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Disney misses Q4 despite strong subscriber growth

 

Wednesday, November 09, 2022

The news shaping the markets today

Ukraine’s Presidential Advisor Mykhailo Podolyak said that Kyiv could restart a dialogue with Russia only after Moscow withdraws its military troops from the country. The US dollar index traded higher amid continued geopolitical tensions.


China’s producer prices fell 1.3% year-over-year in October, following a 0.9% increase in the previous month. Despite the figure being below analyst estimates of 1.5%, the CNY/USD forex pair remained under pressure.


US crude inventories climbed by 5.6 million barrels in the week ended November 4, following a draw of 6.5 million barrels during the previous week. WTI crude oil prices fell slightly on the news.


Japan’s current account surplus narrowed to ¥909.3 billion in September, from ¥1,653.2 billion in the year-ago month. The latest reading topped market estimates of ¥234.5 billion, which sent the JPY/USD pair higher in forex trading this morning.


Australia’s private house approvals fell 7.8% to 9,628 units in September, compared to 4.8% growth in the previous month, which exerted pressure on the AUD/USD forex pair.

 

What’s happening: Shares of Walt Disney fell in after-hours trading on Tuesday, following the release of its fourth-quarter results.

What happened: The entertainment company reported weaker-than-expected sales and earnings for its fourth quarter.

Investors shorted Disney’s stock, despite strong growth in subscribers and the operating income at one of its major segments recording triple-digit growth.

How were the results: The Burbank, California-based company reported growth in sales and earnings for its fiscal fourth quarter.

  • Revenues grew by 9% year-over-year to $20.15 billion but missed the consensus estimates of $21.25 billion.
  • Net income from continuing operations rose by 1% to $162 million.
  • Adjusted earnings came in at 30 cents per share, significantly below the Street expectations of 56 cents per share.

Why it matters: The company’s Disney+ streaming service delivered strong growth in its subscriber count, reporting 164.2 million subscribers in the fourth quarter, beating market expectations of 161 million.

Disney recorded a total of 235 million subscriptions across its platforms, including Disney+, Hulu and ESPN+, representing the addition of 14.6 million from the previous quarter’s figure.

Disney+ subscribers, including domestic and international subscribers but excluding Hotstar, jumped 38% in the fourth quarter. However, average revenue per Disney+ subscriber contracted 10% in the US and 5% globally.

Revenues from the Media and Entertainment division fell 3% year-over-year to $12.7 billion, while the direct-to-consumer segment of this business recorded 8% growth.

Disney’s theme parks witnessed a sharp recovery, despite travel-related restrictions in China. The Parks, Experiences and Products segment posted revenues of $7.4 billion, up 36% from the year-ago quarter.

Although the Media segment’s operating income fell 91%, the Parks segment reported 100% growth.

How shares responded: Disney’s shares fell 6.8% to $93.09 in after-hours trading, following the release of quarterly results. The stock has lost around 36% year to date.

What to watch: Investors will keep an eye on Disney’s growth plans, as the company is scheduled to announce the ad-supported version of Disney+ on December 8. Disney also plans to raise the price of its current basic plan and existing subscribers will be forced to keep the ad-supported plan at the same price or opt for the ad-free plan by paying higher.

Markets will also monitor rising competition from Netflix and other major streaming platforms.

The markets today

European stocks will be in focus today after settling higher on Tuesday

Context: European markets recorded gains on Tuesday, with investors keeping an eye on the US midterm elections.

Details: The benchmark Stoxx 600 had surged to an 8-week high on Tuesday, as investors around the world focussed on the midterm elections taking place in the US. The outcome of these elections will determine which party controls Congress and impact future economic policy.

Eurozone’s retail sales rose by 0.4% in September, while France’s current account deficit widened to €7.3 billion, from €5.9 billion a month ago.

Shares of Pandora climbed more than 10% after the jewellery maker reported better-than-expected quarterly results. Qiagen’s stock also rose around 5% after the company increased its forecast for the full year.

The pan-European Stoxx 600 index gained 0.78% to close at 421.61 on Tuesday, after shedding around 0.5% earlier in the session.

Tech stocks were among the top performers, gaining more than 3%, with all major bourses closing in the green zone. Oil and gas stocks bucked the overall market trend, declining around 1.6% in the session.

The German DAX jumped to the 13,680 mark for the first time since August, while France’s CAC 40 added 0.39%. London’s FTSE 100 gained 0.08% to close at 7,306.14, after retail sales in the country grew 1.2% year-over-year in October, following 1.8% growth in the previous month.

What are expectations: Traders will keep an eye on the ECB’s non-monetary policy meeting. Markets will also continue monitoring other economic data from the European countries.

Other Markets: US indices closed higher on Tuesday, with the Dow Jones index, S&P 500 and Nasdaq 100 up by 1.02%, 0.56% and 0.75%, respectively.

Support & resistances for today

Technical Levels News Sentiment
USD/JPY  – 145.55 and 145.67 Positive
GBP/USD – 1.1523 and 1.1539 Positive
WTI Crude Oil – 88.66 and 89.09 Positive
FTSE 100  – 7292.12 and 7319.59 Negative
S&P 500 – 3793.30 and 3828.60 Positive

Market snapshot

Futures at 0400 (GMT)
EUR/USD (1.0076, 0.01%) Dow ($33,156, -0.06%) Brent ($95.33, -0.1%)
GBP/USD (1.1541, -0.04%) S&P500 ($3,837, 0.05%) WTI ($88.83, -0.1%)
USD/JPY (145.41, 0.19%) Nasdaq ($11,115, 0.19%) Gold ($1,710, -0.3%)

What else to watch today

Brazil’s retail sales, auto production and auto sales, Mexico’s inflation rate, US MBA mortgage applications, wholesale inventories, gasoline stocks, crude oil inventories and distillate stockpiles, Russia’s foreign exchange reserves and inflation rate, as well as France’s new car registrations.


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