Shares in Walt Disney Co. closed 13% lower, its biggest one-day loss since 2001, on Wednesday, as ballooning costs at the entertainment giant's fast-growing streaming division cast a shadow on strong subscriber additions.
Reuters reports shares of the media and entertainment giant hit their lowest since March 2020 on Wednesday.
Disney+ has attracted millions of subscribers and will launch an ad-supported tier next month, but executives' promise of profitability next year and forecast for operating results in the next quarter failed to impress.
"Disney's streaming results are indicative of the tightrope it is walking," said Fred Boxa, associate director at consulting firm Arthur D. Little.
Finance chief Christine McCarthy, in a call with analysts on Tuesday, said the ad tier was not expected to meaningfully impact results until later in the financial year.
Subscriber growth in Disney+ was expected to accelerate in the second quarter, she added, a sign analysts said indicated a soft first quarter.
"As the platform aims for profitability, it's placing some of that burden on its user base in the form of price hikes that could stall growth during a time of economic pinch," said Mike Proulx, research director at Forrester.
A weaker-than-expected annual revenue growth forecast also dragged shares.
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