We are maintaining our fair value estimate as Iger agrees to stay on at the wide-moat firm until July 2019.
CEO Bob Iger agreed to extend his contract for an additional year, pushing the expiration date to July 2019. We had expected Iger to renew his contract this summer in order to provide the board with additional time to find a successor and to soothe any investor worries about the succession process. We believe that the contract was extended for only one year in order to assuage potential candidates who might be worried about Iger retaining the role. We are maintaining our wide moat rating and our fair value estimate of $134. With shares trading in the 4-star range, the stock may offer an attractive entry point for investors with a longer-term investment horizon.
Neil Macker, CFA, is an equity analyst for Morningstar.
The need for the extension arose from the forced resignation of former COO and heir apparent Thomas Staggs whom the board pushed out last April after refusing to designate him as the next CEO. While there have been a number of rumored candidates including board member and Facebook COO Sheryl Sandberg, CBS CEO Les Moonves, and former News Corp President Peter Chernin, no interviews or discussions with potential candidates have been leaked. We believe that the board is searching for someone with an entertainment background who is comfortable navigating a media landscape that is increasingly digital. However, there are not many candidates that fit these criteria who also have experience managing a firm as large and complex as Disney, thus the need for more time and the contract extension.
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