The Walt Disney Company (NYSE: DIS) saw its share price rally in extended trading hours on Wednesday, the 8th of February, after CEO Robert A. Iger reported a “solid first quarter” for the entertainment and mass media conglomerate. With the company “embarking on a significant transformation” aimed at “sustaining growth and profitability”, bullish market sentiment saw Disney’s share price surge 5.6% in extended trading to open at $118.04 on Thursday, its highest price level since late August 2022.
The entertainment giant reported a quarterly diluted earnings per share (EPS) figure of $0.99, beating expectations of $0.79 by nearly 25% but falling short of last year’s quarterly figure of $1.06. With the group’s revenue figure coming in at $23.51 billion, a significant 8% year-over-year increase from the prior year’s quarterly figure, the bullish sentiment was further supported against the company’s decision to “reshape [its operations] around creativity, while reducing expenses [to] deliver value for [its] shareholders.” To save around $5.5 billion over the next few years, Iger announced plans to cut 7 000 jobs, approximately 3% of the company’s global workforce, as part of an overall restructuring plan.
Technicals:
Despite gapping higher to open at $118.04 on Thursday, Disney’s price action retraced from the major $118.82 per share resistance level (green line), which will be watched closely for a potential breakthrough. The bulls could see Disney’s share price rise towards the $127 per share resistance level (higher dotted black line), last tested in August of 2022.
For the bear case, if negative market sentiment prevails, the price action could decline towards the $100 and possibly $90 per share support levels (lower dotted black lines), providing a potential entry point for bullish investors. Alternatively, suppose Disney’s media and entertainment segment continue to yield sluggish growth. In that case, we could see the price action decline towards the major resistance level at $83.75 (red line), last tested in the early months of the Covid-19 pandemic outbreak.
Fundamental Analysis:
Taking a closer look into Disney’s fundamentals, the group reported promising first-quarter results, with revenue and earnings exceeding expectations. While quarterly revenue grew by 8% year-over-year to $23.51 billion, diluted EPS decreased by 6.6% year-over-year to $0.99 per share. Furthermore, net income from continuing operations grew by 11% year-over-year to $1.28 billion from $1.15 billion, while cash used in operations increased by $765 million from $209 million in the prior year’s quarter to $974 million in the current quarter.
Analysing Disney’s segment revenues, the media and entertainment distribution segment saw its quarterly revenue grow by only 1% year-over-year from $14.59 billion to $14.78 billion. Despite sluggish growth in the media and entertainment distribution segment, Disney saw its parks, experiences and products segment yield a 21% year-over-year revenue growth, with the quarterly figure coming in at $8.74 billion compared to last year’s $7.23 billion.
Similarly, Disney’s media and entertainment distribution segment underperformed significantly when analysing segment operating performance. The media and entertainment distribution segment reported a $10 million operating loss in the current quarter. In contrast, Disney’s parks, experiences and products segment reported a stellar 25% year-over-year growth in operating income from $2.45 billion to $3.05 billion.
Media and Entertainment Distribution:
Considering Disney’s media and entertainment distribution segment, Direct-to-Consumer revenues for the latest quarter increased by 13% to $5.3 billion, while operating loss increased by 78% to $1.05 billion. A greater-than-expected loss at Disney+ and poor results at Hulu were the primary drivers behind Disney’s sluggish performance in its media and entertainment distribution segment. Total Disney+ paid subscribers declined by 2.4 million over the quarter, from 164.2 million to 161.8 million, reflecting the streaming provider’s first decrease in paid subscribers since November 2019. Despite Disney+ Core adding 1.4 million subscribers, the Indian brand Disney+ Hotstar lost 3.8 million subscribers due to the lack of Indian Premier League cricket matches. Improved results at ESPN+ partially offset this.
Parks, Experiences and Products:
Disney’s parks, experiences and products segment saw revenues increase by 21% to $8.74 billion while operating income grew 25% to $3.05 billion, reflecting a solid quarter for the segment. Operating income growth of 36% at the domestic parks and experiences was primarily due to more significant volumes and higher guest spending, while the relaxation of Covid-related restrictions, solid growth at Disneyland Paris and higher royalties from Tokyo Disney Resort were some of the main drivers behind superior operating income growth for Disney’s international parks and experiences segment.
Summary:
With the Walt Disney Company (NYSE: DIS) recently exceeding earnings expectations and CEO Robert A. Iger “embarking on significant transformation” to deliver value for Disney shareholders, the entertainment and mass media giant saw its share price test the major $118.82 resistance level for the first time in five months. A rare decrease in Disney+ paid subscribers saw the price action retrace to close at $108.06 on Friday, the 10th of February. The bulls could see the share price rally towards the $127 resistance level, while the bears could see the share price decline towards the $90 support level, which could be watched closely as a potential entry point.
Sources: Bloomberg, CNBC, Daily Mail, Financial Times, FoxNews, The New York Times, The Walt Disney Company, Trading View
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