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Disney's Big Advance May Be Over For Now

Mar. 09, 2021 12:51 PM ETThe Walt Disney Company (DIS)30 Comments


  • Disney's big advance has come as investors have focused on the reopening theme.
  • This has pushed Disney's valuation to its highest levels in more than two years.
  • That has left an options trader to bet that the ride is over.
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Disney's (NYSE:DIS) stock has skyrocketed in 2021. The company has successfully launched its direct to consumer streaming content, and now investors are turning toward the reopening of the theme parks. But that also has sent its earnings multiple to the highest levels in more than two decades, almost more than double its historical average.

The big run-up and the steep valuation are likely the big reason why an options trader is making a big bet that the stock declines by the middle of May, or at the very least, the stock stops rising. This bearish outlook comes in the face of analysts increasing their earnings outlook for the company next year.

Analysts now estimate the company will earn $4.87 in 2022 and $6.33 in 2023. That is up from estimates of $4.75 and $5.93, respectively, back in December. The rising estimates are likely a reflection of the coronavirus vaccine's rollout and hope that all of Disney's theme parks can once again reopen and people return to movie theaters.

The positive news around the virus has also helped boost revenue estimates higher and back to pre-pandemic levels. It's now expected that the company's revenue will climb to a high of $95.6 billion in 2023.

Betting That The Stock Stops Rising

Still, someone made a rather bearish bet on Disney based on changes in the open interest levels. On March 9, the open interest for the May 21 $200 puts and calls both rose by around 19,000 contracts apiece. The data shows that the $200 puts were bought for about $13.50. Meanwhile, the $200 calls were sold for around $13.40. It means that some are betting that Disney's stock price remains below $200 by the expiration date in the middle of May.

Bearish Patterns Forming

Meanwhile, a bearish technical pattern formed in Disney's

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This article was written by

Mott Capital Management profile picture

I am Michael Kramer, the founder of Mott Capital Management and creator of Reading The Markets, an SA Marketplace service. I focus on long-only macro themes and trends, look for long-term thematic growth investments, and use options data to find unusual activity.

I use my over 25 years of experience as a buy-side trader, analyst, and portfolio manager, to explain the twists and turns of the stock market and where it may be heading next. Additionally, I use data from top vendors to formulate my analysis, including sell-side analyst estimates and research, newsfeeds, in-depth options data, and gamma levels. 

Analyst’s Disclosure: I/we have no positions in any stocks mentioned, and no plans to initiate any positions within the next 72 hours. I wrote this article myself, and it expresses my own opinions. I am not receiving compensation for it (other than from Seeking Alpha). I have no business relationship with any company whose stock is mentioned in this article.

Mott Capital Management, LLC is a registered investment adviser. Information presented is for educational purposes only and does not intend to make an offer or solicitation for the sale or purchase of any specific securities, investments, or investment strategies. Investments involve risk and, unless otherwise stated, are not guaranteed. Be sure to first consult with a qualified financial adviser and/or tax professional before implementing any strategy discussed herein. Upon request, the advisor will provide a list of all recommendations made during the past twelve months. Past performance is not indicative of future results.

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Comments (30)

Did this idiot really just say Disney could fall back to 158. Wow that’s a bet I would take any day 10 times over
@mprestam , $158 is not that far down.
crrj profile picture
Will Dems and the "woke/PC" Disney crowd ever protest or ban business from China since they just ruled being gay is a mental disorder? How can Dis make movies in China???
How will that impact supposed woke stocks? Or is their censorship and boycotts held only for US censorship??
@crrj , I didn't know about this Chinese ruling.
crrj profile picture

One has to read sources outside the Dem-controlled left media for accurate and relevant facts. The fact that the left-controlled US media outlets haven't covered this material event, is because it reiterates the hypocrisy in all woke big tech, woke big US corporations (Disney is just one), and of course, the boycott, censorship frenzied Dem left.

The woke left must finally abandon their communist leanings to address this attack on gays by China------but they won't--their outrage is selective, and proven hypocritical. And now dangerous to the gay community.
Turk Malloy profile picture
Good technical analysis. I was wondering about Disney's quick stock price rise too. I think will buy some short-term puts now. Long term stock holders don't worry - you will be fine :) Thanks !
@Turk Malloy , The stock will probably tank right after you buy those puts.
10 Mar. 2021
The most bullish factor to consider is not reopening of parks, but the potentially exponential growth on streaming. Get a fuller picture of the company will warrant a more credible argument.
@Lueezo , Opening the parks won't hurt the bottom line.
thurgood profile picture
The rest of you are paying now too?
@thurgood , I'm not paying. I don't go to Disneyland anymore.
Kimbrillo.He was the Gary Alexander who played left field in the Major Leagues decades ago.Still in left field.He's way out there.
@Thomas Ruszala , I remember him. He struck out a lot @mcbokonon .
The old rules of valuation do not apply here.People are using companies such as Netflix at 440$ to make a fair analysis.In two years Disney will have 200 million subscriptions.Each year they raise their price on those subscriptions.We are not even talking about other hundred enterprises.Disney is Netflix on steroids based on future subscriptions.There is no possibility Disney drops to the 150s.
@Thomas Ruszala $300 here we come
nerd_rage profile picture
@Thomas Ruszala I think they'll have 200M sooner than that, the way they are going.
PE is a lagging indicator and with the parks closed, it is no surprise that the PE ratio is very high. Disney + has been wildly successful in terms of attracting subscribers and Disney has a key edge over Netflix and Amazon in that it has the best library of any of the major film houses. The parks are going to be going gangbusters in just weeks as the pent up demand will be crazy.
onebassplayer5 profile picture
If you doubt Disney, ur dumb, and that’s a fact not an opinion!
You have to look at Disney now the same way you looked at Netflix 5 years ago. Go back to Netflix price at 100 million subscribers and then see where they are at now and then you can forecast what Disney will be when they catch up to Netflix. This will happen and most people will carry both. Those they don’t the parents with kids will make up the difference. I said Disney be $200 when they announced Disney plus and got heckled off this platform. Now I am forecasting $300 end of 2020 with the stock bouncing around 190-225 til the end of this year then 225-250 mid 2022 and end up 300 or close to it December 2022. I believe they will reinstate the dividend once the Disney plus platform pays for itself including content. That should be 2026
nerd_rage profile picture
@thomashogan640 DIS could be bigger than NFLX. DIS has the ability to cross market shows, movies, theme park vacations and merchandise under the same brands. NFLX doesn't have that ability and since they don't have the big brands you need for it, maybe they never will.
@nerd_rage Netflix tried to do a Stranger Things "experience" recently. Basically a miniscule version of a theme park... Something Disney already has... Disney is going to dominate Netflix in the US. It'll be interesting to see how many subscribers they can get internationally.
what about expe and trip
I can see someone bought long 1100 DIS april 220$ calls , right after your bearish article pop out, probably you wanted cheaper entry. Why would disney drop here, all stars align for them . Parks reopening, online streaming, etc. Disney just warming up here before 🚀🚀🚀
epugmire profile picture
How does this even get published?
Just wait until they release their subscriber growth again. Bet against it if you want to.
@cochiseuofm Also when earnings estimates get revised upwards as them parks and cruises resume full occupancy.
@cochiseuofm Chapek just announced 100 million Disney+ subscribers.
“Is this a Mott Capital Management or Gary Alexander article” I asked myself before clicking the link. I knew it was one of them, again, blasting out another article showing they can’t properly analyze growth stocks.
@mcbokonon , There is a Gary Alexander the actor, and then there is the astronaut. Which one are you referring to?
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