Disney Stock Plunges 12% After Reporting Q4 Earnings Miss, High Cost of User Acquisition

Streaming expenses and falling revenue-per-user numbers dragged on the company’s value

ORLANDO, FL - MAY 08: Bob Chapek of Disney talks during the Opening Ceremony of the Invictus Games Orlando 2016 at ESPN Wide World of Sports on May 8, 2016 in Orlando, Florida. Prince Harry, patron of the Invictus Games Foundation is in Orlando ahead of the opening of Invictus Games which will open on Sunday. The Invictus Games is the only International sporting event for wounded, injured and sick servicemen and women. Started in 2014 by Prince Harry the Invictus Games uses the power of Sport to inspire recovery and support rehabilitation. (Photo by Chris Jackson/Getty Images for Invictus)
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Disney shares took another significant dip Wednesday, suffering a nearly 12% loss triggered by worse-than-expected earnings and ballooning expenses in its fourth-quarter earnings report. With that, The Walt Disney Co. stock was down around 40% for 2022.

The high cost of user acquisition was a major factor: Disney says it added 14.6 million subscribers during the quarter, and has eclipsed Netflix’s 223 million tally with a total of more than 235 million. But revenue-per-user shook out at $3.91, falling short of analyst expectations at $4.24, meaning the cost of acquiring and retaining each user was on the rise.

The conglomerate on Tuesday reported a profit of 30 cents a share on revenue of $20.15 billion, while streaming subscriptions hit 164.2 million, during the quarter. But there are concerns about whether the industry Goliath can gain enough subscribers to subsidize the cost of streaming content. 

Disney, which has been in a back-and-forth battle with Netflix for the title of world’s biggest streaming platform, was expected to post a profit of 54 cents per share for the three months ending in September, a 46% increase from last year, on revenues of $21.247 billion.

The parks, experience and consumer products division revenue also came in low, at $7.43 billion against expectations of $7.59 billion. The company also warned that Disney+ subscriber growth will fall in the first quarter, with a content spend approaching $30 billion.