Disney
In one sense, the results validated the market's optimism as its stock is more than 40% higher since the market bottom in December 2018. However, the stock's reaction was muted following earnings, as its guidance came in below expectations, and it didn't give any guidance regarding Disney+. Additionally, the stock has been rangebound since April 2019, trading between $130 and $150.
Inside the Numbers
Disney reported earnings per share of $1.53 per share against expectations of $1.44 per share. Revenue was $20.86 billion against the $20.79 billion consensuses. Of course, the most eagerly awaited part of Disney's earnings report was the update on Disney+. Disney+ represents the company's fastest-growing unit and exemplifies its shift from cable fees to a direct to consumer model.
So far, the service has been a success due to its low pricing and deep content library. CEO Bob Iger remarked that Disney+ has "exceeded even our greatest expectations". Currently, the average monthly revenue per user is $5.56. Iger added that about 50% of customers are in a long-term agreement between one and three years. Additionally, churn rates and conversions of free users to paying members were also better than expected.
Disney expects its streaming service to have between 60 million and 90 million subscribers by the end of 2024 which would translate to between $3.6 and $5.4 billion in recurring revenue. So far, the company has been reluctant to provide more guidance as it focuses on rolling out its product to international markets. In addition to Disney+, ESPN+ has 7.6 million subscribers, and Hulu+ has 30.7 million subs.
Disney's studio revenue was $3.76 billion which was more than double the previous year's first quarter of $1.8 billion. This was largely due to films like Star Wars and Frozen 2. Theme park revenue was $7,4 billion an increase of 8% year over year.
Looking Forward
In its earnings report, Disney stated that the impact of the coronavirus would be unclear especially on its parks in Shanghai and Hong Kong. Hong Kong attendance had already been negatively affected by the protests in December and January. Recently, Disney stated that it is going to shut down both parks for the next six weeks as a precautionary measure.
Disney's stock has been rangebound but is about $10 away from a breakout. Buying these breakouts following long periods of consolidation has been a winning strategy in this bull market.
