3 big profit hits: Disney goes down; Airbnb warns; PayPal “can be blocked”

3 big profit hits: Disney goes down;  Airbnb warns;  PayPal “can be blocked”

Investing.com — Here’s your Pro Recap of the biggest earnings reports you may have missed this week: disappointment at disney a warning from Airbnb and soft advice at PayPal.

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disney comes across lukewarm subscriber numbers

Shares of Walt Disney (NYSE:) fell about 5% on Thursday after the entertainment giant reported $0.93 per share and 157.8 million Disney+ subscribers, less than the 163.1 million expected by Wall Street.

Still, Citi pointed out that the losses continue to shrink:

We believe that the decline in F2Q23 subscribers and the improvement in DTC’s profitability are likely the result of the company’s price increases taken in December. Given the segment’s growing operating profit and DTC’s shrinking losses, we wouldn’t be surprised if the shares traded slightly higher tomorrow.

Goldman Sachs reduce price target to $130 per share, from $136 previously, but remains quoted long on DIS shares:

Our key positive finding from DIS’s F2Q23 results is that we believe management is demonstrating strong execution against key profitability initiatives outlined last quarter… Our key negative finding is that DIS continues to facing secular and cyclic headwinds, which can lead to irregular operating trends, especially during 2H.

Airbnb warns of slowing growth

Airbnb (NASDAQ:) said — a variance from last year’s loss but also $0.02 less than Street’s expectations — on online revenue of $1.8 billion. The company also announced a new share buyback program of up to $2.5 billion.

Looking ahead to the second quarter, the company guided revenue in a range of $2.35 billion to $2.45 billion, in line with Wall Street estimates, but also said Night and Experiences Booked “will have unfavorable year-over-year comparisons in Q2 2023 as we ride pent-up 2022 demand following COVID Omicron Variant.”

After that, shares fell rapidly. Morgan Stanley cut the price target to $95 per share and reiterated an underweight rating on ABNB shares, as InvestingPro reported in Realtime:

Slower than expected growth in overnight stays (with the US facing price and supply constraints) shows how future growth (more dependent on Europe, APAC, LATAM and new business opportunities ) may face higher execution risk. The competitive risk (loss of market share for BKNG) also persists.

Oppenheimer thinks the decelerating speed of 2Q23 nights will increase concerns about slowing growth:

We maintain Perform on uncertain prospects for the second half and a valuation of premiums, 21x EBITDA ’23E against 15x for BKNG, limiting the rise of NT to equities.

Stocks recently lost more than 7% for the week.

PayPal slides as analyst says he ‘may be stuck’

PayPal (NASDAQ:) raised its full-year earnings forecast and beat expectations, but shares fell on a reduced operating margin outlook – from +125 basis points to +100 basis points – for the whole year.

First-quarter earnings were $1.17 per share, above the average expectation of $1.10, thanks to cost reductions and an increase in new accounts. And sales of $7.04 billion slightly beat consensus.

Looking ahead, the company now expects adjusted EPS growth of around 20% to $4.95; up from earlier expectations for growth of 18% to $4.87.

But Oppenheimer thinks PayPal’s actions “could be blocked” in the short term:

We get strategic value from Braintree, but investors will ask us; how long can you cut expenses to compensate for declines in profitability that impact valuation? Significant help to PPCP profitability is likely in quarters/years. So revenue growth is likely slower than TPV’s. We/the investors need a sustainable expansion of the underlying margins given their magnitude.

German Bank said the decline in PYPL shares is the result of investors’ focus on pressures on trading margins:

Dealing margins are under pressure and will only start to improve if branded volumes rebound (as concerns about losing market share persist). Therefore, we expect the higher revenues to be fully offset by lower transaction margins.

Shares were recently down around 12% for the week.

Yasin Ebrahim, Davit Kirakosyan and Senad Karaahmetovic contributed to this report.

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