Disney+ under Bob Iger: Smaller, tighter, profitable, happy Wall Street

Iger is already “delivering the goods,” Wells Fargo stock analysts wrote. It will then deliver streaming profits.

Fiscal first-quarter earnings weren’t great, but Bob Iger’s Disney plan prompted investment bank UBS to title its post-Disney earnings report “A Whole New World” — and rightly so.

In a note to clients Thursday morning, UBS analysts applauded Iger for refocusing the streaming business — and focusing on profitability. They weren’t alone.

“Bob Iger is back with the goods delivered,” Wells Fargo said in its own research note. These include cutting costs, moving away from predecessor Bob Chapek’s overly optimistic Disney+ subscriber guidance, and even promising a modest dividend for this year. Stock analysts praised Iger for “managing the content strategy (ie, pushing back on general entertainment/local services)” and “ESPN as a new stand-alone segment that includes ESPN+.”

“While the future is not 100% certain, the strategy is: profit.”

The previous regime’s streaming strategy was not so good, said media analysts at Moffett Nathanson. “Disney’s streaming strategy has been held hostage” by Chapek’s ambitious subscriber goals, they wrote to investors. The Chapek administration’s goals, such as reaching 230-260 million subscriptions by the end of fiscal year 2024, are “unattainable,” they continued. But Disney “lacked the sincerity and courage to bring them back.”

Not this one. Iger’s Disney is interested in making Disney+ profitable at the end of 2024. Of course, in theory, this can be achieved on a large scale, as Capek wanted, or instead, he can make more bread for bread through his subscribers. Moffett Nathanson thinks Disney+ should cater to superfans — and pay them more.

Now it’s all about ARPU (average revenue per user) and margins, baby, according to Wells Fargo and Moffett Nathanson. Both pointed out that such an approach could also mean exiting certain markets where streaming is not very profitable, such as India. And why not? Disney has already lost subscribers after losing the IPL cricket rights. Leave them to Paramount Global – and the tiny subscription fees.

RED, Mei Lee (voice of Rosalie Chiang), 2022. © Courtesy of Walt Disney Studio Motion Pictures / Everett Collection

“Turns Red”

©Courtesy of The Walt Disney Co./Everett Collection

Analysts at UBS rate Disney shares ( DIS ) as a “buy” with a 12-month price target of $122. The valuation breaks down as follows: Disney’s “legacy” businesses, including linear media, movies, parks and consumer products, are worth $82 a share; the streaming deal is worth $40.

They are in the lowest place. Moffett Nathanson raised its price target by $10 this morning to $130. Wells Fargo raised its price target to $141 from $125 per share.

DIS shares jumped a few percentage points after Wednesday’s results and are currently trading around $115 apiece.

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