Disney needs another plus

Hey Superheroes,

Following the Fed’s rate hold decision last week, the RBA announced its decision to keep the cash rate at 4.35%. 

It’s now been six months since Australia’s last rate hike… many economists believe the next change coming will be a rate cut, with expectations for it to happen between the end of this year and early next year. What do you think?

Either way, earnings season for both the ASX and Wall Street continues on. Here are this week’s stories.

Disney shares lose some magic despite first positive operating income from Disney+ 

Despite finally moving on from its proxy fight saga, Disney lost about US$20 billion in market value on Tuesday, after reporting earnings. For reference, that’s around the total market cap of one of its rivals, Warner Bros Discovery.  

So what happened?

🪄 Some good signs for Disney+

Here’s how Disney performed compared to analyst expectations:

• Revenue: $22.11b expected vs $22.08b actual (↓0.1%)
• Earnings per share (EPS): $1.10 vs $1.21 (↑9.8%)

Disney’s highly-watched direct-to-consumer segment, which includes Disney+ and Hulu, saw operating income jump from a loss of US$587 million in Q1 2023 to an operating profit of US$47 million in Q1 2024. 

This was the segment’s first profitable quarter since Disney+’s debut in 2019. 

Another notable number was the 6.3 million net new subscribers that Disney+ Core gained during the quarter.

📝 Overall a paper loss

Unfortunately, all of Disney’s streaming businesses combined (it also owns ESPN+) added up to an overall operating loss of US$18 million. 

Additionally, while adjusted EPS of US$1.21 is what’s being compared to analyst expectations, Disney’s numbers showed a loss per share of US$0.01. This was due to some accounting impairments done during the quarter.

💃 Former fame and glory

One of the biggest things analysts have noted with this earnings report is that it showed the fourth consecutive quarter of Disney missing revenue expectations.

This has sparked concerns of the challenge that Disney faces in trying to get back its former glory. 

At its peak in 2018, Disney recorded full-year EPS of US$8.36. In contrast, last year’s EPS was a much smaller figure of US$1.29. 

Following its latest numbers, analysts now anticipate that Disney may not regain its EPS record peak until 2028. 

🔦  Some other things we’re shining the Spotlight on:

• A LOT MORE AIRBNBs: Airbnb reported earnings that showed revenue up 18%, active listings up 15% and bookings up 9.5% year-on-year. Despite that, its shares are down over the week, perhaps due to Airbnb’s lower-than-expected guidance for this quarter’s performance.
• APPLE’S NEW (AI)PAD: Straight after its earnings report last week that showed revenues slowing down for many of Apple’s product lines, Apple revealed new iPads whose M4 chips are “more powerful than any neural processing unit in any AI PC today.” 
• SEZZLE’S SIZZLING QUARTER: The former ASX-listed Sezzle (NASDAQ:SEZL) jumped more than 75% overnight after reporting earnings. Its Q1 2024 diluted earnings per share more than quadrupled that of last year’s.  

That’s all for this week’s Spotlight! 

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