Is Walt Disney Stock a Buy Post Q2 Earnings?
20 August 2022 - 12:36AM
Finscreener.org
The Walt Disney
Company (NYSE:
DIS) is one of the
largest global entertainment companies, with a $221.44 billion
market cap. It operates through two verticals –Disney Media and
Entertainment Distribution and Disney Parks, Experiences, and
Products.
It is one of the best-performing
media and entertainment companies of late, as evident from the
stock’s 28% gain over the last month. However, Disney stock is
still down 21% year-to-date, trailing the S&P 500 index by a
wide margin which has lost 10% in 2022.
Let’s see if the media and
entertainment heavyweight should be part of your equity portfolio
right now.
Disney is the world’s largest streaming
platform
Disney+ (the streaming arm of the
company) subscribers stood at 152.10 million as of July 2, while
Disney’s total subscribers came in at 221.10 million, surpassing
streaming giant Netflix’s 220.70 million subscriber
base.
In fact, in the fiscal third
quarter, the platform added 14.4 million subscribers, beating the
10 million consensus estimate. DIS stock jumped 6% intraday after
the release of the quarterly earnings report.
Regarding this, Bob Chapek, Chief
Executive Officer, of The Walt Disney Company, said, “We had an
excellent quarter, with our world-class creative and business teams
powering outstanding performance at our domestic theme parks, big
increases in live-sports viewership, and significant subscriber
growth at our streaming services. With 14.4 million Disney+
subscribers added in the fiscal third quarter, we now have 221
million total subscriptions across our streaming
offerings.”
While streaming platforms such as
Netflix lost subscribers in recent quarters, Disney’s streaming
platform gained traction. At this rate, the company is poised to
have a subscriber base of 245 million by fiscal
2024.
However, the subscriber growth
rate is lower than the previous target of 260 million. This comes
as the platform could not renew the Indian Premier League (IPL)
rights for its Indian streaming platform.
Moreover, the Disney+ platform
incurred $1.1 billion in losses in the prior quarter. The media
subsidiary is expected to become profitable by the end of fiscal
2024.
Following the impressive
subscriber growth in the third quarter, Disney announced its plans
to hike its Disney+ membership prices. From December 8, Disney+
ad-free subscription will be priced at $10.99 per month, marking a
$3 (or 38%) hike.
Rising theme park popularity
The pent-up demand for travel and
leisure has been a boon for Disney theme parks, which saw a 72%
year-over-year jump in revenues in the last quarter. With the
easing of travel restrictions, Disneyland theme parks across the
world witnessed a substantial rise in footprint since the pandemic
days.
In fact, the robust demand is
outpacing the available reservations. Per capita spending at Disney
theme parks is 40% higher compared to 2019 levels, while occupancy
at domestic hotels stood at 90%.
Better-than-expected financials
Disney’s revenues came in at
$21.50 billion for the fiscal third quarter ended July 2, up 26%
year-over-year. It surpassed the Refinitiv consensus revenue
estimate of $20.96 billion.
Net income improved 53%
year-over-year to $1.41 billion, while operating cash flows rose
31% from the prior-year quarter to $1.92 billion. EPS amounted to
$1.09, 13.5% higher than the consensus estimate of
$0.96.
Disney is demonstrating strong
performance across all sectors. With a surprising growth in its
media platforms and surging pent-up demand for leisure travel
amping its theme park revenues, the stock has been outperforming
its peers lately.
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