Disney Has Largest Single-Day Drop Since 2001

It has been a tough day for The Walt Disney Company and Chief Executive Officer Bob Chapek.

After reporting its fourth quarter and full-year 2022 financial results, the House of Mouse’s stock sank to a 52-week low and experienced the worst single-day loss since September 2001.

Even though Disney recorded record-breaking revenue during this last year, management of the company shocked shareholders with their expectations for segment operating income in 2023, which the company uses “as a measure of the performance of operating businesses separate from non-operating factors,” according to Disney’s press release.

Walt Disney Company CEO and Chief Financial Officer Christine McCarthy are now forecasting a high-single-digit growth rate on the metric in the new fiscal year, which was much lower than analysts expected. According to Moffett Nathanson analyst Michael Nathanson, the outlook compared to a Wall Street consensus expectation for 25% growth. He was forecasting 34% growth.

Mr. Nathanson wrote in his note to clients that “rarely have we ever been so incorrect in our forecasting of Disney profits. Given the company’s confidence that Parks trends appear resilient, the culprit for the massive earnings downgrade is much higher than expected [direct-to-consumer] losses and significant declines at Linear networks.”

Disney is experiencing a ton of pressure from Wall Street to prove that its streaming arm will eventually become profitable. The trend of cord-cutting that affect the traditional media business is creating urgency for The Walt Disney Company to show that this is the right direction for the company.

How these concerns will ultimately affect Disney’s strategic direction is yet to be seen. It will undoubtedly be interesting to see how Disney and upper management react to the criticism as we move towards its 100th-anniversary celebration.

Do you believe Disney can address these concerns soon?