Investing 09-11-2022 00:25 12 Views

Disney+ added a whopping 12.1 million subs in Q4 but investors aren’t happy

Shares of Walt Disney Co (NYSE: DIS) lost as much as 10% in extended trading after the entertainment conglomerate said it missed both on top and the bottom line in its fourth financial quarter.

DTC to turn profitable in 2024

On the plus side, though, Disney+ added a whopping 12.1 million new subscribers this quarter – way more than 10.4 million that Street had expected. Including Hulu and ESPN, Disney now has over 235 million subscribers in total.

More importantly, Disney reiterated that its direct-to-consumer business will be profitable in fiscal 2024. In the earnings press release, CEO Bob Chapek said:

By realigning costs, we’ll be on the path to achieve a profitable streaming business that will drive continued growth and generate shareholder value long into the future.

Disney+ is scheduled to launch a cheaper, ad-supported tier on December 8th. That is expected to help with the push to profitability as well.

For now, though, average revenue per subscriber was down 5.0% globally and 10% in North America. DTC lost $1.50 billion this quarter (more than 100% YoY) versus $1.10 billion expected.

Notable figures in Disney’s earnings report

Net income printed at $162 million versus the year-ago $160 millionPer-share earnings remained unchanged year-on-year at 9 centsAdjusted EPS was 30 cents as per the earnings press releaseSales went up 9.0% on an annualised basis to $20.15 billionConsensus was 56 cents of adjusted EPS on $21.27 billion in revenue

For the year, Disney stock is now down more than 40%.

What else is weighing on the Disney stock?

“Media & Entertainment Distribution” and “Parks, Experiences & Products” – both segments came in shy of Street estimates in Q4. You can read the full earnings report here.

Also a negative was the future outlook.

On the earnings call, CFO Christine McCarthy said both revenue and operating income were expected to growth at a “high-single-digit percentage rate” in fiscal 2023. That compared to analysts at 14% and 18%, respectively.

Despite challenges, though, the sell-off might be an opportunity to buy Disney stock considering the Wall Street continues to see upside in it to $137 on average. That’s up 50% from here.

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