8 May 2024
If you are covering Disney’s latest financial results, please find a comment from Ben Barringer, technology analyst at Quilter Cheviot:
“Disney’s second quarter results on the surface were fine, but the outlook is where the disappointment was lurking. While better cost discipline has got its streaming business into better shape, Disney is guiding for a decline in subscriptions in the next quarter as we hit the summer lull. It is hoping to combat this by copying the Netflix model and preventing password sharing globally. The problem Disney has is that its content is not on the same level as Netflix as yet, and is further impacted by the writers’ strike of 2023, thus we are likely to see more churn rather than conversions into new subscribers. With linear TV continuing its perpetual decline, Disney is banking on the stream service delivering consistent profits soon.
“The big disappointment for investors, however, was the future growth of the Parks business, where the vast majority of money is made. Growth is slowing as the post-Covid honeymoon period for travel comes to an end. Consumers are draining the pile of excess savings that were built up during the pandemic, and as a result Disney is suffering. What the new normal looks like remains to be seen, but a good result would be growth somewhere in the mid- to high-single digits.
“Despite the uncertainty, Disney does still remain a high-quality business. Its major problem is that through its size and legacy, it carries a lot of flaws. Netflix by comparison is a much cleaner and simpler business, and as such if investors want exposure to consumer entertainment, its proposition is far more compelling at this stage.”
