It’s been a magical year for Disney. The stock is up nearly 35%. The movie studio already has six billion dollar box office smashes, with “Star Wars: The Rise of Skywalker” potentially becoming the seventh. And the Disney+ streaming service launched to rave reviews and made “Baby Yoda” a pop culture phenomenon.
The House of Mouse will probably not look to shake things up dramatically next year. More movies from Pixar, Marvel and the core Disney brand are on the docket – as well as continued investments in streaming and its trademark theme parks.
That should be enough to keep the momentum going, according to Michael Cuggino, an investment manager who owns Disney in the Permanent Portfolio and Permanent Portfolio Aggressive Growth mutual funds.
“I absolutely love Disney. It’s a core holding because it’s such a diversified entertainment company with the bulk, content and reach to be successful in streaming,” Cuggino told CNN Business.
Disney’s Hollywood dominance should help the company keep a leg up in the rapidly-changing digital media landscape and stay competitive with rivals such as NBC owner Comcast (CMCSA), Netflix (NFLX), Apple (AAPL), Amazon (AMZN), the newly re-merged ViacomCBS (VIAC) and AT&T (T), the parent company of HBO, Warner Bros. and CNN.
Wall Street analysts are pretty bullish about Disney+ as well.
“As we have vividly seen at Netflix, when moving in the right direction, momentum in subscriber growth makes those metrics investors’ sole focus…and the market is sensing big things are brewing in the quarters ahead,” said MoffettNathanson analyst Michael Nathanson in a report last month. Nathanson has a “buy” rating on Disney.
Halo effect from Disney+
The success of Disney+ may be helping other Disney properties, too. Disney-controlled streaming service Hulu, which the company offers as part of a bundle with Disney+ and sports streaming service ESPN+, has benefited from the Disney+ launch.
Evercore ISI analyst Vijay Jayant pointed out in a report last month that Hulu app downloads during the first three days of the Disney+ launch hit their highest levels since Disney took over operational control of Hulu in May.
“A few early technical hiccups aside, it was clearly a pretty, pretty, pretty good start for Disney+,” Jayant wrote. He has an “outperform” rating – essentially a buy – on Disney stock.
But 2020 could still be a somewhat bumpy year for Disney.
The company will need to continue integrating the 21st Century Fox movie studio and TV assets it acquired from Rupert Murdoch’s Fox Corp. (FOX) in a more than $70 billion deal that brought “The Simpsons” into the Disney portfolio.
Then there’s the looming succession question. Iger’s contract was extended two years ago to the end of 2021, when he will be 70. Will Disney once again push back Iger’s retirement date for a fifth time?
“If Iger decided to change his mind again, nobody would have a problem with that,” Cuggino said.
If that doesn’t happen, Disney should ideally name a successor, or strongly signal who that person might be, next year he added.
Many candidates in the House of Mouse to take over after Iger
Could it be Disney’s widely regarded consumer chief Kevin Mayer? Chief Financial Officer Christine McCarthy? ESPN head Jimmy Pitaro? How about Fox exec Peter Rice, who now heads Walt Disney Television? They are all Disney insiders with strong track records and would represent a seamless transition from Iger to Disney’s next growth phase.
Or perhaps Disney launches an external search? Facebook (FB) COO Sheryl Sandberg – who used to be on Disney’s board – has often been mentioned as a dream candidate.
Disney was not immediately available for comment about succession plans.
Disney shouldn’t hire an outsider, Dave Harden, president and chief investment officer of Summit Global Investments and a Disney shareholder, told CNN Business.
“I would not be shocked if they went with an external candidate, but I’d prefer that Disney go with someone who already knows the strategy, has been along for the ride and has served under the tutelage of Iger,” Harden said.
Cuggino agreed that most investors would prefer an insider, even though many media and tech execs would probably love the job.
Investors shouldn’t be concerned that there’s no obvious successor yet, he added. After all, there were doubts whether Iger could keep the magic going when he was promoted to replace Michael Eisner in 2005.
“There were a lot of questions about whether Iger was the right guy nearly 15 years ago. Is he too much of an insider? Can he handle the pressure?” Cuggino said.
Iger did not disappoint the Disney faithful. His last great act may be helping to choose the person that can act as a steadying…Force…at Disney for the next decade.