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News Analysis: Inside Disney's Earnings and Streaming Wars Among A Tech Market Rout

Disney's Performance Shows Strength and Depth Of Portfolio

Quality balance sheets, predictable revenues are key to sustaining stock prices during this current market rout.  Investors only care about future forecast guidance despite current quarterly performance. While Disney's Q1 2022 showed 23% YoY gains with $1.4 billion in operating profit, guidance has been muted in spite of the near pandemic comparables.

Disney+ Continues To Grow While Netflix Falters

Subscriber growth slowed in Q1, but Disney's streaming offering still grew revenue 5% and added 7.9M subscribers to a total of 137.7M total subscribers.  Disney+ as a standalone offering is the clear #3 in the market.  When the complete Disney streaming offerings are tabulated, they now now surpass Amazon prime with 205 million total subscribers.
 
Good news for investors as Disney contemplates a new ad supported subscription tier and continued international expansion.   International expansion will definitely drive down average revenue per user.  However, the streaming player faces additional headwinds with content libraries being pulled back. Lack of content availability may have an impact on near term subscriber adds.  Further, costs are up as Disney plans $32B in content spend

Figure 1. The Key Streaming Players

Netflix 221.8M
Amazon Prime 200M
Disney 137.7M
HBO Max 73.8M
Paramount+ 56M
Hulu 45.3M
Discovery+ 22M
Apple+ 20M

Parks

The park business showed massive demand for revenge travel.  Disney doubled its revenues to $6.8B as hotel, cruise, and concessions showed growth. Disney’s parks business is a shining light for reopening but inflation will impact Disney later in the year as labor costs, energy costs, and supply chain costs will eat at profit margins.  Disney could see more growth upside if Asia finally opens up as Hong Kong is open but Shanghai is closed.

Studios

Movie openings will be a bright spot thought as this is one revenue stream that has room to grow as Americans flock movie theaters for openings this summer.  Disney could see upside with future box office hits.
 

The Bottom Line

Meanwhile, the culture wars continue to roil Disney internally as 200 employees are protesting a move to Florida and the war with the state continues as backlash.  Overall, Disney has weathered the streaming wars well during lock down and is poised for success with more re-openings.  Add potential Metaverse opportunities, expect Disney to move from media giant to tech giant in the next five years.

Your POV

Who do you think will win the streaming wars? Where do you see Disney in the future of the metaverse?

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