Walt Disney Co. has a lot of work to do before its profits on Thursday: nothing less than redefining a multibillion-dollar company.
Last month, the DIS media empire,
pivoted hard to its direct-to-consumer business while trying to reopen its theme parks in California. A strategic reorganization of Disney’s media and entertainment businesses to focus on streaming was underway but gained momentum due to the pandemic, then chief executive Bob Chapek said.
The Disney + streaming service, which has attracted more than 60 million subscribers since its launch in November 2019, has taken a more aggressive approach to move content directly to streaming amid the COVID-19 pandemic. Films such as “Mulan” and “Hamilton” debuted on the service rather than in theaters in the United States, and last week Disney said that Pixar’s next animated film, “Soul” will premiere on Disney + on December 25.
“We see the reorganization as a further strengthening of Disney’s ability to control its distribution by [direct-to-consumer] broadcast the primary monetization mechanism (rather than cable distribution) across businesses, ”Guggenheim analyst Michael Morris said in an Oct. 12 memo. He maintained a buy rating on Disney shares with a price target of $ 140.
To be frank, Disney has little choice. It faces competition from media giants Apple Inc. AAPL,
Netflix Inc. NFLX,
Comcast Corp. CMCSA,
AT&T Inc. T,
Amazon.com Inc. AMZN,
and more. At the end of October, Netflix announced that its standard plan, which allows two streams in HD quality, would drop from $ 12.99 per month to $ 13.99 per month. Its premium plan, which allows up to four simultaneous streams with more high-definition offerings, will drop from $ 15.99 to $ 17.99.
Disney puts eggs in digital basket as company awaits green light from health officials for Disneyland and Disney California Adventure to reopen in Southern California. The company announced at the end of September 28,000 layoffs in its Parks, Experiences and Products segment due to the prolonged closures of theme parks caused by the coronavirus pandemic.
Indeed, a record increase in COVID-19 cases nationwide is suppressing the average daily attendance at Disney World, according to a Deutsche Bank Research note on November 5. “We believe the continued progression of average daily cases in the United States and Florida is negative. impacting park attendance, ”said analyst Bryan Kraft, noting a 15% drop from the previous week.
Disney-owned ESPN said last week it was cutting 300 jobs, or about 6% of its workforce, as cost pressures from the pandemic accelerate the company’s shift from sports media to streaming.
Still, all is not rosy for Disney + as its first anniversary approaches. A key part of the success of the service – Verizon Communications Inc. VZ,
customers who received a free year of the streaming service as a promotion must now start paying or cancel. This, in turn, has created angst among Disney officials that a large percentage of Verizon users will undo, according to a report in L’Information.
What to expect
Earnings: Analysts on average expect Disney to report a loss of 71 cents per share, down from net income of $ 1.07 per share a year ago. Analysts have lowered their outlook for the quarter since the last earnings report as theme parks in California remain closed and live productions remain in limbo due to pandemic; analysts had expected a loss of 17 cents per share in late June.
Contributors to Estimize – a crowdsourcing platform that brings together estimates from Wall Street analysts as well as buy-side analysts, fund managers, business executives, academics and others – are planning a loss of 58 cents per share on average.
Income: Analysts on average expect Disney to report fourth-quarter revenue of $ 14.15 billion, up from $ 19.1 billion in the same quarter a year ago. Estimate contributors predict $ 14.05 billion on average.
Movement of stock: Disney stock is down 14% this year as the S&P 500 SPX index,
increased by 2%.