Disney’s Bob Iger Contract Extension Wins Over Its Target Audience: Wall Street

Georg Szalai
·4 min read
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Disney’s disclosure on Wednesday that CEO Bob Iger has signed a contract extension that will keep him at the helm of the Hollywood giant through 2026 didn’t shock Wall Street. But analysts reacted to and analyzed the unanimous board decision and its implications for the company’s transition plan, which, to Disney, “remains a priority for the board.”

The tenor of most finance experts: investors will welcome stability and a venerable CEO in charge at a time of much industry change and many challenges, but Iger and his team will have more work to do to clarify the giant’s future path, including possible acquisitions and divestitures.

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MoffettNathanson analyst Michael Nathanson, who has an “outperform” rating on Disney, noted in a Thursday report that, “While the challenges are clear for the company, we do not think investors are giving Disney and Iger credit to solve its massively underperforming linear and [direct-to-consumer] profitability. We still have strong conviction in Disney’s longterm cash flow and profitability. Disney’s Parks assets should provide a floor valuation with long-term upside for the equity to be driven by cleaning up the DTC and linear segments.”

TD Cowen analyst Doug Creutz, who has a “market perform” rating on Disney shares with a $94 stock price target, emphasized Iger’s importance for Disney and investors in the title of his report: “The Indispensable Man.” The expert said about the contract extension that “we don’t view this as surprising,” adding: “We also note that with the recent exit of CFO Christine McCarthy, Disney was facing two senior executive searches. Pushing out Iger’s departure date makes even more sense in that context.” Overall, he concluded: “It likely takes a bit of an overhang off the stock, given that Iger is now over halfway through the first year of his original two-year tenure, but it also reinforces the notion that Disney continues to have serious succession planning issues.” Creutz also highlighted that it has not been an easy road or smooth sailing for Iger. “We continue to believe that Disney’s challenges are structural in nature and not easily solved,” the TD Cowen analyst wrote.

Guggenheim Securities analyst Michael Morris in his note wrote that “investors will welcome this leadership stability in the near-term.” But he also pointed out a need for more clarity about Disney’s future over time. “While we view Mr. Iger as the best person to lead the company at the current juncture, this extension does beg a few questions as to what this means for the Walt Disney Company,” he explained. “We anticipate the company will likely provide few additional details on the extension on its fiscal third-quarter earnings call on Aug. 9 and instead we expect the company will focus on its near-to-medium term strategic vision now that CEO stability is assured for the next three-and-a-half years.”

Bank of America analyst Jessica Reif Ehrlich on Thursday called Disney’s September analyst day “an upcoming catalyst,” predicting “additional updates” on business outlook strategy then. “There are several strategic issues on the horizon, including the Hulu buy-in, NBA renewal/ESPN’s broader streaming plans, CEO/CFO succession, and path to direct-to-consumer profitability,” she noted. The expert also commented on Iger’s impact on content. “After several years of resounding successes, Disney’s recent content slate has had mixed results. While this content was mostly produced during the pandemic under previous leadership, we believe a key area of focus for Bob Iger will be on reinvigorating the Disney content engine,” she said. Maintaining her “buy” rating and $135 stock price target, Reif Cohen concluded that Iger’s contract extension was a clear win. “We view this as a positive as it provides Disney steady leadership as the company manages through a turbulent transition period,” she wrote.

Meanwhile, Wells Fargo analyst Steven Cahall in a Thursday report also noted the news with a bit of a wink. “Bob Iger to succeed Bob Iger as next CEO of Disney,” he wrote, emphasizing: “We think most investors expected Iger to extend beyond his initial two-year deal through November ’24 given the long list of strategic TBDs.”

Early on Thursday, Iger appeared on CNBC from Sun Valley, Idaho where he is participating in the annual Allen & Co. gathering of media, entertainment technology and other moguls, discussing Hollywood unions’ demands and company-specific issues.

“While a lot of work has been accomplished in the seven or so months that I’ve been back,” Iger said on Thursday. “The board believed and I agreed with them that there was a lot more work to do, and the timetable that we had initially established — which was two years — seemed like it was putting an undue pressure on us, even though we’re getting at the work really quickly, but to accomplish everything we want to accomplish.”

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