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Mulan comes to Disney +, and how we can see movies change forever.
That Walt Disney (ticker: DIS) made the decision to bring the much-delayed live-action remake of its 1998 animated feature to its Disney + subscription service should come as no surprise. The film was due to launch in March and has since been continuously pushed back. With few signs that Americans were ready to return to cinemas had to give something up – and Disney eventually decided to take advantage of the platform it had available.
Mar Mulan is not Artemis Fowl, that was added to Disney + for free for subscribers. It will cost an additional $ 29.99 to view. Disney has said it does not intend to change the way it releases movies in the future – that this is a one-off situation brought on by Covid-19 and that it still intends to release films under the traditional model first to theaters to release – but not everyone buys it.
LightShed Partners’ Richard Greenfield notes that Disney is talking about Mulan as if it were an experiment, one that would help the company understand how willing customers will be to pay $ 30 for a movie, and whether it drives more Disney + subscriptions. The economy might be better too: Disney would like as much as 85% of sales through Disney + versus 55% of a release in theaters.
Investors seem to be comfortable with where Disney is headed. The stock gained 11% this past week despite reporting a per-share loss of $ 2.61, although, when adjusted for one-time costs, the company reported a profit of eight cents, better than the 64-cent loss analysts had predicted . More importantly, Disney + continues to have subscribers, with 60.5 million as of August 5th. “We remained impressed by Disney’s success in leveraging its content to drive great growth in its digital initiatives, while still balancing its interest in healthy profits in its legacy companies,” JP Morgan analyst Alexia Quadrani writes.
If Disney’s digital strategy is good for its stock, then it certainly is not for the shares of traditional movie theaters, says GreenShed of LightShed. He believes that the waiting times between the release of a movie to theaters and then to rentals and other platforms will shrink, with fewer people going to theaters to see movies. “For filmmakers, the end result is catastrophic,” he writes.
AMC Entertainment Holdings (AMC) has already signed a deal with Universal allowing the studio to start showing films on premium-on-demand after just 17 days and will offer the same deal to other studios. That will bring in some cash, but analysts remain concerned about AMC’s high debt levels and interest rates. In 2019, for example, AMC had $ 968 million in payment revenue, more than its $ 771 million in earnings before interest, taxes, depreciation and amortization, like Ebitda, writes Macquarie analyst Chad Beynon. “Our concern is that even if theaters reopen in limited capacity in the summer, AMC will remain in a precarious financial position,” he explains.
The entire theater sector is one show that investors should feel free to skip.
Enough already, Apple
It’s time to dump Apple and move on.
We know that sounds crazy. The stock has been unstoppable for much of the last decade – and even more so in 2020. But it has gone too far, investors should note.
What do we mean? On Thursday, Apple (AAPL) gained 3.5%, to $ 455.61, putting it nearly 24% above its 50-day moving average. This is the highest since 2008. The 50-day moving average measures the short-term trend of a stock, and technical analysts view it for signs of support and resistance. If a stock market grows well above its trend, it is a sign that it can be set for a fall.
That’s what happened the last time Apple traded more than 20% above its moving average. In March 2012, the stock traded as much as 22.81% above its 50-day moving average and fell more than 20% the following year. Worse, the S&P 500 won 11% in the same period.
To be sure, trading 20% above the 50-day moving average has not always been a warning sign for Apple. While the board suffered after that level approached in 2007 and 2008, it increased massively in 2003 when it hit that level to the dot-com chest.
Still, there are signs that Apple stock needs to cool down. In downgrading it this week, BofA Securities analyst Wamsi Mohan noted that it is now trading at a 10-year high relative to the S&P 500 based on 2021 earnings, and that the expansion of its price / earnings ratio for the largest part came because of the Fed’s actions to boost the economy. In fact, almost the entire increase in Apple’s movement came about because of the willingness of investors to pay more for the stock, not because of an increase in revenue expectations, he notes.
“Since the beginning of the year, the market multiple (excluding the COVID-related correction) has expanded by 2 multiple points, while AAPL shares have expanded by 9 multiple points,” Mohan writes. “We do not think this is sustainable any time soon.”
Apple shot back to 2012 and remained a fantastic forerunner in the long run. Our Tech Trader columnist Eric Savitz thinks it will continue. But from the point of view of this column, it now seems like it’s too hot to handle.
Write to Ben Levisohn at [email protected]
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