Disney selling Hulu would be a 'grave mistake': Analyst
The Walt Disney Company (DIS) is set to release its fiscal second quarter earnings after the closing bell on Wednesday. Revenue is expected to come in at $21.8 billion dollars, with adjusted earnings per share of $0.93.
The media giant is projected to report strong earnings growth on its direct-to-consumer offerings.
Yahoo Finance's Seana Smith and Akiko Fujita interviewed Jason Bazinet, Citi Managing Director, on what investors should expect this quarter.
Bazinet believes a potential Hulu sale would be a "grave mistake" for Disney.
Bazinet says he is in the "minority among investors" as he would like to see Disney buy the balance it doesn't own in order to merge with Disney+ and create what he calls a "TV substitute on the streaming world."
Disney currently owns two-thirds of Hulu with Comcast's (CMCSA) NBCUniversal controlling the rest.
See the full interview here.
Key Video Takeaways:
0:00:00 - What Wall Street is focused on
0:01:14 - Hulu's future with Disney
Video Transcript
AKIKO FUJITA: All eyes are going to be on that direct-to-consumer business. What are you expecting on that number?
JASON BAZINET: Well, just to frame it for you, remember, Disney lost about $4 billion in the streaming business last fiscal year. Their quarter-- their first fiscal quarter, they lost about $1 billion in the quarter. And so no real discernible improvement, right? A billion dollars in a loss times 4 is another 4 billion loss. So what the Street will be focused on is, hopefully, a sharp reduction in the direct-to-consumer losses. The company is [INAUDIBLE] to about $200 million of smaller losses. So call it 800 million. And I think that's what the Street will be focused on. If we end up with a much smaller loss, the shares, I think, will do quite well.
SEANA SMITH: Jason, what do you think we're going to hear when it comes to Hulu? Lots of talk about what exactly that's going to look like here just in terms of its future with Disney, whether or not it could potentially sell its stake. How do you see Disney addressing Hulu down the road?
JASON BAZINET: Look, I was flabbergasted on the last earnings call, right, which was Mr. Iger's first quarter back, when he said everything was on the table when it came to Hulu. He was uncomfortable with what he called "general entertainment," which pointed towards a potential Hulu sale. I think that would be a grave mistake. We would like to see Disney buy in the balance of Hulu it doesn't own, merge that with Disney+, rationalize some costs and really create a-- what I'll call a TV substitute on the streaming world.
But I will tell you, I'm in the minority among investors. Every investor I chat with would be thrilled if Disney sold Hulu. So I'm in the minority. But if anything that Mr. Iger does tomorrow or Disney does tomorrow that indicates that they're more open to selling it, the Street would applaud that. I think actually it would be a mistake. But again, I'm in the minority.
