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Markets reward Disney’s “stream” of good news

Disney’s stock prices climbed by almost 7% after US markets closed on Wednesday, after its fiscal third quarter financial results revealed a string of better-than-expected results.

One of the biggest headlines from its latest earnings: Disney added 14.4 million subscribers worldwide in its latest fiscal quarter, and now has 221 million subscribers across all of its streaming platforms.

That’s now higher than Netflix’s 220.7 million (Netflix recently announced a 970,000 drop in subscribers worldwide last quarter)!

Much has been made in recent years about the so-called “streaming wars”, with the House of Mouse acknowledging this segment’s importance for the company’s overall growth.

Hence, shareholders were heartened to see such encouraging results from this segment, and further rewarded the stock, even after already sending it to its highest close since May and above its 100-day simple moving average through Wednesday’s cash session for the US stock market.

Markets reward Disney’s “stream” of good news

 

Disney delivers positive surprises

Here are some other key figures from Disney’s latest quarterly earnings:

  • Revenue: $21.5B vs $21.0B expected
     
  • Earnings per share (EPS): $1.09 vs. $0.96 expected
     
  • Disney+ subscribers (excluding subscribers to other Disney-owned platforms such as Hulu, ESPN+, Hotstar, etc.): 152.1 million subscribers vs. 148.4 million expected


And on that note about subscribers, fees for Disney+ are set to rise by 38%. Also, it plans to release a version of Disney+ that shows advertisements, set to be released on December 8th.

While the ads-plus-Disney+ version would ensure an additional source of revenue for the company, it could also turn off potential subscribers who prefer an ad-free viewing experience (though such choices are becoming scarcer, with Netflix also set to roll out a cheaper offering with ads in 2023).

What’s clear is that streaming platforms are waving goodbye to the ad-free, cheaper, but loss-making days and is making every effort to become profitable.

Disney has a target to move its streaming business into the black by 2024.

That may spell good news for shareholders, but perhaps not so much for subscribers who have to endure annoying ads.

 

And it wasn’t just Disney+ that brought good news.

Even Disney’s parks segment generated US$ 1 billion more than expected, standing at $7.39 billion which also marks a 70% year-on-year surge compared to the same quarter in 2021.

The US economic recovery has clearly resulted in visitors “streaming” (pun intended) back to its parks, helping to boost the company’s top and bottom lines for the quarter, with profits generated from its theme parks stood at US$2.19 billion in its last fiscal quarter.

That’s six time more than the US$ 356 million it garnered in operating income in 2021’s fiscal Q3 - though such boosts due to the low-base effect isn’t likely to be replicated in future quarters.

 

Disney’s stock set for breakout

To be clear, Disney’s share price remains some 27% lower from where it began the year, and needs to cover more ground than the benchmark S&P 500 which is only down 12% year-to-date at the time of writing (after US markets close on August 10th).

Also, Disney’s stock remains 44.3% lower compared to its record high set back in March 2021.

  • From a fundamental perspective, Disney’s stock prices are beholden to its earnings outlook, which are still subject to macroeconomic concerns such as red-hot inflation and also the risk of a US recession. If households can continue visiting Disney’s parks and paying for streaming services over the coming quarters, at a time when job losses could mount while contending with the sharpest rises in consumer prices not seen since the ‘80s, that would be positive for the stock.
     
  • From a technical perspective, there are signs pointing to a recovery for the share price. With each higher-high, Disney is taking more steps in breaking out from its downtrend. This notion is set to be further strengthened if the stock can indeed post a higher-high past the June 1st intraday peak.

Note that Disney’s stock is set to open the Thursday cash session at just below the psychologically-important $120 mark, provided Wednesday’s post-market gains hold.

Overall, those bullish on Disney’s stocks would be hoping that this momentum can hold and sustain it on a path towards further reducing year-to-date losses.

 

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