about 3 years ago • 3 mins
Disney’s stock really is the happiest place on Earth: the entertainment giant reported better-than-expected earnings late on Thursday, and investors initially pushed its stock up on Friday.
What does this mean?
Investors’ main focus last week seemed to be on Disney+ and its expectation-busting 95 million subscribers. But the streaming service isn’t actually that important to Disney’s bottom line: its subscription income only accounts for 7% of Disney’s total revenue, and it’s still losing more money than it makes.
The bigger stories were Disney’s other direct-to-consumer businesses – ESPN and Hulu – and its long-standing television network operation. The success of those segments offset losses from its theme park business, whose sales more than halved last quarter – and brought a $120 million loss with it.
Why should I care?
For markets: Investors are paying for what they didn’t know.
The initial 1% rise in Disney’s stock was subtle but significant. See, the company’s share price theoretically painted a pretty accurate picture of what investors were expecting to see. But analysts hadn’t banked on so many new Disney+ subscribers, or how effectively the company’s savvy cost-cuts would keep its theme park losses in check. The latter’s even set Disney up for a bigger-than-expected jump in profit when its parks are fully up and running, which might’ve been why investors sent Disney’s shares higher on Friday.
The bigger picture: There’s plenty of room on the screen.
The average American household has three video-streaming subscriptions, and Disney+ and Netflix are at the top of the leaderboard: the former boasted seven of the top ten movies streamed last year, while the latter held the top spot for TV shows. That suggests there’s room for both of them to earn screen time – as long as Disney+’s planned price hikes aren’t too much of a turn-off.
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Fresh data out on Friday showed the UK set a dire record last year: the country’s economy shrank by the most in over 300 years.
What does this mean?
Economic growth data isn’t perfect: it’s a lagging measure, so it arrives too late to make much difference to investors’ forecasts. But it is useful to lay bare the pandemic’s effects around the world, from the US economy’s 4% shrinkage last year to the eurozone’s 7% – and now the UK’s 10%. Still, the Bank of England’s not wallowing in self-pity: its chief economist reckons the UK could surprise most forecasters and announce annual growth of 10% or more by this time next year.
Why should I care?
For markets: There’s good news and there’s bad news.
On the positive side, the UK economy unexpectedly grew by 1% last quarter compared to the one before. That was mostly down to plenty of government spending, as well as the boost the hospitality industry earned from relaxed restrictions around Christmas. But that wasn’t enough to rescue the year as a whole, and hopes aren’t high for this quarter either: between a still-rampant health crisis, a potential post-Brexit collapse in exports, and new strains on the country’s financial services sector, most economists think the UK economy will shrink yet again.
Zooming in: There’s opportunity in a crisis.
The UK does have a couple of things going for it: the country’s ahead of the curve in its vaccine rollout, and a big rise in the household savings rate suggests there’s cash just waiting to be spent. Both factors could set Britain up for a robust recovery, and it could be its beaten-up services sector – which accounts for 80% of the country’s economy – that stands to benefit the most. That benefit should show up on certain companies’ bottom lines, and they might see their long-ignored shares suddenly back in fashion.
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