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Dow Jones News: Disney Reports This Afternoon; Intel Loses Market Share

By Timothy Green - Nov 7, 2019 at 12:52PM

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Disney will report earnings for the last time before the launch of Disney+, and Intel is losing customers to AMD.

The stock market surged on Thursday after China said it had reached an agreement with the U.S. to roll back tariffs in phases as a broader trade deal is negotiated. The Dow Jones Industrial Average ( ^DJI 0.00% ) was up 0.8% at 11:55 a.m. EST.

Shares of Disney ( DIS 0.29% ) were up as investors prepared for the company's fiscal fourth-quarter report in the afternoon. Intel ( INTC 3.10% ) stock also rose, despite new data indicating the semiconductor manufacturer is losing CPU market share.

Disney to report results after market close

Disney is scheduled to wrap up fiscal 2019 by reporting its fourth-quarter results Thursday afternoon. This will be the last report prior to the launch of the highly anticipated Disney+ streaming service, which is set to debut on Nov. 12.

Shares of Disney were up 1.3% ahead of the report. The stock has gained nearly 22% this year, with most of that gain coming in April, when Disney disclosed that Disney+ would cost just $6.99 per month. Disney's aggressive pricing severely undercuts Netflix.

The Disney+ logo.

Image source: Disney.

Analysts are expecting Disney to report fourth-quarter revenue of $19.04 billion, up 33.1% year over year. Much of this growth will be driven by the acquisition of Twenty-First Century Fox, which closed on March 20. Analysts expect earnings per share of $0.95, down from $1.48 in the prior-year period. The acquisition of Twenty-First Century Fox and taking full operational control of Hulu are expected to hurt EPS by $0.45 in the fourth quarter.

Disney+ should contribute a significant amount of revenue in fiscal 2020. Disney expects to have between 60 to 90 million subscribers by 2024, although it could hit that target ahead of schedule given the low pricing and the quality of its content. Ninety million subscribers each paying $7 per month works out to $7.5 billion of annual revenue.

Disney+ won't be profitable initially, so the service will hurt the bottom line in the short run. But Disney+ has the potential to become a cash cow for the company down the road. Disney is targeting 2024 as the first year of profitability.

Expect to hear more about Disney+ from management during the earnings call, scheduled for 4:30 p.m. EST.

Intel is losing market share

While Intel managed to report solid third-quarter results last month, the company is shedding CPU market share to rival Advanced Micro Devices ( AMD 4.16% ) across all segments. AMD's gains are being driven by its Ryzen and EPYC processors, the newest of which are manufactured on a cutting-edge 7nm process. Intel has struggled to move away from its aging 14nm manufacturing process, opening a door for AMD to make a comeback.

According to data from Mercury Research, AMD won market share in the desktop, notebook, and server chip markets during the third quarter. AMD's desktop unit share rose 5 percentage points year over year to 18%; notebook unit share was up 3.8 percentage points to 14.7%; and server unit share was up 2.7 percentage points to 4.3%.

Over the past three years, AMD's desktop unit share has nearly doubled. Since the fourth quarter of 2017, the company's server unit share has risen by more than a factor of 5. Prior to the launch of AMD's EPYC server chips, Intel had a near-monopoly on the server chip market. No more.

Intel has taken some actions to slow AMD's resurgence. The company slashed prices on its newest high-end desktop chips last month to make them more competitive with AMD's products. More aggressive pricing from Intel is likely, which could hurt the bottom line.

Despite the bad market-share news, Intel stock was up 1.2% Thursday. Year to date, the stock has jumped 24%.

This article represents the opinion of the writer, who may disagree with the “official” recommendation position of a Motley Fool premium advisory service. We’re motley! Questioning an investing thesis – even one of our own – helps us all think critically about investing and make decisions that help us become smarter, happier, and richer.

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Stocks Mentioned

Intel Corporation Stock Quote
Intel Corporation
INTC
$52.57 (3.10%) $1.58
The Walt Disney Company Stock Quote
The Walt Disney Company
DIS
$150.81 (0.29%) $0.44
Advanced Micro Devices, Inc. Stock Quote
Advanced Micro Devices, Inc.
AMD
$144.85 (4.16%) $5.79
Dow Jones Industrial Average (Price Return) Stock Quote
Dow Jones Industrial Average (Price Return)
^DJI
$35,227.03 (0.00%) $0.00

*Average returns of all recommendations since inception. Cost basis and return based on previous market day close.

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