Is Walt Disney Stock a Buy Post Q2 Earnings?

The Walt Disney Company (NYSE: DIS) is one of the largest global entertainment companies, with a $221.44 billion market cap. It operates through two verticals –Disney Media and Entertainment Distribution and Disney Parks, Experiences, and Products. 

It is one of the best-performing media and entertainment companies of late, as evident from the stock’s 28% gain over the last month. However, Disney stock is still down 21% year-to-date, trailing the S&P 500 index by a wide margin which has lost 10% in 2022. 

Let’s see if the media and entertainment heavyweight should be part of your equity portfolio right now. 

Disney is the world’s largest streaming platform 

Disney+ (the streaming arm of the company) subscribers stood at 152.10 million as of July 2, while Disney’s total subscribers came in at 221.10 million, surpassing streaming giant Netflix’s 220.70 million subscriber base. 

In fact, in the fiscal third quarter, the platform added 14.4 million subscribers, beating the 10 million consensus estimate. DIS stock jumped 6% intraday after the release of the quarterly earnings report. 

Regarding this, Bob Chapek, Chief Executive Officer, of The Walt Disney Company, said, “We had an excellent quarter, with our world-class creative and business teams powering outstanding performance at our domestic theme parks, big increases in live-sports viewership, and significant subscriber growth at our streaming services. With 14.4 million Disney+ subscribers added in the fiscal third quarter, we now have 221 million total subscriptions across our streaming offerings.” 

While streaming platforms such as Netflix lost subscribers in recent quarters, Disney’s streaming platform gained traction. At this rate, the company is poised to have a subscriber base of 245 million by fiscal 2024. 

However, the subscriber growth rate is lower than the previous target of 260 million. This comes as the platform could not renew the Indian Premier League (IPL) rights for its Indian streaming platform. 

Moreover, the Disney+ platform incurred $1.1 billion in losses in the prior quarter. The media subsidiary is expected to become profitable by the end of fiscal 2024.  

Following the impressive subscriber growth in the third quarter, Disney announced its plans to hike its Disney+ membership prices. From December 8, Disney+ ad-free subscription will be priced at $10.99 per month, marking a $3 (or 38%) hike. 

Rising theme park popularity 

The pent-up demand for travel and leisure has been a boon for Disney theme parks, which saw a 72% year-over-year jump in revenues in the last quarter. With the easing of travel restrictions, Disneyland theme parks across the world witnessed a substantial rise in footprint since the pandemic days. 

In fact, the robust demand is outpacing the available reservations. Per capita spending at Disney theme parks is 40% higher compared to 2019 levels, while occupancy at domestic hotels stood at 90%.  

Better-than-expected financials 

Disney’s revenues came in at $21.50 billion for the fiscal third quarter ended July 2, up 26% year-over-year. It surpassed the Refinitiv consensus revenue estimate of $20.96 billion. 

Net income improved 53% year-over-year to $1.41 billion, while operating cash flows rose 31% from the prior-year quarter to $1.92 billion. EPS amounted to $1.09, 13.5% higher than the consensus estimate of $0.96. 

Disney is demonstrating strong performance across all sectors. With a surprising growth in its media platforms and surging pent-up demand for leisure travel amping its theme park revenues, the stock has been outperforming its peers lately.

Related: How Did This Tech Giant Perform in the June Quarter?