Topline
Shares of Disney are on pace to notch their largest daily decline in six months Thursday following the release of the firm’s quarterly earnings report, which disappointed investors, as the pixie dust wears off from CEO Bob Iger’s November return once celebrated as nothing short of “magic.”
Key Facts
Though it met consensus profit and sales estimates for the first three months of the year, Disney suffered a stock slide after disclosing staggering losses to its subscriber base and worse-than-expected revenue for its Disney+ streaming service.
Shares of the entertainment behemoth sank 9% in early Thursday trading to $92.
That’s by far the stock’s worst day since November 9, shortly before the November 20 comeback of Iger.
Disney’s decline weighed heavily on the Dow Jones Industrial Average, which slipped 360 points, or 1.1%, on pace for the index’s largest daily slide in over a month.
Despite their initial 23% surge in the three months after Iger’s return, Disney shares are now up just 1% since November 20 – far underperforming the S&P 500 and tech-heavy Nasdaq in that stretch.
In a Wednesday note to clients, Daiwa analyst Jonathan Kees described it as a “slightly negative” earnings report due to streaming concerns while its strong profit and sales numbers were “commendable” amid a rocky macroeconomic environment.
Crucial Quote
“We’re still a start-up in many ways,” Iger said Wednesday, describing Disney’s direct-to-consumer streaming segment and pointing to Disney+’s 2019 launch date. The unit lost $659 million last quarter, a 26% year-over-year decline but a stark contrast from rival Netflix’s $1.7 billion operating income in its most recent quarter.
Tangent
Netflix stock’s 100% gain over the last year may far outpace Disney stock’s nearly 10% loss, but Disney has an “incredible advantage” over Netflix in the streaming space, according to David Trainer, CEO of boutique research firm New Constructs. “The ability to use streaming as a mechanism for attracting more consumers into the funnel for Disney’s other offerings, which are very profitable” sets Disney apart, says Trainer. Disney’s parks and products segment turned a $1.1 billion profit last quarter.
Big Number
$16 billion. That’s how much market capitalization Disney lost Thursday, roughly the market cap of Fox Corporation and more than the total value of CBS and Paramount+ parent Paramount.
What To Watch For
If Disney’s high-profile standoff with Florida lawmakers impacts the bottom line of its parks unit as its flagship central Florida park faces opposition from Gov. Ron DeSantis (R-Fla.) and his allies. Disney filed a lawsuit against the state last month to retain its special district status for Disney World. Iger asked Wednesday: “Does the state want us to invest more, employ more people and pay more taxes or not?”
Disney Earnings: Stock Slips As Disney+ Bleeds Millions Of Subscribers (Forbes)
‘Does The State Want Us To Invest More?’: Disney CEO Takes On Florida Gov. DeSantis (Forbes)
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