It has been a challenging year for Disney thus far.
The magic kingdom continues to nurse deep wounds inflicted by the pandemic.
Since the start of 2021, shares of the entertainment giant have gained a paltry 0.27%, underperforming against the S&P 500’s 10.5% gain over the same period.
Although the Covid-19 menace has dished out much pain, it has also provided opportunities. Given how the re-opened theme parks are operating at a lower capacity and the cruise line business remains closed, this may negatively impact Disney’s second-quarter results. However, the streaming services could come to the rescue after Disney reported in early March that Disney+ subscribers surpassed 100 million for the first time.
When is Disney’s earnings call and what to expect?
Disney reports its fiscal second-quarter earnings after U.S markets close on Thursday 13 May.
According to Bloomberg, the entertainment giant is expected to post adjusted earnings of 28 cents per share on revenues of $15.85 billion for the fiscal second quarter. This will mark a 12% decline in revenues during the same period in 2020. For the full year, adjusted earnings are forecast to hit $1.85 per share on revenues of $68.66 billion.
What to watch out for….
Disney+ subscriber numbers will be under the spotlight.
With the company's cash producing juggernauts closed/operating at limited capacity, Disney’s streaming services are likely to remain the primary driver of growth moving forward. As stated earlier, the streaming platform topped 100 million subscribers by early March. Considering how Disney+ has been running for only 16 months, this growth is certainly phenomenal.
Now, this is where things get interesting. Netflix’s added only 3.98 million paid subscribers in the first quarter. With lockdown restrictions easing and consumers returning to outdoor entertainment, this could bad news for the streaming giants. If the subscription numbers for fiscal Q2 disappoint, it could suggest that growth in the industry may be slowing as normality returns. However, strong subscriber growth will be a welcome development for Disney while enforcing pressure on Netflix.
In March, Disney+ raised its monthly subscription to $7.99 a month from $6.99 while the annual subscription increased to $79.99 from $69.99. This hike in prices could boost profitability, especially when considering how its subscription remains cheaper than other competitors. Netflix charges $8.99 per month for a basic plan, Amazon Prime charges $12.99 while a single subscription plan for HBO costs $14.99 per month.
Back in December 2020, the entertainment giant expected Disney+ to have between 230 to 260 million subscribers by 2024. This is more than the population of Africa’s largest economy – Nigeria.
How about the theme parks and resorts?
It is widely known that Disney’s theme parks, cruise business, and hotels have been severely disrupted by the coronavirus pandemic. However, there is some light at the end of the tunnel as all four Walt Disney World theme parks and Disney’s Blizzard Beach Water Park are now open.
Nevertheless, the need for social distancing will likely cap the number of people which are allowed in the theme parks. This could hit revenues until restrictions are fully eased and the parks can run at full capacity.
Technicals: Is a breakout on the horizon?
Disney shares have traded within a $10 range over the past few weeks with support around $180 and resistance at $190. Despite the range, the longer-term trend respects a bearish channel while the MACD trades below zero.
If the earnings report disappoints market expectations, this could encourage decline and daily close below $180. Such a scenario could open the doors towards $173. Alternatively, upbeat numbers could boost buying sentiment towards Disney shares – propelling prices back towards the $190 resistance level. A strong break above $190 could trigger an incline towards $194 and $200, respectively.
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