Shares of Disney fell by 3% after the publication of the quarterly report: losses in the movie segment, sagging revenues from traditional television overshadowed the positive results of theme parks and streaming. Despite profit growth, exceeding revenue forecasts and ambitious plans for digital content, investors preferred to lock in profits: the company's securities have risen 44% since April.

Details

Disney shares fell 3% after the company released its report for its fiscal third quarter ended June 28. The company's revenue from traditional TV networks and sports programming fell short of Wall Street expectations, overshadowing strong results from theme parks and streaming, wrote Bloomberg. 

Profits from traditional television fell 28%, and Disney's movie studio posted a loss of $21 million. The decline in revenue in the movie segment was largely due to low box office receipts for Elio and Thunderbolts, projects from Pixar and Marvel studios, the agency said. Disney's entertainment segment operating profit fell 15% to $1.02 billion, which was roughly in line with Wall Street expectations, notes Barron's. 

At the same time, the theme parks division's profit rose 13% to $2.52 billion, and its revenue increased 8%. The streaming division generated a quarterly profit of $346 mln.

The company's total revenue for the third quarter rose 2.1% to $23.7 billion - in line with forecasts. Adjusted earnings per share amounted to $1.61, exceeding the average estimate of analysts ($1.46), Bloomberg reported.

The number of subscribers to the core Disney+ service totaled 128 million in the third quarter - in line with analysts' expectations, the agency adds. 

The company raised its full-year earnings forecast to $5.85 per share from $5.75. Parks' operating profit is expected to grow by 8%, the upper end of previous estimates. Streaming's earnings forecast has also been raised, from $1 billion to $1.3 billion.

What about the stock?

Investors may have taken the report's weaknesses as an excuse to lock in profits after their meteoric rise, Barron's believes. Disney shares have "started to show signs of life" after a decade of stagnation, the publication writes: since April 8, when markets moved to recover from the shock caused by President Donald Trump's duties, they have risen 44%. By comparison, shares of video service Netflix for the same period added 32%, and the S&P 500 index - 26%.

Earlier this week, analysts at Evercore ISI assigned a buy recommendation (an "above market" rating) to Disney  shares and raised their target price on the stock from $134 to $140. This implies the stock is up 18.6%. 

Of the 32 analysts covering the company's stock, the majority - 25 - recommend buying it (Buy and Overweight ratings). All the rest are neutral (Hold);

What keeps Disney growing?

Disney is actively moving into the streaming market, launching new projects around sports franchises ESPN and Hulu service, Bloomberg notes. On Aug. 21, ESPN will launch a new streaming service for $30 a month that will offer sports fans access to the company's traditional TV channels and a range of interactive features. Disney will also offer a subscription to the new ESPN as part of a bundle with Hulu and Disney+ for $36 per month.

Disney announced new deals with the National Football League (NFL), which will sell it most of its media assets in exchange for 10% in ESPN, strengthening ties between the league and one of its key broadcast partners, Bloomberg writes. Once the deal is finalized, Disney's stake in ESPN will be 72%, while the company's partner, Hearst Communications Inc. - will own 18%. The deal is subject to regulatory approval and is expected to close at the end of 2026, the agency writes.

In addition, Disney plans to integrate the Disney+ and Hulu streaming services into a single app in the coming months. It will use a common recommendation system and offer an expanded catalog of content, including, for example, ABC news. 

Disney CEO Bob Iger said the company is taking "major steps forward in streaming" and shaping a "truly unique streaming offering." 

"With ambitious plans for all areas of the business, we are not yet done building Disney's future - and we anticipate what lies ahead," he added.

This article was AI-translated and verified by a human editor

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