Walt Disney (DIS) Implied Move Suggest Price Volatility But Upside Possible If Disney Revenue Beat Estimate

Walt Disney is expected to reveal quarterly earnings of $0.97 per share, indicating a decline of 2% compared to the year-ago period. Analysts forecast revenues of $23.47 billion, representing a decrease of 0.2% year over year. The consensus EPS estimate for the quarter has been revised 0.4% lower over the last 30 days to the current level.

The deal would create a joint streaming platform for Fox, Disney’s ESPN sports network, and Warner Bros., The Wall Street Journal reported. The stand-alone entity, which will share sports assets from the three, would be available on ESPN’s streaming platform, Hulu, and Max starting later this year. Each company would own one-third of it.

Technical is showing an uptrend and we could see that Walt Disney has started on its upside not long ago, so I would be interested to see how their revenue is going to come up.

If there is a chance of combining deal for streaming, does it mean Walt Disney is concentrating on the other business like the tourist attractions, that could see a boost as travel should have returned to very close to pre-pandemic. As for streaming, I personally do not think Disney Plus is worth subscribing.

DIS last reported earnings on 08 Nov 2023 after the market close (AMC). DIS shares gained +6.9% the day following the earnings announcement to close at 90.05. Following its earnings release, 90 days ago, DIS stock has drifted +10.3% higher.

From the time it announced earnings, DIS traded in a range between 86.65 and 99.32. The last price (99.29) is closer to the higher end of range.

Estimated implied straddle for upcoming earnings is 5.8%. We could be looking at another upside based on how Disney have performed in the past quarter, as long as we do not see the majority of its revenue intake fell.

The options market overestimated DIS stocks earnings move 67% of the time in the last 12 quarters. The predicted move after earnings announcement was ±6.1% on average vs an average of the actual earnings moves of 4.7% (in absolute terms).

This suggest that Disney implied move option valuation is overvalued, it could have a chance of going south as well, but I would think it might be possible for Disney to provide a positive price move after its earnings result.

DIS's last earnings implied volatility (IV30) going into earnings was 34.9. The last time DIS released earnings, the implied volatility dropped to 22.8, resulting in an implied vol crush of 35%. 5 days after earnings, the 30 day IV was 21.0.

Average Implied Volatility Crush For DIS Earnings: 28%

Average 30 Day Implied Volatility 1 Day Before Earnings: 39.9

Average DIS 30 Day IV for the Day of Earnings: 28.7

Average 30 Day Implied Volatility 5 Days After Earnings: 27.4

Based on how Disney is trading now, they could maintain their upside as long as the upcoming reported revenue does not fall below estimate. I am looking forward for Disney to better their revenue especially global travel should have returned to near pre-pandemic level.

I will be looking at Disney price action as well. This could be a potential short trade.

Appreciate if you could share your thoughts in the comment section whether you think Disney could beat estimates and we could see a positive price effect post earnings?

Disclaimer: The analysis and result presented does not recommend or suggest any investing in the said stock. This is purely for Analysis.