Walt Disney (DIS) shares surged higher in pre-market trading after the media and entertainment giant posted stronger-than-expected first quarter earnings, lead by impressive gains in subscriber growth for its streaming service.
Around 11.8 million subscribers were added to the Disney+ streaming service over the three months ending in December, the group's fiscal first quarter, a tally that smashed Street forecasts and dwarfed the 8.3 million additions hauled in by Netflix (NFLX).
Disney's streaming unit, which includes Hulu and ESPN+, ended the quarter with 196.4 million subscribers, and management reiterated its view that Disney+ will grow to between 230 million and 260 million subscribers by the end of its 2024 financial year.
The subscriber gains, as well as a stronger-than-expected overall revenue total of $21.8 billion and profits of $1.06 per share, highlighted a spectacular earnings report that included pre-pandemic levels of activity at its U.S. theme parks and robust outlook heading into the second half of the year. Theme parks revenues, in fact, more than doubled from last year to $7.2 billion, with domestic attendance actually rising from 2019 levels.
"As we return to a more normalized environment, we look forward to more fully capitalizing on the extraordinary demand for our parks, along with the already realized yield benefits that took shape this quarter," CEO Bob Chapek told investors on a conference call late Thursday.
"We have a portfolio of distribution platforms, including powerful and growing streaming services. We have diverse revenue streams that span business models and industries, but which all are interconnected to create entertainment's most powerful synergy machine," he added. "We have the country's top news organization and the most trusted brand for following sports and our theme parks continue to be the most magical places on Earth."
"In short, our collection of assets and platforms, creative capabilities, and unique place in the cultural zeitgeist give me great confidence that we will continue to define entertainment for the next 100 years." Chapek said
Disney shares were marked 4.5% higher in late morning trading Thursday, compared to a 0.3% decline for the Dow, to change hands at $152.85 each, a move that would trim the stock's six-month decline to around 13%.
Disney said it expects to spend around $33 billion on Disney+ content over its 2022 financial year, around at third of which will be devoted to sports rights, as it continues to expand its direct-to-consumer business.
"While streaming will still be a 'show-me story', the streaming positives and very strong parks outlook should refocus attention on the ultimate earnings power of Walt Disney," said Credit Suisse analyst Douglas Mitchelson. "Especially considering the breadth and strength of its content and brands, and given best-in-media positioning longer-term."
