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Is Disney Stock a Buy Despite Earnings and Missed Revenue?


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Shares of disney (NYSE:SAY) have been decimated, but that hardly makes it unique in a market like this. At this week’s low, DIS stock was down more than 50% from its all-time high. Although the recent market pressure is not helping, earnings were the final catalyst to send it to new lows.

The stock price barely crossed the $100 mark before buyers stepped in and drove DIS stock back over $100. Still, DIS stock is up on Friday, and rallying on what was seen as bad news is actually a very good sign. But was it all bad?

On Wednesday after the close, the company released its second quarter results. Disney earned $1.08 per share, missing analysts’ expectations of $1.17. While revenue hit $19.24 billion, it missed analyst estimates of $800 million despite growing 23.3% year-over-year (YOY).

Despite the lack of a title, however, there are several bright spots for Disney.

First, streaming is going much better than expected. While netflix (NASDAQ:NFLX) has real problems with its user growth, Disney’s streaming platforms don’t.

Disney+ has a new total of 137.7 million subscribers worldwide, adding 7.9 million in the quarter. This exceeded expectations of just 2 million subscriber additions in the quarter. In total, along with Disney’s other streaming platforms, the company now has over 200 million streaming subscribers and, as CEO Bob Chapek said, “…we’re in a league of our own.”

Additionally, after Covid-19 crushed the number of Disney parks, second-quarter revenue doubled from the same quarter a year earlier. Revenue reached $6.7 billion, up from $3.2 billion year-on-year and well ahead of analyst estimates of $6.3 billion.

As we saw with HBO’s better-than-expected subscription results a few weeks ago, this should have given investors a hint that Disney’s streaming numbers could also exceed expectations. Additionally, based on what we heard from other executives, this also hinted that the park’s results were better than expected.

Conclusion on DIS stock

When we look at the charts, it is clear that $100 is an area of ​​interest for DIS stocks. Rebounding from this zone now, we need to see Disney recoup $110.75. This puts it above this week’s high and if it happens next week, it gives traders a weekly rotation to the upside.

If stocks can gain momentum from there, it could bring the $120-$125 zone and the descending 10-week moving average into play.

On the downside, however, additional selling pressure could put back into play less than $100. If the DIS stock really gets under pressure, the $80 area could be on the table. These are the March 2020 Covid lows and the rising 200 week moving average.

As of the date of publication, Bret Kenwell had (neither directly nor indirectly) any position in the securities mentioned in this article. The opinions expressed in this article are those of the author, subject to InvestorPlace.com publishing guidelines.

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