Don’t Fear the Streamer
Theaters’ times have come. They were here, but now they’re gone.
Walt Disney Co. (NYSE: DIS) don’t fear the streamer, with Disney+, Hulu and ESPN+. We can be like they are. (Come on, baby.) Don’t fear the streamer!
After the close last night, Disney announced it will restructure its media and entertainment divisions … bringing them all under the banner of streaming — or, as the industry likes to call it, direct-to-consumer (DTC).
You down with DTC? Yeah, you know me.
The new DTC division will be responsible for all content distribution and ad sales. Disney emphasized that it puts streaming first. “We are tilting the scale pretty dramatically [toward streaming],” CEO Bob Chapek told CNBC.
Furthermore, Chapek denied that the pandemic was the cause of the reorganization. “I would not characterize it as a response to COVID. I would say COVID accelerated the rate at which we made this transition, but this transition was going to happen anyway.”
It was going to happen anyway. Period.
I predicted the death of cable TV back in 2017. Back then, Disney took it on the chin with heavy paid subscriber losses, especially from ESPN. But it looks like the mouse has learned from past mistakes.
Disney wants in ahead of the death of movie theaters. It won’t wait to see if theaters recover from the pandemic. It’s moving now, and that’s a very good thing. Movie theaters will never be the same after the pandemic — mark my words. Popcorn and movie theaters … together for eternity?
This decision to reorganize under the streaming banner only strengthens my resolve in backing DIS as a Great Stuff Pick. If you got in when I recommended DIS, you sit on a loss of about 11%. It’s never easy to suffer a loss, but there are great things ahead for Disney.
Finally, there’s one caveat that investors should be aware of.
CEO Chapek has said that Disney is looking at all investments to increase spending on new content … including dividends. Should news arrive that Disney will cut or do away with its dividend, the stock will react negatively. If this happens, it’s another buying opportunity.
Given Disney’s strong leadership, low price and today’s move to go all-in on the streaming market, I’m reiterating Great Stuff’s position: Buy DIS.
Don’t fear the streamer. Baby take my hand … we’ll be able to fly.
However, if Disney just isn’t your thing … your candles don’t have to blow and then disappear. The door to American prosperity is open, and the opportunity’s appeared.
You can be like they are — if you click here now!
Going: The Chase Is On
Riding a wave of solid trading performance (just like I predicted yesterday), JPMorgan said earnings rose 9% from year-ago levels to $2.92 per share — obliterating expectations for $2.22 per share. Revenue was better than expected at $29.9 billion, arriving in-line with last year’s results.
The big story for JPMorgan was a 29% spike in trading revenue to $4.6 billion. Equities trading, specifically, surged 32% to $2 billion. Even more surprising was that investment banking revenue climbed 12%, despite low interest rates from the Federal Reserve.
There was still an undertone of uncertainty, however. JPMorgan only put aside $611 million for credit costs — prep work for possible defaults — compared to $10.5 billion in the prior quarter. Total reserves for credit losses/costs stands at about $34 billion.
According to CEO Jamie Dimon, that could leave JPMorgan over-reserved by $10 billion in a best-case scenario, or under-reserved by $20 billion in a worst-case scenario.
That’s one heck of a range, and the uncertainty weighed on JPM stock today. Well … that and Johnson & Johnson’s vaccine news. More on that right now…
Going: Some More Tears
Earnings per share of $2.20 topped the consensus by $0.22, while revenue rose 1.7% from last year to $21.08 billion. JNJ also lifted full-year earnings guidance to land between $7.95 and $8.05 per share, and revenue to fall between $82 billion and $82.2 billion.
However, the pharmaceutical giant’s COVID-19 vaccine test put a hitch in its giddyap.
J&J announced that it paused its phase 3 vaccine trial due to an unexplained illness in one of the study’s participants. In a statement, J&J noted that the development is “an expected part of any clinical study, especially large studies.”
In fact, the same thing happened to AstraZeneca PLC’s (NYSE: AZN) COVID-19 vaccine study last month.
Investors didn’t take the news well, however, sending JNJ shares down by more than 2% … dragging the market along for the ride.
Gone: What Ho!
Ho believes that the DRAM market — that’s dynamic random-access memory, by the way. But you already knew that, right? — will hit a low in the fourth quarter, but demand will rebound sharply heading into next year.
In fact, Ho forecasts rising DRAM prices in 2021’s first quarter.
Micron has struggled so far this year, with the pandemic and regulations on Huawei — one of its largest customers — negatively impacting revenue. Because of this, Micron put forward a very cautious outlook for the first quarter.
Ho believes the company’s guidance is too cautious, upgrading MU from neutral to buy and setting a price target of $60 — a 20% upside from yesterday’s close.
MU responded by leaping nearly 4% during today’s lackluster trading session.
Listen … do you want to know a secret?
Do you promise not to tell? (Whoa-oh oh, closer.)
Let me whisper in your ear, say the words you long to hear:
Airlines will drastically downplay how bad the third quarter was.
Struggling airlines are nary a secret by now. But with earnings season upon us, watch with keen eyes at how the delicate balance of bad news unravels.
It’s like staying home “sick” as a kid and trying to play outside later: Acknowledge the devastation enough to show you need that ever-looming stimulus … but not enough doom and gloom to spook airline investors (especially not the Robinhood horde).
Delta Air Lines Inc. (NYSE: DAL) scraped the positivity barrel today after disappointing on both earnings and revenue. If you’re into the numbers, Delta’s earnings-per-share loss was $3.30, bigger than the $3.00 loss expected. Revenue was $50 million off.
Here’s CEO Ed Bastian:
Let’s take a look at that encouragement, shall we?
It’s easy to say that more customers are willing to travel when you’re limboing around near-zero expectations. One extra rider last quarter would have made this a true statement, so we can’t take any seemingly positive reports as the whole truth.
For the third quarter, the Transportation Security Administration (TSA) screened nearly 64 million people at U.S. airports. Sounds like a lot of fliers on paper, and it’s 150% more fliers than the previous quarter too! Everything’s coming up roses, right? Airlines are almost out of the woods?
Not even close.
Keep in mind, the TSA screened over 221 million people in 2019’s third quarter. In other words, air traffic is a measly 29% of what it was a year ago. Even as other pandemic-pivoting businesses shape up, the airlines still have a long, long way to go to reach anything close to normalcy.
It’s just a matter of who can lose the least cash in the meantime:
Here’s my point: We’ll see many more companies play the dicey game of downplaying losses and dressing-up growth. It’s all about the spin, baby … just with more skin on the line this quarter ‘round.
Great Stuff: Agents of Fortune … and Earnings
It’s like Christmas morning over here in the Great Stuff newsroom whenever earnings season starts — the raucous laughter of revenue beats and the stench of earnings defeats.
But you know what gets us even more excited than new corporate reports? Emails from you! Yes, you. I see you haven’t written in for this week’s edition of “toe the political line” — I mean, Reader Feedback.
Drop us a line at GreatStuffToday@BanyanHill.com! Let us know what stocks you’re watching out for as the earnings spotlight scours the market. Or … you can take part in two time-honored Great Stuff traditions: ranting and raving!
Seriously, we want to hear what you’re thinking about in these crazy times and climes — market news or otherwise. Thanks in advance, and we’ll catch you tomorrow!
Until next time, stay Great!
Editor, Great Stuff