Disney theme parks experience a slump! Is this an indication of a bleak economic outlook? (08/08/2024)

Hello everyone, in this week's Technical Tracking, let's analyze the trend indicator of the American media giant and entertainment industry - Disney (DIS.US). On August 7, 2024, Disney's Q3 earnings report showed that its theme park business performance was below expectations. At the turning point of the global stock market's significant fluctuations, this indirectly reflects a fact: American consumers are holding onto their wallets to cope with the uncertainty of the economy. The Q3 financial report shows that the "Experience" business sector where the theme park is located had a revenue increase of only 2% year-on-year to 8.4 billion US dollars, while operating profit declined by 3% year-on-year to 2.2 billion US dollars. The "Experience" business is Disney's most profitable "cash cow" business, although its revenue accounts for only 36%, but it contributes more than half of the profits. Disney said that the decline in operating profit of the theme park was mainly due to the weakening demand of American consumers and the cost increase caused by inflation. In addition, the company also warned that this adverse situation is expected to continue for several quarters. In fact, in every aspect of the US economy, there seems to be a hint of coolness in consumer spending. For example, fast food chains such as McDonald's, Burger King, and Taco Bell have all released discounts and value-for-money packages to attract customers who focus on cost-effectiveness. Coffee giant Starbucks also pointed out that customer visits have declined due to the "challenging consumer environment". However, Disney also has good news. Compared with the same period last year, the company's Q3 total operating profit increased by 19% to 4.225 billion US dollars. The growth was mainly driven by the "Entertainment" business sector with the highest revenue share, especially the streaming media business turned losses into profits. Disney's streaming business includes three major streaming platforms Disney+, Hulu, and ESPN+. Compared with the same period last year, the streaming media business has turned from a loss of 0.512 billion US dollars to a profit of 47 million US dollars. This marks the first time that Disney has achieved profitable streaming media business, and the profitable time is one quarter earlier than expected. At the end of October 2023, Disney's stock price hit a 10-year low. Subsequently, the stock staged a rebound trend, rising more than 50% in about five months to a year-and-a-half high. However, the stock price quickly turned down again and fell into a clear downward trend. The "triple bottom" and "head and shoulders top" shapes shown in the daily chart help to see more clearly the bull-bear switch track of Disney's stock price. ● Disney's current stock price is below the major moving averages, including the 50-day moving average (MA50) and the 200-day moving average (MA200), and obviously deviates from these moving averages, indicating that the market is in a bear market phase, with a strong bearish sentiment. ● With the stock price falling to a nine-month low, the trading volume in the last few days has also increased, indicating that the market selling pressure is greater and may need further release. ● The RSI and KDJ indicators have both appeared in the "bottom divergence", which is a preliminary signal for the stock price to rise. However, there are currently no other clearer signals to support a rebound in the stock price. Disney's stock price is currently at a nine-month low, just near the neckline of the "triple bottom" shape mentioned in the previous daily chart (85.5 US dollars). This neckline is very critical because it is an important sign of the start of the previous upward trend, and it is estimated to attract some short-term bulls to buy the dip. On the other hand, if the stock price falls below the "triple bottom" ($78), the bullish confidence will be crushed, and the bearish or dominant market will rule the market. $Disney(DIS.US)$

Hot events

On August 7, 2024, Disney's Q3 earnings report showed that its theme park business performance was below expectations. At the turning point of the global stock market's significant fluctuations, this indirectly reflects a fact: American consumers are holding onto their wallets to cope with the uncertainty of the economy.

The Q3 financial report shows that the "Experience" business sector where the theme park is located had a revenue increase of only 2% year-on-year to 8.4 billion US dollars, while operating profit declined by 3% year-on-year to 2.2 billion US dollars. The "Experience" business is Disney's most profitable "cash cow" business, although its revenue accounts for only 36%, but it contributes more than half of the profits.

Disney said that the decline in operating profit of the theme park was mainly due to the weakening demand of American consumers and the cost increase caused by inflation. In addition, the company also warned that this adverse situation is expected to continue for several quarters.

In fact, in every aspect of the US economy, there seems to be a hint of coolness in consumer spending. For example, fast food chains such as McDonald's, Burger King, and Taco Bell have all released discounts and value-for-money packages to attract customers who focus on cost-effectiveness. Coffee giant Starbucks also pointed out that customer visits have declined due to the "challenging consumer environment".

However, Disney also has good news. Compared with the same period last year, the company's Q3 total operating profit increased by 19% to 4.225 billion US dollars. The growth was mainly driven by the "Entertainment" business sector with the highest revenue share, especially the streaming media business turned losses into profits.

Disney's streaming business includes three major streaming platforms Disney+, Hulu, and ESPN+. Compared with the same period last year, the streaming media business has turned from a loss of 0.512 billion US dollars to a profit of 47 million US dollars. This marks the first time that Disney has achieved profitable streaming media business, and the profitable time is one quarter earlier than expected.

Technical analysis

Trend analysis:

At the end of October 2023, Disney's stock price hit a 10-year low. Subsequently, the stock staged a rebound trend, rising more than 50% in about five months to a year-and-a-half high. However, the stock price quickly turned down again and fell into a clear downward trend. The "triple bottom" and "head and shoulders top" shapes shown in the daily chart help to see more clearly the bull-bear switch track of Disney's stock price.

Indicator interpretation:

● Disney's current stock price is below the major moving averages, including the 50-day moving average (MA50) and the 200-day moving average (MA200), and obviously deviates from these moving averages, indicating that the market is in a bear market phase, with a strong bearish sentiment.

● With the stock price falling to a nine-month low, the trading volume in the last few days has also increased, indicating that the market selling pressure is greater and may need further release.

● RSI and KDJ indicators have both appeared in the "bottom divergence", which is a preliminary signal for the stock price to rise. However, there are currently no other clearer signals to support a rebound in the stock price.

Areas of Focus

Disney's stock price is currently at a nine-month low, just near the neckline of the "triple bottom" shape mentioned in the previous daily chart (85.5 US dollars). This neckline is very critical because it is an important sign of the start of the previous upward trend, and it is estimated to attract some short-term bulls to buy the dip. On the other hand, if the stock price falls below the "triple bottom" ($78), the bullish confidence will be crushed, and the bearish or dominant market will rule the market.

This content discusses technical analysis. Other methods, including fundamental analysis, may provide different perspectives. The examples provided are for illustrative purposes only and do not reflect expected results.

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