Disney stock rose by 3% on Wednesday after the company surpassed analyst expectations for earnings and reduced losses in its streaming division.
Why it matters: Investors are closely watching Disney’s progress in making its streaming services profitable by the 2024 deadline.
Details: Last quarter, Disney cut losses in its streaming division to $347 million from $1.4 billion the previous year. The company also increased the average monthly revenue per paid subscriber for most of its streaming services.
CEO Bob Iger credited advancements in Disney’s streaming advertising products for boosting digital ad revenue. While Disney’s linear advertising business is doing better than expected, it still faces challenges, unlike some of its competitors who reported significant losses in linear TV advertising.
Positive News: Disney exceeded analyst expectations not only in profitability metrics but also in subscriber numbers, adding 7 million Disney+ subscribers last quarter. The total number of paid streaming subscribers across all Disney services is now 150.2 million.
Strategic Moves: Disney recently agreed to buy Comcast’s 33% stake in Hulu. The merger of Disney+ and Hulu into a single app is set to launch next month.
Activist Pressure: Disney’s positive earnings report is expected to help the company manage pressure from activist hedge fund Trian Fund Management and co-founder Nelson Peltz. Iger mentioned hearing from Peltz but didn’t have specifics about his intentions.
Cost-Cutting Success: Disney announced an increase in its annualized efficiency target from $5.5 billion to $7.5 billion, indicating that cost-cutting measures are effective. The company aims to significantly grow free cash flow in fiscal 2024, approaching pre-pandemic levels.
CEO Focus: Iger emphasized doubling down on business units like parks, streaming, and movies that are driving positive results. Disney plans to continue investing in theme parks and cruises.
Strategic Considerations: Disney is exploring options for its linear assets, acquired from Fox Corp. in 2019. Iger clarified that while they are open-minded, nothing is imminent.
ESPN Transition: Disney is not selling ESPN but is seeking a strategic partner to manage the network’s shift into the streaming era. ESPN Bet, a sports betting venture with Penn Entertainment, is set to launch next week.