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Disney Shares Surge as Strength in Parks, Streaming Lift Outlook · Bloomberg Intelligence

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  Speaker 2: That Disney story again stocks up nine percent, although it
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  Speaker 2: is down nine percent for the year, so they got
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  Speaker 2: some work to do there. We go to the analytical
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  Speaker 2: side of this story, Githa Ranganath, and she is the
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  Speaker 2: media analyst for Bloomberg Intelligence based on in Princeton. Etha,
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  Speaker 2: you follow this company for many years. Have they finally
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  Speaker 2: finally turned the corner and they can become a stock
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  Speaker 2: that most people need to own? I think so, Paul.
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  Speaker 3: I think you know, this turnaround story has now been
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  Speaker 3: in the works ever since Bob Eiger came back more
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  Speaker 3: than two years ago, and it looks like, you know,
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  Speaker 3: everything that he's kind of put in place along with
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  Speaker 3: the CFO Hugh Johnston, is really working. So they did
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  Speaker 3: raise a guidance, you know, for the full year. But
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  Speaker 3: it's not just that, it's just the conviction in the
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  Speaker 3: outlook as you kind of look out and build out
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  Speaker 3: the earnings model for the next few years. I mean,
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  Speaker 3: we are basically looking at them doubling their EPs from
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  Speaker 3: close to almost six dollars this year to well over
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  Speaker 3: ten eleven dollars in the next four to five years.
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  Speaker 3: So just a lot of conviction I think now in
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  Speaker 3: their long term growth trajectory, with those new parks, with
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  Speaker 3: the added capacity, with the sixty billion dollar investment, with
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  Speaker 3: you know, the Abu Dhabi Park, new cruise ships, everything
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  Speaker 3: seems to be finally kind of coming together.
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  Speaker 4: Last quarter, though, the question was about their theme parks
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  Speaker 4: prices are too high. The consumers pinched there was a
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  Speaker 4: competitor opening up a park in Florida and everyone was
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  Speaker 4: kind of worried. What changed in three months.
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  Speaker 3: Yeah, so they did say at that point that, you know,
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  Speaker 3: summer bookings were strong. Of course, nobody really believed them.
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  Speaker 3: But you know, when they kind of reported the numbers
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  Speaker 3: today and you saw that thirteen percent increase in operating
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  Speaker 3: income in the domestic parks, domestic parks are really the
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  Speaker 3: bread and butter of you know, the Disney tein park
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  Speaker 3: business makes up seventy percent of revenue. You know, then
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  Speaker 3: that has really managed to I think a lay fears
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  Speaker 3: and they you know, it's not just what they reported, Alex,
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  Speaker 3: it's what they said for the remainder of the year.
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  Speaker 3: So they said bookings are up this quarter four percent.
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  Speaker 3: They said bookings advanced bookings are up for the fiscal
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  Speaker 3: fourth quarter seven percent, and that is with that new
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  Speaker 3: Epic Universe coming on board. So still demand seems to
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  Speaker 3: be really resilient. It seems to be strong, even though
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  Speaker 3: there's a little bit of softness internationally. Domestically, they seem
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  Speaker 3: to be in very good shape.
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  Speaker 2: So Getha talk to us about the profitability of their
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  Speaker 2: streaming businesses writ large here. How profitable are they? Do
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  Speaker 2: you think they can approach the profitability of say Netflix, I.
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  Speaker 3: Think they can over time, They definitely can. So this year, Paul,
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  Speaker 3: we're looking at just over a billion dollars in operating
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  Speaker 3: income on a twenty five billion in revenue. That's about
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  Speaker 3: four five percent margins. But really what we're you know,
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  Speaker 3: looking to the north star here is definitely Netflix. As
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  Speaker 3: you just pointed out, Netflix should get to thirty percent
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  Speaker 3: operating margins this year. So that's really what what Disney
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  Speaker 3: is working towards. So even as we kind of build out,
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  Speaker 3: you know, or we look at the earnings trajectory for
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  Speaker 3: that streaming unit over the next couple of years. I mean,
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  Speaker 3: we look at them getting to you know, fifteen sixteen
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  Speaker 3: percent margins over the next two to three years, and
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  Speaker 3: then of course a lot more upside with you know,
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  Speaker 3: the pricing power, with subscription growth, with password sharing, with
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  Speaker 3: you know, their advertising buildouts, so they have a lot
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  Speaker 3: of different levers that they can pull as well.
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  Speaker 4: Is the goal to catch up with Netflix in terms
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  Speaker 4: of streamer subscribers? Is it about profitability?
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  Speaker 2: Like?
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  Speaker 4: What's the goal there? Because Netflix is so far ahead
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  Speaker 4: just in basic numbers.
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  Speaker 3: Netflix is absolutely far ahead, and there's no doubt about that,
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  Speaker 3: Alex they have well over three hundred million subscribers just
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  Speaker 3: in terms of scale, Disney has about one hundred and
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  Speaker 3: twenty five. So there's one hundred and twenty five million.
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  Speaker 3: So there's a lot of cashing up to do. But
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  Speaker 3: there is one area where Disney is far ahead of Netflix,
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  Speaker 3: and that's advertising. They have a very very good advertising
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  Speaker 3: infrastructure and this is an area that Netflix is kind
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  Speaker 3: of really struggling with. And then remember Disney has a
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  Speaker 3: big weapon that they can use with that ESPN. It's
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  Speaker 3: not going to be called flagship I know. But with
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  Speaker 3: that ESPN streaming launch coming a little bit later this year,
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  Speaker 3: they have you know, they're spending something like eleven to
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  Speaker 3: twelve billion dollars in sports rights that they are going
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  Speaker 3: to monetize from a streaming perspective. So that is where
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  Speaker 3: you know, they're going to have an unrivaled streaming product
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  Speaker 3: even when you compare it to Netflix, because they're going
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  Speaker 3: to offer you entertainment, they're going to offer you sports.
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  Speaker 3: You know, there's going to be something for everybody. So
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  Speaker 3: it's going to be you know, I think they can
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  Speaker 3: you know, I'm not sure if they're going to completely
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  Speaker 3: be able to match Netflix in terms of subscriptions, but
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  Speaker 3: they're going to be able to get to that profit number,
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  Speaker 3: I think pretty quickly.
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  Speaker 1: Keith.
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  Speaker 2: If I'm an investor in Disney, I just kind of
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  Speaker 2: write off what used to be the core business, which
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  Speaker 2: is the cable network business, and to say it's in
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  Speaker 2: secular decline. I'm focusing more on the growing streaming business.
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  Speaker 2: Is that kind of the.
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  Speaker 3: Play that is the playball across and that's across majority
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  Speaker 3: of the space, So you know, yes, it's just kind
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  Speaker 3: of you know, coming along if you will. Advertising is
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  Speaker 3: a big concern their affiliate fees again as in secular decline.
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  Speaker 3: We know other companies are actually trying to separate out
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  Speaker 3: their cable networks business just because it's been struggling and
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  Speaker 3: the outlook doesn't look good. Comcast actually is, you know,
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  Speaker 3: separating out its cable networks a little bit later this year.
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  Speaker 3: They even have a new name for that new business.
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  Speaker 3: And you know, we kind of expect WBD, Warner Brothers,
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  Speaker 3: Discovery will do something similar, but yeah, I think it's
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  Speaker 3: pretty much at this point, it's pretty much written off, Paul.
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  Speaker 3: The linear networks business is dying, all right.
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  Speaker 4: Getha, thanks a lot, Really appreciate you either running out
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  Speaker 4: on Boomerg and talent is analysts on US Media on
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  Speaker 4: Disney Earning.
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