Things have been…complicated…with the Walt Disney Company lately.
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Though some financial results have been positive, others have exposed serious challenges the Company is facing. Bob Iger has extended his time as CEO, major changes could be in store for big pieces of the Company, and things like the strikes in Hollywood have impacted the business in a big way. So what’s happening now? Well, things aren’t looking great for the stockholders and one analyst has shared his thoughts on how things might need to change.
On August 28th, Disney stock was trading at low levels — around $83.94. According to Forbes, the stock has been “hovering” at some of its lowest levels since October 2014 (9 YEARS ago).
Forbes reports that Disney is the 78th-worst performing stock over the last 10 years out of “the 468 S&P companies who have been publicly traded during the period.”
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So what do some analysts have to say? CNBC spoke with Barton Crockett, a senior analyst at Rosenblatt recently about the situation and asked whether the stock is expected to go lower or turn around.
Crockett said one thing or the other is going to happen and that Disney would either have to “find some kind of solid footing” to support the stock or the pressure is going to build to restructure and break up.
©Disney | Walt Disney Company Headquarters
Crockett said that he doesn’t think the management team likely wants a huge amount of restructuring and divisions in the Company, and that they likely believe they can turn the business around before it gets to that point.
But, he warned that Disney has had activists in the Company before (which we saw with the Nelson Peltz situation) and he noted that activists could return if things don’t “shape up.”
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Iger has already commented on the fact that some businesses — specifically the linear networks Disney is involved in (like ABC, National Geographic, and FX) — may not be core to Disney. When previously asked whether the businesses could potentially be sold off and separated from Disney, Iger said he’d let the interviewer speculate. Iger did say, however, that he is “very objective about their future” with the company.
Iger has also discussed searching for a partner to work with Disney on ESPN-related matters, and Disney is reportedly in talks with Amazon about a new streaming service involving ESPN.
ABC Commissary in Hollywood Studios
During the CNBC interview, Crockett was asked what Disney needs to do first in terms of changes at the company — spin-off linear networks, deal with the upcoming Hulu buy-out (which will cost Disney some big money), work on the ESPN partnership, or something else.
Crockett said that in his mind, the right structure for Disney IS a breakup.
Slinky Dog Dash
He proposed that the theme parks be treated as one thing, while TV networks are moved off into another structure. And then Disney’s content library could also be separated from the other businesses.
He noted how Disney’s content library is exceptionally valuable and could be of great use to a number of tech platforms. He also suggested that popular content and libraries will likely gravitate to these tech-focused platforms in the future, which is what makes Disney’s talks with Amazon so interesting.
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The interviewer asked whether Crockett’s proposed structure would separate Disney’s theme parks from Disney’s own content and what that would look like.
Crockett said that he does think that a structure that separates the parks from the content is best, but he noted that this would NOT mean you’d lose Mickey Mouse in the parks. Instead, he insisted that it would not be complicated to set up licensing deals that would last in perpetuity as part of a theoretical separation.
Mickey Mouse
He said the first focus, however, should be separating those TV networks that Iger has already said are not core to Disney. The second step would be looking at what happens with Disney’s content library.
He acknowledged that Disney likely does NOT want to lose their content library, but cautioned that he thinks they’ll lose the right to keep that if the business doesn’t turn around and they don’t take the necessary steps.
Jasmine and Genie
In his view, there will be pressure for content with the quality level of Disney to be married to tech platforms. Will that mean a full separation of Disney’s parks from the content they are often based on? Potentially.
When asked about whether there has been any political impact on Disney’s situation (given Disney’s battle with Florida Governor Ron DeSantis), Crockett noted that he wouldn’t say definitively that there’s been no political impact, though Iger has claimed that politics really hasn’t impacted things like park attendance.
Disney vs. DeSantis
Crockett did note that other companies aren’t in this political debate, but Disney has somehow ended up in it and hasn’t really been able to navigate around it. Still, he noted that this is the world we’re in so they have to work around it.
What will become of the Disney Company in the future? Will it fully spin off its linear networks? Will it separate its content from the parks? We’ll certainly be watching for updates and let you know what we find. Stay tuned for all the latest.
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All speculations, no facts or data. That’s the problem (and gamble) with Analyst’s, it’s all personal opinion. Many times they may be right, but it seems most of the time their wrong.
It’s amazing how a “Research Analyst” in the media somehow feels he’s qualified to tell big, complex, diversified companies how to run themselves. He has no practical background on the ins & outs of these companies, and is little more than a professional curmudgeon. (by the way, look up his qualifications….. he’s been an analyst at a bunch of investment firms, using his degree in English to better understand the complexities of the theme park business). He & his media peers are looking for headlines and, in this case, “Break-up Disney” is a big headline. There’s no question that Disney does have its challenges. But, the overly simplistic solutions this guy talked about, with the entire focus on the stock price being at its lowest in 4 years is naive, shallow & shortsighted. One of Disney’s strengths is their breadth of products, services and investments. That diversification protects the overall company when various components have tough times. Because attendance was bad (WDW), a movie was a miss (Little Mermaid), an investment is expensive (Hulu) should not result in this wringing of hands & cries of agony (unless you’re a media analyst who’s looking for more air time).
The first step is to get Black Rock, State street and Vangard out of there, or somehow give the voting rights back to the shareholders. Good luck with that though – it will never happen so things will just motor along as usual….
As a stock owner in Disney and a big Disney Fan. I see the following as necessary for serious consideration so I truly hope they are listening. Drop the networks: too many players. Drop ESPN or spin it off and make it pay for itself. Parks and content Library should stay together so that easy of right and continue to flow into the parks for rides, merchandise, content in movies made etc. People forget that Disney is a a la carte sector when it comes to what it has or how people of all ages generally act upon it’s services. Park goers, Cruising, Disney Plus, Movies/Media productions, Social Media and Finally some good video games (yes I play one and I am way beyond being a kid). It’s the content people! The magic, the tie in’s, the art of what Disney creates. No one does it like Disney but somehow they have moved out of the core and are know caught by the tail. The only way to free oneself is to create, image and expand the Parks, movie content and work on resort areas as opposed to just DVC units. Also, I have noticed what appears to be a hold on really using technology through out the service sector, while mobile ordering and genie plus are great more tech could be applied. Lot’s of price raising and limited benefits are taking a toll on the resort traveler and Disney needs to adjust as they have asked us too. My stock is low now and honestly, I would rather have a decent return on my stock then an extremely big one if the people are paid well, the parks and content is expanding and technology is developed to further the innovations. Wasn’t that one of the many objectives for Disney anyway.
Making better, more interesting and less political movies and new content for ABC, Disney Channel and Disney+ would go a long way in shoring up their current ills. When Disney has a hit, everything blossoms, merchandise, park attendance, cruise line, everything, as people want to see their new heroes in-person and buy merchandise featuring these new characters. The political agenda that Iger says doesn’t exist but everyone else agrees is front and center, needs to be dropped. It alienates a good chunk (20% to 30%) of Disney’s loyal customer base, to the point of not buying Disney entertainment or drastically lowering their historical spend rates with Disney. Revisit pricing and bundled packages to stimulate demand.