Disney Stock Falls Ahead Of Earnings As Delta Variant Looms

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Disney (DIS) reports Q3 earnings late Thursday, as the delta variant poses a new threat to the theme parks and studio segments. Disney stock fell.




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Meanwhile, the streaming video business has seen a slower growth lately, while also drawing a lawsuit from a Hollywood superstar.

Disney Earnings

Estimates: FactSet analysts see earnings per share surging to 55 cents from 8 cents in the year-ago quarter. Revenue is expected to jump 42% to $16.76 billion.

Results: Check back later.

“The pace of recovery for Disney’s parks and resorts profit hub has been an important story exiting Covid-19, given it will likely be a key cash-flow generator through which Disney+ can reinvest into its streaming ventures,” said Third Bridge analyst Joe McCormack. “The rise of the delta variant poses a material risk to that recovery profile.”

Stock: Shares dipped 0.3% to 177.56 on the stock market today. Disney stock is in a long consolidation with a 203.12 buy point, according to MarketSmith chart analysis. It has an RS Rating of 54 out of 99 and an EPS Rating of 31. Its relative strength line is going sideways, after floating near highs in February. Shares have been trading right at the 50-day line for several days.

Rival streaming giant Netflix (NFLX) was down 0.3%. Movie theater chain AMC Entertainment (AMC) was up 1.8%.

Subscriber Slowdown Weighs On Disney Stock

Disney’s subscriber growth, a key revenue driver during the pandemic, is losing momentum, according to internal data The Information reviewed last month.

Disney+ reportedly had little more than 110 million total subscribers late in the third fiscal quarter vs. 103.6 million in the second quarter, which missed expectations for 109 million.

In Q2, Disney reported around 159 million total subscribers across its streaming services, which include Hulu and ESPN+. Revenue for Disney’s direct-to-consumer business grew 59% to $4 billion in Q2.

The slowdown comes amid a lawsuit filed by “Black Widow” star Scarlett Johansson, who claims breach of contract and lost residuals when Disney simultaneously released the Marvel blockbuster on Disney+ and in theaters on July 9. Disney has requested a confidential arbitration to settle the case.

The movie took in $80 million in domestic box-office receipts and $78 million internationally in its opening weekend. And for the first time, Disney disclosed the amount of money a new release generated from Disney+ Premier Access, which cost subscriber an extra one-time fee of $29.99. “Black Widow” took in $60 million from streaming sales.

“Jungle Cruise,” which was released in late July, generated $61.8 million in opening-weekend box office receipts worldwide and $30 million in Disney+ streaming sales.

“Disney’s tactics around theatrical releases will have a big impact on the broader exhibition industry, with industry experts noting that if they choose to release all films permanently simultaneously day-and-date on Disney+, they could potentially cut the movie theater industry in as much as half,” McCormack said.

But in an earlier interview with IBD, industry expect Dan Rayburn said that’s unlikely to happen.

“It wouldn’t work for a lot of other movies. ‘Black Widow’ transcends other cultures and countries,” he said. “This was a unique case and a unique piece of content. It’s not announcing the next ‘Star Wars’ movie is going to be released like this.”

Revamped Theme Park Passes 

Meanwhile, Disney recently unveiled a new annual pass program dubbed Magic Key, which goes into effect Aug. 25. The cheapest pass costs $399 but is only for Southern California residents on select days of the year. The other passes range from $649-$949 with varying blackout dates. An all-access annual pass goes for $1,399, which includes free parking.

The most expensive pass is actually less expensive than the previous top-tiered pass, which used to cost $1,449. But the Dream Magic Key offers slightly fewer perks. Overall, the prices have remained within range of the old passes, although there are more blackout dates for the restricted passes.

Follow Adelia Cellini Linecker on Twitter @IBD_Adelia.

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