#As Disney Wins Proxy Battle, Wall Street Is Wait-and-See On If Bob Iger Can Land Succession

After Wednesday’s annual shareholder meeting — featuring CEO Bob Iger successfully fending off dissident investors, led by Trian’s Nelson Peltz — Wall Street experts are gaming out the next steps Disney may take as it plots out room for growth.

Analysts shared took stock of the vote’s impact on and outlook for Disney, its stock, and its management team, led by Iger. Succession planning and the need to optimize streaming and pay-TV profits are among the key priorities they outlined.

Disney shares closed down 3.1 percent at $118.98 on Wednesday, but were up slightly in Thursday pre-market trading.

MoffettNathanson analysts Michael Nathanson and Robert Fishman maintained their “buy” rating on Disney shares, but increased their stock price target by $10 to $135, citing “a higher market multiple and increased conviction in our full-year 2025 earnings per share estimates.”

Addressing the stock’s outlook, they shared: “While it might have admittedly taken longer than we first expected back when we upgraded Disney to ‘buy’ on the night of CEO Bob Iger’s return, we believe the company has finally focused on fixing the key challenges that we were left behind by the prior CEO” Bob Chapek.

Iger and his management team have outlined four key priorities: reaching and ensuring streaming profitability, reinvigorating creativity, establishing the future of Disney’s media businesses, including ESPN and other TV networks brands, and turbo-charging the theme parks unit.

“We think the market is finally reflecting optimism that CEO Iger along with CFO Hugh Johnston will drive upside to Disney’s long-term operating profitability,” the MoffettNathanson analysts argued. “This starts with Disney delivering upon or outperforming its fiscal-year 2024 adjusted earnings per share guidance of least 20 percent growth and pacing ahead of its $8 billion fiscal-year 2024 free cash flow guidance.”

They estimate that Disney can in fiscal year 2027 hit a streaming profit margin of 14 percent and come in “ahead of consensus with $7.45 in earnings per share,” the MoffettNathanson experts wrote. “But could it possibly be sooner? To us, that is the key investor question tied to the fateful decision to rightly change the long-term direction of Disney away from linear and towards streaming.”

Meanwhile, TD Cowen analyst Doug Creutz described the proxy battle as a not much more than a distraction from the business at hand. “We expected this outcome and see little impact to Disney other than reducing the amount of management bandwidth being spent on the issue,” he wrote in a report. “While the proxy fight made for good headlines, we don’t think it was a serious focus for investors.”Overall, Creutz stuck to his “hold” rating and $100 stock price target on Disney.

Morningstar analyst Matthew Dolgin had a similar take on the board room battle, maintaining what his firm calls a “fair value estimate” of $115 on Disney’s stock. “The stock’s recent appreciation now reflects forthcoming improvement, which we expect will occur regardless of which side had won,” he wrote. “The most important thing for Disney is that the battle is now behind it, and it can return its focus to addressing the issues that need to improve.”

Dolgin then outlined his take on management priorities. “Most notably, Disney needs to figure out how to best preserve pay-TV revenue as viewership shifts to streaming services,” the analyst argued. “Trian identified the struggle Disney has had in growing a profitable streaming business, but it offered few tangible solutions. We agree with Trian’s suggestion that a key is bundling the service with other media firms, but Disney is already on that track: Disney, Warner Bros. Discovery and Fox intend to create a joint-venture streaming service in 2024, and Disney+ is now included as part of the bundle for Charter’s pay-TV subscribers.”

But the strategy is still evolving, emphasized the Morningstar expert. “We are skeptical that the sports joint venture will ultimately be the best manifestation of a bundled product due to the difficult balance between offering a compelling price point and not accelerating the cannibalization of pay-TV subscriptions,” he wrote.

Dolgin highlighted that he “strongly disagreed with Trian’s suggestion that Disney should explore deemphasizing the importance of nonsports linear networks, perhaps by finding a strategic partner.” Explained the analyst: “Even excluding sports networks, linear networks made up one-third of Disney’s operating profit in fiscal 2023, and we believe they have significant synergies with Disney’s streaming platforms as consumer habits evolve toward streaming.” Concluded Dolgin: “We don’t believe streaming services alone will ever be as lucrative for traditional media companies as the pay-TV bundle was.”

The Morningstar analyst also emphasized the need for succession planning. “We have no doubt this is now a priority for Disney and CEO Bob Iger,” who is now 73, he wrote, adding: “we suspect he will use this last chance to ensure the board undertakes a very thorough process and hands the reins to the best candidate.”

Analysts beyond Wall Street also chimed in on the priorities for Disney after the proxy battle.

“After months of distraction, Disney leadership can now focus on important unresolved issues: completing the acquisition of Hulu, achieving profitability in direct-to-consumer services, and what to do with linear networks,” opined Enders Analysis analyst Gareth Sutcliffe.

“The proxy battle surfaced useful ideas and recommendations that Disney should implement: appointing a chief technology officer to the C-Suite would help the company better respond to technology-first competitors and AI,” he also argued.

“The votes are in, and Disney has won, but the pressure on the company remains,” said Third Bridge analyst Jamie Lumley. “Following the end of the proxy war, Disney now needs to focus on executing on a full agenda of tasks in 2024 to fully put the company on the right path.”

Streaming will be one core focus, he argued. “Streaming profitability by the end of this fiscal year is a top priority for Disney, but our experts are skeptical about the company’s ability to deliver on its margin goals in the near term.”

Explained Lumley, “It took Netflix over a decade of streaming to deliver sustainable double-digit operating margins, and considering the challenges Disney has had in just minimizing losses, it may be a while yet before it can boast a comparable margin profile.”

The Third Bridge expert also mentioned such open questions as “the growth opportunity of the sports streaming joint venture” with Warner Bros. Discovery and Fox Corp. and the planned $60 billion investment in Disney’s parks & experiences unit. Emphasized Lumley: “With the parks being one of the remaining steady earnings drivers at the company, investors want to know how Disney plans to strengthen this segment for the long term.”