 to $105. The new price target suggests about 19% upside for Disney.
From a technical analysis perspective, Disney's stock looks neutral, having printed both a double top and a double bottom pattern on the daily chart over recent trading sessions. 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 broke up through the upper descending trend line of a descending triangle pattern on Tuesday, and on Wednesday, the stock temporarily fell back into the formation before bouncing back up above the pattern. The pattern leans bearish but when a stock breaks up from a descending triangle, it can signal a larger reversal to the upside.
- On Aug. 3 and Aug. 4, Disney formed a bullish double bottom pattern near $85 to which the stock reacted positively on Tuesday and Wednesday. The potential bearish double top pattern that Disney printed near the $90 level on Aug. 1 and Wednesday could indicate the stock will fall lower, however.
- Bullish traders want to see Disney receive a positive reaction to its earnings print and for the stock to break up above $90, which would negate the double top pattern and indicate an uptrend may be on the horizon. Bearish traders want to see the stock suffer a negative reaction to the news and then for Disney to fall under $85, which would set the stock into a new downtrend.
- Disney has resistance above at $92.71 and at $100.90 and support below at $85.45 and at $79.07.
Photo via Shutterstock.
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