After huge streaming losses, the Walt Disney Company, led by FORMER CEO Bob Chapek, shares hit their lowest level in 2 years. As ballooning costs at the entertainment giant’s fast-growing streaming division cast a shadow on strong subscriber additions, Walt Disney tumbled 13% to the lowest since March 2020.
The executives’ promise of profitability next year and forecast for operating results in the next quarter failed to impress, despite the fact that the Disney+ streaming service has attracted millions of subscribers and will launch an ad-supported tier next month, per reports on both NY Post and FL Times. For fiscal fourth-quarter earnings after a $1.5 billion loss in its streaming division, the famous mousy-ears company missed analysts’ expectations.
Fred Boxa, associate director at technology and management consulting firm Arthur D. Little, said that Disney’s streaming results are indicative of the tightrope it is walking. Compared with a 20% drop in the S&P 500, shares have fallen more than 35% this year, battered by a cautious outlook for ad sales and recessionary fears. The ad tier was not expected to provide a meaningful impact on results until later in Disney’s financial year, said Finance chief Christine McCarthy, in a call with analysts. She added that subscriber growth in Disney+ was expected to accelerate in the second quarter, a sign analysts said indicated a soft first quarter.
Research director at Forrester, Mike Proulx said: “As the platform aims for profitability, it’s placing some of that burden on its user base in the form of price hikes that could stall growth during a time of economic pinch.” Also, another thing that made the shares go down is a weaker-than-expected full-year revenue growth forecast. While the Street was expecting 12% growth for the company, Disney estimated a “high single-digit” percentage growth in revenue in this fiscal year compared to the last.
“The streaming investment cycle coinciding with macro weakness is certainly testing Disney investor patience,” said Credit Suisse analysts, who by far had the steepest cut of $31. According to Refinitiv data, the median price target on the stock is $125. 13 brokerages cut their price targets at least on Disney stock.