Shares of Walt Disney (DIS) plunged after the company reported weaker-than-expected Disney+ subscriber growth in fiscal Q4, reports Chris Quigley, value investor and contributing editor to The Prudent Speculator.
Subscribers for the streaming platform grew by 1.8% quarter-over-quarter to 118.1 million (vs. 119.6 million consensus estimate), while EPS was $0.37 (vs. $0.49 estimate) and global revenue was $18.53 billion (vs. $18.78 billion estimate).
The company’s Media and Entertainment Distribution revenue rose 3.2% quarter-over-quarter to $13.08 billion and Parks, Experiences and Products revenue rose 26% quarter-over-quarter to $5.45 billion.
CEO Bob Capek said, “And as we head into fiscal ’22, we remain keenly focused on advancing them to drive our continued growth … using the power of our far-reaching platforms and new technologies to give consumers the best entertainment experience possible.”
Mr. Capek mentioned that the company’s new annual pass program is off to a strong start, “In late August, Disneyland Resort launched Magic Key, the new annual membership program that is resonating strongly with legacy annual passholders, while also attracting new passholders. In fact, about 40% of current sales are to new passholders.”
We thought Disney’s results were solid and note that Disney’s target for Disney+ subscribers is between 230 million and 260 million by the end of fiscal 2024.
Disney is a long way from that number, but with the service expanding to new international markets and Disney+ serving as a nice complement to other streaming services, we think it remains an accomplishable goal.
The dividend has yet to be reinstated and management did not discuss its status on the call, but our Bloomberg data suggests that it might be brought back in mid-2022.
Disney earnings are projected to grow from $2.29 per share this year to $4.51 next year and near $7.00 by 2024. That makes the near-term valuation metrics a little bit expensive, but we think the long-term outlook plus Disney’s high-quality business makes it a core component in our broadly diversified portfolios. Our Target Price is $202.
