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Disney’s Daring $60B: Fueling Growth or Wasteful? Unraveling ABC Sale & Park Investment Implications!

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  • Earnings and Revenue: EPS of $1.04, On a GAAP basis, the EPS was -$0.25, Total revenue of $22.33 billion
  • Sports Agreements: Secured sports programming agreements to broadcast ACC football, basketball, and NASCAR Xfinity Series, aiming to boost viewership and revenue.
  • Asset Optimization: Potential sale of the ABC Network offers Disney a chance to offload lower-growth assets and reduce net leverage.

The Walt Disney Company (Disney) has demonstrated strong financial performance in the third quarter of 2023, with its earnings surpassing expectations. Despite missing revenue estimates by a slight margin, Disney’s strategic initiatives across its different business segments have contributed to its overall growth trajectory.

Q2 2023 Performance

Disney reported earnings per share (EPS) of $1.04, beating the consensus estimate by $0.07. However, the EPS on a GAAP basis was -$0.25, missing the estimate by $0.29. Disney recorded a total revenue of $22.33 billion, slightly lower than market expectations.

Subscriber Growth        

Disney’s performance in the third quarter is marked by several positive highlights. The company saw an impressive growth in Disney+ subscribers, adding 14.4 million subscribers and reaching a total of 221 million subscriptions across all streaming offerings. Domestic theme parks experienced strong performance, with increased attendance and guest spending. Furthermore, international parks and resorts, particularly Disneyland Paris, contributed to the segment’s operating income.

Strategic Content Expansion for The CW Network and Sports Programming Agreements

Disney made significant strategic announcements during the quarter. It unveiled new content for The CW Network’s 2023-2024 schedule, including scripted series and alternative programming. Additionally, Disney secured sports programming agreements to broadcast ACC football, basketball, and NASCAR Xfinity Series, which is expected to enhance viewership and drive revenue growth. The company also announced the expansion of Disney+ with new content and market expansion, fostering subscriber growth and engagement.

Strategic Announcement Description
New Content Unveiled New scripted series and alternative programming announced for The CW Network’s 2023-2024 schedule.
Sports Programming Agreements Agreements secured to broadcast ACC football, basketball, and NASCAR Xfinity Series, expected to enhance viewership and revenue.
Disney+ Expansion Continuous expansion and enhancement of Disney+ with new content and markets, fostering subscriber growth and engagement.

Investment in Parks, Experiences, and Products Segment

Disney’s revenue breakdown highlights the growth in subscription fees and theme park admissions, which demonstrated strong year-over-year increases. The Direct-to-Consumer segment experienced significant revenue growth, reflecting positive consumer engagement. The company’s continued focus on international markets, particularly in the Asia Pacific region, presents growth opportunities. The potential sale of the ABC Network offers Disney an opportunity to offload lower-growth assets while reducing net leverage. Furthermore, Disney’s expanded investment in its Parks, Experiences and Products segment aims to enhance capacity and yield robust returns.

Revenue Segment Quarter Ended July 1, 2023 Quarter Ended July 2, 2022 % Change (QoQ)
Affiliate Fees $4,234 $4,337 -2.37%
Subscription Fees $4,537 $3,889 16.68%
Advertising $3,043 $3,535 -13.97%
Theme Park Admissions $2,731 $2,312 18.12%
Resort and Vacations $1,990 $1,805 10.24%
Retail and Wholesale Sales of Merchandise $2,226 $1,896 17.41%
Merchandise Licensing $876 $916 -4.37%
TV/SVOD Distribution Licensing $646 $1,119 -42.27%
Theatrical Distribution Licensing $838 $620 35.16%
Home Entertainment $209 $149 40.27%
Other $1,000 $926 7.99%
Total Revenue $22,330 $21,504 3.85%

 

Conclusion

Disney’s robust earnings, strategic initiatives, and operational pivots underscore a promising outlook. Bolstered by positive financials, its strategic focus on streaming, global expansion, and innovative ventures like ad-supported plans are pivotal, we assign a “Buy” rating to Disney’s stock. The company’s performance suggests a trajectory towards the bullish price target, backed by a 32.96% return. However, caution is warranted. Market fluctuations, industry rivalry, and its current valuation pose risks, potentially swaying the stock towards the bearish realm. Investors must remain vigilant amidst uncertainties, balancing the company’s potential with the market dynamics to make informed decisions.

Disclosure: We don’t hold any position in the stock. This is not a recommendation of any kind to trade as investment carries risk.

Source: https://thewaltdisneycompany.com/press-releases/

https://thewaltdisneycompany.com/app/uploads/2023/08/Q3_FY23_Earnings_Presentation.pdf

https://thewaltdisneycompany.com/app/uploads/2023/08/q3-fy23-earnings-transcript.pdf

https://seekingalpha.com/news/4012319-a-disney-sale-of-abc-to-nexstar-could-work-for-both-wells-fargo

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