Yahoo Finance Disney faces renewed pressure from Nelson Peltz after stock hits 9-year low
Disney (DIS) stock hit a new nine-year low last week as the company grapples with declines in the TV business, a potential asset sale, and succession questions.
The company now faces added uncertainty after activist investor Nelson Peltz launched a renewed attack on the media giant.
Yahoo Finance confirmed Peltz will seek multiple board seats, including one for himself, after his hedge fund Trian Fund Management boosted its stake in the company, which is now valued at a reported $2.5 billion for more than 30 million shares. The news was first reported by The Wall Street Journal late Sunday.
Disney's stock rose about 2% on Monday following the news but was still trading near a 52-week low.
"It puts a lot of pressure [on Disney]," Needham analyst Laura Martin told Yahoo Finance Live on Monday.
She added Peltz will be "good for shareholders" in the short term given his sharp focus on delivering value through more immediate strategies like asset sales.
"Nelson Peltz is going to try to disaggregate and sell off pieces much more aggressively, which will take better care of public shareholders in the near term," she explained, adding that "Bob Iger's vision is more of a five-to-10-year vision."
Martin said she's not sure if Peltz will ultimately need board seats "or just has to threaten a war" given his massive stake in the company.
"He owns enough that I don't even know if he needs to get board seats to actually get something done here and make money on his investment. We'll see. But worst case, you'll have an activist in the boardroom who will be much more short term focused than anyone currently on the board."
Peltz ended his previous proxy battle against Disney in February after the company committed to various cost-cutting initiatives, which included layoffs, in addition to restructuring the business, establishing a succession planning committee, and revealing plans to reinstate its dividend by the end of the calendar year.
Peltz had said Iger needed to execute on his plan — but, with the stock trading at just below $85 a share, and falling more than 20% since the end of Peltz's previous proxy battle, it's clear more needs to be done.
Has Disney's share price bottomed out?
The company's parks business is slowing. Its linear TV division is declining, and so are subscribers to its flagship streaming service Disney+. Direct-to-consumer has yet to hit profitability while the media giant also seems to have lagged competitors at the box office. Advertising has also been a challenge this year.
In the midst of those headwinds, the Hollywood strikes and Disney's highly publicized Charter dispute have highlighted media's shifting economics as traditional cable declines while the less profitable streaming business takes over.
Iger has attempted to reset the company — from putting Disney's linear assets up for sale and searching for a strategic partner for ESPN's streaming offering to partnering with sports gambling company Penn Entertainment (PENN) and potentially selling off its Star India business.
He's also committed to raising streaming prices for the second time this year, upping the monthly price of the company's ad-free Disney+ and Hulu plans by more than 20%. Those price hikes will officially hit on Thursday.
Macquarie analyst Tim Nollen, who has a Neutral rating on the stock and $94 price target, said Disney's future hinges on two near-term catalysts: direct-to-consumer (DTC) and ESPN.
"One is how quickly can they get DTC into profitability. I don't know how much more they can do beyond what they are doing," he said. "And then next what is what can they say about ESPN? I just don't think they're ready to say anything yet."
Nollen said it's likely the NBA's upcoming rights renewal deal will be a big factor in the streaming transition of ESPN, in addition to pricing the service and determining agreements with pay TV operators.
"Disney is doing the right things, I just think it takes time," he said, noting he still sees long-term value in the stock despite the overarching uncertainties.
He's not alone. Bernstein analyst Laurent Yoon initiated coverage on Disney last week with an Outperform rating and $103 price target, citing bullishness surrounding Disney's DTC transition, in addition to its expected buyout of Hulu from Comcast (CMCSA).
Ultimately, Nollen said he'd "like to think [shares] have bottomed out" but that there are still potential negatives that could drive the stock lower such as a worsening ad market, possible recession, lower park attendance, or a delay in the timeline of achieving DTC profitability, which is currently expected by the end of fiscal 2024.
"Still, it's not like Disney's sitting back doing nothing," Nollen said, noting Disney was an early mover in the streaming space.
"Nelson Peltz just wants to shake things up and move things faster. I don't know if that can be done," he continued. "It's not like Disney is being complacent by any means. It just is big and complex. And there's a lot they have to work through to get there."
With additional reporting from Brian Sozzi
Alexandra Canal is a Senior Reporter at Yahoo Finance. Follow her on Twitter @allie_canal, LinkedIn, and email her at alexandra.canal@yahoofinance.com.
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