Author: Damjana Cvetkovska
Publication date: 13.08.2024
Walt Disney operates as a global entertainment conglomerate, with activities across four key sections: Media Networks, Parks and Resorts, Studio Entertainment, and Consumer Products. The company is an industry leader in film distribution, incorporating its extensive film and television library, over various platforms such as theatrical releases, home entertainment, pay-per-view, video-on-demand, pay television, and free-to-air television markets. In recent times, Walt Disney (DIS) shares have decreased by 0.11%, reaching their lowest levels in months. This decline is pertaining to a number of negative headlines affecting the entertainment giant, contributing to investor concerns.
How Disney gains profit
The Disney Media Network comprises of a few broadcast networks such as ESPN, National Geographic, and FX. Additionally, Disney owns National Geographic Magazine and holds a 50% equity stake in the A&E network.
Despite numerous competitors on the market, Disney regularly earns considerable revenues from this section of its business.
Disney Parks and Resorts bring in revenue through various segments, including cruise lines, resorts, and theme parks. This section includes National Geographic Expeditions, Aulani, and Adventures by Disney.
Revenue streams for these businesses consist of food and ticket sales, hotel accommodations, and property rentals. Even though this section is an important part of Disney's business model, its income can be volatile, as shown by the notable revenue decline during the pandemic.
Disney's Studio Entertainment section constitutes about 15% of its total revenue. This is significant due to Disney’s new record for box office sales in 2021, exceeding its previous accomplishments. The company's movies produce over 40% of all ticket sales on the US market.
This section encompasses well-known banners such as Walt Disney Pictures, Lucasfilm, Marvel, Pixar, Touchstone, and UTV. In addition, Disney brings in earnings through recorded music and live performances.
Disney revenue streams
The company assesses the profitability of its different business sections through the use of operating income. In the fiscal Q1, section operating income increased by 27% to $3.88 billion. The company's earnings report considers the consequential challenges from the COVID-19 pandemic since early 2020, with the most affected being the Parks, Experiences, and Products section. Disney had to close the theme parks, discontinue cruise operations, and stop guided tours. Nevertheless, since May 2020, the company has progressively reopened its theme parks, although at reduced capacity in the beginning. Presently, Disney’s domestic parks and experiences are functioning without major capacity restrictions in general, and cruises and guided tours have resumed services. In addition, interruptions in film and TV production have caused a reduction in content for Disney's media and entertainment section.
Pricing for streaming services
Disney's standalone streamers are all receiving price increases. Disney+ will cost 25% more—$9.99 per month—if one is prepared to accept ads. The ad-free Disney+ is being raised 14% to $15.99.
Hulu's ad-supported tier will cost $9.99, while its ad-free option is increasing by $1 to $18.99. ESPN+ will be $1 more expensive per month, rising to $11.99.
The popular Trio bundle (Disney+, Hulu, and ESPN+) is having a $2-per-month increase. The new prices are $16.99 (ad-supported) and $26.99 (ad-free).
The ad-free Duo (Disney+ and Hulu without ESPN+) remains at $19.99 per month, but the ad-supported Duo is increasing by $1 to $10.99.
The new pricing will be in effect on October 17.
Downfall of the Disney stock
Disney shares fell by 0.8% to $90.23, advancing towards their lowest closing price since January 11, 2024, when they ended at $89.45. The stock has now been in decline for seven consecutive days. If this trend continues, it will mean its longest losing streak since September 7, 2023, when the company experienced six days in a row of declines.
Moreover, the stock has decreased by 0.3% this year, while the S&P 500 has risen by 15%. According to MoffettNathanson analyst Robert Fishman, who maintains a Buy rating with a $125 price target, Disney's first half of 2024 has seen important events and challenges. These comprehend dealing with activist shareholders, enhancing direct-to-consumer profitability, resolving litigation related to Florida Parks, and significant improvements in theatrical performance.
Is it the right time to invest in Disney?
Revenue and Gross Profit: Disney’s revenue grew to $23.155 billion, up from $22.083 billion in Q2 2024, echoing positive momentum. Gross profit also increased, showing efficient cost management and strong revenue generation.
Operating Income: Operating income had a sharp rise to $4.827 billion from $2.336 billion, hinting at robust profitability improvements.
Net Income: Net income surged to $2.842 billion from $216 million in Q2, emphasizing notable financial recovery.
EBITDA: EBITDA jumped to $3.971 billion from $1.588 billion, revealing strong operational performance.
Conclusion
Disney has shown a strong recovery with notable increases in revenue, operating income, and net income. This illustrates that the company is effectively navigating its challenges.
With compelling gains in key financial metrics, Disney seems to be on a strong reclamation path in the Q3 2024. Consistent growth in streaming and park operations could make Disney a promising investment.
You can also read about:
Comments