Disney is starting to fire on all cylinders now that Covid has subsided. Disney's parks are back in full swing, and movie theaters are springing back to life in this post-pandemic environment. Despite Disney's full business nearly back online, the stock sits near a 52-week low. Disney (DIS) should be in the sweet spot of capitalizing on the pent-up post-pandemic consumer wave of travel and spending at its parks while being the new and preferred content provider via Disney Plus. The former is roaring back while the latter continues to build out content and expand its membership base.
The streaming efforts (Disney Plus, ESPN, and Hulu) have transformed Disney's business model with recurring revenue streams, which will be further bolstered by its legacy businesses now that Covid is diminishing. Taken together, Disney has set itself up to benefit across the board with its streaming initiatives firing on all cylinders while its theme parks are back online and movie theaters have reopened. The company has been posting phenomenal streaming numbers that have negated the negative pandemic impact on its theme parks. However, the streaming-centric narrative is changing as the theme park revenue flows into the company's earnings. Disney presents a very compelling buy for long-term investors as the synergy of its legacy business segments combines with its wildly successful streaming initiatives, all of which have more pricing power down the road to expand margins.
“Hulk Smash” Earnings
Bank of America analyst Jessica Reif Ehrlich noted that the most recent quarterly results were "Hulk smash" and largely driven by Disney+ direct-to-consumer segment, as well as "significantly better" results from its parks, experience, and products business, which generated $2.45 billion, compared to estimates of $1.35 billion.
As a result, Reif Ehrlich "significantly" raised her earnings estimates for fiscal 2022 to $4.18 per share, up from a prior outlook of $3.34 per share, due to the first-quarter results. During the quarter, Disney added roughly 11.8 million Disney+ subscribers, totaling 129.8 million. Across all subscriptions, Disney ended the period with 196.4 million subscribers, including 45.3 million for Hulu.
For the quarter, Disney earned $1.06 per share on $21.82 billion in revenue, compared to estimates of $0.63 per share and $20.99 billion in sales. In addition, Reif Ehrlich added that near-term catalysts for Disney include "continued theme park improvement/recovery," along with direct-to-consumer rollouts in new countries and "increased content output in 2HFY22 and potential price increases."
Streaming And Theme Park Synergy
The company continues to exceed all expectations in the streaming space via Disney+, Hulu, and ESPN+. Disney's streaming initiatives have been major growth catalysts for the company. Disney+'s growth in its subscriber base is yielding a durable, growing, and sustainable recurring revenue model. This streaming bright spot in conjunction with its park and resorts coming back online has been a perfect combination as of late, especially with widespread vaccinations. Disney+ has racked up 129.8 million paid subscribers, Hulu has 45.3 million paid subscribers, and ESPN+ has over 17 million paid subscribers. Collectively, Disney now has over 192 million paid streaming subscribers across its platforms. Disney+ has been wildly successful via unleashing all its Marvel, Star Wars, Disney, and Pixar libraries in what has become a formidable competitor in the ever-expanding streaming wars domestically and internationally. Disney now offers a hybrid growth business model that combines its legacy business via theme parks and future streaming growth, all with pricing power.
Post-Pandemic And Box Office
Disney's business segments are back online as the pandemic subsides worldwide. The latest theatrical release of Spider-Man: No Way Home, generated $1.86 billion worldwide. Movie productions have resumed, movie theaters and theme parks have reopened to full capacity, and sports have returned to pre-pandemic formats. The resumption of these activities will feed into Disney's movie and streaming business segments. Disney continues to dominate the box office year after year with a long pipeline of blockbusters in the queue. Disney is going all-in on the streaming front and acquired full ownership of Hulu, and the company has launched original Disney+ content to its streaming service with tremendous success.
The current weakness in Disney stock is a great opportunity for long-term investors, especially on the heels of its "Hulk smash" earnings. Disney has successfully shifted its business model to a synergy between its legacy business and a new subscription-based streaming service that produces a durable, growing sustainable and predictable revenue. These streaming properties possess tremendous pricing power over the years to come, with over 192 million paid subscribers across its various platforms.
In the backdrop, its legacy business segments are regaining their footing as the pandemic subsides. The box office has come alive with Disney's Black Widow, Chung-Chi, Eternals, and finally Spider-Man: No Way Home, the latter being the best proxy in a post-pandemic world. All the initiatives that Disney has taken over the previous few years to remediate its business and restore growth have come to fruition via its Fox acquisition and its streaming initiatives. Disney (DIS) continues to invest heavily into its streaming services (Hulu, ESPN+, and Disney+) to propel its growth and dominance in the streaming space. The company is evolving to meet the new age of media consumption demands via streaming and on-demand content. Disney's streaming initiatives will continue to be major growth catalysts moving forward. Disney is a compelling buy as its legacy theme park business are back online in conjunction with its streaming initiatives, as seen in its most recent earnings report.
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