Following the news that Bob Iger was returning to the Walt Disney Company and replacing Bob Chapek, stock analyst company MoffettNathanson has upgraded its rating on company shares to “outperform” after “concern that the former CEO Bob Chapek had become wedded to astreaming strategy that did not make sense given today’s reality.”
With the stock price jumping almost 10% ahead of the stock market opening, MoffettNathanson analyst Michael Nathanson said:
“Magic is back. We raise the valuation multiple to reflect our greater confidence in the company’s trajectory under the leadership of returning CEO Bob Iger. [He can] help guide the company through this period of massive secular change. We applaud Disney’s board for the courage to make this change.”
“We have never hidden our affection for Mr. Iger and the job that he did in building Disney into the global powerhouse that it has become. Over the many years, Mr. Iger’s decision-making and strategic positioning – which ignored the Street’s often incorrect short-term focus – would ultimately separate Disney from the media pack. In addition, his communications skills and his ability to stay focused and honestly optimistic in the face of structural challenges provided a constant ballast in the roughest of media waters. We believe investors will value the transparency and return Disney some of its long-lost magic with a stronger narrative driving the stock higher again.”
Over the past year, Disney has been adding more general entertainment onto Disney+, with content like “Deadpool” and “The Orville”, but this hasn’t pleased MoffettNathanso, who wants Disney+ to return to its family-friendly only approach, saying:
“that the broader shift at Disney+ from Disney-themed family and branded content into a general entertainment fare was a poor decision that would hurt return on investment.
We would hope and expect that Mr. Iger examines the investment plans at Disney+ and re-focuses their investment on areas of franchise strength and away from broader general entertainment content. In other words, Disney+ – and Disney’s shareholders – could probably do better with fewer end-state subscribers made up of super fans willing to pay high revenue per user, which would generate much higher margins.”
A Wells Fargo expert also told investors about their hopes about what we might see from Bob Iger regarding the future of Disney’s streaming services.
“Disney doesn’t shake things up without more changes to come. Since the late 2020 investor day, investors have worried that DTC is over-extended between franchise IP, general entertainment and sports. We expect Iger’s first order of business to be a clear plan as to how Disney’s streaming services shape up over time, which could reopen discussion about whether Disney+ is to be a franchise IP content hub or a broader entertainment platform. Hulu’s fate would similarly rest in that balance. We expect to learn more on these fronts in the early days/weeks/months of Iger’s new term.”
While in the United States and in Latin America, Disney+ has largely kept to the family-friendly idea that Bob Iger introduced. Internationally, in over 90 countries, Disney+ has thousands of titles in the Star brand from FX, ABC and 20th Century Studios, so the idea that Disney+ could just go backwards around the world, does seem a flawed strategy, especially since it has been a huge success.
One of the many reasons Disney has brought back Bob Iger is to try to stabilise the company and set out a new plan for the future. With the streaming side of the business not expected to bring in a profit until 2024 and with billions of dollars of debt behind it. The stock market and Disney fans have reacted positively to Bob Iger’s return, but there are still many questions about the future of the company.
Unfortunately, we are just going to have to wait and see what happens next, with regards to the future of Disney+ and Hulu under the control of Bob Iger. Will it be a step back, or will he move forward with some of Bob Chapek’s plans?
What do you think of these analysts’ thoughts?
Source – THR