Disney Shares Leap As Streaming Success Offsets Q3 Loss

Disney said its year-old streaming service, Disney+, has more than 73 million subscribers, just under half of the global base of rival Netflix, which has been online since 2007.

Walt Disney Co.  (DIS) - Get Report shares powered higher Friday after posting its first quarterly loss in nearly two decades amid the global coronavirus pandemic but noted a surge in popularity for its Disney+ streaming entertainment service.  

Disney posted an adjusted loss of 20 cents per share for the three months ending in September as coronavirus-triggered shutdowns hammered theme parks and studio earnings, while group revenues slumped 23% to $14.71 billion.

Parks revenues tumbled 61% to $2.6 billion, Disney said, as the group's main attractions around the world remained closed during the quarter, loping $2.4 billion in profits from the division Media revenues fell 11% to $7.2 billion, although cable networks revenues rose 11% to $4.7 billion, the company said, thanks in part to the resumption of professional and collegiate sports in the United States.

The bright spot for the quarter, however, was the growth in paid subscribers to its Disney+ streaming entertainment service, which was launched last year and has continued to challenge the market dominance of Netflix  (NFLX) - Get Report. Global subs passed 73.7 million during the quarter, a much higher-than-expected figure that offset the market impact of Disney's quarterly coronavirus hit.

Disney said it would provide an update on global subscriber numbers for Disney+ during its December 10 investor day presentation. 

"The growth of Disney+ speaks volumes about the strength of our IP, our unparalleled brands and franchises and our amazing content creators, all part of the Disney difference that sets us apart from everyone else," CEO Bob Chapek told investors on a conference call late Thursday. "And when you look across our full suite of streaming service, we have exceeded 120 million paid subscriptions worldwide, with impressive subscriber gains for ESPN+ and Hulu, including the rapidly growing Hulu + Live TV."

Walt Disney shares were marked 3.34% higher in early trading Friday to change hands at $139.90 each, a move that extends the stock's six-month gain to around 37%.

"Management delivered on the promise for Parks re-openings to be incremental margin positive, while streaming subscriber trends remain strong, with Disney+ again sailing past our estimate," said BMO Capital Markets analyst Daniel Salmon, who carries an 'outperform' rating with a $165 price target on the stock. 

"Our (direct-to-consumer) value is now $100 as DIS has shifted faster than expected. 18 trading days until the December 10th investor day: we recommend building positions ahead of an event that will likely lay out the path to one day take that value even higher."