Disney+ Missed a High Bar to Start 2021

One year after the explosion of the newly released Disney+, a pandemic, Walt Disney’s streaming momentum reached a deceleration in the first three months of 2021. This service did not meet the expectations of investors and analysts for another strong growth in subscribers. Although Disney’s profits exceeded expectations and the company’s theme park department showed signs of recovery, Disney’s stock plummeted. Disney shares fell more than 3% in after-hours trading on Thursday. The media and entertainment company’s earnings per share in the second quarter of its 2021 fiscal year (corresponding to the first quarter of the calendar) were 50 cents, or $912 million. After adjusting for one-time and non-cash factors, Disney said that the company’s quarterly earnings per share was 79 cents, a year-on-year increase of 32%, which greatly exceeded the 27 cents expected by Wall Street analysts. Revenue was US$15.6 billion, a decrease of 13% from the same period last year and did not reach the US$15.9 billion expected by analysts.

However, for Disney, the most important numbers have nothing to do with the traditional TV, theme park and movie businesses that make up the vast majority of its sales and revenue. After the rapid growth of users of Disney+ and other streaming services, investors have caused its stock price to soar by more than 75% in the past year, even as the company suspended dividends, closed theme parks and delayed its value by billions of dollars. The film was made from the theater. The focus shifted from Disney’s challenging gift to its long-term streaming potential.

Unfortunately, Disney+ did not meet lofty expectations in the second fiscal quarter. The consensus of analysts is that there are approximately 14.4 million new Disney+ users, and by the end of March, this number has reached approximately 109 million worldwide. Instead, the service only added 8.7 million subscribers, reaching 103.6 million by the end of the quarter. There is no doubt that this is still explosive growth, but it is not enough for favored investors or stocks with a P/E ratio of about 48 times. Barron warned earlier this week that the risk is the adverse effect of entering Thursday’s earnings report. Streaming competitor Netflix (NFLX) cited the “Covid-19 pull forward” trend of user growth in 2020, when the company reported a big mistake in the field last month, and its stock sold 7 after the results were announced. %the above. Disney+ is unlikely to survive the same trend last quarter.

CEO Bob Chapek said on Thursday’s earnings conference call that with the emergence of new content in the pandemic and streaming services, movie and TV production will pick up again, and he expects subscriber growth will Speed ​​up again. However, Chapek said that due to the suspension of the Indian Premier League Cricket League due to Covid-19 earlier this month, this may hurt Disney + Hotstar’s subscriber growth in India during the quarter. This quarter, ESPN+ users increased by 1.7 million to 13.8 million, compared with the previous consensus of 13.4 million, while Hulu added 2.2 million users to 41.6 million. The average analyst expectation is 40.8 million. Disney management expects that by the end of fiscal year 2024, its streaming media business portfolio will have 260 million subscribers worldwide, and executives said on Thursday that the company is still expected to achieve its goals.

Disney’s theme park business is still under pressure this quarter, because the resort is still in a state of closure or decline in operating capacity. Revenue from this division fell 44% from the same period last year to US$3.2 billion, while operating losses were US$406 million, about half of the loss in the same period last year. However, this is an improvement over previous pandemic seasons and better than expected. For most investors, Disneyland’s performance in 2022 or 2023 may be more important than its performance in early 2021. As for Disney’s TV business, which includes channels such as ABC and ESPN, its revenue has declined slightly from a year ago. However, operating profit increased by 12%, mainly due to lower programming and production costs. Chief Financial Officer Christine McCarthy warned Thursday that many of these expenses will be refunded in the second half of Disney’s fiscal year. Advertising sales rose, while wire cutters continued to reduce ratings.

Disney’s overall media and entertainment distribution division’s revenue increased by 1% to $12.4 billion, including all content except for its parks and consumer products business. The operating income of this business unit increased by 74% to $2.9 billion, much better than Wall Street’s expectations. Unfortunately, this is not a number that investors are concerned about this quarter.

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