Reports second quarter 2021 earnings on Thursday, May 13 after close
Expected Revenue: $ 15.86 billion
EPS expectation: $ 0.27
For investors in Walt Disney Co. (NYSE 🙂 tomorrow's quarterly report is significant. It could show that subscriber growth in the Disney + streaming service, which has become the company's main growth engine during the pandemic, is slowing down as the U.S. economy reopens and after a year of binge-watching TV, people are getting their indulge in external activities.
Netflix (NASDAQ :), Disney & # 39; s main rival in the streaming industry, delivered a disappointing month last month when it told investors that its streaming service has added far fewer new customers in the first three months of 2021 than Wall Street had expected. And according to NFLX forecasts, the current quarter is going to be more challenging. Netflix predicts a profit of just 1 million new customers – a fraction of the 4.44 million analysts predict.
Disney + reached more than 100 million users in just 16 months after its launch in the US in November 2019 and was rolled out to Canada, Australia, Latin America and Singapore in the months since. The rapid rise of the service underscored the strength of the Disney name, along with entertainment franchises featuring Marvel, Star Wars and Pixar. Netflix, the pioneer of subscription streaming, ended 2020 with nearly 204 million subscribers worldwide.
Disney & # 39; s "Nomadland," a film about a grief-stricken woman who travels the American West, won the 2020 Academy Award for Best Picture, taking the company a major win and ending a nearly twenty-year drought for Hollywood's largest studio
Tremendous growth of Disney + inventory during the pandemic as visitors left its theme parks, movie theaters and cruise lines. After rising 25% last year, Disney shares lost momentum in 2021. They closed at $ 181.67 on Tuesday.
Disney Weekly Chart.
Theme Parks, Pent-Up Consumer Demand
While a potential slowdown in streaming subscriber numbers is a major risk investors should be aware of ahead of tomorrow's report, there are other positive catalysts that could support sales growth this year.
These include a spike in theme parks revenues following their gradual reopening, pent-up consumer demand, as well as the first signs of traction on the international rollout of Star, the company's new content hub. UBS analysts reiterated their buy rating on Disney shares in a note last month, saying it was "paving the way for a recovery."
"We expect the results to highlight steady direct-to-consumer momentum leading up to a burgeoning content slate as recovery begins to take shape in the parks."
Before the pandemic, the Disney Parks division was one of the company's most trusted money-makers. This division's revenues were up 70% between 2013 and 2017. In 2019, the last full year before COVID-19, the unit's operating income increased 11% – the pinnacle of the Disney divisions – as the crowds on busy days increases regularly.
Currently, the Disney parks in both Florida and California are open, albeit with limited capacity, but that could change this year as more of the US population is vaccinated and COVID restrictions are relaxed.
Bottom Line
Disney, with its major revenue-generating units still under pressure, is betting on the reopening of the economy and the success of its streaming business. These two catalysts are strongly reflected in the stock price, making it more difficult for the stock to continue to perform strongly from here. DIsney's guidance for the remainder of this year is key to setting the direction for its stock.
