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Former Disney CEO Bob Iger Is Back Again And Shareholders Are Loving It

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Key Takeaways

  • Bob Iger led Disney as CEO from 2005 through 2020, turning the company into a media juggernaut.
  • Under ex-CEO Bob Chapek, the company continued to grow until the most recent earnings report.
  • Iger is set to lead the company for just two years and will help find his replacement.

In a shocking announcement, former Disney CEO Bob Iger is returning to lead the entertainment giant after parting ways with Bob Chapek.

This news is surprising because Disney recently agreed to keep Chapek as CEO through 2025. What’s more, upon leaving Disney in 2021, Iger said he would not return. Still, he is taking the reins as CEO once again.

Here is what happened and the outlook for Disney moving forward.

History of Bob Iger leading Disney

Former and now-current CEO Bob Iger has been reinstated at Disney following the abrupt dismissal of Bob Chapek. Iger was a dynamic presence at Disney during his 15-year tenure and helped make the company an entertainment powerhouse.

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In 2020, Iger stepped down to take on the executive chairman role but handed the day-to-day operations over to Chapek.

Iger took Disney from a business worth $50 billion to over $250 billion during his time as CEO. Under his reign, Disney acquired Marvel, Pixar, The Muppets, Fox Entertainment, Hulu, and Lucasfilm. These acquisitions helped build on Disney’s strength as a media production company while strengthening its core brand of Disney characters.

Disney’s parks also saw improved performance during Iger’s initial run as CEO. He oversaw the opening of Disney’s first theme park and resort in China and appointed Bob Chapek to the position of chairman of Walt Disney Parks and Resorts. During this time, Disney also invested more than $24 billion in other attractions and its cruise ship line.

Iger’s legacy at Disney involved taking the large entertainment company and turning it into a juggernaut. Disney owns significant media properties and controls multiple media outlets due to Iger’s vision and drive.

Stock Performance Under Bob Iger

Bob Iger became Disney’s CEO in October 2005 when the stock price hovered around $23.82 per share. The stock fluctuated wildly in the early days of his holding the position, falling to $16.77 in early 2009.

However, after reaching that low, the stock climbed steadily. Its share price continued improving in value from 2010 through 2015, reaching $120 on July 31, 2015.

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Iger saw the stock hit a high of $148.29 in 2019, and it hovered around the $139 mark when he announced his departure. He left the company just before the pandemic, and Chapek ran the company up until November 21, 2022.

Disney’s performance under Bob Chapek

Ex-CEO Bob Chapek was hand-picked by Iger to replace him when he stepped down from the role in 2020. During Chapek’s time at Disney, he successfully guided the parks through the pandemic shutdowns and saw Disney+ gain millions of subscribers.

Disney’s board was so pleased with his management of the company that it renewed and extended his contract in late June 2022 to run through July 2025.

Disney board chair Susan Arnold stated, “In this important time of growth and transformation, the Board is committed to keeping Disney on the successful path it is on today, and Bob’s leadership is key to achieving that goal.”

The board’s sentiment towards Chapek changed when Disney reported a loss of $1.5 billion in the fourth quarter. Chapek planned to initiate a hiring freeze, lay off workers, and encourage employees to limit business travel, all normal moves for a company with huge revenue declines.

However, this wasn’t the driving force for Chapek’s downfall. Instead, his lack of definitive response to Florida’s Parental Rights in Education bill and his handling of Scarlett Johannson’s salary for the film “Black Widow ” led to the board seeking to replace him.

Employees staged walkouts in protest over the Parental Rights in Education bill, and Chapek issued a letter of apology stating that he let employees down by not being a stronger ally.

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Ultimately, Chapek made a statement condemning the bill, and Florida Governor DeSantis took a public stance against the company by introducing a bill to revoke Disney’s Reedy Creek Improvement District.

While this will likely have no major impact on Disney’s operation due to existing legislation protecting the district, it didn’t help Chapek’s image internally or externally. The board reaffirmed Chapek’s role as CEO after these issues wound down and normal operations resumed.

Disney’s direct-to-consumer revenue increased in the fourth quarter year-over-year by 8%. However, this missed analysts’ expectations. Net income from continuing operations increased by 1.89% year-over-year, while the company’s net profit margin fell by 6.98%.

The biggest surprise was a net change in cash, down over 1,099%. Earnings per share also missed analyst estimates by close to 47%. Shares in Disney closed at $98.88 on November 23, 2022, well under its high of $203.02 in March 2021.

Issues Disney faces moving forward

Iger is returning for two years, giving him very little time to plan a course of action and implement changes. The core issue Disney faces is making its streaming division profitable.

To date, its Disney+ streaming service has yet to turn a profit. Activist investors are pushing Iger to sell some streaming assets to cut losses and trim its $46 billion in long-term debt.

Another issue that concerned the company was Chapek’s continual increase in ticket prices and fees to attend Disney Parks. This move turned off the very loyal base of Disney fans.

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Beyond that, Chapek focused too much on Disney+ over other company divisions, causing an operational imbalance. He was also too quick to lay off Disney Cast Members during the early days of COVID, resulting in fewer people willing to return to work when restrictions were eased.

Bottom Line

Iger is tasked with restoring the balance between divisions, improving trust among park employees, and garnering board member cooperation. The board thinks Iger can walk this tightrope, but it remains to be seen if he can get Disney on the right path in just two years.

Whether or not Disney is a good buy for investors remains to be seen. If you are thinking about investing in Disney, Q.ai can help. Using artificial intelligence (AI), it predicts how investments might perform and rebalances portfolios according to those projections. Best of all, you can activate Portfolio Protection at any time to protect your gains and reduce your losses, no matter what industry you invest in.

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Source: Fox Business

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