Bob Iger's on track to bring back the magic at Disney — allowing the stock to further soar

Published Thu, Feb 9 20234:02 PM ESTUpdated Wed, Mar 8 20232:29 PM EST

Walt Disney (DIS) CEO Bob Iger thrilled investors like us by laying out a comprehensive restructuring plan this week, initially sending shares of the entertainment giant soaring. But now comes the hard part: Executing on ambitious cost cuts and generating long-sought profits at Disney's beleaguered streaming unit. Shortly after Disney announced a fiscal first-quarter earnings beat Wednesday, Iger laid out a reorganization and restructuring strategy that includes slashing $5.5 billion in costs and eliminating 7,000 jobs . Those tough moves should ultimately make Disney's earnings power much stronger in the years ahead. Disney stock, which is up more than 26% year-to-date, soared more than 5% on the news before giving up those gains Thursday afternoon amid a broader retreat in equities markets. "In order for us to be more profitable as a company in this business, we have to reduce our expenses," Iger said in an interview with CNBC Thursday. "We have an opportunity to look at what it costs us to produce everything." DIS YTD mountain Disney (DIS) 1-year performance Iger on Thursday reiterated his commitment to stemming losses in Disney's direct-to-consumer operations — which includes streaming platforms Disney+, Hulu and ESPN+ — through reduced spending, while still maintaining quality content. "Now that we are even more focused on delivering profitability, we have to be more discerning in terms of what we say yes to," Iger said. And, he added, that means "saying no to things that don't deliver the value and saying yes to things that do." Disney on Wednesday maintained that Disney+ will start delivering profits by fiscal year 2024. Meanwhile, activist investor Nelson Peltz of Trian Partners, who had been waging a proxy battle to gain a seat on Disney's board, told CNBC Thursday he was satisfied with Iger's leadership around costs cuts and said "the proxy fight is over." Disney's board in November pushed out then-CEO Bob Chapek amid dismal streaming losses, while reappointing Iger to the top job . Iger, who previously served as Disney's CEO for 15 years before stepping down in 2020, has a solid track record of delivering profits at the company. The Club take Iger "listened to everything that needed to be done and upended everything that he felt was in the way of great profitability," Jim Cramer said Thursday. "The stock is going to continue on this path if he continues to execute," he added. Disney's solid earnings print on Wednesday once again showed Iger is the right man for the job. He showed he's serious about righting the wrongs of his predecessor by making difficult decisions like layoffs to focus on profitability and sustainable growth. We were also intrigued by how Iger wants Disney to get back to what it does best by leaning into its existing franchises and focusing less on general entertainment. We're glad that Peltz took the win and declared his proxy fight over because it allows management to focus on execution without the distraction of an activist. But while Disney shares have made a strong comeback since Iger returned as CEO, the company must now deliver on its plan. One positive quarter doesn't solve the existing headwinds that traditional media still faces. Disney is still transitioning towards direct-to-consumer, an area that many big media players are focused on as linear TV steadily declines and consumers seek out a la carte entertainment options. Ultimately, we think Iger will bring back the magic at Disney — and we reiterate our 1 rating on the stock, meaning we would buy shares of Disney here. (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.

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