Disney Earning Preview: Disney Plus Ranks High On App Store

Disney earnings tomorrow will report subscriber numbers for its OTT-streaming service tomorrow in what is perhaps the most anticipated earnings report of the week. One day after the launch, Disney announced that Disney Plus had attracted 10 million subscribers. App store data collected in the remaining part of the quarter suggests that Disney Plus continued to outperform.

Disney Plus Beat out Social Media on Many Days

When looking at the top-ranking free apps, Disney’s media entertainment app knocked out the #1 viral sensation TikTok on a few days and ranked higher than Instagram, YouTube, Facebook Messenger, Whatsapp and Snapchat on many other days.

Across top-grossing apps, Disney Plus held its own against the top-grossing gaming industry with many high-ranking days on Android and the iOS app store. This is rare as the majority of downloads for over-the-top (OTT) media apps come from OTT players, such as Roku, Amazon Fire, Google Chromecast or Apple TV.

According to Apptopia, a provider of app intelligence, the Disney Plus app ranked number one every day for the first four weeks following its launch in both the App Store and Google Play.

While App Store data cannot guarantee an earnings beat, the app store ranking most certainly doesn’t hurt Disney’s chances for a strong earnings report tomorrow. Analysts are looking for either 20 million or 25 million, depending on the consensus source.

Netflix had highlighted search terms in their earnings report to prove the popularity of their programming. Interesting enough, according to Google, Disney Plus was the top trending search term in 2019, showing the popularity of the overall service as compared to any one show in particular.

Ahead of Disney Earnings: Bullish Analyst Reports

For Disney’s earnings tomorrow, analysts are predicting adjusted earnings of $1.47, according to FactSet. This represents a decline from $1.84 per share a year ago. Estimates for fiscal Q1 2020 revenue are at $20.77 billion, up from $15.33 billion, according to FactSet. The software platform, Estimize, has an adjusted earnings consensus of $1.49 a share and revenue consensus of $21.18 billion.

There is a string of analysts who have published positive notes on Disney. Rosenblatt Securities raised subscriber estimates for Disney+ to 25 million users by the end of the first quarter in 2020, up from 21 million. He calculated the penetration at 43% in households without children and points towards the popularity of Baby Yoda in The Mandalorian as an indication of the reach. (Baby Yoda also claimed a top search spot on Google in 2019).

Bank of America released a note at the end of December that stated Disney’s estimate for FY 2024 guidance of 60 to 90 million subscribers appears to be low. Their price target is $168 with a buy rating.

Amazon Prime, not Netflix, is at Risk

Many analysts wonder if Disney Plus will eat market share from Netflix. Instead, Amazon should be concerned as the Prime Video app may be pushed out as the number two streaming app as Disney’s user base grows. According to Apptopia’s data, over the first four weeks, Disney+ beat out Prime Video with total hours spent in-app.

Amazon Prime Now reported subscriber numbers of 150 million, yet failed to be ranked in the Top 20 most ranked shows. This includes Prime’s top hit The Marvelous Mrs. Maisel. This suggests that many of Prime Now’s subscribers may have the app downloaded as part of their Prime delivery service, yet spend little time in the app compared to competitors.

Meanwhile, two of Disney’s Marvell titles were ranked in the top 20 in both 2018 and 2019.

Once Disney proves itself on subscriber numbers, the next challenge will be to convince subscribers with free promotions to pay for the service. The upcoming task for the global media powerhouse will be to release enough consistent hits, like The Mandalorian, to keep up the monthly active user numbers. Quality is clearly not an issue for Disney, yet quantity could be.

Mastering high retention, low churn and viral mechanics will be a new set of skills for Disney, who has primarily specialized in theater releases and theme parks.

Theme park attendance in Hong Kong during the political unrest may affect earnings. The coronavirus and closure of the Shanghai theme park during the busy New Year holiday will also affect earnings next quarter in fiscal Q2 2020. Analysts may overlook these setbacks for now with the main focus being on Disney Plus.

The stock analysis is an opinion and the app store data is not financial advice. Please consult your financial advisor before investing in any stock.