Updated: The company’s shares rose 6.3 percent Monday as Disney investors installed Bob Iger as CEO of The Mouse House.
On Sunday, Disney’s board made a surprise announcement that Iger, who previously led the company as CEO from 2005-25, would return for a two-year term. Iger replaces Bob Chapek, who was ousted due to a series of missteps at the media conglomerate during his tenure.
Moffett Nathanson analyst Michael Nathanson upgraded DC stock from “market perform” to “outperform” and set a 12-month price target of $120, saying “the magic is back” in a note Monday.
“We applaud the Disney board for their courage in making this change,” Nathanson wrote. “We’ve never hidden our love for Mr. Iger and the work he’s done to build DC into a global powerhouse.
It has happened,” he said. The financial analyst did not recommend the firm buy Disney shares as of May 2020 “for a number of reasons, including former CEO Bob Chapek’s commitment to a streaming strategy that doesn’t make sense in today’s reality.”
Disney shares rose as much as 10 percent in premarket trading Monday. It closed down 6.3% from earlier highs to close at $97.57/share amid a decline in broader market indexes.
Earlier this month, Disney’s stock price fell after the media conference missed Wall Street’s expectations in the September quarter and revealed that direct-to-streaming losses and a reduction in linear TV cable cuts for fiscal 2023 would be more than expected.
In the year On November 7, Disney shares fell to their lowest level in more than two years, at $86.75/share. This was the lowest closing price for Disney shares since March 20, 2020, during the dramatic market selloff at the start of the Covid pandemic. The stock is down 41% since Friday.
In bringing in Iger as CEO, Disney’s board chief said he had instructed him to “set a strategic direction for renewed growth and work closely with the board to develop a successor to lead the company when he retires.”
“I am extremely positive about the future of this great company and am thrilled that the board has asked me to return as CEO,” Iger said in a statement.
During his 15 years as Disney’s CEO, Iger led the acquisitions of Pixar, Marvel, Lucasfilm and 21st Century Fox, increasing the company’s market capitalization fivefold. Iger led Disney’s creative efforts until becoming chief executive in December 2021, and “the company’s strong content pipeline is a testament to his leadership and vision,” the board said.
Iger is “probably the best leader in media,” Wells Fargo senior analyst Steven Kahl wrote in a note Monday — and Disney’s board gave him the green light to “shake things up.”
“He sees him as a permanent leader in an uncertain time,” Cahal wrote in the memo. “What’s more important is that Iger is famous among its creative ranks. [Disney] And Hollywood – an area where Chapek was not accepted. Chapek was seen as an actor at Park Op, but Iger is the content guru, and content is believed to be the lifeblood of the company.
Early in Iger’s tenure as CEO, Disney’s film division suffered huge losses after “letting go of expensive generic entertainment,” Nathanson wrote in the memo, as he pivoted after buying Marvel, Lucasfilm and Pixar. “We expect Mr. Iger to review his investment plans at Disney+ and hopefully focus his investment on areas of franchise strength and away from general entertainment content,” the analyst said. In other words, Nathanson writes, “Disney+ — and Disney’s shareholders — would probably do better with a few end-state subscribers made up of superfans willing to pay more.” [revenue per subscriber]This creates a very high margin.
In addition, given the ongoing steep decline in the pay-TV ecosystem, Nathanson Iger expects that “deep cost-cutting at ESPN will require a review of all upcoming sports rights to better adapt to these new times.”