The DOW Just Hit A Record High, So Why is Disney Still Struggling?

The end of the year is nearly upon us, and the stock market is having an historic rally. After a bumpy first 10 months of the year, the DOW Jones Industrial Average has been on an incredible upswing these last two months, gaining nearly 5,000 points. For the first time in history, the DOW broke 37,000. Most of this increase came as inflation settled, the Federal Reserve decided to keep interest rates steady, and strong employment numbers.

But despite these historic numbers, the Walt Disney Company’s stock still seems to lag. Despite Disney’s CEO Bob Iger’s rosy outlook at his third quarter meeting with Wall Street investors, many are still convinced there are significant fundamental problems with Disney that Iger has yet to address. These problems keep Disney’s stock in a holding pattern that will likely continue into the new year.

In March 2021, Disney stock sold for nearly $200 a share. However, it will close 2023 at under $95 a share. Despite a small bump in the past 45 days, most analysts on Wall Street are concerned about Disney’s path forward. Here are two significant issues Iger will have to address in the new year:

Activist Investor

For the second time this year, activist investor Nelson Peltz is launching a proxy battle against Bob Iger and the Disney Board. But this time, Peltz has more firepower. He agreed to a deal with fired Marvel Studios head Ike Perlmutter that gave Peltz’s Trian control over Perlmutter’s shares of Disney stock. Peltz announced he would nominate himself and former Disney CFO James Rasulo to the Disney Board.

Peltz said in a statement:

For shareholders, this subpar performance has destroyed value. Disney stock has underperformed the stocks of Disney’s self-selected proxy peers and the broader market over every relevant period during the last decade and during the tenure of each non-management director. Furthermore, it has underperformed since Bob Iger was first appointed CEO in 2005 – a period during which he has served as CEO or Executive Chairman (directing the Company’s creative endeavors in this role) for all but 11 months. Disney shareholders were once over $200 billion wealthier than they are now.

Disney responded to Peltz by offering all shareholders a $.30 a-share stock dividend, but it will not be enough to hold off Peltz this time. This fight will continue into the new year, which causes uncertainties in the boardroom. And there’s nothing investors hate more than uncertainty.

Movies and Television

This could be a historically bad year for the Walt Disney Studios. When the year is all said and done, Disney could have five movies lose more than $100 million: Ant-Man and the Wasp: Quantumania (2023), Indiana Jones and the Dial of Destiny (2023), Haunted Mansion (2023), Wish (2023), and The Marvels (2023). And there doesn’t seem to be an end in sight.

Bob Iger tried to stop the bleeding by changing the 2024 release schedule in the hope that some of Disney’s new releases could be rewritten for better quality. Iger has admitted that fixing Marvel is his top priority, but with Jonathan Majors facing a jury this week on domestic violence charges, there may not be an easy fix. Majors was set to play Kang the Conqueror, the villain in the next phase of the MCU.

Iger has an offer on the table of $10 billion for ABC, but he hasn’t shown any interest in selling the network yet. With cable TV dying, Iger has few options for most of Disney’s networks. Disney’s one profitable network, ESPN, is facing an uncertain future. Iger said that ESPN would be jumping to a streaming service model, and ESPN jumped into sports gambling earlier this year. But all of these changes at ESPN require money and can only be made if ESPN continues to own the rights to all major sports in America. And the cost of those exclusive rights continues to rise, and ESPN will have to renegotiate its contract with the NBA soon.

Iger’s Choices

Bob Iger has already said that to increase revenue, the Walt Disney Co. has to cut spending, but he has yet to outline exactly what that will look like across the company. In films, he has said that Disney will make fewer films but of better quality.

Will that be enough to satisfy analysts in the New Year? That seems unlikely. But this is why Iger is back in the big chair: to make those tough decisions. And there will be plenty of those in 2024.

We will continue to update this story at Disney Fanatic.