Will Avatar help Disney? 📊 One step closer to earnings report

Entertainment sector giant Disney (DIS.US) will report Q4 2022 earnings after the US session today. Analysts will pay particular attention to whether the company, thanks to its strong brand, managed to withstand weaker consumer sentiment, and whether it cut billions in losses from its Disney+ streaming service. The report will also show how much the company's release of Avatar: The Creature affected revenues. Wall Street expects CEO Bob Iger to share a new vision for the company's growth.

Forecasts

Revenues: $23.52 billion (FactSet) vs. $21.8 billion in Q4 2021 ($20.15 billion in Q3 2022)

EPS: $0.78 (FactSet) vs. $1.06 in Q4 2021 ($0.30 in Q3 2022)

Streaming (Disney+, ESPN,Hulu): $1.3 billion loss vs. $1.5 billion loss in Q3 2022

Disney+ subscribers: 163 million subscribers vs. 164 million in Q3.

• Consensus expects Q4 to have been markedly better than Q3 for the company indirectly due to the successful release of Avatar and higher 'holiday' theme park revenue, as previously signaled by the company. North America accounts for the vast majority of revenue, which, with consumers there still strong, could limit any sales weakness in Asia or Europe;
• Good business in the parks could offset losses from expansion and investment in streaming (Disney+) and, even despite an expected decline in subscribers, improve sentiment if optimistic forecasts are issued. Investors, however, will have to assess the extent to which losses from streaming can be offset;
• Bob Iger has built Disney's 'modern business' through which investors will pay particularly close attention to what plan to revive the business he will propose after his high-profile return and re-assumption of the role of CEO. Upon his return, the chairman has given more power to the company's creative directors to break the stagnation, and conversations about Disney's restructuring are still expected to take place exclusively between decision-makers at the company. During Iger's previous 15-year tenure, the company generated a return of more than 550% for shareholders.

Streaming problems

Q3 2022 results were weighed down by growing streaming losses, although Disney+ subscribers grew 39% to more than 164 million. Losses grew as the company continued to invest in content and expand the service in external markets so analysts will remain sensitive to whether there has been any improvement. Investors began prioritizing profit over subscriber growth.

• According to Wells Fargo, it will be in the interest of CEO Bob Iger to comment to help price the stock in order to fend off the pressure on the board from billionaire Nelson Peltz, who as a shareholder is lobbying for his own succession to the board, reorganizing streaming, cutting costs and increasing the dividend. Disney may drop expenses to improve profitability and content;
• UBS says Disney+ may look better than the market thinks thanks to new pricing and advertising. This would coincide with Disney's own forecasts, which indicated in Q3 that losses from streaming would decline rapidly and that the platform would reach renegotiability in 2024.
• Morgan Stanley lowered its estimate of the number of Disney+ subscribers in Q4 2022 to about 1.2 million from about 2.55 million, indicating an outflow following recent price increases.

Disney shares (DIS.US), W1 interval. The stock price reacted by bouncing off a key resistance zone near $85 (orange horizontal line), but the SMA200 and SMA100 averages are approaching a bearish formation in technical analysis as a 'death cross', when the SMA100 crosses the SMA200 from above signaling possible longer-term weakness. It is worth noting, however, that this formation is often 'delayed' as a result of which it previously occurred just above the price bottom in 2008. Source: xStation5