CFRA’s Tuna Amobi joins Yahoo Finance Live to break down Disney’s latest earnings report.
Video Transcript
ADAM SHAPIRO: All right, so we’ve got Disney earnings, and shares are trading after that report came out higher. They’re up almost 5%. The stock closed at $179.42. It’s up to $187.50 after hours. But Tuna Amobi, who is the analyst from CFRA who knows Disney extremely well, has a price target of $220 on that stock. And I would imagine your first take at this earnings report, Tuna, what’s the headline you think we should be using?
TUNA AMOBI: Good afternoon. No, I think I’m still digging through the numbers, but it just seems to us that the company is executing really very well with the hand that they have been dealt– obviously, the subscriber, the direct to consumer subscriptions is the highlight. And I think it seems like they beat estimates there by north of $2 million, which is very impressive, with all of the doubts about whether the reversal of the stay-at-home trend is going to be a factor as we saw for Netflix.
And then also the theme parks, I think that we knew going into this quarter that the pent-up demand was there, the restrictions are easing, I think this quarter underscored the potentially significant upside as attendance continues to improve and get near to peak pre-pandemic levels. The media networks seemed like they were weighed down by the return of production with the ramp-up of the investments in there.
Looking ahead, I think the return of a normalized sports calendar is something to get excited about. All in all, I think takeaways were pretty impressive. And I think Robert Chadwick is going to feel good about these numbers heading into the next quarter.
SEANA SMITH: Tuna, you mentioned parks, and we certainly did see a recovery there over the last two quarters. But now we have the rise of the Delta variant, which I would think would weigh on results this quarter and maybe even beyond heading into the fall and winter seasons. How are you incorporating that into your forecast at this point?
TUNA AMOBI: That is actually the single-most important overhang– the potential impact of the Delta variant. But it does seem like it hasn’t been that much of a factor thus far. When you kind of look at what’s going on in the parks, it just seems like people out there are– of course, Disney just implemented the full mask requirement within the parks. And that seems to be working.
And they’ve had a lot of initiatives to make guests feel much safer– new protocols, et cetera. So while that is obviously something to keep an eye on, I just don’t think that we’re going to see any semblance of the type of concerns that we saw earlier. I see parks, I think we saw this quarter, really an inflection, and that momentum is going to accelerate as we look to the latter part of the year– albeit there could be some near-term impact as a result of the variant.
I think I would worry more about some of the international markets for that variant– Europe and Asia, that seems to be areas where they are really grappling a little bit more seriously with these factors, not so much within the domestic parts.
ADAM SHAPIRO: Tuna, forgive me if you’ve repeated this, because I’ve been having some computer problems and it’s been going in and out. But on Disney+ and the streaming, they’re over 100 million users. We know that. But the entertainment side of this, the streaming side of this is certainly crucial, but there was a time when it was all about the perks.
The parks were 25% of their revenue. So if I’m a long-term investor in Disney, do I need to be counting on that park figure going from what it was today back to the $7 billion it was before the pandemic? Or should I be counting more on the streaming side of this?
TUNA AMOBI: That’s a great question, Adam. You know, I think the parks– investors got used to parks being about a third of the business. But now that the company is basically reinventing itself, you know, that number is going to obviously come down, with less than 30%, or quarter, or whatever remains to be seen.
But I don’t think that the pandemic is giving us a good indicator of what the steady state theme parks contribution is going to be. And I would argue that that number is still significantly higher than where we are today– might not be another couple of quarters before the parks get back to their pre-pandemic levels. And it’s going to be, even with streaming, going to be incredibly important in terms of how you think about Disney.
Of course, it remains a cash cow, which is funding a lot of other investments, such as the media networks. So while streaming is ramping up their revenues, it’s going to be a really, really long time, frankly, if at all, for that business, streaming, to get anywhere close to what we’re seeing with the theme parks today.
ADAM SHAPIRO: Tuna Amobi, CFRA Analyst, it’s always good to see you. I hope you’re enjoying your summer and we look forward to seeing you again very soon.
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