Epic Games: 1.5 billion investment from Disney

Disney to invest 1.5 billion in Fornite game owner
  • Jonathan Rowe
  • 16.02.2024

Disney's stock price rose 6% in the US market. The company has beaten the forecasts for the first fiscal quarter of fiscal year 2024. In addition, the entertainment giant announced a $1.5 billion investment in Epic Games, creator of the video game "Fornite," one of the world's most popular games with 100 million monthly users.

The press release states that Disney and "Fortnite" will collaborate to develop new games and entertainment experiences that allow users to interact with content, characters and stories from Disney, Pixar, Marvel, "Star Wars," "Avatar" and others through play, viewing, purchasing and interactive experiences.

In an interview with CNBC, Disney CEO Bob Iger called the investment "potentially our most significant endeavor in the gaming arena." He emphasized its relevance, citing demographic trends and the investment and media consumption preferences of Generation Alpha, Generation Z and even millennials.

Share buybacks

Disney generated $23.549 billion in revenue in its fiscal first quarter, which was in line with $23.512 billion in the same period of the previous fiscal year. EBIT was $3.876 billion (+27%) and EPS was $1.22 (+23%).

"The performance is better than anticipated in the first fiscal quarter. Despite the fact that the number of subscribers did not meet expectations (149.6 million against the consensus forecast of 151.2 million), losses in the streaming business were lower than expected (-138 million against -390 million in the consensus)", - explain experts Bankinter. They also note that the company suggested that this business line could become profitable before the fourth quarter.

On the expense side, Disney has already cut $500 million in expenses during the quarter and said it will meet its forecast of cutting at least $7.5 billion in expenses for the year.

The full-year earnings per share forecast beat estimates: 4.60 versus 4.27. On the subscriber side, the company is forecasting 5.5 million to 6 million more Disney+ subscribers in the second quarter of 2024.

Finally, Disney announced a $3 billion share repurchase (1.6% of capitalization) and raised its dividend by 50% (to $0.45 per share, dividend yield of 0.5%).

"In short, good numbers that boost the stock," commented Bankinter.

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