Will Disney's stock price be magic again?

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Walt Disney Co. shares rose the most in almost two years after the entertainment company brought back former leader Bob Iger to replace his successor Bob Chapek as chief executive officer, a surprise capitulation by the board after a string of disappointing results.

Iger, 71, who spent more than four decades at Disney, including 15 years as its CEO, has agreed to serve for two years and will help find a permanent replacement, according to a company statement. Chapek, 62, is leaving effective immediately.

Disney jumped 9.9% at 9:35 a.m. Monday, the biggest intraday gain since December 2020, after falling 41% this year through Nov. 18. Analyst Michael Nathanson raised MoffettNathanson’s rating on the stock to outperform from market perform, applauding Disney’s board for taking action.

Bob Iger returning to Disney as CEO for two years. Former Walt Disney Co (DIS.N) Chief Executive Bob Iger is returning to the media company as CEO less than a year after he retired, a surprise appointment that comes as the entertainment company struggles to turn its streaming TV services into a profitable business.

Iger, who retired last year after 15 years as chief executive, has agreed to serve as CEO for two more years, Disney said in a statement late on Sunday. He will replace Bob Chapek, who took over as Disney CEO in February 2020.

While Chapek steered Disney through the COVID-19 pandemic, Disney disappointed investors this month with an earnings report that showed continued losses at its streaming media unit that includes Disney+.

Through Chapek's short tenure, Disney became engulfed in an internal culture war after being accused of remaining silent on Florida legislation that would limit classroom discussion of sexual orientation and gender identity.

"The Board has concluded that as Disney embarks on an increasingly complex period of industry transformation, Bob Iger is uniquely situated to lead the Company through this pivotal period," Susan Arnold, chair of Disney's board, said in the statement.

In June, Disney's board voted unanimously to extend Chapek's contract for three years.

"I am an optimist, and if I learned one thing from my years at Disney, it is that even in the face of uncertainty—perhaps especially in the face of uncertainty—our employees and Cast Members achieve the impossible," Iger said in a memo to employees seen by Reuters.

The leadership change caught employees by surprise, one company source said.

Earnings for Disney should be a nice little surprise.

Walt Disney earnings are due after today’s close and investors will be watching for news of how their Disney+ subscription service has been doing. Has Disney+ managed to eat into Netflix and Amazon Prime’s margins? Disney already has more subscribers than Netflix as it surpassed Netflix’s 220 million subscribers 3 months ago. Will it now extend that lead?

Disney has recently announced a multi-year extension of its F1 broadcast partnership where F1 races will continue to be shown on ESPN network in the US through the 2025 season. So, can Disney shares announce a few surprises today after the close?

Streaming growth, a continued theme park rebound, and stable TV and movie revenue are what Walt Disney DIS investors are counting on when the company reports its latest results.

Disney (ticker: DIS) will publish results for its fiscal fourth quarter, which corresponds to the calendar third quarter, after the market closes on Wednesday.

The Dow Jones entertainment giant's earnings have steadily improved over the last six quarters as it recovered pandemic losses. Still, Disney stock tumbled roughly 44% over the past year.

Analysts will closely watch the number of Disney+ subscribers after Disney lowered its forecast for 2024, introduced ad tiers and hiked the price in the third quarter.

The streaming industry is grappling with slowing subscription growth and soaring production costs for new content. In response, the "House of Mouse" announced the price for the ad-free version of its streaming service will surge 38% to $10.99 a month, starting Dec. 8. And it will introduce a lower-priced, ad-supported tier, similar to what its competitor Netflix (NFLX) just launched.

In August, Disney lowered its target to 215 million to 245 million Disney+ subscribers by the end of 2024, down from its February forecast of 230 million to 260 million. Still, the company expects Disney+ to be profitable within two years.

Disney's theme-park revenue leapt 70% to $7.39 billion in fiscal Q3, thanks to a post-pandemic rebound in travel. However, foot traffic at its Shanghai resort has been slow to recover as China continues with its "zero-COVID" policy strategy. And theme-park sales could take another hit China implements further lockdowns.

Disney's traditional media business faces exposure to negative macro trends, but the focus on sports with its ESPN and Hulu properties position it favorably, KeyBanc analyst Brandon Nispel wrote in a late-October research note. He believes Disney's platform of services provides a competitive advantage in their ability to convert linear TV watchers to streaming subscribers. And despite park attendance softening, he thinks Disney's are resilient and provide significant cash to help fund the transition to streaming. Nispel lowered his price target on Disney stock to $143 from $154 but maintained an Overweight rating.

Disney Earnings

Expectations: Disney earnings are expected to jump 48% to 55 cents per share while revenue grows nearly 15% to $21.3 billion.

For the fourth quarter, Wall Street sees Disney+ adding 8.9 million Disney+ subscribers to 161 million. That would be a downshift from fiscal Q3, when Disney+ added 14.4 million subscribers.

Including ESPN+ and Hulu — which already raised prices — analysts see Disney adding 10.4 million users to 231.5 million.

How to trade to stocks during earnings reports

Must know.

You follow your stocks daily. You are ready to buy and sell whenever an opportunity arises. Then, out of nowhere, boom, your stock jumps 9%. An hour later another stock plummets 40%. You ask yourself: what’s going on?! Crazy times!

Well, not so crazy. It might just be “earnings season.” Sorry Moderna, thank you Pfizer.

What is earnings season

Earnings season is when publicly traded companies announce their earnings. The year is divided into four quarters. About a week or two after each quarter, companies begin to announce their previous quarter earnings.

The year is divided up as follows:

Quarter 1: January- March

Quarter 2: April-June

Quarter 3: July- September

Quarter 4: October-December

Earnings Calendar | Nasdaq has an earnings season calendar where you can track when each company is scheduled to announce its earnings.

Why should I care about earnings season

When a company announces its previous quarter earnings, we find out two critical pieces of information. First: Was the company profitable? Second: Did the company’s earnings or losses meet expectations?

These pieces of information provide investors with a more accurate picture of the company’s value, and in turn, affect the stock price.

Market prices reflect investors’ attempts to continuously figure out the actual value of a company. This ongoing effort leads to rises and falls in the stock price of the company due to positive or negative events that impact the company. This could be news occurring in the broader industry of a company, or other economic events which can affect the price of a stock.

Throughout the year, analysts pore over statistics in an attempt to gauge the actual value and status of a company. Then comes earnings season. If analysts are correct in their valuation of a company, then the earnings will not have a major impact on the stock price. However, an earnings report which falls below expectations, or exceeds expectations, will reverberate in the stock price.

When a company’s quarterly earnings report exceeds expectations, it means that investors misjudged the value of the company. They thought the company was worth less than its actual value. However, the earnings report revealed that the company’s worth is much greater. Therefore, the stock price will jump based on that report.

The opposite happens when an earnings report falls below expectations. Investors realise that the company’s value is less and, therefore, the stock price falls.

Keep your eye on earnings season

If you are an investor, you want to be super focused during earnings season, especially relating to stocks in your portfolio. If you are researching other stocks, earnings season may provide you with indications on whether the stock in question is a good pick.

During earnings season, stocks tend to be more volatile, specifically in the period leading up to the earnings report and in the aftermath. During these periods, as an investor, you want to be on top of things to ensure that you make timely decisions about your financial assets.


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