Disney Proxy Battle Comes to a Head at Shareholder Meeting Wednesday—What You Need To Know

Disney (DIS) is set to hold its annual shareholder meeting on Wednesday, with market participants watching closely for updates on the proxy battle between the company and activist investors, as well as possible details on its parks segment and its streaming strategy.

Ahead of the shareholder meeting, analysts at Bank of America and UBS increased their price targets for the stock, citing momentum on strategic priorities for Disney and robust theme park demand.

Shareholders To Vote in Proxy Battle Showdown

At the meeting, shareholders will vote on board directors as the months-long proxy battle between Disney and activist investors Trian Group and Blackwells Group comes to a head.

Disney has recommended investors vote for the 12 people it nominated, including CEO Bob Iger, while Trian Group nominated Nelson Peltz and Jay Rasulo to the board, and Blackwells Group nominated three other board candidates.

Bank of America analysts said ahead of the meeting that Iger “appears to be in command and control and on a growth offensive,” adding that he has “spent the past year restructuring the company” and “is now focused on multiple bullish drivers for the company” which include strong free cash flow (FCF) generation, continued momentum in parks and experience, improved film slate, and increased confidence in direct-to-consumer profitability by the end of the fiscal year.

The firm said that Disney’s ability to meet and exceed targets “will continue to be drivers of share performance over the intermediate term.” Disney reported better-than-expected earnings in its fiscal first quarter and announced several projects in February.

UBS analysts said they “remain bullish on Disney shares and believe there is potential upside to the model in a number of areas that should push consensus estimates up over the next several quarters,” but noted that “in the near term, the upcoming shareholder vote amid activist pressure could add volatility to the stock.”

“The biggest risk in our view is potential management change were the activists to be successful in the bid for board seats,” they added, saying that “this could cause a downturn in the shares just as the benefits of Bob Iger’s latest tenure are starting to take hold.”

Insight on Momentum in Disney’s Park Segment

During the shareholder meeting, company executives could also provide investors a closer look into Disney’s parks segment, which analysts expect to contribute to strong earnings in its second quarter.

Bank of America analysts said that the firm anticipates “DIS’ F2Q to reflect a continuation of the strong underlying momentum reported in F1Q,” noting that “park performance remains robust and we project operating income to grow in the low-mid teens in F2Q.”

UBS analysts increased their estimates for the parks segment by 8% to $2.3 billion for the second quarter, “driven by strong US attendance despite lapping the 50th anniversary in FL” and “continued improvement in international parks.”

Streaming Updates on Disney+, Hulu, and ESPN+

Disney could provide more insight into how the company is faring in the streaming space as it combines Disney+ and Hulu, and works on a sports package as ESPN partners with Warner Bros. Discovery (WBD) and Fox (FOXA).

Bank of America analysts said that “recent price increases across Disney+/Hulu/ESPN+” and “strong advertiser demand for the recently launched ad-supported tier on Disney+” contribute to the firm’s expectation that Disney could outperform peers in the 2024 fiscal year.

UBS analysts said that Disney’s direct-to-consumer segment is “the biggest source of near term upside” and that it projects the company will be “helped by subscriber growth (password sharing crackdown starting in phases), price increases and advertising ramp.”

“The consolidation of Hulu in the U.S. should also drive engagement and help streamline operations, boosting streaming margins,” the analysts said.

UBS noted that it expects “the Content segment to turn profitable with incrementally higher licensing revenues and improved box office with the new slate,” adding that it expects “linear Entertainment to continue to decline but this will be partly recaptured within the Sports segment and the new sports bundle.”

Bundling Disney+, Hulu, and ESPN+ could help Disney better compete with Netflix (NFLX), UBS indicated.

Disney shares fell 0.7% to $121.53 on Monday to start the week, though they’ve gained more than 33% year to date.