Media and entertainment giant The Walt Disney Company (NYSE:DIS) is scheduled to announce its fiscal Q1 earnings after the market closes on February 8, 2023. This will be the first earnings call since Bob Iger returned as the CEO in late November. Analysts’ expectations reflect a decline in the Q1 FY23 bottom line.
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Earnings Expected to be Under Pressure
Disney posted weaker-than-expected results for Q4 FY22 (ended October 1, 2022) due to mounting losses at the company’s Disney+ streaming business. Disney+ subscribers increased by 39% to 164.2 million. Nonetheless, Disney+ losses increased as the company continued to invest heavily in content and rolled out the service in additional markets.
For Q1 FY23, analysts expect the company’s revenue to increase nearly 7% to $23.3 billion. Disney’s top line is expected to benefit from some blockbuster movie releases in the quarter, including Avatar: The Way of Water.
Meanwhile, Wall Street projects Q1 FY23 adjusted EPS to decline over 25% year-over-year to $0.79, reflecting continued pressure on the profitability of the streaming business. During the Q4 FY22 earnings call, the company’s former CEO Bob Chapek stated that the company continues to expect Disney+ to achieve profitability in FY24, with losses projected to start shrinking in Q1 FY23.
What is the Price Target for DIS Stock?
Ahead of the results, Morgan Stanley analyst Benjamin Swinburne trimmed his Q1 FY23 Disney Plus core net subscriber additions estimate to more than 1.2 million from over 2.55 million to reflect elevated churn from recent price hikes.
Swinburne remains bullish about Disney’s ability to generate significant earnings growth over the next several years, driven by continued growth at its Parks and Experiences businesses and a “return to growth” of its Media and Entertainment businesses in FY24. The analyst reiterated a Buy rating with a price target of $115.
Walt Disney scores Wall Street’s Strong Buy consensus rating based on 20 Buys and four Holds. The average DIS stock price target of $119.79 implies 9% upside potential. Shares have advanced over 23% so far in 2023.
Conclusion
Disney’s Q1 FY23 earnings could continue to be under pressure due to losses at the company’s Disney+ streaming business. Investors expect the company to issue favorable guidance for the quarters ahead due to pressure from activist investor Nelson Peltz.
Peltz, who co-founded Trian Fund Management, intends to join the Disney board after criticizing the company for several issues, including its succession planning and “over-the-top” compensation packages.
