"Always in motion is the future" -- according to Star War's Yoda. That's especially true in the stock market, where today's winners may be tomorrow's has-beens -- or the other way around.
It's never easy to predict what any particular industry or company will look like several years ahead. Before you know it, the most accurate forecast may be undone by a global health crisis, a busted mortgage lending system, or a game-changing artificial intelligence (AI) tool.
But if it doesn't matter where you want to get to, then it really doesn't matter which way you go. Hence, the first step to successful investing is to find a suitable target.
When looking at Walt Disney's (DIS -0.04%) future, I surely won't get every detail right. Still, the mere attempt to find a reasonable destination is well worth the effort. And today is a good day to try.
What will Disney look like in three years? Let's make a few educated guesses.
The biggest change is already planned
First and foremost, the company should be under new management by 2027. Industry legend Bob Iger has promised to stay in the C-suite until the end of 2026, leaving room for a strong long-term heir to the enchanted throne. It remains to be seen who Iger's replacement might be, and his last attempt to retire peacefully brought in the chaotic leadership of Bob Chapek.
I won't attempt to pin a name on this blank space, but it probably won't be an upgrade. I'll give the next Disney leader the benefit of the doubt, but Bob Iger's enormous shoes aren't easy to fill.
Iger revolutionized Disney with major acquisitions like Marvel, Lucasfilm, and Pixar, vastly expanding its media empire and driving unprecedented growth. Under his watch, Disney ran on creative works and innovation. It was never about the numbers, and Iger's human touch is exactly what this imaginative empire needs.
Iger's big plans
That being said, Iger agreed to a specific timeline. He should have ample scope to complete his most pressing plans before handing off the CEO baton again. So what is Bob Iger trying to accomplish by the end of 2026?
Luckily, he has been quite clear and transparent with these important strategies. Creativity and innovation were always the qualities closest to the Disney company's proverbial heart, and this will continue as long as Iger has a say in the matter. The ongoing strategic restructuring and CEO search are important and deserve a tight focus, but not at the cost of sacrificing creative quality. Follow these guiding stars, and the long-term financial results will follow.
There's a more hands-on set of four "key building opportunities" in Disney's current ambitions, as stated in November's fourth-quarter earnings call:
- Achieving significant and sustained profitability in Disney's streaming business
- Building ESPN into the preeminent digital sports platform
- Improving the output and economics of Disney's film studios
- Turbocharging growth in the experiences business
Disney's progress toward these goals is mixed, with many significant challenges along the way.
The Disney+ streaming platform has 113 million subscribers but still delivers negative operating profits in every quarter. ESPN's domestic operations are profitable, but some of its recent bottom-line growth was the result of college football contracts not being renewed.
Last year's lower film studio costs were largely forced by slower content production schedules, due to long-lasting strikes in the writers' and actors' guilds. The clearest success story came from parks and experiences, where Disney's newer international resorts have been massive hits.
Disney's new look in 2027
The inflation crisis should be a fading memory in 2027. The business world will never really be the same after the coronavirus pandemic, but consumers and corporations alike will have settled into a "new normal" in another three years. Of course, I'm assuming that there won't be another unseen, unexpected, uncomfortable crisis on that three-year journey, but haven't we all been through enough shocks and negative surprises recently?
The next three years may become the ultimate test of Iger's stewardship. The company is already radically different from the media empire of the 2010s, not to mention the emerging resort and hotel network of the 1990s. Disney has more creative firepower than any other company, and Iger is putting that storytelling portfolio to work before he leaves.
In the last couple of years of Iger's legendary leadership, Walt Disney has transformed into a media-streaming giant with a world-class set of resorts built around household-name theme parks. The journey ahead is as much about honoring Disney's storied past as it is about embracing a future full of potential.
Image source: Walt Disney.
As I said earlier, the financial results should follow. Specifically, the streaming business should transform from an unprofitable drag into a sustainable cash machine, supported by ESPN's market-defining sports content. All of this potential success will spring from the all-important content catalog.
This long-term plan is dramatically different from the classic Disney business in many ways, but it's also a return to Winning With Creative Content 101. I trust Bob Iger to take Disney that far, achieving most of the goals on his checklist. The resulting new-age media king should be worth more than the work-in-progress business you see today, with stronger profit margins and higher valuation ratios.
When Iger steps down again, investors should know all about his chosen successor. I hope they find a good one to carry on the work Bob Iger is doing today.
