Disney earnings preview: Can Disney+ maintain its torrid pace to sustain the Magic Kingdom?
Walt Disney Co. has managed to adroitly navigate the pandemic despite being hamstrung by shuttered amusement parks and an indefinite pause in live-action productions.
Propelled by its streaming service, the Magic Kingdom DIS,
Still, how does Disney fend off the likes of Apple Inc.’s AAPL,
It offered plenty of answers in December during a marathon investor day briefing. It unfurled a slate of big-budget movies — including “Raya and the Last Dragon” in March 5 — will open on its burgeoning streaming service and in theaters as part of a direct-to-consumer push. In coming years, Disney+ will be home to a fire hose of 10 new Marvel series, 10 new “Star Wars” series, 15 animated and live-action Pixar and Disney series, and 15 Disney-Pixar films that will be newly branded as Disney+ Original.
As of Dec. 2, Disney+ had 86.8 million paid subscribers, and Disney expects that figure to balloon to 230 million to 260 million by the end of 2024. Including Hulu and ESPN+, total world-wide direct-to-consumer subscribers should reach 300 million to 350 million by the end of 2024.
It might be a stretch for Disney+ to top 100 subscribers in Q1, but plenty of analysts are looking for sustained growth.
What to expect
Earnings: Analysts polled by FactSet on average expect a loss of 33 cents a share, which would be a decline from $1.53 a share in the first quarter of 2019. The estimate has plummeted from a penny a share on Sept. 30.
Contributors to Estimize, a crowdsourcing platform that gathers estimates from Wall Street analysts as well as buy-side analysts, fund managers, company executives, academics and others, are also projecting a loss of -33 cents a share on average.
Revenue: Analysts on average expect Disney to report $15.89 billion in first-quarter revenue, according to FactSet, down from $20.86 billion the year before.
Estimize contributors are expecting revenue of $15.89 billion.
Stock movement: Through Thursday, shares are up 28% over the past 12 months, giving it a market value of $327 billion. The S&P 500 index SPX,
What analysts are saying
• “We now expect Disney+ to end FQ1 with 95m subs from 90m prior, and vs. 86.8m reported as of December 2, as we are encouraged by third-party data. According to Apptopia, Disney+ mobile MAUs have increased from 33m as of December 2 to 50m as of January 2, with substantial growth coming from Brazil and Mexico.” — JPMorgan analyst Alexia Quadrani, while maintaining an overweight rating and hiking price target to $210 from $175 on Jan. 11.
• “We were wrong… We were simply blown away [on investor day] by the depth of content being created for Disney+ (and the dollars behind it). Increasing content spend on Disney+ to over $8 billion by 2024 compared to a target of $4 billion set just a year ago is a dramatic acceleration.” — Lightshed Partners analyst Richard Greenfield, upgrading Disney’s rating to neutral from sell on Jan. 8.
• “We maintain Buy on differentiated assets, direct-to-consumer momentum (Star/Star+ launches and more Disney+ markets in 2021; content investment should also benefit consumer products/licensing and Parks), and out-years post-COVID recovery at Parks (we expect
pent-up demand on leaner cost base).” — Truist Securities analyst Matthew Thornton, maintaining a buy rating and raising price target to $195 from $175 on Jan. 5.
