Market Overview

10 August 2023

Disney Not Disappointing, But Limited In Perspective

Strategic investors in Walt Disney Company are not supposed to be disappointed with a small Q2 2023 revenue miss. It would be unfair to complain that sales growth between April and June amounted to 3.86% "only" against 4.6% consensus. The EPS was even 4% better than expected, though nothing remarkable could be in numbers around one dollar per share for the House of Mouse. 

The whole combination of financial indicators looks rather normal or good than bad. Yet, the first market reaction on the Q2 report was nervous, so that the stock prices went down within a 2%, mostly led by previously accumulated worries ahead of the entertainment conglomerate's forward guidance. However, the crowd sentiment quickly reversed to positive in after hours trading on August 9. Disney share prices gained 2.5% to 4.2% at extended trading hours, as a cautious crowd was digesting company’s conference call details. 

The company mentioned it was on the way to cutting costs by more than $5.5 billion, as it promised six months ago. Its CEO Bob Iger, who returned to run Disney before last Christmas, proclaimed an "unprecedented transformation", meaning a restructuring process, which is needed to make the streaming business profitable. The company managed to cut losses of its streaming services to $512 million, compared to nearly $1.1 billion of losses just a year ago. Eroding TV shows segments and a movie box office encourage action, so that Disney+ added 800,000 new online subscribers. In order to attract and retain more families, Disney+ is going to launch its ad-supported mode in Europe and Canada in November 2023, and is offering its ad-free package since September.

Bob Iger said much on cost efficiency, including that Disney was "not just reducing the number of titles it releases, but also the cost per title", so that the company was "rationalizing" its financial sources. Disney's direct-to-consumer streaming business rose by 9% to $5.5 billion, collecting more money from an average subscriber. A restart of the Shanghai theme resort park after COVID-19 restrictions allowed the segment of parks, experiences and products to collect 13% higher quarterly sales, providing an 11% jump in operating income.

At the same time, a movie remake of The Little Mermaid, a famous cartoon, failed commercially, and fresh rumours about Snow White that is far from being white and the Seven Dwarfs, which are not dwarfs at all, may be warning for the nearest future. Regulatory troubles in Florida state, as well as a 100-day strike of Hollywood script writers and the Screen Actors Guild, due to the lack of residual payments from streaming services and demands for curbs on emerging AI technology in the movie industry, may cloud the horizon, limiting positive developments.


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Lysakov Sergey
Market Focus
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