Disney's rally is mostly centered around cost restructuring. We would fade this rally as it approaches 125/share
Disney$Disney(DIS.US$ recently released its quarterly earnings, which were generally positive. Despite a decline in the number of Disney+ subscribers, the direct-to-consumer business reported a narrower loss of $1.05 billion compared to the analyst estimate of $1.22 billion. The company's total earnings rose to $1.28 billion with an 8% increase in revenue to $23.51 billion.
To increase profits for the streaming segment, Disney raised prices for Disney+ and added a lower-priced ad-supported tier for the service in December. The company's CEO, Bob Iger, stated that the company is undergoing a significant transformation to reduce expenses and achieve profitability in its streaming business by fiscal 2024.
Despite the initial upbeat performance post-earnings, we see 125-130 as the upside target with rather limited upside from here, and do not rule out a retest under 95 in the weeks ahead if markets are weak.
Disney is a short-sell candidate at 130-135 (28X Forward P/E) for traders who have the desire to hedge their portfolios as we believe the tide will turn against Consumer Discretionary companies in the coming months of 2023.
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