The Walt Disney Company (NYSE:DIS) Stock Earnings Could Offer Investors Some Hulu Clues

The Walt Disney Company (NYSE:DIS) Stock Earnings Could Offer Investors Some Hulu Clues

The Walt Disney Company (NYSE:DIS) Stock Earnings Could Offer Investors Some Hulu Clues

While “Avengers: Endgame” seems to dominate any and all discussion of Walt Disney (NYSE: DIS ) lately, the company’s got other topics of interest to share when it reports earnings on May 8. For many DIS stock holders, there’s another “endgame” that they’re wondering about.

Namely, streaming and what Disney intends to do with its majority stake in the Hulu platform while the team focuses on its yet-to-launch on-demand service Disney+. One option could be to put Hulu on ice for now. Owners of DIS stock probably wouldn’t complain either. Indeed, some observers have suggested Disney should do just that.

But, the case for continuing to cultivate Hulu – and potentially compete with its own on-demand home-grown video service – just got a whole lot better. Hulu added 3.8 million U.S. subscribers last quarter , roughly doubling the 1.74 million domestic members that rival Netflix (NASDAQ: NFLX ) added to its roster during the first three months of this year.

Disney stock is up 18.7% since the April 11 Disney+ announcement, while the S&P 500 index has eked out a 1.2% gain in the same three-week period. And, Netflix stock? It’s gained 2.5%.

Netflix still dwarfs Hulu, to be clear. The on-demand video giant boasts a total of 60.2 million U.S. subscribers , and another 88.6 million paying members overseas, where the company doesn’t face a saturation problem. It added 7.86 million international customers last quarter, too. Even with Hulu’s big first quarter, it’s still only got 26.8 million paying members on board. Nevertheless, it’s something to build on, and what makes Hulu different than Netflix could also be what turns it into a boon for Disney and its shareholders.

In fact, that Disney-controlled Hulu shared its subscriber numbers at all speaks volume about how seriously the company wants investors to take it.

Streaming Wars

Though waged for years, the streaming wars have only recently begun to heat up.

Aside from Hulu chasing undisputed leader Netflix, Apple (NASDAQ: AAPL ) is entering the game … albeit sideways, mostly leveraging third-party content . Amazon (NASDAQ: AMZN ) has been in the fray for a while as well, though it’s still not clear if the e-commerce behemoth is in the streaming game to make money as a streamer, or as a means of selling more merchandise.

Hulu has wiggled its way out of a similar uncertainty, though. It is a for-profit streaming service that makes money by selling ads and selling subscriptions. Others are similar to it, but none are exactly like it.

That doesn’t mean Hulu is profitable for its 60% owner Disney … at least not yet. But, there’s a light at the end of the tunnel.

Number Crunching

Last fiscal year, Disney booked a $580 million loss on equity in streaming investments – mostly Hulu. That was before it got the 30% stake Fox held in Hulu at the time, by virtue of last year’s acquisition of 21st Century Fox . The increasingly smaller consortium also recently bought back the 10% stake AT&T (NYSE: T ) owned via its purchase of Time Warner .

If Hulu is still bleeding money, Disney’s two-thirds stake ups the size of the loss that may be holding DIS stock back.

That’s a big “if” though. Last year, Hulu generated $1.5 billion in ad revenue above and beyond sales it raked in through subscriptions. eMarketer expects that figure to reach $1.8 billion this year , and swell to $2.7 billion in 2021.

Pinning down revenue from subscriptions is a tougher matter. Options range from $7.99 per month to as much as $44.99 per month for a so-called “skinny bundle” of cable offerings. Conservatively assuming an average monthly fee of $13 per member, however, Hulu collects on the order of $4 billion per year just from membership fees.

Sales aren’t profits, clearly. But, a swing to real profitability may be in the cards.

Same, But Different

And that’s where Disney’s majority stake in Hulu has the potential, as a business model, to prove disruptive to Netflix.

Both streaming players create their own content as well as rent video content from third-parties. But, Netflix only utilizes – can only utilize – its home-grown shows and movies like The Handmaid’s Tale and The Crown by distributing it through the app. However, Disney – which also owns Fox – and Hulu’s 30% owner Comcast (NASDAQ: CMCSA ) have access to a wealth of already-created films and programs that can be readily repurposed on the cheap. Comcast also owns NBCUniversal.

Indeed, Netflix curates content from Disney and NBC, feeding the very beasts it’s fighting.

Overall, the bias in prices is: Upwards.

Note: this chart shows extraordinary price action to the upside.

By the way, prices are vulnerable to a correction towards 124.16.

The projected upper bound is: 142.19.

The projected lower bound is: 128.60.

The projected closing price is: 135.40.

Candlesticks

A white body occurred (because prices closed higher than they opened).
During the past 10 bars, there have been 5 white candles and 5 black candles. During the past 50 bars, there have been 21 white candles and 28 black candles for a net of 7 black candles.

Momentum Indicators

Momentum is a general term used to describe the speed at which prices move over a given time period. Generally, changes in momentum tend to lead to changes in prices. This expert shows the current values of four popular momentum indicators.

Stochastic Oscillator

One method of interpreting the Stochastic Oscillator is looking for overbought areas (above 80) and oversold areas (below 20). The Stochastic Oscillator is 24.0887. This is not an overbought or oversold reading. The last signal was a buy 0 period(s) ago.

Relative Strength Index (RSI)

The RSI shows overbought (above 70) and oversold (below 30) areas. The current value of the RSI is 67.07. This is not a topping or bottoming area. A buy or sell signal is generated when the RSI moves out of an overbought/oversold area. The last signal was a sell 2 period(s) ago.

Commodity Channel Index (CCI)

The CCI shows overbought (above 100) and oversold (below -100) areas. The current value of the CCI is -15. This is not a topping or bottoming area. The last signal was a sell 4 period(s) ago.

MACD

The Moving Average Convergence/Divergence indicator (MACD) gives signals when it crosses its 9 period signal line. The last signal was a sell 2 period(s) ago.

Rex Takasugi – TD Profile

WALT DISNEY CO closed up 0.670 at 135.000. Volume was 28% below average (neutral) and Bollinger Bands were 140% wider than normal.

Open High Low Close Volume___
132.550 135.310 132.300 135.000 1,971,545

Technical Outlook
Short Term: Neutral
Intermediate Term: Bullish
Long Term: Bullish

Moving Averages: 10-period 50-period 200-period
Close: 136.17 119.85 114.43
Volatility: 23 35 28
Volume: 2,476,087 3,409,877 2,337,882

Short-term traders should pay closer attention to buy/sell arrows while intermediate/long-term traders should place greater emphasis on the Bullish or Bearish trend reflected in the lower ribbon.

Summary

WALT DISNEY CO is currently 18.0% above its 200-period moving average and is in an upward trend. Volatility is high as compared to the average volatility over the last 10 periods. Our volume indicators reflect moderate flows of volume into DIS.N (mildly bullish). Our trend forecasting oscillators are currently bullish on DIS.N and have had this outlook for the last 20 periods.

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