Following the release of below-par quarterly results for the Walt Disney Company (DIS) on Tuesday evening and a larger-than-anticipated loss for its Disney+ streaming service, the entertainment and media behemoth’s shares plunged 13% Wednesday, falling to the lowest level since the pandemic in 2020.
For the fiscal fourth quarter that ended on October 1, Disney reported adjusted profits per share of 30 cents, below the average forecast of 57 cents made by analysts surveyed by Visible Alpha. Revenue increased 9% to $20.15 billion, falling short of market forecasts.
Streaming services are losing money
The Disney+ streaming service’s greater loss was the primary cause of the profitability shortfall and led to more spending on original and licensed content. Even though the number of Disney+ subscribers globally increased 39% year over year to 164.2 million, losses in Disney’s direct-to-consumer sector more than quadrupled to $1.5 billion.
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The service didn’t benefit from premium pay-per-view movie offers like Jungle Cruise and Black Widow in the most recent quarter, which caused revenue per domestic Disney+ user to decline 10% on the same basis.
The firm issued a warning, stating that it anticipates slower core Disney+ subscriber growth along with lower subscriber numbers for the Indian service Hotstar in the first quarter. For the entire year 2023, content spending is anticipated to be in the low $30 billion area.
Christine McCarthy, the CFO of Disney, predicted that Disney+ losses would peak this year, with management predicting a $200 million decline in streaming losses in the first quarter of 2023.
“We expect our DTC operating losses to narrow going forward, and that Disney+ will still achieve profitability in fiscal 2024, assuming we do not see a meaningful shift in the economic climate,” Disney CEO Bob Chapek said in the earnings release.
Entertainment parks also declined
Disney’s theme parks, which swiftly recovered from COVID-19 thanks to new attractions, higher prices, and upgraded technology like the Genie+ app, fell short of forecasts in the third quarter as recession worries restrained consumer spending.
The firm’s resorts, adventures, and consumer products sector reported revenue of $7.43 billion compared to projections of $7.59 billion and operating income of $1.51 billion vs. $1.9 billion. The Disney Resort in Shanghai is still shuttered as a result of the stringent COVID-19 regulations in China, and the business said it had “no visibility on the reopening date” for the Shanghai facility.
While cable customers continued to cut the cord, the company’s TV networks, including ESPN and ABC, witnessed a 5% year-over-year fall in revenue while producing a 6% increase in operating income.
Bear market rages
The stock price plummeted below 90 USD for the first time since March 2020, when the world experienced a global lockdown amid the COVID pandemic.
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The following essential support is seen at 80 USD, and bulls must defend it. Otherwise, we might see another sharp decline toward 60 USD.
Disney daily chart, Source: Author´s analysis, tradingview.com
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