Disney Stock Hits Two-Year Peak Before Earnings

However, options traders and analysts have been pessimistic toward the stock

Managing Editor
Aug 6, 2018 at 2:50 PM
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Walt Disney Co (NYSE:DIS) stock is up 2% at $116.42 in afternoon trading, and just off a two-year high of $116.84, as investors await the media powerhouse's impending earnings report, which is slated for after the close tomorrow, Aug. 7. Below we will take a look at what the options market is pricing in for Disney after earnings, and how the stock has been faring on the charts following Comcast's (CMCSA) bid withdrawal for Twenty-First Century Fox (FOXA) assets.

Disney stock has been on an uptrend since early May, a time that coincides with the 30-day moving average transitioning from a ceiling of resistance to a line of support for the shares. DIS has picked up 10% in just the past month, and is set to mark its highest close since November 2015.

jpgDaily Chart of DIS with 30MA

Digging into the blue chip's earnings history, DIS has closed flat or lower the day after the company reports in four of the last eight quarters, including a 2.2% decline in May 2017. Looking back eight quarters, the shares have moved 1.9% the day after earnings, on average, regardless of direction. This time around, however, the options market is pricing in a much larger-than-usual 6.2% move for Wednesday's trading.

Switching gears, per data from the International Securities Exchange (ISE), Chicago Board Options Exchange (CBOE), and NASDAQ OMX PHLX (PHLX), DIS options traders have been leaning bearishly ahead of the company's highly anticipated report. Disney stock's 10-day put/call ratio of 1.09 stands in the 71st percentile of its annual range. In other words, puts have been bought over calls at a faster-than-usual clip.

Analyst sentiment has also been pessimistic, with nine of the 13 firms in coverage on DIS sporting a tepid "hold" recommendation. Further, the stock's average 12-month price target of $117.57 is a discount to current trading levels. Should Disney surprise to the upside after earnings, an exodus of option bears or a wave of upbeat analyst attention could propel the blue chip even higher.

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