Walt Disney (NYSE: DIS) shares opened slightly higher following its fiscal Q1 earnings in which the company reported better than expected earnings. Shares opened at new highs but sold off to close 2% lower.
Inside the Numbers
In its fiscal Q1, Disney reported more than expected growth in paid subscribers, and its first quarterly profit since before the pandemic. Earnings per share was $0.32, while analysts were expecting a loss of $0.41. Revenue also came in higher at $16.3 billion vs $15.9 billion expected.
The biggest surprise was that the company reported it had reached 95 million paid subscribers to Disney+. However, the numbers may be slightly inflated due to free trials for Verizon (NYSE: VZ) who may not choose to renew their subscriptions. The company did note that its conversion from free to paid subscribers is going better than expected.
Due to these promotions, average monthly revenue per paid Disney+ subscriber dipped by 28% from $5.56 to $4.08. Another factor was Disney+ subscribers also include subscribers from India and Indonesia who pay a lower subscription fee than other markets. Not including foreign figures, average revenue per sub would have been slightly higher at $5.37.
The company also reported a total of 146 million subscribers across all streaming services including ESPN+ and Hulu. Revenue for Disney's direct to consumer business increased by 73% to $3.5 billion which offset losses in parks and movie studios.
Revenue at Disney's parks business declined by 53% to $3.6 billion due to many of its theme parks being shut down or experiencing limits on attendance. In total, the pandemic cost Disney's parks division around $2.6 billion in the first quarter. However, the good news is that COVID case counts are sharply declining across the country which is leading to gains for all types of travel stocks including Disney. In addition to parks, the movies division was also negatively affected as licensing revenue dropped by 56% to $1.7 billion.
Stock Price Outlook
Disney's path is emblematic of the overall stock market. Parts of its business have been totally demolished by the coronavirus. But, other parts of its business are experiencing unprecedented growth.
However, now that the coronavirus crisis seems to be ending, investors are anticipating that its parks division will be return to its previous status. Not only this, it will likely see increased demand and pricing power for an extended period of time. However, now Disney also has a booming streaming division as well.