Surprise Earnings Beat at Disney Overlooks Some Deep Pain
Disney reported a surprise profit after the bell Tuesday, and shares are rallying.
Disney+ subscribers hit the company’s five-year estimate within eight months.
With parks closed or at limited capacity, the company’s earnings will take years to rebound.
Two cheers for the House of Mouse. Few companies have been more impacted by the pandemic than The Walt Disney Company (NYSE:DIS). Yet the company managed a surprise earnings beat when it reported after the bell yesterday.
Earnings Show Strong Streaming Growth, Weak on Parks and Cruises
While the company managed to report a profit after accounting adjustments, revenue was nearly cut in half compared to a year ago.
Theme parks remain closed or under strict capacity limitations, and the company’s cruise ships remain docked.
While the base Disney+ has been a hit, the company is planning what it calls “one-off” event. The live-action remake of Mulan, scheduled to hit theaters this fall, will also be available on the streaming platform starting September 4.
Disney’s actions with this remake suggest that theater attendance will remain low for the foreseeable future and that the company will need to monetize produced films as best it can in today’s environment.
Disney shares surged 9% on these earnings. Shares remain about 20% off their 52-week highs of $153. For a company that’s had to make radical changes and has seen revenues drop by half, the real story here is Disney’s fairy-tale valuation of 40 times earnings.
If everything goes right in the world, Disney’s stock may head higher, and the valuation may drop at the same time. From what the company is telling us, that day is a ways off.
Disclaimer: This article represents the author’s opinion and should not be considered investment or trading advice from CCN.com. The author owns Disney shares.