Disney Stock Plunges as Streaming Losses Shake Investors. Disney Stock witnessed a sharp decline of 8.73%, indicated by the red down-pointing triangle, as shares slid on Thursday. The company’s report revealed a significant decrease in income from its traditional television business, while its streaming segment still struggles to achieve profitability.
The entertainment giant’s shares retreated nearly 9% to $92.22, marking the largest percentage decline since Nov. 9, when it fell over 13%. For the day, Disney Stock stands as the worst performer in both the S&P 500 and Dow Jones Industrial Average.
This drop occurs despite Disney’s notable reduction in losses within its streaming business during the second quarter, supported by increased prices for Disney+. However, the company faced a loss of approximately 300,000 subscribers in the U.S. and Canada. Additionally, its global subscriber count took a hit due to cancellations in India, where Disney lost the streaming rights to a popular cricket league that contributed to new sign-ups.
The total global subscribers for Disney+ decreased by four million, ending the quarter at 157.8 million. Analysts had expected the streaming service to show sequential growth with 163.2 million subscribers.
Analysts expressed concern over the projected softness in subscriber numbers for Disney+ in the current quarter, as well as the muted growth in domestic theme parks. Trust analyst Matthew Thornton pointed out that higher domestic Disney+ prices and reduced marketing efforts were negatively impacting subscriber counts.
Disney CEO Robert Iger expressed satisfaction with the recent minimal price increase for the non-ad-supported version of Disney+. He mentioned that this indicated pricing elasticity, highlighting the company’s belief in its pricing strategy during a call with analysts on Wednesday.
Iger also announced Disney’s plans to integrate Hulu content within Disney+ in the U.S. by the year’s end, while keeping streaming platforms such as ESPN+ available as standalone options.
UBS analysts viewed the decision to combine the streaming platforms as confirmation of Disney’s intention to take full control of Hulu in January. They suggested that the move could result in additional cost savings, building upon the company’s existing plan to reduce costs by $5.5 billion. Disney has initiated negotiations with rival Comcast, which currently owns one-third of Hulu.
In terms of Disney’s theme parks, weaker growth numbers are anticipated for the second half of the year compared to the previous year’s performance, which benefited from the 50th anniversary of Walt Disney World’s opening.
Christine McCarthy, Disney’s financial chief, explained that this comparison, along with inflationary cost pressures and a new union agreement, is expected to have a modest adverse impact on domestic parks and experiences operating margins in the third quarter. However, McCarthy noted that operating margins for domestic parks and experiences should still be higher than the previous year due to the continued strength of international parks.
Despite the challenges faced, analysts found positive takeaways from the quarter, including Disney’s progress in meeting or exceeding its cost targets and its best free cash flow performance since 2019.