Bob Iger is back. He's the steady hand that Disney needs as CEO to get it back on track

Published Mon, Nov 21 20229:09 AM ESTUpdated Mon, Nov 21 202211:35 AM EST

Kevin Stankiewicz @in/kevin-stankiewicz-b5593466 @kevin_stank

Bob Chapek is out as chief executive of Disney (DIS), the company said late Sunday, a leadership shakeup that nearly two weeks ago we began to champion as necessary to get the entertainment giant back on track. We're pleased to see Bob Iger is returning to the CEO role nearly three years after he vacated it , and the market agrees as Disney shares surged as much as 9% in premarket trading Monday morning to over $100 each. As of Friday's close, the stock was down 35% year to date. Iger's reappointment, which is effective immediately, also comes about 11 months after he stepped down as Disney chairman . Chapek was Iger's hand-picked successor, but investor confidence in Chapek had begun to wane in recent months as Disney shares struggled to find momentum and losses in its Direct to Consumer (DTC) streaming division mounted. After Disney's terrible fiscal fourth-quarter results Nov. 8 , the Club felt no choice but to call for Chapek's ouster. Jim Cramer doubled down on the need for a CEO change Thursday during the Club's November "Monthly Meeting," correctly predicting that Disney shares would surge on news that Chapek was replaced. Disney said Chapek stepped down. Chapek's tenure was set to run to July 2025, after Disney's board unanimously approved a three-year contract extension in late June . Iger has committed to serve two years as CEO and agreed to help the board develop his eventual replacement, according to Disney. Iger previously led Disney from 2005 to 2020. Wall Street analysts are generally viewing Iger's return positively, albeit rather unexpectedly. Bank of America reiterated its buy rating and $115 price target, writing in a note to clients that Iger at the helm "could significantly boost investor sentiment and introduces a potential upcoming catalyst in the form of a new strategic direction." Meanwhile, media-focused research firm MoffettNathanson upgraded Disney to the equivalent of a buy from hold and boosted its price target to $120 from $100. "What I find about Bob Iger is he's honest and direct. It's going to be a different regime than when he first started. he's going to have to cut things. he's going to have to look at the portfolio and really make some hard decisions. But that's what has to be done now. The business is in a different place," analyst Michael Nathanson told CNBC on Monday. JPMorgan came out with a mid-morning note of caution, saying they're "reluctant to recommend chasing" the stock on concerns that there are not any quick fixes for the issues facing the company, especially in DTC. Analysts there are, however, keeping their equivalent to a buy rating on Disney. The Club's take Iger will be the steady hand Disney needs in this critical moment. He is a well-respected, effective communicator. We expect him to be much more thoughtful in terms of navigating cord-cutting at the company's media division and positioning the streaming business toward profitable growth. Iger also will have to fix the issue of Disney's balance sheet. When Disney reported that awful quarter earlier this month that showed its expenses and operating losses were too high, we voiced our frustration about Disney leadership. The quarter made it clear that Chapek's strategy was not working and a change at the top was necessary to return this great franchise to its winning ways. If you listened to our November "Monthly Meeting" last week , you would have heard how passionate we were about Chapek's removal being in the best interest of shareholders. We said Disney shares would immediately pop on his firing because he had shown he was too incapable of running a company of Disney's scale. We are pleased to see the board listen to its shareholders and make a switch at the top. As good as Chapek was operating the theme parks through the Covid pandemic and into the reopening with record margins, Disney at its heart is a creative company and he did not have the creative chops to lead. In the past, we were willing to give Chapek the benefit of the doubt due to his experience operating the company's profitable theme parks division. We also recognized that external complications such as the Covid pandemic were out of his control, and even some internal challenges — such as Disney's debt-laden balance sheet — were inherited. However, as time went on, it became clear Disney's operational focus was lacking, especially on the streaming side, and that a course correction was needed. As for past criticism of the Fox deal under Iger, perhaps his surprise return can help fix that troubled integration. On Monday's "Morning Meeting," Jim said Iger reassuming the CEO job calls to mind Howard Schultz returning on an interim basis to Club holdings Starbucks (SBUX) earlier this year, replacing the chief executive who had succeeded him back in 2017. (It's worth noting that Kevin Johnson at Starbucks retired as CEO). Schultz came in with a clear focus to right the ship and make sure the coffee giant was in tune with the latest customer trends and employee morale. Schultz's transformation plan was a key reason we invested in Starbucks in August, and so far it seems to be paying off. We think Iger could have a similar impact at Disney. Remember, there's a lot at stake here with two activist investors involved in Disney and pushing for changes. Third Point's Dan Loeb wants Disney to buy the rest of Hulu. Trian's Nelson Peltz wants a board seat and was against rehiring Iger, according to The Wall Street Journal. (Jim Cramer's Charitable Trust is long DIS. 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Bob Iger, CEO, The Walt Disney Company

Scott Mlyn | CNBC