Bob Chapek and Christine McCarthy cruised into an earnings report yesterday that depended on a really good question not being asked. Yet it was.
Disney stock is down before the bell today. That is to be expected. A ho-hum earnings report was made to look more impressive by CEO Bob Chapek and CFO Christine McCarthy before questioning revealed a big flaw in the projections. Despite live television (i.e. sports) and the domestic theme parks (mostly Walt Disney World) carrying the quarter for the company, a couple of snags really soured investors as they looked behind the curtain. First, let’s take a look at the overall stats:
- Revenue: $20.15 billion vs. $21.26 billion expected
- Adj. earnings per share (EPS): $0.30 vs. $0.51 expected
- Disney+ subscriber net additions: 12.1 million vs. 9.35 million expected
- Parks, experience and consumer products revenue: $7.43 billion vs. $7.59 billion expected
Now you might look at those numbers and think I have it reversed. I don’t. Here’s why:
In Q4, Disney had the Disney+ Day in which they sold Disney+ for two dollars per subscription for one month. That’s a gimmick that boosted net subscriber adds. Only if those subscribers stick around will the number be impressive. At the same time, Disney said they had peaked with the most losses they’ll take on how much they spend for Disney+ content versus how much subscriptions pay in. You see, Disney+ has never made a profit. There was just one problem with that prognostication. Disney had to admit in questioning that their outlook on so much of 2023 is based on the economy staying the course — in other words, no recession. However, that seems very unlikely. It’s so unlikely that the majority of people probably think we’re already in a recession to begin with!
Additionally, though the parks number comes in lower than expectations, it’s actually a good thing. See, that’s why you read these articles; who else is going to say this sort of stuff? Disney managed to only comin slightly under park revenue expectations despite two Chinese theme park resorts either being totally closed or operating at stupidly low capacity levels. Disney also managed to nearly make expectations despite interruptions in Walt Disney World’s operations due to a hurricane. Overall, that’s a win.
There are three big issues that have people questioning Disney going forward… issues that have dropped the stock more than 50% in the last two years:
- Can Disney actually make its Disney+ subscriber/monetization goals in the face of a recession?
- Are declining successes for content releases likely to damage interest in the parks or in Disney+?
- Will Disney be able to make up the loss of secondary and tertiary revenues on content that have now been fully migrated into just Disney+?
We discussed all of this for hours live on Valliant Renegade’s show yesterday afternoon. If you’re so inclined to go much farther into the earnings report for fiscal year 2022, you’re welcome to peruse the video below. Bonus: Drunk 3po actually was able to join us in the last half hour or so!
For all the latest news that should be fun, keep reading That Park Place. As always, drop a comment and let us know your thoughts!
