Walt Disney once said, "A kick in the teeth may be the best thing in the world for you."
He was speaking about how adversity can help develop character. That rather painful life lesson is being put to the test as the Disney (DIS) entertainment juggernaut he founded over a century ago gears up for its April 3 shareholders meeting.
The extreme dental work is courtesy of billionaire investor Nelson Peltz, whose company Trian Fund Management owns about $3 billion worth of Disney stock.
He has been in a proxy battle for a seat on Disney’s board of directors for over a year, and the fight has been tensing up over the past few months.
Trian announced in January last year that Peltz, its CEO, is seeking a seat on Disney’s board because he believes that the company is “in crisis.”
Days after the announcement, Disney pushed shareholders not to elect Peltz due to his lack of skills and experience in media.
Peltz said recently that he believes the messaging in Disney movies has become too “woke,” according to a recent interview with the Financial Times.
Analyst believes in Bob Iger
He also stated that he “wasn’t that crazy” about Disney’s recent movies “The Marvels” and "Black Panther,” which both appear to represent Disney’s push towards diversity, equity, and inclusion.
Blackwells Capital is also pushing three candidates to take seats during the shareholder meeting, though Reuters has reported that the firm has supported its current direction.
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George Lucas, who gave us "Star Wars", recently put out a statement in support of the company's current leadership team, led by CEO Bob Iger, saying “Creating magic is not for amateurs.”
"When Bob recently returned to the company during a difficult time, I was relieved," he said. "No one knows Disney better."
Peltz claims he is not trying to fire Iger but wants to help him.
TheStreet Pro columnist Stephen Guilfoyle said that Disney's stock "will trade sideways for a period of time and then, in my opinion, continue to recover."
"I remain a Nelson Peltz fan, but also believe that CEO Bob Iger is capable of maintaining the company's momentum with or without Peltz," he wrote on March 26.
Guilfoyle boosted his price target for Disney to $144 per share from $120.
"With my old target reached, my MO is to take at least a small profit at target and go higher," he said. "That is what I will do.'
Wall Street analysts have rallied around the Mouse House in the last few days.
On Monday, Barclays analyst Kannan Venkateshwar upgraded Disney shares to overweight from equal weight and boosted his price target on shares to $135 from the prior $95.
"The incessant Disney-related news flow ahead of the proxy vote has dominated investor considerations since last quarter's earnings, and we expect this to continue helping the stock near term," the analyst said, according to Investing.com.
In January, Disney reached a preliminary agreement to sell a controlling interest in Star India and set the value of the Indian media giant far below what it was worth when first acquired five years ago.
Disney valued Star India at $3.9 billion ahead of the planned sale to Viacom18, formed in partnership between billionaire Mukesh Ambani’s Reliance Industries, Bodhi Tree Systems and Paramount Global, the Wall Street Journal reported.
Disney well-positioned, analyst says
When the sale was tentatively agreed on in December, Disney reportedly valued the company at around $10 billion, while Reliance estimated it somewhere between $7 and $8 billion.
Raymond James analyst Ric Prentiss reiterated his outperform rating on Disney. He raised his price target to $128, from $112, as he adjusted his model for recent company commentary and the announced sale of a majority stake in its India business.
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“We believe Disney’s assets position it well to navigate the transition from the profitable, but declining, linear TV business to the currently unprofitable, but growing, streaming business, which the company expects to become profitable by FYE24," the analyst said.
Prentiss also believes that Disney has the strongest intellectual property portfolio in media.
This in turn, he said, drives all the business units — studios, linear networks, streaming, "and of course the very large and cash generating Experiences (e.g., parks, cruises, consumer products) business that Disney is investing in significantly with about $60 billion of expected capital expenditures over the next decade."
Seaport Research analyst David Joyce raised the firm's price target on Disney to $127 from $117 while keeping a buy rating on the shares.
The firm said a “number of factors” point to Disney “turning the corner," Joyce wrote in a research note.
Parks should continue demonstrating success with pricing offsetting labor cost increases and plateauing but managed, attendance, the analyst said.
"Theatrical releases and operating losses should bottom this year from the prior senior management strategy, then start to improve," Joyce said, "more college sports rights have been renewed and expanded, and the very public activist shareholder battle leading up to this year's annual meeting is almost behind it."
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