disney stock rises as disney+ beats wall streets estimates

The price of Disney stock is rising nearly 9% this morning in pre-market trading action after the company reported that it managed to attract more users than expected to its streaming platform in Q3 2022 while also surpassing Wall Street’s estimates for both earnings and revenues.

During the three months ended on 2 July, Disney (DIS) managed to generate total revenues of $21.5 billion resulting in a 26% jump compared to the same period a year ago.

The positive performance of the Parks, Experiences, and Products segment helped pushed the company’s top-line results to these levels as sales from this business unit jumped 70% on a year-on-year basis to $7.39 billion.

Revenues from the direct-to-consumer (DTC) also experienced a positive 19% increase to $5.1 billion as the company managed to attract a significant number of new users to its platforms. During the quarter, Disney+ added 36.1 million subscribers to the service and ended the period with 152.1 million paid customers – a figure that exceeded Wall Street’s forecast of 147 million for the quarter.

However, the operating losses produced by Disney’s DTC segment – the one that includes the performance of Disney+, Hulu, and other streaming platforms the company owns, spiked significantly compared to a year ago as they moved from $293 million to $1.06 billion.

This large operating loss was the result of lower average revenues per user in the US and Canada for Disney+ as they declined 5% during the quarter to $6.27 and higher expenditures in programming, production, technology, and marketing.

Disney+ To Reach Peak Losses in 2022

The management team emphasized during the corresponding earnings call with analysts that peak losses for Disney+ should be hit this year as more resources will be deployed on producing content to strengthen the platform.

Despite the poor bottom-line performance of this segment, Disney still managed to produce net income from continuing operations of $1.4 billion during the quarter resulting in a 53% jump compared to the same period a year ago.

Also read: Netflix Looks to Reverse Slide in Subscriber Growth with Ad-Supported Version

On a per-share basis, GAAP earnings jumped from $0.5 to $0.77 per share while they jumped 36% to $1.09 per share on an adjusted basis. This figure was 10 cents higher than Wall Street’s consensus estimate for the period.

The fact that Disney beat analysts’ estimates for multiple financial and operating metrics is perhaps the reason why the stock is surging this morning.

Disney Raises Prices of Streaming Services, Trims Long-Term Forecast for Disney+

Disney appears to have opted to increase the price of its Disney+ service to reduce these losses as users of the no-ads package will now pay $10.99 per month – a $3 increase – while the ad-supported version will now cost $7.99 per month. Also, users will be able to purchase a bundle that includes Disney+ and Hulu for $9.99 per month.

Other streaming services offered by the company also experienced price increases in response to elevated inflationary pressures in the United States and overseas.

As for the long term, the management team has lowered their forecast for Disney+ subscribers for 2024 from a range between 230 and 260 million to a new estimate ranging from 215 to 245 million. However, the company reaffirmed that Disney+ will be a profitable business by then.

“As we sit here today, we remain confident that Disney+ will achieve profitability in fiscal 2024 and look forward to several upcoming catalysts, including reaching a steady state of tent pole original content releases, delivery of premium general entertainment and international local originals and the upcoming launch of our ad-supported tier, alongside the new pricing structure announced earlier today”, stated Christine McCarthy, Disney’s Chief Financial Officer in regards to the service’s outlook.

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