What You Need To Know
Walt Disney Co (NYSE: DIS) exceeded analyst expectations for the fourth quarter, with earnings per share (EPS) of 82 cents and revenue of $21.2 billion. The company's theme parks were the biggest driver of profit, with earnings rising 31% to $1.76 billion.
Disney+ also saw strong growth, with subscribers reaching 150.2 million. Domestic subscribers increased by 0.5 million Q/Q and international subscribers grew by 6.4 million Q/Q.
The company plans to cut an additional $2 billion in expenses and resume paying a dividend by the end of 2023.
Activist investor Nelson Peltz is seeking several board seats at Disney, arguing that the company's costs are too high. Peltz’s Trian Fund Management has oversight of about $2.5 billion of Disney shares.
CEO Bob Iger is evaluating how to reposition Disney as its traditional TV networks continue to lose viewers and advertisers. The company is also buying rival Comcast's one-third stake in the Hulu streaming service for at least $8.61 billion.
Why This Is Important for Retail Investors
Strong earnings beat: Disney's fourth-quarter earnings beat analyst expectations, indicating that the company is on track to recover from the pandemic. This is good news for retail investors who are holding Disney stock, as it suggests that the company's stock price could rise in the future.
Cost cutting and dividend restart: Disney's plans to cut an additional $2 billion in expenses and resume paying dividends are also positive signs for retail investors. Cost cutting will help to improve Disney's profitability, which will make the company more attractive to investors. And the dividend restart will provide shareholders with a steady stream of income.
Disney+ subscriber growth: Disney+ subscriber growth exceeded expectations. This is a positive sign for Disney's streaming business, which is a key part of the company's growth strategy.
Declining content spending: Disney's overall content spending is expected to fall to $25 billion in the current fiscal year, down 17% from two years ago. This is a good sign for Disney's profitability, as it suggests that the company is becoming more efficient with its spending.
Potential TV network sale and ESPN streaming: Disney's CEO has said that he's open to selling the company's traditional TV networks. This could be a positive development for retail investors, as it could free up capital for Disney to invest in other growth areas, such as streaming. Additionally, Disney's plans to offer ESPN as a standalone streaming product could boost subscriber growth and revenue for the sports network.
How Can You Use This Information?
Here are some of the investing ideas that can be explored using this information:
Growth Investing
Focus on Disney's growth opportunities in the streaming and content creation industries. The company has a strong track record of producing popular content, and its streaming services have the potential to grow significantly in the coming years.
Disney's international operations are growing faster than its domestic business. Disney's parks and resorts are particularly successful in international markets.
Disney's emerging businesses, such as its technology division and its direct-to-consumer (DTC) initiatives have the potential to drive significant growth for Disney in the future.
Seek out companies that are partnering with Disney to develop new technologies and products. These companies could benefit from Disney's brand and distribution network.
Growth investing focuses on stocks of companies expected to grow at an above-average rate compared to other stocks in the market; learn more in our article titled 'What is Growth Investing?'.
Momentum Investing
Disney's stock could be attractive if it is experiencing upward momentum. Positive news and strong market sentiment could boost Disney's stock price. For instance, the company's recent earnings report and positive news about its streaming business could create a buying opportunity.
Technical analysis can help investors identify price trends and support and resistance levels.
Momentum investing rides the wave of existing market trends by buying assets that have shown an upward price trend and selling those in a downtrend.
DIS Stock Q4 Key Takeaways:
Disney is turning a corner, and its progress has allowed it to move beyond a period of fixing and begin building its businesses again.
Disney is making significant cost savings and is on track to reach its $7.5 billion annual target.
Q4 adjusted earnings per share nearly tripled over the prior year, and all three of Disney's businesses, Entertainment, Experiences, and Sports, saw significant increases in fourth quarter operating income compared to Q4 of fiscal 2022.
Disney's ad-supported streaming tier is rapidly growing and is more valuable than the ad-free tier.
Disney is focused on creating elite content and telling great stories.
Disney is increasing CapEx from $5 billion in 2023 to $6 billion in fiscal 2024 to invest in its parks and experiences business.
Overall, Disney is in a strong position and is well-positioned for future growth.
Bob Iger, Chief Executive Officer & Director, The Walt Disney Co., commented:
As we transition ESPN to a streaming future and more fully integrate general entertainment content into Disney+, we will have a DTC offering unlike any other in the industry.
Read What Others Are Saying
FT: Bob Iger pledges to cut another $2bn from Disney's cost base
CNBC: Disney expands cost-cutting plan by $2 billion, posts better-than-expected profit
The Walt Disney Company: Disney Earnings Q4 2023: CEO Bob Iger Reveals Four Building Opportunities
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Relevant ETFs
Some investors prefer to invest in stocks via an exchange-traded fund for ease and reduced risk. Some popular ETFs include the following:
Large-Caps: Vanguard Mega Cap ETF (MGC)
Mid-Caps: Vanguard Mid-Cap ETF (VO)
Small-Caps: Vanguard Small-Cap ETF (VB)
Growth: iShares Core S&P U.S. Growth ETF (IUSG)
Value: iShares Core S&P US Value ETF (IUSV)