The clock is ticking on Bob Iger. The former Walt Disney (DIS -0.93%) CEO that figured he'd enjoy a happy retirement of writing books and potentially pursuing political ambitions is back at the helm of the media giant. There's a lot to fix at the company, and it's easy to wonder if he'll be able to get everything done in two-year timeline he has established before stepping down again.
I'll cut to the chase: I think Iger will still be CEO three years from now. Let me make an even more brazen market call, predicting that Disney stock will more than double in three years. The shares are down to roughly half of where they were at their peak two years ago, so let's see why I think that the House of Mouse can be hitting new highs by early 2026 (if not sooner).
Image source: Disney.
What might the future hold?
Let's assume what many market watchers consider to be obvious right now. The global economy will get worse before it gets better, and that's going to be hit to the gut of Disney as a consumer-facing titan. Advertisers will pare back their marketing budgets for the company's TV and streaming businesses. The iconic theme parks segment that set new records in fiscal 2022 will be challenged. Box office returns will continue the systemic decline that's been happening for two decades.
Thankfully, the horizon is brighter than the pothole-filled road that lies immediately ahead. Let's start with Disney's media and entertainment distribution segment. Revenue rose 8% in fiscal 2022, as a 20% surge in its premium streaming business was enough to lift flat results at its legacy linear networks.
Disney+ -- along with Hulu and ESPN+ -- now account for nearly a quarter of the company's total revenue. The sticking point here is that the direct-to-consumer streaming business served up an operating deficit of more than $4 billion in the last fiscal year. The red ink at Disney+ is the main reason why Iger is here and dismissed CEO Bob Chapek is not. When the platform launched three years ago, the goal was for Disney+ to become profitable by the end of fiscal 2024. With losses widening, it didn't seem likely. As Iger's primary objective, you have to like his chances of getting the balance right on the streaming end. It may not happen in two years, but three years from now we could be there. A recent price hike and the addition of an ad-supported tier should help Disney+ in the quest to add to the media giant's bottom line instead of subtract from it by early 2026.
Ads will naturally come back to the market once consumers are spending again, and Disney's unmatched content catalog and franchises will continue to make it a desirable market for advertisers to reach. Despite Avatar: The Way of Water becoming the first film since 2019 to top $2 billion in worldwide ticket sales, theatrical distribution will continue to be a challenge for Disney and its peers. The good news is that the company already has strong and established streaming platforms that will help offset any weakness at the local multiplex.
Turning to Disney's theme parks business, the segment saved it over the past year as "revenge travel" became a thing. Folks paid a premium to get back to the leading theme park operator after scrapping vacation plans in 2020 and at least globally in 2021. This segment will see turnstile clicks slow this year if not next year if there isn't a soft landing to the mounting economic pressures, but Disney's gated attractions always bounce back.
The interesting year for the theme parks will be 2025, when its largest rival in Florida opens Epic Universe at Universal Orlando. Disney will need a response if it doesn't want to squander market share at its largest resort. Iger hasn't said a lot about the future of Disney's theme parks business, but if he really wants to cement his legacy -- and be able to stay away for good this time -- it will have to be about more than just turning Disney+ around. It's too late for Disney to have a new park in Florida to compete against Epic Universe when it opens, but the plans will likely be in place by then to keep patrons close and shareholders even closer.
Disney continues to be the class act of media stocks. Trailing revenue already exceeds its pre-pandemic peak of fiscal 2019. Analysts see adjusted earnings surpassing the all-time high of $7.08 a share it posted in fiscal 2018 by fiscal 2026. Getting the stock back above $200 in three years seems more than reasonable if Iger is largely successful this time.
