What Wall Street experts are saying about Disney ahead of earnings

Media giant and theme park operator Disney (DIS) is scheduled to report results of its fiscal first quarter after the market close on Wednesday, February 7, with a conference call scheduled for 4:30 pm ET. What to watch:

STREAMING: In Q4, Disney reported results that CEO Robert Iger said “reflect the significant progress we’ve made over the past year.” Iger added: “While we still have work to do, these efforts have allowed us to move beyond this period of fixing and begin building our businesses again. We have a solid foundation of creative excellence and innovation built over the past century, which has only been reinforced by the important restructuring and cost efficiency work we’ve done this year, and we’re on track to achieve roughly $7.5 billion in cost reductions.”

With its last quarterly update, Disney said it added nearly 7M core subscribers to Disney+, reporting 112.6M core paid subscribers for the streaming service as of the end of Q4, as well as Disney+ Hotstar paid subscribers of 37.6M as of September 30, 2023. The company also reported total Hulu subscribers of 48.5M as of September 30, 2023.

BOARD FIGHT: At the end of November, Disney reinstated its dividend, announcing it would pay a 30c per share dividend for second half of FY23, payable January 10, 2024 to shareholders of record at the close of business on December 11, 2023.

On the same day, Trian Fund Management, which said at that time that it beneficially owned approximately $3B of stock in The Walt Disney Company, reported that following conversations with Disney’s CEO, Disney extended an offer to Trian to meet with the Board but informed Trian that the Board was turning down Trian’s request for Board representation, including Nelson Peltz.

Subsequently, Blackwells Capital, which had identified itself as “a shareholder of Disney since 2018,” issued its support for the ongoing restructuring led by Bob Iger, and “stewarded by an enviable Board of Directors recently enhanced” through the appointments of James Gorman and Jeremy Darroch. Jason Aintabi, chief investment officer of Blackwells, commented, “Disney has one of the most attractive portfolios of beloved brands and businesses. The combined stewardship of the refreshed Board and the leadership of Mr. Iger, offer Disney shareholders the best opportunity to surface value. Mr. Peltz and Trian need to withdraw this costly and disruptive effort to displace experienced voices in the boardroom and substitute them with Mr. Peltz and his nominees.”

Since then, it has been reported that activist investor Nelson Peltz, whose firm Trian has been pushing for representation on Disney’s board, will soon lay out a plan that it sees Disney being able to follow to achieve profitability in streaming by bundling its ESPN+ service with a larger player interested in sports, such as Netflix (NFLX), people familiar with the matter told Bloomberg’s Thomas Buckley and Lucas Shaw. Trian will publish a white paper detailing its thesis and recommendations for Disney in the weeks after the entertainment giant’s next earnings report on February 7, the sources said.

SPORTS STREAMING VENTURE: On February 6, ESPN, a subsidiary of Disney, Fox (FOXA, FOX) and Warner Bros. Discovery (WBD) reported that they have reached an understanding on principal terms to form a new joint venture to build a new platform to house “a compelling streaming sports service.” The platform will bring together the companies’ portfolios of sports networks, certain direct-to-consumer sports services and sports rights – including content from all the major professional sports leagues and college sports. The formation of the pay service is subject to the negotiation of definitive agreements amongst the parties. The offering, scheduled to launch in the fall of 2024, would be made available directly to consumers via a new app. Subscribers would also have the ability to bundle the product, including with Disney+, Hulu and/or Max.

Following that news, sources told CNBC’s David Faber that the new service is expected to be priced at over $40 per month, but “not much over” that amount.

DISAPPOINTING BOX OFFICE: In mid-November, Marvel Studios and Disney’s “The Marvels” opened to $47M at the domestic box office in its opening weekend, taking the top position but ranking as the worst start in the history of the Marvel Cinematic Universe. Overseas, the superhero pic grossed an estimated $63.3M for a global start of $110.3M.

Later that month, Thanksgiving weekend did not pan out for media giant Disney either, as its animated film “Wish” came in after Apple’s (AAPL) “Napoleon” and Lionsgate’s (LGF.A) “Hunger Games” prequel, “The Ballad of Songbirds and Snakes,” with just $31.7M over the long weekend. “The disappointing debut comes after Disney just saw its latest Marvel film bomb as CEO Bob Iger attempts to revamp the company’s film division,” said Yahoo News.

On December 4, Loop Capital lowered the firm’s price target on Disney to $108 from $110 as the analyst pointed to the company’s continued “disappointing box office results,” and given the synergy at Disney, the lower interest in its latest releases that could also impact Disney+ sign-ups and consumer product sales.

More recently, Loop Capital lowered the firm’s price target on Disney further, to $106 from $108, and kept a Buy rating on the shares. The firm reduced its December quarter segment operating income view by about $200M to $3.4B, approximately half at the film division and half at DTC, and now assumes that Disney+ core subscribers decline by 2.1M in the quarter due to roll off of global promotional pricing earlier in the quarter and higher churn with the $3 price increase implemented domestically in mid-October, the analyst told investors. Loop also notes that in Parks, growth is coming from the Asian parks, which were still not operating at full capacity last year, and California, with tougher comparisons in Orlando.

CONSENSUS: In terms of overall results for the fiscal first quarter, analysts are calling for Disney to report total revenue of $23.8B. The consensus Q1 earnings forecast stands at $1.02 per share, according to Bloomberg. For the March-end quarter, analysts’ consensus currently calls for revenue of $22.37B and for the “House of Mouse” to post a profit of $1.00 per share, according to data from Bloomberg.

SENTIMENT: Check out recent Media Buzz Sentiment on Disney as measured by TipRanks.