Media giant The Walt Disney Company (NYSE:DIS) reported fourth quarter financial results after market close Tuesday.
Analysts break down what to make of the quarter that saw revenue and earnings per share both come in shy of Street estimates.
The Analysts
- Morgan Stanley analyst Benjamin Swinburne has an Overweight ratting and a price target of $125.
- Rosenblatt analyst Barton Crockett has a Buy rating and lowers the price target from $134 to $120.
- Needham analyst Laura Martin has a Hold rating and no price target.
Related Link: Why Disney Stock Is Diving Today
The Takeaways
Morgan Stanley: Disney’s earnings per share can double from fiscal 2022 to fiscal 2025 as a result of the Parks segment growth and the improvement on profitability for the streaming segment, according to Swinburne.
While Disney’s fiscal 2023 guidance came in below expectations, Swinburne isn’t concerned.
“This is primarily a function of margin pressure at legacy TV networks, with lower F4Q Parks & Streaming results also contributing," Swinburne said. "While guidance is a headwind to EPS recovery, we remain bullish Parks while the streaming outlook is largely unchanged."
Expect strong growth to continue for the Parks segment, Swinburne adds.
“Disney is the first company in our coverage to provide formal guidance for 2023 – given its September fiscal year end. While there is too much uncertainty over both the economy and the streaming business to frame the FY23 guidance as conservative or estimates now ‘de-risked,’ we do believe the company provided guidance it intends to deliver.”
Rosenblatt: Fourth quarter results provided updated progress on the streaming end, but featured a setback for its legacy television business, Crockett says.
The analyst called the subscriber trends solid for Disney’s direct-to-consumer business. While average revenue per subscriber was down, Crockett reminded investors that the upcoming price hike and ad-supported plan could help ARPU.
“Disney, we believe, is a substantial leader in the theme park sector that is part of the rising experiential share of consumer wallet. Disney is also uniquely well positioned to will its DTC pivot to success and manage ramping pay TV headwinds,” Crockett wrote.
Needham: A Hold rating from Martin is primarily due to growing direct-to-consumer losses, the analyst said. While the losses continue, Martin highlighted the progress Disney has made against rival Netflix Inc (NASDAQ:NFLX).
“In the 3 years since launch, Disney has overtaken Netflix as the OTT subscription industry leader,” Martin said. Disney added around 57 million subscribers in fiscal year 2022 to end the year at 235.7 million subscribers.
Disney’s Bad Day: Disney’s revenue and earnings miss on Tuesday was only one of the bad news items for the media company Tuesday.
Hours after it announced fourth quarter financial results, it was announced that Florida Governor Ron DeSantis won re-election. DeSantis was one of the earliest called national races with a decisive win over Democrat candidate Charlie Crist.
While DeSantis narrowly won the governor race in 2018 in a vote that needed a recount, there will be no recount this time around. DeSantis won with one of the biggest margins by a Republican governor candidate in Florida state history.
DeSantis clashed with Disney over the media giant's stance against the so-called “Don’t Say Gay” bill. DeSantis also signed a measure to dissolve special governing status for Disney in April.
With DeSantis leading the state, Disney World could continue to see pressure on any special privileges and tax breaks it previously had.
DeSantis is considered a front runner as president in 2024, which could make his time as governor perhaps less focused on Disney and more focused on a potential showdown with former President Donald Trump for the Republican candidacy.
DIS Price Action: Disney shares are down 11% to $89.18 on Wednesday, setting new 52-week lows.
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