Walt Disney Co. Chief Executive Bob Iger is sticking around for longer in the company’s top post, and while he has ideas for changes at the company, they won’t necessarily be easy to execute.
That’s the assessment of Dave Novosel, an analyst at Gimme Credit, who reiterated his underperform recommendation on Disney’s DIS, +1.65% debt in light of the challenges facing Iger and the broader company.
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He noted that, while Iger recently floated the possibility that it might sell some linear TV assets as that business careens toward obsolescence, pulling off a sale won’t be so straightforward.
“Although the sale of the TV assets would make sense strategically for Disney, the question is who would buy them,” he wrote. “We do not see any natural suitors. And even if a buyer could be found, what price would these assets attract?”
Similarly, Novosel said that Disney faces a tough road ahead as it strives for streaming profitability by the end of fiscal 2024. Disney “presumably” has leveraged its content as a main driver of subscriber growth, spending some $ 30 billion on programming last year. But if the company pulls back on that spending, it threatens to hurt subscriber momentum, in his view.
Disney’s board of directors has tabbed Iger to stick around as CEO for two years longer than initially planned as the company bangs out a succession strategy, and while Iger’s return to Disney last year was lauded by many, Novosel highlighted that some of the company’s current problems are of his making.
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“He advocated the strategy of offering lower prices while spending liberally to add a huge amount of content,” Novosel said.
Novosel expressed concerns that Disney’s free-cash flow will face constraints as a result of “hefty capital expenditures associated with the parks segment and the likelihood that the dividend is reinstated soon.” Plus, Disney is likely to pay at least $ 9 billion to buy out Comcast Corp.’s CMCSA, +0.88% one-third stake in Hulu, though the cost could be “possibly much more.”
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