Analysts praise Disney’s cost-cutting plan, say focus on profitability is ‘restoring the magic’

The cost-saving initiatives unveiled by Disney on Wednesday give analysts another reason to remain bullish on the media giant. The commentary from analysts comes after the company on Wednesday revealed plans to cut 7,000 jobs and slash $5.5 billion in costs . Disney also said it would restructure the company in three division: Entertainment, ESPN and parks and experiences. The news came on top of fiscal first-quarter results that surpassed Wall Street’s expectations and smaller subscriber losses. The new transformation plan marks Bob Iger’s first major move since his return as CEO and comes as Disney faces a proxy battle with investor Nelson Peltz and his firm Trian Management. DIS YTD mountain Disney’s year-to-date performance Shares gained more than 6% before the bell, putting it on track to build on a roughly 29% gain this year. Many analysts viewed the cost-cutting strategies undertaken by Disney as a positive for the company, and shares, and as a sign that it’s thinking proactively about its profitability. “Bob Iger laid out a plan for cost cuts, content and streaming rationalization and ultimately improved profitability,” said Wells Fargo’s Steven Cahall in a Wednesday note to clients. “An execution story is a cleaner catalyst path, and the shares should track higher on confidence + estimates.” Cahall hiked his price target on Disney to $141 per share from $125. The new target implies upside of 26.1% for the stock. In a Thursday note, Credit Suisse’s Douglas Mitchelson said the transformation plan adds further support to the bank’s earnings estimates above consensus and a higher valuation multiple, while Evercore ISI’s Vijay Jayant referred to the news as Disney “restoring the magic.” “The hard work is ahead, but substantive and specific cost savings suggest a sense of urgency to maximizing long-term returns,” said Morgan Stanley analyst Benjamin Swinburne. The cost changes also boost his confidence in Disney’s ability to reach an adjusted earnings per share compound annual growth rate of more than 20% through 2025, he added. Bank of America’s Jessica Reif Ehrlich agreed with the consensus take, lifting her full-year earnings per share estimates and her price target on shares to $135 from $115. The new target represents roughly 21% upside from Wednesday’s close. “Bob Iger has a long, strong track record which provides confidence he will manage this transition for DIS,” she said. — CNBC’s Michael Bloom contributed reporting

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