After reconciling with Disney’s (NYSE:DIS) board earlier this year, activist investor Nelson Peltz has once again locked horns with the entertainment giant and initiated a proxy contest. Peltz’ Trian Fund Management, holding approximately $3 billion in Disney stock, has proposed two independent director candidates, including Peltz himself and former Disney CFO James Rasulo, for election to the Disney Board of Directors.
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Let’s dig deeper.
Peltz vs. Disney
In January, Peltz initiated a proxy contest with Disney. Later, he made peace with Disney, stating that the company plans to do everything he wants. However, in October, a report from the Wall Street Journal highlighted that Peltz had renewed efforts to secure board seats at Disney, including one for Peltz. This development was unexpected as Disney was already making efforts to improve its financial performance. The company implemented organizational changes and job cuts. It expects to achieve roughly $7.5 billion in cost reductions through its restructuring plan.
While Disney took the initiative to improve its financials, Trian contended that the company has significantly underperformed its peers and its inherent potential. Highlighting Disney’s earnings, Trian added that the company’s EPS has decreased in recent years. Moreover, its EPS was over 50% lower than its peak, despite significant capital investment.
The asset management firm asserted that Disney stock has consistently underperformed its peers and the broader market over the past decade. Notably, Disney stock has gained about 47% in the past decade, compared to about 166% in the S&P 500 Index (SPX). Moreover, Trian emphasized that the company’s turnaround plan is not working. With this backdrop, let’s look at the Street’s recommendation for Disney stock.
Is Disney a Buy, Sell, or Hold?
Disney stock has underperformed the broader markets over the past decade. However, its efforts to rebuild the company and cut costs keep analysts optimistic about its prospects. With 18 Buy and six Hold recommendations, Disney stock has a Strong Buy consensus rating. Further, analysts’ average price target of $108.45 implies 15.45% upside potential from current levels.
