Disney’s stock rises
Disney stock rose after the media giant posted earnings that beat expectations and announced strong gains in direct-to-consumer business, as well as plans to significantly increase annual cost reductions. Investors also welcomed news that Chief Executive Bob Iger will return for two year term replacing Bob Chapek as Chief Executive.
Morningstar senior equity analyst Neil Macker forecasts continued growth for Disney’s Experiences division, which includes theme parks. These assets afford the company a wide moat.
Disney announced in streaming, that they have increased their investment in Epic Games from $1.47 billion to $1.5 billion and plan on working together on creating a gaming universe connected with Fortnite – this announcement helped ease concerns that its loss-making streaming business may never become profitable; its shares rose nearly 6% during after-hours trading as a result.
Disney’s stock falls
Investors remain skeptical of Disney, despite its earnings beat and cost-cutting successes, despite investors remaining confident about its media giant status. Disney faces multiple challenges related to ownership of ESPN, Pixar, Disney parks and key Fox assets; furthermore it must build out Disney+ streaming service, having recently secured Taylor Swift’s rights for live-action version of her Era Tour concert movie.
Disney recently made waves when they announced a $1.5 billion investment in Epic Games, marking their entry into the gaming industry and opening up exciting possibilities such as adding Disney characters, movies and retail experiences to popular video game platforms such as Fortnite.
Investors and analysts are also concerned about the company’s declining revenue and profit outlook, its lack of transparency, which analysts feel casts doubt upon its long-term growth potential. Furthermore, its struggling e-commerce business has had an adverse effect on its stock price, leading to it shedding over 6% over recent weeks – more than any other Dow index contributor to an abrupt selloff.
Disney’s stock declines
Disney stock plunged on Thursday as its fiscal second-quarter earnings missed estimates and investors expressed concern over subscriber losses at streaming service Disney+. Disney’s theme parks, consumer products and international businesses performed well, but Netflix remains fierce streaming competition with their new ad-supported tier offering more robust streaming content options than Disney+ does.
Disney has seen unprecedented expansion over the last decade, through acquisitions such as Pixar and Marvel Entertainment as well as 20th Century Fox, streaming media with Hulu and Disney+ services, and debuting an ESPN sports network this summer.
Investors remain wary of Disney’s efforts to expand its digital footprint, particularly its upcoming ESPN sports network. Many fear the company could face challenges related to declining linear TV business, cost-cutting measures and rising interest rates; their stock has dropped more than 6% this year and ranks 78th worst performing in the S&P 500 over 10 years; its return lags behind that of longstanding large cap stocks like Netflix which saw an incredible 900% gain.
Disney’s stock gains
Disney stock surged 7% after hours on Wednesday following better-than-expected quarterly earnings and significant cost cuts, as well as announcement of a $3 billion share buyback program and reinstatement of dividend payments previously suspended due to COVID-19 pandemic.
Disney+ and Hulu subscription-based video streaming services continue to expand, yet contribute only marginally to overall revenues. Furthermore, debt levels for this company remain elevated.
Investors remain optimistic that the company can improve margins and profitability through strategic adjustments, including merging with ESPN, Fox and Warner Bros. Discovery to form an elite sports streaming service.
Investors should closely track DIS for updates. You can follow its stock on a free float chart here, while Motley Fool’s stock advisory service has recommended buying shares (it has outshone S&P 500 performance over three decades) The Motley Fool owns shares of Walt Disney and Netflix.
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