The Mouse’s Fury, Whiffed Wishes and Canadian Railroad Dreams
Friday Four Play: The “Happiest Place On Earth” Edition
Just like Jason Voorhees, Walt Disney (NYSE: DIS) just won’t stay down for long. And today’s quarterly report raised the Mouse’s House from the proverbial grave once again.
Now, since Disney is a Great Stuff Picks portfolio holding, you know I never thought Disney was dead … isn’t he like frozen somewhere? I should probably let it go. (Let it gooo!)
Right now, Picks portfolio readers sit on a gain of about 28% on DIS — if you got in when I first recommended DIS in December 2019. If you waited until my most recent recommendation in December 2020, you’re looking at about a 5% gain.
Neither gain is something to write home about, that’s for sure. But today’s report shows us that Disney is about to head into the unknown! (Ok, that’s the last Frozen reference, I promise.)
I mean, just look at the numbers! (The numbers, Mason! What do they mean?!)
- Earnings Per Share: $0.80 reported versus $0.55 expected.
- Revenue: $17 billion versus $16.76 billion expected.
- Disney+ Subscribers: 174 million versus 170.3 million expected.
Disney also beat Wall Street’s Theme Park revenue expectations as COVID-19 restrictions eased. Heck, people are so happy to be out of the house — and flush with savings from being locked down — that per-capita guest-spending during the quarter surged past pre-pandemic levels back in 2019.
Basically, Disney grabbed hold of Wall Street’s paws and threw those expectations right off a cliff … just like Scar and Mufasa.
In fact, there was only one shadowy part of Disney’s report: uncertainty from the COVID-19 delta variant. I think there are more COVID variants than Loki variants at this point.
Either way, Disney expressed concerns about the delta variant, but noted that most of its theme park woes were centered on businesses and conventions:
And that, Great Ones, sums up the entirety of Disney’s report. Strong demand for parks. Strong demand for movies. Strong demand for streaming. Strong demand for pretty much anything Disney touches.
I don’t know about you, but I’m excited for Disney’s future … and the future gains we’re gonna see from our DIS holding in Great Stuff Picks. I still rate the shares a buy, so it’s not too late to get in. What are you waiting for?
Pssst: Don’t Put This Off For Tomorrow…land
If you think that Tesla’s 1,297% rise in 24 months … or Plug Power’s 1,277% rise in nine months were something, wait until you see this.
Charles Mizrahi believes we’re on the cusp of a startling new event that will shake the tech sector to its core … and give rise to a whole NEW generation of American tech titans.
And now for something completely different! Here’s your Friday Four Play:
No. 1: You Pay For This & They Give You That
You can’t always get what you want, but if you order from Wish, you’ll literally never get what you need…
Woah, Neil Young into the Stones … the Frozen soundtrack … you’re stuck on the dad setting today, huh?
If you’re out of the loop, Wish is basically an online junk shop roulette for bored, drunk people and YouTubers making/faking reaction videos.
When you WISH upon a star … it doesn’t matter who you are, everything your heart desires … will be a hot mess, apparently.
No one who actually needs to buy something will search for it on Wish. You go to a site where the chance of you actually receiving the product you ordered is more than 10%. Plus, a certain rainforest-themed site offers “blink and it’s at your door” style shipping — not Wish’s “maybe it’ll show up next year?” kinda shipping.
Am I being unfair about Wish? I don’t know — you let me know in the inbox about your Wish experiences. Either way, Wall Street ordered a positive earnings report, but what finally showed up was a steaming dog turd in a ripped paper bag.
In typical WISH fashion, ContextLogic’s earnings were nowhere near what analysts expected, but I’m not quite sure why they had their hopes that high to begin with.
The company reported a loss of $0.18 per share on revenue of $656 million. The Street was more optimistic, estimating a loss of $0.13 per share on revenue of $722.9 million — swing and a double miss.
You’d be hard-pressed to conjure a worse report. Earnings at a loss? Check. Revenue shrank and missed? Double check. Lower active users and higher costs? Yep, got those too. ContextLogic also expects third-quarter revenue to drop further following a pullback in digital ad spending … at least for WISH.
As you’d expect, WISH shares were dragged down as much as 27% by the report. The stock is now down 77% from its February highs, but the pummeling didn’t stop there: Cowen kicked off the downgrade-a-thon, but then J.P. Morgan shot back with a rare double downgrade.
Umm … any WISH hodlers out there? I wish you good luck. You’re gonna need it.
No. 2: Danger Will Robinson! Danger!
Space: the final investment. These are the voyages of the Starship Oligarchy and its quest to seek out new revenue streams, new sources of income and to boldly go where no Sir Dick has gone before!
Umm … that’s Richard. Sir Richard, if you’re nasty.
All right, which one of you let the air out of Virgin Galactic (NYSE: SPCE)?
One minute, SPCE is doing its best Major Tom impression. The next minute, SPCE looks more like a failed SCUD launch. I expected a bit of contraction in the stock after Sir Richard Branson’s voyage to the edge of space, but this?
SPCE is down more than 30% since that historic launch. That’s not normal, even for Virgin.
Now, if you’re thinking: “There has to be more to the decline than this!” You are correct. This isn’t just a “sell on the news” event following Virgin’s virgin trip into space. For the answer, look no further than Sir Richard himself. (He was in the library with the candlestick, I hear!)
According to a regulatory filing, Sir Richard sold nearly $300 million in SPCE stock between August 10 and August 12. There are two problems with this report.
First, it gives the impression that Branson is cashing in on a historic event for the company — one that drove SPCE significantly higher than it deserved. It also implies that Branson feels now is a good time to take profits, and that’s just what Wall Street is doing today.
Second, he sold between August 10 and 12? Talk about bad timing. SPCE was already down 10% from its highs at that point. And on August 11, SPCE experienced another sharp drop … maybe due to Branson’s selling?
Either way, SPCE is at its lowest point since May. Given the sell-off and the potential for support near $25, now might be a good time for a short-term bullish bet on SPCE stock. Either buy the shares outright … or maybe a September $26 or $27 strike call option?
I’m not officially recommending either strategy, but if your risk tolerance is high enough, it’s definitely worth a closer look.
No. 3: Train In Vain
We’re back in the railroad stock saddle again, Great Ones! Today’s your lucky unlucky day: We’re putting our ears to the rails and figuring out what’s a-comin’ down the line for train stocks. Oh, and an impromptu reader spotlight as well:
I don’t trade options, although I’m trying to learn. But it seems very complicated, as you say, I’m not a whippersnapper anymore, so I’m on the slow train there.
And what about the Atchison Topeka and Santa Fe … DBA as KSU, any tidbits of info on what’s happening along the railways? Good buy? Great Buy? Wait to see if Canada buys up the shares? — Janice S.
I’m glad you wrote in, Janice! If anything, just to prove that it’s not just me who still digs railroad stocks… I mean, the bidding war on Kansas City Southern’s (NYSE: KSU) behalf is peak popcorn-popping entertainment.
Kansas City Southern is still hellbent on merging with Canadian National Railway (NYSE: CNI) … which we’ll just call “CN” here for clarity. But Canadian Pacific Railway (NYSE: CP) has been consistently outbid all throughout the courtship for KSU.
And for weeks now, everyone thought the war was over — that the $33.6 billion KSU/CN deal was almost set in stone, pending regulator approval.
The latest is this: For some reason, Canadian Pacific expected KSU to accept a new lower bid of $31 billion earlier this week. KSU pretty much left Canadian Pacific on “read” until today, when KSU officially rejected the bid. Would you blame them? Money talks and lower bids walk.
But Canadian Pacific also came to the table with a key argument: The KSU/CN merger, Canadian Pacific believes, would create overlap in the combined railway’s lines between the Gulf Coast and the Midwest, potentially hurting competition across the central U.S.
Plus, think of the congestion around Chicago, man! — Canadian Pacific, probably.
In other words, right as antitrust and surface board regulators decide on the KSU/CN mega merger, Canadian Pacific slips in a bid that it knows won’t be accepted … while also raising monopolistic alarms.
KSU isn’t having any of that “anti-competition” talk, however. No biggie, it’ll just sell off some 70 miles of track in Louisiana where KSU and CN networks overlap. For its part, CN played nice and claimed it’ll stay connected with other railroads “to allow customers to ship goods using a combination of different railroads if they choose.”
As for myself? I am but a mere bystander in Canadian Pacific’s train wreck of a bidding strategy. Personally, there are too many unknowns with this particular deal following through (or not). But I don’t doubt that this merger would also inspire other railroads to start hooking up … if you’re interested in hunting out the next potential buyout target.
Oh, and because I couldn’t help myself but notice … you want to learn more about options? Preferably the simple way? Talk about asking the right questions at the right time…
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No. 4: When The ZIP Line Snaps
I’m sure you’re all aware, but the U.S. jobs market is all kinds of strange right now.
Everywhere you look, you see companies looking to hire — blue collar, white collar or even no collar. It’s a job-seeker’s market right now.
And at the risk of this sounding like an ad for ZipRecruiter (NYSE: ZIP), the job platform is well-praised for automating much of the hiring process.
So I’m not surprised that the number of employers using ZipRecruiter shot up 120% as of this latest report. Nor am I surprised that ZIP’s revenue beat estimates ($183 million versus $160.2 million expected).
But, if I were a ZIP investor, I’d question why per-share earnings suddenly flipped, sinking to a loss of $0.55 this quarter compared to an $0.18 profit a year ago. Worse still, the loss was more than double the $0.20 loss that Wall Street’s analysts expected.
I guess ZipRecruiter’s seemingly endless podcast shout-outs came at a steep cost … I swear, podcasters only choose from like four sponsors, and if I have to hear about Hello Fresh one more time, oof…
Anyway, does ZIP have any saving grace? Any optimism at all here?
Kind of, but not really. The company ended up raising its full-year revenue estimates, up to a range of $651 million and $665 million, but analysts still expect revenue to reach $668.5 million. And therein lies the ZIP’s crushing crux.
ZipRecruiter has strong tailwinds from the hot job market, but it desperately needs to capitalize on that market further — it’s not going to last forever. The reopening hokey pokey obviously benefitted ZipRecruiter’s revenue … but where are the actual earnings?
The market initially cheered the report’s revenue beat with a 5% raise but immediately fell to a 5% loss.
It’s Electric! Boogie Woogie … Great Stuff!
Welcome to the weekend, Great Ones! Take a deep breath and relax — you made it. Friday night!
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