Disney's stock jumps 7%in premarket trading early Thursday following the company’s fiscal first-quarter earnings beat and a series of significant announcements.
In its most notable news, CEO Bob Iger unveiled Disney’s ambitious step into the gaming industry, announcing a $1.5 billion investment in Epic Games, the creator of the popular game Fortnite. Iger emphasized the partnership's potential to leverage Disney's extensive intellectual property, spanning Disney, Pixar, Marvel, Star Wars, and Avatar, to develop new gaming experiences.
"We're excited about the potential to create a transformative games and entertainment universe," Iger remarked, highlighting the integration of Disney's storytelling with Epic's gaming platform.
Additionally, Disney revealed several upcoming ventures, including the launch of an ESPN streaming service in 2025, an exclusive streaming release of Taylor Swift's Eras Tour movie on Disney+, and the announcement of a sequel to the beloved animated film "Moana."
Despite revenue slightly missing estimates and remaining relatively flat year-over-year, Disney surpassed earnings expectations with adjusted earnings per share of $1.22 for the first quarter, compared to the forecast of 99 cents. The company also announced a substantial dividend increase of 50%, boosting shareholder confidence.
Ben Barringer, a technology analyst at investment manager Quilter Cheviot, commented on Disney's financial performance, stating, "The results demonstrate stable revenue and effective cost management." Barringer highlighted the significance of the Epic Games partnership while cautioning that its impact might unfold gradually.
"Disney anticipates modest revenue growth while maintaining a focus on cost discipline to ensure returns for shareholders," Barringer noted, acknowledging ongoing challenges in Disney's Parks business and the decline in linear television.
Disney's proactive measures come amidst pressure from activist investor Nelson Peltz, who has urged the company to enhance its performance. Peltz's investment firm expressed dissatisfaction with Disney's previous performance, stating, "We saw this movie last year, and we didn’t like the ending."
The announcement of a 50% increase in the cash dividend, alongside promising earnings guidance for fiscal 2024, reflects Disney's commitment to addressing investor concerns. The company reported adjusted earnings of $1.22 per share for the first quarter, surpassing analyst expectations, and projected full-year earnings growth of at least 20% compared to the previous year.
However, Disney continues to grapple with challenges in its traditional linear TV business and slower growth in its parks division. CEO Bob Iger has implemented cost-cutting measures to mitigate these challenges, aiming to achieve at least $7.5 billion in annualized savings by the end of fiscal 2024.
Streaming remains a focal point for Disney's growth strategy, with the company reporting narrowed losses in its streaming division. Despite a decline in core Disney+ subscribers following price increases, Disney expressed confidence in its streaming business's long-term profitability.
The company outlined plans to crack down on password sharing, aiming to bolster subscriber revenue in the coming quarters. Additionally, Disney provided an update on its streaming services' performance, highlighting sequential growth in average revenue per user (ARPU) and projecting further subscriber additions in the second quarter.
Disney aims to capitalize on its iconic brands and intellectual property to drive innovation and expand its presence in the gaming and streaming industries. The strategic partnership with Epic Games signals Disney's commitment to leveraging its storytelling expertise in new digital realms, while upcoming content releases underscore the company's focus on delivering compelling entertainment experiences across multiple platforms.
Disney's strong earnings performance, coupled with strategic investments and forward-looking initiatives, positions the company for continued growth and resilience in a rapidly evolving entertainment landscape.