Walt Disney will report its Q2 FY23 earnings after the US markets close on 11 May APAC time. The entertainment giant beat on the top and bottom line in the fiscal first-quarter earnings as the theme park’s revenue has seen strong growth, offsetting its sluggish performance of the Disney+ streaming business, which suffered a 2.4 million loss in subscribers. The return of CEO Bog Iger did not quite convince investors of Disney’s further growth as its shares fell about 14% since the last earnings report. The Disney+ subscriber growth and its guidance into the streaming business will be key to steering its shares near-term price action.
Another single digit growth is expected, with Disney+ losing steam
In Q1 FY23, Disney reported earnings per share at $0.99, or a 7% decline from a year ago. The revenue was at $23.51 billion, or 8% growth year over year. Disney+ total subscribers declined to 161.8 million globally in the same quarter. According to Yahoo Finance, the entertainment giant is expected to report earnings per share at $0.93, or a 14% drop annually. The revenue estimate is at $21.79 billion, or a 7% growth year over year.
Disney’s growth has significantly slowed to a single digit in Q1 FY23. While the theme park segment has seen a sharp growth pullback, its growth in the streaming business also slowed significantly. The decelerating growth of Disney Park was mostly due to a year-on-year comparison with the period during the Covid closure in the prior year.
Disney Media and Entertainment Distribution is also sluggish with only 1% growth in revenue. Disney+ subscribers had their first drop losing 1% in the first fiscal quarter from above 30% growth in the previous quarters in 2022.
The price hike for streaming services has led to a sharp decline in Disney+ subscribers. The Linear Networks, including ESPN, Disney Channel, Disney Junior, and broadcast ABC, declined 5%, and the direct-to-consumer segment growth slowed to 13% from 20% in the first fiscal quarter, suggesting the streaming business faced fierce competition from rivals such as Netflix, Amazon Prime, and Apple TV.
In its financial report in Q1 FY23, the company highlighted the widened operating loss of $1.1 billion in Direct-to-Consumer reflected “higher programming and production costs and increased technology costs” and “an unfavorable foreign exchange impact.”
Since Bob Iger was back at the helm in November 2022, he pushed cutting costs in content production, announcing a $5.5 billion cost-reducing plan, including 7,000 job cuts, or an approximate 3% of its workforce as shown in October 2022. Iger engages in the development of creative content and further development in the Disney+ streaming business. He recognized the company into three segments: Disney Entertainment, ESPN division, and Disney Parks.
A return of growth in Disney+ subscribers and revenue may offer an instant upside price action in its share price. But disappointing figures in this section may slash its share price again.
Source: CMC Markets NG as of 8 May
Disney’s shares have been moving in a short-term ascending channel since 13 May 2022. With signs of breaking above the 100-day moving average, the near-term price directional bias is to the upside, with the potential long target at about 102. A breakout of this level may take its shares to approach 112, the highest seen on 9 February when the company reported the Q1 FY23 earnings. The potential pivotal support may be at 90, which is the low on 13 March, then 84, a 3-year low.