Walt Disney earnings are on deck, and investors will be looking for continued growth in the entertainment giant’s streaming business as the space grows even more competitive.
Disney is scheduled to report earnings before the stock market opens on Thursday.
Disney is will report fiscal-fourth-quarter earnings on Thursday before the stock market opens. Analysts expect earnings of $1.11 a share on revenue of $22.49 billion for the September quarter, according to FactSet. In the same period last year, the company reported earnings of 82 cents a share on revenue of $21.2 billion.
Disney achieved profitability across its combined streaming services for the first time in its June quarter. That was a something investors had been waiting to see as the company has worked to grow its direct-to-consumer business while traditional legacy television becomes less popular.
Wall Street will want to see profitability again.
Meanwhile, the streaming space continues to get more competitive. Almost every major entertainment company has its own streaming service, like Paramount Global’s Paramount+, Comcast’s Peacock and Amazon.com’s Prime. And with all of these players, Netflix continues to be Disney+’s biggest competitor.
These services have implemented different ways to get more subscribers to their platforms, including cracking down on password sharing, introducing lower priced ad-tiers, and streaming live sports. On Tuesday, Netflix said its advertisement-supported subscription tier has hit70 million global monthly active users.
“The way Disney and all the streaming companies are looking to structure their advertising tiers is to make it essentially at least net neutral, if not positive, to have the advertising offset the lower price points.” MoffettNathanson analyst Robert Fishman told Barron’s.
But showing streaming growth isn’t the only way that Disney can impress investors. Improvement in its Experiences unit, which includes theme parks, would be a welcome surprise.
Disney stock fell 4.5% on Aug. 7 after the company said the Experiences unit’s operating income dropped as consumers were pinched by inflation. There’s a chance theme park demand remains challenged, and the impact of hurricanes—on top of competition with Universal’s park updates—could add to those headwinds, Fishman said.
However, Fishman has a Buy rating on Disney with a $120 price target. He believes that the investments Disney is putting into growing its theme parks, along with direct-to-consumer growth, make the stock a worthy play.
“We think that the assets that they have are not being properly reflected in the current stock price, and they have the opportunity to prove to investors that their strong IP [intellectual property], their strong assets at parks and on DTC, should be more highly valued,” he said.
Shares of Disney have risen 14% this year, underperforming the 26% increase of the S&P 500.