Trading Nation

Ahead of Disney earnings, chart suggests one key level offers value

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Trading Nation: Disney gets downgraded day before earnings

Disney is about to report earnings.

The company, which is scheduled to announce results after the bell Tuesday, heads into the report amid uncertainty – MoffettNathanson cut the stock to neutral on Monday, warning of even more downside in its theme parks and studio entertainment divisions.

Shares of Disney are down 28% this year as the coronavirus pandemic and lockdowns cloud its outlook. The stock rose by 32% in 2019.

There could be an area of opportunity if the shares succumb to more weakness, though, according to one trader.

"I think you've got to be patient here," said Bill Baruch, president of Blue Line Capital, Monday on CNBC's "Trading Nation." "This stock did not surge last year because of the parks. It's media, it's the direct to consumer and the streaming. I think there's a lot of value down here -- $90, $95 if you be patient and the broader market may come in a bit and that could give you the opportunity to buy Disney at this price."

Disney would need to fall 13% to reach the bottom of that range at $90. 

Gina Sanchez, CEO of Chantico Global, is more cautious on the stock given the uncertainty.

"Seventy percent of Disney's revenues come from just parks and media and if you have lower ad spending budgets for the next 18 to 24 months, and you have a very slow reopening of the parks, then that is definitely going to hurt Disney," Sanchez said during the same segment. "If we see a resurgence or any kind of second wave, then that could hit parks as well. … There is reason for caution."

Disney is expected to post 91 cents in adjusted profit for its fiscal second quarter ended in March, according to FactSet, down from $1.61 a year earlier. This is even as sales are projected to rise by 21%.

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