DIS: Mousing Around in DIS Before Earnings Feb 7th

by Dan February 3, 2012 12:51 pm • Commentary

DIS ($39.80) –No New Trade Here, Will Re-Visit Prior to Earnings Next Week

Event: reports their fiscal Q1 after the close Feb 7th

-The options market is implying about a 3.5% move following earnings, which seems reasonable to the 6.4% average move over the last 4 qtrs and the 4.5% average move over the last 8 qtrs.

4 Quarter Earning history from LiveVol Pro

-At the money implied vol in Feb at about 29 looks fairly rich to the 30 realized vol of about 19.5, but pretty fair to the 60 day realized of about 29.

Sentiment & Price Action:

-Wall street analysts seem fairly mixed on the stock with 16 Buys, 17 Holds and No Sells, with an avg 12 month price target of about $42.87 .

-Short interest sits at about 2.7%.

-The stock is up 6.3% ytd which slightly under-performs the SPX which is up about 6.8% ytd.

-For a stodgy Dow component, the stock had quite a year and is basically dead flat to where it was exactly 365 days ago……but in that time period it had a peak to trough sell off of 36% and now sits 40% higher than the intra-day Oct low and only about 10% from the 52 week highs.

Technicals: The chart is fairly impressive and since gapping above the $38 resistance level on the first day of the year, the stock has been basing above that level and now banging up against the next resistance level at $40.

[caption id="attachment_8557" align="aligncenter" width="300" caption="1 Yr DIS chart from Bloomberg"][/caption]


Valuation: DIS trades at about 13x fiscal 2012, with expected earnings growth of ~16% and sales growth of only 5%.  While it trades at a slight premium to the S&P, it trades at a discount to the 17x & 15x that it traded at in fiscal 2010 and 2011 respectively.

MY TAKE:  As many readers know I think the market has come too far too fast, but if companies like DIS confirm the economic recovery then these are kind of the last few pieces of the puzzle that Bulls need.

I don’t have a particularly strong opinion on DIS’s earnings next week or the outlook that they will give, but I will tell you that the stock is likely to be $42 or $38 in a month.

Lets Keep an eye on this one over the next couple of trading days before earnings and we will post any trades that come to mind.