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Netflix Inc shook Wall Street last month when
the streaming video pioneer disclosed it lost subscribers in the
first three months of the year and forecast more defections
through June.
Shares of Netflix have fallen 71% this year, and Disney shares
are down 31%. The Mouse House is schedule to release its
quarterly earnings report after markets close on Wednesday.
"We’ve reached a point of streaming saturation," Forrester
analyst Mike Proulx said. "Consumers have only so much time and
money to allocate to the ever increasing streaming service
options."
The Disney+ streaming service is still growing. Analysts predict
it will have attracted 5.3 million new subscribers through March
for a total of nearly 135.1 million, according to FactSet
estimates.
New sign-ups are projected to pick up to nearly 10.8 million
from April to June, analysts estimate.
Disney reiterated in February that it expects to amass between
230 million and 260 million Disney+ subscribers by the end of
September 2024.
The company needs to average nearly 9.1 million new customers
per quarter to reach the low end of that range, or 11.8 million
to reach the high end. Chief Executive Bob Chapek has said that
growth may fluctuate from quarter to quarter.
Forrester surveys showed viewers were impressed by Disney's
original programming from its strong stable of entertainment
brands, Proulx said, though some felt it was not updated enough.
Disney has been addressing this by adding ABC programming to
Disney+, he said, and will debut the much-anticipated "Obi-Wan
Kenobi" series May 27. Chapek has said Disney will up the pace
of new programming by year's end after facing COVID-related
production hurdles.
MoffettNathanson analyst Michael Nathanson kept his "neutral"
rating on Disney on May 2 but cut his price target by $20 to
$130.
"Judging by the recent struggles of Netflix, the (streaming)
business model isn't as attractive as once thought," he said.
Disney's earnings-per-share for the March quarter are expected
to reach $1.19, according to IBES data from Refintiv, boosted by
strong parks results as pandemic-weary visitors crowded Disney
World.
The parks unit "has bounced back ahead of expectations, and we
anticipate the segment emerging from COVID-19 with more profit
upside longer-term," JP Morgan analyst Philip Cusick said in a
research note.
The company has been in a battle with politicians in Florida,
where officials passed a law that would revoke the
self-governing status of Walt Disney World in June 2023 after
Chapek opposed legislation to limit discussion of sexual
orientation in schools.
Some critics have threatened to cancel Disney+ or Disney theme
park vacations in protest.
Forrester's Proulx said most consumers do not follow through on
boycott threats and it is rare for businesses caught up in
"cancel culture" to suffer a material financial impact.
(Reporting by Lisa Richwine in Los Angeles;Additional reporting
by Eva Mathews in Bengaluru; Editing by Lisa Shumaker)
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