Disney Report: Investors Worried About Slowing Streaming Business

The fiscal year 2021 fourth quarter report will be released on Wednesday, November 10, following the close of regular trading in the United States.

Revenue forecast: $ 18.82 billion

Earnings per share forecast: $ 0.52.

It is becoming more and more difficult for the largest entertainment company to impress investors. This year, despite the reopening of amusement parks and movie theaters after a pandemic hiatus, Walt Disney Company (NYSE: DIS) stocks were among the laggards in the stock market.

The pressure is off paper from slowing growth in the video streaming business, which competes directly with Netflix (NASDAQ: NFLX).

Disney shares finished the day before at $ 175.11, having lost about 1% since the beginning of the year. Netflix shares gained more than 25% over the same period.

Streaming service Disney +, which has emerged as a key driver for the company, has seen significant growth during lockdowns. By the end of July, the cumulative number of its subscribers had increased to 116 million.

Launched in November 2019, the service provided much-needed support to Disney at a time when revenue from amusement parks, cruises and movie theaters plummeted. However, as CEO Bob Chapek admitted, the streaming business will not grow in a straight line, which means that the quarterly report released today may be talking about weakening results.

This slowdown period seems to us to be an excellent opportunity for long-term investors to build up Disney stock. With amusement parks, cinemas and cruises reopening after COVID-19 lockdowns, Disney has more than enough room to surprise investors.

Traditional business growth is recovering

Czapek told investors in July about strong booking rates at amusement parks, despite the delta strain of the coronavirus. Disney expects to fully staff its parks by the end of this year, following thousands of layoffs in 2020. All Disney parks, without exception, have resumed operations, with an increase in attendance and customer expenses. This division quadrupled its revenue during the summer quarter.

While the traditional Disney business is gradually returning to dock levels, the media division, to which the streaming business belongs, is cutting losses. JP Morgan analysts point out that the company could be a welcome surprise in the long term, given the strong content and expansion into new markets.

In their view, Disney shares are likely to appreciate in value as investor confidence is back on track following a slowdown in subscriber growth in the last two quarters. The company may be able to pleasantly surprise the market thanks to its growth in international markets and strong content.

Disney has dozens of films and TV shows on the way to keep current and attract new viewers. Over the coming year, the company will continue to expand into new overseas markets where Disney + is not yet available.

Wells Fargo analysts say investors are too worried about the company’s predictions for Disney + subscribers. According to them, the company can still reach its goal of 260 million viewers by 2024. Goldman Sachs analysts, one of the main bulls on Wall Street for Disney, believe that a large amount of new original content and other proactive measures should contribute to further growth of the subscriber base.

To summarize, Disney remains an attractive option for long-term investors due to its dominant position in the entertainment industry. Any potential pullback in stock following the release of the report should be viewed as a buying opportunity, especially as the underlying business is picking up again and Disney has established itself as the second largest streaming provider after Netflix.