Disney Stock Up On Surprise Earnings As Streaming Subscribers Jump


Media and entertainment conglomerate Disney (DIS) crushed fiscal first-quarter estimates late Thursday with a surprise profit as the number of streaming subscribers jumped. Disney stock rose.


Disney Earnings Report

Estimates: Analysts expect Disney to post a loss of 45 cents a share vs. EPS of $1.53 a year ago, as revenue drops 24% to $15.8 billion, according to Zacks Investment Research.

Results: EPS of 32 cents on revenue of $16.25 billion. Parks revenue sank 53% to $3.59 billion. The parks segment’s operating income was impacted by $2.6 billion. Disney sees costs related to regulations and safety measures totaling $1 billion in fiscal 2021.

Media and entertainment revenue fell 5% to $12.66 billion, though Pixar’s „Soul“ took in $100 million in global box office receipts. Within the media unit, direct-to-consumer revenue, which includes Disney+ and other streaming services, jumped 73% to $3.5 billion. Operating losses narrowed to $466 million from $1.1 billion.

Disney+ subscribers climbed to 94.9 million, up from 86.8 million as of Dec. 2 and 258% from a year ago. They will deliver a bigger revenue boost in March, when the monthly fee rises by $1 to $7.99 in the U.S. and by 2 euros to 8.99 euros a month in Europe. ESPN+ subscribers are up 83% on the year to 12.1 million, and Hulu is up 30% to 39.4 million.

While theme parks and theaters remain closed and cruise ships docked, streaming growth is picking up. Disney+ represented 6% of consumer’s average time spent streaming weekly in December 2020, while rival Netflix (NFLX) declined slightly to 28% from 31% in December 2019, JPMorgan analyst Alexia Quadrani wrote in a note to clients.

Pixar’s „Soul“ finished No. 1 during Christmas week, according to Nielsen’s rankings. Shows like „WandaVision“ and „The Mandalorian“ have been big hits for Disney+. „The Mandalorian“ has made headlines in recent days for another reason, too. Lucasfilm, which produces the Star Wars series, announced yesterday it had fired star Gina Carano, who played former Rebel Alliance soldier Cara Dune, for controversial political comments on social media.

Disney Stock

Shares rallied 2.5% late after closing up 0.7% at 190.91 on the stock market today. Disney stock surged past a buy point of 183.60 and is still within buy range from a flat base, according to MarketSmith chart analysis.

Its relative strength line, which compares a stock’s performance with that of the S&P 500, is rising. Disney stock has an RS Rating of 73 out of a possible 99.

Among streaming rivals, Netflix fell 1% Thursday, Apple (AAPL) lost 0.2%, and Amazon (AMZN) dipped 0.7%.

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Disney+ Onslaught Ahead

During the pandemic, the streaming service has been a bright spot for Disney stock, and big plans are ahead.

On a conference call Thursday, Disney CEO Bob Chapek said the new Star-branded streaming service will launch internationally Feb. 23. Star will be a sixth brand within Disney+ in some markets, joining the Disney, Pixar, Star Wars, Marvel and National Geographic brands. But it will feature edgier content from properties like FX and 21st Century.

At an Investor Day on Dec. 11, management said there are more than 100 titles in the works for Disney+. And Chapek said the company expects to have 230 million-260 million Disney+ subscribers by 2024. That’s up from its prior estimate of 60 million-90 million for the same time frame.

Meanwhile, U.S. customers who signed up for Disney+ through promotional deals are sticking around. Verizon (VZ) stated more than two-thirds of customers who have rolled off the initial Disney+ promotion chose to maintain the subscription either through Verizon or by opting into a mix-and-match plan that included the Disney bundle for free, Quadrani said.

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Will California Parks Reopen Soon?

Disney stock got a lift earlier this week, when Disneyland President Ken Potrock told employees that a ticketed food event was in the works for California Adventure in mid-March. Company officials said the event would run multiple days a week at reduced capacity.

The event would bring back about 1,000 workers to the park and raised hopes for a wider opening, which would help ease a major drag on the bottom line and Disney stock.

Disneyland is also considering „day-parting“ annual passes when the park reopens, according to media reports. That means pass holders could visit the park for certain portions of the day at a reduced price. That would allow park officials to control crowds while reopening during a pandemic.

Meanwhile, California lawmakers introduced a bill last week that would allow Disneyland to reopen sooner than the current plan. The bill wants to place theme parks in the Orange (moderate) Tier 3 of the state’s Covid-19 guidance for reopening amusement and theme parks. Currently, theme parts are not allowed to reopen until the county in which they reside achieves Yellow (minimal) Tier 4.

In December, guidance was amended to allow small parks to reopen in Tier 3. The bill asks authorities to treat large and small parks equally.

If the bill passes, Disneyland could only operate at 25% capacity. Disneyland has been closed since March 2020. It is not expected to reopen before spring or summer.

Please follow Adelia Cellini Linecker on Twitter @IBD_Adelia.


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