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
- Discover: eyeQ analysis explained | eyeQ: our smart machine in action | Glossary
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.
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.
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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.
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