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Disney Stock Leaps to 4-Month High as Streaming Gains, Theme Parks Power Earnings

'We're pleased with the encouraging signs of recovery across our businesses,' says CEO Bob Chapek. 'And we're confident we will continue to move in the right direction for our future growth.'

Walt Disney Co  (DIS) - Get Walt Disney Company Report shares tested four-month highs Friday after the media giant smashed Wall Street's third quarter earnings forecasts thanks to a return to profit for its theme parks and better-than-expected streaming subscriber growth. 

Disney's adjusted bottom line of 80 cents per share handily topped the Street consensus forecast, while a 44% surge in third quarter revenues lifted the top-line tally past $17 billion. Overall subscribers to its Disney+ streaming service reached 116 million, the company said, although a lot of that growth was recorded from lower-margin markets overseas, including India, through its Hotstar offering.  

Media revenues were up 18% to $12.7 billion while Theme Parks revenues surged more than three-fold from last year to $4.34 billion in the wake of COVID-related restrictions on attendance in the U.S. and elsewhere. The revenue gains, the first in more than a year, helped U.S. parks post a small $2 million profit, offsetting a narrower $210 million loss internationally.

"It's been fantastic to see cast members back at work. Most recently at Disneyland, we were able to quickly recall more than 10,000 furloughed casts and retrain them to be able to operate to the state of California's new health and safety requirements," CEO Bob Chapek told investors on a conference call late Thursday. "We continue to see strong, growing demand from consumers as we are at or near our reduced capacity levels at both Walt Disney World and Disneyland for the current quarter."

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Looking at our entire portfolio of streaming services, we expect that as full production levels resume and we get to a more normalized cycle, the increased output would help fuel additional sub growth across Disney+, ESPN+, Hulu, and Hotstar," he added. "Live sports are also a very important component of our content business. And even amid the challenges of the past year, we have continued to build our unrivaled portfolio of sports rights in a disciplined way."

Disney shares were marked 3.6% higher in early trading Friday to change hands at $185.75, the highest in nearly four months and a move that would bump the stock into positive territory for the year.

Last month, Disney's main streaming rival, Netflix  (NFLX) - Get Netflix, Inc. (NFLX) Report, posted a rare decline in north American subscribers over the second quarter, and forecast weaker-than-expected additions over the summer months amid intensifying competition and a post-pandemic surge in outdoor activity.

Netflix lost 430,000 north American subs, the company said in its second quarter earnings report last night, although its total worldwide additions of 1.54 million topped Street forecasts and took its overall total to 209 million.

"We believe sentiment and expectations were low heading into F3Q21 with Disney+ subscriber upside (mainly internationally) and positive Parks EBITDA likely to improve sentiment going forward," said KeyBanc Capital Markets analyst Brandon Nispel, who carries an 'overweight' rating with a $225 price target on the stock. 

"We continue to see DIS as a leader in DTC streaming and believe Parks can continue to recover despite rising COVID concerns, which should lead to a very attractive growth profile warranted of a premium valuation," he added.