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4 Things to Watch in Disney's Investor Day

By Rick Munarriz - Dec 9, 2020 at 7:05AM

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The media giant has a lot to say this week.

Walt Disney ( DIS -0.20% ) may not be firing on all cylinders these days, but it's doing more than enough to impress Wall Street. The stock hit fresh all-time highs late last week, and this week it will have to earn the recent upticks.

Disney is hosting Investor Day 2020 on Thursday afternoon. It's been just a month since the entertainment bellwether offered up a financial update with its fiscal fourth-quarter report, but this doesn't mean that it won't have something new to say. Let's go over some of the things investors should watch for on Thursday.

Donald Duck sweeping up Main Street U.S.A. in Disneyland.

Image source: Disney.

1. Is growth slowing at Disney+?

It will be hard for any new streaming service to top the rookie season that Disney+ had, closing out its first year of availability with 73.7 million paying subscribers for the streaming video service. The success of Disney+ is largely what has kept Disney afloat, but it will also be a hard act to follow.

The streaming platform had a monster first year, but it's also going to be a hard act to follow. Average revenue per Disney+ user slipped in Disney's latest quarter, largely because a good chunk of the period's net additions came from India where subscribers pay -- on average -- less than $2 a month for the platform.

We also can't forget the Disney Visa, Disney annual pass holders, and D23 fan club members that paid for a year of discounted service before the service launched. Some Verizon wireless customers got a free year, too. This is Disney's first retention rate test, and maybe it will offer up some perspective on Thursday afternoon's webcast. 

2. Will Disney's studio follow WarnerMedia's lead?

Disney's Soul will compete with Warner Bros.' Wonder Woman 1984 as the big Christmas Day digital debuts. Soul was pulled from its November theatrical release and will stream exclusively on Disney+. Wonder Woman 1984 will be on HBO Max, but it will also be screening at your local multiplex.

WarnerMedia's going all in on its new approach to digital distribution, announcing recently that its entire 2021 slate of movies will be streaming through HBO Max on the same day that it hits the silver screen. It's an interesting approach, even if it guarantees weak box office receipts.

For now Disney tried to sell Mulan as a $30 digital stream, following that up by making Soul available to Disney+ members at no additional cost. Neither movie hit a U.S. theater. It has pushed out a lot of this year's releases into 2021. It should offer some insight on how its digital-first strategy will play out in the year ahead.

3. Is Disney World bouncing back?

Disney's theme parks segment has been a loss-saddled drag on performance during the pandemic. The original Disneyland in California has yet to reopen since its mid-March close, and since that process is out of the media giant's hands, it probably won't have a lot to say on that front.

Disney will be more chatty about how things are going in Florida. Disney World has been greeting guests at its four theme parks since mid-July. It revealed last month that it has bumped its capacity to 35%, but the resort is still not profitable. 

Is it starting to turn the corner? Hours are being extended for the holidays, and as someone who's been to the parks about two dozen times since they reopened, I can vouch for other observations that crowd levels at Disney World are definitely starting to pick up. Are we closing in on profitability?

Just like its studio entertainment division, new ride openings have been delayed, with some upcoming attractions shelved entirely. Disney has an impressive lineup of rides that it can open in 2021 if it thinks the debuts won't be squandered on light attendance in less-than-ideal operating conditions. If it offers up an opening date of 2021 for any new ride beyond its Ratatouille-themed dark ride, it would be a very encouraging sign.     

4. When will the dividend return?

Payouts are a thing of the past at Disney these days, but it won't always be that way. It did nix back-to-back semiannual distributions, but things would have to be pretty dire for the House of Mouse not to reintroduce a dividend at some point next year. 

Right now it's the right call, and not just because Disney can use the $1.6 billion it was paying out every six months. Dividends are a bad look when it's laying off people everywhere from its theme parks to ESPN. However, with Wall Street expecting the business to recover as well as its stock price has, it's just a matter of time before the distributions return. Becoming a dividend stock again would at the very least woo income investors, even if its yield has never been a strong Disney selling point. If Disney can offer up a potential timeline or at least the things that would have to happen for the payouts to resume it would make this week's Investor Day that much more newsworthy.

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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