What Disney’s New CEO Has on His Plate as Shares Fall

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Wall Street isn’t thrilled that Disney  (DIS) - Get Walt Disney Company Report CEO Bob Iger is stepping down, although analysts are quick to note that new CEO Bob Chapek is the right ma for the job. Chapel has several tasks in front of him.

Disney shares fell as much as 1% to $127 a share Wednesday morning, while the broader U.S. market edged higher.

Disney stock had risen 33% to $151 between the end of February 2019 and the end of 2019, just before volatility in the broader U.S. rose sharply on account of the Coronavirus, which impacts Disney’s China Parks business. It’s now down 16.5% from that all-time high.

Real Money's Bruce Kamich breaks down where charts indicate the stock could head next. 

Iger had been CEO since 2005, which began a 357% run for the stock to date, easily beating the S&P 500’s 164% gain in that span.

 Iger oversaw several major decisions for the company like the 2018 Fox acquisition and the company’s creation of its own streaming platforms like Disney Plus and ESPN Plus. Disney is pivoting from being a traditional movies and televisions producer to an over-the-top players as eyeballs shift online.

Iger was expected to step down in 2021 when his contract ended.

The “timing is s surprise,” wrote Citigroup analyst Jason Bazinet in a note. “We expect investors will be surprised by today’s news.” Bassinet thinks Iger’s act will be a “tough act to follow.”

“Investors will be just as surprised as we have found Disney management to be regarding this sudden shift,” wrote Credit Suisse analyst Douglas Mitchelson in note. “Replacing Mr. Iger was a daunting task for the board, but we expect Mr. Chapek was a good choice to take on the challenge of managing this more complicated Walt Disney post the Fox acquisition and post the shift to direct-to-consumer streaming.”

With 27 years of experience at Disney, "Chapek has experience running Home Entertainment at the studio, consumer products during years of growth, and most recently the massive global Parks business,” wrote Morgan Stanley analyst Ben Swinburne in a note.

Disney has focused recently on what management calls the “three pillars.” Those are the creative content generation, technology and streaming distribution and expanding into new markets, like possibly steaming into Europe.

Traditional movies and television are expected to become a smaller portion of the pie for Disney, as streaming takes hold. Disney’s cable networks revenue segment, as a percent of total revenue, is expected to fall from 28% in 2018 to 20% by 2022, while total revenue grows 55% over those years, according to analyst polled by FactSet.

To continue the broader mission those numbers encapsulate, “Mr. Chapek stated that he will follow the three pillared strategy Mr. Iger put in place of a decade ago: generating the best creating content possible; fostering innovation and utilizing the latest technology; and expanding into new markets around the world,” wrote Mitchelson.

Simply put, Disney wants to keep distributing the right content on the right new streaming platforms, while also expanding overseas.

Chapel must also prioritize renewing Disney’s portion of NFL broadcasting rights, which may air on ESPN plus, according to analysts. 

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