Wells Fargo said Tuesday it expects Walt Disney (DIS) to “come out swinging” when the entertainment conglomerate reports its fiscal first quarter results early next month. At the Club, we are a little more cautious and will be looking closely at a detailed turnaround plan from CEO Bob Iger. When Disney releases its first-quarter results on Feb. 8, analysts expect earnings per share to be 80 cents per share, down 24.5% from the same period last year, while total revenue increased year over year. 7% should rise. year, to $23.35 billion, according to Refinitiv estimates. “We think DIS management will come out with the F1Q23 call to deflect criticism. We see a refocus on [intellectual property] instead of [subscriber targets], aggressive cost action and the potential for earnings upgrades. We like this setup in print,” Wells Fargo analysts wrote in a research note. The analysts predicted that Disney’s financial performance could improve if the company returned its focus to monetizing intellectual properties such as brands, characters and properties associated with the classic entertainment franchise. DTC) business — consisting primarily of its beleaguered streaming business — to boost profitability by the start of fiscal 2024. The streaming division includes Disney+, Hulu, and ESPN+. Disney launched an advertising tier for Disney+ in early December, but the company doesn’t expect to see it until later reaping the benefits this year Disney suffered an operating loss of $1.47 mi ljard at its DTC unit in the company’s fourth fiscal quarter — a dismal quarter that led the board of directors to move CEO Bob Chapek and returning veteran Disney executive Bob Iger to the corner office. The lead up to Disney’s next earnings release comes as Nelson Peltz, the CEO and founder of the activist investment firm Trian Partners, wages an ongoing proxy battle to secure a seat on Disney’s board. Peltz has said he wants to “work with Bob Iger and other directors to take decisive action that will result in improved operations and financial performance.” The Disney board unanimously decided earlier this month not to offer Peltz a seat, according to a recent SEC filing. Trian currently has a nearly $1 billion stake in Disney. Like other investors – including the Club – Trian has expressed frustration with Disney’s streaming losses, overspending and a share price drop of more than 44% last year. Shares of Disney are up more than 21% since early 2023. “Trian wants a higher share price and will push management to make decisions that it believes will achieve that goal,” said Wells Fargo. The bank reiterated its overweight or buy rating on Disney, with a price target of $125 per share. Disney closed Tuesday up 0.29%, at $106 each. Disney’s upcoming earnings will give Iger a chance to recalibrate the company’s strategy and address some of the pain points that worry investors, including excess spending, debilitating losses in streaming and a deteriorating balance sheet. If the company announces a robust and comprehensive plan to contain costs, it could help improve Disney’s long-term profitability and cause shares to rise. As we’ve argued for months, many companies, especially those in the technology sector, need to make a turnaround toward profitability, and we think cost reductions would be well received by the market. We remain cautiously optimistic that Iger, who helped drive value for an iconic company in his previous roles as CEO and Chairman, can right the ship at this critical juncture. But we also support Peltz joining the board because he would push for the cost discipline that the company so desperately needs. (Jim Cramer’s Charitable Trust is long DIS. See here for a full list of the shares.) As a subscriber to the TSTIME Investing Club with Jim Cramer, you receive a trade alert before Jim makes a trade. Jim waits 45 minutes after sending a trade alert before buying or selling a stock in his charity’s portfolio. If Jim has talked about a stock on TSTIME TV, he will wait 72 hours after the trade alert is issued before executing the trade. THE ABOVE INVESTING CLUB INFORMATION IS SUBJECT TO OUR TERMS AND CONDITIONS AND PRIVACY POLICY, TOGETHER WITH OUR DISCLAIMER. NO FIDUCIAL OBLIGATION OR DUTY EXISTS OR IS CREATED BY YOUR RECEIPT OF ANY INFORMATION PROVIDED IN CONNECTION WITH THE INVESTING CLUB. NO SPECIFIC OUTCOME OR PROFIT IS GUARANTEED.
Disney World’s Magic Kingdom in Orlando, Florida.
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Wells Fargo said Tuesday it expects Walter Disney (DIS) to “come out swinging” when the entertainment conglomerate reports first-quarter fiscal results early next month. At the Club, we are a little more cautious and will be looking closely at a detailed turnaround plan from CEO Bob Iger.
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