Disney Stock – What to know in the week ahead
Traders this week are gearing up for another packed week of quarterly earnings results.
The vast majority of companies that have so far reported results have handily beaten expectations, even after a series of upward revisions over the past couple months.
As of Friday, 59% of the S&P 500 has so far reported fourth-quarter results, according to data from FactSet. Of these, 81% of companies beat earnings expectations, which would tie it for the second-highest percentage of earnings beats since FactSet began tracking the metric in 2008. And earnings are currently on track to rise by 1.7% for the fourth quarter, which would mark the first quarter that S&P 500 companies report aggregate earnings growth since the final quarter of 2019.
Two of this week’s closely watched earnings results will come from ride-hailing rivals Lyft (LYFT) and Uber (UBER), which are set to report quarterly results on Tuesday and Wednesday after market close, respectively.
The pandemic dealt a blow to both companies throughout much of 2020, as consumer sheltering in place eschewed shared rides. Revenue fell by 48% in the third quarter over last year at Lyft, and 20% at Uber.
While sales are likely to still be down sharply in the fourth quarter, many analysts noted that the worst is probably behind both of these companies as the economy starts to reopen later this year.
“We see a confluence of positive factors giving Uber and Lyft tailwinds into 2021 with more investors coming back to the story with many of the dark clouds clearing (Prop 22, demand improving), and a greater focus on ‘reopening’ plays,” Wedbush analyst Dan Ives wrote in a note, referring to the California proposition that allowed both companies to continue classifying their drivers as contract rather than full-time workers.
Fourth-quarter guidance from both companies last quarter appeared to affirm their upward trajectory. Uber CEO Dara Khosrowshahi said during the company’s last earning’s call in November that he expected adjusted EBITDA losses would improve on a year-over-year basis in the fourth quarter, after widening by about 7% to $625 million in the third quarter. The company also doubled down on its target of hitting its first quarter of adjusted EBITDA profitability by the end of 2021.
Lyft CEO Logan Green also said last quarter that the company expected to report its first quarter of adjusted EBITDA profitability by the end of this year, even if rides remain depressed compared to when they first issued that guidance back in late 2019. At the time, Green also said operating expenses would retreat further this year, and that revenue per active rider would pick up, suggesting more frequent rides by Lyft users.
Over the course of the pandemic, Uber has had an edge on Lyft, however, in that its business included both mobility and food delivery segments. The latter picked up strongly during the pandemic as customers sheltering in place ordered more food online, helping offset declines in ride-hailing. Gross bookings at Uber’s smaller UberEats business more than doubled in each of the second and third quarters of 2020, while mobility bookings more than halved over both periods. And while UberEats remains an unprofitable unit in the business, Khosrowshahi said in November he was confident the delivery business would post adjusted EBITDA profitability “sometime next year.”
Uber also recently made another acquisition to supplement its delivery business, announcing earlier this month that it would be picking up the alcohol-delivery company Drizly. The acquisition is expected to close in the first half of 2021 and will not be reflected in fourth-quarter results, but may factor into the company’s guidance, if issued this week. Uber’s earlier acquisition of peer food-delivery company Postmates closed in December, prior to the end of the fourth quarter.
Shares of Uber have risen 57% over the last year and 29% since market close of Nov. 6, after which Pfizer (PFE) and BioNTech ((BNTX)) first announced positive efficacy data on their COVID-19 vaccine and sparked a rally in reopening stocks. Lyft shares have risen 9.5% over the last year, but 40% since the close of Nov. 6.
Disney (DIS) is also poised to report fiscal first-quarter results this week, which will likely reflect ongoing growth in streaming platform Disney+ alongside some improvement across the company’s more virus-exposed theme parks and experiences businesses.
Disney+ has been a key source of momentum for the entertainment giant while other areas of the business floundered during the pandemic. The streaming platform boasted 86.2 million subscribers as of Dec. 2, Disney reported at its investor day in December, reaching that level in just over a year of operation. Across all operations including Hulu and ESPN+, streaming subscribers totaled 137 million.
However, the company’s subscriber numbers still pale compared to those at Netflix, which reported nearly 204 million global paid viewers as of the end of last year.
Still, the breakneck growth so far at Disney+ has already led the company to upwardly revise its longer-term projections. Disney said at its investor day that it now expects between 230 million-260 million global subscribers by the end of fiscal 2024, up significantly from the 60 million-90 million target the company posted in 2019. Disney+ is expected to become a profitable business segment by fiscal 2024 as well. And the company will also be increasing the price of Disney+ by $1 to $7.99 for U.S. users starting in March.
But while Disney+ soared, Disney’s parks, cruises and other live entertainment operations languished throughout much of 2020. This area of the business had once comprised the profit engine of Disney prior to the virus, but swung to losses in each of the fiscal fourth and third quarters of last year as visitations dried up.
While most of Disney’s global parks have reopened with limited capacity, Disney’s flagship theme parks in Anaheim, California remain closed due to the pandemic. Disneyland and Disney California Adventure have both been closed since last March, and the aggregate impact of global park closures and weak visitor trends led Disney to slash tens of thousands of jobs throughout last year. Just last week, however, two California Assembly members introduced legislation that would allow theme park operators to reopen their locations sooner than previously proposed.
Shares of Disney have risen 28% over the last year, outperforming the S&P 500’s 16.6% gain over that period.
Monday: Hasbro (HAS) before market open; Take-Two Interactive (TTWO), Chegg (CHGG) after market close
Tuesday: Centene (CNC), Coty Inc. (COTY), S&P Global (SPGI) before market open; Tenet Healthcare (TNT), Twitter (TWTR), Lyft (LYFT), Cisco Systems (CSCO) after market close
Wednesday: Coca-Cola (KO), Under Armour (UAA), CME Group (CME), General Motors (GM) before market open; Uber (UBER), MGM Resorts International (MGM), Zillow Group (ZG), iRobot (IRBT), Sonos (SONO), Spirit Airlines (SAVE), Zynga (ZNGA), O’Reilly Automotives (ORLY) after market close
Thursday: PepsiCo (PEP), Kraft Heinz (KHC), Yeti Holdings (YETI), Tyson Foods (TSN), Molson Coors (TAP), Duke Energy (DUK), Kellogg (K) before market open; GoDaddy (GDDY), Disney (DIS), DataDog (DDOG), Expedia (EXPE), HubSpot (HUBS), Affirm Holdings (AFFM) after market close
Tuesday: NFIB Small Business Optimism, January (97.0 expected, 95.9 in December); JOLTS Job Openings, December (6.450 million expected, 6.527 million in November)
Wednesday: M(BA) Mortgage Applications, week ended February 5 (8.1% during prior week); Consumer price Index, month-over-month, January (0.3% expected, 0.4% in December); Consumer price Index excluding food and energy, month-over-month, January (0.2% expected, 0.1% in December); Consumer price Index year-over-year, January (1.5% expected, 1.4% in December); Consumer price Index excluding food and energy year-over-year, January (1.5% expected, 1.6% in December); Real Average Hourly Earnings year-over-year, January (4.1% in December); Real Average weekly Earnings, year-over-year, January (5.3% in December); Wholesale inventories, month-over-month, December final (0.1% expected, 0.1% in prior print); Monthly Budget Statement, January (-$143.6 billion in December)
Thursday: Initial jobless claims, week ended February 6 (773,000 expected, 779,000 during prior week) Continuing claims, week ended Jan. 30 (4.592 million during prior week)
Friday: University of Michigan Sentiment Index, February preliminary (80.9 expected, 79.0 in January)
Emily McCormick is a reporter for Yahoo Finance. Follow her on Twitter: @emily_mcck
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Disney Stock – What to know in the week ahead
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