Trending tickers: Disney | Rolls-Royce Holdings | Alphabet | ITV
A look at the stocks making headlines on Thursday
Disney reported second-quarter earnings which broadly met analysts’ expectations on the top and bottom line. However Disney+ streaming subscribers fell by 4 million, hitting 157.8 million versus expectations for 163.17 million.
It sent the company’s shares down almost 5% after-hours as investors seemingly disregarded a stronger performance in its parks, experiences and products division which enjoyed 17% revenue growth to $7.7bn, mostly thanks to strong sales in its theme parks.
Victoria Scholar, head of investment at Interactive Investor said: “After a tough 2022 in which the stock shed over 40%, Disney shares have enjoyed a significant recovery this year, thanks to the broader rebound in growth stocks, significant restructuring including 7000 job cuts, as well as Bob Iger’s return as CEO.”
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However, Scholar noted, the earnings highlight the intense competition in the streaming wars amid an onslaught of incumbent and new entrants in the sector.
“Disney has also been dealing with a political battle with Florida’s governor Ron DeSantis, a drop in Disney+ Hotstar revenue in India and a writers’ strike which has impacted some of its productions,” she added.
Rolls-Royce Holdings (RR.L)
In London, Rolls-Royce Holdings stock was down nearly 4% on Thursday despite the group saying it was on track to to meet guidance for operating profit of between £800m and £1bn this year.
The company also said flying hours hit 83% of pre-pandemic levels in the first four months of 2023.
“Shares in Rolls-Royce have enjoyed an incredibly strong year so far, rallying over 50% amid optimism towards the new CEO Tufan Erginbilgic and a strong earnings performance last year thanks to the recovery in international aviation post covid,” Victoria Scholar said.
“Erginbilgic has been spearheading a major transformation programme which has reinvigorated the engine maker’s bull case. He also recently appointed a new CFO, in another sign that he is making his mark. In January when he was appointed CEO, Erginbilgic described Rolls Royce as a ‘burning platform’,” she added.
Rolls Royce is the FTSE 100’s best performing stock over the past six months, although the stock is still trading at less than half of its value from its 2018 peak and is giving back some of those gains today.
Investors continue to watch Alphabet stock after the group announced it was rolling out more artificial intelligence (AI) for its core search product, in the hope it will create some of the same excitement generated by Microsoft Corp's update to rival search engine Bing in recent months.
At its annual I/O conference in California on Wednesday, the Google and YouTube parent company revealed a new version of its namesake engine, called the Search Generative Experience.
It said the revamped Google can craft responses to open-ended queries while retaining its recognisable list of links to the web.
"We are reimagining all of our core products, including search," Sundar Pichai, Alphabet's chief executive said at the event.
The AI update comes after the company reported first quarter earnings on Tuesday that beat expectations on the top- and bottom-lines. It also authorised a $70bn stock buyback.
Alphabet stock climbed as much as 5% in after hours trading on the news.
Shares in ITV were down nearly 5% after the British broadcast giant said a tough advertising market would continue in the April to June period as a lack of major events and economic uncertainty dampens company spend.
In its quarterly update, trading was in line but it guided its total advertising revenue (TAR) for the second-quarter to be 12% lower, putting it behind current analyst forecasts.
However, ITV pointed to an improvement in the third-quarter with the return of its popular reality show and a world sports event that will boost ad spend again.
"We are looking forward to Q3 with Love Island and the Rugby World Cup set to draw large broadcast and streaming audiences," the group said.
Russ Mould, investment director at AJ Bell, said the latest update from ITV comes as TV advertising faces both a structural challenge, as the audience for linear television declines, and a cyclical challenge as companies trim their advertising spend thanks to an uncertain economic outlook.
"This was reflected in free-to-air broadcaster ITV's first quarter trading update which, not unexpectedly, showed a big decline in advertising revenue and signalled a weak showing on this front in the current quarter too.
"Advertising spend on its digital platforms is proving more resilient but not sufficiently so that it can make up for the drop off elsewhere,” he said.
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Mould further noted that the ITVX platform, which he said created a real stink with shareholders when it was unveiled just over a year ago, seems to be performing well.
"The production business, seen for several years as a route to reducing ITV's reliance on volatile advertising spend, is growing at a decent lick. However, the company is struggling to pass on rising production costs.
"In the recent past there was real clamour for content as streaming platforms engaged in a battle royale to claim subscribers. Now, however, media firms are striving to be more parsimonious as investors look for a greater measure of financial discipline," Mould added.
Watch: Disney CEO addresses Gov. DeSantis controversy during earnings call
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