Disney Shocker: Bob Iger’s Back, Netflix Buyout Chatter Persists

You’ve heard of Return of the Jedi, but what about “Return of the CEO”? An otherwise calm Sunday night handed Wall Street a real barn-burner as Disney’s (NYSE: DIS) board of directors announced the firing of one Bob and the re-hiring of another.

Bob Chapek replaced Bob Iger in the CEO role in early 2020, a time when COVID-19 wreaked havoc on Disney’s theme-park businesses. The cord-cutting trend was also in full swing as Millennial and Gen Z consumers ditched cable and flocked to streaming services like Netflix (NFLX).

It was quite the plot twist, then, to discover last night that Disney’s board ousted Chapek and rehired Iger as CEO. Even Iger himself was apparently surprised by this, as he reportedly wrote, “It is with an incredible sense of gratitude and humility—and, I must admit, a bit of amazement—that I write to you this evening with the news that I am returning to the Walt Disney Company as chief executive officer.”

The above graphic gives the consensus analyst price target for DIS stock.

Runway to Netflix Buyout?

So, why did Disney’s board oust Chapek after just two and a half years? It might have something to do with the controversy over Florida’s “don’t say gay” law, but there’s probably more to it than that.

Most likely, Disney’s board feels that Iger can navigate the company through a tough transition. Disney can’t rely on revenue from broadcast and cable networks anymore. Younger viewers want streamed content, and Netflix poses a major threat to Disney.

Ironically enough, even after the devastation of COVID-19, Disney’s theme-park revenue was the bright spot in the company’s most recently reported quarterly earnings release. As families ventured out again, Disney’s theme-park business made up for the company’s struggling streaming division.

Disney’s in a tough spot, and clearly, Disney’s board didn’t view Chapek as the company’s savior. Chapek apparently expects Disney’s streaming business to be profitable by September of 2024, but that might be too little, too late. In Disney’s most recent quarter, Disney’s streaming unit posted a $1.47 billion earnings loss, which was more than double the year-earlier loss.

Disney didn’t specifically mention a Netflix buyout last night, but Iger’s return could signal a regime change that would favor such an acquisition. It would be a pricey proposal, no doubt, but purchasing Netflix would make Disney the leader in the U.S. streaming market as Disney already has a considerable backlog and pipeline of streaming content.

Of course, everything related to a possible Netflix acquisition is pure speculation at this point. Still, Iger’s return raises a few questions and a whole lot of possibilities as a potential buyout of Netflix could bring the magic back to Disney’s bottom line.

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