Disney stock drops after reporting earnings miss, wider streaming loss

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Disney (DIS) is set to report its fiscal fourth-quarter earnings on Tuesday after the bell as investors eye advancements in streaming profitability and the health of its theme parks business amid various macroeconomic headwinds.

Here’s what Wall Street expects, according to Bloomberg consensus estimates:

Revenue: $21.26 billion expected

Adj. earnings per share (EPS): $0.51 expected

Disney+ subscriber net additions: 9.35million expected

Parks, experience and consumer products revenue: $7.59 billion expected

Disney+ reported a surge of subscribers in the third quarter (14.4 million) amid new market launches and a robust slate of content like “Obi-Wan Kenobi.” Although subscriber net additions are expected to decelerate in the fourth quarter to just 9.35 million, recent price hikes suggest average revenue per user of $4.29, according to estimates.

The company will roll out its $7.99 ad-supported tier in December, one month after Netflix’s much-anticipated debut. Despite the overall slowdown in ad spend, analysts remain bullish on the profitability prospects of ad-supported plans — especially for streaming companies.

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Investors will be keeping a close eye on direct-to-consumer losses after the company maintained its goal of reaching streaming profitability by 2024. Disney+, Hulu, and ESPN+ lost a combined $1.1 billion in the third quarter, but Disney CFO Christine McCarthy said she expects peak Disney+ losses by this year.

The company lowered its 2024 subscriber guidance to between 215 million to 245 million paying users — down from the prior 230 million to 260 million. It now anticipates 135 million to 165 million “core” Disney+ subs, while its Indian brand Disney+ Hotstar‘s subscriber forecast is set at 80 million.

The guidance slash came as a result of slowing subscriber trends in addition to the loss of its streaming rights for the Indian Premier League, which could cause a dip in Hotstar subscribers.

Hotstar makes up about 36% of the total Disney+ user base. As of the period ending July 2, 2022, Disney+ Hotstar members totaled 58.4 million (up from the second quarter’s 50.1 million.)

Disney’s theme parks are widely expected to deliver strong Q4 results.

Disney’s theme parks, which saw quick COVID bounce backs amid increased attractions, price hikes, and updated technologies like the Genie+ app, are widely expected to outperform in the quarter — despite fears of an impending recession.

Wall Street expects revenue from the company’s parks, experiences, and consumer products division to come in at $7.59 billion, with operating income estimated at $1.9 billion.

Similar to slowing subscriber net additions, operating income is expected to drop off compared to the third quarter’s whopping $2.19 billion. Analysts warn that Hurricane Ian likely pressured profits, while macroeconomic challenges like inflation remain a concern.

The company will likely tout its upcoming film slate on the earnings call (“Black Panther: Wakanda Forever,” “Avatar: The Way of Water,” and more), but management could also face questions on the future of Hulu and ESPN, along with its ad tier expectations.

Overall, despite Disney’s strong positioning relative to competitors, a potential warning on forward-looking guidance or a lowering of its subscriber or revenue estimates could trigger a sell-off as investors brace for more economic volatility.

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Alexandra is a Senior Entertainment and Media Reporter at Yahoo Finance. Follow her on Twitter @alliecanal8193 and email her at alexandra.canal@yahoofinance.com

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