Disney's upbeat ESPN view part of acquisition strategy, analyst says

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Disney’s stock bounced back last week when CEO Bob Iger appeared upbeat despite ESPN’s continued struggles. At least one analyst thinks Iger’s outlook is part of Disney’s acquisition strategy.

In a research note (sub. req.), BTIG analyst Rich Greenfield says that Iger and Disney are interested in girding the company’s stock before going after an acquisition target.

“Maybe Iger and Disney are simply trying to signal confidence in ESPN in hopes of getting their stock up as they plan to make a major acquisition. Hard to remember a time in history when Disney has talked so openly about not being strategically complete,” Greenfield wrote. “Increasingly it feels like what is Disney going to buy, rather than is Disney going to make a major acquisition.”

The “strategically incomplete” comments to which Greenfield is referring came from a Bloomberg TV interview last week with Iger. In it, Iger described Disney’s recent investment in MLB’s BAMTech platform and how it allows Disney to get closer to customers, offering customized experiences, and in turn mine and sell viewer data.

“Do we have to own distribution? No not as a company. We are doing quite well without it. Would we like to have the kind of distribution that solves the problem or provides us with the opportunity I just described? Yes we would,” Iger said.

Disney has stayed mum about any potential acquisition targets but reports have suggested that the media giant could be interested in buying either Netflix or Twitter. Both would give Disney more direct access to subscribers.

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Last week, Disney announced its most recent quarterly numbers, marked by the Media Networks group, which houses ESPN, leading to a revenue decline. Media Networks revenue fell 3 percent to $5.7 billion as cable networks revenue dropped 8 percent to $3.96 billion as ESPN’s revenues dropped because of lower advertising and affiliate revenue.

Still, Iger stayed upbeat about ESPN because the network could soon reach more viewers in the millennial age group once live streaming services like DirecTV Now and Hulu’s product launch.