Bob Iger now under pressure to wow with an encore

Until kingdom come. Bob Iger waved his magic wand and made two dissidents sort-of disappear. Walt Disney’s boss beat back efforts by pushy billionaire Nelson Peltz and another investor to get their respective candidates voted onto the entertainment conglomerate’s board. The next trick is to wow shareholders by narrowing a valuation gap with Netflix.

It took Iger summoning all his powers to keep the keys to the Magic Kingdom. He enlisted public support from JPMorgan boss Jamie Dimon, reclusive “Star Wars” mogul George Lucas and even predecessor Michael Eisner. Spilled secrets about the vote, including BlackRock’s backing, added to the drama. In the end, Disney said at the virtual annual shareholder meeting on Wednesday that all 12 of its nominees won by a “substantial margin.”

Now Iger is under immense pressure to deliver a showstopping encore. During his first 15-year run as Disney’s master of ceremonies, he delivered impressive returns to shareholders on the back of the Pixar, Marvel and Lucasfilm acquisitions, as well as the ESPN sports network. He botched his succession plan, however, and failed to properly position the company for the video-streaming era, leading to his return in 2022, less than two years after he decamped.

No one would be amazed to see Iger pull yet another contract extension out of his hat so he can stick around past 2026. It’s a sleight of hand he has performed six times already. To restore and secure his legacy at Disney will require more impressive feats.

The $270 billion enterprise trades at about 13 times expected 2025 EBITDA, based on estimates gathered by LSEG. With Disney dependent on Hulu, Disney+ and some new iteration of ESPN for growth, the best benchmark is Netflix, which fetches a multiple of 23 times.

Iger said in February that Disney’s direct-to-consumer division will generate double-digit margins, someday. Since then, the stock is up about a fifth and some 50% since Peltz came calling. But there’s a long way to go, considering the company is on pace to generate just a 5% EBITDA margin on $25 billion of streaming revenue next year, according to consensus analyst forecasts. When Netflix’s top line was around the same size in 2020, its comparable profitability measure was 20%.

There’s much more for Iger to do, too. He’s under fire over everything from golden parachutes to transgender benefits, and there’s also the matter of identifying a suitable replacement. Peltz and other investors will be watching closely for any slipups in the performance.