The Walt Disney Company (DIS.US) will open the book of its accounts for the second fiscal quarter of 2022 on May 11. For now, investors are extremely bearish on the company. This pessimism is largely unwarranted, but investors should be on the lookout for some very important developments for the company.
After the close of the market on Wednesday, May 11. While each quarter is important to any business, it's important to note that there is more at stake in this quarter than in most typical quarters. This is because there is a great deal of pessimism surrounding the company and its future prospects. Investors are concerned about a slowdown in the streaming business and are concerned about the impact of ongoing closures at some of the company's parks around the world in response to continued coronavirus infection rates. . While these are legitimate, the company's overall picture would likely be attractive in the long run. Regardless of the outcome, investors are sure to be on the lookout for a few key developments by the time earnings are released.
Again, investors will pay attention to streaming data
Right now, one of the biggest concerns regarding The Walt Disney Company and its prospects relates to Streaming. After all, it was the rapid adoption of the company's main streaming service, Disney+, that was responsible for rocketing the stock above $200 last year. Today, it is trading at “only” $110.29. This year alone, the stock is down 28.8%. And from their 52-week highs, they are down 41.2%. The biggest concern for the company appears to come from rival Netflix (NFLX.US). In his latest results, he revealed a drop of 200,000 subscribers on his platform. Although in all fairness, had it not been for the company's decision to comply with the sanctions on Russia and cease operations, it would have offered an increase in the number of subscribers of 500,000. But that's less important than the fact that the company forecast another 2 million subscribers leaving its platform by the end of the half.
Streaming Data, Disney
At the end of its latest quarter, The Walt Disney Company had 129.8 million subscribers on Disney+. Although this is impressive, investors are confident that the company will achieve the 230 million to 260 million global subscribers that the company forecast it would have by the end of 2024. To reach the lower end of that range, the company would need to add on average around 9.1 million subscribers each quarter between this quarter and the following.
So far, that doesn't seem like a big deal. In the last quarter alone, the number of subscribers the company had increased by 11.7 million compared to the number the company had just a quarter earlier. As for those worried about market decline, the fact is that Netflix is one of the most expensive companies on the market and lacks the kind of resources that major content companies like The Walt Disney, Amazon or Apple have. So fears regarding the prospects for The Walt Disney Company's streaming business are overblown right now. And investors are over-projecting the harsh reality of Netflix onto a company that has a much better value proposition for its users.
Kezdjen befektetni még ma, vagy próbálja ki ingyenes demónkat
Élő számla regisztráció DEMÓ SZÁMLA Mobil app letöltése Mobil app letöltéseStreaming Data Disney+, ESPN+ and Hulu
Either way, it's very important for investors to keep an eye on Disney+ subscriber numbers. However, they should also continue to keep a close eye on the number of subscribers to the company's other two major streaming services. Sequentially in the last quarter, ESPN+ so its number of subscribers grew by 4.2 million, rising to 21.3 million at the end of the last quarter. Meanwhile, Hulu's subscriber count grew by 1.5 million to 45.3 million at the end of the last quarter. These are also an important part of the value proposition that surrounds The Walt Disney Company as a whole. In addition to this, investors should also keep an eye on prices. Year-over-year in the latest quarter, The Walt Disney Company saw Disney+ prices rise 9.4%. For ESPN+ and Hulu, those increases were 15.2% and 1%, respectively. It would be an especially positive sign if prices increase while the number of subscribers grows. But if the opposite happens, it could mean further weakness in the market.
Walt Disney's debt and cash flow will be important
Investors should also pay attention to certain fundamentals such as debt and cash flow. When the company reported net debt of $39.69 billion, it was up $1.24 billion quarter-on-quarter. It also marked the first time in a year that debt increased sequentially. Of course, this ties in well with operating cash flow. In the first quarter of the year, the company generated a net cash outflow of $209 million. That compares with the $75 million inflow posted in the same quarter a year earlier.
Disney Debt and Cash Flow Data, Disney
Theme parks, weak point of Disney's structure
One of the biggest pain points for The Walt Disney Company during the pandemic involved the company's theme parks and other recreational assets. For the most part, the world now has the coronavirus largely under control and reopened after a rough couple of years. But that has not been the case everywhere. Disneyland in Shanghai, for example, remains closed for now. And the company's theme park in Hong Kong just opened on April 21. China continues to take Covid very seriously, resorting to some of the most restrictive responses to the pandemic of any country on the planet. While this may be a life-saving measure, there is no denying that it will have a negative impact on businesses like this one.
Walt Disney Parks & Experiences, Disney
Even with that being the case, there is a chance that the Parks and Experiences portion of The Walt Disney Company will do well. In the first quarter of 2022, for example, revenue associated with these activities amounted to $5.66 billion. That compared to $1.87 billion reported just a year earlier. Operating income also improved, going from a negative $1.06 billion in the first quarter of 2021 to $1.58 billion in the first quarter of this year. Much of that improvement came as a result of the company's domestic operations. Profits went from a negative 798 million dollars to a positive 1,560 million dollars.
Technical analysis
The company maintains a negative outlook through a process initiated in November 2021, with a downward channel. With no forecast of a sharp turnaround in the trend, the stock is approaching a key support zone between $99 and $108. Level it shouldn't lose.
source: xStation
However, the RSI indicator shows bullish divergence signal. That could be discounting a turn in the value's trend that could theoretically attack the resistance of the channel to mark an achievement of higher lows.
Dario Garcia, EFA
XTB Spain
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