☕ Cisco beats but the fade continues
Nov 14, 2024Good morning! 👋
I wrote to you from Japan earlier this week suggesting that traders are itching to engineer a short-term downturn and that’s what we’ve got this morning as I type.
Good!
The markets require buying and selling to work properly.
The excuse this time around is that wholesale prices rose 0.2% so the Fed has no additional impetus to get on the stick with rates.
Again, good.
I’m inclined to do a little shopping, particularly if the selling accelerates.
Remember…
The markets are the only store on earth where people fear a sale.
Here’s my playbook.
1 – House of Mouse’s comeback, don’t bet on it
Disney narrowly beat earnings estimates (Read):
- EPS of $1.14 vs expectations of $1.10
- Revenue of $22.6B vs expectations of $22.4B
- Revenue increased 6% YoY
- Streaming business (Disney+, Hulu and ESPN+) turned profit for second consecutive quarter
- Increase of 4.4 million paid subscribers compared with the previous quarter
Q4 was one of the best quarters for ‘em, with Pixar’s Inside Out 2 and Marvel’s Deadpool & Wolverine breaking box office records as the year’s top two movies, and the company is investing in new projects across theme parks, Disney Cruise Line, and its Experiences division.
Disney stock has jumped 10% as I type.
Time to buy Disney?
I really would like to but probably won’t because there no edge and no defendable proposition to my way of thinking:
- Management squandered a once proud brand portfolio by making an effort to offend nobody yet wound up offending nearly everybody and threw creativity out the proverbial window.
- Returnee CEO Bob Iger is out the door (again) come 2026 which means any short-term guidance jump today assumes that whoever takes his place will carry on; that’s a big leap of faith considering how many times Disney’s tried and failed to pass the baton. Not for nothing, but word on the street and in articles like this one is that the “short list” of candidates' stinks. (Read)
- The double-digit growth everybody is so excited about today is largely dependent on advertising tiered programming that seems to me to be the exact path Cable TV took before customers left en masse and the industry crashed.
To be fair, I love a turnaround story as much as the next person but DIS has returned -22.22% over the past 5 years while the S&P 500 has returned +93%, a 115.22% performance gap.
Disney doesn’t just need a turnaround, it needs a “Hail Mary.”
MyPOV: The company can have all the double-digit growth it wants for the next three years but chances are good that’ll pale in comparison to the triple digit potential elsewhere.
2 – AMD layoffs are a smart move
AMD is laying off ~1,000 employees, which is 4% of the company’s global workforce. (Read)
Many investors are quick to panic about layoffs because they think it means that the company is in trouble.
Not so in a situation like this one.
CEO Lisa Su knows exactly what she’s doing.
AMD will increasingly shift its focus to AI and data centers (which accounted for 51% of the company’s entire revenue last quarter). Laying off non-essential employees (to that effort) will likely not only boost top line revenue but bottom-line profits, too.
Put another way… there’s no sense paying extra staff when the AI they’re fueling can also help AMD improve its own business.
I hope I’ve got enough shares.
3 – Cisco beats but the “fade” continues
Cisco reported earnings and topped analyst forecasts (Read):
- Revenue decline of 6% YoY, networking segment –23% whilst security segment doubled
- Raised full year guidance
- Strong product demand with product orders up 20% YoY
But… and this is a big one… in doing so reported the 4th consecutive quarter of declining revenue at a time when Nvidia, AMD and Broadcom just to name a few peers have been posting record revenues.
Putskies, short or avooooooooiiiiiid….
4 - Meta fined... again!🤦
The European Commission has fined Meta nearly €800 million over abusive practices related to Marketplace which it says is being promoted to Facebook users without giving 'em a choice. (Read)
Hmm. 🤔
Meta getting fined is more regular than the milkman.
Not long ago the EU hit Meta with penalties and fines equivalent to 10% of global annual revenue under the Digital Markets Act. (Read) Before that it was GDPR’s fine of €1.2 billion for data transfers to the U.S. And before the “before that” it was providing misleading information during the review of its acquisition of WhatsApp in 2014, and for breaches of EU data protection rules related to the Cambridge Analytica scandal in 2018.
And people have asked me why I still won’t touch the stock??!!
Meta is a one-trick pony.
It’s made a lot of people a lot of money; Meta is still just not for me.
5 – Wearable health tech is going to make credit rating agencies look like the Boy Scouts
I wear an Apple Watch practically nonstop to track my fitness, sleep and other metrics because the information I get from it helps me maintain the high-performance lifestyle I love.
Now, I’m rethinking that premise.
No doubt wearable health tech is the gateway to customizable medicine but at what cost?
Amazon, Google, Samsung, Microsoft and other companies all capture health care data and share it (for billions of dollars a year in one form or another) with big pharma, advertising firms, and health insurance companies.
Once again, we are a) being productized without our permission and b) the information collected is being used against us in the form of higher rates, less coverage etc.
Mark my words, it won’t be long before you have an extra jelly donut in the morning and your health insurance premiums go up that afternoon. 🤦
If only the reverse were true and there were discounts for people who lived well, were healthy and made smart choices…
Just sayin’.
Meanwhile, there’s only one company with adequate privacy gates in place and OBAers have that one covered. Hopefully you do, too.
Bottom Line
People fear change because they overvalue what they have and undervalue what they could have if they gave that up. - James Belasco.
As always, MAKE it a great day - you got this!
I promise.
Keith 😃
