Walt Disney

  • Walt Disney, the house of (Mickey) Mouse, reported   fiscal second quarter results which saw the entertainment giant post better-than-expected   streaming subscriber growth.

  • Disney+   subscriptions rose 33% to 137.7 million and average revenue per user (ARPU)   was up both locally and internationally (see the subscriber figures in the   table below). Disney also guided for a stronger second half for its fledgling   streaming business. Direct to Consumer offerings (which includes ESPN, HULU   and Hotstar) exceeded 205 million users as of the end of the period.

  • Revenue for the group rose 23% to $19.3 billion. This includes a $1   billion penalty from early termination of some licensing agreements so the   content could be expedited to its direct to consumer offerings. Excluding once-offs, diluted EPS for the quarter increased 37%   to $1.08 from $0.79 in the prior-year quarter.

  • With   the lifting of Covid restrictions, Disney’s parks, experiences and products   segment grew revenue over 100% y/y to $6.7 billion during the quarter.     Operating profit for the segment swung to a profit of $1.75   billion from a $406 million loss previously. This was thanks to increased hotel   bookings, cruise ship trips, attendance at Parks, higher ticket prices, and   spending on food, beverage and merchandise. International guest arrivals are   picking up but are not yet near pre-pandemic levels. Additionally, some   international parks were not open full-time in the quarter and Disney   Shanghai remains closed.

  • The Media and Entertainment division saw revenues climb 9% to $13.6   billion. Following a loss of subscribers at Netflix, investors are weary as   to whether Disney can maintain its streaming growth potential. There are also   concerns over declining returns from high capex, as well as how increased inflation and a possible recession might   impact its other business divisions.

  • Shares of Disney are down 33% year-to-date and over 40% y/y. The company   is on relatively expensive valuation, which is possibly justified by the   earnings quality of this diversified entrainment giant and it’s ability to   consistently generate positive Free Cash Flows (which it reinvests into the   business).  This may not yet be the bottom for Disney but we like the   business and own the share in long-term managed portfolios.

Walt Disney