Disney’s stock has taken a hit as the company focuses on making its streaming business profitable. With increased competition in the streaming Market, Disney is looking to maximize its revenue from platforms like Disney+ and Hulu. Investors are closely watching Disney’s efforts to capitalize on the growing demand for streaming content.
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Disney reported that its streaming business turned a profit for the first time in its fiscal second quarter. However, the company expects weaker results in the current quarter, leading to a nearly 10% drop in its stock price. Despite this, CEO Bob Iger’s recent turnaround plan has instilled confidence in investors.
The direct-to-consumer (DTC) segment of Disney’s entertainment business, which includes Disney+ and Hulu, posted an operating income of $47 million in Q2, a significant improvement from the previous year. However, the company anticipates losses in the DTC sector in the third quarter due to its Indian brand, Disney+ Hotstar.
Not all of Disney’s streaming services were profitable in Q2, with total direct-to-consumer losses amounting to $18 million. The company aims to achieve full streaming profitability by the fourth quarter of this year. Despite this, Disney beat analyst expectations with adjusted earnings of $1.21 per share and revenue of $22.1 billion.
Disney raised its guidance for full-year adjusted earnings growth to 25%, showcasing confidence in its long-awaited turnaround. However, the company reported an impairment charge of over $2 billion after merging its Star India business with Reliance Industries.
KeyBanc analyst Brandon Nispel noted that soft guidance for entertainment streaming may dampen enthusiasm among investors. Disney’s tepid outlook for its Experiences business, which includes theme parks, is also viewed as a negative. CFO Hugh Johnston mentioned global travel moderation and rising costs as potential challenges for the company.
In Q2, Disney saw an increase in Disney+ subscriber additions, with over 6 million new subscribers surpassing Bloomberg consensus estimates. The company also noted positive momentum in average revenue per user (ARPU) amid recent price hikes and a crackdown on password sharing.
The parks business delivered strong results, with domestic operating income rising to $1.61 billion. However, domestic operating income at ESPN fell 9%, attributed to lower affiliate revenue and production costs.
Looking ahead, Disney is doubling down on sports streaming through partnerships with Fox and Warner Bros. Discovery. The company is also working on a standalone ESPN streaming platform set to debut in fall 2025. Additionally, Disney has agreed to increase its media rights deal with the NBA to $2.6 billion.
Overall, Disney’s performance in Q2 reflects both successes and challenges in its streaming and entertainment segments. The company continues to navigate changing consumer trends and industry dynamics while aiming for sustained profitability in its streaming services.
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1. Why is Disney’s stock falling?
Disney’s stock is falling because the company is investing a lot of money into their streaming services and it’s taking time to become profitable.
2. Is Disney’s streaming service not doing well?
Disney’s streaming service is actually quite popular, but it’s taking time for the company to make a profit from it.
3. Will Disney bounce back from the stock drop?
Disney is a strong company with many successful businesses, so it’s likely that they will bounce back from the stock drop in the future.
4. Should I be concerned about investing in Disney right now?
It depends on your risk tolerance and investment goals. Disney has a strong track record and many successful businesses, so it could still be a good long-term investment.
5. What is Disney doing to make their streaming business profitable?
Disney is working on creating original content, expanding their subscriber base, and finding new revenue streams to make their streaming business more profitable.
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