On CNBC’s “Squawk Box,” Rosenblatt Securities Senior Analyst Barton Crockett appeared to discuss Disney’s falling stock prices, and suggested an option The Walt Disney Company could consider to turn things around.
Analyst Suggests Breaking Up Disney
On “Squawk Box,” Crockett was asked what Disney could do in order to improve its stock price, which hit a three-year low yesterday, closing at $82.83. At other points in the past week, it has reached decade lows. Crockett responded with two possible options.
Look, I think one thing or the other is going to happen with Disney stock […] They’re either going to find some kind of solid footing underneath the business that’s going to support the stock, or the pressure is going to build on this company to restructure and to break up.
I think in the latter scenario, you’ve got certainly an opportunity for value to be created from these levels, and I don’t think the management team wants that. I think they believe they can turn the business around so it doesn’t get to that point.
Crockett went on to explain the latter situation, sharing his suggested strategy for improving stock value at the company.
In my mind, the right structure is a break up […] The right structure is a theme park-anchored equity; the TV networks moved off into a structure where, perhaps, private equity that traffics in challenged assets, cash flow-challenged assets at low multiples would be interested; and a content library that’s exceptionally valuable, and could be of great use to any number of tech platforms.
Co-anchor of “Squawk Box” Andrew Ross Sorkin immediately brought up the difficult question with making the theme parks separate from Disney’s content library: how can you make a Disney park without Mickey Mouse and other familiar IPs? Crockett had a suggestion for this as well.
I’m not saying that you lose Mickey in Disney [Parks] at all. I’m saying, and I think it’s really not complicated, to set up the licensing deals in perpetuity as part of a separation.
Crockett also suggested that the first separation should be of Disney and its TV networks, which are “declining assets” that the company has acknowledged, and that the second separation should be between Disney and its content library.
I do think that they do not want to lose [their content library], but I think they’ll lose the right to keep that if the business doesn’t turn around and they don’t take the necessary steps.
I do think, over time, that content of this quality, of this caliber, the pressure is going to build for those to be married to tech platforms. Does that take the form of a full separation? Potentially, and I think that’s a process that, from here, creates value for shareholders.
While The Walt Disney Company has shared no intention of restructuring at this time, it is certainly an interesting prospect to consider when looking ahead to the future of the Disney Parks. You can watch the full interview for yourself here.