Wall Street has been dominated by efficiency-related themes, and Walt Disney Co. CEO Bob Iger is being praised for bringing greater discipline to the media behemoth.
Iger, who returned to the top position at Disney DIS, +0.13% in November following the firing of previous CEO Bob Chapek, spoke with investors on his first earnings call since his return on Wednesday. He appeared to adopt a fresh approach that was well received by Wall Street.
According to Wolfe Research analyst Peter Supino, who has an outperform rating on the stock and raised his price target for it from $117 to $133, “the debut earnings call of Bob Iger’s second tour made it clear that Iger will lead Disney out of its streaming landgrab phase and into a period of greater efficiency.”
He noted that Disney’s management is making “drastic evolutions of the company’s DTC strategy (shifts across the programming focus, global reach, and price)” and that these changes might have “deep operational and financial repercussions.”
Iger returns to Disney and appeases Wall Street, in my opinion.
Disney aims to give creative executives greater control over what material is created and how it is promoted, thus structural changes to the organizational structure offer potential, he stated.
While the importance of this change may not be completely understood from the outside, Maral noted that it eventually represents a fundamental change in the accountability of how content performs financially throughout the firm and aims to have a more efficient, integrated, and streamlined structure.
The trend was also explained by Laura Martin of Needham: “DIS’s past CEO got dismissed in part, we believe, because streaming losses exceeded $1.5B last quarter since content providers had no profit accountability,” Martin said.
According to Steven Cahall of Wells Fargo, the report included “everything the bulls wanted.”
He added: “Disney+ will be less promotional and focus on improving ARPUs and profitability, which might mean leaving some geographies where streaming isn’t especially lucrative.”
Disney reaffirmed a target for direct-to-consumer profitability by the end of fiscal 2024, Cahall remarked, despite the expense reductions.
He said, referring to revenue per user, “It clearly felt Disney was intimating while addressing the constraints of investing in original content in low-RPU areas without actually stating the words ‘India’ and ‘Hotstar.’”
He increased his target price from $120 to $130 while keeping an outperform rating on the company.
Martin of Needham, who rates the company with a hold recommendation, questioned if Disney would eventually sell a 10% to 15% stake in ESPN.
In contrast, KeyBanc Capital Markets analyst Brandon Nispel displayed some reluctance when contemplating the stock’s significant gain during the extended session.
In the end, he concluded, “We would not be shocked to see the stock fade tomorrow, given the big picture concerns remain unaddressed,” even after a 45-minute callback with DIS’s CFO.