Shares of Walt Disney (DIS) fell to a 6-1/2 month low Monday and are down more than -1% this year, significantly underperforming the S&P 500 ($SPX) (SPY), which is up more than +18% this year. Investors hope that CEO Iger can turn the company around in his second stint. Disney’s stock price surged nearly sixfold during Iger’s first 15-year stay as CEO through February 2020. However, the company now faces more complex challenges than during Iger’s first stint as CEO.
Former Disney CEO Chapek oversaw a -28% decline in Disney’s share price during his brief time as CEO, as the Covid-19 pandemic forced the company to temporarily shut its theme parks, film studio, and cruise business. Current Disney CEO Iger, whose two-year contract was extended last week through December 2026, has yet to turn the stock around as Disney’s share price has fallen -6.8% since he returned as CEO in November. In comparison, Netflix (NFLX), which competes with Disney directly in streaming, is up 56%.
Iger is having a tough time so far in turning around Disney’s fortunes. He has slashed spending with cutbacks and layoffs at a time when rival Netflix is adding subscribers. This week, Iger put roughly a third of Disney up for sale, declaring Disney’s linear TV assets noncore. He also said the company is looking to sell or restructure its TV and streaming business in India and is seeking a strategic partner for ESPN. Before the pandemic, Disney’s media networks generated 35%, or $24.8 billion, of company revenue and more than 50%, or $7.5 billion, of its operating income.
However, Iger's options for turning Disney around are limited by the accelerating decline of the cable TV business. Even Disney’s streaming business is underperforming and is expected to register a loss of about $800 million in Disney’s just-ended fiscal third quarter. Management offered low prices to attract customers with the launch of Disney+ in 2019 and is now trying to raise prices without losing customers after Disney+ lost 4 million subscribers last quarter.
Disney is also struggling to recover from a series of misses from the company’s film division and the strike by Hollywood actors and writers against all the media companies. Disney’s revenue stream had been built on its cable networks, but the profits from these networks have been increasingly shrinking.
Some analysts, however, believe that CEO Iger can turn Disney around. Needham & Co said that Iger staying as CEO through 2026 provides a “higher signal quality regarding Disney’s path,” providing a “reasonable investment timeframe” for the company to rebound.
On the date of publication, Rich Asplund did not have (either directly or indirectly) positions in any of the securities mentioned in this article. All information and data in this article is solely for informational purposes. For more information please view the Barchart Disclosure Policy here.
