Disney Q3 earnings: ‘I think WBD is a better bet within media’

Walt Disney Co (NYSE: DIS) says its flagship streaming service continued to lose subscribers in the fiscal third quarter. Its shares are still trading slightly up in extended hours.

Disney+ lost 11.7 million subscribers in Q3

Disney+ ended the quarter with 146.1 million subscribers worldwide – down a more-than-expected 7.4% sequentially. The entertainment conglomerate saw its direct-to-consumer sales come in at $5.5 billion that also missed consensus by some $200 million.

On the plus side, though, quarterly loss attributed to the DTC segment narrowed sharply to $512 million versus $758 million expected. Still, Kevin Dryer of Gabelli Funds said today on CNBC’s “Closing Bell: Overtime”:

I think Warner Brothers Discovery which is already knocking at the door of making money in streaming might be a better bet within media. As they generate cash and pay down debt, the equity could be worth a lot more.

Note that on the earnings call, CEO Bob Iger did reveal that Disney+ is gearing up to crack down on password sharing in 2024 in line with his broader commitment to making streaming a profitable business.  

Other business segments also missed expectations

The Walt Disney Co brought in $8.3 billion via theme parks, experiences, and product sales – ahead of last year’s figure as well as analysts’ forecast.  

Its largest segment, media and entertainment, generated $14 billion this quarter versus $14.3 billion expected and $14.1 billion a year ago. According to Barbara Doran of BD8 Capital Partners:

They’re under pressure in every area of their business. Even in theme parks, attendance was down in June and July. The beat is part of the $5.5 billion cost initiative that CEO Bob Iger had announced earlier.

Television networks and content sales and licensing also came in shy of Street estimates in the third quarter. Disney shares are down roughly 25% versus their year-to-date high at writing.

Notable figures in Disney’s Q3 earnings report

• Lost $460 million that translates to 25 cents per share
• Had $1.41 billion of net income (77 cents a share) last year
• Adjusted EPS printed at $1.03 billion as per the press release
• Revenue went up 4.0% year-on-year to $22.33 billion
• Consensus was 95 cents a share on $22.5 billion in revenue

Disney was impacted by $2.65 billion worth of impairments and one-time charges in its third quarter. Doran also told CNBC today:

The big uncertainty with Disney and with it been de-risked is we don’t know what the long-term earnings will be, we don’t know what the long-term growth will be, and I don’t think we’ll know for a while.

Just a day earlier, Disney’s ESPN partnered with Penn Entertainment to launch a sportsbook as Invezz reported here.