Disney+ added a whopping 12.1 million subs in Q4 but investors aren’t happy

on Nov 8, 2022
  • Disney reports weak Q4 results and issues disappointing future guidance.
  • Its flagship streaming service added way more subscribers than expected.
  • Disney stock lost as much as 10% in after-hours trading on Tuesday.

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Shares of Walt Disney Co (NYSE: DIS) lost as much as 10% in extended trading after the entertainment conglomerate said it missed both on top and the bottom line in its fourth financial quarter.

DTC to turn profitable in 2024

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On the plus side, though, Disney+ added a whopping 12.1 million new subscribers this quarter – way more than 10.4 million that Street had expected. Including Hulu and ESPN, Disney now has over 235 million subscribers in total.

More importantly, Disney reiterated that its direct-to-consumer business will be profitable in fiscal 2024. In the earnings press release, CEO Bob Chapek said:

By realigning costs, we’ll be on the path to achieve a profitable streaming business that will drive continued growth and generate shareholder value long into the future.

Disney+ is scheduled to launch a cheaper, ad-supported tier on December 8th. That is expected to help with the push to profitability as well.

For now, though, average revenue per subscriber was down 5.0% globally and 10% in North America. DTC lost $1.50 billion this quarter (more than 100% YoY) versus $1.10 billion expected.

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Notable figures in Disney’s earnings report

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  • Net income printed at $162 million versus the year-ago $160 million
  • Per-share earnings remained unchanged year-on-year at 9 cents
  • Adjusted EPS was 30 cents as per the earnings press release
  • Sales went up 9.0% on an annualised basis to $20.15 billion
  • Consensus was 56 cents of adjusted EPS on $21.27 billion in revenue

For the year, Disney stock is now down more than 40%.

What else is weighing on the Disney stock?

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“Media & Entertainment Distribution” and “Parks, Experiences & Products” – both segments came in shy of Street estimates in Q4. You can read the full earnings report here.

Also a negative was the future outlook.

On the earnings call, CFO Christine McCarthy said both revenue and operating income were expected to growth at a “high-single-digit percentage rate” in fiscal 2023. That compared to analysts at 14% and 18%, respectively.

Despite challenges, though, the sell-off might be an opportunity to buy Disney stock considering the Wall Street continues to see upside in it to $137 on average. That’s up 50% from here.


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