Walt Disney Co (DIS) Kicks Off New Year With New Highs

Blue-chip media stock Walt Disney Co (NYSE:DIS) is higher to start 2017, with help from the success of Rogue One and an upgrade at Evercore ISI

Jan 3, 2017 at 12:35 PM
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Walt Disney Co (NYSE:DIS) is starting 2017 off on a high note. The entertainment company's latest "Star Wars" installment, "Rogue One," just enjoyed its third consecutive weekend at the top of the box office, and -- similar to these three Dow peers -- the stock scored some upbeat analyst attention. Specifically, Evercore ISI said the blue chip "stands to be a significant beneficiary" of President-elect Trump's tax reform plans, upgrading the shares to "buy" from "hold" and hiking their price target to $120 from $103 -- near record-high territory. Since the new trading year began just hours ago, DIS shares managed to notch a new 12-month high of $106.90 -- to the delight of recent option buyers -- and were last seen 1.9% higher at $106.21, backing down from their 2016 high of $106.75.

From a longer-term perspective, the blue-chip media stock has been climbing higher in recent months, and is currently up more than 17% from its early October lows. What's more, the recent bullish cross of its 20-day and 200-day moving averages underscores recent strength. Despite the stock's uptrend, though, 12 of 23 analysts still rate the shares a lukewarm "hold." A round of additional upgrades could push the shares even higher.

It looks as though option players are betting on DIS to extend its recent upswing. DIS' 50-day call/put volume ratio at the International Securities Exchange (ISE), Chicago Board Options Exchange (CBOE), and NASDAQ OMX PHLX (PHLX) of 2.25 sits just 2 percentage points from an annual peak, indicating option buyers have been exceptionally bullish towards the blue chip in recent weeks. What's more, near-term option players are also more call-heavy than usual, with DIS' Schaeffer's put/call open interest ratio (SOIR) of 0.76 sitting in the call-skewed 19th percentile of its annual range. The two top open interest positions are the front-month January 100 and 105 calls, both of which sit in the money, indicating there isn't currently much in the way of options-related resistance in the near term.

However, not everyone is betting on DIS to continue its journey higher. DIS short interest is up 20.3% over the last reporting period, suggesting some of the recent call buying could be short sellers hedging their bets. 

Whatever their motive, near-term option buyers are getting a bargain. The stock's Schaeffer's Volatility Index (SVI) of 15% is higher than just 9% of all other readings from the past year, indicating option players are pricing in relatively low volatility expectations for Walt Disney Co (NYSE:DIS) shares right now. Meanwhile, DIS' Schaeffer's Volatility Scorecard (SVS) sits at a relatively elevated 68, indicating DIS has tended to exceed volatility expectations over the past 12 months. 

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