Is Disney a Hot Stock?

With shares of Disney (NYSE:DIS) trading around $81, 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. Its movies and shows, theme parks, and products have remained a main attraction for many years and will continue well into the future.

Making good on the agreement just weeks after it was announced, Disney and DISH Network Corp. (NASDAQ:DISH) announced Tuesday that they will be unveiling WATCH Disney products and shows to DISH customers throughout the U.S. DISH customers will now have access to WATCH ABC, WATCH ABC Family, WATCH Disney Channel, WATCH Disney XD, and WATCH ESPN, according to a press release. Early last month the two companies announced a multiyear distribution deal in which Disney promised that DISH would have the rights to live-streaming content from Disney and Disney-owned media outlets, like ABC and ESPN. The deal “removes the risk of a blackout … and provides opportunities for incremental revenue [for Disney] with the inclusion of video on-demand,” wrote Drew Crum, an analyst at Stifel who spoke with USA Today following the deal’s announcement.

It also means that Netflix (NASDAQ:NFLX) subscription might look a little less appealing to subscribers who already have access to Disney-owned content without it. According to the company’s website, WATCH Disney is “a new way to watch full episodes of your favorite Disney Channel shows online through your computer, laptop, iPad, iPhone, iPod touch, or Kindle Fire. Full episodes ON DEMAND — watch anytime, anywhere.”

T = Technicals on the Stock Chart Are Strong

Disney stock has been flying higher in recent years. The stock is currently trading near all time highs and looks poised to continue. 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




What does this mean? This means that investors or traders are buying a very significant amount of call and put options contracts, as compared to the last 30 and 90 trading days.

Put IV Skew

Call IV Skew

May Options



June Options



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 very significant 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 Q4

2013 Q3

2013 Q2

2013 Q1

Earnings Growth (Y-O-Y)





Revenue Growth (Y-O-Y)





Earnings Reaction





Disney has seen increasing earnings and revenue figures over the last four quarters. From these numbers, 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, Dreamworks (NASDAQ:DWA), Time Warner (NYSE:TWX), 21st Century (NASDAQ:FOXA), and sector?



Time Warner

21st Century


Year-to-Date Return






Disney has been a relative performance leader, year-to-date.


Disney is a global entertainment company that aims to deliver smiles to many consumers worldwide. The company and DISH Network announced Tuesday that they will be unveiling WATCH Disney products and shows to DISH customers throughout the U.S. The stock has seen a strong run in recent years and is currently trading near all time highs. Over the last four quarters, earnings and revenues have been rising, which has investors pleased with the company. Relative to its peers and sector, Disney has been a year-to-date performance leader. Look for Disney to OUTPERFORM.

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