Advanced Television

Analysis: What’s next for Disney?

December 6, 2022

Analysts at MoffettNathanson (MN) welcomed the return of Bob Iger as CEO. They were not alone. The market responded well to his rehire, but now MN rightly asks ‘What’s next?’ and recognises the tough tasks ahead for Iger and his team.

“Cord-cutting is now running over -6 per cent, the Parks [division] cash engine can face headwinds from a slowing macro landscape, and the linear-to-DTC pivot appears to be in disarray. We have consistently been focused on all of these issues and importantly do not expect new leadership to be very sanguine about them either,” said the bank.

Then there’s Disney’s share price. MN reminds clients that since the announcement of iger’s exit as Disney’s CEO in February 2020, Disney’s share price has been on a ride akin to those found within its parks. The stock fell to a low of $85.76 during the onset of the pandemic, climbed +14 per cent following the unveiling of the company’s expanded streaming vision at its December 2020 Investor Day, peaked around $200 in March 2021 and has since fallen all the way back down to around $100 as market sentiment around streaming shifted and macro conditions deteriorated.

“In our view, some of the weakness is due to the fact that Disney today now is a very different company existing in a very different world,” added the research firm.

“In FY 2022, Disney saw -10 per cent less revenue than we expected back in February 2020, while segment EBIT was a shocking -38 per cent worse. Excluding DTC, which has undergone the greatest transformation, and US Parks, which were most impacted by the pandemic, the company had -17 per cent less revenue and -30 per cent less EBIT than we had forecasted. Bottom line, Disney is a far less profitable company than we expected, with only half the net income we thought they would generate in FY 2022 and even more amazingly, only 12 per cent the free cash flow ($1.3 billion) compared to our prior estimate of over $10 billion,” continued MN.

MN believes that Iger should look again at the February 2020 ‘Expansion Plan’, and reduce investment in general entertainment content.

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