Disney Shares Soar after Bob Iger Replaced Bob Chapek as CEO

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Shares of entertainment giant Disney soared Monday after the company announced a major and surprising change: CEO Bob Chapek would be replaced by Bob Iger, effective immediately.

Mr. Iger, who served as CEO from 2005 to 2020, returns to the company following Mr. Chapek’s resignation after less than three years in the role.

After Disney announced the CEO change, its shares soared, rising as much as 9% in early trading Monday.

The media giant’s shares closed at $97.57 on Monday, up 6% from previous figures. However, the stocks of Disney, which is a Dow 30 component, have fallen 37% over this year.

Actually, Disney was among the worst three performers of the Dow Jones this year, along with Salesforce and Intel, closing below $100 on Friday despite major indices rising.

Disney shares’ surge comes less than a year after Mr. Iger left the company and just days after Mr. Chapek announced he was cutting costs.

On November 11th, Mr. Chapek sent out an interim memo to his executives, saying he was planning some job cuts and specific hiring freezes in response to the impact of rising costs from its streaming platform Disney+.

Moreover, last month, the entertainment giant underperformed earnings expectations and key revenue segments for the fiscal fourth quarter.

Back then, Disney shares plummeted 8%, and the company revealed that its streaming platform’s growth could slow down in the future.

According to October reports, Disney’s fourth-quarter revenue in the media and entertainment division hit $12.7 billion after falling 3% year-over-year, with direct-to-consumer and movie theater businesses struggling to stay afloat.

However, StreetAccount analysts had estimated the company would earn at least $13.9 billion in segment revenue.

In addition, the company’s theme park business also delivered far less than analysts expected despite reporting an increase in revenue.

Upon returning to Disney, Mr. Iger sent a message to employees via email, saying he was returning to The Walt Disney Company as CEO.

Some media outlets retrieved and published the email. The company’s shares soared in only hours, peaking early Monday morning after hitting a 52-week low on November 9th.

Wall Street’s analysts seemed optimistic about the move and how the decision to bring back Mr. Iger could improve the fortunes of the entertainment company’s stock, which had lagged the market during Mr. Chapek’s highly criticized tenure.

While Mr. Chapel was expected to resign due to the scrutiny he faced, Mr. Iger’s return is a big positive surprise, Wells Fargo’s Steve Cahall said.

Mr. Cahall insisted that Mr. Iger would act as a catalyst that could improve DIS’ content aspects. Therefore, analysts expect “bigger potential strategic changes” around the direct-to-customer long-term shape.

In addition, Mr. Cahall expects investors to welcome the news of Mr. Iger’s return, as it doesn’t solve all of the company’s problems but puts perhaps the best Media leader “at the helm with a mandate to shake things up.”

Laura Martin, the senior entertainment and Internet analyst at the independent bank and asset management firm Needham, said Mr. Iger’s return helped shareholder value.

Ms. Martin stated that Mr. Iger’s ability to handle the difficult external issues Disney is facing would prove beneficial in retaining and attracting talent. In addition, she hopes the new CEO will reinstate profit accountability, moderate transmission losses at a faster rate, and help the company negotiate better deals.

On Monday, the S&P 500 hit 3,949.94 after falling 0.39%, while the Nasdaq Composite closed the day at 11,024.51 after falling 1.09%.

The Dow Jones Industrial Average fell 45.41 points, accounting for a 0.13% drop, to reach 33,700.28. However, Disney shares’ rise mitigated the index’s losses.

According to B. Riley Financial’s chief market strategist, Art Hogan, the recovery in the entertainment giant’s shares put a “dent” in the global economic recovery that analysts had hoped would kick off with China’s lifting of strict Covid-19-related restrictions.

Additionally, many expect the recent bear market rally to stall, as a shorter trading week over the Thanksgiving holiday could lead to higher volatility and lower volumes as traders take a break.

The New York Stock Exchange, for example, will be closed on Thursday for Thanksgiving and will have shorter trading the next day.

Meanwhile, investors continue to monitor Federal Reserve officials’ messages amid doubts and concerns about whether aggressive interest rate hikes will continue.