Market commentary by eToro analyst for Romania, Bogdan Maioreanu
Disney (DIS) produced a surprise this week posting very good results with parks being the star. Relaxation of the Covid measures brought back the visitors to the parks with China’s exception, bringing the number of visitors close to 2019 levels. Streaming services, expanding internationally (including in Romania) also showed a surprising increase in the number of subscribers challenging Netflix leadership in the segment.
Walt Disney Company (DIS) revenues rose 26% for the quarter to 21.5 Billion dollars beating market expectations by a half billion dollars. Operating income more than doubled, to 2.12 Billion dollars, and total segment operating income rose by 50% to 3.57 billion dollars in the quarter ending on July 02, 2022. Earnings per share from continuing operations jumped to 0.77 dollars per share on a headline basis and adjusted EPS came to $1.09, vs. expectations for 99 cents a share. As a result the share price rose to 112.5 dollars.
The main driver for the positive results of the company was a surge in the company’s Parks, Experiences and Products whose revenues jumped 70% to 7.39 Billion dollars. This is consistent with the return of the public to parks and increase in tourism after the Covid restrictions were lifted.
These results were primarily due to growth at US parks due to higher volumes due to higher attendance, occupied rooms nights, cruises and increased guest spending, partially offset by higher costs. The star of the international parks was Disneyland Paris. that was open for the entire quarter compared to 19 days in the similar quarter in 2021. The good results were partially offset by a decrease at Shanghai Disney Resort due to the park being open only 3 days in the current quarter. Despite the attendance in the parks being slightly below 2019, Disney managed to deliver significantly higher revenue and operating income.
The first Disney park was built in Anaheim, California. The construction started in 1954 on 65 hectares of land. One year later on July 17, 1955 and after spending 17 million dollars, the park opened with 18 rides. Initially the park was named “The Mickey Mouse Park,” and then “Disneylandia” but before opening was changed to “Disneyland”. In its first year it was visited by 5 million people. Now, worldwide, there are 6 Disney Resorts in California, Florida, Tokyo, Paris, Hong Kong, and China with a total of 12 parks that were visited in 2019 by more than 115 million people.
Disney surpasses Netflix in the number of subscribers
A surprising result came from the streaming services. Disney+ added 14.4 million subscribers beating largely the 10 Million expectation, a 31% year-over-year increase that brought that service to 152.1 Million users. Part of these subscribers are also Romanians since the service opened in Romania in the middle of June. ESPN+ users rose to 22.8 Million, a 53% increase year-over-year, and Hulu subscribers rose to 46.2 Million, up 8%. This is rising the number of Disney subscribers to 221.1 Million surpassing Netflix’s (NFLX) declining 220.7 Million subscribers. However these subscribers are across several platforms and Disney might count them several times due to the bundle offerings. Despite the increases in subscribers, Disney Media and Entertainment Distribution revenue rose more modestly, by 11% to 14.11 Billion dollars.
The battle for subscribers is intensifying and the streaming services are changing the structure of the fees. Disney and Netflix are introducing cheaper subscriptions but containing advertisements. There are also reports that Paramount (PARA), Comcast (CMCSA) – owner of Peacock – and Disney are approaching Walmart (WMT) in an attempt to include their streaming services in the retailer’s 12.95 dollars membership offering. In this way they expect to attract new subscribers that are feeling now the burden of prices increases due to inflation.
Bogdan Maioreanu, eToro analyst and markets commentator, has over 20 years of experience in financial services and investments and a strong background in journalism. He held different Corporate Banking management positions in both Raiffeisen Bank and OTP Bank, before moving to business consultancy roles working for IBM Romania among others. Bogdan is an Executive MBA from Asebuss and Washington University.
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