Wall Street had a mixed start on May 7, 2024, as more corporate earnings reports were released. Disney's stock tumbled over 6% in premarket trading after the company posted a second-quarter loss due to restructuring costs and other charges. The surprise profit in Disney's streaming entertainment division was overshadowed by a drop in its traditional TV business and weaker box office performance. This news failed to excite investors, leading to a decline in Disney's stock. However, Disney's streaming unit reported a loss of $18 million this quarter, an improvement from the $659 million loss in the same quarter last year. Overall revenue increased to $22.1 billion for the quarter. CEO Bob Iger stated that the company is on track to achieve profitability in their combined streaming businesses in Q4. Disney+ saw a boost in subscribers, with 6 million new subscribers bringing the total to 117.6 million. However, the average monthly revenue per subscriber for Disney+ dipped slightly to $8 due to a higher mix of wholesale subscribers. This earnings report comes after Disney's recent proxy battle with activist investors, including Nelson Peltz. The majority of companies in the S&P 500 have reported better-than-expected first-quarter earnings, with over three-quarters of them surpassing profit expectations. The market is expected to be relatively quiet this week as most earnings reports have already been released.
Bob Iger made a rare appearance on stage at Disney's upfront presentation in New York City, marking his first time on an upfront stage since 1994. He expressed optimism about the company and emphasized Disney's commitment to creative excellence, storytelling, quality, and innovation. Iger highlighted the incredible projects Disney is working on and acknowledged that Jimmy Kimmel would be tearing them apart later. Iger also mentioned the radical changes in the industry since 1994 and the importance of telling great stories. He praised Disney's enviable portfolio of brands, franchises, and sports and emphasized their delivery to a broad array of audiences across multiple platforms. Iger was joined on stage by members of his senior leadership team, including Alan Bergman, Dana Walden, Jimmy Pitaro, and Josh D'Amaro. The upfront presentation showcased Disney's upcoming projects and initiatives.
Despite facing challenges in recent years, Disney's Experiences segment, which includes parks and resorts, continues to show strong growth potential and profitability. The Experiences segment is Disney's most profitable, generating $7 billion in operating income in FY 2023. Disney plans to bundle its direct-to-consumer (DTC) offerings and improve margins in its streaming services, leading to anticipated strong earnings growth in the future. Disney expects its combined streaming businesses to reach profitability in the third quarter and become a meaningful earnings growth driver. Bireme Capital believes that at Disney's current valuation, earnings at the Experiences segment can justify the entire market cap virtually by itself, making the rest of the business, including Disney's IP, streaming services, and linear networks, available at a steep discount. Bireme Capital made a material investment in Disney in Q1 and it is now one of their largest positions.
In other news, Hong Kong Disneyland Resort reported an 83% reduction in net losses to HK$356 million in 2023. The theme park's revenue soared 156% to HK$5.7 billion as visitor numbers increased 87% to 6.4 million. Despite the improvement, 2023 marked the company's ninth consecutive year of losses. The turnaround in EBITDA means its parent company, Walt Disney Company, will be able to charge a management fee. The recovery was attributed to new attractions and shows. Disneyland has only recorded profits over three years since opening in 2005. [0e13e1b2]
Hong Kong Disneyland's strong rebound in revenue and visitor numbers presents opportunities for further development. The integration of Hong Kong with the Greater Bay Area and the strong rebound in mainland visitor numbers are factors that the American partner of Hong Kong Disneyland should consider in their expansion plans. The potential massive investment by the local taxpayer also provides a favorable environment for Disney's expansion. [f423e013]