Disney Widened its Lead Over Netflix, but its Financials Leave Much to be Desired
Disney Q4 FY2022 Results
In the previous quarterly results, Disney had knocked rival Netflix off the top spot in number of streaming subscribers, taking advantage of the latter's shocking loss of more than one million users during the first half of the year. However, Netflix returned to growth in the third quarter, reporting 223.09 million paid subscribers. [1]
On Tuesday it was Disney's turn to provide its latest update, which showed that it not only stayed ahead of its competitor, but actually widened the lead. It reported a total of 235.7 million users as of October 1, for it ESPN+, Hulu and Disney+ streaming services, with the last one alone adding around 12 million users in the reported quarter, in a 39% year-over-year surge. [2]
CEO Bob Chapeck talked of "rapid growth" in regards to Disney+ -which launched just three years ago- as direct result of the "strategic decision to invest heavily in creating incredible content and rolling out the service internationally" and stills expects profitability in fiscal 2024.
Despite the subscriber surge, Revenues of the Direct-to-Consumer (DTC) sector declined on a quarterly basis, while the Operating Loss widened to approximately $1.5 billion. However, during the earnings call, CFO Christine McCarthy said that losses peaked in the reported Q4 FY2022, expecting an improvement of "at least $200 million" in the next quarter. [3]
Disney's overall top and bottom line were worse compared to the previous quarter, leaving much to be desired. In the reported Q4 FY2022 (period ended October 1), the entertainment giant generated Revenue in excess of $20 billion and Net Income of just 162 million, a big miss from the $1.4 billion of Q3.
The Parks, Experiences and Products (DPEP) business remained on its post-pandemic recovery path, with the seventh straight profitable quarter, helped by higher volumes and increased guest spending which was partially offset by cost inflation. Operating Income more than doubled from a year ago to $1.514 billion, but the figure marked a significant decline on a quarterly basis.
Disney has now become the leader of the streaming business, but the market may be getting saturated, while surging inflation is not helpful. Its tradition DPEP sector is performing well, but the current adverse economic environment creates some skepticism, whereas Covid-19 challenges have not eclipsed, with Disneyland Shanghai closed since last week. We will now be looking forward for the next quarterly results, which will reflect the company's performance during the important holiday season.
The company's stock dropped in Tuesday's extended trading after the results, as markets appeared disappointed by the top and bottom line miss. DIS.us had a bad first-half in the year, which culminated July's 2+ year lows. It bounced back however and managed to avoid losses in the third quarter.
Nikos Tzabouras
Senior Market Specialist
Nikos Tzabouras is a graduate of the Department of International & European Economic Studies at the Athens University of Economics and Business. He has a long time presence at FXCM, as he joined the company in 2011. He has served from multiple positions, but specializes in financial market analysis and commentary.
With his educational background in international relations, he emphasizes not only on Technical Analysis but also in Fundamental Analysis and Geopolitics – which have been having increasing impact on financial markets. He has longtime experience in market analysis and as a host of educational trading courses via online and in-person sessions and conferences.
References
| Retrieved 08 Nov 2022 https://s22.q4cdn.com/959853165/files/doc_financials/2022/q3/FINAL-Q3-22-Shareholder-Letter.pdf | |
| Retrieved 08 Nov 2022 https://thewaltdisneycompany.com/app/uploads/2022/11/q4-fy22-earnings.pdf | |
| Retrieved 31 May 2023 https://thewaltdisneycompany.com/disneys-fiscal-full-year-and-q4-2022-earnings-results-webcast/ |
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