Disney's Short-Term Hurdles Creates Long-Term Opportunity

Disney DIS has been trading on a high from its new direct-to-consumer streaming platform Disney+ since it was announced last April. Now the stock is down to its lowest price since the announcement due to corona concerns and its abrupt change in leadership on Tuesday evening (February 25th), which has left investors uneasy.

<p class="canvas-atom canvas-text Mb(1.0em) Mb(0)–sm Mt(0.8em)–sm" type="text" content="Leadership Change” data-reactid=”19″>Leadership Change

Bob Iger, Disney’s CEO for the last 15 years, had previously planned to step down from the helm when his contract was up in 2021, but decide that now was as good a time as any to hand over the reins to Bob Chapek, who appears to be the perfect man for the job. Iger had led the company through two of its most significant transitions of this century: The acquisition of 21st Century Fox and the launch of Disney+, which is expected to be the future of this enterprise.

<p class="canvas-atom canvas-text Mb(1.0em) Mb(0)–sm Mt(0.8em)–sm" type="text" content="According to the Disney’s press release, “Robert A. Iger assumes the role of Executive Chairman and will direct the Company’s creative endeavors, while leading the Board and providing the full benefit of his experience, leadership and guidance to ensure a smooth and successful transition through the end of his contract on Dec. 31, 2021.”” data-reactid=”21″>According to the Disney’s press release, “Robert A. Iger assumes the role of Executive Chairman and will direct the Company’s creative endeavors, while leading the Board and providing the full benefit of his experience, leadership and guidance to ensure a smooth and successful transition through the end of his contract on Dec. 31, 2021.”

Bob Chapek has been with Disney for the past 27 years and has been in a leadership position in a wide variety of different segments, getting exposure to the whole business. Below is an excerpt from last night’s press release that highlights Chapek’s background before being Chairman of Disney Parks, Experiences, and Products.

<p class="canvas-atom canvas-text Mb(1.0em) Mb(0)–sm Mt(0.8em)–sm" type="text" content="“From 2011 to 2015, Mr. Chapek was President of the former Disney Consumer Products segment, where he drove the technology-led transformation of the Company’s consumer products, retail and publishing operations. Prior to that, he served as President of Distribution for The Walt Disney Studios and was responsible for overseeing the Studios’ overall content distribution strategy across multiple platforms including theatrical exhibition, home entertainment, pay TV, digital entertainment and new media. He also served as President of Walt Disney Studios Home Entertainment, where he spearheaded the successful “vault strategy” for the Company’s iconic films and transformed the primary format of home entertainment from DVD to Blu-ray.”” data-reactid=”23″>“From 2011 to 2015, Mr. Chapek was President of the former Disney Consumer Products segment, where he drove the technology-led transformation of the Company’s consumer products, retail and publishing operations. Prior to that, he served as President of Distribution for The Walt Disney Studios and was responsible for overseeing the Studios’ overall content distribution strategy across multiple platforms including theatrical exhibition, home entertainment, pay TV, digital entertainment and new media. He also served as President of Walt Disney Studios Home Entertainment, where he spearheaded the successful “vault strategy” for the Company’s iconic films and transformed the primary format of home entertainment from DVD to Blu-ray.”

<p class="canvas-atom canvas-text Mb(1.0em) Mb(0)–sm Mt(0.8em)–sm" type="text" content="The Opportunity” data-reactid=”24″>The Opportunity

The coronavirus has been a big drag on Disney’s Parks and Experiences with theme parks in Hong Kong and Shanghai being closed since the end of January. If the virus continues to spread, Disney will likely have to close down more parks and suspend its cruise liners. Parks, Experiences, and Products make up 35% of Disney’s revenue and 58% of its operating income.

There could be a significant decline in profitability from this substantial income contributor, but this should only be a short-term issue. Its full impact will only be realized once the coronavirus has run its course, which has no timeline, something that is weighing on investors’ minds. The newly named CEO, Bob Chapek, who had been heading the compromised business segment for 5 years, is the man we want at the helm to weather the corona crisis.

Disney is a stock that I currently own, and I’m planning on doubling down. I don’t know how much more the markets will allow DIS to slide before they start buying this stock up (at a discount, let me add). I don’t believe the coronavirus will have a lasting impact on Disney’s profitability beyond the short-term, and as a long-term investor, I like these shares’ at their current price. I will like even more as if it continues to fall

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