Walt Disney Recovered from Covid Era Loss but Grossly Undershot Investors’ Expectations

The Walt Disney Company reported financial results for the fourth fiscal quarter and fiscal 2021 ended October 2, 2021.

Walt Disney is one of the ten most expensive brands in the world. It is one of the largest Hollywood studios, the owner of 11 theme parks and 2 water parks, as well as several broadcast networks, including the American Broadcasting Company, ABC. Walt Disney's headquarters are located in Burbank, California, USA. There are also major departments in France (The Walt Disney Company France (since 1992)), Japan (The Walt Disney Company Japan (since 1959)) and Russia (The Walt Disney Company CIS (since 2006)). Number of employees: more than 223,000 people

Walt Disney owns the following subsidiaries: Walt Disney Studios; Walt Disney Television; Marvel Entertainment; Disney General Entertainment Networks; Disney Sports Networks; Disney Media & Entertainment Distribution; Disney International Operations; Disney Parks, Experiences and Products; National Geographic Partners (73%); A&E Networks (50%); ESPN Inc. (80%). Disney's main competitors are currently other major media corporations such as Warner Media, Sony Corporation, Comcast Corporation and Viacom. As an animation studio, the company's main competitor is the animation company DreamWorks SKG.

Key results of the published earnings report:

Revenue $18.5 billion (+26% YoY) undershot the consensus estimate at $18.8 billion. Operating income was $1.6 billion, higher by about $1 billion than a year ago, but well below the analysts’ average of $2 billion. Net income grew to $159 million (against loss of $710 million last year). Adjusted EPS was $0.37, below Wall Street's estimate of $0.53.

The company added just 2.1 million subscribers to Disney+ this quarter (+12.4 million last quarter), up to 118.1 million in total. The analyst consensus forecast was for 126.2 million subscribers. Long-term target: Disney+ sticks to its plans to grow subscribers to 230-260 million by 2024. Average monthly income per paid Disney+ subscriber decreased from $4.52 to $4.12 due to an increase in Disney+ Hotstar subscribers in the current quarter compared to the year-ago quarter.

Disney theme parks posted revenue growth, but margins were disappointing. Many parks are already reopened, but some have capacity restrictions. Disney's Parks, Amusement & Merchandise segment generated revenues of $5.5 billion, doubling that the year before and in line with estimates.

Summary: In the short run, there is a potential risk of further share price decline. Disney shares have not yet reached their buying point. The long-term outlook remains moderately positive, but it may be already priced in. The drivers remain virtually the same: further development and expansion of streaming and the recovery of the cruise segment. The entertainment conglomerate is gearing up to make a technological leap into the world of virtual reality.