Disney shares hit lowest level in 2 years after streaming losses

0

Shares in Walt Disney tumbled 13% to the lowest since March 2020 on Wednesday, as ballooning costs at the entertainment giant’s fast-growing streaming division cast a shadow on strong subscriber additions.

Disney+ has attracted millions of subscribers and will launch an ad-supported tier next month, but executives’ promise of profitability next year and forecast for operating results in the next quarter failed to impress.

The company, led by CEO Bob Chapek, missed analysts’ expectations for fiscal fourth-quarter earnings after a $1.5 billion loss in its streaming division. 

“Disney’s streaming results are indicative of the tightrope it is walking,” said Fred Boxa, associate director at technology and management consulting firm Arthur D. Little.

Shares closed $86.75 on Wednesday. They have fallen more than 35% this year, compared with a 20% drop in the S&P 500, battered by a cautious outlook for ad sales and recessionary fears.

Finance chief Christine McCarthy, in a call with analysts on Tuesday, said the ad tier was not expected to provide a meaningful impact to results until later in Disney’s financial year.

Subscriber growth in Disney+ was expected to accelerate in the second quarter, she added, a sign analysts said indicated a soft first quarter.

“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,” said Mike Proulx, research director at Forrester.

A weaker-than-expected full-year revenue growth forecast also dragged shares. Disney estimated a “high single-digit” percentage growth in revenue in this fiscal compared to the last, while the Street was expecting 12% growth.

At least 13 brokerages cut their price targets on Disney stock.

Credit Suisse analysts, who by far had the steepest cut of $31, said “the streaming investment cycle coinciding with macro weakness is certainly testing Disney investor patience.”

The median price target on the stock is $125, according to Refinitiv data.

FOLLOW US ON GOOGLE NEWS

 

Read original article here

Denial of responsibility! Vigour Times is an automatic aggregator of the all world’s media. In each content, the hyperlink to the primary source is specified. All trademarks belong to their rightful owners, all materials to their authors. If you are the owner of the content and do not want us to publish your materials, please contact us by email – [email protected]. The content will be deleted within 24 hours.

Leave a comment
Enable Notifications OK No thanks