The Walt Disney Company (NYSE: DIS) gave the market a jump start by delivering a beat and raise earnings report before the market opened on May 7.
The company pointed to strength at its iconic theme parks as well as a jump of over one-million subscribers to its Disney+ streaming service.
DIS stock shot up more than 10% as investors cheered that, for one quarter at least, Disney’s magic had returned. But is this a Disney-only story, or will it extend to other consumer discretionary stocks? And will it last?
The company did say it was monitoring macroeconomic conditions closely for potential impacts on its business.
Chief executive officer (CEO) Bob Iger also noted that “uncertainty remains regarding the operating environment for the balance of the fiscal year.”
But, for now, the story is growth.
Revenue for the quarter was $23.6 billion, which was 7% higher year-over-year (YOY) and beat analysts’ forecasts of $23.1 billion.
Earnings per share (EPS) came in at $1.45, which was 19% higher both year over year and compared to analysts’ forecasts.
Theme park revenue was $8.9 billion, which was higher than the $8.4 billion recorded in the same quarter last year and significantly higher than the $7.98 billion it raised last year.
Even the company’s linear cable business showed a 2% increase in operating income, even as revenue declined by 13%.
A New Park in the Middle East Shows a New Business Model
Disney is partnering with regional developer Miral Group to open a new theme park in Abu Dhabi. This will be the company’s first theme park in the Middle East and its first major new theme park in over a decade.
The partnership is win-win for the country and the company. Disney has been looking at the Middle East for some time as it looks to export Disney stories to the region’s younger audience. In 2024, Abu Dhabi announced plans to invest over $10 billion to grow its tourism business.
What’s noteworthy about the partnership is how it will work. Miral is responsible for financing, building, and operating the resort. However, Disney Imagineers will provide creative and technical support and operational oversight. According to a regulatory filing, Disney will earn royalties based on the park’s revenue.
Disney+ Adds Over 1 Million Subscribers; Is the Worst Over?
In what may be the most pleasant surprise for investors, Disney reported over $1.4 million in new subscribers to its Disney+ streaming service. That was higher than analysts’ estimates and also higher than the company’s internal forecast, which forecasted a slight decline.
The surge in new subscribers to Disney+ is significant as it marks a pivotal recovery for Disney’s streaming business. Since his return as CEO, Iger has cut more than $5 billion in services and content from the company’s streaming business. This growth reinforces Disney’s competitive stance in the saturated streaming market, signals effective content strategies, and boosts investor confidence. It also helps offset declines in the company’s traditional media segments, showcasing Disney’s successful pivot to digital.
Disney Raised Its Full-Year Guidance
Many companies are refraining from issuing full-year guidance due to uncertainty around tariff policy. That’s why it was encouraging to see Disney not only offer guidance but significantly raise its earnings target for the full year.
Specifically, Disney is forecasting full-year earnings per share of $5.75, which is 5.6% higher than the $5.44 projected by analysts. The company also raised its operating cash flow guidance to $17 billion from $15 billion. It confirmed that it had bought back $1 billion in shares for the quarter. Disney had previously announced its intention to buy back $3 billion in shares, so perhaps they are on pace to raise that number.
Is DIS Stock a Buy?
As recently as mid-April, the Relative Strength Indicator (RSI) showed Disney stock as being oversold. The stock was rallying ahead of earnings, and this strong report has pushed the stock above its 50-day simple moving average. It also puts the stock right back at a level that formed resistance in late March.
The post-earnings surge has pushed the stock’s RSI to an overbought level. But if analyst sentiment becomes more bullish, it’s possible that the stock could retest the March 2025 highs around $113.
The market is one big interconnected machine. Long gone are the days (for better or for worse) of having to track and trade one market at a time and not needing to understand what exactly made that asset or individual stock move in the first place. Today’s market is a bit different, and traders and investors alike need to be aware of the global macro environment to survive and get ahead of the competition.
To do this, there is a simple concept for getting a sounding board in the market’s behavior and outlooks found in correlation regimes and swings. With this in mind, investors should consider two things when embarking on understanding how changing correlations affect the market and why: the mathematical aspect and the narrative aspect.
As correlations begin to align between value stocks and the energy sector, as seen through the iShares S&P 500 Value ETF (NYSEARCA: IVE) and the Energy Select Sector SPDR Fund (NYSEARCA: XLE), there are not only mathematical implications but also a narrative that tells investors where the economy and the rest of the S&P 500 might be headed next. This is where the edge is born for retail investors in today’s market.
Growth and Energy Together: What It Means
This doesn’t happen often, but growth stocks have been tracking the oil price lately (or vice versa), and that usually carries a very strong signal. The short version is that if oil prices come down due to less optimistic economic outlooks, money will naturally flow out of speculative growth stocks with more downside risk during this economic downturn.
To track this relationship, investors can simply measure the price data or chart the price of oil together with the iShares S&P 500 Growth ETF (NYSEARCA: IVW) and keep this tool in their back pocket when directional biases are needed.
The opposite can be said when correlations aren’t as strong as they are today, but the fact is that the market is screaming a big warning sign for those who know where to look. In fact, many other technical and fundamental factors suggest this bear market is far from over.
Another behavior comparison investors can look into for this relationship is the correlation between oil and value stocksmeasured by the value exchange-traded fund(ETF). This one has swung deep into the negative, almost forming a mirror image between oil and value stocks.
The economic reasoning is along the same lines, as economic uncertainties and downturns hurt speculative growth stocks and oil, money will likely flow more into value stocks that carry much less downside risk during these down cycles.
How the Market Is Taking This
Over the past month, investors have seen the SPDR S&P 500 ETF Trust (NYSEARCA: SPY) swing into bearish territory, defined as a 20% or more decline from recent highs, only to then elicit a reaction from institutional capitalto come bail it out of that funk.
However, as the market started moving higher in recent weeks, the same volume simply stopped participating, as if having no confidence that the market could continue moving higher. Measuring this decline in volume, along with the correlation shifts in value, growth, and oil, can give investors a clearer picture of how much risk there is.
There is a very strong divergence between the S&P 500 index and the energy sector, and investors need to be fully aware of it today. The Energy Select Sector SPDR Fund has underperformed the broader S&P 500 by as much as 10% over the past month alone, which has a deeper meaning.
Given that oil and energy are underperforming due to economic uncertainties and potential bearish scenarios in the United States economy, there should be no reason for the S&P 500 to outperform energy by this much, especially as there is no interest in growth stocks at the moment, with value taking over.
In fact, investors can see this theme at play with the $517 million in institutional selling that took place in the energy ETF in the most recent quarter (which is only made up of April and May 2025 so far). At the same time, as much as $2.2 billion of capital flew into the value stocks ETF, solidifying this divergence in preferences driven by fundamental economic narratives.
The size of the global cloud computing market is expected to roughly double from 2023 to 2028, reaching nearly $1.3 trillion by the end of that five-year period. Demand for cloud computing continues to surge, and the companies that make this technology possible—data centers, platform operators, and others catering to cloud infrastructure needs—stand to be primary recipients of the increase in spending on all things cloud.
Though the cloud industry is increasingly well-established, there is still some jostling for position among cloud infrastructure firms. Further, new technological developments and expansion into burgeoning markets mean that there is space for some of these companies to capture additional market share.
From an investor’s perspective, it may be difficult to determine which cloud infrastructure plays are most likely to be winners. Here, we examine three companies with varying levels of name recognition within the cloud space to see how each might appeal to investors interested in exposure to this fast-growing market.
Wall Street Bullish Despite Mixed Results, Cloud Spin-Off Rumors Swirl
APLD has had mixed stock performance over multiple time periods, including gains of about 68% in the last year and a decline of roughly a third year-to-date (YTD). Part of this may be due to a lack of alignment between what investors see as a strongly promising industry—in which Applied Digital has taken an early lead after its 2022 pivot away from cryptocurrency mining—and its results.
In the latest quarter, Applied Digital missed analyst expectations on revenue, despite posting a year-over-year (YOY) increase of more than 22%. However, its net loss per share was two cents better than expected. The report threw Applied Digital’s future into question, though, as the company’s executives speculated about selling off its fast-growing cloud services business and potentially transitioning into a REIT.
Couchbase Narrows Losses and Grows Revenue, Eyes Edge Computing for Future Growth
Couchbase Inc. (NASDAQ: BASE) is distinct from Applied Digital’s business model in that it supplies database-as-a-service products for enterprise applications. This allows customers to deploy and manage Couchbase Server across different cloud settings.
Couchbase’s fiscal 2025, which ended Jan. 31 of this year, saw a fairly solid 16% YOY revenue improvement. It also saw annual recurring revenue growth of 17% for the same period—this latter figure may point to the sustainability of Couchbase’s relationships with individual customers over time.
Losses remain a factor, although Couchbase narrowed its losses from operations in the most recent quarter compared to the prior-year period.
The company has struggled with cash flow, which declined YOY on both an annual and a quarterly basis as reported in February. On the other hand, analysts may be optimistic about Couchbase’s recently launched Edge server, designed to be used offline for low-latency data access and processing.
Expansion into new areas such as this could be key to Couchbase’s continuing to carve a niche for itself in a competitive industry.
Operational Losses and Revenue Retention Are Issues for Fastly
Another service provider in the edge cloud platform space, Fastly Inc. (NYSE: FSLY), generates a substantial portion of its revenue from content delivery and security services.
While this provides it with an operational focus, it also positions the company to compete with larger, better-established providers. Fastly tends to cater to larger customers, although it has faced trouble with dwindling revenue from these clients.
Negative operating income also plagues Fastly, meaning that the firm has that much more of an uphill battle before it can achieve sustainable profitability.
This is enough to give analysts pause, as all nine ratings for Fastly are Hold, and the stock is down about 37% YTD.
In the battle of cloud infrastructure firms, investors may have more success with another company, although the price drop has given the company a relatively attractive P/S ratio of 1.6.
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