Disney pops on earnings, Airbnb warns about Delta, DoorDash predicts order slowdown

Julie Hyman, Brian Sozzi and Myles Udland discuss some of Friday’s early movers, including: shares of Disney up in early trading after reporting its best earnings and sales since before the pandemic, Airbnb seeing a quarterly revenue jump of 300% but cautious about travel outlook, and DoorDash posting record sales in Q2 but expecting “the pace of consumer behavioral shifts to slow.”

Video Transcript

JULIE HYMAN: Let's indeed talk about Disney in a little bit more detail here. The company coming out with earnings per share ahead of estimates by quite a margin. Revenue also beating estimates. Disney Plus subscribers, 116 million. That's about 3 million ahead of estimates here.

And the company's theme park business, first profitable quarter since March of last year, $356 million. Of course, you guys, the question, of course, for Disney, as has been for a lot of companies, is, what's going to happen now that we are seeing the Delta variant spreading? There have been some indications that people are canceling trips, perhaps.

We had Southwest recently out with a warning. But Bob Chapek does not seem concerned as of yet about that business. He said they've seen some group cancellations and such, but not anything, he says, as of yet to be worried about. Sozzi, I know you were keying in on what he said, in particular, about those reservations.

BRIAN SOZZI: Right, Julie. And we have a story right now on the Yahoo Finance page looking at other companies like Disney that had been warning late in this earnings season cycle about the impact of the Delta variant. So click on that story and read the other two companies. Deep tease there. But to your point on Disney, they are calling out a rise, I wouldn't say spike, a rise in the number of group cancellations to their parks because of the COVID-19 Delta variant.

Now, Chapek was very quick to say our bookings are still strong. We're getting ready to do more cruises. All of those things look pretty, pretty well-- pretty well from his vantage point. But I think why you're seeing the stock here trade the way it is premarket, higher premarket, again, this is another quarter, Myles, that Disney stock is trading off their streaming numbers, 116 million subscribers for Disney Plus.

That is a blowout quarter. Now, I would like them to be showing more on the average revenue per user metric. That continues to be under pressure just a little bit. But again, you're seeing the stock trade, I think, off that number. You see that chart right there, that subscriber growth for Disney Plus has been absolutely off the charts.

MYLES UDLAND: Yeah, and if you look at the way that the streaming space sort of came of age, right, it was about Netflix and what was Netflix for so long, you know, still is, it's a growth story. It's a subscriber growth story. Disney among the new entrants into this space between HBO and Paramount and others, I mean, Disney is where you are seeing the most subscription growth. Disney can tell the top-line growth story.

Obviously, the Disney piece of that, as we can see here in the chart, is the most compelling. Maybe ESPN added some subs, but it wasn't a whole lot. The Hulu business has been OK. But you know, again, Hulu's mostly a US product, and there's a 105 million households, so we're talking about almost 40% penetration there.

But the Disney Plus story is a top-line growth story. It's an international growth story, right. We had a lot of-- their growth in the most recent quarter came from there. It was the Hotstar business in India, which, again, is going to be a little bit of a lower-- or it is a little bit of a lower margin piece of that Disney Plus empire. But ultimately, Disney Plus continues to be able to successfully tell the Street a story of user growth.

And look, the content that is on there for most families-- and I mean, OK, it's not really my demo, right. I mean, I know there's, like, Star Wars millennials or whatever. But the content that's on Disney Plus for most families is the kind of thing at a, I think it's, what, $6.99 price point, it fits into the budget for just about everybody with something on there for just about everybody. And so I think in terms of the way, Julie, that Disney has separated itself from the field in streaming continues to impress and I think until further notice is going to remain the main pillar of this investable thesis, because that funnels back into the parks business, which certainly remains strong.

JULIE HYMAN: Yeah, definitely. And I think, you know, it's also been very interesting, obviously, how Disney Plus's strategy has been different from that of a Netflix in terms of the amount of new content that gets made for Disney Plus. But the content that it does have for the people who are devotees of this franchise or that is enough, and it happens frequently enough, that it's enough to sort of keep people hanging on.

I mean, I guess we could have a conversation another time, as well, about the strategy of releasing every episode of something all at once versus the once-a-week strategy, which is what Disney Plus has taken. Apple has taken that as well and HBO Max. I guess Netflix is increasingly lonely as the streaming service that just releases everything all at once.

BRIAN SOZZI: Yeah, and I think just moving off the streaming for a bit, while I do think the stock is trading off that premarket, it's now up about 4 and 1/2%, I think ultimately to be a buyer of Disney stock here, you have to have strong belief that those cancellations that Chapek called out, those group cancellations, doesn't spread to the average Joe taking their families-- or planning family vacations out in the fall. Airbnb, we'll talk more about their quarter in a second, but Airbnb noted they're seeing increased cancellations for the fall season.

Does that have any impact or read through into Disney? That is very important, especially when you see Disney shares now trading at almost 40 times-- 40 times forward earnings. That's about 15 points higher than their about 10-year historical average. So that is a big premium that investors are paying to own a Disney recovery story here. And that has to play out. That recovery has to play out in the parks over the next six months if you're a buyer of Disney stock here, really, at $187.

MYLES UDLAND: At Walt Disney World, third quarter attendance levels were generally at or near our daily capacity levels, which increased throughout the quarter. Per cap spend was up significantly versus fiscal 2019 at both Walt Disney World and Disneyland. So I mean, Sozzi, I think that's the story. I don't think it's that complicated.

They have to get behind the Disney parks story. People come for as-- in whatever number Disney is able to staff the park, open the park, open the hotels, staff the hotels, they're full, and they continue to be full. And sure, on the margins, maybe you're going to see some cancellations. But I think if we've seen one thing for how the market is thinking about the Delta variant, I mean, we're looking at a market that's rotating back into cyclical names with rates moving higher as we're trying to tell this story of, oh, the Delta variant's going to upset the economy, the market's betting on the economy continuing to grow, and actually retrenching itself on that trade.

So I struggle to see-- and I think the market is speaking clearly here. I struggle to see how a few group cancellations is going to then be kind of a bleed over problem for Disney, which continues to tell you every time they open the gates they get a line out the door. And until further notice-- and let's be honest, they're not getting shut down in Florida-- you know, that story is just not really going to change that much.

JULIE HYMAN: Well, though, I guess there's California. But even there, it seems like a lot of places are stopping short of outright shutdowns. And given all of this, it makes the case of Airbnb a little more curious, doesn't it? Airbnb, we should say, second quarter was just a huge quarter, right, a smaller loss than estimated, higher revenue than estimated.

Second quarter gross bookings were up 37% from 2019 levels. The value of those bookings, $13.4 billion. That increase that you saw in revenue just there was up 10% from 2019 as well. And the company said 200% surge in nights and experiences booked, which includes all of its stays, and also tourist activities because, increasingly, it is selling those experiences. 83.1 million total bookings for the quarter.

All of that's great, but then the company said it's going to have a decline in quarterly bookings in this current quarter versus the third quarter of 2019. Its revenue outlook held up, interestingly, but the number of quarterly bookings is going to go down. So guys, Myles, how do you square this with what we're hearing from a Disney or, for that matter, what we're hearing from something like a Southwest? Do you think Airbnb is being too cautious here?

MYLES UDLAND: Well, look, it's been an interesting year for Airbnb stock, let's say. I think a lot of what we've seen in the second quarter had been anticipated correctly by investors back in the early part of this year, as we can obviously see on this chart. I think the challenge for Airbnb, and it goes back a little bit to the Disney Plus conversation, but you just think about there are businesses that at various times are growth stories, and the growth is just about how many people you bring on to your platform, how many users are you signing up, for example, in this case how many people are booking Airbnb stays.

And for the company to say that they'll see sequential softness, , I think challenges that story a little bit. Revenue continuing to grow basically means that people are booking more expensive stays on your platform, which is all fine and well. All else equal, you anticipate that those were higher margin events. But the question here was, well, I thought this was a growth story? I thought this is bringing people onto the platform?

I didn't think it was going to be, Brian Sozzi, a margin expansion story at this point in Airbnb's lifecycle. And if we want to say, or if I'm going to argue, that Disney is somewhat Teflon to any concerns about the pandemic, I think Airbnb perhaps a little bit less so. I also think another on-the-margins risk for Airbnb, not a huge one, but on the margins softens up those bookings a little bit. I mean, how many people did we hear about, oh, I booked an Airbnb for a month, and I'm going to go work remotely?

And you know, what's the restriction on that now? We see a lot less of that. Sure, in major metros, major employers might be changing their plans, but the BLS told us that we've got 13% of workers teleworking now. That's down from in the mid-20s this time last year. So a big decline, certainly, in some of that kind of business. And that, of course, is going to be that longer-stay business than Airbnb has been excited about.

BRIAN SOZZI: Well, Myles, if you want to rent me out a room in your new house, I'm all for it, man. I can use the room. Dig it. I'll pay whatever you want. But you know, just staying up, I will mention that margin recovery story in a second, because that's a very good point you brought up. But you have to give Airbnb some credit here. They continue to execute at a high level in a very challenging, challenging environment.

I'm looking at a good note from Jefferies' Brent Thill, a longtime tech analyst, saying, quote, "We continue to believe that Airbnb remains one of the best assets in travel and in a distinct position to flex with its alternative travel portfolio." So perhaps a little bit of a different story here when it comes to the COVID-19 Delta variant compared to, let's say, the lodging sector, compared to a Disney. They're able to flex that model. Thill is staying at $190 price target.

But really, Myles, to your point here, why the stock is coming off here in the premarket really is because of margins. I mean, you look at their outlook, adjusted operating profits for the third quarter are expected to be down versus the third quarter of 2020 and the third quarter of 2019. So the Street is not going to like that. And also, too, bookings. We've been looking at two-year stacked comparisons throughout this earnings season.

And Airbnb is saying those bookings are going to be below the second quarter level and below the level of the third quarter of 2019. And that's why the market does not like this quarter. But again, I wouldn't be surprised if at some point in the session this stock, in fact, goes in the green. There are a lot of analysts out this morning, guys, defending the stock and citing Airbnb execution on the profit line, the adjusted operating profit line, for reasons for staying bullish.

JULIE HYMAN: Just one more comment on the margins here before we move to our next one, and that's the so-called host wars, right. Part of what Airbnb is spending on is marketing and incentives to people who are hosting, not just people who would rent, but people who are hosting. And on that side, they are fighting with Vrbo and some of the other companies that are trying to get into-- more break into that business. So we'll see how that cost line looks going forward.

Let's move to DoorDash. And here, similar theme, right? This is one of the companies that benefited during the pandemic, and we'll see how it's going to go going forward. You can see their revenue beating estimates. It looks like the loss coming in wider than had been estimated. And expenses, they're also going higher as it's increasing its investments to build out categories that are not just meals, trying to get into other areas.

And that speaks to the report earlier in the week that Instacart had reached out to the company about potentially selling itself to DoorDash. So obviously that would have added groceries, but the deal did not happen. Sales, by the way, that sales increase, 83% increase in sales. And if you look at some of the other numbers, customers placed 345 million orders in the quarter, which is 69% higher. The gross value of those orders at $10 and 1/2 billion.

And so all of these, if you equal what's going on with the stock as the result of what the company has been saying, shares are trading a little bit down. That's because it said that it expects a seasonal decline in new customers and order rate. So that might be what's weighing on the shares. Customer behavior, they said, remains uncertain. So Myles, you know, we're seeing sort of a similar theme here with some of these as investors try to figure out what do these companies look like right now.

MYLES UDLAND: Yeah, and when you look at-- I mean, and DoorDash tells its own story, right? But you look at what Uber Eats-- I called them Uber Eats-- what Uber tells us, I mean, the eats business, the delivery business is a challenging business to have profitable unit economics, where each delivery that someone makes using your platform makes money for you. And you know, DoorDash talked on their call about take rate, and I thought they did a great job.

I mean, I think the DoorDash call did a great job of sort of outlining what the business is and where they're going, and they talked about all the dynamics around take rate. And you basically need efficiency, you need order frequency, and you need to make sure those orders aren't messed up. And we all know how easy it is to get yourself a refund on DoorDash.

And bringing that level of-- to them, it's an investment, bringing that level of investment down, of course, you're going to improve the business. But as they grow into new markets, of course, all three of those things then come back into play. You're going to be refunding more orders. You're going to have to be incentivizing drivers even more to take the order. And you're going to have to get new customers to build the habit of ordering more frequently on DoorDash and not, as the company said on the call, just ordering because they got a promotion, because they got their first $30 free, you know, all these different things that have hit all of our inboxes at different times.

But I think looking at DoorDash and Airbnb, the companies basically went public, I think, on the same day or day or two apart, a week apart, it was December of last year, and the two stocks are pretty much flat over that period. Airbnb is up maybe a couple dollars a share. DoorDash is almost exactly at the same share price. The premarket indication is almost at the exactly-- was almost the exact same share price.

And so, you know, Brian Sozzi, I find it interesting that the market-- I mean, these companies basically-- well, DoorDash had a growth story to tell. Airbnb had a recovery story to tell. But since they've made their debuts, the market has looked at these two businesses and says, yeah, you know, you guys, you're in great shape, but my view of you hasn't changed in the last nine months. The future of your business hasn't really changed that much versus what I was hearing in the roadshow and in those indications ahead of those market debuts.

BRIAN SOZZI: Yeah, I think that's the right takeaway here, Myles. I know just short term, you know, you're seeing the stock under pressure here in the early going, the third quarter operating profit outlook zero or no operating profits to $100 million. That would be down compared to $113 million they reported in the second quarter.

But really, DoorDash, 345 million orders, as you mentioned, Julie, up 69% year-over-year. That is huge, especially considering this quarter people left their house after getting a vaccine to go out and eat dinner. It tells you that people want to still stay engaged with delivery services.

We saw it within the Domino's results. We saw it in Papa John's results. We saw it in Pizza Hut results. Saw it in Chipotle as well. Sure, the economy may have been reopening in the second quarter and reopening to a lesser degree this quarter, but behavior changes are sticking. And for DoorDash, that looks to be a good thing.

JULIE HYMAN: I think people also had some cooking fatigue at this stage after cooking at home for a long time.