Walt Disney Seeks Cost Cuts to Overcome Challenges

Walt Disney CEO Bob Iger is determined to address the current challenges faced by the company through increased cost-cutting. Analysts are cautiously optimistic about the potential positive impact on the stock, which has recently reached its lowest levels in nine years.

Earnings Report Boosts Disney Shares

Following a positive earnings report, Disney (ticker: DIS) saw its shares rise by 4.1% in premarket trading on Thursday, reaching $88.00. The headline surprise of the report was the announcement of an additional $2 billion in future cost savings, bringing the company's total cost-cutting target to $7.5 billion.

Analysts See Potential Bargain

Despite the recent slump in Disney stock, some analysts view this as a potential opportunity for investors. Seaport Research analyst David Joyce highlighted the company's mixed results but noted that the cost-cutting measures being implemented are paving the way for strong free cash flow growth in 2024, along with the likely resumption of dividend payments.

Joyce, who has a Buy rating on Disney stock, has set a target price of $96.

Dividend Resumption and Future Growth

The resumption of Disney's dividend payments had already been signaled earlier this year when CEO Bob Iger first introduced the initial cost-cutting target. The expected increase in free cash flow from $4.9 billion in the recently ended fiscal year to $8 billion in fiscal 2024 further supports the positive outlook for the company's future growth.

Challenges Ahead for Linear TV Channels and Streaming Model Transition

Despite positive developments, Iger still faces challenges concerning the future of linear TV channels like ABC and the transition to a fully streaming model for ESPN. Activist investor Nelson Peltz and his Trian Fund Management are anticipated to push for more radical changes in these areas, potentially leading to a proxy battle for board seats.

Analyst Tejas Dessai from exchange-traded fund provider Global X believes the performance of the TV vertical could stabilize as the election year approaches, making Disney stock even more attractive. Furthermore, political advertisers are projected to spend approximately $12 billion on linear TV channels during the 2024 election cycle, potentially boosting revenues.