Morningstar Investor users sign in here.

Stocks

Old emperor, new groove: What’s going on at Disney?

Bob Iger, who ran Disney for 15 years and enriched shareholders in the process, is back at the helm after the ousting of Bob Chapek.

Mentioned: The Walt Disney Co (DIS)


The Walt Disney Company (DIS) is a vast entertainment empire spanning Disneyworld, Marvel, Pixar, the Star Wars franchise and Mickey Mouse. But it has had a management shakeup. This is not unusual in the corporate world but this one has caused quite a stir. Morningstar analyst Neil Macker describes it as a "stunning move".

What's happened?

Disney has swapped a Bob for a Bob. Former chief executive Bob Iger, who ran Walt Disney from 2005 to 2020, is replacing Bob Chapek with immediate effect. Iger has signed a two-year deal to help the firm find a long-term successor and set its strategic direction..

Is he likely to stay on?

Macker says he wouldn’t be surprised, particularly as he delayed retirement three times in his first era as CEO. He's willing to put the hours in to help the company become untangled. 

Does Iger bring high hopes?

"Iger has a much longer and stronger record with investors, which will likely help Disney and him during the transition period," Macker notes. In his 15-year reign, shares soared from around US$25 to US$140. He also has closer ties with Hollywood studios and is more comfortable rubbing shoulders with the "talent".

"The reinstatement of Iger will likely help with Hollywood relationships, given his much stronger ties within that community than Chapek," Macker adds.

"Iger […] has generally been highly thought of by cast members and could help lighten some of the relationship strain that arose from the pandemic." When Chapek took over from Iger in 2020, Iger was described as an extremely tough act to follow.

What did Chapek achieve?

Under Chapek, Disney expanded into streaming via Disney+, a subscription service rivalling Netflix and Amazon Prime on price. It boasts the Marvel franchise films, Star Wars and The Simpsons among its current offering. 

Chapek was also known for focusing on the parks side of the business—and pushing an expansion in the metaverse—but he was less adroit at handling Hollywood. 

It's worth pointing out Chapek oversaw the re-opening of Disney's parks after the pandemic, a tricky diplomatic situation in China, which has a park in Shanghai.

What does it mean for customers?

Streaming is likely to stay key to the company strategy.

"We expect Iger will unwind some of the major changes put in place by Chapek. Even with the changes, we expect Iger will continue to emphasise the central role of streaming at Disney," Macker says.

How have investors reacted?

Shares jumped as much as 9% to more than US$100 following the news on Monday, but this is below the Morningstar fair value of US$170 per share. Disney stock remains down 36% in the last twelve months and the company has just unveiled a US$1.5 billion loss in the last quarter and announced job cuts.

Morningstar’s Macker says the US$170 fair value estimate is likely to be slightly lowered after the announcement, although he maintains the company's wide moat rating.

Will Chapek have to don a Mickey Mouse suit?

Unlikely. Disney is known for its galaxy-sized payouts. Chapek is expected to pick up more than US$50 million in severance. In the 1990s, the company stunned investors and the corporate world when it paid former President Michael Ovitz about US$130 million for a "no-fault" payout, the majority of which came from stock options. He’d been at the company for 14 months. In the same decade, former CEO Michael Eisner—Bob Iger’s predecessor—exercised stock options that made him a profit of US$565 million, a record at the time.

America Inc has since cooled on the idea of offering stock options as a "golden goodbye"—particularly as it tends to incentivise short-term risk-taking to boost stock prices.

But there is an argument it ties payout to performance: if a company has performed badly under a CEO’s tenure, that at least is reflected in the size of the payoff.



© 2023 Morningstar, Inc. All rights reserved. Neither Morningstar, its affiliates, nor the content providers guarantee the data or content contained herein to be accurate, complete or timely nor will they have any liability for its use or distribution. This report has been prepared for clients of Morningstar Australasia Pty Ltd (ABN: 95 090 665 544, AFSL: 240892) and/or New Zealand wholesale clients of Morningstar Research Ltd, subsidiaries of Morningstar, Inc. Any general advice has been provided without reference to your financial objectives, situation or needs. For more information refer to our Financial Services Guide at www.morningstar.com.au/s/fsg.pdf. You should consider the advice in light of these matters and if applicable, the relevant Product Disclosure Statement before making any decision to invest. Our publications, ratings and products should be viewed as an additional investment resource, not as your sole source of information. Morningstar’s full research reports are the source of any Morningstar Ratings and are available from Morningstar or your adviser. Past performance does not necessarily indicate a financial product’s future performance. To obtain advice tailored to your situation, contact a financial adviser. Some material is copyright and published under licence from ASX Operations Pty Ltd ACN 004 523 782.

More from Morningstar

3 shares for income investors
Stocks

3 shares for income investors

A dividend screen is a jumping off point for further research.
What we think of Morningstar subscribers' most traded share
Stocks

What we think of Morningstar subscribers' most traded share

This stock was the second largest ‘buy’ for 2023 and was also the second largest ‘sell’ for Morningstar subscribers.
How to build an income portfolio
Stocks

How to build an income portfolio

Investors love dividends but creating an income stream involves more than just picking the highest yielding shares.
The art of buying stocks at 52-week lows
Stocks

The art of buying stocks at 52-week lows

Stock markets are highly efficient in the long run yet share prices can fluctuate wildly near term. The art of investing is buying quality stocks...
A cheap US dividend share that’s 30% undervalued and yields above 4%
Stocks

A cheap US dividend share that’s 30% undervalued and yields above 4%

Income investors: Stock up on this narrow-moat name.
This equity raise looks extremely attractive
Stocks

This equity raise looks extremely attractive

We recommend participating in the retail offer, providing it is consistent with your financial goals.