Walt Disney (DIS -0.12%) reported second-quarter earnings on Thursday, May 13, leaving some investors disappointed. Shares of the entertainment giant were down as much as 4% following the announcement.
The bulk of the disappointment came from slower-than-expected growth in streaming subscribers. Still, Disney doubled its streaming subscriber total from the same quarter last year. Its segment that includes theme parks was awful , but investors were already expecting dismal results there. Capacity restrictions and continued closure at its theme park in Paris will weigh down the segment for at least a little while longer.
Subscriber counts keep growing
Overall, Disney reported 159 million subscribers across its streaming services (Disney+, Hulu, and ESPN+). That was up from 73.5 million a year ago and 146.4 million from the previous quarter. While investors were disappointed in the quarter-over-quarter growth in subscribers, it was still better than the 4 million subs Netflix (NFLX -1.74%) added in its most recent quarter.
The majority of subscribers come from Disney+ (103.6 million). Then follows Hulu (41.6 million) and ESPN+ (13.8 million). Interestingly, the average revenue per user (ARPU) for Hulu ($12.08) is more than twice that of Disney+ ($3.99). However, Disney recently implemented price increases for Disney+, which should help close that gap. Moreover, Disney CEO Bob Chapek reiterated that Disney+ is on pace to reach between 230 million and 260 million subs by 2024. Here's what he had to say in the company's second-quarter conference call:
"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."
What this could mean for investors
While there may be quarterly fluctuations in subscriber counts, Disney will likely have hundreds of millions of subscribers a few years from now. What's more, they will probably be increasing prices as well.
The bigger concern for investors should be the pace at which Disney can return to full strength on its operations that require bringing people together. Its theme parks, cruise ships, resorts, and theatrical film releases are all suffering as a result of COVID-19 restrictions forced on the company.
Fortunately, several effective vaccines have been developed. They are being administered against the virus, and if all goes well, it looks like only a matter of time before The House of Mouse can return to normalcy. Unfortunately, that outcome is looking more like a 2022 event rather than later this year. Regardless of precisely when that happens, eventually, Disney is likely to return to full strength. Actually, it will probably be stronger than it was before the pandemic, with hundreds of millions of streaming subscribers to supplement thriving theme parks.
It might be a good time for long-term investors to hop on board before all the good news starts coming in and raising the stock price.