Source: PaxForex Premium Analytics Portal, Fundamental Insight
This year is a special year for the Walt Disney Company, as 2023 is the centennial of the company's founding. The House of Mickey is one of the most successful entertainment companies in history, and despite recent adverse events, there is every reason to believe that this company will dominate the field for another century.
Last year, Disney stock fell 37%, failing to escape the pains of the recession and the subsequent sell-off in the stock market. This year, however, the company and investors have a lot to look forward to. Here are some reasons not to write off Disney this year.
Disney's streaming business has experienced ups and downs over the past 12 months as the company has focused all of its efforts on growing its subscriber base.
In Q4 of fiscal 2022, Disney's media and entertainment segment posted a 3% year-over-year decline in revenue to $12.7 billion and a 91% decline in operating income to $83 million. The significant decline came after Disney invested about $30 billion in content in 2022, working to develop its flagship streaming service, Disney+.
The company's significant investment in streaming paid off as it achieved the highest number of subscribers in the industry in Q3 2022 and maintained its lead in Q4, reporting 236 million users versus Netflix's 223 million. Subsequently, Disney assured investors in Q4 that it expects "reduced operating losses going forward" as it works to achieve Disney+ profitability in fiscal 2024.
According to Grand View Research, the streaming market was worth $59.14 billion in 2021 and will grow at an average annual rate of 21.3% through 2030. Disney's significant content spending in 2022 is worrisome, but leadership in a fast-growing market could pay big dividends in the long run.
For much of 2020 and 2021, Disney experienced weakness in critical parts of its business as movie theaters and theme parks closed due to quarantine restrictions reduced revenue. After reopening last year, audiences and box office receipts gradually returned, and in 2023 the movie industry stands a good chance of returning to pre-pandemic form.
In fact, Disney has already made positive steps toward recovering its losses in the media and entertainment segment with the sequel to 2009's "Avatar." "The Way of the Water" grossed $1.7 billion at the box office on Jan. 8, becoming the seventh highest-grossing film in history in just four weeks. Variety reported that the film cost $350 million to produce, suggesting that Disney has reached profitability with the new film.
In addition, the company has many releases planned for the rest of the year, including three Marvel blockbusters and the latest Indiana Jones movie starring Harrison Ford. In 2023, a combination of lower content costs and higher box office receipts could significantly boost Disney's media profits.
After nearly two years of theme park closures, Disney is welcoming guests again in 2022. In Q4 2022, revenues from the parks rose 36% year over year to $12.7 billion, and segment operating income more than doubled to $1.5 billion. Even as rising inflation dampened demand in other industries, Disney park attendance remained strong.
As a result, the company has used the past year to restructure its parks, prioritizing revenue growth per person, which will allow it to maintain its position in the event of a further economic downturn that reduces attendance. In 2022, Disney raised ticket prices worldwide and began charging for once-free services such as the Fast Pass program.
After some consumer discontent, however, Disney reversed some of the price increases in January. In the end, per-person costs have risen nearly 40 percent since 2019. Fares related to hotel parking and attraction photos were revised, and the company increased the number of park days available at the lowest price.
However, Disney has not lowered ticket prices, and for good reason. Disney Parks, Experiences, and Products Chairman Josh D'Amaro said the other day that the price revision was not due to demand, but to show fans that "we are listening to them." Even despite the price increases, attendance at the parks remains high, with several days at Disneyland California selling out in January.
Disney's thriving parks business is a strong asset as the company continues to grow media revenue and push its streaming business toward profitability by 2024.
As long as the price is above 94.00, follow the recommendations below:
- Time frame: D1
- Recommendation: long position
- Entry point: 99.64
- Take Profit 1: 107.00
- Take Profit 2: 116.00
Alternative scenario:
If the level of 94.00 is broken-down, follow the recommendations below:
- Time frame: D1
- Recommendation: short position
- Entry point: 94.00
- Take Profit 1: 90.00
- Take Profit 2: 84.00
