Jim Cramer's plans for Disney stock after everything we learned from CEO Bob Iger

Published Fri, Jul 14 20236:52 AM EDT

Walt Disney 's (DIS) bumpy business turnaround is taking longer than expected. The tone of CEO Bob Iger's interview Thursday made us believe that the next earnings print — and maybe the quarter after that — won't be stellar. There are many competing priorities and struggling areas that are not great for earnings right now. But Iger is focused on his long-term vision of transforming the company which should materialize over time. Jim Cramer has often said recently that Disney is more of a 2024 story. That's why we're willing to wait and hold the stock even if it means enduring some short-term pain. "Bob is going to work the magic. He'll get it done," Jim said Thursday. "It's just that it's not going to be done as fast as we like." He added: "We are willing to suffer through it." DIS YTD mountain Disney YTD performance Jim said that if investors who don't own Disney were to buy it now they won't be happy with its fiscal 2023 third-quarter print, which is scheduled for after the close on Aug. 9. The consensus estimate, according to Factset, calls for fiscal Q3 earnings-per-share (EPS) at Disney of $1.04 — 5 cents lower than its June quarter a year ago. Revenue is expected to drop nearly 5% to $22.57 billion. Disney shares had certainly looked like they were headed in the right direction at the beginning of 2023. But since the February year-to-date high of $113 in the stock, it's been rough sledding. In Thursday's CNBC interview, Disney CEO Bob Iger — who will now stay in the top job through 2026 — said his efforts to restructure the beleaguered entertainment giant should prove "transformative," even as he cautioned that significant challenges remain in the near term. Iger had told CNBC in February that he did not intend to remain as CEO past 2024. He rejoined Disney back in November, replacing his hand-picked successor Bob Chapek, who was fired after a rocky tenure leading the company. Linear TV Disney's linear television business has been weighed down by a migration to streaming platforms and a weaker advertising market. "Disruption of traditional TV business happened at a greater extent than I was aware," Iger said at the annual Sun Valley conference of the media elite in Idaho. He evoked Walt Disney and the longevity of the company, which has survived and thrived through many disruption cycles. Iger suggested Disney's networks may not be a part of the franchise in the long term and he's "open to ideas" regarding a spin-off . Such a move would "improve the growth and multiple" and could be worth $10 per share on the stock, according to Wells Fargo. The analysts have a $147-per-share price target on Disney and an overweight (buy) rating. ESPN Iger also said he was open to selling an equity stake in ESPN, as it prepares to transition more of its sports content from the network to streaming. He added the company is looking into to further improve its ESPN offering through collaborations with strategic partnerships. Jim called fellow Club holding Apple (AAPL) a "natural partner" for ESPN given the release of the Apple Vision Pro mixed-reality headset. Jim had a chance to demo the Vision Pro and called it the "single best way to see a game that I've ever seen." Jim raised the idea of a potential Disney/Apple partnership since Iger was at the unveiling of the Vision Pro headset last month. Hulu As part of Disney's future streaming business, Hulu is expected to be a strategic asset. Iger said Disney will eventually buy Comcast 's remaining stake in Hulu, calling the streaming service an "attractive asset" to consumers and advertisers. Comcast is the parent of NBCUniversal and CNBC. In that February interview, he had left the door open to buying the rest of Hulu. "I don't think that Bob's going to get out of paying very little for Hulu," Jim said, which could lead to further pressure on the entertainment giant's balance sheet. However, Disney does plan to integrate Hulu content into its Disney+ app by the end of this year. Parks In another core business segment, Iger reiterated Disney's theme parks are still a competitive business, calling it a "very popular business and product." During the interview Iger brushed off the Flordia Gov. Ron DeSantis' feud, saying politics is "not a factor" for lower theme park attendance in recent months. DeSantis is seeking the 2024 Republican presidential nomination. The Disney CEO said he isn't concerned about fewer theme park goers who may not prefer to travel in the intense heat of the summer season in Florida and believes current pricing at its parks is at a great value to consumers. Jim regarded Iger's take on this front as a positive and sees Disney parks as an edge over competitors like Netflix (NFLX), which just have streaming. Bottom line We're encouraged by the optimism from Bob Iger's interview but the reality is that the business is quite challenged even more than what he first anticipated. Earlier this year, just months after Iger's return, Disney reorganized into three segments: Disney Entertainment, including most of its media and streaming, an ESPN division, and a parks, experiences and product unit. At the time, Disney also announced a major $5.5 billion cost-saving plan, which came with thousands of layoffs. Fast forward, Iger is now extending his contract for two more years — a sign that the turnaround requires a lot more time and implies that little should be expected from Disney for at least the next two quarters. The 72-year-old Iger, who now gets some more time to find a successor, must figure out a way to stop the blood-letting in streaming. The "transformative" work that Iger is undertaking to reshape the many businesses of Disney means the stock could be stuck in a holding pattern until there is more clarity on each one. Ultimately, though, we think Iger will get it right and the quality of Disney's assets will be better reflected in the stock price in time. (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 . 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Disney CEO Bob Iger speaking with CNBC's David Faber at the Allen&Co. Annual Conference in Sun Valley, Idaho.

David A. Grogan | CNBC

Walt Disney's (DIS) bumpy business turnaround is taking longer than expected.