Disney stock spikes with former CEO’s return

The return of Walt Disney Company’s CEO Bob Iger from retirement has been met with cheers from analysts along with a surging stock price following the ouster of Bob Chapek, Iger’s handpicked successor.

The company’s stock has fallen more than 40 percent this year. It ended trading at $91.80 on Friday after starting the year at nearly $160 a share. Following Disney’s surprise announcement on Sunday night, shares closed up 6.3 percent on Monday.

Michael Antonelli, a market strategist for Baird, said on Twitter that Iger’s return was “probably the most significant piece of corporate upheaval since [Steve] Jobs went back to $AAPL”.

A veteran at Disney, Chapek, 62, oversaw divisions including theme parks, consumer products and home video before taking over in 2020 amid a tumultuous time. His short tenure as the head of the company was marred by its shaky financial performance during the pandemic.

MoffettNathanson analyst Michael Nathanson told MarketWatch that Chapek “appeared anchored to the streaming strategy laid out in the December 2020 Investor Day which had created, we felt, unrealistically high subscriber targets without a grasp for the underlying return on investment”.

Nathanson upgraded Disney’s stock from market perform to outperform after Iger’s return.

He wrote that “we would hope and expect’’ that Iger re-focuses the company’s investment on areas of franchise strength and away from broader general entertainment content, Nathanson wrote.

Iger didn’t take long to make his first move: the removal on Monday of Kareem Daniel, who ran the newly created Media and Entertainment Distribution group.

Iger’s return comes less than five months after Disney’s board of directors voted unanimously in June to extend Chapek’s contract as CEO for another three years. His new contract began in July and was set to run until 2025.

“The Board has concluded that as Disney embarks on an increasingly complex period of industry transformation, Bob Iger is uniquely situated to lead the Company through this pivotal period,” said Susan Arnold, Disney’s board chairwoman.

Iger, 71, has spent more than four decades at the company, including 15 years as the company’s CEO. He was instrumental in Disney’s acquisition of major brands such as Pixar, Marvel, 21st Century Fox and Lucasfilm, the home to Star Wars.

Iger has agreed to remain in the role for an additional two years and “to work closely with the Board in developing a successor to lead the company at the completion of his term”, Disney said.

During the July-September financial quarter, the media giant reported lower than expected profits and revenue, including the loss of $1.5 billion on its streaming service business.

Shortly after the poor earnings report came out, Chapek sent a memo to Disney leadership announcing plans to cut costs through layoffs, hiring freezes and other measures, which led to some internal pushback against him, according to CNBC.

He also faced backlash after initially remaining silent over a Florida law that prohibits instruction on sexual orientation and gender identity in public schools for kindergarten through third grade.