Of all the surprises that could have come out of earnings season, one of the biggest may have landed in our laps thanks to the Magic Kingdom. Disney (NYSE:DIS) turned in a profit against an expected loss, and by a pretty decent margin too, thanks in large part to its streaming service, Disney+. Sure, there was more to the picture than just the streaming, but thanks to that, sweet victory was indeed snatched from the very jaws of defeat.
When You Wish Upon a Profit
Disney's numbers turned out to be a win on a scale few expected. The consensus was that Disney would turn in a quarterly loss of $0.41, which isn't out of line given its hobbled theme park business, anemic movie production capabilities, and its as-yet-unprofitable streaming service. Disney, however, turned in a total win with earnings of $0.32, nearly doubling consensus figures. Revenue was a bit more narrow of a win, but not that narrow; the company was expected to bring in $15.9 billion, but instead brought in $16.25 billion.
Streaming was a clear winner for the company as Disney+ is approaching 95 million paid subscribers. Given that a subscription to Disney+ starts at $6.99 a month, assuming no bundles or discounts are involved, that represents almost $664 million a month for the company. The company is said to be quite happy with the rate at which those who tried the promotion are becoming full subscribers. However, there's a problem with this figure as the average monthly revenue paid per subscriber recently dropped to $4.03 a month from $5.56. This comes as the 95 million paid subscribers now includes numbers from Disney+Hotstar, which brings in numbers from both Indonesia and India, lowering the averages somewhat.
The theme parks are still pulling in cash, even as lockdown restrictions cripple or outright shut down operations. Parks, experiences, and products still brought in $3.58 billion, and future gains here would be “...determined by the rate of vaccination of the public.” With Disneyland hosting a vaccination site, however, it's personally contributed to the vaccination of over 100,000 people.
Even content sales turned in some value, bringing in $1.7 billion for the quarter despite no new theatrical releases for the last quarter and only limited home entertainment releases.
The Analysts Seen About Everything
The broader analyst pool, meanwhile, seems to largely agree with any positive assessment of the entertainment juggernaut, based on our latest research. The company has maintained a consensus “buy” for the last six months, and one of increasingly bullish sentiment.
Six months ago, the company held one “sell” rating, 11 “hold” and 16 “buy” ratings. Three months ago, that shifted significantly toward “buy” as there was one “sell” rating, eight “hold” and 18 “buy.” A further shift toward “buy” came a month ago as the company had one “sell” rating, seven “hold” and 23 “buy,” which is where we are today.
The price target, meanwhile, has only increased in that whole time span. Six months ago it sat at $129.23 before increasing to $141.60 three months ago. A month ago it jumped up further to $159.93, until today, where it sits at $170.76. Given current share prices of $190.39, though, that's the first time downside risk has been established in six months.
The (Flying) Elephant in the Room
Disney, right now, is a company in flux. If indeed it can get its theme park business back up and running, it could be a serious powerhouse. Yet there are some signs that Disney will never be what it once was again; Disney's own success in streaming is likely cannibalizing some of its cable trade, as most of the people going to streaming services to begin with are cable-cutters getting out from under the hefty bills of cable providers.
But a Disney with its parks and production efforts fully up and running, plus control of streaming platforms that are a serious Netflix (NASDAQ:NFLX) competitor? Now that's a whole different kettle of fish, and one that would certainly be worth investing in. Sure, that's going to depend on vaccination rates and whether or not governors take those rates sufficiently seriously to start allowing businesses to reopen fully, but the best-case scenario here is downright dazzling.
Right now, prices might be a bit high. The consensus suggests there's some downside risk, so maybe backing off a bit might be a smart idea. Keep an eye on Disney, however...because it's never smart to count a company this diversified and this culturally powerful out of the running altogether. There's likely to be a dip coming up, and when that hits, be ready to buy.
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