Source: PaxForex Premium Analytics Portal, Fundamental Insight
Walt Disney gave an update on its streaming business during its fiscal 2022 Q1 earnings report after the market closed on Feb. 9. Shareholders were satisfied that Disney noted an acceleration in growth in this segment.
That was something of a relief to those who thought the streaming segment's growth would stall as the economy recovered. As a result, Disney stock was up 3.3 percent the day after the announcement. The rise came on a day when the broad market declined amid reports that inflation rose faster than expected in January.
In general, Disney said total subscribers to its three streaming services (Disney+, ESPN+, and Hulu) rose to 196.4 million as of Jan. 1. That puts the House of Mickey in second place in the streaming battle. Rival Netflix reported its earnings in late January, showing a total of 222 million subscribers.
However, Disney continues to pick up the pace as the company said subscriber growth will be more pronounced in the second half of fiscal 2022. Netflix, meanwhile, is projecting subscriber growth in the next quarter well below its historical average for that period.
The company's flagship service, Disney+, added 11.7 million subscribers over the previous quarter to reach a total of 129.8 million, a 37% increase over the same period last year. Disney+ didn't launch until November 2019, perhaps the best time to launch any business, and has already reached 129.8 million subscribers. Disney CEO Bob Chapek reiterated his confidence that Disney+ will reach 230 million to 260 million subscribers by 2024.
Chief Financial Officer Christine McCarthy spoke in more detail about Disney+'s success during a conference call following the release of first-quarter results:
"Overall, we are pleased with the growth in Disney+ subscribers this quarter and look forward to launching new markets and a strong content lineup this year. As I've said before, we don't expect subscriber growth to be linear from quarter to quarter, and we still expect growth in the second half of the fiscal year to exceed growth in the first half."
Disney's content engine hasn't been able to get its work done at full capacity because the pandemic is limiting production. If it managed to achieve this level of growth without running at full capacity, shareholders should be encouraged by the potential when it picks up. That may be one reason why Chapek is confident that Disney+ will be able to attract more than 100 million subscribers in the next two years.
Interestingly, Disney's stock price is closely tied to the fate of its streaming segment. One possibility for this connection is that Disney's stock price will rise in 2020, even though the rest of its business has been hit hard by the pandemic-related closures. At the same time, in 2021, as the economic recovery gathered momentum and all the theme parks reopened, Disney's stock price fell, as the chart shows.
The difference in performance can be attributed to a surge in consumer demand for home entertainment in 2020, which benefited Disney's streaming services. Disney's subscriber growth slowed in 2021 when the economy reopened.
So it's not surprising that Disney stock rose the day after the announcement of revving subscriber growth. Shareholders may be further encouraged by management's confidence in continued growth for the remainder of the year and into 2024.
As long as price is above 142.30, follow the recommendations below:
- Time frame: D1
- Recommendation: long position
- Entry point: 154.40
- Take Profit 1: 164.60
- Take Profit 2: 169.50
Alternative scenario:
If the level of 142.30 is broken-down, follow the recommendations below:
- Time frame: D1
- Recommendation: short position
- Entry point: 142.30
- Take Profit 1: 134.30
- Take Profit 2: 129.40
