Magical Kingdom

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What's going on?

Disneys 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 isnt actually that important to Disneys bottom line: its subscription income only accounts for 7% of Disneys total revenue, and its still losing more money than it makes.



The bigger stories were Disneys 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 didnt know.


The initial 1% rise in Disneys stock was subtle but significant. See, the companys share price theoretically painted a pretty accurate picture of what investors were expecting to see. But analysts hadnt banked on so many new Disney+ subscribers, or how effectively the companys savvy cost-cuts would keep its theme park losses in check. The latters even set Disney up for a bigger-than-expected jump in profit when its parks are fully up and running, which mightve been why investors sent Disneys shares higher on Friday.



The bigger picture: Theres 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 theres room for both of them to earn screen time as long as Disney+s planned price hikes arent too much of a turn-off.

Originally posted as part of the Finimize daily email.

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