Interactive Investor

eyeQ: an entertaining stock that now looks vulnerable

Experts at eyeQ use AI and their own smart machine to analyse macro conditions and generate actionable trading signals. Today they analyse a stock giving a bear signal.

28th June 2024 12:21

by Huw Roberts from eyeQ

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"Our signals are crafted through macro-valuation, trend analysis, and meticulous back-testing. This combination ensures a comprehensive evaluation of an asset's value, market conditions, and historical performance." eyeQ

Walt Disney

Trading signal: long-term strategic model
Model value:$84.93
Fair Value Gap: +16.88% premium to model value
Model relevance: 73% 

Data correct as at 28 June 2024. Please click glossary for explanation of terms.

Trouble at Walt Disney

The Walt Disney Co (NYSE:DIS) is in a strong macro regime – big picture stuff like economic growth and inflation explains 73% of moves in the stock price.

And according to eyeQ, Disney should be trading around $85.00. That’s a huge fall versus our model value of around $110 just two weeks ago.

The entertainment company is hugely reliant on stronger economic growth, so the recent run of weak economic reports has dragged our model value (in effect a target price) significantly lower.

Disney’s share price fell in April / May but has subsequently stabilised in June. That stabilisation is at odds with the deterioration in the macro environment. The stock is now almost 17% rich to macro conditions, and our machine has flagged a bear signal.

Don’t bet against the US consumer is an age-old adage in investing. Fair enough, their ability to keep spending is impressive. However, if this stock is in your portfolio and you do fear slower economic growth ahead, it looks particularly vulnerable right now.  

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Source: eyeQ. Past performance is not a guide to future performance.

Useful terminology:

Model value

Where our smart machine calculates that any stock market index, single stock or exchange-traded fund (ETF) should be priced (the fair value) given the overall macroeconomic environment.

Model (macro) relevance

How confident we are in the model value. The higher the number the better! Above 65% means the macro environment is critical, so any valuation signals carry strong weight. Below 65%, we deem that something other than macro is driving the price.

Fair Value Gap (FVG)

The difference between our model value (fair value) and where the price currently is. A positive Fair Value Gap means the security is above the model value, which we refer to as “rich”. A negative FVG means that it's cheap. The bigger the FVG, the bigger the dislocation and therefore a better entry level for trades.

Long Term model

This model looks at share prices over the last 12 months, captures the company’s relationship with growth, inflation, currency shifts, central bank policy etc and calculates our key results - model value, model relevance, Fair Value Gap.

These third-party research articles are provided by eyeQ (Quant Insight). interactive investor does not make any representation as to the completeness, accuracy or timeliness of the information provided, nor do we accept any liability for any losses, costs, liabilities or expenses that may arise directly or indirectly from your use of, or reliance on, the information (except where we have acted negligently, fraudulently or in wilful default in relation to the production or distribution of the information).

The value of your investments may go down as well as up. You may not get back all the money that you invest.

Equity research is provided for information purposes only. Neither eyeQ (Quant Insight) nor interactive investor have considered your personal circumstances, and the information provided should not be considered a personal recommendation. If you are in any doubt as to the action you should take, please consult an authorised financial adviser. 

Disclosure

We use a combination of fundamental and technical analysis in forming our view as to the valuation and prospects of an investment. Where relevant we have set out those particular matters we think are important in the above article, but further detail can be found here.

Please note that our article on this investment should not be considered to be a regular publication.

Details of all recommendations issued by ii during the previous 12-month period can be found here.

ii adheres to a strict code of conduct.  Contributors may hold shares or have other interests in companies included in these portfolios, which could create a conflict of interests. Contributors intending to write about any financial instruments in which they have an interest are required to disclose such interest to ii and in the article itself. ii will at all times consider whether such interest impairs the objectivity of the recommendation.

In addition, individuals involved in the production of investment articles are subject to a personal account dealing restriction, which prevents them from placing a transaction in the specified instrument(s) for a period before and for five working days after such publication. This is to avoid personal interests conflicting with the interests of the recipients of those investment articles.

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