Disney Shareholders Hate This Ride

After Disney flubbed the most basic equation in finance, CEO Bob Iger needs to work some magic to move the stock price

- SHAWN TULLY

OF ALL THE GREAT companies renowned for providing strong, reliable shareholder returns in recent decades, it's hard to think of any that have gone from prince to frog as fast as Disney. Indeed the stock now sells at 40% below its level of four years ago, showing that the markets take a dim view of its prospects. The entertainment colossus turns 100 this year, and it's striving to accomplish what few enterprises save for Coca-Cola have achieved: remain a powerhouse into a second century. But make no mistake. Though Bob Iger was only away from the CEO perch for less than three years, he's returned to a new world. Tom Rogers, former president of what would become NBCUniversal Cable Entertainment, ex-CEO of TiVo, and now executive chairman of GameSquare, believes that streaming's low profitability versus cable will restrain Disney's earnings for a long time to come. "They're not putting forward a transparent enough analysis," he says.

On May 10, Disney issued a disappointing Q2 earnings report that sent its stock tumbling 9.5% over the next two days, erasing $20 billion in market cap, and killing all the gains since Iger returned in November. In Q2, its traditional TV earnings dropped by a shocking 35% from a year earlier. Losses from streaming declined from $1 billion three months earlier to $659 million, as Disney pared its inflated marketing costs. What troubled analysts and investors was the 4 million or 2% drop in subscribers since Q1.