- Needham Analyst Laura Martin repeated a hold on Walt Disney Co DIS.
- For Q4 ’22, while maintaining the DIS revenue estimate at $21.2 billion (up 14% Y/Y), it cut the operating profit estimate by 29% to $1.9 billion.
- Guidance reflects Content Sales Licensing & Other OI guidance of $100 million below 4Q21 levels (a loss of $65 million) and higher than previously estimated costs as DIS continues to license third-party content reduced.
- The guidance reflects higher DTC losses (now $1.35 billion versus $800 million previously) related to costs associated with selling less of its own content to external third parties and higher than expected content spend. It also reflects a higher tax rate.
- These three downgrades were partially offset by higher OI in the Parks segment than it had previously forecast.
- As a result, their 4Q22 operating EPS estimate drops 45% to $0.35.
- Their re-rating reflects that consensus estimates for DIS are overestimated, reflecting high near-term investment in DTC in 2022 and another year of unclear earnings contributions from linear TV and film releases as vaccines are slowly rolled out globally.
- She believes DIS has a strong enough balance sheet to weather an extended COVID-related earnings decline.
- Longer term, she believes DIS’s asset mix of digital and physical assets (i.e. an omniverse) maximizes its capture of economic value.
- Longer term, she believes DIS will be a winner in the streaming wars.
- She believes that the success of the Metaverse will require high quality content libraries with successful film and TV franchises to drive mass adoption, which bodes well for DIS and any other entertainment company with extensive libraries and successful franchises.
- Price promotion: DIS shares traded 0.96% lower at $96.51 on the last check Friday.
- Photo via company
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