Activist investor Nelson Peltz called off the proxy contest with the entertainment giant Disney (NYSE:DIS). The move came after Disney announced a strategic restructuring plan to accelerate growth and profitability.
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Disney announced organizational changes, including reorganizing the business into three core divisions – Disney Entertainment, Disney Parks, Experiences and Products, and ESPN.
Alan Bergman and Dana Walden will head the Disney Entertainment business. Moreover, it will include the entire portfolio of Disney’s entertainment media and content businesses globally, along with streaming.
DIS will implement the organizational changes immediately. Furthermore, Disney targets $5.5 billion in cost savings across the company.
Disney expects to reduce non-content costs by $2.5 billion. In that regard, it is eliminating approximately 7,000 jobs. Meanwhile, on the content side, it expects to generate a cost savings of about $3 billion over the next few years, excluding sports. In the streaming business, Disney will no longer provide long-term subscriber guidance. Meanwhile, it expects Disney+ to hit profitability by the end of Fiscal 2024.
What stands out is that the company intends to reinstate dividend payments by the end of the calendar year, which is a positive.
In response to these measures, Peltz said in an interview with CNBC that Disney plans to do everything he wants.
Earlier, Peltz listed Disney’s failed succession planning, elimination of dividends, over-the-top compensation practices, increased financial leverage, and flawed Direct-to-Consumer strategy as critical issues plaguing the company.
He also asked Disney’s management to deleverage its balance sheet and reinstate dividends.
What’s the Prediction for Disney Stock?
Disney stock has gained over 27% year-to-date. Meanwhile, it carries a Strong Buy consensus rating on TipRanks based on 19 Buys and three Hold recommendations. Moreover, analysts’ price target of $128.78 implies 16.69% upside potential.
