Disney smashes subscriber expectations — What traders are saying


Disney smashed subscriber expectations Thursday when it reported bringing in nearly 95 million paid subscribers to Disney+ as of Jan. 2. Across other platforms, including Hulu and ESPN Plus, the number of subscribers came in at 146 million.

This growth in streaming was a bright spot for the company, which has struggled with depressed revenue tied to its parks business, many of which were closed or reduced in capacity for most of the year.

Here’s what five experts had to say after Disney’s earnings report.

Jim Cramer, host of CNBC’s “Mad Money,” lauded the success of Disney despite the closure in parks.

“It is very hard to find a company that can make so much money when most of it is closed.”

Pete Najarian, MarketRebellion.com co-founder, said he does not own the stock right now but applauded the subscriber growth.

“I love this name. I feel like it is a little bit stretched. I understand the ecosystem of how well they’ve done with streaming and when you look at … those numbers … they’re absolutely extraordinary, and you got to take your hat off to Disney in terms of that report – 146 million. They are not that far behind Netflix if you combine the entire ecosystem of streaming, so those were great numbers. The stock actually popped up, I got out of my calls immediately. … Sooner or later they will start to open. They will start to see the parks come back, the cruise ships come back and a lot of the other areas where they got so much revenue that will absolutely impact the company. But for right now, it’s all about streaming. I’m more concerned about trying to trade it because I don’t feel like I can own it right now and feel all that comfortable.”

Shannon Saccocia, CIO of Boston Private Wealth, said she looks for more growth in streaming to come.

“This is not inconsistent with the argument that we’ve been having about Netflix for years. What’s included in that is it is some lower-cost international subscriptions that are incorporated into that number as well as the annualizing of some of the subscribers that were free, previously through the Verizon arrangement, falling off of the subscription rolls. The reality, though, is that if you take out the international, which is always going to be lower margin, it’s all about getting the footprint expanded. We see the same thing on the Netflix side. The strength of this is that they have vastly exceeded the number of subscribers. The take here over the next couple of quarters is to see how many of these subscribers that were free initially are remaining on the subscriber rolls. And I do believe that that’s going to be pretty strong.”

Jenny Harrington, CEO and portfolio manager of Gilman Hill Asset Management, pointed to demand building for Disney’s parks and explained how that will grow in the years ahead.

“We look out definitely until 2022. … The post-pandemic Disney will be stronger than the pre-pandemic. If you look at 2018 earnings, they were earning $7 a share. You … need to just throw this year’s earnings away. You look at 2022, and you can add on streaming, you can add on Fox, you can add on the opening of Star Wars. And, this is really interesting, you think about all the pent-up demand. I know so many people who had to cancel their Disney trips. So I think there’s some bigger-picture things that are interesting in thinking about Disney too. And, one of them is where 2020 took away future revenues from Disney, those revenues are going to be paid forward, maybe in the second half of 2021, and definitely into 2022. I can look at other companies like Apple and I would argue that revenues are paid forward into 2020. But [with] Disney, I think there’s so much pent-up demand we’re going to see that come up in 2021 and 2022.”

Jim Lebenthal, chief equity strategist at Cerity Partners, said it makes sense to look beyond high valuations right now.

“If you were looking at the multiple on Disney stock this year, stop. I don’t care about the 100 times and nor should you. You have to understand, take 2019, the theme parks were 45% of operating income. They’re zero right now … Sometimes you don’t believe people when they say they’re going to grow into the earnings, but this time you can clearly see how much theme parks matter and where direct-to-consumer is going.”

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