As we move into the heart of earnings season…

This Wednesday could be a big sign of our economic health.

Walt Disney (DIS – NYSE) is scheduled to report quarterly financial results this Wednesday morning – and their results could provide critical clues as to the health of several sectors – including travel, tourism, entertainment spending, and streaming.

What Analysts Are Expecting

Going into the report, Disney’s revenue is expected to rise nearly +4.5% year over year to $23 billion – while analysts predict a small bump in paid subscribers for their Hulu and ESPN Plus digital offerings.

However…

Their box office sales remain weak.

Disney’s live-action remake of Snow White just topped $200 million worldwide.

But, since the movie cost over $250 million to make, this was considered a bust. In response, Disney halted plans for a live-action remake of Tangled (the Rapunzel story).

The Netflix Problem

Another overhang for Disney involves their competition (and stock performance) compared to Netflix.

In 2018, Netflix became the most valuable media company when it topped Disney in stock market capitalization (around $152 billion at the time).

Since then, Netflix’s market cap has exploded to nearly $500 billion.

All while Disney has remained around the same level.

Valuation Gap Widens

Right now, Netflix trades for 42x the forward earnings consensus…

…While Disney trades for 15.6x forward earnings consensus.

That Disney valuation puts them lower than when all their theme parks were shut down during Covid.

As it stands, Netflix is now worth about three Disneys.

YOUR ACTION PLAN

How do you play this upcoming earnings release from Disney? Well, their last three earnings reactions have all been higher: +4%, +8%, +3.5%. So, the trend is slightly to the upside.

However, investors need to see some headway in their competition with Netflix.

If they are not going to show any progress in streaming, then Disney shares could easily fall on Wednesday.

This two-sided trigger catalyst could set up quite nicely for an Overnight trade inside The War Room. To see how we’re playing it, click here!

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