Disney stock drops after reporting wider streaming loss, earnings miss

Disney (DIS) reported fiscal fourth-quarter earnings on Tuesday after the bell, missing on both the top and bottom lines. Macroeconomic challenges, including the global advertising slowdown, weighed on earnings as the company also battled higher-than-expected streaming losses.

Disney stock moved lower on the heels of the report, with losses accelerating as investors digested the results — down as much as 10% in after-hours trading.

Here are Disney’s fourth-quarter results compared to Wall Street’s consensus estimates, as compiled by Bloomberg:

  • Income: $20.15 billion vs. $21.26 billion expected

  • Adj. earnings per share (EPS): $0.30 vs. $0.51 expected

  • Disney+ subscriber net additions: 12.1 million vs. 9.35 million expected

  • Parks, experience and consumer products revenue: $7.43 billion vs. $7.59 billion expected

Disney+ saw subscriber net additions rise to 12 million, beating expectations of just over 9 million. The beat comes after the company reported a surge of subscribers in the third quarter (14.4 million) following new market launches and a robust slate of content.

The company warned that it expects core Disney+ subscriber growth, along with Hotstar subscriber numbers, to be lower in the first quarter. Content spend was guided in the low $30 billion range for full-year 2023.

Disney+, Hulu, and ESPN+ lost a combined $1.5 billion in the fourth quarter (vs. a loss of 1.1 billion in the third quarter). Disney CFO Christine McCarthy said she expects peak Disney+ losses by this year, with management guiding that streaming losses will shrink by about $200 million in the first quarter of 2023.

“We expect our DTC operating losses to narrow going forward and that Disney+ will still achieve profitability in fiscal 2024, assuming we do not see a meaningful shift in the economic climate,” Disney CEO Bob Chapek said in the earnings release.

“By realigning our costs and realizing the benefits of price increases and our Disney+ ad-supported tier coming December 8, we believe we will be on the path to achieve a profitable streaming business that will drive continued growth and generate shareholder value long into the future ,” he continued.

Despite recent price hikes, average revenue per user for Disney+ dropped to $3.91 vs. estimates of $4.29 amid opposing foreign exchange impact and a larger subscriber mix.

The company will roll out its $7.99 ad-supported tier in December, one month after Netflix’s much-anticipated debut. Despite the overall slowdown in ad spend, analysts remain bullish on the profitability prospects of ad-supported plans — especially for streaming companies.

Park operations miss expectations amid recession fears

Disney’s theme parks, which saw quick COVID bounce backs amid increased attractions, price hikes, and updated technologies like the Genie+ app, also missed expectations in the quarter as recession fears pressured consumer demand.

Revenue from the company’s parks, experiences, and consumer products division came in at $7.43 billion, with operating income hitting $1.51 billion (vs. estimates of $1.9 billion.) Shanghai’s Disney Resort remains closed amid strict COVID-19 protocols. The company revealed it has “no visibility on reopening date” for the Shanghai location.

Nevertheless, McCarthy said the media giant anticipates a “strong” holiday season at the parks in the first quarter of 2023.

On the earnings call, the company touted its upcoming film slate, revealing that it sees “Black Panther: Wakanda Forever” and “Avatar: The Way of Water” driving movie sales. Not so good? Its linear TV business. McCarthy revealed she expects linear tv subscriber declines to accelerate, in-line with current industry trends.

Disney’s theme parks are widely expected to deliver strong Q4 results.

Alexandra is a Senior Entertainment and Media Reporter at Yahoo Finance. Follow her on Twitter @alliecanal8193 and email her at alexandra.canal@yahoofinance.com

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