- Disney missed EPS forecasts by about 90%.
- Revenue for the fiscal Q4 also missed by about 5%.
- 7% slide puts Disney stock near attractive demand zone.
The Walt Disney Company (DIS) stock slid 6.8% after hours to $93.09, its lowest level in about a month as the market was confounded by an explosion in streaming costs. Shares sold off as much as 9% when Disney posted results for the fiscal fourth quarter with adjusted EPS of $0.30, about 90% off Wall Street estimates for $0.56, and revenue of $20.15 billion which was $1.3 billion off the mark.
Disney earnings news
The serious miss was partially explained by hyper-growth in its streaming costs. Now that Disney+ has become one of the biggest streaming platforms in the world, Disney executives are doubling down on investments in order to keep their competitive advantage intact. Disney is spending on the order of $30 billion or more annually to retain users by creating original content.
The strategy has seemed to help as Disney+ beat the estimate for 161 million Disney+ subscribers by posting 164.2 million to end the quarter.
“Our fourth quarter saw strong subscription growth with the addition of 14.6 million total subscriptions, including 12.1 million Disney+ subscribers," said CEO Bob Chapek. "The rapid growth of Disney+ in just three years since launch is a direct result of our strategic decision to invest heavily in creating incredible content and rolling out the service internationally."
Chapek noted that the service would not achieve profitability until fiscal 2024 but that profitability would be greatly helped by a new Disney+ ad-supported tier that the company plans to unveil in December. In total Disney+ lost $1.5 billion during the quarter on $4.9 billion in revenues. Macquarie Research put out a note recently saying they expect Disney to do $800 million in ad sales alone next year for the new ad-supported tier. Chapek said the company had already secured 100 major advertisers for the service.
The company's theme park segment did $7.4 billion in sales during the quarter and doubled operating income compared with the same quarter a year ago. However, analysts were less pleased by the segment's margins, which have begun to tighten.
"The company’s operating income guidance for next year is much weaker than present expectations and management tone appeared more cautious due to macro risks as well as potential impact from factors such as higher churn in streaming due to price increases," wrote Barclays analyst Kannan Venkateshwar.
Disney stock forecast
The sell-off means that Disney stock is back near the demand zone that provided support during June and July. This zone, colored light blue in the daily chart below, stretches from just above $90 to just above $92. It also held strong on October 13 during that month's swing low. Any move below $90 would signify a stronger drop to the covid pandemic low of March 2020 at $79. We are not sure that level is in the cards, however. Disney remains an elite large-cap stock, and appears to be winning the streaming wars. It now has 235 million subscribers across its many platforms, including ESPN+ and Hulu.
The Moving Average Convergence Divergence (MACD) indicator looks ready to turn over for the worse, but the 9-day moving average is still well above the 21-day average. Traders' best bet is scooping up shares once they fall below $92.
Disney daily stock chart
Information on these pages contains forward-looking statements that involve risks and uncertainties. Markets and instruments profiled on this page are for informational purposes only and should not in any way come across as a recommendation to buy or sell in these assets. You should do your own thorough research before making any investment decisions. FXStreet does not in any way guarantee that this information is free from mistakes, errors, or material misstatements. It also does not guarantee that this information is of a timely nature. Investing in Open Markets involves a great deal of risk, including the loss of all or a portion of your investment, as well as emotional distress. All risks, losses and costs associated with investing, including total loss of principal, are your responsibility. The views and opinions expressed in this article are those of the authors and do not necessarily reflect the official policy or position of FXStreet nor its advertisers. The author will not be held responsible for information that is found at the end of links posted on this page.
If not otherwise explicitly mentioned in the body of the article, at the time of writing, the author has no position in any stock mentioned in this article and no business relationship with any company mentioned. The author has not received compensation for writing this article, other than from FXStreet.
FXStreet and the author do not provide personalized recommendations. The author makes no representations as to the accuracy, completeness, or suitability of this information. FXStreet and the author will not be liable for any errors, omissions or any losses, injuries or damages arising from this information and its display or use. Errors and omissions excepted.
The author and FXStreet are not registered investment advisors and nothing in this article is intended to be investment advice.
Recommended content
Editors’ Picks
EUR/USD treads water just above 1.0400 post-US data
Another sign of the good health of the US economy came in response to firm flash US Manufacturing and Services PMIs, which in turn reinforced further the already strong performance of the US Dollar, relegating EUR/USD to the 1.0400 neighbourhood on Friday.
GBP/USD remains depressed near 1.2520 on stronger Dollar
Poor results from the UK docket kept the British pound on the back foot on Thursday, hovering around the low-1.2500s in a context of generalized weakness in the risk-linked galaxy vs. another outstanding day in the Greenback.
Gold keeps the bid bias unchanged near $2,700
Persistent safe haven demand continues to prop up the march north in Gold prices so far on Friday, hitting new two-week tops past the key $2,700 mark per troy ounce despite extra strength in the Greenback and mixed US yields.
Geopolitics back on the radar
Rising tensions between Russia and Ukraine caused renewed unease in the markets this week. Putin signed an amendment to Russian nuclear doctrine, which allows Russia to use nuclear weapons for retaliating against strikes carried out with conventional weapons.
Eurozone PMI sounds the alarm about growth once more
The composite PMI dropped from 50 to 48.1, once more stressing growth concerns for the eurozone. Hard data has actually come in better than expected recently – so ahead of the December meeting, the ECB has to figure out whether this is the PMI crying wolf or whether it should take this signal seriously. We think it’s the latter.
Best Forex Brokers with Low Spreads
VERIFIED Low spreads are crucial for reducing trading costs. Explore top Forex brokers offering competitive spreads and high leverage. Compare options for EUR/USD, GBP/USD, USD/JPY, and Gold.