- January 18 Disney announced theme park price increases testing it’s price elasticity of demand.
- The stock price of a company with a very strong Investment Thesis and one of the best performers throughout the recent Bear Market is showing signs of fatigue.
Money Flow Index (20 is oversold, 80 is Overbought): at 60 the index is high, however it has turned downwards.
MACD Momentum: has crossed above the ‘Zero’ line however it appears to be curling over reflecting a first possible sign of a reversal.
On Balance Volume (accumulation/distribution): shares have been under selling pressure leading up to the earnings release of Netflix which is seen as a primary competitor to Disney’s Disney+ streaming service.
TECHNICAL SUPPORT: $110
TECHNICAL RESISTANCE: $118
2ND SUPPORT LEVEL: $108 then $102
What does that mean at MONEYWISEHQ
Disney’s announcement of theme park price increases tests the price elasticity of demand. This creates a new uncertainty as Apple similarly increased the price of it’s iPhones which have been criticized for negatively affecting sales. On January 16, Netflix announced a US $2/month increase.
Will price increases affect the demand for the product?
Additionally, these increases are a very direct reflection of inflation and a strong economy which brings into focus the potential for future US Federal Interest rate hikes.
Business is about revenue and earnings growth. In order to grow theme parks revenue, either
- attendance must increase or
- prices must increase.
If the company is compelled to increase prices it is either because attendance is decreasing or Disney feels it has price elasticity which will not affect attendance.
Disney has low exposure to the US/China trade war so any resolution would have a low impact as a catalyst.
The next catalyst for Disney is
- Earnings report due February 5
Big Money Managers will be focusing on the next growth driver, Disney+, as well as associated costs with the rollout. Integration and monetization of the Fox assets will be closely monitored. Very importantly, Disney has a number of summer Blockbuster movies scheduled for release. These positive catalysts May act to stimulate share price in the first half of 2019.