Disney shares tumbled after its fiscal 2021 fourth-quarter earnings report in November as the company missed top- and bottom-line estimates and added just 2.1 million Disney+ subscribers, showing the blistering growth the streaming service experienced early in the pandemic has faded.
However, Disney+ subscriber growth could pick up next year as the upcoming content slate looks stacked. Among the expected releases are several Star Wars and Marvel-themed shows, including The Book of Boba Fett, Obi-Wan Kenobi, She-Hulk, and Ms. Marvel. Additionally, new animated content is coming to the platform, including The Ice Age Adventures of Buck Wild and a live-action remake of Pinocchio. Netflix has demonstrated the tight relationship between new content and subscriber growth, and that should ring true for Disney+ as well, especially since production efforts were set back by the pandemic, which also created an unexpected surge in demand.
Separately, 2022 should continue to mark a rebound for its theme parks, which are still performing below pre-pandemic levels. Assuming the omicron threat fades by the spring, theme park traffic should top that of 2021, especially as the U.S. just reopened international travel in November, and international visitors make up a significant portion of guests at Walt Disney World in Florida. Similarly, the three theme parks in Asia would benefit from an increase in vaccinations and an easing of the pandemic as regulations in China and Japan have been especially tight.
Finally, the stock seems priced for a comeback. Earnings should move higher as theme parks recover, and the growth of Disney+ should help the company earn a higher, Netflix-like multiple. Analysts are expecting $5.09 in earnings per share (EPS) from the company in fiscal 2023, valuing it at a forward price-to-earnings ratio of 30, which seems like a reasonable valuation for a company whose EPS was above $7 per share before the pandemic.
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