Insights

Why Disney Stock Fell 19% in April

What happened
Shares of Disney (NYSE: DIS) were pulling back last month as a combination of factors weighed on the entertainment giant. Among them were a disastrous first-quarter earnings report from streaming rival Netflix (NASDAQ: NFLX), a broader pullback on the market on concerns about inflation and a potential recession, and a brewing political backlash in Florida where Gov. Ron DeSantis dissolved the special jurisdiction, Reedy Creek, that is home to the Walt Disney World complex.
By the end of the month, Disney stock had fallen 19%, according to data from S&P Global Market Intelligence, down roughly 40% from its peak last fall. 
Image source: Disney.

As you can see from the chart below, the stock declined steadily over the course of the month as investor fears mounted.

DIS data by YCharts
So what
The biggest drag on Disney stock last month was Netflix’s crash after its first-quarter earnings report came out. The leading streamer reported a surprise decline in subscribers in the quarter, losing 200,000 members, and said it expected another decline of 2 million in the second quarter.
The news led some to believe that the streaming market was maturing faster than expected, which could be a problem for Disney+. This fast-growing streaming service led Disney to restructure its organization to focus on streaming. While we don’t know if Disney+ experienced the same headwinds as Netflix, the market is likely adjusting its estimates for the  total addressable market for video streaming, especially as the industry gets more competitive.
Disney stock fell 5.6% on April 20 as Netflix crashed, and Disney stock continued to decline for the duration of the week.
Meanwhile, the dispute that led Florida Governor Ron DeSantis to revoke Walt Disney World’s governmental autonomy is unlikely to have a material impact.  
Now what
Disney has an opportunity to shift the narrative next week when it reports second-quarter earnings. The company’s theme parks should benefit from the rebound in the travel industry as well as the recovery in movie attendance. However, Disney+ will remain a key focus of investors, and the company will need to show growth in its streaming service.
Still, the stock looks undervalued, given its wealth of intellectual property and its history of substantial profits.

Jeremy Bowman has positions in Netflix and Walt Disney. The Motley Fool has positions in and recommends Netflix and Walt Disney. The Motley Fool recommends the following options: long January 2024 $145 calls on Walt Disney and short January 2024 $155 calls on Walt Disney. The Motley Fool has a disclosure policy. –

What happened

Shares of Disney (NYSE: DIS) were pulling back last month as a combination of factors weighed on the entertainment giant. Among them were a disastrous first-quarter earnings report from streaming rival Netflix (NASDAQ: NFLX), a broader pullback on the market on concerns about inflation and a potential recession, and a brewing political backlash in Florida where Gov. Ron DeSantis dissolved the special jurisdiction, Reedy Creek, that is home to the Walt Disney World complex.

By the end of the month, Disney stock had fallen 19%, according to data from S&P Global Market Intelligence, down roughly 40% from its peak last fall. 

Image source: Disney.

As you can see from the chart below, the stock declined steadily over the course of the month as investor fears mounted.

DIS data by YCharts

So what

The biggest drag on Disney stock last month was Netflix’s crash after its first-quarter earnings report came out. The leading streamer reported a surprise decline in subscribers in the quarter, losing 200,000 members, and said it expected another decline of 2 million in the second quarter.

The news led some to believe that the streaming market was maturing faster than expected, which could be a problem for Disney+. This fast-growing streaming service led Disney to restructure its organization to focus on streaming. While we don’t know if Disney+ experienced the same headwinds as Netflix, the market is likely adjusting its estimates for the  total addressable market for video streaming, especially as the industry gets more competitive.

Disney stock fell 5.6% on April 20 as Netflix crashed, and Disney stock continued to decline for the duration of the week.

Meanwhile, the dispute that led Florida Governor Ron DeSantis to revoke Walt Disney World’s governmental autonomy is unlikely to have a material impact.  

Now what

Disney has an opportunity to shift the narrative next week when it reports second-quarter earnings. The company’s theme parks should benefit from the rebound in the travel industry as well as the recovery in movie attendance. However, Disney+ will remain a key focus of investors, and the company will need to show growth in its streaming service.

Still, the stock looks undervalued, given its wealth of intellectual property and its history of substantial profits.

Jeremy Bowman has positions in Netflix and Walt Disney. The Motley Fool has positions in and recommends Netflix and Walt Disney. The Motley Fool recommends the following options: long January 2024 $145 calls on Walt Disney and short January 2024 $155 calls on Walt Disney. The Motley Fool has a disclosure policy.

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