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The Week Ahead in Earnings Reports

Plus500 | Monday 07 February 2022

Disney, Peloton, Uber, and Lyft are set to release quarterly earnings results this week. Firms had to surf between continuing waves of COVID-19 infections as 2021 came to a close. How are analysts predicting that they measured up?

Earnings

Will Disney Stay Enchanted?

Disney’s (DIS) is expected to provide its shareholders with some welcome news at its earnings release this Wednesday after the markets close. The Zack’s estimate for the venerable firm’s Q4 2021 earnings per share is $0.58, a rise of over 80% from the final quarter of 2020. 

Disney’s proprietary Disney+ streaming platform has enjoyed considerable success throughout the COVID-19 pandemic due to stay-at-home orders across the industrialised world. However, the company may have lost some of its magic. 

Many analysts are expecting relatively strong growth of upwards of 8 million new subscribers, for Q4. This would represent a nearly four-fold increase from Q3 2021’s figures. However, the pandemic has put some roadblocks in the way of new content production for Disney+. 

Disney stock fell 12.5% over the course of 2021, with some saying that its more recent decline could be related to Netflix’s (NFLX) travails. Traders may see a restricted growth outlook for streaming video services now that fewer people across the world are forced to stay at home.

Despite Disney+’s growth pains, investors may want to take the long view on the streaming platform’s prospects–the service is less than three years old and still building up its repertoire. The firm’s executive suite has indicated an expectation of reaching a quarter-billion subscribers by the end of 2024. Additionally, Disney also owns streaming services Hulu and ESPN+, which haven’t been lacking in subscriber growth either.

Unlike other digital content producers, Disney’s revenue sources are widely diversified. Due to travel restrictions, visitorship at the company’s famous theme parks in Europe and North America cratered, but with the lifting of public health-related limitations, families flocking back to Disney parks could have provided a welcome boost to revenue in the holiday quarter. While still below Q4 2019’s numbers, revenue from theme parks and experiences could have netted Disney over $6 billion in Q4 2021.

Traders will have to wait until Wednesday to discover whether Disney can shed its 2021 dubious honor of the worst-performing share on the Dow Jones Industrial Index (USA 30).

Peloton’s Uphill Climb

Peloton (PTON) benefited greatly from a sharp increase in the demand for at-home exercise-related products with the beginning of the coronavirus pandemic. The company’s flagship product is an internet-connected stationary bike; users pay a monthly subscription fee to participate in fitness classes from the comfort of their homes.

Peloton’s offerings seemed tailor-made for the COVID-19 era, and the firm’s shares rose by over 400% in 2020. However, some are saying that its business strategy may have been overzealous. Banking on customer growth continuing on a strong incline, Peloton may have overextended itself with wide-ranging investments in production and capacity expansion. These have brought the firm’s cost floor up as the return to gyms and fitness centers became possible, and fewer consumers needed to settle for an expensive stationary bike. In 2021, Peloton started feeling the burn, with a 75% drop in share price for the year.

Last Friday, rumors spread that Peloton was even considering a buyout from Nike (NKE) or Apple (AAPL); these suppositions have yet to be substantiated, but the firm’s stock rose sharply following their release. Still, the company is fighting some negative publicity stemming from a negative portrayal in the most recent Sex and the City movie, as well as a prominent sharheolder publicly calling for CEO John Foley to be dismissed from his post. 

Perhaps in order to calm investors, Peloton took the unusual step of releasing preliminary Q2 2022 results on January 20th. Preliminary revenue results were $1.14 billion, within the market-expected range. On the same day, Foley reassured investors that the company was reassessing its asset allocation in order to maximize profitability in the post-pandemic era. We’ll have to wait until Tuesday after the bell to find out if the Zack’s estimate, losses of $1.18 per share, are borne out.

Will Investors Hitch a Ride?

Two major ride-sharing services are also expected to release earnings this week. Lyft is expected to release Q4 2021 results on Tuesday after the bell, with Uber (UBER) following on Wednesday.

Both firms have been under pressure since early 2020, with 40% fewer passengers seeking rides over the past two years due to COVID-19 restrictions. Uber’s bottom line was somewhat protected by continued demand for food delivery via the UberEats application, but this revenue stream has stagnated as well in recent months according to some estimates. However, some analysts are predicting that the drop in transport requests was reversed as 2021 came to a close, with Uber rides up 54% and Lyft by 41% in the fourth quarter.

Despite these encouraging figures, traders may be taking a closer look at the driver supply side of Uber’s and Lyft’s business models this week. For the past two years, these two firms have struggled to draft enough independent contractors to their rolls and even offered perks to keep the wheels turning. Some are positing that these issues may have resurfaced in the fourth quarter with the global spread of the coronavirus’ Omicron variant.

Despite UberEats ably competing with competitor Doordash (DASH), analysts are predicting a loss of 20-30 cents per share to be revealed by Uber on Wednesday. Even with an expected quarterly revenue figure of over $5.3 billion, the firm’s shares could decline after its earnings are released.

On the other hand, Lyft (LYFT) is expected to come in at an EPS of around 8 cents, with quarterly revenue topping $940 million. Much of where the stocks of these two firms head after their Q4 2021 releases depends on whether investors see driver supply and ride demand picking back up as we move further into 2022.

All in all, the week ahead could be an interesting one for traders on the market. With different industries having been variously affected by COVID-19 and responding in distinct ways, this week’s quarterly results could shed some light on where these shares are headed in the new year. 


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