Walt Disney Focuses on Profitability Improvement: Will the Stock Price Rise Further?

[Asia Economy Reporter Minji Lee] Walt Disney's stock price rose slightly as it posted first-quarter results in line with market expectations. With CEO Bob Iger announcing a strategy to focus on profitability enhancement this year, attention is focused on whether the stock price can rise further.

On the 11th, Walt Disney's stock price stood at $108.06. Over the past month, Walt Disney's stock price increased by 12.18%. Amid expanded risk appetite at the beginning of the year, the stock price showed a slight upward trend after announcing first-quarter results that met market expectations.

In the first quarter (October to December 2022), Walt Disney's revenue was $23.51 billion, up 7.8% year-on-year. Non-GAAP operating income was $3.04 billion, down 6.6% during the same period, and net income recorded $1.28 billion, an increase of 15.9%.

Looking at revenue by business segment, Media & Entertainment recorded $14.78 billion, up 1.3%. Disney Parks, Experiences and Products posted $8.74 billion, up 20.8% during the same period. In terms of operating income, the Media & Entertainment segment recorded a $10 million loss, turning negative, while Disney Parks, Experiences and Products operating income increased 24.6% to $3.05 billion.

Researcher Nayoung Jung of Hyundai Motor Securities said, “The overlap of the endemic phase and travel season led to significant growth in theme park and experience sales, driving overall revenue growth. Operating income exceeded pre-COVID-19 levels due to increased spending per traveler, admission fee hikes, and paid tickets for reduced waiting times.”

The operating loss in the Media & Entertainment segment was affected by weak advertising revenue, which impacted the linear network business. Additionally, costs related to Disney+, Hulu, and ESPN+ (DTC) businesses also had an impact. Disney+ paid subscribers stood at 162 million, experiencing customer churn due to price increases.

Disney plans to cut costs by $5.5 billion to secure profitability. First, it aims to reduce $2.5 billion in selling, general and administrative expenses and operating costs by 2024. The company plans to cut 7,000 employees, accounting for 3.2% of its total workforce.

Thirty billion dollars will be saved in non-sports content areas. This is in response to growing investor concerns about increased Disney+ content scheduling and production costs. Researcher Nayoung Jung explained, “However, since no specific target achievement period was specified and considering the high saturation of the OTT market, operating losses in the Disney+ segment are expected to continue through 2023.”

Furthermore, to improve content quality, Disney will reorganize into three business units: Entertainment, ESPN, and Theme Parks. This strategy aims to grant more authority and responsibility to creative leaders. Researcher Hanwi of NH Investment & Securities said, “As the CEO’s additional moves to reactivate the growth flywheel centered on quality content are anticipated, it is necessary to maintain a positive investment perspective on the company.”

This content was produced with the assistance of AI translation services.