Cramer says Disney is a buy, and CEO Bob Chapek is the leader the company needs now

Published Thu, Apr 21 20223:45 PM EDTUpdated Thu, Apr 21 20223:49 PM EDT

Kevin Stankiewicz @in/kevinstankiewicz @kevin_stank

Disney (DIS) is a stock worth buying here, in part because we believe in management's ability to repair the media and entertainment giant's balance sheet. Bottom line We added to our Disney position Wednesday , as the company's shares, along with other streaming players, were caught up in selling related to Netflix 's disappointing results and huge stock plunge. We think Club members should have Disney on their purchase radar, too. "The stock should be bought, if not bought aggressively," Jim Cramer said on Thursday's "Morning Meeting." "Just be aware, not backing away. We are going forward," he added, noting Wednesday's close under $125 is a particularly attractive level for Disney. The stock was losing more than 2% in a down market Thursday. Disney's been in the headlines lately — most recently, as Florida Republicans vote to remove the company's special district status for Disney World. The legislature and Gov. Ron DeSantis are targeting Disney after the entertainment giant criticized the state's so-called "Don't Say Gay" law. We expect very little impact on Disney's earnings related to this political fight, which put Disney CEO Bob Chapek under scrutiny nationally and within his own the company for his initial silence over the bill. Chapek's eventual condemnation of the measure was met with criticism from both sides. The LGBTQ+ community believed it was not enough, while conservatives argued it is a social issue CEOs and companies should stay out of. The CEO Disney needs While acknowledging the misstep in Florida, Cramer said investors should give Chapek another chance because he's the kind of CEO Disney needs right now. Chapek is a strong operator who will pay down debt and grow Disney's profitability, which at some point would allow the company to reinstate its semi-annual dividend and stock buyback program. Disney's share repurchase program was halted in 2018 as the company prepared to buy 21st Century Fox. More on that deal later. Disney's dividend was suspended in 2020, shortly after the Covid pandemic hit and it has remained on pause. Under former CEO Bob Iger, Disney acquired 21st Century Fox, which Cramer called a "checkered asset" on Thursday's "Morning Meeting." Iger's 15-year tenure at Disney is generally well-regarded, but this particular acquisition — in our view — is far from the crown jewel on his resume. Disney took on billions of dollars of debt to finance the stock-and-cash deal, which was valued at the time at $71 billion. The transaction was completed in late March 2019 — and less than a year later, Iger stepped down as CEO. He was replaced by Chapek, who has since worked to implement a number of internal organizational changes . While buying 21st Century Fox gave Disney entertainment assets such as National Geographic and 20th Century Studios, it was an expensive deal. Cramer elaborated further in the Club's "Morning Meeting," saying, "The big issue had been, point blank, how much Iger spent on Fox, and that's what is keeping that balance sheet from being the balance sheet we like." He added, "Chapek will fix that. He is a fixer." "Let's get out of the 'blame Chapek' [game] and remember, he had nothing to do with the disastrous Fox acquisition that was made by Bob Iger," Cramer continued. "I'm going all in Chapek." The bigger picture We like Disney's stock for a number of other reasons, in addition to Chapek's leadership, including its theme parks division. In short, it's booming again after a pandemic hit, and we don't think Wall Street gives that business enough love. While the investment community was right to focus on Disney's growing streaming business during Covid, we think the company also is a reopening play as consumers get out and spend on experiences. Despite the Street's embrace of Disney's streaming ambitions, the stock is now trading lower than it did on April 11, 2019 — the day the company held a big investor day to lay out its vision for Disney+. However, Disney is more than just streaming company and a theme park operator. It an entire ecosystem of entertainment properties from movies to rides to merchandize that pull more and more people under the Magic Kingdom umbrella. Once there, they'll spend more time and more money. That so-called flywheel effect has been part of our thesis on Disney from the get-go, and we were willing to buy more shares Wednesday as Netflix cratered. We see Netflix as a more one-dimensional company that creates and distributes content, while Disney is a multidimensional play that ties all of its different businesses together. (Jim Cramer's Charitable Trust is long DIS. See here for a full list of the stocks.) As a subscriber to the CNBC Investing Club with Jim Cramer, you will 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 charitable trust's portfolio. If Jim has talked about a stock on CNBC TV, he waits 72 hours after issuing the trade alert before executing the trade. THE ABOVE INVESTING CLUB INFORMATION IS SUBJECT TO OUR TERMS AND CONDITIONS AND PRIVACY POLICY , TOGETHER WITH OUR DISCLAIMER . NO FIDUCIARY OBLIGATION OR DUTY EXISTS, OR IS CREATED, BY VIRTUE OF YOUR RECEIPT OF ANY INFORMATION PROVIDED IN CONNECTION WITH THE INVESTING CLUB. NO SPECIFIC OUTCOME OR PROFIT IS GUARANTEED.

Bob Chapek, CEO of Walt Disney

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