Since the last time The Walt Disney Company reported its financial results, a ton has changed. With many management changes and a vicious proxy fight underway, we examine what stakeholders of Disney should be on the lookout for when the company reports its results on February 8.
Related: Famous Investor Says Former Disney CEO Bob Chapek Was “Ever-Incompetent” and “Ever-Woke”
Next week, The Walt Disney Company is set to announce its fiscal year first quarter results for 2023. The Walt Disney Company must provide the general public with quarterly and annual reports because it is a publicly-listed firm. Whether you own Disney stock or not, these requirements give Disney fanatics and enthusiasts an opportunity each quarter of every year to hear directly about the latest updates from Disney executives.
Last year was the worst year for Disney’s stock in more than five decades; the share decline couldn’t seem to find an eventual bottom.
It’s no secret that The Walt Disney Company shares have been on a downward trend during the past couple of years. In March 2020, the stock plummeted on Wall Street when the theme parks were forced to close because of the COVID-19 pandemic, which was understandable. Following the pandemic low, Disney Plus subscriptions grew, the Disney Parks eventually reopened, and people continued to shop for Disney merchandise. This coincided with the stock doubling from its dreadful pandemic lows in early 2021 to as high as $197 per share. However, due to overall market forces and continuous missteps from former CEO Bob Chapek, shares of the entertainment giant failed to live up to the reliable stock it once was and have had the worst year since 1974.
Related: Disney+ Is Losing Millions, But Disney Parks Could Be a Problem For Iger
Disney’s Board of Directors eventually lost patience. On November 20, 2022, Bob Chapek was fired after a tumultuous few years, and former Disney CEO Bob Iger stepped into the leadership role again. Immediately after Iger came back into the Disney fold, Disney’s stock drastically increased as analysts said that the magic had returned. Those gains slowly started to go down and disappeared as the rest of the stock market began to sell off at the end of last year. Then Avatar: The Way of Water (2022) came out in theaters and underperformed during its first couple of weeks, which caused the stock price to drop again.
In addition to the c-suite shake-up, there were many changes within Disney’s shareholder base. In August 2022, multiple reports surfaced that Hedge Fund Manager, Dan Loeb, bought a new stake in The Walt Disney Company’s stock and pushed senior management to spinoff the company’s ESPN division. In a letter published by the hedge fund manager, Mr. Loeb made his case publicly that it was in the firm’s shareholders’ best interest that management should spin off ESPN.
In the letter to Walt Disney Company CEO Bob Chapek, Loeb stated, “ESPN would have greater flexibility to pursue business initiatives that may be more difficult as part of Disney, such as sports betting.” He also said, “We believe that most arrangements between the two companies can be replicated contractually, in the way eBay spun PayPal while continuing to utilize the product to process payments.”
We would also learn that towards the end of the year, Trian Fund Management LP, the hedge fund owned by famous activist investor Nelson Peltz, would buy more than $800 million worth of The Walt Disney Company stock days after the company’s lackluster fiscal fourth-quarter earnings report.
Expectations For The First Quarter’s Results
The upcoming report and earnings conference call with Wall Street will mark the first quarter with Bob Iger back at the Disney CEO post. Bob Iger had previously served as the group’s CEO from 2005 to 2020 and had tremendous success as CEO in his first go around.
Box office sales for Disney’s films are expected to support revenue growth for the group, with the latest Avatar movie has grossed over $2bn. Subscription numbers for Disney+, Hulu, and ESPN+ will again be in focus, determining the success of new packaged bundle offerings which amalgamate these services. Disney Park’s and Experience’s divisions had a phenomenal return to growth in 2022, and markets will look to see whether this momentum is continuing within its international parks. Markets will also look to see the health of linear network television for the group and hear further about restructuring initiatives pertaining.
Related: Disney’s Bob Iger Praises James Cameron For Preserving His Reputation
According to Refinitiv data, the company is expected to have sales of $23.36 Billion and earnings per share of $0.79 for the quarter.
What Will Bob Iger Focus on in 2023?
The Walt Disney Company and Bob Iger have the chance to add another 40 million subscribers to Disney+, Hulu, and ESPN+ in 2023. Disney and Iger are promising to focus more on turning a profit from their streaming business in 2023. While it may be raising prices and curbing content expense growth, increasing its subscriber base will still play a significant role in the path toward profits.
Disney’s parks and experiences revenue grew 73% in 2022, fully recovering from 2019 figures. Disney expects to build on that growth in 2023. This year, the Disney Parks division is celebrating its 100th anniversary and holding events at the parks throughout the year. It’ll have unique decor, food, and new attractions for diehard Disney fans. The milestone could attract better-than-average attendance throughout 2023.
Related: Disney World’s Four Glaring Issues that Bob Iger Needs to Change
Walt Disney World and Disneyland appear to be increasing the crowd capacity at their parks, opening new and temporarily dormant rides. Disney’s Shanghai Park is now fully open for business, too. That should drive incremental revenue over 2022 when China’s COVID-19 policies more restrict it.
In addition, Disney has several movies on the docket for its next billion-dollar release following Avatar: The Way of Water (2022). The Marvel Cinematic Universe enters Phase 5 at the start of 2023 with the next installment of Ant-Man (2015). It’ll continue in the summer with the third entry in the Guardians of the Galaxy (2014) series. Both could be box office hits, and $1 billion in ticket sales isn’t unfathomable. But that would be surprising, given how the movie business has performed in the last few years. Disney’s most sure-to-be $1 billion release could be The Little Mermaid (2023). Live-action remakes have proven successful, with both 2019 releases topping $1 billion. But it’ll take a lot to drive $1 billion in ticket sales for a film that isn’t chock-full of action scenes that must be experienced on the big screen for full effect.
Disney’s 2023 films could do much better at the box office than its 2022 slate, but a billion-dollar release is not a sure bet. Importantly, though, they may play an essential role in driving subscribers to Disney Plus and keeping them subscribed throughout the year.
Related: One Favorite Walt Disney World Resort Perk Has Officially Returned
Disney’s Board Room Battle
In a major shakeup earlier this year at The Walt Disney Company, the Theme Park and Entertainment Giant named Mark Parker as Disney’s new Chairman of the Board.
During the announcement of Parker’s appointment, Disney also disclosed that it is facing a proxy fight from activist investor Nelson Peltz and his fund Trian Partners. Trian has nominated Peltz to serve on the Board.
The company released a statement stating, “The Walt Disney Company remains open to constructive engagement and ideas that help drive shareholder value. While senior leadership of The Walt Disney Company and its Board of Directors have engaged with Mr. Peltz numerous times over the last few months, the Board does not endorse the Trian Group nominee and recommends that shareholders not support its nominee and instead vote FOR all the company’s nominees.”
Related: New Park Map Erases Highly Anticipated EPCOT Construction Project
What makes this proxy fight interesting is that according to reports, Nelson Peltz, who is famous for corporate activism (or as others may describe as corporate raiding) and helping companies in an intimate style of active management, was reportedly not in the view that recently appointed CEO Bob Iger should be back in control of the company.
We will most likely receive updated commentary on how the battle is shaping up during the earnings call with Wall Street analysts.
Related: Abandoned Magic Kingdom Attraction Reopening After Three-Year Closure
There is a lot of information and details to pay attention to when The Walt Disney Company reports its results on November 8. Will Disney beat Wall Street expectations, and how many streaming subscriptions will Disney+ reach? Even though there are investors out there who believe The Walt Disney Company will prevail, many other investors still have questions. Remember to listen next week to find out all the latest updates!
The question going forward is what magic Disney CEO Bob Iger has up his sleeve to get Disney shares, Disney Parks, and Disney Media turned around in the right direction. There is a lot to fix, but is he up to the task?
Do you think Bob Iger can get Disney’s stock moving in the right direction this year? Let us know your thoughts by leaving us a comment below.
Disclosure: Inside the Magic has no stock, option, or similar derivative position in any of the companies mentioned. Inside the Magic does not have any business relationships with any company whose stock is mentioned in this article.
Additional disclosure: The analysis is provided exclusively for informational purposes and should not be considered professional investment advice. Before investing, please conduct in-depth personal research and utmost due diligence, as there are many risks associated with the trade, including capital loss.