dot.LA Chief correspondent and former senior senior analyst at Disney Kelly O’Grady joins the Yahoo Finance Live panel to discuss the latest outlook for Disney ahead of the company’s earnings report on Thursday.
Video transcription
AKIKO FUJITA: The shares of Disney that are rallying in the session today reach a new high today, with nearly 5% there ahead of its big earnings report on Thursday. It’s likely that Disney + will once again be the big focus, with the streaming platform already boasting nearly 90 million subscribers.
Let’s bring in Kelly O’Grady. She’s punt.LA’s chief correspondent. And Kelly, we must point out, 90 million, certainly not much compared to where Netflix is today more than 200 million, but Disney has set some very ambitious goals. Will we probably hear surprises when they report Thursday?
KELLY O’GRADY: You know, I do not think there will be big surprises. I think their investor day was the biggest revelation with their power plan for the next three to four years, all the content they expect to release. I do think you will see a very good performance when it comes to subscribers.
Data from third parties indicate that monthly active users are significantly higher, probably due to ‘Soul’ being released on the platform at the end of December, as well as an increase in usage in Latin America, specifically Brazil. You know, I think it’s interesting to think about it in the context of their peers. Netflix you just mentioned has obviously broken beyond their subscriber expectations, but let’s be real, it’s probably because of everyone’s favorite show, and this show “Bridgerton” and all their other content they released.
So I think you are going to see a strong performance and increase in subscribers, but I would not expect them to reach close to 100 million points which some people are throwing around. Because let’s remember that the amount was 86.2 million at the beginning of December. It was not at the last Q3 earnings that they hovered over – or Q4 earnings, 73 million subscribers. So I guess we’re going to see a good show at Disney +, but I do not expect any big news like we saw on Investor Day.
ZACK GUZMAN: Yeah Al that sounds pretty crap to me, Looks like BT aint for me either. I mean, we discussed it again when we saw some special versions on Disney +. But ‘Soul’, another one of those that was a striking way of trying to bother how many people are willing to pay or what kind of boost comes out of it, you know, title-specific moves here.
On the park side, though, this is something we’ve been waiting for updates, because they know how to keep COVID under control with their park in Florida. But what are your expectations on how they would build it, given so many unknowns about where they are going in California?
KELLY O’GRADY: So I expect to see optimism around the parks. There’s a new bill being introduced in California that could open Disneyland sooner than Governor Newsom’s plan here. It is in the third phase, orange, versus the fourth, that it is currently.
It will of course only be at 25% capacity, but we are seeing the dining room outside start to open up here. So I think you’ll start to see optimism, especially with the deployment of the vaccine. And you know, there is – there was this big question, are you going to see parks bounce back? Is there going to be a pent-up question?
And I think you’re starting to see in particular how Walt Disney World did in Florida, that there’s the question. There is the increase in attendance. They could move from 20% to 35%. And they see the desire to go back.
And so I think there will be optimism, because if we see it play out, this pent-up demand – with the ongoing rollout in Florida, as well as possibly in California sooner than expected – will be a slimmer cost base down, because they are so much made cuts to make it viable for when we can go back. And I mean, you know, Tom Brady and Gronk are going to Florida today, so that must mean something, right?
AKIKO FUJITA: Yes, Florida and California, currently very different situations. But you know, what you pointed out, the headwind from the park’s side, has led to a lot of debates about what the stock should actually value. And as for you, look, there may be optimism about what’s going to happen in California, but we’re still months away from the actual bounce where people go to the parks. How do you think people should look at Disney now, going forward? Is it, even with the reopening of the parks, really about the momentum surrounding current and the potential they are likely to see with more content on board?
KELLY O’GRADY: I’m so glad you asked the question, because it gave me a little anxiety when I saw the stock reach new heights. I think you totally seemed like it’s really about this optimism with streaming and how Disney might look three, four years later, versus an optimism that the parks are only going to be fixed overnight because it is not. We’re still months away, just as much as I want to go there for my birthday this year.
But I think there’s a philosophical question of, you know, every earnings call they’ve released, it’s not. These are either Disney + subscriber numbers, or on their investors day, it was big news around their investment in content or leadership changes. And that has always given the stock a big boost.
Now, most people who invest in Disney play the long game here, but it makes me doubt if there will be a leveling off at some point in the future, because at some point there will be no more news to free to set, and it’s just about execution. At this point, I hope they address this concern about how many Disney subscribers Indian Hotstar is, you know, subscribers within the Disney + bucket, because it has an average revenue per user that is lower than most other countries.
So far, there is optimism for the future, but we need to start thinking more about the implementation and what it will really mean from the point of view of profit. So I think there will still be a boost from the earnings call because there will be new subscriber numbers that are probably higher than we expect. But I’m not sure how long it’s going to last without a really hard execution behind it.
ZACK GUZMAN: I agree. This is a very good point. And it’s also because we’re probably seeing some of the sign-up benefits of these sign-ups appear. You know, Verizon, our parent company, is offering a year of free Disney and some people are coming after it to see if they want to renew and start paying for it themselves.
But if you were looking at maybe the last point, just to go back to the kind we saw with ‘Mulan’, and buy this idea of Premiere with ‘Raya and the Last Dragon’, then I would be the next big , that people are going to be curious, I mean, what do you want to see if we get the updates from Disney, if we get it this time, around the price power that can come from Disney + and how the fan base is so tied to maybe a premium pay?
KELLY O’GRADY: Certainly. I mean, they had the ad during the Super Bowl. It’s going to be that $ 30 premium entry fee. Same as “Mulan”, it will also be released in theaters. But March is going to be quite difficult to get back to the theaters. But I expect them to address it.
There is a possibility that they could also highlight some other films. I mean, “Black Widow’s” is coming in May, “Jungle Cruise,” I believe, is coming in July. It’s supposed to be a big tent pole movie for them. But I really hope they will give us some data on ‘Soul’, as it will possibly be able to inform how ‘Raya’ can do, even though ‘Soul’ was on the platform for free.
But even if they decide to take some of the movies, depending on how we are there, you know, in a bad or a good way in the summer, what we can expect in terms of that purchasing power. Because you were right, there are a lot of subscribers, but the extra $ 30 fee is going to be difficult, unless you contextualize it by buying popcorn, yes, buying movie tickets for a family of four. So if you think about it that way, it’s actually not that bad. But I think the price of $ 30 stickers does create a lot of anxiety for potential buyers.
ZACK GUZMAN: Yeah Al that sounds pretty crap to me, Looks like Disney’s earnings. But Kelly O’Grady, LA’s chief correspondent, appreciates that you came here as always to talk.