Walt Disney Company (The)Viés de baixa
DISNEY SHORT @120
The Walt Disney Company.
My attention was drawn to this stock due to the negative affect its news may have produced on Netflix on Friday 17/04/2020. While Netflix's stock price decreased by -3,69%, Disney's stock price increased by +4.52%. I find this paradoxical because if analyst downgraded Netflix and weren't optimistic on the Netflix's business growth due to the negative affect of unemployment on the streaming/leisure industry as well as cost cutting on secondary non-essential products and services then why did Disney go up?
Disney is a direct competitor to Netflix with its new streaming service Disney+. It offers a variety of content with movies, series and original creations ranging from Pixar, Marvel, Star Wars, National Geographic and many more studios. The success of the new Disney+ streaming service was iterated in an investor relations post from April 8th saying that after only 5 months Disney+ had reached more than 50 million paid users in over a dozen countries and is expected to expand to more countries over 2020. Of course, is good news for the company as it has started to make its mark in the streaming business alongside competitors such as ROKU, APPLE, AMAZON & NETFLIX. Therefore, perceived as good news by investor leading the stock price to surge up by over +7% intra-day (101.07 to 107.99).
BUT In this same press-release, it is specified that it is a forward-looking statement meaning the information could be rendered irrelevant due to internal decision factors based on:
- changes in domestic and global economic conditions, competitive conditions and consumer preferences;adverse weather conditions or natural disasters; health concerns; international, regulatory, political, or military developments (including government requests to delay direct-to-consumer launch in certain jurisdictions);technological developments; and labor markets and activities.
As well as external factors, mainly COVID-19. The affected areas of the company by COVID-19 could be:
the performance of the Company’s theatrical and home entertainment releases; the advertising market for broadcast and cable television programming; demand for our products and services; construction; expenses of providing medical and pension benefits; income tax expense; performance of some or all company businesses either directly or through their impact on those who distribute our products; and achievement of anticipated benefits of the TFCF transaction.
The Walt Disney company has 5 market segments, all related to the leisure, entertainment and travel business's:
1- Walt Disney Studios Entertainment
2 - Disney Consumer Products
3 - Walt Disney Parks and Resorts
4 - Disney Media Networks
5 -Walt Disney Internet Group/Disney Interactive Media Group
1st quarter will be having poor results as all segments apart from home streaming services of Disney and channels will see increased revenue due to closed parks and resorts, cutting out a part of cash flow. Looking for a run up to results due to optimism around streaming services and neglect of other operations. Also, the stock is negatively correlated to unemployment rate which is foretasted to reach 20% and be worse than during the 2008 crisis.
The plan is to short the shit out of Disney with a small position from 120 as a swing trade waiting for the stock to crash post-earnings release going into Q2 where the effects of COVID-19 will really start affecting the economy. This analysis is based on the assumption that Disney will disappoint in its earnings report. I am confident in this analysis but must remain wary because you can never be sure of how earnings release will be perceived by traders and investors. Earning estimates between last Q4 of 2019 and Q1 of 2020 are expected to drop by 16% whereas I am looking towards a higher drop meaning further disappointment. Looking to hit lower lows in end May to mid June. Might seek to buy back in once company is undervalued and how the global economy behavior evolves.
PLAN: There is an interesting risk/reward on this trade. Open position @120 with TP1 @110, TP2 100 and TP380 and SL@125.
TIME: Swing trade with a 4-6 week time limit.
NOTE: The streaming part of the business will probably be the most talked about figure, potentially creating hype.
Let me know what you think in the comments as I'll respond and be updating the trade as we move forward into the week.
My attention was drawn to this stock due to the negative affect its news may have produced on Netflix on Friday 17/04/2020. While Netflix's stock price decreased by -3,69%, Disney's stock price increased by +4.52%. I find this paradoxical because if analyst downgraded Netflix and weren't optimistic on the Netflix's business growth due to the negative affect of unemployment on the streaming/leisure industry as well as cost cutting on secondary non-essential products and services then why did Disney go up?
Disney is a direct competitor to Netflix with its new streaming service Disney+. It offers a variety of content with movies, series and original creations ranging from Pixar, Marvel, Star Wars, National Geographic and many more studios. The success of the new Disney+ streaming service was iterated in an investor relations post from April 8th saying that after only 5 months Disney+ had reached more than 50 million paid users in over a dozen countries and is expected to expand to more countries over 2020. Of course, is good news for the company as it has started to make its mark in the streaming business alongside competitors such as ROKU, APPLE, AMAZON & NETFLIX. Therefore, perceived as good news by investor leading the stock price to surge up by over +7% intra-day (101.07 to 107.99).
BUT In this same press-release, it is specified that it is a forward-looking statement meaning the information could be rendered irrelevant due to internal decision factors based on:
- changes in domestic and global economic conditions, competitive conditions and consumer preferences;adverse weather conditions or natural disasters; health concerns; international, regulatory, political, or military developments (including government requests to delay direct-to-consumer launch in certain jurisdictions);technological developments; and labor markets and activities.
As well as external factors, mainly COVID-19. The affected areas of the company by COVID-19 could be:
the performance of the Company’s theatrical and home entertainment releases; the advertising market for broadcast and cable television programming; demand for our products and services; construction; expenses of providing medical and pension benefits; income tax expense; performance of some or all company businesses either directly or through their impact on those who distribute our products; and achievement of anticipated benefits of the TFCF transaction.
The Walt Disney company has 5 market segments, all related to the leisure, entertainment and travel business's:
1- Walt Disney Studios Entertainment
2 - Disney Consumer Products
3 - Walt Disney Parks and Resorts
4 - Disney Media Networks
5 -Walt Disney Internet Group/Disney Interactive Media Group
1st quarter will be having poor results as all segments apart from home streaming services of Disney and channels will see increased revenue due to closed parks and resorts, cutting out a part of cash flow. Looking for a run up to results due to optimism around streaming services and neglect of other operations. Also, the stock is negatively correlated to unemployment rate which is foretasted to reach 20% and be worse than during the 2008 crisis.
The plan is to short the shit out of Disney with a small position from 120 as a swing trade waiting for the stock to crash post-earnings release going into Q2 where the effects of COVID-19 will really start affecting the economy. This analysis is based on the assumption that Disney will disappoint in its earnings report. I am confident in this analysis but must remain wary because you can never be sure of how earnings release will be perceived by traders and investors. Earning estimates between last Q4 of 2019 and Q1 of 2020 are expected to drop by 16% whereas I am looking towards a higher drop meaning further disappointment. Looking to hit lower lows in end May to mid June. Might seek to buy back in once company is undervalued and how the global economy behavior evolves.
PLAN: There is an interesting risk/reward on this trade. Open position @120 with TP1 @110, TP2 100 and TP380 and SL@125.
TIME: Swing trade with a 4-6 week time limit.
NOTE: The streaming part of the business will probably be the most talked about figure, potentially creating hype.
Let me know what you think in the comments as I'll respond and be updating the trade as we move forward into the week.
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