One Wall Street analyst expects The Walt Disney Company to pull the firm’s streaming subscriber targets and reset expectations for shareholders.
CEO Bob Iger must show investors of The Walt Disney Company a different side to his management style as he returns to lead Disney by cutting costs and restoring profits in just two years after spending cash left and right for acquisitions of a streaming business in his prior tenure.
Disney’s board of directors surprised shareholders in late 2022 by announcing the departure of Chief Executive Bob Chapek and appointing Iger to a two-year contract to return the company to growth.
The most pertinent priority on Iger’s agenda is most likely Disney Plus, the streaming service Iger led in creating in 2019. The losses within the streaming segment have more than doubled in the last reported quarter to $1.5 billion. Streaming has become a hindrance to bottom-line profits as The Walt Disney Company spends heavily on content to attract subscribers, testing investor patience and contributing to a 40% slide in its shares last year.
Due to the pressures from Disney shareholders, Wells Fargo analyst Steven Cahall has now predicted that Iger would reset expectations and ultimately revise its aggressive subscriber growth targets during the next earnings call. Next month’s earnings call will be Iger’s first earnings call since returning to the company. Cahall would say in an update to investors, “We expect Bob Iger’s first public call since returning as CEO to be action-packed. With a proxy battle looming, management’s best avenue to defend against activism is a higher stock price.”
Cahall not only says that Iger would pull its streaming subscriber targets, but he also expects The Walt Disney Company to embark on a $2 billion cost-cutting program focusing primarily on non-programming costs. Cahall calculated that Disney’s DTC non-content costs are now about 30% of revenue compared to Netflix’s 21.5%. This cut in costs will ultimately assist Disney in breaking even on streaming earlier than expected in 2024.
The call from Cahall comes at a moment when the Disney Board of Directors is in a significant proxy battle for control of the company with Trian Partner’s Nelson Peltz.
Do you think it is the right call for Bob Iger and Disney to revise its streaming subscriber goals?