- Disney beats on subscribers but misses on earnings
- Streaming losses have peaked
- Profitability expected in 2024
Despite beating Wall Street estimates for Disney+ subscriptions in the fourth quarter, Walt Disney (DIS:NASDAQ) missed forecasts for revenues and profit, sending the shares down 7% in aftermarket trading.
Adjusted earnings per share of $0.3 fell well short of the $0.55 expected by analysts while revenue was also light at $20.15 billion.
On a more positive note, Disney reported 235 million subscriptions across its various streaming platforms while Disney+ amassed 164.2 million compared with expectations of 161 million.
However, investors seemed more interested in the profitability of the streaming business. Disney is spending billions to compete with arch rivals Netflix (NFLX: NASDAQ), Paramount Global (PARA:NASDAQ) and Warner Bros. Discovery (WBD:NASDAQ).
The direct-to-consumer unit clocked-up losses of $1.5 billion in the quarter.
The company also guided for lower revenue growth of 10% in the new fiscal year which weighed on investor sentiment. The shares are down 36% year-to-date compared with a loss of 53% for Netflix.
IS THERE A CREDIBLE ROUTE TO PROFITABILITY?
CEO Bob Chapek insisted the company had reached an inflection point for losses, saying ‘we expect our DTC operating losses to narrow going forward and Disney+ will still achieve profitability in fiscal 2024’ and adding, ‘assuming we do not see a meaningful shift in the economic climate.’
The company’s plan to reach profitability is based upon increasing prices, launching an advertising tier and a realignment of costs and marketing spending.
Disney said it had secured more than 100 advertisers for the US launch of the ad-supported tier on 8 December supported by strong base pricing.
Analyst Tim Nollen at Macquarie estimates the ad-tier could rake in an additional $800 million of revenues next year.
Elsewhere Disney Parks reported revenue of $7.4 billion beating forecasts with operating income of $1.5 billion more than doubling from a year ago.
Disney’s US parks are making more money than before the pandemic according to chief financial officer Christine McCarthy.
