Did Walt Disney Accelerate Subscriber Growth in Q1?

The Walt Disney Company (NYSE: DIS) is scheduled to report fiscal 2022 first-quarter results on Feb. 9. The House of Mouse has struggled to bounce back from the devastations caused by the pandemic.

Still, despite reopening all its theme parks and other operations that depend on bringing people together, its stock price is not responding in kind. Instead, the market is more focused on Disney's streaming services. That's why, when Disney reports Q1 earnings on Feb. 9, subscriber growth will take center stage.

A child at a theme park eating cotton candy.

Image source: Getty Images.

Disney+ is expanding into new markets

Impressively, Disney has grown its flagship streaming service Disney+ to 118 million subscribers as of Oct. 2 after launching it in November 2019. Still, investors were disappointed that Disney only added 2.1 million subscribers from the previous quarter.

Counting Disney's other two streaming services, Hulu and ESPN+, it has a total of 179 million subscribers, up from 174 million in the prior quarter.

Several factors were to blame for the slower growth. Disney could not create the quantity of new content it wanted because the coronavirus is challenging production.

Additionally, Disney shed some subscribers in an international segment. The bulk of that decline was due to a surge in signups the previous year. Most of those subscriptions were annual memberships, and the renewal period created some churn.

Still, Disney's streaming segment is in its early stages of development. The company plans to more than double the number of countries where it's available to 160 by fiscal 2023. Of course, availability in new markets means millions more potential customers.

In that regard, Disney expects between 230 million and 260 million subscribers to Disney+ by the fiscal year 2024 and to be profitable by then too. So, despite the short-term volatility, investors should focus on the long-run trajectory for the streaming segment. As long as management keeps reiterating its confidence about reaching those long-run targets, substantiated by quarterly progress, investors can be confident, too.

What this could mean for Disney investors

Analysts on Wall Street expect Disney to report revenue of $18.56 billion and earnings per share (EPS) of $0.61. If it meets that revenue projection, it would be an increase of 14.2% from the same period the year before.

Disney's stock has been down 21.8% in the last three months. The market has mostly ignored the company's improving performance at its theme parks, which are all reopened and thriving.

The fall in its price was exacerbated when rival Netflix (NASDAQ: NFLX) reported less-than-expected subscriber growth and pessimistic guidance for near-term growth. Given Netflix's poor results, the market expects something similar from Disney. If The House of Mouse can disappoint the pessimists and report better robust subscriber growth, it could be the catalyst that lifts the stock higher.

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Parkev Tatevosian owns Walt Disney. The Motley Fool owns and recommends Netflix and Walt Disney. The Motley Fool recommends the following options: long January 2024 $145 calls on Walt Disney and short January 2024 $155 calls on Walt Disney. The Motley Fool has a disclosure policy.

The views and opinions expressed herein are the views and opinions of the author and do not necessarily reflect those of Nasdaq, Inc.


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