Walt Disney (DIS 0.15%) investors cheered the news of CEO Bob Iger's return, and it's not hard to see why.
In the nearly three years that former CEO Bob Chapek was at the helm, the stock sputtered as the company's pivot to a streaming-first enterprise seemed to lose steam and also spilled plenty of red ink on the income statement. As you can see from the chart below, Disney stock significantly underperformed the S&P 500 during Chapek's tenure.
Disney stock jumped 6.3% the day the news came out, showing Iger's got the support of the investor class, but will his return change anything for the company? Here's why the boomerang CEO could again flip the script at the House of Mouse.
1. He's a top-notch deal-maker
When he was CEO from 2005 to 2020, Iger closed a string of deals that gave Disney a colossus of intellectual property, including acquiring Pixar, Marvel, Star Wars-owner Lucasfilm, and finally 21st Century Fox.
Disney has mined that new IP for hit movies, theme park rides, consumer products like toys, and streaming shows. Its $4 billion acquisition of Marvel, for example, is likely one of the best deals in modern history as the Marvel Cinematic Universe, or the Marvel movies Disney has made, brought in nearly $20 billion just at the box office through 2019.
We're still in a golden age of M&A deals in the entertainment industry as Warner Bros. Discovery just formed, and it seems nearly every streaming outlet is looking to beef up its content or partner with a larger player. Arguably, there's no one better suited to navigate this era of consolidation than Iger, who has the experience and ability to put Disney on the best course in streaming.
2. He's universally respected in Hollywood
Leadership matters in any industry as CEOs set the culture and the tone for the company, and a well-admired leader like Iger will inspire and recruit new talent to join Disney.
In Hollywood, good leadership may be even more important because it's key to attracting talent to make hit movies and TV shows, and having Iger back in the hot seat should give Disney a step up in that area.
Even Netflix co-CEO Reed Hastings doffed his cap to Iger upon his return, saying on Twitter:
Ugh. I had been hoping Iger would run for President. He is amazing.
-- Reed Hastings (@reedhastings) November 21, 2022
According to Business Insider, a number of Disney employees, including some top brass, cheered his return, saying that Chapek's reorganization to prioritize the streaming division had left creative departments feeling short-changed and created animosity within the company. One even called Iger's comeback a "pipe dream" -- and in this case, it has come true.
There's plenty of anectodal evidence that bringing back Iger has given a morale boost to frontline Disney workers as well. One Orlando-based reporter, Gabrielle Russon, told The Motley Fool that the local response from Disney World cast members and others has been positive.
3. He's already gotten to work
In his first week on the job, Iger didn't waste any time correcting Chapek's mistakes. The new boss let go of Kareem Daniel, the head of the Disney Media and Entertainment Division that Chapek created, and he plans to restructure the media titan again.
He said the new organizational design would be in place in months, but emphasized that storytelling would be at the center of the business. He also said it was important to create a more efficient cost structure, indicating the company would slash some of the expenses that led the streaming division to lose $4 billion in the last fiscal year.
NYSE: DIS
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Iger, it seems, believes the pendulum had swung too far toward the streaming business, and sees putting out the best content as the company's most important priority.
It's not surprising that Iger's actions have already been fast and furious. The agreement with the board was that the 71-year-old would become CEO for two years and help find a replacement while he's there. His work won't be easy, especially with the Disney streaming unit bleeding cash and the need for another restructuring, but after his previous success, it's hard to doubt that he's the best person for the job.
It will take time for Iger's changes to pay off, but Disney stock seems to have a lot of upside potential, considering its wealth of intellectual property and its flywheel business model, where video entertainment, theme parks, and consumer products all reinforce one another and the overarching Disney brand.
That collection of assets is hard to beat. It's time for it to start working for investors.
