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Disney is playing chess and everyone else is playing checkers.

– Jeff

Hey there carnivores,

Markets were up on Tuesday but only slightly.

Today we’re talking Disney’s earnings and its new strategy.

Keep raging,

Jeff & Jason

Buckle up

It’s been a minute since Disney reported a loss. But, alas, 2020 has been one f*cked up year.

The House of Mouse reported its first quarterly loss since 2001, showing a $4.72B GAAP loss for its fiscal Q3. Revenue came in at $11.78B, short of the $12.37B expected. Earnings per share was 8 cents on an adjusted basis, compared to an expected loss of 64 cents. 

Timeout… how tf can EPS be positive but profit be negative? Glad you asked. The GAAP reporting reflects charges related to Disney’s acquisition of Fox, including severance, contract termination, and integration costs. Adjusted earnings focus only on current period operations #themoreyouknow.

So what’s in the bag?

In addition to the loss, Disney’s revenue fell short. Three of its main business segments underperformed compared to the same quarter last year. Worst off was Parks which put a $3.5B dent in Disney’s operating income. Things don’t appear to be getting much better as coronavirus cases in Florida continue to surge. At least there are no lines…

It’s not all bad, though (…just mostly). Walt’s DTC and International business grew 2% and brought in $3.97B for the quarter.

On the “+” side

Disney’s streaming networks are putting in work during these… unprecedented times. The company now has 100M paid subscribers between Hulu, Disney+, and ESPN+. Disney+ accounts for more than half of those subs, already exceeding its goal of 60 to 90M. Sucks to suck, Quibi.

Piggybacking off of the success of ‘Hamilton’ on the platform, CEO Bob Chapek announced the company will release ‘Mulan’ on it’s Netflix killer, bypassing a theatrical release. 

There is, of course, one major difference between ‘Mulan’ and everything else on Disney+. ‘Mulan’ (the live-action version) will cost $29.99.

The bottom line…

Consumers’ reactions to $30 movies at home will be telling for the future of film. If this experiment goes well for Disney, there is little incentive for movie makers with their own content networks *cough* Disney *cough* to even put movies in theaters.

Last week, Universal inked a deal with AMC to reduce the number of days it must keep films in theaters to 17 days, down from 90.

☑️ Quite the coincidence.

The SEC is looking into Kodak’s disclosure of its new deal to create generic drugs for the US government. The day before the company and President Trump announced the deal, Kodak saw its share price rise 25%. Trade volume also went crazy, dwarfing previous sessions. Something smells fishy, and it’s not film chemicals being repurposed for pharmaceuticals. 

The SEC is looking into how, and to whom, the Pride of Rochester, NY disclosed terms of the deal. The company allegedly tipped off Rochester reporters on July 27th, a day before the announcement, and didn’t place an embargo on the press release. A few outlets published early and then deleted the stories at Kodak’s behest. In Kodak’s defense, it’s not used to having big news to share. 

☑️  Jammed up.

Google’s deal to buy Fitbit has hit a snag in Europe. The company is facing months’ worth of delays, as antitrust regulators in the EU are concerned that Google will be using sensitive health data of users to sell ad space. I don’t need anymore companies using my data to advertise blood pressure medication, thank you very much. 

The $2.1B deal hinges on Google’s ability to convince the authorities otherwise, which it’s been desperately trying to do since the deal was announced. The EU however, says that Google’s ironclad word and track record are “insufficient to safeguard competition.” Hey guys, I don’t think they’re buying it, might be time to take a new approach.

☑️  Drink up.

North America is still performing at the highest level…when it comes to binge drinking. Unfortunately for Diageo, that’s the only place that is. The liquor maker saw a rise in sales in North America since the beginning of the pandemic, but had to take a $1.78B impairment charge due to low sales in India, Nigeria, and Ethiopia. 

Organic net sales for the brand fell 8.4%, despite analysts only calling for a 7.3% drop. Ivan Menezes, Diageo’s CEO, said the company’s recovery trajectory was “uncertain,” and that COVID all but crushed strong sales it was experiencing before the pandemic hit. Well, you know what this means, we’ll have to drink more Smirnoff Ice to make up for Ethiopia..

☑️  Time to pay the piper.

Argentina has a plan to pay off its debt. On Tuesday, the third-largest economy in South America announced it was restructuring more than $65B in debt, putting a band-aid on the country’s third sovereign default in the last 20 years. 

The deal is led by BlackRock, an Argentinian bondholder, and helps the Argentine government avoid the same public backlash it received after defaulting on its national debt back in 2001. As part of the deal, Argentina will change payment dates on new bonds without raising the interest Argentina pays on the loans. I guess all those gambles on Argentina’s economy taking off weren’t accounting for a global pandemic.

 

Author: Jeff Bishop

One of the best traders anywhere, over the past 20 years Jeff’s made multi-millions trading stocks, ETFs, and options. He is renowned as an incredible trader with a deep insight and a sensitive pulse on the markets and the economy. Jeff Bishop is CEO and Co-Founder of RagingBull.com.

Even greater than his prowess as a trader is his skill and passion in teaching others how to trade and rake in profits while managing risk.

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