Analyst on Disney shares: Disney is making progress in an important future area

• Disney can significantly reduce streaming loss
• The entertainment group is aiming for streaming break-even as early as 2024
• Media analyst sees ‘huge, huge progress’

The US entertainment company Walt Disney gave investors a look into its books and caused a lot of joy with its figures for the first quarter. Group sales remained virtually unchanged at $23.55 billion and even missed analysts’ estimates of $23.8 billion. However, the quarterly profit increased from 1.28 to 1.9 billion dollars.

Disney achieves success in streaming

But the developments in the streaming sector received the most attention. This is due to the fact that Disney’s media business is undergoing major changes: the cable television business in the USA, which has been a reliable moneymaker over the years, has been shrinking for months as more and more viewers switch to streaming. In view of this, the US company launched its own streaming service, Disney+.

Disney also accepted enormous losses in order to catch up with the industry leader Netflix. Investors were now pleased to note that losses in the streaming business – also known as the direct customer unit – were reduced from $984 million in the same quarter last year to just $138 million. This also significantly exceeded expectations, as analysts had expected a loss of $419 million, according to FactSet. Revenues in the streaming business with Disney+ and the sports offering ESPN+ grew by 14 percent to a good six billion dollars.

Management is extremely optimistic for the future: the streaming business should generate profits as early as the fourth quarter of the financial year. In addition, CFO Hugh Johnston surprised us with quite optimistic statements about margins: “[Wir] “We have never been more confident about our path to creating a strong and sustainable streaming business with long-term subscriber growth and ultimately double-digit operating margins, a business that we expect to be a key driver of the Company’s earnings growth,” he is quoted by “MarketWatch”.

Fight against password sharing

However, the number of subscribers to Disney+’s core offering shrank by one percent to 111.3 million in the first quarter – for comparison: Netflix recently reported more than twice the number of subscribers with over 260 million customer households. For the next few months, Disney is aiming for an increase of 5.5 to 6 million users. The action against password free riders planned from summer should help.

While sharing accounts has so far been permitted, users outside of a shared household will have to pay for their own subscription in the future. Although such an approach is not without risks because disgruntled users could switch to the competition, Disney is relying on the attractiveness of its streaming offering with films and series about “Star Wars” and the Marvel superheroes. According to CFO Johnston, Disney is still in the early stages of this approach and does not expect benefits before the second half of 2024.

Analyst sees great progress at Disney

Bloomberg Intelligence senior media analyst Geetha Ranganathan emphasized in an interview with Yahoo Finance that she believes streaming numbers are the “most important metric in terms of future profitability for Disney.” After the media group lost around $2.5 billion last year and around $4 billion before that with its streaming business, the analyst is now seeing “some tangible results in terms of the profitability of streaming.”

For Ranganathan, the fact that the losses in the streaming business were reduced from almost a billion US dollars in the same quarter last year to just 138 million US dollars is “huge, huge progress that they are making in the profitability of streaming. They are always giving “We still expect them to break even or achieve positive profits in the fourth quarter of the fiscal year. But I think they could possibly do that even sooner, given the progress they have made,” says the analyst optimistically .

Editorial team finanzen.net

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