Shares of Disney surged as the market opened Thursday after the entertainment giant reported better-than-expected quarterly results and said it would slash about 7,000 jobs.
CEO Bob Iger told investors that the cuts were part of an effort to reduce costs by $5.5 billion, including $3 billion on the content side and another $2.5 billion in non-content spending.
The moves were widely applauded by Wall Street.
Shares added $4.83, or 4.3%, to $116.61 in morning trading, their highest point since August.
Disney stock is up about 24% since the start of the year, but remains down about 30% from its year-ago peak of $157.50.
Disney CFO Christine McCarthy said during a conference call with analysts that the cost cuts will enable Disney to declare a “modest” dividend later this year. The company’s dividend suspension is one of Peltz’s major complaints.
Iger returned as CEO in November after his successor Bob Chapek’s disappointing performance raised concerns and set restructuring in the works. The combination of stronger results and the reorganization plans prompted at least a half dozen analysts to raise their price targets on the shares.
Wells Fargo has one of the highest targets, with analyst Steven Cahall upping his to $141 from $125, implying he now expects Disney stock to rise about 26% in 2023. He kept an “Overweight” rating, the equivalent to “Buy” on the stock based on Iger’s plan for cutting costs plus rationalizing content and streaming.
The firm views Disney as an execution story with a “cleaner catalyst path,” according to TheFly.com. Cahall wrote that the results provided “everything the bulls wanted.”
Barclays analyst Kannan Venkateshwar was less enthusiastic, raising the firm’s price target to $110 from $98 and keeping an “Equal Weight” or “Neutral” rating on the shares.
Venkateshwar wrote that operating income came in better than expected thanks to theme park performance, but investors focused more on the strategic shifts Iger outlined. Disney did present a new framework to guide expectations, which should offer better visibility with respect to costs and margins, but it likely comes with trade-offs on revenue growth, the note warned. That “may be tough for investors to underwrite” at the present stock price.
Bank of America analyst Jessica Reif Ehrlich raised her price target on Disney to $135 and kept a “Buy” rating on the stock.