09 November 2023
If you are covering the latest financial results from Disney or Arm, please find below a comment from Ben Barringer, technology analyst at Quilter Cheviot:
Disney
“Disney is going through a bit of a messy period and these latest results highlight the challenge the company is facing. The company has managed to keep a lid on costs and is reducing spend on content, but revenues are lighter than expected as Disney continues to suffer from being a legacy media giant.
“Traditional TV continues its decline, and while Disney+ subscriptions were better than expected, it is now guiding for lower than expected subscriber growth as price increases bite. The parks and resorts side of the business continues to do well and is being helped by a strong American consumer – although how long this will last with interest rates much higher for longer remains to be seen.
“Ultimately Bob Iger is still trying to sort out the mess Disney has created for itself and you are starting to see why this is becoming a longer term project for him. With the price for the remaining Hulu stake likely to rise, the writer and actor strikes causing content issues, attempts to sell off the Indian business and worries around Disney+’s scalability and profitability, the task ahead of him is a big one. For investors, the likes of Netflix are a much more attractive given they don’t have any of that baggage that comes with being a legacy business.”
Arm
“In its maiden results update, Arm has delivered in improving margins, but more worryingly the guidance is very weak. Straight out of the IPO gates you would expect a company to beat expectations and raise guidance – that would be prudent stock management. However, Arm has failed in doing that and there are risks for the company in China, as was highlighted ahead of the IPO.
“We were certainly looking for strong execution, which it is delivering on margins. Demand for artificial intelligence in autos is very strong, but consumer electricals has been weaker than expected. With Arm China also weak, the company has much to do if it is to see its share price consistently trade above the IPO price. For now, however, it is likely to bounce around that level and ultimately disappoint a few hoping for better results in the short-term.”
