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Dot.LA chief correspondent and former Disney senior analyst Kelly O’Grady joins the Yahoo Finance Live panel to discuss Disney’s latest outlook ahead of the company’s earnings report on Thursday.
Video transcript
AKIKO FUJITA: Disney shares rallied in the session hitting a new high today, up nearly 5% there ahead of its big earnings report on Thursday. Disney + will likely be the focus again, with the streaming platform already boasting nearly 90 million subscribers.
Let’s bring in Kelly O’Grady. She is the chief correspondent of dot.LA. And Kelly, it must be pointed out, 90 million, certainly not a lot compared to where Netflix is today at over 200 million, but Disney has put forward some really lofty goals. Are we likely to hear any surprises when they report on Thursday?
KELLY O’GRADY: You know, I don’t think there will be any huge surprises. Their Investor Day, I think, was the big reveal with their streaming plan for the next three to four years, whatever content they plan to release. I think you’re going to see a very good performance in terms of subscribers.
Third-party data shows monthly active users are up significantly, likely due to the release of “Soul” on the platform at the end of December, as well as an increase in usage in America. Latin, especially in Brazil. You know, I think it’s interesting to think of them in the context of their peers. Netflix that you just mentioned, of course, exceeded the expectations of its subscribers, although let’s face it, it’s probably because of everyone’s favorite show, and that “Bridgerton” show, and all of them. their other content they’ve posted.
So I think you’re going to see some good performance and an increase in subscribers, but I wouldn’t expect them to hit the nearly $ 100 million that some people threw. Because let us remember, this figure of 86.2 million was at the beginning of December. It wasn’t in the last third quarter profit they were hovering – or the fourth quarter result, 73 million subscribers. So I think we’re going to see some good performance on Disney +, but I’m not expecting huge news like we saw on Investor Day.
ZACK GUZMAN: Yeah, kinda those bits and pieces that we always tease. I mean, we were talking about it when we saw a few special releases on Disney +. But “Soul,” another one that stood out and was sort of trying to figure out how much people would be willing to pay or what kind of boost would come from, you know, title specific moves here.
On the park side, though, that’s something we’ve been waiting for updates because, you know, they’ve been able to keep COVID under control with their park in Florida. But what are your expectations on how they would frame this build, given so many unknowns about their destination in California?
KELLY O’GRADY: So I expect to see some optimism around the parks reports. There is a new bill being introduced in California that would allow Disneyland to open earlier than Governor Newsom’s plan here. It would be at level three, orange, compared to level four, which is currently the case.
Now that would only be 25% of its capacity, of course, but we are seeing alfresco restaurants starting to open up here. So I think you’re going to start to see some optimism, especially with the rollout of the vaccine. And you know, there was – there was this big question, are you going to see the parks bounce back? Will there be pent-up demand?
And I think you’re starting to see, especially with the way Walt Disney World in Florida has done, that there’s this demand. There is this increase in attendance. They were able to go from 20% to 35%. And they see the desire to return.
And so I think there will be some optimism, because that pent-up demand, if we see that playing with – with the continued deployment in Florida, as well as potentially in California sooner than expected, it’s going to be on a costs lighter because they’ve made so many cuts to try and make this viable when we can go back. And I mean, you know, Tom Brady and Gronk are going over there today in Florida, so that must mean something, right?
AKIKO FUJITA: Yeah, Florida and California, very different situations right now. But you know, what you pointed out, the headwinds on the park side, has led to a lot of debate about what the stock should actually be valued on. And speaking of you, listen, there might be some optimism about what’s to come in California, but we’re still months away to see the big rebound where people actually go to the parks. How do you think people should, you know, watch Disney right now? Is that – even with the parks reopening, is it really about the momentum around streaming and the potential that they’re likely to see with more content on board?
KELLY O’GRADY: I’m so glad you asked this question, because it’s something that gave me a bit of anxiety when I see the action continuing to reach new heights. I think you’re absolutely correct that it’s really around that optimism with streaming and what Disney might look like three, four years later versus the optimism that the parks are going to be fixed. by magic overnight because they are not. We are still months away, as much as I would love to go for my birthday this year.
But I think there’s this philosophical question of, you know, every revenue call they put out some kind of big news, right. These are either Disney + subscriber numbers or, on their investor day, their investment in content or changes in direction. And that always gave the stock a big boost.
Now, most of the people who are invested in Disney play the long game here, but it makes me wonder if there will be a leveling at some point in the future, because at some point there will be no more. news to publish, and it will just be a matter of execution. On that point, hopefully they’ll address that concern about how many of those Disney subscribers who are Indian Hotstar subscribers, you know, in the Disney + bucket, because that generates a lower average revenue per user than the most other countries.
So at this point on OK there is optimism for the future, but we need to start thinking more about execution and what that is really going to mean from a profit standpoint. So I think there will always be a boost as a result of the results call, as there will be new subscriber numbers that will likely be higher than expected. But I don’t know how long it will last without a really tough run behind it.
ZACK GUZMAN: Yeah no. This is a very good point. And that happens too, as we may be seeing some of these benefits of signing up. You know, Verizon, our parent company, gives Disney a year free and some people come over there to see if they want to renew and start paying.
But when you look at maybe the last point, just going back to what we saw with “Mulan” and this idea of Premiere buys with “Raya and the Last Dragon”, that would be the next big one I think the folks are going to be curious about, I mean, what are you looking to see when we get these updates from Disney, if we get them this time around, around the pricing power that could come from Disney? + and how is this fan base so attached to maybe paying a premium?
KELLY O’GRADY: Sure. I mean, they had the ad during the Super Bowl. It will be this access fee of $ 30. Identical to “Mulan”, it will also be released in theaters. But March will be a bit difficult when it comes to getting back to theaters. But I expect them to address this.
It is possible that they also highlight a few other films. I mean, “Black Widow” is coming in May, “Jungle Cruise” I believe is coming in July. These are meant to be great tent pole movies for them. But I really hope they give us data on “Soul”, because that can potentially inform how “Raya” might do, even if “Soul” was free on the platform.
But also, if they do decide to take some of these movies, depending on our situation, you know, in the wrong or the right way this summer, what we can expect in terms of purchasing power. Because you’re right, there are a lot of subscribers out there, but that extra $ 30 fee will be tough, unless you contextualize it into the fact that, yeah, you know you would buy popcorn, you would buy movie tickets for a family of four. So when you think about it that way, it’s actually not that bad. But I think the $ 30 sticker price creates a lot of anxiety for potential buyers.
ZACK GUZMAN: Yeah, a lot of – a lot of snatches to keep our eyes peeled for when we get that later in Disney revenue. But Kelly O’Grady, dot.LA chief correspondent, appreciates your coming here to chat, as always.
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