Walt Disney Q4 earnings preview: what to expect amid declining Disney+ subscribers and strong park revenue

The entertainment giant at a glance

Walt Disney Co. is one of the world's largest and most well-known entertainment conglomerates. Its business divisions include media networks, theme parks and resorts, studio entertainment, music, consumer products, and interactive media.

Walt Disney is scheduled to report its full-year and fourth-quarter (Q4) earnings after the market closes on Thursday, 9 November 2023 at 8 am AEDT.

The rocky road of Q3: a mixed bag

Walt Disney's Q3 results were mixed, impacted by declining streaming users and substantial restructuring costs.

"Our results this quarter are reflective of the unprecedented transformation we're undertaking to restructure the company, improve efficiencies, and restore creativity to the centre of our business," said Robert A. Iger, Chief Executive Officer.

Disney+ and the subscribers saga

The company noted that subscribers had fallen to 146.1 million for Disney+ during the most recent quarter, a 7.4% decline from the previous quarter. Most of the subscriber losses came from Disney+ Hotstar after it lost the rights to Indian Premier League cricket matches.

A silver lining: parks and experiences

The Parks, Experiences and Products division saw a 13% increase in revenues to $8.3 billion during the quarter, driven by strength in its international parks.

Facing declining users and revenues, Disney announced it would follow in the footsteps of streaming rival Netflix by raising the price on its ad-free streaming tier and cracking down on password sharing.

The company elected to keep the price stable on its ad-supported tier. Reports suggest that half of Disney's streaming platform users are on the ad-supported tier, which has increased engagement by 35% since March.

A snapshot of Walt Disney's Q3 results

Key investor focus areas: Hulu's future and ESPN's sale

• The market is expecting to hear that Disney added 3.1 million subscribers, which, combined with higher prices, should bolster the streaming division
• Investors will be keen to assess the impact of cost-of-living pressures on attendance at parks, including Disney's flagship park, Disney World in Florida
• Investors will focus on plans for streaming service Hulu, which is two-thirds owned by Disney and the remainder by Comcast
• Investors will seek information on plans to sell specialty sports network ESPN after Disney recently released standalone financials for ESPN.

Key financials - summary

Wall Street's expectations for the upcoming results are as follows:

• Earnings per share: $0.72 adjusted vs $1.03 in Q3
• Revenue: $21.42 billion vs $22.33 billion in Q3

Walt Disney's revenue chart

Disney technical analysis

Walt Disney's share price has fallen over 60% from its March 2021 high of $203.02 to last week's closing price of $79.33. Four weeks ago, it briefly fell below its COVID-19 crash low of $79.07 to $78.73, its lowest level since October 2014.

Disney weekly chart

As viewed on the daily chart below, the share price of Disney has made fresh cycle lows after diving below support at $84.00 in late August. While it hasn't built acceptance below $80.00, it has been well capped by resistance at $86.20–$86.30.

To alleviate downside risks, the Disney share price must recover above this resistance, coming from mid-September and mid-October highs. It also needs a sustained close above the 200-day moving average at $91.43 to set up a test of the resistance area at $100–$105. On the downside, the next support level is at $76.30–$74.30, dating from early 2014.

Disney daily chart

• _{TradingView: the figures stated are as of 30 October 2023. Past performance is not a reliable indicator of future performance. This report does not contain and is not to be taken as containing any financial product advice or financial product recommendation.}