Wall Street analysts and investors welcomed back Bob Iger as the CEO of the Walt Disney Co. after Sunday’s surprise news that the Hollywood conglomerate’s former head would return to replace Bob Chapek. And experts started discussing possible strategic changes that he could usher in.

Disney shares, in pre-market trading on Monday, were up 9.3 percent at $100.29 as of 7 a.m. ET. The stock had hit a 52-week low of $86.28 earlier this month. As of Friday’s market close, it had fallen about 40 percent so far this year.

“Magic is back,” MoffettNathanson analyst Michael Nathanson cheered the return of Iger and upgraded the rating from “market perform” to “outperform,” while raising his stock price target by $20 to $120. “We raise the valuation multiple to reflect our greater confidence in the company’s trajectory under the leadership of returning CEO Bob Iger,” he explained in a Monday report, adding that the company veteran could “help guide the company through this period of massive secular change.” The expert’s conclusion: “We applaud Disney’s board for the courage to make this change.”

Nathanson noted that “we have never hidden our affection for Mr. Iger and the job that he did in building Disney into the global powerhouse that it has become.” He explained: “Over the many years, Mr. Iger’s decision-making and strategic positioning – which ignored the Street’s often incorrect short-term focus – would ultimately separate Disney from the media pack. In addition, his communications skills and his ability to stay focused and honestly optimistic in the face of structural challenges provided a constant ballast in the roughest of media waters. We believe investors will value the transparency and return Disney some of its long-lost magic with a stronger narrative driving the stock higher again.”

The analyst also shared his take on Chapek’s leadership: “We have not recommended the shares since May 2020 for multiple reasons, including concern that the former CEO Bob Chapek had become wedded to a streaming strategy that did not make sense given today’s reality. With limited experience on the media side of Disney, Mr. Chapek had done an expert job in managing Disney’s parks through the challenges created by the COVID-19 pandemic, but he appeared anchored to the streaming strategy laid out in the December 2020 Investor Day which had created, we felt, unrealistically high subscriber targets without a grasp for the underlying return on investment.”

The MoffettNathanson analyst added that he believed “that the broader shift at Disney+ from Disney-themed family and branded content into a general entertainment fare was a poor decision that would hurt return on investment.”

Nathanson then outlined possible changes under Iger. “We would hope and expect that Mr. Iger examines the investment plans at Disney+ and re-focuses their investment on areas of franchise strength and away from broader general entertainment content,” he wrote. “In other words, Disney+ – and Disney’s shareholders – could probably do better with fewer end-state subscribers made up of super fans willing to pay high revenue per user, which would generate much higher margins.”

The MoffettNathanson analyst also said that he has been “worried that the restructuring of the company with a new DMED (Disney Media and Entertainment Distribution) division, has hurt the morale of the creative leadership and has created more bureaucracy, which has slowed decision-making.” At the start of his first run as CEO, Iger “enacted a sweeping decentralization effort that limited the stifling influence of a centralized strategic planning group, which he later wrote in his book, The Ride of a Lifetime, was
one of his greatest achievements and had the effect of “as if all the windows had been thrown open
and fresh air was suddenly moving through’,” Nathanson wrote. “We would not be surprised to see him enact a similar effort this time around, giving the company a renewed focus on letting the creative leaders have the freedom and profit and loss responsibilities that they desire.”

Others on Wall Street also lauded the return of Iger.

“Disney is boldly changing up its CEOs with former leader Bob Iger returning to the seat and replacing the troubled Bob Chapek,” Wells Fargo’s Steven Cahall summarized the decision in a report entitled “What About Bob?.” “While Chapek’s departure is not a surprise due to recent turmoil and the stock’s decline, Iger’s resurgence is a positive surprise.”

He highlighted that investors would see the change at the top as a clear positive. “Iger will be viewed as a catalyst to improve the content aspects of Disney, and we expect bigger potential strategic changes around the long-term shape of DTC (direct-to-consumer),” the analyst wrote. “While the announcement doesn’t solve all of Disney’s problems, we think investors will embrace it as it puts perhaps the best leader in media at the helm with a mandate to shake things up.”

After all, he noted: “Investors are big fans of Bob Iger, in our experience, given his history of leading Disney through major content acquisitions (e.g. Marvel, Pixar, Lucas, 21st Century Fox) and the pivot to streaming (announced in 2017). The Street will see him as a steady leader in uncertain times.”

Iger also returns with much admiration from creatives. “Equally important is that Iger is considered popular among the creative ranks within Disney and Hollywood — an area where Chapek was not embraced,” Cahall emphasized. “Chapek was seen as an ace on park ops, whereas Iger is the content guru, and we think content is believed to be the lifeblood of the company (with streaming potentially garnering the largest enterprise value).”

What lies ahead for Disney under Iger? “Expect some strategic redirection,” the Wells Fargo expert told investors. “Disney doesn’t shake things up without more changes to come. Since the late 2020 investor day, investors have worried that DTC is over-extended between franchise IP, general entertainment and sports. We expect Iger’s first order of business to be a clear plan as to how Disney’s streaming services shape up over time, which could reopen discussion about whether Disney+ is to be a franchise IP content hub or a broader entertainment platform. Hulu’s fate would similarly rest in that balance. We expect to learn more on these fronts in the early days/weeks/months of Iger’s new term.”

With Iger taking over with a two-year commitment, a mandate to “set the strategic direction for renewed growth” and a promise to work with the board to find a long-term successor, Cahall also discussed how the transition from Iger to Chapek had worked out. “When Bob Iger exited Disney in early 2020, it was a surprise to the Street, as was the appointment of the relatively unknown Chapek. The two-and-a-half years since have been rocked by instability, both exogenous (e.g. COVID) and endogenous (e.g. political turmoil, guidance challenges). In late 2020 and into 2021 Chapek was seen as an early success for stewarding parks through the pandemic and setting new lofty expectations for DTC at the December 2020 investor day. Since then much has gone awry on DTC execution, with the share price recently hitting a five-year low (excluding March 2020) after fiscal fourth-quarter 2022 results. We do not believe that Chapek’s exit is a major surprise to investors, though we think Iger’s return is.”

Chapek has an “overweight” rating and $125 price target on Disney’s stock.

PP Foresight analyst Paolo Pescatore in London called the return of Iger as CEO “a huge surprise and completely unexpected.” He also told THR that the change at the top “underlines the state of the streaming landscape and challenges faced by all traditional media companies pivoting towards this new world.”

Pescatore also expects changes ahead for Disney. “The bold move might feel like the right one. However, the business is at a different phase of growth,” he said. “It will take time, and immediate success is not guaranteed. Short-term measures will likely mean a focus on restricting operations and efficiencies.”

“Wow! Didn’t see this coming! Brilliant move for Disney to return to a stable, trusted hand who now has a chance to calm the markets, boost morale, and revisit a transitional move that perplexed many of us at the time.”

Peter Csathy, chairman of consultancy Creative Media, told THR: “Wow! Didn’t see this coming! Brilliant move for Disney to return to a stable, trusted hand who now has a chance to calm the markets, boost morale and revisit a transitional move that perplexed many of us at the time.”