Short-term traders are strongly focused on Walt Disney’s (NYSE:DIS) loss of streaming subscribers, but this definitely isn’t the end of the road for a famous name like Disney. I am bullish on DIS stock because the company’s overall quarterly results are perfectly acceptable, and I believe there’s a terrific dip-buying opportunity now.
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As we’ll discover in a moment, Disney has been doing well in some areas but could improve in others. Specifically, the company’s theme parks are thriving, but some facets of Disney’s streaming business aren’t up to par. This doesn’t mean Disney is totally failing in its streaming segment, however, so there’s no need to dump your DIS shares.
Disney Posts in-Line Quarterly Results
Anyone taking a big-picture view of Walt Disney’s earnings track record should be glad to know that the company has been consistently profitable during the past couple of years. Furthermore, Disney just released its earnings results for its fiscal second quarter (which ended April 1 of this year), and while DIS stock fell 8%, the overall results basically matched experts’ forecasts.
Starting with the top-line results, Disney’s revenue increased 13.4% year-over-year to $21.82 billion, which was practically in line with the consensus estimate. Moreover, Disney matched Wall Street’s forecast of $0.93 per share in quarterly earnings. So far, so good (or not so bad that the results should justify an 8.7% share-price plunge).
In addition, Disney demonstrated growth in its Parks, Experiences, and Products division. Specifically, the company’s revenue in that segment grew 17% to $7.78 billion. However, it appears that the financial press and stock traders are largely uninterested in Walt Disney’s thriving theme parks. That’s because streaming services are top-of-mind in the 2020s. So, how did Disney fare in its streaming unit?
Disney Loses Streaming Subscribers
It might surprise you to learn that Walt Disney’s Media and Entertainment Distribution revenue actually increased 3% year-over-year. However, that’s not the result that DIS stock traders chose to focus on. Rather, they concentrated on Disney’s decline in its Disney+ streaming service subscribers.
Here’s what happened. In Fiscal Q2 2023, Disney+ lost 4 million or 2% of its paid subscribers. The streaming service had 157.8 million users at the end of the quarter, while analysts had called for 163.5 million users. I believe this isn’t a huge miss, but stock traders clearly didn’t want to see the Disney+ user base shrink.
Among the main culprits was a decline in Disney+ Hotstar subscribers, as the service lost the broadcast rights to the Indian Premier League (a popular cricket league in India). Also, Disney+ subscribers in North America declined by 300,000 to 46.3 million – again, not a huge fall-off, but investors aren’t willing to accept any decline in this area.
On the other hand, Walt Disney’s global Disney+ average revenue per paid subscriber rose by 13% quarter-over-quarter to $4.44 (2% year-over-year). Sure, there was a fall-off in this metric for Disney+ Hotstar. Yet, the Disney+ average revenue per user grew by 20% in North America.
Most likely, this increase can be attributed to the company’s price hikes. I suspect that people are accustomed to higher streaming service prices by now, as elevated inflation has forced many businesses to raise the cost of their services. Thus, the Disney+ price increases seem to be paying off for Walt Disney so far.
Is DIS Stock a Buy, According to Analysts?
Even as DIS stock takes a beating, there are still experts on Wall Street with a bullish outlook for Disney. On TipRanks, DIS has a Strong Buy consensus rating based on 13 Buys and three Holds. The average Disney stock price target is $128.79, implying 39.5% upside potential.
If you’re wondering which analyst you should follow if you want to buy and sell DIS stock, the most profitable analyst covering the stock (on a one-year timeframe) is Michael Nathanson of MoffettNathanson, with an average return of 19.11% per rating and a 70% success rate. See below.
Conclusion: Should You Consider Disney Stock?
Walt Disney is doing just fine with its theme parks and other in-person experiences. However, stock traders are obsessing over a quarterly decline in streaming service users. This won’t necessarily be an ongoing problem, but some folks are already envisioning the worst-case scenario.
Worst-case scenarios rarely actually occur, so I feel that there’s an opportunity here with DIS stock. Therefore, consider a share position in Disney because it seems likely that the stock will recover in time, and Walt Disney can still demonstrate future growth and improvement in its streaming service.
