Shares in the Dow component finished at $96.21, down 1.4% on more than twice the normal trading volume. The downbeat session made Disney one of the few laggards in the media sector during an overall up day for the broader market.
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Iger’s stunning return to the company he led as CEO from 2005 and 2020, replacing Bob Chapek after an up-and-down two-and-a-half years has heartened many employees at the company as well as investors. The stock jumped 6% on Monday, though it gave back some of its gains over the course of the trading day.
Bulls and bears have been sifting through the business challenges facing Iger as he retakes the controls.
“The next two years at Disney will be challenging,” Rich Greenfield of Lightshed Partners wrote in a blog post. “Iger is coming back to a vastly different landscape than when he departed in early 2020.”
Among his recommendations for Iger is trying to unload ESPN and ABC because of their dwindling linear subscriber bases in an era of 6% annual cord-cutting. If interest rates or other economic factors stymie a sale, he said, significant cost cuts should be implemented, including staying out of the next round of NBA budding for a rights package starting in 2025.
Eric Jackson, president of a Toronto-based EMJ Capital, told CNBC he doesn’t see any “quick fixes” for Disney under Iger. Leaving aside trading activity during the Chapek era, which was complicated by Covid, he said the company’s stock has been stuck in the $100 range for several years. The culprit, he said, is a potent but declining linear TV asset in ESPN as well as obligations to fund streaming efforts like Disney+, Hulu and ESPN+. “Streaming itself is just not that great a business,” he said.
Kenneth Leon, Research Director at CFRA Research, who has a “buy” rating on Disney shares, remains a believer in the stock. Still, he wrote in a note to clients, “a more pragmatic strategy is needed, especially with a 2023 recession looming.”
Deutsche Bank took on the question of succession, given that Iger has struggled to hand the reins during his otherwise accomplished run as chief executive, postponing his own retirement three times before the unsuccessful transition to Chapek. Under the terms of Iger’s new deal, he is meant to stay only through the end of 2024 and a chief part of his mission will be to identify his successor. In a research note, Deutsche said it wasn’t too surprising that Disney wound up looking backward in order to solve its leadership issue. “There just aren’t any other Bob Igers out there,” the bank concluded. “Perhaps this time, they’ll start with the creative leader they’re seeking and try to develop that individual’s skills over the next two years.”
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