Reply To: Traders Market Weekly: Thanksgiving, a Time for Reflection

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Truman
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Following disappointing earnings #WaltDisney up big after appointing Robert Iger as CEO.

Upgrades, $NFLX well wishes,
Follows activist investor Trian Fund Management more than $800 million stake
$DIS 101.32, +9.52, +10.4%

MoffettNathanson analyst Michael Nathanson upgraded Disney (DIS) as a result of the return of the 71-year-old Iger, noting that he expects the chieftain to look at everything that has been done since he left and Bob Chapek took over.

“Putting it all together, we expect the new CEO to re-examine and re-direct Disney’s current streaming strategy, honestly deal with the challenges confronting its linear networks by cutting back on non-essential sports, change the centralized approach to content procurement established under former CEO Chapek and manage the company forward with discipline, sound strategy and flawless execution,” Nathanson wrote in a note to clients.

The analyst added that the stock’s multiple “will likely move higher as these new changes are implemented.”

Even Netflix (NFLX) CEO Reed Hastings commented on the news, as he tweeted that he wished Iger would have run for President of the United States and that the long-time Disney CEO is “amazing.”

Needham analyst Laura Martin, who has a hold rating on Disney (DIS), noted that Iger’s return, effectively immediately and for at least two years, according to The New York Times, should help shareholder value in a number of ways, including his “calming, patient, diplomatic style of handing conflicts” inside the company.

Martin also noted that there will be a focus on raising return on invested capital, including cutting streaming losses faster, as well as handling external issues, such as Florida’s Parental Rights in Education Act, colloquially known as the “Don’t Say Gay” legislation, in a more “deft” manner.

Iger has previously come out in opposition of the legislation and Disney (DIS), under Chapek, was initially silent on the legislation before Chapek faced internal pressure to denounce it. In doing so, he also angered politicians in Florida, where Disney has more than 100,000 employees at Walt Disney World.

Martin also noted that the return of Iger would help stop the exodus of people at the company and positively impact Disney’s (DIS) ability to negotiate deals and partnerships because of how respected he is.

Bank of America anlyst Jessica Reif Ehrlich, who has a buy rating, noted that Iger’s return should be “well-received,” but given that he hand-picked Chapek, it is a bit of a curious event.

“We now expect Iger to fully re-evaluate several of the recent strategic initiatives and corporate restructurings over the past two years, which could create some near-term uncertainty on direction of the company,” Reif Ehrlich explained.