Walt Disney shares slumped nearly 5% in pre-market trading on Thursday after the family entertainment company reported lower-than-expected earnings and revenue in the fiscal fourth quarter as slow growth in streaming users fell short of analysts’ expectations.
The Burbank, California-based company reported Q4 revenue of $18.53 billion in the fourth quarter, missing the Wall Street consensus estimates of $18.79 billion. The company reported earnings per share of $0.37, below the market consensus estimates of $0.52 per share.
Disney+ added 2.1 million subscribers, way below the market expectations of 10.2 million. That was also the tiniest jump since the streaming video service was launched, Reuters reported. Following this, Walt Disney shares fell nearly 5% to $166.30 in pre-market trading on Thursday.
By 2024, the company plans to have 260 million customers, and management expects the recent slowdown to be temporary.
“Disney posted a weak end to fiscal 2021 as Disney+ only added 2.1 million customers, its lowest quarter yet, to end the year at 118 million subscribers. Still, the Disney+ subscriber base increased by 44.4 million in fiscal 2021, well ahead of the 18.4 million new users added at Netflix over the same period,” noted Neil Macker, senior equity analyst at Morningstar.
“While Netflix is the much larger service with almost 214 million subscribers around the globe, Disney+ is only available in just over 60 countries, many of which were added in the last year. Even with the slower-than-expected subscriber growth this quarter, we still project robust long-term growth for the service. We maintain our wide moat and fair value estimate of $170.”
Walt Disney Stock Price Forecast
Twenty analysts who offered stock ratings for Walt Disney in the last three months forecast the average price in 12 months of $215.32 with a high forecast of $263.00 and a low forecast of $175.00. The average price target represents a 23.43% change from the last price of $174.45. From those 20 analysts, 16 rated “Buy”, four rated “Hold” while none rated “Sell”, according to Tipranks.
However, technical analysis suggests it is good to sell now as 100-day Moving Average, and 100-200-day MACD Oscillator signals a strong selling opportunity.
Morgan Stanley gave the base target price of $210 with a high of $250 under a bull scenario and $135 under the worst-case scenario. The firm gave an “Overweight” rating on the entertainment company’s stock.
“Impact on our Overweight (OW) thesis: Our OW thesis on Walt Disney (DIS) shares is based on the view that Disney is one of a shortlist of global streaming platforms that can achieve significant scale and profitability, which combined with the earnings growth at its Parks business offers investors adjusted EPS growth from $2 in FY21 to $10 in FY25. In addition to this growth, the earnings mix shift will move away from legacy media earnings towards streaming and parks which should be accretive to ROIC and the multiple,” noted Benjamin Swinburne, equity analyst at Morgan Stanley.
“The F4Q results and the updated outlook was a mixed bag with respect to our thesis, but ultimately we see the negative near-term revisions as tied to the timing of content delivery in streaming and operating leverage at parks.”
Several other analysts have also updated their stock outlook. CFRA cut the target price by $20 to $200. Barclays slashed the target price to $175 from $210. Guggenheim cut the target price to $205 from $215. JPMorgan raised the target price to $230 from $220.
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This article was originally posted on FX Empire