Disney(Nyse: dice) He released the earnings of the first quarter of a financial quarter on Wednesday morning, and the market responded with “Meh.” After opening with a short pop, the stock fell quickly and was trading down about 1% for most of the session.
Few other companies have so many obvious competitive benefits but have had so much trouble on the stock market, as the stock has basically been always over the last decade.
Some investors believe that Disney finally turns the corner after several years of overwhelming earnings. After all, his streaming business is now profitable, and fully owns Hulu. He is also about to launch ESPN's leading streaming service in the fall.
Certainly there is potential in the stock given its bevy of recent streaming leader assets and performance Netflixthat indicates that the Streaming market It can be even more than investors had believed.
However, there are three things that Disney needs to show before he is convincing on a path to growth.
Image source: Disney.
Disney has successfully turned its streaming business, but growth is still a problem. In a quarter when Netflix added nearly 20 million subscribers to its streaming service, Disney lost 700,000 on Disney+ and added 1.6 million on Hulu, a net earnings of 900,000. Prices also rose, so streaming revenue was up during the quarter although subscriber growth was very small.
The Disney record over the past year is more impressive as it adds 13.3 million subscribers to Disney+ over the last four quarters, although the new number may have boosted that number by the new bundle with Hulu. He also added 3.9 million subscribers to Hulu.
The Disney streaming strategy has long appeared mixed. Netflix, by comparison, has been noted for years that it wants to provide a wide range of video entertainment options so it has something for everyone.
The value offer with several Disney options seems less clear. Hulu's owner gave Disney a chance to unite the two services together, making the customer experience simpler and meant that only advertising and programming for one service must to him. The current bundle can feel clunky and unnecessary, and Disney seems to be ready to make a similar mistake with Fub and Hulu + Live TV, keeping them as separate services rather than combining them.
Its streaming motion could grow even more untidy when it launches ESPN for streaming as it seems ready to own at least four separate streaming services, bundled or not.
The recent slide at Disney Subs may be a Blip, but I would like to see a more consistent growth of a segment that is supposed to represent the future of the company.
The biggest spot in the first quarter of Disney's report was his performance at the Box Office. He flipped a loss in his sales/licensing business of $ 224 million to a profit of $ 312 million, mainly due to success MOANA 2 and Mufasa: The Lion King.
Tent franchise productions as Moana is the largest key to the Disney's Flywheel business model. The success of those films helps to drive theme park visits, buy products such as toys, and subscriptions for its streaming services.
Disney paid $ 71 billion for Fox entertainment in 2019 and has battled to get its money worth. Cranking Box Office hits with that intellectual property and others is the best way to make it pay off.
Theatrical releases also have a lot of leverage, because hit can make a big profit, while a bust will lose money. Not all films will be popular, but Disney should be producing solid profits from the sales and content licensing segment every quarter.
It's a brave new world for ESPN. The company's dominance of the cable ecosystem has faded in the streaming age, and is now facing competition from technology giants, as well as traditional media companies.
Meanwhile, the price of sports content continues to rise because of the popularity of live sports and competition with the deep pocket technology giants.
The launch of ESPN's flagship service later this year will be a vital test for the company. Not only does Disney need to attract a significant audience to ESPN, but it also needs to be profitable and show that it can grow that profit. To do so, ESPN may need to get its roots back and connect with audiences by programming studio as Sportscenter As well as live sports.
Disney's future may rely on ESPN above all else, as it has been a valuable cow for the company for a long time, and its decline has been a big reason for stock battles over the past decade .
We will not have a reply for at least a few quarters after its launch, but its success is a key necessity for CEO Bob IGER, who is expected to retire next year.
Disney's guidance calls for high-digit-resolutions earnings-festival growth of the year, which is right, but not enough to excite investors. If the company operates across all aspects of business, it could grow profits much faster than that. The potential is still there, but Disney needs to achieve in the three areas above to give the earnings they have been expecting to shareholders.
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Jeremy Bowman He has posts in Netflix and Walt Disney. The Motley Fool has jobs in and recommends Netflix, Walt Disney, and Fubotv. The fool has motley and Disclosure Policy.
