Yahoo Finance Disney's (DIS) Shares Falter as Avatar Movie Misses Estimates
The Walt Disney Company’s DIS latest movie Avatar: The Way of Water grossed $134 million on the opening weekend at the domestic box office, missing expectations of more than $175 million. The figure also came short of Disney’s expectation of $135-$150 million.
Internationally, Avatar: The Way of Water grossed $300.5 million, bringing the movie’s opening overall weekend collection to $434.5 million, trailing Marvel Studios’ Doctor Strange in the Multiverse of Madness ($442 million).
Per CNBC data, China accounted for $57.1 million in ticket sales for the three-day opening weekend. China contributed roughly $265 million to the original Avatar movie, which, despite collecting only $77 million in the opening weekend, went on to become the highest-grossing movie of all time.
The first Avatar movie, released in 2009, grossed $2.9 billion worldwide. It edged out Avengers: Endgame after a September 2022 re-release helped the movie add $73 million in ticket sales.
Disney shares fell 4.77% to $85.78 at close on Dec 19. Disney shares have lost 44.6% year to date compared with the Zacks Media Conglomerates sector’s decline of 37.6%.
The Walt Disney Company Price and Consensus
The Walt Disney Company price-consensus-chart | The Walt Disney Company Quote
Disney Relies on Disney+ to Recover
Disney has been heavily investing in its streaming services to launch new movies and shows to gain traction. This has aided subscriber growth as Disney+ added more than 12 million global subscribers in the fourth quarter of fiscal 2022.
However, Disney’s direct-to-consumer division reported an operating loss of $1.5 billion in fourth-quarter fiscal 2022, which doubled year over year. This has been attributed to macroeconomic factors like inflation, which have spiked up the cost of production for the company, as well as adverse foreign exchange impact that decreased Disney+’s ARPU by 5%.
Disney+ also faces significant competition from Netflix NFLX, which has a strong pipeline of content and has reached 223 million subscribers worldwide. A saturated streaming market, with the presence of services from the likes of Apple AAPL and Comcast CMCSA, is creating headwinds for Disney+.
Streaming market leader, Netflix, reported better-than-expected third-quarter 2022 subscriber numbers. The streaming giant gained 2.41 million paid subscribers globally, higher than its estimate of gaining one million users. Netflix added 4.38 million paid subscribers in the year-ago quarter.
Apple’s streaming service, Apple TV+, continues to gain recognition with its critically acclaimed and popular shows like Ted Lasso.
Comcast’s Peacock had more than 15 million paid subscribers in the United States at the end of third-quarter 2022. Moreover, Peacock had approximately 14 million bundled and free users, totaling around 30 million monthly active accounts.
Nevertheless, Disney is focusing on the realignment of cost, including meaningful rationalization of marketing spending, and optimization of content slate and distribution approach to deliver a steady state of high-impact releases that efficiently drive engagement.
Disney also reappointed Robert A. Iger, popularly known as Bob Iger, as CEO. Bob Iger had actively been involved in the launch of Disney+ in 2019. His expertise and experience of more than four decades are likely to help the company create an efficient and cost-effective structure for the streaming platform.
This Zacks Rank #5 (Strong Sell) company expects Disney+ to reach profitability by 2024. It is also counting on releases such as Black Panther: Wakanda Forever, apart from Avatar: The Way of Water, to fuel its subscriber acquisition.
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