Disney Stock: Bull and Bear Cases
Disney Stock: Bull and Bear Cases
By:Mike Butler
DIS is at pandemic lows, down 10% in 2023. What's next?
- Disney closed just a few points off the stock price lows the company saw during the pandemic in March 2020.
- The company is down 10% in 2023, with mounting issues related to the traditional cable agreement they have with Charter's Spectrum cable customers.
- Spectrum customers experienced a blackout of Disney channels like ESPN and ABC, even through popular events like the U.S. Open tennis tournament.
- Streaming services like ESPN+ and Disney+ are still reporting strong numbers as society continues to shift away from traditional cable.
For such a strong, household name brand, The Walt Disney Co. (DIS) is not having a fun year based on the price of the stock. The company seems to have reached the line in the with cable company Charter Spectrum, which no longer has a traditional cable partnership with Disney for channels like ESPN and ABC.
As you can imagine, this is a pretty big deal for the implication of the future of how we watch TV, although we've already begun the cable unwind with the surge of new streaming products that are more tailored to the individual viewer.
DIS stock has had staggered earnings results, missing earnings-per-share (EPS) expectations every other quarter over the past four quarters, with similar results from a revenue standpoint.
A bullish case for Disney stock
If you can stomach some more potential downside movement, it's hard to ignore a household name stock like Disney at pandemic lows. The expected move through the December 2023 options cycle is around +-$8.05 based on current implied volatility. If it were realized to the downside, the move would put the stock at a level it hasn't seen since 2014. If you don't think Disney will go back to 2014 lows, that may make you a Disney bull.
A bearish case for Disney stock
The company is having a tough time catching any sort of rally in the stock market, which is troubling when you consider the streaming competitors in Apple (AAPL), Amazon (AMZN) and more are having a great 2023 so far. The company also ceased its dividend payments as you can see in the image above - the green dollar sign circles (dividend payments) stop at the pandemic lows and have not resumed since.
With so many question marks around the traditional cable platforms, investors may look to competitors that have other means of making a dollar, outside of their own streaming platforms. Without the dividend stock classification, I think Disney loses some steam in that department where long term dividend investors may park their money elsewhere.
Mike Butler, tastylive director of market intelligence, has been in the markets and trading for a decade. He appears on Options Trading Concepts Live, airing Monday-Friday. @tradermikeyb
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