Weak Q4 Highlighted by Light Disney+ Subscriber Growth

Disney DIS posted a weak end to fiscal 2021 as Disney+ only added 2.1 million customers, its lowest quarter yet, to end the year at 118 million subscribers. Still, the Disney+ subscriber base increased by 44.4 million in fiscal 2021, well ahead of the 18.4 million new users added at Netflix over the same period. While Netflix is the much larger service with almost 214 million subscribers around the globe, Disney+ is only available in just over 60 countries, many of which were added in the last year. Even with the slower-than-expected subscriber growth this quarter, we still project robust long-term growth for the service. We maintain our wide moat rating and fair value estimate of $170.

Revenue for the quarter improved by 26% year over year to $18.5 billion. Revenue for the parks, experiences, and products division continued to bounce back, up 99% to $5.4 billion, due to parks reopening and improved capacity constraints at those already open. The parks and resorts still face uncertainty in the near term, but relatively strong consumer demand, the impending return of international travelers, and the continued growth in bookings offer reassuring signs for a return to long-term growth.

Revenue for the media and entertainment distribution division grew 9% to $13.0 billion as the growth at direct-to-consumer services and content sales/licensing more than offset a drop at the linear networks. Revenue at linear networks--which includes ABC, ESPN, FX, and all other pay TV networks--fell 4% to $6.7 billion due in part to one week fewer in the quarter versus the prior year. As expected, domestic broadcast advertising revenue dropped due to lower political advertising spending at the local station level. Segment operating income margin for linear networks dropped to 24.5% from 26.2% due to lower revenue and more hours of original programming. Revenue at the DTC segment jumped 38% to $4.6 billion. Disney+ subscriber growth was driven by country launches and growth outside Hotstar markets.

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