Okay, when it comes to the Walt Disney Co. (DIS) - Get Report , I'm biased. Know that up front as I go about my business, and tell you what I think about the stock, and it's potential. First off, Disney is expected to go to the tape with the firm's fiscal first quarter results after the closing bell tonight (Tuesday). Consensus view is for EPS of $1.55 on revenue of $15.05 billion. Those numbers if realized amount to EPS growth of -18% on revenue growth of -2%. Hmm, ugly? Right? Not entirely. Let's dig in.
We'll start with the studios, because that is where the uneven comparison really is. For the quarter, Disney released two 'blockbuster" movies, one being a Mary Poppins sequel. A year ago, the studios released three "blockbuster" movies, one of which was Star Wars Episode VIII, and another a Thor movie. In terms of global box office, the two 2018 high end movies add up to less than did the third place of those three 2017 entries(COCO). Given this, mixed with continued expectations for the impact of cord-cutting across the cable networks, this leaves the firm in a very interesting spot. There will be growth in the resorts and theme parks as they have been crowded and the firm has enforced it's pricing power on the consumer, but that is not why investors will tune into the conference call on Tuesday evening. Any position taken in between publication of the numbers and the actual call would be in my opinion, akin to gambling.
There's a lot going on that CEO Bob Iger will have to get detailed on. Start where you want, but Iger has to discuss in detail, the expected launch of Disney Plus, the streaming service that will compete with the likes of Neflix (NFLX) - Get Report , Amazon (AMZN) - Get Report Prime, Alphabet's (GOOGL) - Get Report YouTube, and AT&T (T) - Get Report . After the success of ESPN Plus, much is expected here, and the fact that the firm is the king of content should position it at an advantage to the competition in terms of expected margin once initial expenses are stabilized. Then, Iger will have to guide on just how well the takeover of the various assets at 21st Century Fox (FOXA) - Get Report , (FOX) - Get Report is progressing. By the way, Fox reports on Wednesday. That deal, by the way, will leave Disney in control of Hulu, another streaming competitor, enhance the firm's broad control over content, and force the sale of the Fox regional sports networks.
As an investor, I need to hear a firm date on Disney Plus, and a precise dollar number as far as cost synergies are concerned on the deal with Fox.
We see here that the stock's rebound off of the December lows has stalled just above Fibonacci resistance as earnings approach. The top orange trend line illustrates a series of lower highs, the lower line a stable base if the sharp selloff is exempted from the model. This may skew the result, but it is how I am advancing. In my opinion, the second Fib model to the right displays various catch-points for the shares should they be displeased with what they hear from Iger this evening.
The Walt Disney Company
Target Price: $120 (down from $122)
Add: $108, $105
(A longer version of this column appeared at 8:32 a.m. ET on Real Money, our premium site for active traders. Click here to get great columns like this from Stephen "Sarge" Guilfoyle, Jim Cramer and other experts throughout the market day.)
At the time of publication, Stephen Guilfoyle was Long AMZN, DIS, FOX equity, Short DIS puts.