By Senad Karaahmetovic
Shares of Walt Disney (NYSE:DIS) are down over 7% in pre-market Wednesday trading after the company reported weaker-than-expected earnings for its fiscal fourth quarter.
Disney reported an EPS of $0.30 per share on revenue of $20.15 billion, missing the average analyst estimate of $0.59 on revenue of $21.38B. Revenue grew 8.7%, fuelled by a 36% increase year-over-year in income from the Parks.
The media and entertainment business saw its revenue drop by nearly 3% to $12.73B, a big miss compared to the $13.81B consensus.
"2022 was a strong year for Disney, with some of our best storytelling yet, record results at our Parks, Experiences and Products segment, and outstanding subscriber growth at our direct-to-consumer services, which added nearly 57 million subscriptions this year for a total of more than 235 million," said Bob Chapek, Chief Executive Officer, Walt Disney.
The entertainment giant witnessed “strong subscription growth” as it managed to add 14.6M total subscriptions, including 12.1M Disney+ subscribers. The total number of Disney+ subscribers stood at 164.2M at the end of the quarter, up 39% year-over-year (YoY) and higher than the average analyst estimate of 162.5M.
The ESPN+ subscribers base increased 42% YoY to 24.3M while the total Hulu subscribers number is now 47.2M, up 7.8% year-over-year.
“We expect our DTC operating losses to narrow going forward and that Disney+ will still achieve profitability in fiscal 2024, assuming we do not see a meaningful shift in the economic climate,” Chapek added.
Disney expects its FQ1 operating loss will improve by more than $200M compared to the last quarter while the FQ2 should see a “larger improvement.”
Barclays analysts cut the price target to $98 per share from the prior $105 to reflect falling estimates. The analysts also reiterated an Equal Weight rating as they see further downside in Disney shares amid low visibility.
“Revenue and OI guidance next year implies profitability across most Disney segments could be worse than expected, in some cases materially so. Streaming guidance is also likely to be tough to get to without tradeoffs,” they wrote in a note.
Guggenheim analysts also slashed the price target as they went to $115 from the prior $145.
“Our lowered estimates primarily reflect greater DTC losses, slower parks profit growth than previously forecast. We maintain our BUY rating,” they said to clients.