Disney’s strong quarterly numbers, especially the rebound of its theme parks to 2019 levels of revenue and operating income, propelled a 3% gain for its stock despite the gloom on Wall Street.
The stock, which is a Dow component and a bellwether for consumer sentiment, finished at $152.25. It extended its rally from mid-January, when it slipped below $130 to establish a new 52-week low. The upswing came despite a 2% decline for both the Dow and Nasdaq, mostly due to fresh inflation worries.
After the close of trading on Wednesday, Disney reported that its flagship Disney+ streaming service had just shy of 130 million subscribers as of the January 2 end of the quarter. That tally surprised analysts, who were expecting a number closer to 125 million. Theme parks, though, given how vital they are to the overall company, have been the main driver of investor enthusiasm, managing to recover to a pre-Covid state of health. Attendance at U.S. sites rose by double digits over the prior quarter, and per-capita spending shot up 40% compared with the same period in fiscal 2019. Overall parks revenue came in at $7.2 billion, with operating margins at 34%.
Analysts, no matter what their view is of the long-term potential for Disney shares, saluted the quarterly results. Michael Nathanson of MoffettNathanson called the quarter a “massive surprise,” especially the performance of the parks unit. He maintained his “neutral” rating on the stock, however.
“On the face of it, the Disney+ numbers looked good with 11.7 million net additions,” he wrote in a note to clients. There were significant caveats, though — 2 million of the subscribers came via a bundle with Hulu + Live TV and another 2.6 were on Disney+ Hotstar, which gives Disney+ to Hotstar subscribers for just a dollar. “Netting that out, despite more markets to pull from, the 7.1 million in quarterly adds was about 60% of the net subscriber additions of the same quarter last year,” Nathanson concluded.
The stellar performance of the theme parks proved more than enough for Benjamin Swinburne of Morgan Stanley. He playfully titled his note to clients, “No Se Habla De Bruno – Reiteramos Overweight.” (“We Don’t Talk About Bruno” — as the Encanto soundtrack hit has it — “we reiterate overweight.”) In hailing the parks, he observed, “Disney is achieving this success despite operating below capacity and without the benefit of international tourism.”
Tuna Amobi with CFRA kept his 12-month price target of $200 on Disney shares as well as his “buy” rating. Disney+ will see an “even greater acceleration” as 2022 unfolds as it adds more global territories, he predicted.
Macquarie’s Tim Nollen remains a believer, with an “outperform” rating and $185 price target. “Investing in Disney shares means believing the streaming transition will succeed, and enjoying the cyclical rebound at the parks,” he wrote in a client note. “Disney is demonstrating its prowess in both areas.”
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