Walt Disney Company | Fundamental Analysis - Opportunity ? 🔔

19. Mai 2021

he Walt Disney Company ended the second fiscal quarter with 103.6 million subscribers to its streaming service Disney+. Although that was more than double the number in the same quarter last year, analysts had expected Disney+ to have 109 million subscribers at the end of the quarter.

The stock has dropped sharply since the earnings report was released and is now down 4.3 percent year-over-year. Investors are probably questioning if Disney is still a good investment.
Here are some important points from the Q2 results that hint that the House of Mouse is doing well and the current decline could be a good buying opportunity.

Disney was already actually set to frustrate investors after Netflix missed its own subscriber forecast in the quarter ended March. There was a strong surge in subscribers to streaming services during the pandemic, which may take a quarter or two to level off.

Nevertheless, there were lots of aspects in the earnings report meaning that Disney+ is still on track to meet its long-term subscriber goal. For instance, CFO Christine McCarthy said that Disney "grew subscribers faster in the last month of the second quarter than in the first two months." And that's in spite of the first price increase for Disney+ since launch.

Covering the near-term outlook, CEO Bob Chapek said: "We're on track to reach our forecast of 230 million to 260 million subscribers by the end of the fiscal year 2024."

Even after price increases last quarter, Chapek said that "we haven't seen a significant increase in subscriber churn after price increases in [the Europe, Middle East, and Africa] region."

The company anticipates subscriber growth to be greater once content production returns to full capacity. Chapek said that "the anticipation for the new Marvel series "Loki," which will be released June 9, is off the charts."

Don't forget that Disney has racked up more than 100 million subscribers without using the deep pipeline of Star Wars and Marvel content that company executives announced in a

December presentation to investors. As the company adds more content from these powerful franchises, the number of subscribers should increase.

Disney's average revenue per user (ARPU) fell 29% to $3.99 during the quarter. It, of course, contrasts with Netflix's 6% annual growth in the last quarter. But there's more to it than that.

The drop in ARPU is due to the launch of Disney+ Hotstar in India, which brings in less revenue per user than Disney+ in other markets. Excluding Hotstar, Disney+'s ARPU would have been virtually unchanged at $5.61.

"As we move into the rest of the year, we should start to feel the positive effect on Disney+ ARPU from the price increases we have undertaken around the world," McCarthy said.

Of course, theme parks are still an important part of Disney's business, with revenue of $26 billion in fiscal 2019. Revenues from Disney's parks, attractions, and products fell 44 percent year over year this quarter. But that's an improvement over the 53% drop in the previous quarter.

Company executives said more good news during the earnings call. "At Walt Disney World, attendance trends continued to improve steadily throughout the second quarter, and guest per capita spending was up again by double digits from the previous year," McCarthy said.

Disneyland Resort opened on April 30, and management is "very enthusiastic" about the response from guests.

It's hard to say where the stock will move in the short term, but Disney franchises are some of the most valuable in the entertainment industry. It's safe to say that once Disney adds more content from its top brands on Disney+ and the rest of the business fully recovers from the pandemic, the stock price will likely trade higher than it does now. So, yes, you could consider the price decline a good buying opportunity.

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