Disney stock wobbles on day two of Bob Iger’s reboot as investors gauge impact of CEO Shuffle

Disney shares fell more than 1% on the second day of Bob Iger’s return as CEO, reflecting investors’ mixed views on the media giant’s outlook.

Shares in the Dow component closed at $96.21, down 1.4% on more than double normal trading volume. The weak session made Disney one of the few laggards in the media sector on an overall positive day for the broader market.

Iger’s impressive return to the company, which he served as CEO from 2005 to 2020, replacing Bob Chapek after two and a half years on and off, was encouraging to many of the company’s employees and investors. The stock rose 6% on Monday despite giving back some of its gains during the trading day.

Bulls and bears acknowledged Iger’s business challenges as he regains control.

“The next two years at Disney will be challenging,” Rich Greenfield of Lightshed Partners wrote in a blog post. “Iger returns to a very different landscape than when he left in early 2020.”

One of his recommendations for Iger is to relieve ESPN and ABC of their dwindling linear subscriber base in an era of 6% annual cable disruption. If interest rates or other economic factors impede a sale, significant cost-cutting is required, including missing out on the next NBA round for a 2025 rights package.

Eric Jackson, president of Toronto-based EMJ Capital, told CNBC he doesn’t see any “quick fixes” for Disney under Iger. Aside from trading activity during the Chapek era, which was complicated by Covid, he said the company’s shares have been stuck in the $100 range for several years. The culprit, he said, is also a strong but unwieldy linear TV asset at ESPN as commitments to finance. streaming efforts like Disney+, Hulu and ESPN+. “Stream itself is just not a great business,” he said.

Kenneth Leon, research director at CFRA Research, who has a buy rating on Disney shares, remains a believer in the stock. Still, he wrote in a note to clients, “a more pragmatic strategy is needed, especially with a 2023 recession looming.”

Deutsche Bank addressed the issue of succession as Iger struggled to hand over the reins during his otherwise successful career as chief executive, postponing his own retirement three times before failing to join Chapek. Under the terms of Iger’s new contract, he is scheduled to stay only until the end of 2024 and will be an important part of his mission to identify his successor. In a research note, the German said it is not too surprising that Disney is looking back to solve its leadership problem. “There just isn’t any other Bob Igers,” the bench concluded. “Maybe this time they start with the creative leader they’re looking for and try to develop that person’s skills over the next two years.”