When Disney (DIS) unveils fiscal fourth quarter 2021 results after the bell on Wednesday, user growth for the entertainment giant’s streaming service Disney+ and the recovery in foot traffic at theme parks will be closely watched by investors.
New membership additions for the company’s two-year-old Disney+ have come into focus after a surge in direct-to-consumer video streaming at the height of stay-at-home orders during the COVID-19 pandemic helped buoy Disney. However, the return to in-person activities has put a damper on subscriber growth for all streaming video services. Meanwhile, turnout at Disney's lucrative parks and resorts remains below pre-virus levels as traffic dwindled amid rising cases and restrictions, but analysts expect a post-pandemic uptick in attendance to parks to help the media conglomerate stage a rebound.
Here are the main metrics expected in Disney’s report based on Bloomberg consensus estimates:
Revenue: $20.8 billion expected vs. $17.02 billion during prior quarter
Adjusted earnings per share: 57 cents expected vs. 80 cents during prior quarter
According to Bloomberg consensus data, Disney is expected to see Disney+ streaming subscribers grow by about 7 million on a quarter-over-quarter basis, a jump from 2.1 million new members brought on in the prior quarter. The company has targeted bringing on between 230 million and 260 million subscribers in total to the service by the end of fiscal 2024.
However, as the swaths of subscribers who signed up for Disney+ during lockdowns go back to regular routines, stock-watchers are worried about whether the all-important facet of Disney’s business can continue to churn out a profit. Some analysts anticipate a lineup of new video content will help boost subscriber numbers.
A falloff in consumers signing up for streaming services has already impacted Disney’s competitors on the heels of a broader downturn for “stay-at-home” companies. Netflix, the leading U.S.-based internet streaming platform, accumulated 8.3 million subscribers in the three-month period ended Dec. 31, below its own expectations of 8.5 million subscriber additions. The company also forecasted a lower-than-expected net add of 2.5 million subscribers in Q1 2022.
The outlook sent Netflix cratering and dampened investor sentiment around how other streaming giants, including Disney+, may fare. Shares of Disney have fallen in empathy by as much as 8% year-to-date, underperforming the S&P 500. Its latest dip followed the disappointing guidance from Netflix as investors worry about stagnant growth for all streaming platforms.
Disney was up 2.06% to $145.41 per share as of 12:53 p.m. ET on Wednesday.
With performance figures underway, analysts are optimistic Disney+ fared better last quarter than the previous thanks to a boost from new content releases, including "The Beatles: Get Back" documentary, which alone is estimated to have prompted 200,000 households to subscribe to the platform, per subscription-analytics firm Antenna.
Disney also joins streaming peers in hiking prices for its services as it invests heavily in the creation of new original content for the platform, which generally has helped bolster sign-ups. The company raised prices for its Disney+ streaming services one year ago to $8 a month, while Hulu, majority owned by Disney, increased the price of its live TV subscription services in December by $5 a month to $70 a month. The fee includes Disney+ and ESPN+, which alone costs $7 a month.
In Netflix’s earnings call on Jan. 20, Chief Operating Officer Greg Peters said that “customers are willing to pay for great entertainment,” citing Disney+ and other streaming services as “endorsements” of that theory and arguing that subscribers have typically been willing to allot more for subscription fees if it means better storytelling and more variety.
“A 2H re-acceleration in Disney+ streaming subscriptions, a steady ramp-up at the parks unit and a best-in-class film studio will reinvigorate the narrative, we believe, and raise confidence in Disney's long-term success," said Bloomberg Intelligence analysts Geetha Ranganathan and Kevin Near in a note. “A 20% drop in the stock price over the past six months mainly reflects fears about Disney's ability to hit its fiscal 2024 subscriber goals.”
While reopenings have put a dent in streaming activity, the return to face-to-face activity is likely to bode well for Disney’s other key business: theme parks.
"Disney has a huge advantage over Netflix in that it can monetize its content in multiple ways, whereas Netflix only has one way to monetize content," David Trainer, CEO of New Constructs, wrote in a recent research note. "With Disney, in addition to paying subscribers, it can monetize its content through movies, merchandise and theme parks and already has the infrastructure in place to do this successfully."
Sales for theme parks, experiences and the consumer business are projected to have grown by 72% to reach $6.2 billion as mobility improved at live events and locations globally. Although this would mark an improvement from COVID-spurred losses, pre-pandemic parks and experiences revenue had totaled $7.6 billion in the final quarter of 2019.
Alexandra Semenova is a reporter for Yahoo Finance. Follow her on Twitter @alexandraandnyc