Will Slowing Streaming Growth Impact Disney’s Q3 Results?

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Walt Disney

Disney (NYSE:DIS) is expected to publish its Q3 2023 results on August 9. We expect Disney’s revenues to come in at $22.5 billion for the quarter, slightly ahead of consensus estimates, marking an increase of over 4.5% versus last year. We expect earnings to stand at $ 0.99 per share, compared to a consensus of $0.97 per share.  See our analysis of Disney Earnings Preview for an overview of how Disney’s revenues and earnings will likely trend.

So what are some of the trends that are likely to drive Disney’s results? We expect Disney’s theme park business to remain a key driver of the company’s growth, as potentially higher attendance, and growing spending, drive sales. For perspective, over Q2 FY’23 (the quarter ended March) the parks and experiences division saw sales grow by a robust 17% and this trend should hold up over Q3 as well. Disney’s sizable media and entertainment distribution could continue to see muted results amid economic headwinds and concern about the advertising market, as marketers have scaled back amid high inflation and cooling consumer spending. Investors will also be closely watching the performance of Disney’s streaming business, which has faced headwinds of late due to mounting competition, the impact of price hikes, and the loss of rights to stream the popular Indian Premier League. Over the last quarter, overall sales of the direct-to-consumer streaming business rose by about 12% to $5.51 billion, marking a slowdown from the 23% growth levels seen in Q2 FY’22.

So is Disney stock a buy in the current environment? Despite concerns in the streaming and media operations, we still remain positive on Disney stock for a couple of reasons. Disney is looking to unlock more value by restructuring its business while cutting costs to bolster profitability. The stock also remains down by over 55% from highs seen in 2021.  We value Disney stock at about $117 per share, which is about 35% ahead of the current market price. See our analysis of Disney revenue for a closer look at the company’s key revenue streams and how they have been trending.

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 Returns Aug 2023
MTD [1]
2023
YTD [1]
2017-23
Total [2]
 DIS Return -3% -1% -17%
 S&P 500 Return -2% 17% 100%
 Trefis Multi-Strategy Portfolio -4% 24% 298%

[1] Month-to-date and year-to-date as of 8/5/2023
[2] Cumulative total returns since the end of 2016

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