Is Disney In Trouble?

Disney's stock price is the lowest it has been in two years and layoffs are likely imminent.

By Chad Langen | Published

When Disney recently presented its quarterly report with less-than-stellar figures, the news sent the company’s stock crashing to its lowest price in over two years. Now, according to Variety, the company is looking to cut costs through layoffs, a targeted hiring freeze, and implementing limits on company travel. In a memo to top executives obtained by the outlet on Friday, CEO Bob Chapek noted some of the challenges the company is currently facing, including “economic uncertainty”, but he asserted that he’s confident the future is bright for the House of Mouse.

Disney has faced significant losses as record-high inflation continues to pinch the wallets of consumers. Although the company saw an increase in subscriptions for Disney+ that far exceeded Wall Street’s expectations at 12.1 million, its operating losses continue to stack up. The company reported jaw-dropping losses of nearly $1.5 billion in its fiscal fourth quarter.

In his memo to Disney employees, Chapek explained that the company will seek out ways to save money, including establishing a cost-cutting team to ensure expenses are being trimmed wherever possible. The unit will be led by Chapek, Chief Financial Officer Christine McCarthy, and General Counsel Horacio Gutierrez. The cost-saving efforts were first hinted at by Chapek and McCarthy during the recent earnings call, with the latter explaining that their measures will offer both short-term and long-term savings for the company.

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The memo is the latest indicator of how Disney intends to push forward after a disappointing quarter that was undoubtedly disheartening to investors. The company’s shares plummeted to a 52-week low last Wednesday to $87 from a Monday total of $101. Fortunately, the company had a slight rebound last Friday, posting around $95, and we’re hoping the cost-cutting measures being implemented by the company’s higher-ups will put the company back on a profitable track.

Prior to the company’s quarterly report presentation, Disney executives were expecting growth in the high-single-digits with analysts estimating a growth of 25%. Clearly, the actual figures were much lower than analysts were anticipating. Even Michael Nathanson, an analyst at MoffettNathanson, indicated that forecasts by analysts were way off, and the company’s numbers were far below Wall Street’s expectations.

On top of their losses, Disney has been caught up in multiple controversies, including its open opposition to Florida Governor Ron DeSantis’ putting his signature on a bill preventing the discussion of sexual orientation in classrooms. The company’s opposition was met with praise by some consumers, while others condemned it for being too “woke.” Now that DeSantis has won another term as governor, we can expect more back and forth between him and Disney going forward.

Fortunately, it’s not all bad news for House of Mouse, as all three streaming services owned by Disney including Disney+, Hulu, and ESPN+ saw faster growth than expected in the most recent quarter. The company closed out its fiscal year 2022 with over 235 million streaming accounts, with 164.2 million of those being from Disney+. Those numbers should continue to rise, particularly when Disney+ launches its ad-supported tier on December 8th.