They don't call them activist investors for nothing. Trian Partners' Nelson Peltz has reportedly sold his entire stake in Walt Disney (DIS 0.82%), sources have told Barron's, CNBC, and other financial outlets. Peltz unloaded his more than 32 million shares at "close to $120 a share," according to the unnamed source. It's a price point that Disney stock hasn't traded at since April 4, the day after his bid to take over two seats in the media giant's boardroom fell short in a proxy battle.
If the reports are accurate, his timing seems astute in the short run. Disney's shares are down 18% since the annual shareholder meeting eight weeks ago, so Peltz's move -- which freed up nearly $4 billion in stock sale proceeds and a profit of roughly $1 billion to deploy elsewhere -- seems like a smart call. (They don't call them billionaires for nothing.)
Is it the best move for Peltz in the long run? I don't think so. Let's take a closer look.
NYSE: DIS
Key Data Points
The upside of proxy battles
It's easy to dismiss Peltz as a boardroom distraction in back-to-back years, but he did help those of you, like me, who are still Disney shareholders. He did light a fire under Disney to go public with positive developments, possibly ahead of schedule, in an aggressive counter to get stakeholders to stay loyal to the current slate of directors.
Disney's fiscal-first-quarter report in February -- its last chance to impress investors ahead of its annual shareholder meeting -- was a treasure trove that helped catapult the stock higher. Did Disney really need to boost its dividend by 50% five months ahead of when it would actually go out? How about announcing its first buyback in six years?
Disney was already boosting the rewards of its cost-cutting measures before Peltz came pelting. However, is it a coincidence that it outbid rival streaming services so Disney+ could land the popular Taylor Swift film weeks before the proxy battle's voting deadline?
Peltz likely knew that even an unsuccessful proxy battle would deliver stock gains in a stock that had fallen short of market returns in the three previous calendar years. Cashing out and moving on is what a serial activist investor does, but it doesn't mean that long-term Disney shareholders need to follow suit.
Image source: Disney.
The upside of Disney
It wasn't a surprise that Disney shares retreated after the shareholder vote. Disney had emptied its quiver of bullish arrows back in February's report, so May had a hard act to follow. It's also just unfortunate timing that the potent economy that Disney needs for its theme parks, cruise ships, and premium streaming services to thrive is getting cloudy.
My money is still on the House of Mouse in the long run. Its theme parks continue to be the class act of the industry, with per-guest monetization metrics well above the pre-pandemic peak. This has been a challenging year for multiplex operators, but unlike last year, Disney has a strong slate of films rolling out in the second half of this year. Its streaming business turned a surprising profit in its latest quarter and should be on pace for consistent profitability by the end of this fiscal year.
The stock may be drifting lower since its proxy-battle high, but analyst profit targets are heading higher. Buying Disney for 18 times next fiscal year's projected earnings is a bargain in this otherwise expensive market.
Peltz may have better places for his billions, but the leading entertainment stock is attractive at current prices for investors in it for the long haul. He lost the proxy battle and won the war.
Those sticking around who know the company well know both the challenges facing the industry, as well as Disney's advantages. Peltz is an activist. I'm a "passivist" when it comes to Disney, and I think we can both win over time.
