Reports Q3 2021 results on Thursday, August 12 after closing time
Expected Revenue: $16.76B
EPS forecast: $0.54
The Walt Disney Company (NYSE:) is likely to have a tough financial story to tell when it reports its latest quarterly earnings on Thursday after its close.
While it was great news for its old companies that the world's largest media and entertainment company has opened its theme parks and theaters, it could also mean fewer subscriptions for its streaming business, which is the main growth engine for the industry. have become Burbank. , California-based company during the pandemic.
If what happened to Disney's main rival, Netflix (NASDQ:), offers any clue, House of Mouse will have a hard time avoiding this outcome. Netflix last lost 430,000 subscribers in the US and Canada as life in North America returned to normal after a year of lockdown and stay-at-home orders fueling demand for home-based entertainment.
Disney, which had 103.6 million streaming customers at the end of April, has enjoyed the past year and a half as its Disney+ service quickly became a formidable streaming competitor to Netflix. Launched in November 2019, the service gave the business a much-needed boost as sales of the theme parks and theaters plummeted.
The slowing growth of Disney+ subscriptions has also taken some shine off its stock in recent weeks. The stock is down 13% since hitting a record high of $203 intraday in early March. The stock closed at $177.07 Tuesday.
Return To Normal
Despite this uncertainty, there are clear signs that Disney has become much stronger after the pandemic and that growth is quickly returning to normal levels. will return, thanks to huge pent-up demand for outdoor travel and entertainment.
For the quarter ended June 30, analysts expect revenue to grow 42% to $16.76 billion compared to the same period last year. Earnings per share are expected to come in at $0.54, recovering from a $0.64 loss from last year.
There may be some bumps on this road to recovery as the pandemic evolves and the emergence of virus variants could delay a full reopening, but Disney's diversified business has what it takes to bounce back eventually.
Already, executives have said bookings for Disney World in Orlando, Florida, are back to 2019 levels, while guest spending per capita at the park has risen double-digit in the last period from a year ago. As for growth at Disney+, the company is sticking to its forecast of 260 million global subscribers by the end of 2024, helped by a solid content list after production delays and theater closures for more than a year.
Morgan Stanley, who has an overweight rating for Disney's stock, advises investors to buy this stock when the stock is weak. The recent note said:
"Stocks are stable for the full year digesting last year's big 4Q run-up and concerns about streaming estimates in the near term. We are raising estimates and our [price target] for a faster recovery of parks and a successful NFL -renewal."
Morgan Stanley raised his price target to $210 per share from $200, representing an 18.6% premium from where the stock closed Tuesday.
Bottom Line
Disney streaming growth has likely peaked after a strong run during the pandemic, but that slowdown is normal and highly anticipated. Any weakness in Disney stock after earnings is a buying opportunity in our view, especially as Disney's core businesses, including theme parks and movie theaters, grow again and the company has established itself as the second largest streaming entertainment provider after Netflix. .
