Netflix got slammed by Wall Street. Is Disney next?
By Frank Pallotta, CNN Business
Wall Street was not kind to Netflix when the streaming giant released its year-end results last month. Weak financial guidance sent its stock tumbling. Is Disney+ — the other big name in streaming — about to take a similar beating?
Disney is set to report first-quarter earnings on Wednesday and Wall Street’s eyes once again will be on the growth of Disney+ — the most important part of the company’s media empire. And this quarter will be even more closely watched than usual.
Disney is coming off an earnings report in November that showed its streaming growth had slowed in the fourth quarter. That sent Disney’s stock down as much as 8.5% on the morning following the report. Its stock has also tumbled from a record high of $203 per share last March to $142 per share on Tuesday.
To be sure, Disney and Netflix are very different companies, primarily because Disney’s business is far more diversified, stretching to theme parks, cable networks, merchandising and films.
Yet Disney has made its bet on streaming, and as goes Disney+ so goes the rest of Disney with it. If the service struggles to bring in subscribers, Wall Street doesn’t really care how many people bought Baby Yoda plush dolls or tickets to Disney World.
Disney CEO Bob Chapek said following the earnings in November that the company continues to manage its direct-to-consumer business, which includes Hulu and ESPN+, for the “long-term.” He also noted that the company is “confident that our high-quality entertainment and expansion into additional markets worldwide will enable us to further grow our streaming platforms globally.”
Disney+’s subscriber count has cooled considerably since rocketing to 100 million subscribers last year. In its fourth quarter of 2021, for example, Disney+ signed up only two million new subscribers, a steep drop from the 12 million it added in the third quarter.
Disney also will have to deal the possibility that it will disappoint the market as Netflix did last month with its own lackluster earnings reports. Netflix’s stock fell as much as 20% when it announced it had 221.8 million global subscribers but forecast growth of only 2.5 million for the next quarter.
Yet there’s reason to be bullish about Disney.
The service has been full of popular content over the last few months. There was “Hawkeye,” Marvel’s new series about the avenging archer, and “The Beatles: Get Back,” an eight-hour documentary about recording the band’s last album from Peter Jackson.
Hit theatrical films like “Shang-Chi and the Legend of the Ten Rings” and “Jungle Cruise” were also added to the service. Later in the quarter, so were the animated musical “Encanto” and “The Book of Boba Fett,” a new series from the Star Wars franchise.
Jessica Reif Ehrlich, an analyst for Bank of America, expects Disney+ to report it added seven million subscribers this quarter because of just that kind of content. Yet Ehrlich notes the service may have to keep expanding its offerings in order to attract even more subscribers.
“With the success of ‘The Beatles: Get Back,’ we would not be surprised if [Disney] diversifies their content output beyond their traditional brands (e.g. Marvel, Star Wars, Pixar and Disney) to broaden the service’s reach and appeal,” she wrote in December.
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