Iger Plus: What To Make Of The Disney CEO's Early Departure, Bob Chapek's Accession

As Disney focuses much of its future on streaming with Disney+, the company's new strategy will be overseen by Iger+.

Bob Iger's surprise announcement that he is stepping down as CEO of Walt Disney Co DIS seemed to come at a strange time. It comes just as Disney is making one of its biggest transformations ever: moving from a company that puts iconic content on the big screen to a company that also streams content into homes.

But while Iger is stepping down from day-to-day overall leadership, he will remain executive chairman, focusing intently on overseeing content. Having strong content is critical to success in an increasingly competitive streaming landscape.

Bob Chapek, who has run the company's theme parks arm, will take over as CEO. Iger was expected to step away when his contract runs out in 2021.

The reaction from many media industry observers, aside from surprise, was a bit of confusion. But sell-side analysts said having Iger laser-focused on content in light of its importance makes sense and reaffirmed confidence in the stock.

See Also: Bob Chapek Is The New CEO Of Disney As Bob Iger Steps Away

What Now For Disney?

Disney+ has done better than expected since launching in November. But if the company's central gambit on home delivery of content through both Plus and the Hulu streaming service is going to succeed in the long term, Disney's creative output has to be strong, Morgan Stanley's Benjamin Swinburne said.

Freeing up Iger to focus solely on the content could be critical to that success.

"By keeping Bob Iger on as Executive Chairman and (perhaps more importantly) as director of the company's creative endeavors, Disney can better maximize the unique window of opportunity in front of it to expand its content reach globally," Swinburne wrote in a note. He reiterated an Overweight rating on Disney with a $170 price target.

Iger himself made it clear in a CNBC interview that was exactly the plan.

His new priority of late has been "making sure the creative pipeline of the company was really rich, that all of our creative engines were working extremely well and I wanted to spend more and more of my time on that," Iger said.

"But the only way that I was able to do that was to give up the day-to-day running of the company."

See Also: Here's Why Disney CEO Bob Iger Is Time's Businessperson Of The Year

Confusing To Some

Not everyone saw it that way. Some media industry watchers were baffled that Iger's successor would have a background running the company's theme parks business rather than coming from the company's clear new focus - the world of streaming media.

Many had expected Kevin Mayer, who has been running Disney's streaming services, to be the next CEO as part of that ongoing transformation to a direct-to-consumer content provider, according to CNBC's Alex Sherman.

"Disney’s future is supposed to be streaming — not theme parks," Sherman wrote.

Obviously Disney has a reason behind what it's doing -- but choosing Bob Chapek over Kevin Mayer as Disney's next CEO is at least superficially strange because it confuses the company's narrative. And Disney is pretty good at storytelling: https://t.co/wR4F7bX0GU

— Alex Sherman (@sherman4949) February 25, 2020

Chapek Liked By Analysts

But Chapek's elevation got good marks from analysts, as did the certainty the move appeared to provide.

"Mr. Chapek brings unmatched internal leadership experience spanning a large portion of the company during three transformational decades — including stewardship of DIS’ complex, consumer-facing and widely successful global theme park business," Bank of America's Jessica Reif Ehrlich wrote in a note to investors. "Additionally, we believe DIS shareholders will continue to benefit from Mr. Iger’s leadership and creative strategy through the end of 2021."

Reif Ehrlich kept a Buy rating on Disney with a $168 target price.

Swinburne also noted that making Chapek CEO now, instead of elevating him to COO or president, gives him the clear designation as the guy who will follow Iger in leading Disney, rather than a more tentative hire.

DIS Price Action

Shares of Walt Disney Co were down slightly to $127 at time of publication. When Iger took over as CEO in 2005, the stock was trading under $30 a share.