Sunday Night Stunner at Disney as Iger Returns as CEO for at Least Two More Years
Our Disney stock fair value estimate of $170 expected to be slightly lowered.
In a stunning move, Walt Disney’s (DIS) board reinstalled Bob Iger as CEO of the firm on Nov. 20 with Bob Chapek stepping down immediately. Iger had served as Disney’s CEO from March 2005 to February 2020 and executive chair from February 2020 to December 2021. Iger signed a two-year deal to serve as CEO to set the strategic direction for the firm and help find a successor. While Iger and the board will work together to identify the next CEO, we would not be surprised if Iger extends his stay, as he previously delayed his retirement three times in his first stint as CEO.
We maintain our wide moat rating and expect to slightly lower our $170 fair value estimate after the release of the full annual financials to account for a flatter linear network revenue trajectory and slower streaming margin improvement.
We expect that Iger will unwind some of the major changes put in place by Chapek. Even with the changes, we expect that Iger will continue to emphasize the central role of streaming at Disney. We think Chapek’s protege and right-hand man, Kareem Daniel, will likely either follow Chapek or be pushed out. With Daniel out of the way, we believe that Iger may return P&L responsibilities to division heads from the centralized model under Daniel in order to retain and attract talented executives. However, the reorganization under Daniel did streamline decision-making, a necessary feature in the very fast-moving world of streaming.
On the softer side, the reinstatement of Iger will likely help with Hollywood relationships, given his much stronger ties within that community than Chapek. While Iger may not be as focused as Chapek on the parks side of the business, he has generally been highly thought of by cast members and could help lighten some of the relationship strain that arose from the pandemic. Additionally, Iger has a much longer and stronger record with investors, which will likely help Disney and him during the transition period.