Disney Stock (NYSE:DIS)
After the media giant, Walt Disney Co (NYSE:DIS) reported quarterly results on Wednesday that showed earnings per share missed estimates by a penny while Disney+ shed 4 million subscribers in the quarter, the stock of Disney (NYSE:DIS) tumbled as much as 9% and closed down 8.7% on Thursday, marking its largest decline in the past six months. The results showed that Disney+ lost 4 million subscribers in the quarter.
In spite of Disney’s ongoing efforts to reduce costs by $5.5 billion this year, streaming losses have narrowed as a result of the subscriber loss.
It was the first report to be released following Disney’s announcement of its new three-pronged business reorganization, which included Disney Entertainment, ESPN, Disney Parks, Experiences, and Products. With this action, CEO Bob Iger is attempting to streamline the media behemoth and reorient the business’s strategy. Later this year, the company will start reporting under the new system.
Operating income for theme parks, especially those abroad, reached $2.17 billion in the third quarter, continuing their strong outperformance. This is consistent with recent trends at competitors like Comcast’s Universal (CMCSA), which is a publicly-traded company.
Despite the fact that Disney+ subscribers fell short of expectations as a result of recent price increases, streaming losses shrank to $659 million in the second quarter, which was higher than the consensus estimate of $850 million and down from a loss of $887 million in the same period of the previous year. The company’s quarterly streaming losses totaled $1.1 billion in the first quarter and $1.5 billion in the fourth quarter.
Iger said in the earnings release, “We are pleased with our accomplishments this quarter, including the improved financial performance of our streaming business,” which reflect the strategic changes that have been made throughout the company to realign Disney for sustained growth and success. “We are pleased with our accomplishments this quarter, including the improved financial performance of our streaming business,” Iger said. “From motion pictures to television, to sports and news, and even our theme parks, we continue to deliver for our customers even as we work to establish a more efficient, coordinated, and streamlined approach to our business,”
The following table compares the results of Disney’s second quarter to the consensus estimates provided by Wall Street, as compiled by Bloomberg:
Revenue: $21.82 billion versus $21.82 billion expected
Adjusted earnings per share (EPS) came in at $0.93 compared to the $0.94 that was anticipated.
The total number of Disney Plus subscribers is 157.8 million, which is lower than the expected 163.1 million subscribers.
Revenue from Disney Parks, Experiences, and Products was $7.78 billion, which was higher than the expected $7.67 billion.
Iger, who resumed his role as CEO in November, has maintained a laser-like concentration on the company’s profitability despite the fact that investors are increasingly placing a greater emphasis on margins rather than subscriber growth. After spending an estimated $33 billion on content in the previous year, the company’s direct-to-consumer division, which includes Disney+, Hulu, and ESPN+, experienced a staggering loss of more than $4 billion during its fiscal year 2022, which ended on October 1.
Since that time, Iger has made a concerted effort to develop new sources of income, such as Disney’s recently introduced ad-supported tier. In addition, Iger has implemented a number of price increases to assist in reducing losses and increasing metrics such as the average revenue per user, or ARPU.
The domestic average revenue per user (ARPU) for Disney+ increased by 20% quarter over quarter to reach $7.14 in the second quarter of 2022. The business reported a domestic ARPU of $5.95 during the prior quarter.
Iger has repeatedly stated that the company is confident in its ability to achieve profitability in the streaming business by the year 2024, despite the fact that the road ahead will be difficult.
On Thursday, it became clearer what the future holds for Hulu after Iger reversed his previous stance, in which he stated that “everything was on the table” in relation to the massive streaming platform.
The company revealed it will soon offer a one-app experience domestically that incorporates Hulu content via Disney+.
The operating income from the parks division of the company came in higher than expected at $2.17 billion, which is more than the $1.76 billion recorded in the second quarter of 2022.
The growth of strong domestic theme park trends drove Parks’ revenue to soar to $3.05 billion in the first quarter. Analysts have remained largely bullish on the parks business despite heightened risks to margins amid inflation.
After receiving a great deal of negative feedback from customers as a result of excessively long wait times and exorbitant ticket prices, Disney made some long-awaited updates to its park reservation system and annual pass holder program earlier this year.
Meanwhile, advertising remained a headwind, just like it was for other businesses in the industry. In comparison to the same time period a year earlier, quarterly linear network revenue was down by 7%.
The Walt Disney Company’s earnings report for the second quarter of 2023 draws attention to the strong financial performance of the company across all of its business segments. This strong performance is driven by growth in attendance, new releases, and the ongoing success of the company’s streaming services. With a robust pipeline of new content and products and ongoing investments in technology and infrastructure, Disney is well-positioned to continue its growth trajectory and remain a leader in the media and entertainment industry.
Featured Image: Unsplash @ Tyler Nix
