Disney (NYSE: DIS) reported strong Q2 earnings which topped expectations across the board including subscriber growth, earnings, and revenue. The company's streaming division continues to grow at a mind-boggling rate with more than 115 million subs. In addition, the theme park business is also quickly returning to its pre-coronavirus levels.
After hours, Disney's share price was trading 5% higher, however, the stocks gave back some gains in the following trading session. Overall, Disney is 40% higher over the last year, flat on a YTD basis, and 10% off it's all-time highs.
Inside the Numbers
In Q2, Disney reported $0.80 expectations of $0.55. Revenue also beat at $17.02 billion vs expectations of $16.76 billion. It also topped estimates for subscriber growth at 116 million vs 114.5 million. This represents a 13.6 million increase from the last quarter.
The company's average monthly revenue per subscriber dipped 10% to $4.16. The company attributed this to increasing sign-ups worldwide where it has cut deals with partners for distribution in countries like India and Indonesia.
Overall, Disney has 174 million subscriptions including Disney+, ESPN+, and Hulu. In total, it generated revenue of $4.3 billion, a 57% increase. The company believes the total market size for subscriptions is 1.1 billion globally, and it believes Disney+ will reach between 230 million and 260 million subscribers by 2024.
Starting in Q3, the company will be releasing new films to the platform following 45 days of playing in theatres. The company has increased its investment in original content and believes this will drive more people to the platform.
The Parks, Experiences, and Products division returned to profitability for the first time since the pandemic began with revenue increasing by 308% to $4.3 billion, as all parks were open during the quarter. Last year, this unit had a loss of $1.9 billion, while it produced an income of $356 million this quarter.
Stock Price Outlook
Disney's stock has been a long-term outperformer. It's not terribly complicated as the company has a special connection with many customers who were raised watching Disney films and are now eager to share it with their kids. In addition, the company has continued to innovate with new offerings in terms of its parks, content, and distribution.
And, the company has been remarkably successful over the past decade with nearly all of its initiatives becoming wildly successful whether it was the purchase of LucasFilms, the new Star Wars-themed park, the Marvel acquisition, Disney+, etc.
Of course, the pandemic devastated its parks and movie business, but there was a silver lining that allowed Disney+ to become a juggernaut with more than a million subscribers. And now, the economy reopening means that the parks division will once again be a positive contributor to the top and bottom line.