Parks are ‘underappreciated part of business’

00:00 Brad Smith

Disney shares are on the move after topping second quarter expectations and raising its full-year outlook citing strong performances from its theme parks and streaming business. The company added 1.4 million Disney Plus subscribers in the quarter, bringing the total number of subscribers to 126 million. Joining us now, we’ve got Geetha Ranganathan, who is the Bloomberg Intelligence Senior media analyst. Geetha, great to have you back here with us. I just want to get your read in on these results.

00:37 Geetha Ranganathan

Thank you, Brad. So this was really, you know, A+ for Disney in terms of execution. So such strong momentum across all businesses, especially as you pointed out, both at the theme parks business. Remember, theme parks makes up about 55 to 60% of Disney’s operating income. So extremely, extremely important to the company in the context of overall results. And also, it’s, you know, so sensitive to the overall macro trends, as well as consumer sentiment. So for them to come out and raise EPS guidance, this was supposed to grow high single digits. Now they’ve raised it to 16% growth is really telling. And then of course, streaming as well. Yes, Maddie.

01:55 Maddie

Thank you, Geetha. Sorry about that. I do want to talk more about the streaming, but in terms of the price action, I’m just curious. Do you think that this is a little bit too optimistic with the stock over 9% up right now, given that it’s still down 50% from its prior peak?

02:18 Geetha Ranganathan

I don’t think it’s too optimistic. So they did, you know, they obviously they have a very good growth outlook. And I think why that has managed to dispel so many fears is because, you know, we were really kind of expecting this overall consumer slowdown to have a pretty significant impact on the outlook for Disney’s parks. And, you know, they kind of come out swinging and point to advanced bookings being up pretty substantially both in fiscal third quarter as well as fiscal fourth quarter. And that’s just not the macroeconomy. Remember, we also have a major competitor in Comcast Epic Universe, which is just opening in a few weeks in Florida, and that’s supposed to be a source of major competition. And for them to come out and give such a strong forecast, I mean, just points to the confidence the management team has, and really kind of raises investor confidence across the board.

03:55 Brad Smith

I guess another facet to this too is how Disney is gauging the interest in the demand for parks internationally, especially with the announcement this morning about extending the company’s global reach, captivating new audiences with the seventh Disney destination. That’s going to be targeting Abu Dhabi. So all of that in mind here, how do we get a kind of broader read on or how investors should be grading Disney on bringing some of these new parks experiences to life over the long term?

04:37 Geetha Ranganathan

Yeah, I think parks has really been such an underappreciated part of the business, Brad. And I think now investors are really going to be forced to pay attention. I mean, they have fantastic IP, they have a world class brand, and the amount of investments that they’re undertaking in that business. There’s $60 billion that they’ve committed to grow capacity in the parks to increase the number of attractions across all of these different properties. And then you have them adding this seventh new destination in Abu Dhabi, you know, they already have about 100, 120 million visitors to their parks every year. You know, expect that to now rise pretty substantially with this new park that’s going to come on board. And then you have them making really huge investments in their cruise ships. So, remember, they just added their sixth cruise ship and they’re basically going to double their fleet capacity over the next five to 10 years. So again, we’re looking at them basically doubling, or maybe even tripling their cruise revenue. So, across the board, again, with the theme park segment itself, we’re seeing tremendous strength in the domestic parks, and then of course, they’re adding capacity, building out the footprint, and then doubling down on cruises.