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Investing, Stocks  | December 21, 2021

Media and entertainment giant The Walt Disney Company (NYSE:DIS) stock is reflecting the slowdown in its legacy operations and domestic channels. The resurgence of the Omicron COVID-19 variant could have repercussions in its parks and cruise business.

The reopening trend has been played and peaked out. Disney+ memberships continue to grow to reach 118.1 million subscribers indicating a 60% growth rate in Q4 2021. The Marvel Cinematic Universe Phase 4 is well underway and generates excitement and steady membership growth.

Bargain hunters that were patient enough not to chase entry into Disney shares can watch the current sell-off for opportunistic pullback levels to gain exposure.

Q4 FY 2021 Earnings Release

On Nov. 10, 2021, Disney released its fourth-quarter fiscal 2021 results for the quarter ending September 2021. The company reported an adjusted earnings-per-share (EPS) profit of $0.37 excluding non-recurring items versus consensus analyst estimates for $0.51, a (-$0.14) miss.

Revenues rose 26% year-over-year (YoY) to $18.53 billion, falling short of consensus analyst estimates for $18.77 billion. Domestic revenue channels fell (-5%), and operating income fell by (-14%). Disney+ subscriptions grew 60% YoY to $118.1 million and ESPN+ subs rose 66% YoY to 17.1 million.

Disney CEO Bob Chapek commented,

“This has been a very productive year for The Walt Disney Company, as we’ve made great strides in reopening our businesses while taking meaningful and innovative steps in Direct-to-Consumer and at our Parks, particularly with our popular new Disney Genie and Magic Key offerings.

As we celebrate the two-year anniversary of Disney+, we’re extremely pleased with the success of our streaming business, with 179 million total subscriptions across our DTC portfolio at the end of fiscal 2021 and 60% subscriber growth year-over-year for Disney+.

We continue to manage our DTC business for the long-term and are confident that our high-quality entertainment and expansion into additional markets worldwide will enable us to further grow our streaming platforms globally.”

Conference Call Takeaways

“As we close out the fourth quarter, I'm pleased to say that it's been a very productive year for The Walt Disney Company. As we've made great strides in reopening our business, while also taking meaningful and innovative steps to position ourselves for continued long-term growth.

Despite the many ongoing challenges of the pandemic, we ended the quarter with an adjusted EPS of $0.37 compared to a loss of $0.20 last year. Christine will go more in-depth on the quarter and the coming year in her remarks. Last quarter, we talked about our strategic priorities for the future, and as we head into fiscal '22, we remain keenly focused on advancing them to drive our continued growth.

First and foremost, telling the world's most original enduring stories.” He continued, “Second, maximizing the synergy of our unique ecosystem to deepen consumers' connection to our characters and our stories, and lastly, using the power of our far-reaching platforms and new technologies to give consumers the best entertainment experience possible.

I'll briefly talk about how we are executing against these priorities in 3 key areas: Direct-to-Consumer, sports, and Parks, Experiences, and Products. On the Direct-to-Consumer side, we are extremely pleased with the success of our portfolio streaming services. Disney+, ESPN+, and Hulu continue to perform incredibly well with 118.1 million, 17.1 million, and 43.8 million subscribers, respectively, for a total of 179 million subscriptions. To put this growth in perspective, in the past fiscal year alone, we have grown the total number of subscriptions across our DTC portfolio by 48%, and Disney+ subs in particular by 60%.”

Legacy Segments

CEO Chapek updated on its legacy segments,

“We are very encouraged by what we're seeing and look forward to launching Disney Genie at Disneyland very soon. Alongside these transformative programs, we continue to invest in our parks and resorts themselves. We introduced a host of new attractions as part of Walt Disney World's 50th-anniversary celebration, which kicked off on Oct. 1.

These include Remy's Ratatouille Adventure at EPCOT, which has quickly become one of the parks top attractions, our new themed restaurant SPACE 220, and Two New Nighttime Spectaculars, and there is lots more in store in the coming month, including the highly anticipated indoor coaster Guardians of the Galaxy: Cosmic Rewind, and the one-of-a-kind Galactic Starcruiser experience.

As part of this immersive 2-night adventure, guests will become heroes of their own Star Wars stories. Reservations went on sale just 3 weeks ago, and the first 4 months of voyages have virtually sold out for this premium experience. Disney Cruise Line continues to be one of the highest-rated guest experiences of any of our offerings.

As I said earlier, all 4 of our ships are now sailing and we continue to see tremendous demand for the incredible experiences we offer at sea. We are thrilled to be launching a new ship, the Disney Wish in June of 2022 and will welcome her sister ships to the fleet in 2024 and 2025.

Combined, these 3 vessels will help increase capacity and our footprint in a business that has historically generated a double-digit return on investment, driven by a premium price that might be well above the industry average. Before leaving our Parks and Experiences, I want to mention the continued transformation of our Consumer Products business.

We have almost completed the reduction of our physical footprint, which will enable us to pivot our approach with a focus on our e-commerce platform, shopDisney and on more compelling retail partnerships, such as Disney Store at Target (NYSE:TGT), which will triple its locations by the end of the year.

In short, our parks around the globe now have more to offer guests than ever before, with our new offerings and we're making it even easier for them to have the best time imaginable, tailored specifically to their individual needs and preferences in a way, only Disney can.”

Opportunistic Pullback Price Levels

Using the rifle charts on the weekly and daily time frames provides a precision view of the landscape for DIS stock. The weekly rifle chart collapsed after peaking above the $178.38 Fibonacci (fib) level. The weekly 5-period moving average (MA) is falling at $149.80, with lower weekly Bollinger Bands (BBs) near the $137.24 fib.

The weekly market structure high (MSH) sell triggered a breakdown below $169.03. The weekly market structure low (MSL) buy triggers the breakout above $154.66. The daily rifle chart uptrend has a 5-period MA sloping down at $149.33 towards the 15-period MA at $149.01 to form a breakdown on the crossover potentially.

The daily stochastic has crossed down towards the 50-band as momentum turns again. The daily BBs are compressing, which precedes a price range expansion. Prudent investors can monitor for opportunistic pullback price levels at the $144.97 fib, $142.18 fib, $137.24 fib, $131.36 fib, $125.33 fib, $120.12 fib, and the $110.45 fib level. Upside trajectories range from the $164.03 fib to the $184.10 fib level.

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