What To Watch In Disney Earnings Report

Media giant and theme park operator Disney (DIS) is scheduled to report results of its first fiscal quarter after the market close on February 11, with a conference call scheduled for 4:30 pm ET. What to watch:

1. DISNEY+: Disney launched its streaming service, Disney+, in the U.S., Canada, and The Netherlands in November of last year and has since extended the offering to a number of additional geographies.

With its last quarterly report, Disney reported 73.7M Disney+ paid subscribers as of October 3. The company also reported ESPN+ paid subscribers of 10.3M in Q4, versus 3.5M last year, and reported total Hulu paid subscribers of 36.6M in Q4, versus 28.5M last year.

"Even with the disruption caused by COVID-19, we've been able to effectively manage our businesses while also taking bold, deliberate steps to position our company for greater long-term growth. The real bright spot has been our direct-to-consumer business, which is key to the future of our company, and on this anniversary of the launch of Disney+ we're pleased to report that, as of the end of the fourth quarter, the service had more than 73 million paid subscribers - far surpassing our expectations in just its first year," said CEO Bob Chapek at the time of the company's earnings.

Since then, at the company's analyst day on December 10, Disney said that Disney+ had 86.8M subscribers as of December 2, adding that the service has exceeded expectations and has "launched" the company into a "new era" of DTC offerings. The company raised its Disney+ subscriber forecast to 230M-260M by FY24, versus a prior view of 60M-90M, noting at the time that its Disney+ subscriber projections now include Star+.

On January 14, Citi analyst Jason Bazinet raised the firm's price target on Disney to $205 from $175 and kept a Buy rating on the shares. The analyst increased price targets on both, but continues to prefer Disney to Netflix (NFLX), he noted at that time. As a late entrant, Disney has a "quicker and easier path" to subscriber growth over the next three years, Bazinet told investors. Second, the analyst suspects Netflix "may have some hiccups" over the next few quarters as price hikes potentially dampen quarterly net additions, "tactically disappointing" the Street. "Disney, on the other hand, is apt to keep prices relatively stable," said Bazinet.

More recently, on January 22, UBS analyst John Hodulik upgraded Disney to Buy from Neutral with a price target of $200, up from $155. Disney is positioned to achieve scale similar to streaming leader Netflix with 340M-plus global subscribers by 2024, Hodulik told investors. The analyst believes Disney's "premium" intellectual property creates pricing power and enables the company to spend less per subscriber on content, "driving better economics over time." Further, its Parks business will become a beneficiary of vaccine availability and pent up demand for leisure travel in the second half of 2021, added Hodulik.

2. THEME PARKS: At the time of its last earnings call, Disney said: "COVID-19 and measures to prevent its spread impacted our segments in a number of ways, most significantly at Parks, Experiences, and Products where our theme parks were closed or operating at significantly reduced capacity for a significant portion of the year, cruise ship sailings and guided tours were suspended since late in the second quarter and retail stores were closed for a significant portion of the year." At that time, the company estimated that its COVID-19 related costs may total approximately $1 billion in fiscal 2021. "The most significant adverse impact in the current quarter and year from COVID-19 was approximately $2.4 billion and $6.9 billion, respectively, on operating income at our Parks, Experiences and Products segment due to revenue lost as a result of the closures or reduced operating capacities... In total, we estimate the net adverse impact of COVID-19 on our current quarter and full-year segment operating income across all of our businesses was approximately $3.1 billion and $7.4 billion, respectively, inclusive of the impact at Parks, Experiences, and Products," Disney stated.

On February 4, two California Assembly Members representing districts impacted greatly by the closure of Disneyland and Six Flags Magic Mountain (SIX) readied a bill that will place all theme parks in the "Orange - Moderate - Tier 3" of the state's COVID-19 Industry Guidance for Amusement Parks and Theme Parks, Deadline's Tom Tapp reported.

On February 8, CNN's Clare Duffy and Natasha Chen reported that some Disney fans will finally have the opportunity to return to the California Adventure Park in March for a limited-time experience, about a year after the company's theme parks closed due to the pandemic.

3. CONSENSUS: In terms of overall results for the first quarter, analysts are calling for Disney to report total revenue of $15.93B. The consensus Q1 loss forecast stands at (41c), worse than the forecast for a quarterly loss of (3c) per share that analysts projected 90 days ago. For the March-end quarter, analysts' consensus currently calls for revenue of $16.5B and for the "House of Mouse" to post a profit of 21c per share.