Disney Is Testing Yearly Lows, Here Is Why

Key Insights

• Disney’s fiscal Q2 report missed analyst estimates, and the stock made an attempt to settle below the $100 level. 
• Traders are worried that the company will not be able to show strong growth in the near term. 
• The stock has already lost about half of its value from the highs that were reached back in 2021, which could attract speculative traders. 

Disney Stock Falls After Quarterly Report

Shares of Disney gained additional downside momentum and tested yearly lows after the company released its fiscal second quarter report.

Disney reported revenue of $19.24 billion and adjusted earnings of $1.08 per share, missing analyst estimates on both earnings and revenue.

The company noted that it added 7.9 million Disney+ subscribers in the quarter, but this growth failed to provide any support to the stock.

Meanwhile, Disney’s park segment continued to rebound. The revenue in this segment has more than doubled on a year-over-year basis.

Nevertheless, the market is worried about Disney’s ability to grow its revenue and earnings at a sufficient pace. These worries are caused by the general nervousness in the market amid rising interest rates and the potential slowdown of the economy.

What’s Next For Disney Stock?

Currently, Disney is expected to report earnings of $4.15 per share in the current year and $5.4 per share in the next year, so the stock is trading at 25 forward P/E.

S&P 500 remains under significant pressure, and traders are worried about the general health of the economy amid high inflation. In this environment, it is not clear whether the current Disney valuation is cheap enough to attract more investors.

At the same time, the stock has already lost roughly half of its value from the highs that were reached back in 2021. As the revenue of the park segment continues to grow while Disney+ subscriptions increase, analyst estimates may move higher, which could provide more support to Disney shares after the strong pullback.

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