The actions of disney sank after reporting a fairly strong earnings report, as the entertainment giant walks a tightrope between growing and shrinking its entertainment business. streaming.
Early Tuesday, Disney reported revenue of $22.08 billion and earnings per share of $1.21 for the quarter ending March 30. Thus, it fell slightly short of analyst estimates, who expected sales of $22.12 billion, but exceeded earnings per share expectations of $1.10.
As for its full-year profit growth forecast, Disney raised it from 20% to 25%, still one point below Wall Street’s forecast of 25.3%.
Perhaps most interestingly, Disney reported a quarterly operating profit of $47 million for its streaming services. Hulu and Disney+a massive turnaround from the loss of $587 million in the comparable period of 2023. It is an achievement for the broader direct-to-consumer segment that burned more than $8 billion of cash in the last three fiscal years.
Still, Disney shares fell 10% to $105 in late morning trading, heading for their worst day since Nov. 9, 2022, sending the stock to its lowest price since early February.
Why are Disney shares going down?
At first glance, the fall seems ridiculous, but it reflects the difficult task facing the CEO Bob Iger and company to return the entertainment giant to its glory days. For one thing, Disney’s stock price is still up 16% so far this year, outpacing the S&P 500’s 10% growth, meaning the market needed to be really impressed by Disney’s results to continue to advance its position on the company’s valuation.
To a large extent, the numbers and outlook underscore the problems Disney has had for years, as Disney’s $4.70 earnings per share trail is far below its annual earnings from 2015 to 2019, and analysts do not expect it to the giant recovers its record profit from 2018 until 2028.
Big number: $20 billion is the market value that Disney lost on Tuesday, roughly equivalent to the total stock market capitalization of its entertainment rival and parent company. HBOWarnerBros Discovery.
“We expect streaming to be a growth driver for the company in the future,” Iger said in Tuesday’s earnings call, in which he called Hulu and Disney+ earnings a testament to the turnaround the company has begun since its return. as CEO in November 2022.
Iger’s statements are a fairly bold statement considering the extensive losses suffered by all platforms except Netflix. Analysts expect Disney’s streaming unit to make its first full-year profit next year, although the parks division is still expected to account for the bulk of profits.
Disney stock had its best day in four years following its February earnings report. Last quarter also resulted in a victory over billionaire activist investor Nelson Peltz at the annual shareholders meeting held in April. Peltz’s campaign focused on the prolonged decline in Disney stock, whose five-year return of -11% is well below the S&P’s 95% return. Disney stock remains more than 40% below its 2021 high.
To future
In line with his quest for efficiency, Iger said Tuesday that he expects Disney to slow down production of its wildly popular (and expensive) movie content. superheroes from Marvel to probably two television series and between two and three movies a year.
This is a considerable slowdown compared to the average of more than four programs in the Cinematographic Universe Marvel on Disney+ since the premiere of WandaVision in 2021 and the 10 MCU films published between July 2021 and November 2023, at an average rate of more than four films a year.
Disney intends to reduce production and focus more on quality, according to Iger. He stated that he remains extremely excited about Marvel’s offering, including the upcoming Avengers films, as the four previous installments of the saga are among the 15 highest-grossing films in history.
Note published in Forbes US.
