With shares of Disney (NYSE:DIS) trading around $67, is DIS an OUTPERFORM, WAIT AND SEE or STAY AWAY? Let's analyze the stock with the relevant sections of our CHEAT SHEET investing framework:
T = Trends for a Stock’s Movement
Disney is a diversified worldwide entertainment company. The company operates in five business segments: Media Networks, Parks and Resorts, Studio Entertainment, Consumer Products and Interactive. Disney offers entertainment that sends smiles to consumers across a range of countries around the world. It’s movies and shows, theme parks, and products have remained a main attraction for many years and will continue well into the future. As Disney continues to provide excellent entertainment, look for the company to remain a leader in the industry.
T = Technicals on the Stock Chart are Strong
Disney stock has seen an explosive move higher over the last couple of years. The stock is currently trading at all-time high prices and sees no signs of slowing. Analyzing the price trend and its strength can be done using key simple moving averages. What are the key moving averages? The 50-day (pink), 100-day (blue), and 200-day (yellow) simple moving averages. As seen in the daily price chart below, Disney is trading above its rising key averages which signal neutral to bullish price action in the near-term.
(Source: Thinkorswim)
Taking a look at the implied volatility (red) and implied volatility skew levels of Disney options may help determine if investors are bullish, neutral, or bearish.
| Implied Volatility (IV) | 30-Day IV Percentile | 90-Day IV Percentile | |
| Disney Options | 21.42% | 16% | 17% |
What does this mean? This means that investors or traders are buying a minimal amount of call and put options contracts, as compared to the last 30 and 90 trading days.
| Put IV Skew | Call IV Skew | |
| June Options | Flat | Average |
| July Options | Flat | Average |
As of today, there is an average demand from call buyers or sellers and low demand by put buyers or high demand by put sellers, all neutral to bullish over the next two months. To summarize, investors are buying a minimal amount of call and put option contracts and are leaning neutral to bullish over the next two months.
On the next page, let’s take a look at the earnings and revenue growth rates and the conclusion.
E = Earnings Are Increasing Quarter-Over-Quarter
Rising stock prices are often strongly correlated with rising earnings and revenue growth rates. Also, the last four quarterly earnings announcement reactions help gauge investor sentiment on Disney’s stock. What do the last four quarterly earnings and revenue growth (Y-O-Y) figures for Disney look like and more importantly, how did the markets like these numbers?
| 2013 Q1 | 2012 Q4 | 2012 Q3 | 2012 Q2 | |
| Earnings Growth (Y-O-Y) | 36.21% | -3.75% | 17.34% | 31.17% |
| Revenue Growth (Y-O-Y) | 9.89% | 5.21% | 3.42% | 3.87% |
| Earnings Reaction | -0.12% | 0.42% | -5.95% | 1.36% |
Disney has seen increasing earnings and revenue figures over the last four quarters. From these figures, the markets have been pleased with Disney’s recent earnings announcements.
P = Excellent Relative Performance Versus Peers and Sector
How has Disney stock done relative to its peers, News Corporation (NASDAQ:NWS), Time Warner (NYSE:TWX), Dreamworks (NASDAQ:DWA), and sector?
| Disney | News Corporation | Time Warner | Dreamworks | Sector | |
| Year-to-Date Return | 34.97% | 26.33% | 26.91% | 30.66% | 24.87% |
Disney has been a relative performance leader, year-to-date.
Conclusion
Disney provides unforgettable entertainment experiences to consumers of all ages in a multitude of countries across the globe. The stock has been a strong performer, now trading at all-time high prices, and is poised to continue higher. Earnings and revenue figures have been increasing over the last several quarters which has kept investors pleased. Relative to its peers and sector, Disney has been a year-to-date performance leader. Look for Disney to continue to OUTPERFORM.
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