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Disney Shares Slump as Slowing Subscriber Growth Offsets Solid Earnings

Disney+ had around 103.6 million subscribers at the end of April, the media giant said, but slowing international additions weighed on overall growth as the coronavirus pandemic continues to impact Disney's global business.

Walt Disney Co.  (DIS) - Get The Walt Disney Company Report shares slumped lower Friday after the media and entertainment group posted weaker-than-expected subscriber figures that offset a solid first quarter earnings report. 

Disney said adjusted earnings for the three months ending in March came in at 79 cents per share, well ahead of Street forecasts, but also noted a 13% decline in group revenues, to $15.61 billion, and an overall subscriber total for its Disney+ streaming services of 94.9 million, both of which fell shy of analysts' estimates.

The bulk of Disney's operating profits came from its media division, which earned $2.9 billion, while its pandemic-hit theme park business lost another $406 million. 

Where we have been able to reopen our theme parks with limited capacity, guests have consistently demonstrated a willingness and a desire to visit, which we believe is a testament to the fact that they feel confident in the health and safety protocols we put in place," CEO Bob Chapek told investors on a conference call late Thursday. "And given the demand we're seeing now, we're confident we'll only grow once the pandemic is behind us."

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"During this difficult time, we have made significant changes while finding new and innovative ways to conduct our businesses. But at the same time, we have chartered a course for an even more deliberate and aggressive DTC push for Disney+, ESPN Plus, Hulu and Star," he added. "I'm really proud of how well our team has performed in the face of a multitude of ongoing challenges, both creatively and across our parks and experiences and legacy and DTC distribution platforms."

Walt Disney shares were marked 4.1% lower in early trading Friday to change hands at $171.00 each, a move that nudges the stock into negative territory for the year.

"Regardless of the near-term setback of Disney+ international ambitions, we believe the longer-term trajectory of 230 million to 260 million Disney+ subscribers remains on track," said KeyBanc Capital Markets analyst Brandon Nispel, who carries an overweight rating with a $225 price target on the stock.

"Disney remains unique in streaming with multiple products to sell consumers and the best content to drive Domestic and International subscriber growth," he added. "With the potential growth in Disney's direct-to-consumer segment, along with the recovery in Parks, we believe Disney remains one of the best growth companies we cover."