Disney's board showdown is coming to a head, but one winner is already clear

By Emily Bary

'Thanks to the feud, public shareholders have already won,' Needham analyst writes

We'll soon find out who comes out on top in Walt Disney Co.'s proxy battle with activist investors, but one winner may be apparent before the votes are even counted.

"Thanks to the feud, public shareholders have already won," Needham analyst Laura Martin wrote in a note to clients Tuesday. That's because Disney's stock (DIS) is up 34% so far this year, outpacing the S&P 500's SPX 9% gain.

Disney is fighting it out with activist investors from Trian Group and Blackwells Capital, both of which nominated alternative director candidates to serve on Disney's board. The media company's annual meeting is scheduled for Wednesday.

In Martin's view, Disney is already making progress on initiatives that will help it drive growth and manage expenses.

"We believe Trian and Blackwells have added urgency to the turnaround, but not substance," she wrote. "Since we believe the vote will be close, [Disney] will remain under pressure to drive shareholder upside going forward, we believe. This is good for public shareholders."

Opinion: Disney is making progress on a key goal, and is ready to pull another lever

Disney still has a number of issues to tackle, regardless of who gets board seats. Martin notes that the company has to contend with cord-cutting, "anemic" box-office trends, a slowdown in theme-park demand and losses in its streaming unit.

From her perspective, Disney's best option would be to sell itself to Apple Inc. (AAPL) or Amazon.com Inc. (AMZN), though she notes that current regulators would be highly unlikely to approve such a deal. She has a buy rating and $145 target price on Disney shares.

Read: Apple hit with consumer lawsuits on the heels of DOJ's sweeping antitrust case

Separately, Rosenblatt Securities analyst Barton Crockett said: "Disney's actions - using aggressive verbiage and a steady drumbeat of missives - suggest a degree of nervousness." But he had anticipated that the company would win its proxy battle, even before the Wall Street Journal reported Monday that Disney was ahead with more than half of the votes cast thus far. Ballots cast can still be changed, he noted.

"This is feeling closer than we expected, and speaks to the likelihood that if circumstances get tougher at Disney proxy battles could persist," he wrote.

Still, he upped his price target on shares of Disney to $137 from $129 in his Tuesday report, as he updated his model to reflect factors such as management's commentary that free cash flow is on track to top guidance. He rates the stock a buy.

-Emily Bary

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04-02-24 1219ET

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