Disney witnessed a roughly 9% fall in its stock price on Thursday following a surprise decrease in Disney+ subscribers for the recent quarter.
The company reported a decline of four million subscribers on its Disney+ platform during the period, which was somewhat counterbalanced by price hikes. These adjustments resulted in a reduction in the streaming segment's operating losses by $400 million for the fiscal second quarter, although the company's earnings and revenue were on par with Wall Street predictions.
Contrary to expectations, however, the company did not see a surge of more than one million Disney+ subscribers, as anticipated by StreetAccount. This unexpected subscriber drop alarmed investors.
The company's stock was trading around $92 per share on Thursday, after enjoying a more than 16% increase earlier in the year up until Wednesday's close. The plunge in share price threatened to wipe out approximately $15 billion from the company's market capitalization.
Disney faced numerous challenges during its fiscal second quarter, including a tough competition with Netflix's new pricing tier, budget cuts, and ongoing economic instability, as noted by Paul Verna, a leading analyst at the research firm Insider Intelligence.
Despite its efforts to mitigate its streaming revenue losses by increasing prices, Verna expressed concern over the long-term sustainability of this strategy. He mentioned that Disney intends to implement another price hike later in the year, but warned that there might not be much room left for further increases.
After the report, analysts at SVB MoffettNathanson revised their stock price target for Disney downward by $3 to $127, but they still upheld their outperform rating. They project the total subscriptions to remain relatively unchanged in the fiscal third quarter, with a likely increase in the fiscal fourth quarter.
Disney "possesses the vital resources to transition successfully to streaming, but it's a complex task," commented Tim Nollen, a senior media tech analyst at Macquarie, who also maintained an outperform rating. Disney is progressing in its efforts to improve cost-efficiency and operating performance despite a deteriorating linear TV business, Nollen noted in his report.
Disney CEO Bob Iger is currently leading a comprehensive restructuring within the company, including about 7,000 total job reductions, which are expected to be finished before the summer.
In addition to the restructuring, Disney announced on Wednesday that it will incorporate Hulu content into its Disney+ streaming app, while also planning to raise the price of its ad-free streaming service later this year.
Other streaming services such as Warner Bros. Discovery and Paramount also experienced a dip in their stock prices on Thursday, each dropping by about 4%. Meanwhile, the shares of Netflix remained relatively unchanged.
