Disney Earnings: How to Trade the Q2 Figures
Disney Earnings: How to Trade the Q2 Figures
Disney is set to report earnings on Tuesday, May 7, before market open. Investors’ focus returns to fundamentals after proxy fight ends.
- Disney will report earnings on Tuesday, May 7, before the market opens.
- Investors’ focus returns to fundamentals after a proxy fight ends.
- High IVR gives traders hefty premium to trade options for earnings.
Disney (DIS) is scheduled to report earnings on Tuesday, May 7, before the market opens.
DIS is up about 25% for the year to date, highlighting a positive start to the year against the S&P 500’s 6.5% gain. Disney surged over 10% following its last earnings report.
Will the good times continue after Disney reports its fiscal second-quarter earnings?
What do investors expect from Disney?
Investors expect to see Disney report earnings per share (EPS) of $1.11 and revenue of $22 billion. That would be up from the year-ago quarter, when DIS reported $1.03 EPS and revenue of $21.8 billion. However, it would be down from last quarter's EPS of $1.22 and revenue of $23.6 billion.
Now, with the proxy battle behind Disney, investors can turn their focus back on the fundamentals of the business.
Streaming subscriptions are in focus this quarter ahead of an announced crackdown on passwords like the one that Netflix (NFLX) has recently implemented. CEO Bob Iger announced during a CNBC interview the timing of the password crackdown, saying that the measure will start in only a limited number of countries, with a full implementation by September.
Last quarter, Disney’s Hulu added 1.2 million subscribers. However, Disney+ core subscribers fell sequentially by 1.3 million. That came amid a price increase for the streaming service.
If Disney's password crackdown follows a successful rollout experienced by Netflix, it could end up being a net positive for the stock. Disney trimmed its streaming losses by almost $300 million last quarter, and if that trend continues, shareholders will likely reward the stock.
Analysts expect improved metrics from Disney’s theme parks business to continue following a solid Q1 when Disney’s Asia experiences segment turbocharged revenues. International experiences revenue grew 35% year-over-year and domestic revenue grew 4% over the same period.
With the base effects from the 50th anniversary celebration out of the way, domestic operating income from experiences should return to show better growth. Meanwhile, higher ticket prices and attendance growth should continue to buoy profits from parks.
Trading Disney earnings
Disney traded with an implied volatility rank (IVR) of 82.6 as of Friday, May 3. That volatility comes after a pullback from highs traded in April and broader volatility in the U.S. equity markets.
For those believing that Disney will repeat its previous earnings reaction, a bullish trade could be done through selling a put spread. That said, setting the short strike around recent support by selling the 110 put and buying the 109 put would give a max profit of 39 and max loss of 61, with a probability of profit of profit (POP) of 65% for the May 10 strike.
Thomas Westwater, a tastylive financial writer and analyst, has eight years of markets and trading experience. @fxwestwater
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