Disney is expected to publish its Q2 2023 results on May 10, reporting on the first full quarter since Bob Iger’s return to the helm as CEO. We expect Disney’s revenues to come in at $21.9 billion for the quarter, slightly ahead of consensus estimates and marking an increase of over 7% versus last year. We expect earnings to stand at about $0.94 per share, compared to a consensus of $0.93 per share. See our analysis of Disney Earnings Preview for an overview of how Disney’s revenues and earnings will likely trend.
So what are some of the trends that are likely to drive Disney’s results? We expect Disney’s theme park business to remain a key driver of the company’s growth, as potentially higher attendance and growing spending drive sales. For perspective, over Q1 FY’23 (the quarter ended December) Theme park revenue was up about 27% year-over-year. That said, we expect Disney’s closely watched streaming business to fare poorly this quarter due to two broad factors. Firstly, Disney lost the rights to the IPL cricket tournament in India and this is likely to lead to subscriber losses for Disney+ Hotstar offering. Moreover, the company carried out a price hike for Disney+ in the U.S. in December and this could also result in some customer churn, although this could be partly offset by the introduction of a new ad-supported version of Disney+. Now Disney has been focusing more on the profitability of its streaming business, guiding that the service is likely to turn profitable by the end of 2024. We will be watching for progress on this front when the company reports Q2 2023 results.
So is Disney stock a buy in the current environment? While there are clearly some concerns for the company, with the growth in the streaming business cooling and potential economic headwinds likely to impact the parks business, we still remain positive on Disney stock for a couple of reasons. Disney is looking to unlock more value by restructuring its business. In February, the company announced plans to reorganize into three segments, namely Disney Entertainment which includes most of the streaming and media operations, a Theme Parks segment, and an ESPN division which will hold the company’s sports-related businesses. The company has also been looking to slash costs by close to $5.5 billion, with plans to lay off as many as total 7,000 positions. This could help the company bolster profitability. We value Disney stock at about $120 per share, which is about 20% ahead of the current market price. See our analysis of Disney’s valuation for more information on what’s driving our price estimate for Disney and how its valuation compares with peers. See our analysis of Disney revenue for a closer look at the company’s key revenue streams and how they have been trending.
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