Shares of Disney (NYSE:DIS) have been put under pressure in recent days after a leaked internal memo showed that the entertainment giant has plans to put a pause on hiring and eliminate an unspecified number of jobs. In the memo, CEO Bob Chapek explained:
“We are limiting headcount additions through a targeted hiring freeze…As we work through this evaluation process, we will look at every avenue of operations and labor to find savings, and we do anticipate some staff reductions as part of this review.”
The company also has plans to create “a cost structure taskforce” to oversee expenses among its 190,000 employees. Notably, spending on content and marketing will be affected by the task force.
This has investors concerned about these Disney layoffs and DIS stock. Let’s go into that.
DIS Stock: Disney Plans Hiring Freeze and Layoffs
In the short term, cutting jobs can provide for lesser expenses and higher net income. However, in the long term, the addition of jobs and employees drives growth and innovation.
The memo follows a disappointing third quarter in which Disney’s streaming division saw combined losses of $1.47 billion compared to losses of $630 million a year ago. InvestorPlace contributor William White also noted that the entertainment missed on earnings per share (EPS) and that “more trouble could be coming.” The company attributed some of the losses to a lack of theatrical releases. On the bright side, marketing expenses seem to be paying off, as Disney reported 12.1 million new Disney+ subscribers.
It’s clear that Disney is going through a rough patch, although DIS stock is by no means a bad investment. As macroeconomic conditions improve, investors should expect an uptick in DIS as well.
On the date of publication, Eddie Pan did not hold (either directly or indirectly) any positions in the securities mentioned in this article. The opinions expressed in this article are those of the writer, subject to the InvestorPlace.com Publishing Guidelines.