Quarterly earnings only provide a fraction of insight into the multi-billion dollar long-term strategies deployed by entertainment media companies. But that fraction serves as a baseline summation of how effective a company’s approach is proving in the moment and against the competition. That’s why The Walt Disney Company (DIS) can’t be thrilled with its fiscal-year 2021 fourth quarter earnings reported Wednesday, November 11.
Disney underperformed relative to expectations in earnings per share (37 cents vs. 51 cents expected) and revenue ($18.53 billion vs. $18.79 billion expected) this past quarter. The all important Disney+ subscriber growth fell in line with the company’s cautious estimate in the “low single-digit millions” with just 2.1 million adds. (For context, the service added 12.4 million new customers in Q3 of the fiscal year.) While Disney+ now boasts a total of 118.1 million global customers and has grown its sub base 60 percent since last year, investors are concerned the company could miss its target of 260 million subscribers by 2024.
“Unfortunately for Disney, the company seems to be hitting a roadblock when it comes to subscriber growth for its streaming service,” Haris Anwar, senior analyst at Investing.com, told Observer. “That slowdown is taking away much of the excitement that surrounded the stock during the pandemic.”
Disney’s share price has fallen 14 percent since hitting an all-time high of $201 in early March. The Q4 deceleration of Disney+ has “created doubts that its service can create a serious challenge for the market leader Netflix (NFLX),” Anwar said. After the stock fell 4 percent in after-hours trading Wednesday night, it is expected to drag in the coming weeks as investors take a wait-and-see approach to Disney’s ongoing legacy business recovery.
On that front, park and theater attendance are both rising. But Wall Street has crowned direct-to-consumer business the ruler of financial importance. It’s what powered Disney’s stock surge through the pandemic even as the company hemorrhaged billions of dollars. And it now casts a shadow on the company’s immediate financial future.
“Slowing subscriber growth numbers this quarter may weigh heavily on Disney in the coming weeks, and a break of price support around 167 could open the door to further to downside around $155-160,” David Keller, chief market strategist at StockCharts, told Observer.
Netflix, which has long performed well in the holiday corridor, is positioned to end 2021 on a high with a massive upcoming content slate. Disney+ has its own holiday treats in store: the release of Marvel’s Hawkeye later this month and the highly-anticipated Star Wars TV series The Book of Boba Fett in December. Yet one question is how much room for growth remains in the Marvel and Star Wars subscriber demographic, which may have already reached saturation point. What the service really needs is another Hamilton—a splashy piece of content that attracts new fans to the streamer.
