Shares of Walt Disney Company (DIS) vaulted 6% on Monday as CEO Bob Chapek was replaced by former CEO Bob Iger. Chapek will be remembered for having followed -- and preceded -- a Disney legend.
It's easy to imagine Iger as a superhero, returning to save the day like Iron Man. But it will take more than a snap of his fingers to give Disney shareholders a Hollywood ending.
Iger replaced former CEO Michael Eisner in 2005 and spent 15 years at Disney's helm. During Iger's first tenure, Disney smashed earnings estimates like the Hulk on a rampage. As a result, shares of Disney climbed a heroic 588% with Iger in control.
Iger's return has Disney shareholders feeling nostalgic, but can he bring the magic back? Or will his encore feel like a shallow sequel to a classic film?
According to the charts, Iger and Disney have some work to do.
On the long-term weekly chart, Disney has been in a steady downtrend for 18 months. The stock is down nearly 38% year to date, badly underperforming the S&P 500's decline of 17.13%.
Source of charts: TradeStation
Shifting the view to the daily chart, Disney slammed into its 50-day moving average (blue) on Monday's open and declined from there. Note the presence of the 200-day moving average (red) just above the stock's bearish trend line, creating an additional layer of resistance.
Disney's stock needs to climb above its 200-day moving average, which has capped Disney shares for more than a year. That key indicator currently rests at $113. I won't consider buying the stock unless Disney can climb above that moving average.
On Monday, Disney did manage to rise 6% on over five times its average volume. While that's impressive, the stock failed to maintain its initial gain of more than 9%.
Rome wasn't built in a day, and neither was the Disney empire. According to the charts, the market is skeptical that bringing Iger back for an encore will cure all that ails the entertainment giant.
Since Iger stepped down in 2020, Disney's share price has eroded by about 30%. Some believe that makes Chapek the villain, but the scope of the company's troubles would challenge any leader.
There are still plenty of questions on investors' minds. Will Iger revamp Disney+? The Disney streaming division, which includes Disney+, ESPN+ and Hulu, lost $1.5 billion last quarter.
How will Iger prepare Disney's theme parks for a potential recession in 2023? When it comes to franchises such as Marvel and Star Wars, what is the optimal mix and amount of content?
Instead of trying to guess whether Iger can return Disney to its glory, I'll wait for the charts to tell me if his plans are succeeding.