Walmart Soars, Disney+ Roars and Trade Tears Pour
You Better Stop, and Look Around…
Here it comes.
Here it comes.
Here comes your 19th market breakdown.
Oh, who’s to blame. These trade talks are just insane. Last Friday, I warned that President Trump was getting tough on trade with China once again. Following a week of speculation on tariff rollbacks, Trump made it abundantly clear that the U.S. had agreed to no such thing.
Then, on Tuesday, President Trump said that if China didn’t agree to a trade deal, he’d “substantially raise those tariffs.”
“They’re going to be raised very substantially. And that’s going to be true for other countries that mistreat us too,” Trump warned.
China, meanwhile, returned fire by again calling for tariff rollbacks to be part of any “phase one” trade deal. “If both sides reach a phase one agreement, the level of tariff rollback will fully reflect the importance of the phase one agreement,” said Gao Feng, the Chinese Ministry of Commerce’s spokesperson.
Gao appears to imply that, if the U.S. is serious about a “phase one agreement,” then rollbacks will be on the table. According to Gao, the trade war started with tariffs, and it should be ended by removing those tariffs.
Unfortunately for investors, we can expect this back-and-forth to continue for a while.
A new site for signing a phase one agreement hasn’t been chosen yet, after last month’s Chilean meeting was canceled. U.S. locations proposed by the White House were ruled out, with the focus now shifting to Asia and Europe.
More time for tit-for-tat or “I’m rubber, you’re glue” is not conducive to your portfolio … at all. It allows time for negative rhetoric to amplify, China to push for rollbacks and Trump to get even tougher on China.
It also allows for the U.S. and Chinese economic situations to worsen further. While market headlines continue to blast China for slowing economic growth, the U.S. is not escaping unfazed. According to recent Purchasing Managers Index data and a Harvard study, the tariffs offer an increasing concern for the U.S. economy.
The point is, the needle on the Great Stuff Trade War Chart is moving again — this time toward “market sells off on trade war fears.” And today’s market dip may be the start of that next phase in the cycle.
Here’s where we stand right now:
Good: Destination Pluto
There’s a sleeping giant in the streaming market. We all know about HBO Max, Disney+, Netflix et al. But how many of you know about Pluto TV?
Pluto TV is a free online streaming service from Viacom Inc. (Nasdaq: VIA). It sports more than 100 channels, ranging from Viacom favorites like MTV to CNN and Fox Sports. With the CBS Corp. (NYSE: CBS) merger, Viacom plans to bring CBS channels to Pluto TV as well.
Did I mention it’s free? If you like traditional cable TV (ads included, unfortunately), Pluto TV is where it’s at.
This morning, Viacom offered up its latest quarterly report, and things are moving along swimmingly. The company beat earnings and revenue expectations, despite year-over-year declines. Most of those declines, however, are related to rolling out Pluto TV content and moves to acquire CBS.
In other words, Viacom is spending on growth … and managing to stay within the lines at the same time, so to speak. If the company can continue to expand its streaming options with Pluto TV while not going into massive debt like its competitors, Viacom could be a dark horse to watch in the streaming market.
Better: Online Juggernaut
If there’s a hard-and-fast rule in retail, it’s that you never count out Walmart Inc. (NYSE: WMT).
The retailing behemoth reported earnings this morning, and Wall Street is going gaga. Earnings topped expectations by $0.07 per share, same-store sales grew faster than expected and e-commerce sales skyrocketed 41%.
That last point is a major driver in WMT’s rally today, as it helped overshadow the fact that Walmart’s revenue came in a little lighter than expected.
On the e-commerce front, Walmart now has roughly 3,000 locations for in-store pickup — including groceries — free same-day pickup at retail locations and unlimited delivery to 1,400 locations via its Delivery Unlimited service.
Clearly, Walmart is driving hard for e-commerce market share, and its latest quarterly results offer up a rosy outlook for the holiday shopping season. Investors are pleased, to say the least.
Best: 10 Million in 1 Blow
I told you Disney+ was going to be huge. Now, we have proof.
The Walt Disney Co. (NYSE: DIS) announced it brought in 10 million Disney+ customers on the first day. No wonder the service was having trouble keeping up. Disney+ was simply overwhelmed by its own popularity.
That’s a hard number to put in perspective, but let’s offer a bit of a comparison, shall we?
AT&T Inc.’s (NYSE: T) HBO Max has about 8 million subscribers. CBS All Access and Showtime also have about 8 million subscribers. Disney’s Hulu has about 28.5 million, and Netflix Inc. (Nasdaq: NFLX) rolls in with a whopping 158 million subs.
So, in one day, Disney+ brought in more subscribers than some services have attracted during their entire operational existence.
Granted, these data should be taken with a grain of salt. Disney offers a seven-day free trial right now, so many of these subscribers may not be paying subs … yet.
But Disney’s episodic release format (à la HBO’s Game of Thrones) should keep subs around longer than those who binge-watch a series and then dump a service. And, if you’re a Star Wars fan, The Mandalorian is an excellent show that’s worth the price of admission so far.
Great Stuff: Quick Takes
There are so many important stories today that I just couldn’t limit it to the usual three. So, here are a few quick takes on other happenings around the market:
- Cisco Systems Inc. (Nasdaq: CSCO) managed to both bomb its earnings report and raise Chinese trade war fears at the same time. Good job, Cisco.
- Canopy Growth Corp. (NYSE: CGC) proved that no matter how low expectations are, you can always go lower. That’s the problem with market sentiment, though. We’ll get back to the cannabis sector tomorrow after Aurora Cannabis Inc. (NYSE: ACB) reports earnings. Though, I’d call ACB a buy right now. It’s down about 10% and hasn’t even released a report.
- Want to read a cable TV hit piece on the streaming market? Bloomberg has one for you. Click here if you want to read about cable TV’s dreams of high-priced streaming bundles. Also note the complete lack of commentary from consumers or actual streaming companies.
- Oh … and while we’re at it, here’s another cable TV hit piece. This time, they calculate the “true” lifetime cost of streaming services. Seriously? I mean, what about the lifetime cost of food? Remember, these articles arrived just after Disney+ hit 10 million subs. I think cable TV companies are really, really worried, don’t you?
Oh, what a tangled web we weave, when emails we request to receive.
It’s Reader Feedback Time!
We’re running long today, so let’s dive right in with a question from Mikael R.:
I don’t recall having read anything about your take on virtual reality and augmented reality in the years to come. Any thoughts or insights?
I’ve covered virtual reality (VR) and augmented reality (AR) before, but not here in Great Stuff. The problem with both is that neither is quite ready for prime time just yet. Despite the success of Sony’s PlayStation VR and other devices, VR is still lacking that complete immersion factor that many of us are waiting for.
VR is still a good long-term investment. It’s catching on in the medical field. Intuitive Surgical Inc. (Nasdaq: ISRG) comes to mind as a great opportunity in VR. But for a real investment bang, it needs to resonate with retail consumers. And it’s not quite ready for that market yet — especially for the cost.
AR, however, is where the money is at right now. It’s inexpensive to implement. It’s exciting. And it doesn’t require full immersion to truly enjoy. Best of all, you can use AR easily on today’s smartphones and tablets. In fact, AR will be one of the driving forces behind the 5G revolution.
You might have heard of Pokémon Go, a mobile game that makes expert use of AR. That’s just the tip of the iceberg. Pretty much every mobile company, gamemaker, chipmaker or social media company worth its salt is looking seriously at how to implement AR right now.
That’s a pretty broad field — too broad for me to narrow down here. Luckily, Banyan Hill expert Paul Mampilly can help. Paul lives on the cutting edge of technology investment strategies.
Next, we have Disney+ nonbeliever, Steve G.:
No, I have not signed up for Disney, nor will I. I have all of the Disney and Pixar movies digitally. What do I play them on, you ask? Vudu … through my Roku, of course. Speaking of which, I purchased Roku stock late last week on the dip — and on your recommendation — and am already up over 10%. Thanks, Great Stuff!
Roku;s my go-to
For movies and stock profit
Disney not so much
All the best, my friend. Keep up the good work.
Welcome back, Steve! Glad you’re still enjoying Great Stuff. I guess if you already have a way to stream Disney movies, that works. But Vudu? You know if that service ever goes under, you’ll likely lose those digital copies, right? Just a warning on digital content.
And that Roku Inc. (Nasdaq: ROKU) recommendation? It’s up another 8% since you wrote in on Tuesday. Congratulations! Your success truly is great stuff.
Finally, we have Patti I., who asked:
Patti is responding to one of Tuesday’s suggested questions: “What … is the airspeed velocity of an unladen swallow?”
The answer, according to Monty Python and the Holy Grail, depends on whether it is an African or European swallow. You have to know these things when you’re a king, you know.
Until next time, good trading!
Great Stuff Managing Editor, Banyan Hill Publishing