Key points
- Walt Disney is facing a proxy war as billionaire Nelson Peltz aims to have Disney’s board of directors seats voted on April 3, 2024, at the shareholders meeting.
- Peltz claims the board of directors was aloof, unfocused and lacking accountability in his 133-page white paper, which includes Bob Iger’s CEO succession, to turn around the company with shareholders in mind.
- Disney said its direct-to-consumer (DTC) segment, which includes Disney+, will be profitable by the fourth quarter of 2024.
- 5 titles we like more than Walt Disney
The Walt Disney Co. NYSE: DIS shares rose to 52-week highs, but not necessarily due to material improvements in operations. There is an ongoing proxy war between billionaire activist investor Nelson Peltz of the Trian Fund and Walt Disney CEO Bob Iger. The battle comes down to control of the Board of Directors while shareholders will vote at the investors meeting on April 3, 2024.
How did proxy warfare emerge?
Nelson Peltz’s Trian Group owns more than $3.5 billion in Disney stock. Peltz spoke out against the Board of Directors who he says is responsible for the deplorable underperformance of the stock and operations. Peltz is vying for two seats on the council. Peltz says the board isn’t truly committed and needs to take responsibility. Trian started #RestoreTheMagic, stating: “…the root cause of underperformance is a lack of focus, alignment and accountability from the Board.”
The White Paper against Disney
Peltz noted the cultural shift within the company and his disgust with the company’s direction, which has been anchored in the “woke” culture that replaced many of its iconic characters, leading to box office disasters like The Marvels and Haunted Mansion. Simply put, Peltz believes that Disney has lost its way and its traditional values, pandering to a message of diversity and inclusion.
On March 4, 2024, Trian released a 133-page white paper, “White Paper: Trian’s Case for Change at Disney,” detailing Peltz’s plan to reorganize the company, which includes performance-based compensation with value for shareholders, reaching 15% Margin of 20% and replacing its CEO.
Trian Group appoints 2 board members
In a letter to shareholders, Trian Group released a statement: “To help ensure a better future for this great company, we believe that Disney needs new independent directors who have a shareholder mindset, deep and relevant experience and a sense of urgency. We have nominated two of these candidates, Nelson Peltz and Jay Rasulo, who have invested their own money in Disney stock and are committed to helping Disney.”
A history of participation on the board
Nelson Peltz has had a history of taking control of boards of directors, influencing companies primarily for the best for shareholders and customers. He is President of the Board of Directors of Wendy’s Co. NASDAQ: WED. He managed to take a seat The Proctor & Gamble Co. NYSE: PAGE AND Kraft Heinz NASDAQ: HNZ and turning the title. Peltz holds board positions at 20 other companies, schools, civic organizations and museums. Peltz commented that the fight is not about Bob Iger but about board oversight. Check the heat map of the sector on MarketBeat.
A turning point in the pipeline?
The day after the release of the Trian White Paper, Disney said it would exceed guidance expectations in a conference on March 5, 2024. Disney said it would exceed cash flow guidelines for 2024. ESPN has grown in terms of ROI and ratings in 2022, 2023 and the first quarter of 2024. Its direct-to-consumer (DTC) segment, which includes Disney+, is expected to be profitable by the fourth quarter of 2024. This has left investors to wonder if the timing and if Disney was bluffing in reaction to the Trian White Paper.
Alliances intervene
A number of large shareholders intervened in the proxy war. Vocal shareholders backing Bob Iger include Jamie Dimon, George Lucas, Blackwells Capital Abigail Disney, Roy Disney and 6 other family members. ISS shareholders, Egan-Jones and the CalPERS pension fund support Peltz. Disney shares rose 5% in the week leading up to the shareholder meeting. The question is whether it is pushed higher because of Peltz’s proxy war or the defense against it.
After the shareholder vote on April 3, 2024, Disney stock will reveal who is responsible.
Analysts intervene
Several analysts upgraded Disney’s stock ahead of the investor meeting. UBS reiterated its Buy rating and raised its price target on DIS to $140 on March 27, 2024. Analyst John Hodulik noted that they remain bullish on stocks driven by multiple potential upsides that can lead to higher yields than earnings at 25% for a 3-year CAGR. This will be driven by the Parks business, with the help of the Content and DTC segments. He commented: “We expect FCF of $9 billion in F24E (versus forecasts for around $8 billion), rising to $14 billion in F26E, supporting increasing buybacks, dividend growth and incremental investment. Parks continue to exceed expectations as new spending will increase capacity.”
Disney analyst ratings and price targets I’m on MarketBeat. Disney colleagues and competitor actions can be found with MarketBeat Stock Screener.
Daily bull flag breakout
The daily candlestick chart for DIS illustrates an ascending triangle breakout pattern to 52-week highs. The bullish move is driven by analyst improvements and the proxy war, which will conclude the shareholder meeting vote on April 3, 2024. The daily relative strength index (RSI) is in deep overbought territory in the 80 band. stocks could trigger a news sell reaction after the proxy vote. The pullback support levels are at $114.13, $106.80, $99.28, and $94.83.
Before you consider Walt Disney, you’ll want to hear this.
MarketBeat tracks Wall Street’s highest-rated and best-performing research analysts and the stocks they recommend to their clients on a daily basis. MarketBeat identified the five stocks that top analysts are quietly whispering to their clients to buy now before the broader market takes hold… and Walt Disney wasn’t on the list.
While Walt Disney currently has a “Moderate Buy” rating among analysts, top-rated analysts believe these five stocks are better buys.
View the five stocks here
MarketBeat analysts just released their top five short stocks for April 2024. Find out which stocks have the most short interest and how to trade them. Click the link below to see which companies are on the list.
Get this free report