Disney Reports Streaming Profit, Price Hikes to Come
Walt Disney stock is trading lower despite the entertainment giant's beat-and-raise quarter and announcement of price hikes. Here's what you need to know.
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Walt Disney (DIS) stock is trading modestly lower Wednesday despite the entertainment and media giant reporting higher-than-expected top- and bottom-line results for its fiscal third quarter and raising its full-year profit forecast.
In the quarter ended June 29, Disney's revenue increased 3.7% to $23.16 billion, driven by 4.5% growth in its Entertainment segment to $10.58 billion. Its earnings per share (EPS) were up 35% from the year-ago period to $1.39.
Disney's results were boosted by its direct-to-consumer (DTC) entertainment business, consisting of Disney+, Hulu and ESPN+, which combined to post a profit for the first time ever and one quarter ahead of the company's guidance.
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Separately, Disney also announced price increases for these streaming services yesterday, according to CNBC. Beginning in mid-October, most Disney+, Hulu and ESPN+ plans will increase by $1 to $2 per month.
"Our performance in Q3 demonstrates the progress we've made against our four strategic priorities across our creative studios, streaming, sports, and Experiences businesses," said Disney CEO Bob Iger in a statement. "This was a strong quarter for Disney, driven by excellent results in our Entertainment segment both at the box office and in DTC, as we achieved profitability across our combined streaming businesses for the first time and a quarter ahead of our previous guidance."
The results beat analysts' expectations. Wall Street was anticipating revenue of $23.07 billion and earnings of $1.19 per share, according to CNBC.
For the second consecutive quarter, Disney raised its full-year profit forecast. The company now anticipates earnings-per-share growth of approximately 30%, up from its previous forecast of 25% growth.
Is Disney stock buy, sell or hold?
Disney is near the bottom of the pack this year as far as Dow Jones stocks go. Yet, Wall Street is bullish on shares. According to S&P Global Market Intelligence, analysts' average target price for DIS stock is $122.59, representing implied upside of nearly 40% to current levels. Additionally, the consensus recommendation is Buy.
Not everyone is as optimistic toward the blue chip stock, though. Financial services firm CFRA has a Hold rating on Disney stock with a $100 price target.
"We think a further strategic realignment may be needed in linear," wrote CFRA Research analyst Kenneth Leon in a July 23 note. "Cable pay TV, including ESPN and the ABC network, is a legacy unit that is losing advertising revenue and pay TV subscribers. Sports rights and the hefty offer to air the NBA should be called out on the earnings call."
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