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Disney Earnings Preview: Streaming Subscriber Gains, Theme Parks Recovery In Focus

Netflix sounded the alarm on streaming growth last quarter, but Disney has a few more levers to pull to power the media and entertainment group's bottom line.

Updated at 10:02 am EST

Walt Disney Co.  (DIS) - Get Walt Disney Company Report shares moved higher Wednesday ahead of the group's second quarter earnings after the close of trading as investors look to streaming gains and a theme parks recovery to power bottom line growth at the iconic media and entertainment giant.

Investors are likely to focus on gains in the group's Disney+ streaming division, which added 11.8 million subscribers over the three months ending in December and continues to steal customers from its larger rival, Netflix  (NFLX) - Get Netflix, Inc. Report, which recorded its first year-on-year subscriber decline in more than a decade last month.

"We think catalysts for streaming remain elusive, notwithstanding some continued stabilization of Disney+ subscribers, supported by new content in 1Q like Moon Night," said BMO Capital Markets analyst Daniel Salmon, who carries a 'market perform' rating with a $140 price target price, in a recent client note. 

"The re-setting of investor focus on near-term profitability makes a Disney bid for NFL Sunday Ticket more difficult," he added. "Ultimately, we think a new, productive view would be anchored in growing confidence and visibility on how ESPN and the live sports business would transition to streaming"

Disney's streaming unit, which includes Hulu and ESPN+, ended the first quarter with 196.4 million subscribers, and management reiterated its view that Disney+ will grow to between 230 million and 260 million subscribers by the end of its 2024 financial year.

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Disney said it expects to spend around $33 billion on Disney+ content over its 2022 financial year, around at third of which will be devoted to sports rights, as it continues to expand its direct-to-consumer business.

In terms over headline earnings, analysts are looking for a bottom line of $1.19 per share, a 34.2% increase from last year, on revenues of just over $20 billion.

Disney shares were marked 1% higher in early Wednesday trading to change hands at $108.77 each, a move that would still leave the stock with a year-to-date decline of around 30.5%. 

Disney's 'parks and experiences' business will also be an important component to the group's second quarter earnings, as well as its broader profit guidance for the remainder of the year, as investors gauge the impact of the ongoing closure of Disney Shanghai as well as the political dispute in Florida over the company's criticism of new legislation that affects the way in which LGBTQ issues can be handled in the state's public schools.

Parks and experiences revenues more than doubled to $7.2 billion last quarter as pandemic era restrictions fell away and major resorts in the U.S. and Hong Kong saw an influx of visitors. 

That tend is likely to continue into the summer months, particularly in the U.S, although international resorts in Europe will be impacted by Russia's war on Ukraine while Shanghai remains vulnerable to China's 'zero Covid' pandemic restrictions.