Walt Disney Co. shares surged to their best percentage increase in nearly two years Monday after the surprise weekend announcement that former chief executive Bob Iger was returning to lead the media giant after Bob Chapek’s ouster. Chapek had taken over for Iger in February 2020, having brought experience as the head of the company’s parks, experiences and products business. But some analysts questioned his ability to manage the company’s media operations as the broader streaming industry eventually seemed to necessitate a more rational mindset.
rallied 6.3% Monday — their largest percent increase since December 11, 2020, when they rose 13.6% — and enough to pace the Dow Jones Industrial Average’s
and S&P 500 index’s
gainers. The media and entertainment giant’s stock had fallen more than 28% from the time that Chapek took over as CEO through Friday’s close, while the S&P 500 rose almost 27% during that stretch. “With limited experience on the media side of Disney, Mr. Chapek had done an expert job in managing Disney’s Parks through the challenges created by the COVID-19 pandemic, but he appeared anchored to the streaming strategy laid out in the December 2020 Investor Day which had created, we felt, unrealistically high subscriber targets without a grasp for the underlying return on investment,” wrote MoffettNathanson analyst Michael Nathanson, who added that Disney “barely wavered from these goals until recently.” Nathanson upgraded Disney’s stock to outperform from market perform upon the news of Iger’s return for a two-year stint. He noted that Iger has experience turning around Disney’s film business by reorienting it after the company had waded too deep into general-entertainment films. “We would hope and expect that Mr. Iger examines the investment plans at Disney+ and re-focuses their investment on areas of franchise strength and away from broader general entertainment content,” Nathanson wrote. “In other words, Disney+—and Disney’s shareholders—could probably do better with fewer end-state subscribers made up of super fans willing to pay high RPU [revenue per user], which would generate much higher margins.” He also offered that Iger could have a less “sanguine” view of ESPN than Chapek, g …