Current Price: $189 Price Target: $215
Position size: 2% TTM Performance: +35%
Key Takeaways:
- Broad beat – big profitability beat driven by better-than-expected results in DTC and parks.
- Better than expected subscriber numbers across all streaming services – Disney+ has 95M subs ahead of expected 90M. They now have 146M subs across Disney+, Hulu and EPSN+. That is second only to Netflix, which has about 204M.
- Parks showing promising signs of demand and open parks contributing to profitability
Additional highlights:
- DTC decrease in operating loss was due to better subscriber numbers across Hulu, Disney+, ESPN+ and increased ad revenues.
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Disney+ now has 95M subs ( goal is 230-260m Disney+ subs by 2024), Hulu is ~40M and ESPN has >12M.
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They had revealed 87M Disney+ subs at investor day at beginning of Dec, so subs up 8M in Dec alone.
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DIS DTC business generated $3.5B in revenue last quarter vs Netflix’s Q4 revenue of $6.6B.
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Star International streaming service – announced at their investor day in December, is launching Feb. 23.
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Disney+ ARPU down on mix given higher growth in lower ARPU international regions. Increasing prices in US and Europe by $1.
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India is 1/3 of Disney+ – their Indian streaming service Disney+ Hotstar accounts for ~30% of global subscriptions, or about ~32 million customers.
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Solid conversion from Verizon free promos.
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ESPN – in response to an analyst question about poor viewership of the Super Bowl (lowest in more than a decade), and what it means for ESPN. Chapek said they’re looking at the “long-term” trends of sports viewership and is mulling a “a more true ESPN direct-to-consumer” service.
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Parks re-openings…
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Parks and resorts that were opened during the quarter all operated at significantly reduced capacities, yet all achieved a net incremental positive contribution during the period they were open – meaning revenue exceeded the variable costs associated with being open.
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Walt Disney World Resort (FL) and Shanghai Disney Resort were open for all of Q1.
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Disneyland Resort (CA) was closed and the cruise business was suspended for the full quarter.
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Disneyland Paris was open until the end of October, or for about one-third of the quarter.
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Hong Kong Disneyland was opened until the beginning of December or for about two-thirds of the quarter.
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Disneyland and Disneyland Paris are expected to stay closed until at least the end of this fiscal quarter.
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Disneyland Hong Kong may reopen in the quarter.
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Vaccination rates – are the main determining factor for reopening parks. Chapek said vaccines would be a “game-changer” for Disney if they’re distributed to everyone who wants one this year. Though he expects you’ll see mask-wearing and social-distancing in Disney parks at least until the end of 2021, and probably 2022.
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Attendance improving – Average daily attendance at Walt Disney World is growing – a sign demand for theme parks is strong. Attendance expanded “significantly” in the last three months of the year, compared to the previous quarter.
Sarah Kanwal
Equity Analyst, Director
Direct: 617.226.0022
Fax: 617.523.8118
Crestwood Advisors
One Liberty Square, Suite 500
Boston, MA 02109
$DIS.US
[category earnings ]
[tag DIS]