Is Disney+ Waltzing Walt Disney?

It’s been a year since Disney+ launched, and the streaming service has far outperformed expectations.

Hey Global Investor, here’s what you need to know before the US markets open.

Market Snapshot 📈

S&P 500 (Friday Close) 3,585.15 +48.14 (1.36%)

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Is Disney+ Waltzing Walt Disney?

It’s been a year since Disney+ launched, and the streaming service has far outperformed expectations.

Background: Walt Disney Co. is a global conglomerate whose wide range of businesses are tied together by a strong brand that generates loyalty from customers of all ages. But Disney is facing one of its toughest challenges ever in the pandemic. Revenue is down across many of the company’s conventional businesses, such as theme parks and movie studios.

Back in October, Disney announced restructuring its media and entertainment segments to focus more on the booming streaming business. Traditionally, Disney has been a TV and movie theater-driven company. But now, it is aiming to transform into a direct to consumer business that would rival Netflix.

What Happened?  Disney reported an adjusted loss per share for fiscal Q4 that was not as bad as Wall Street consensus. Similar on the revenue front as well. Its direct to consumer business showed rapid subscriber growth, even if it’s currently losing money.

Key Numbers

  • Adjusted EPS: -$0.20 vs. -$0.70 expected
  • Revenue: $14.71B vs. $14.20B expected

A quick look at Disney’s three big business lines:

Movie studio’s revenue plunged 52% Y-o-Y as theatres worldwide remained shut; Disney barely released any films before the pandemic. TV and movie productions have since restarted, and new projects are getting on the floor.

Theme parks, experience, and products segment saw a 61% decline in sales as parks reopened with reduced capacity; cruise ships remained docked. Theme parks did better than break-even, but full recovery is still far away.

The media segment that includes FX, National Geographic, Disney Channel, and ESPN, saw 11% revenue growth; the return of live sports across the US and Europe helped. However, the operating income dropped by 7%.

Disney’s streaming segment provided the silver lining. Disney+ amassed 73.7M paying subscribers (analyst expectations was 65.5M). Disney’s other two streaming services, ESPN+ and Hulu, grew to 10.3M and 36.6M paying subscribers, respectively.

With the pandemic surely dragging into the next year, can the segment “stream”line Disney’s problems? Only time will tell.

Market Reaction: Disney stock is down 6% YTD. On Friday, Disney closed at $138.36, up 2.1%

Company Snapshot 📈

DIS $138.36 +2.84 (2.10%)

Analyst Rating (25 Ratings) BUY 68%  HOLD 32%  SELL 0%

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