Disney Q3 earnings

Current Price: $185     Price Target: $215

Position size: 2%          TTM Performance: +35%   

 

 

 Key Takeaways:

  • Better than expected Disney+ subscriber numbers – after slightly weaker than expected subs last month, they reported a small beat this quarter. In general, Disney+ has been ramping far ahead of initial expectations. However, still no change to breakeven guidance for their DTC platform, as they increase investment on content.
  • Strong Parks results – parks segment returned to profitability
  • Seeing success w/ hybrid film releases – flexible distribution strategy of being able to release content in both theaters and direct to Disney+ is an advantage
  • Capital return still paused – Still not paying a dividend or buying back shares, but they do expect to return to both.

 

Additional highlights:

  • Quotes from the call…
    • “we will maximize the synergy of our unique ecosystem to further deepen consumers connection to our characters and stories. And we will use the power of our far-reaching platforms and emerging technologies to better anticipate what our consumers want and deliver them a more seamless and more personalized entertainment experience.”
    • “Last month, we completed our first cruise since the start of the pandemic with the Disney Magic, which is currently sailing short-term staycations for U.K. residents, and a Disney Dream set sail on its first U.S. based cruise this week. Future bookings for all of our ships remain strong with bookings in the third quarter, in particular, having benefited from the announcement of our fall 2022 itineraries and the successful marketing launch of our fifth ship, the Disney Wish, which will set sail in summer of 2022.”
  • They now have 174M subs across Disney+, Hulu and EPSN+. That is second only to Netflix, which has a little over 200M. Disney+ now has 116M subs, Hulu is ~43M and ESPN has ~15M. Goal is 230-260m Disney+ subs by 2024.
  • Global rollout will continue to support sub growth – Disney+ is available in a limited capacity in Japan, expanding to the full market in late October, followed by additional APAC markets, including South Korea, Taiwan and Hong Kong in mid-November. Launch of Disney+ in Eastern Europe has moved from late 2021 to the summer of 2022, primarily to allow for an expanded footprint that will include parts of the Middle East and South Africa.
  • ARPU should steadily rise over time – overall ARPU this quarter was $4.16 (ex-Hotstar, it was $6.12). Their ARPU is weighed down by lower Disney+ fees outside the US, but they will gradually raise prices over time and they have ways (other than sub fees) to make money off of their content w/ advertising, parks and consumer products (especially w/ content like Pixar, marvel, star wars).
  • Flexibility is a key component of their distribution strategy. They have 3 approaches for distributing films. 1) Release in theaters with a simultaneous offering via Disney+ Premier Access, 2) release straight to Disney+, and 3) traditional exclusive theatrical releases. Hybrid releases mitigated the impact of theater closures, but theaters are re-opening and they intend to continue to use this model.  
  • Improving parks and lots of content on the horizon bodes well for future results…
    • Content updates…
    • Park re-openings…everything is open. Generally operating at or near current capacity limits w/ robust guest spending trends and strong reservations.

 

 

Sarah Kanwal

Equity Analyst, Director

 

Direct: 617.226.0022

Fax: 617.523.8118

 

Crestwood Advisors

One Liberty Square, Suite 500

Boston, MA 02109

www.crestwoodadvisors.com

 

 

$DIS.US

[category earnings ]

[tag DIS]