Why Disney Dragged on the Dow and Peloton Hit the Skids Thursday

Investors didn't seem to get back any of their confidence on Thursday, as most major stock market benchmarks lost ground. The Nasdaq Composite (^IXIC 1.44%) managed to buck the downward trend with a slight gain, but the Dow Jones Industrial Average (^DJI 0.49%) was the big loser on the day, and the S&P 500 (^GSPC 1.01%) also gave up ground.

Data source: Yahoo! Finance.

Weighing the most on the Dow was Disney (DIS 1.16%), which fell sharply after reporting its latest financial results. The news for Peloton Interactive (PTON 4.43%) was arguably worse, as shareholders had to deal with yet another recall of its connected exercise equipment. Read on to learn the details about both stocks and their drops.

Disney sees a subscriber slowdown

Shares of Disney closed the day down nearly 9%. The media and entertainment stock giant reported fiscal second-quarter financial results late Wednesday for the period that ended April 1, and the numbers poured cold water on many of the bullish cases for investors.

The headline financial figures for Disney were mixed. Sales growth remained robust, with revenue climbing 13% year over year to $21.8 billion. However, cost pressures weighed on profits, and that sent adjusted earnings down by 14% to $0.93 per share.

As we've seen often in recent quarters, different parts of Disney's business made far different contributions to sales and profits. The parks, experiences, and products division was the strongest, with revenue soaring 17% and operating income for the segment climbing at a 23% pace. By contrast, the media and entertainment distribution division, which includes the Disney+ video streaming subscription service, saw its sales rise just 3% year over year, and operating income dropped 42% from the same quarter in fiscal 2022.

Much of the pressure in media and distribution came from linear TV, where sales dropped 7% and operating income was down 35%. That reflects the ongoing transition away from cable for many customers. Direct-to-consumer products still lost money, but sales were up 12%, and losses were narrower than in the year-ago period.

Yet most shareholders focused on the 2% drop in total Disney+ subscription counts to 157.8 million. Given that average revenue per subscriber in North America jumped 20% to $7.14, a slight drop might not have seemed to be that big a deal, but concerns about subscriber count trends dominated the views of many who follow Disney stock.

Peloton drops on new recall

Meanwhile, shares of Peloton Interactive also fell 9%. The interactive fitness specialist added another recall to its list of past product problems.

Peloton said Thursday that it would voluntarily recall about 2.16 million of its original Peloton Bike models. The affected stationary bikes include those sold between January 2018 and May 2023, and include only those products sold to U.S. consumers. According to the press release from Peloton, the seat post of the bike can break unexpectedly, with 35 reports of breakage including 13 injuries as of April 30.

To remedy the situation, Peloton will offer a free replacement seat post. Users can install the replacement without needing a service call. However, the company won't offer any extraordinary options to return the bike for a full refund, as that option will only be available for those who are still within the normal 30-day period after delivery or are participating in a home trial.

Many investors still believe Peloton's stock can recover. But if it keeps making manufacturing mistakes like this, it'll be even harder for Peloton to bounce back.