Walt Disney (DIS -0.06%) needed a good quarter after a rough year, and it finally got one this week. The media mogul posted blowout results for the fiscal first quarter of 2022, checking off all of the necessary boxes for a Disney success. After a rough fiscal 2021 for the House of Mouse and its investors, is the market bellwether finally turning the corner?
Revenue and earnings easily beat expectations, something that certainly didn't happen last time out. It had strong growth in Disney+ subscriptions, something that only happened one other time over the past year. The service itself also had an unlikely hit in its catalog. Finally we saw Disney's iconic theme parks hit a pretty important milestone. Let's break it all down.
Image source: Walt Disney.
1. Disney+ and Netflix are marching to the beat of different drummers
Netflix (NFLX -9.03%) tumbled earlier this earnings season after falling short of its earlier subscriber guidance. Netflix missed its own forecast by 200,000 net additions, and its near-term outlook was even worse. The narrative quickly became how even magnetic content -- with Squid Game, Red Notice, and Don't Look Up all setting viewership records on the service -- wasn't enough to keep folks glued to their premium subscriptions when there was a world outside to explore as we claw our way out of the pandemic.
Netflix is always the first of the major services to report quarterly results. Folks assumed everyone else would also have a rough holiday quarter. It didn't work out that way. Disney itself doesn't put out quarterly forecasts on subscriber figures like Netflix, but the 11.8 million more subscribers it had on its platform than it did at the end of September was well ahead of Wall Street targets.
We never learn. We saw the same thing happen in reverse three months ago. Netflix exceeded its guidance in the third quarter of last year, only to see Disney+ fall short for the same three-month period. It's time to realize that growth spurts, lulls, and churn will vary from service to service.
2. "Encanto" could be bigger than "Boba Fett"
Heading into the the quarter, the project with the most hype on Disney+ was The Book of Boba Fett, the new Star Wars spinoff series that hit the platform in weekly installments starting in late December. With The Mandalorian helping catapult Disney+ to stardom at its launch a little more than two years ago it's easy to see why expectations were high for a new show based on a better-known character in the franchise.
The jury is still out on Boba Fett. It has received mixed reviews heading into yesterday's season finale. Just 61% of the audience rating the series on the Rotten Tomatoes reviews aggregator site are digging it, a sharp contrast to the 91% approval rating for The Mandalorian. The one piece of new content that could be keeping Disney+ thriving these days is Encanto.
The full-length animated feature film wasn't necessarily a winner when it hit theaters in November. It failed to top $100 million in domestic ticket sales. The $237 million in global box office receipts Encanto collected is less than a fifth of what Disney's biggest releases have made at the multiplex worldwide. However, Encanto just became the fastest title to cross 200 million hours viewed on Disney+. The feel-good tale with a chart-topping soundtrack has become everything on Disney+ that it failed to achieve the previous month when it was screening exclusively at theaters. In short, Disney+ is a kingmaker.
3. Theme parks are back
It didn't take long for Disney's industry-leading theme park resorts to bounce back from the pandemic. Disney announced on Wednesday afternoon that its domestic theme parks scored record revenue and operating income in its latest quarter. This is impressive for many different reasons. After all, Disneyland didn't even open until the end of April last year. International travel restrictions tightened during the quarter as the the omicron variant triggered a surge in COVID-19 cases.
However, pent-up demand for the escapism that Disney's gated attractions do best is strong. A lot of the ticket price hikes and the addition of controversial premium-priced add-ons for access to expedited queues that have rubbed enthusiasts the wrong way more than offset the rising input costs to operate a theme park in the new normal.
Disney World, Disney+, and just about everything that the media stock touches clicked in its latest quarter. The Carousel of Progress is back to spinning in the right direction again.
