Walt Disney (NYSE:DIS) shares fell about 5% on Thursday after the entertainment behemoth reported fewer-than-expected Disney+ subscribers.
Disney reported EPS of $0.93 coming in worse than the consensus of $0.95. Revenue grew 13% year-over-year to $21.82 billion, in line with expectations.
Disney+ subscribers came in at 157.8M, missing the 163.1 M consensus.
Linear Networks revenues decreased 7% to $6.6B, and operating income decreased 35% to $1.8B. Direct-to-Consumer (DTC) revenues grew 12% to $5.5B and operating loss decreased by $0.2B to $0.7B due to improved results at Disney+ and ESPN+, partially offset by lower operating income at Hulu.
Disney+ saw improved results from increased subscription revenue, lower marketing costs, and more content provided on the platform, partially offset by higher programming and production costs and, to a lesser extent, increased technology costs. Higher subscription revenue was attributable to subscriber growth and increases in retail pricing, partially offset by an unfavorable foreign exchange impact.
Improved results at ESPN+ were attributable to growth in subscription revenue due to an increase in retail pricing and subscriber growth.
Disney Parks, Experiences and Products segment revenues grew 17% to $7.8B, and segment operating income increased 23% to $2.2B, reflecting increases at its international and domestic parks and experiences businesses, partially offset by lower results at its merchandise licensing business.
Citi analysts highlighted that losses continue to narrow.
"We believe the lower F2Q23 subscribers and improved DTC profitability are likely are result of the company’s price hikes taken in December. Given the segment operating income beat and narrowing of DTC losses, we would not be surprised if shares traded modestly higher tomorrow," analysts said in a note.
Goldman Sachs analysts cut the price target to $130 per share, from the prior $136 but remain Buy-rated on DIS stock.
"Our key positive takeaway from DIS’s F2Q23 results is that we believe management is showing solid execution against key profitability initiatives outlined last quarter... Our key negative takeaway is that DIS continues to confront both secular and cyclical headwinds, which may yield lumpy operating trends including during 2H," they wrote.
Additional reporting by Senad Karaahmetovic