After its latest quarterly report, Wall Street analysts are weighing if Disney ‘s cost-cutting measures and strength in its experiential businesses can outweigh challenges within the media giant’s streaming service. On Wednesday, the major media conglomerate reported 93 cents in adjusted earnings per share for its second fiscal quarter, exactly in line with the consensus estimate of analysts polled by Refinitiv. Disney slightly beat on quarterly revenue, posting $21.82 billion against a $21.78 billion forecast. But investors focused on the total number of subscriptions to streaming platform Disney+, which sat at 157.8 million while analysts expected 163.17 million, according to StreetAccount. Notably, the company said it would add Hulu content to Disney+ and said it would raise the price of the ad-free option later this year. Analysts said Disney performed well in its cruise and parks business, while implementing cost-saving measures. But they said those plusses need to be weighed against the weakness seen in media and streaming as the company tries to make Disney+ more viable and position itself in a weakening advertising market. “Disney is in the early stages of restructuring its Media businesses, taking significant cost out and revisiting its content monetization strategy,” wrote Morgan Stanley analyst Benjamin Swinburne. “Fortunately, it is buttressed by continued Parks strength which along with valuable brands and franchises can bridge it to this uncertain future.” Shares were down more than 5% before the bell Thursday. The stock has gained 16.4% so far this year. DIS YTD mountain Disney Swinburne said he is keeping his overweight rating and expectations for a 20% compound annual growth rate in adjusted earnings per share through its 2026 fiscal year, helped by strength in parks and potential in the media business. He noted management’s commitment to maximizing revenue in the latter “in an admittedly difficult environment,” an apparent nod to the cooling advertising landscape. Despite the missed subscriber estimate, some analysts pointed out the narrowing of losses on the direct-to-consumer business. Citi analyst Jason Bazinet credited that to price hikes for the streaming service in December. “Given the segment operating income beat and narrowing of DTC losses, we would not be surprised if shares traded modestly higher tomorrow,” Bazinet said in a note to clients Wednesday. Meanwhile, Evercore ISI analyst Vijay Jayant noted that the second-quarter operating income beat was primarily due to the timing of the Disney+ and Hulu release slate moving. Because of that, the firm’s full-year estimate hasn’t changed. ‘Moving pieces’ Still, some analysts don’t necessarily expect smooth sailing ahead. Bank of America analyst Jessica Reif Ehrlich said the price hikes could drive long-term profit at the same time as experiential businesses like cruises and parks perform well. But she said those wins are “counterbalanced” by headwinds in linear networks, the fact that Disney+ subscriber growth should remain “muted” in the current quarter and the potential for a deceleration in domestic parks in the second half of the year coming off the 50th anniversary celebration for Walt Disney World. Reif Ehrlich kept her buy rating and $135 target price for shares, while lowering her estimate for full-fiscal year earnings per share. For Goldman Sachs analyst Brett Feldman, the net impact of the “cross currents” is consolidated estimates for most periods, as the path to streaming profitability and success of cost-saving measures was “slightly” offset by the challenges for maintaining park margins and pressures on the linear TV business in the changing advertising landscape. Feldman kept his buy rating on the stock, but lowered his price target by $6 to $130. The new target still implies an upside of 28.5% over Wednesday’s close. And KeyBanc analyst Brandon Nispel disagreed with Citi’s Bazinet, saying the stock could keep sliding given both the missed Disney+ number and the cautious outlook for domestic parks in the second half of the year. While keeping his overweight rating on the stock, Nispel cut $10 from his price target to bring it to $120. That new target still reflects an 18.6% upside. “DIS moving pieces make DIS messy,” he said. But, he said “we continue to like DIS” because it’s still in the early innings for direct-to-consumer monetization, the cost-saving initiatives are setting the company up well for 2024 and a “recession” in parks may already be priced in. — CNBC’s Michael Bloom contributed to this report.
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