Comcast Goes For Disney’s Throat, Plus Amazon’s Profit Last Quarter Was Friggin’ HUGE
“Looking to the future, the next big step will be for the very concept of the ‘device’ to fade away” — Google CEO Sundar Pichai. Pichai may be right, and he’s got his money where his mouth is—Google recently invested in secretive augmented-reality startup Magic Leap (subject of a crazy Wired profile).
- U.S. stocks didn’t fare well yesterday, but don’t even get us started on the Nikkei 225, which plummeted 3.6% (its biggest decline since February) after the Bank of Japan shocked the world by choosing not to expand its stimulus program
Alternatives to Watch
- The aforementioned decision by the BOJ sent the value of the yen surging to its highest point against both the dollar and the euro in over six years
- After an abysmal 6% drop on Wednesday following poor earnings, Apple fell another 3% yesterday after Carl Icahn announced he sold all of his close-to-1% stake in the company. His big concern: exposure to a slowing China
U.S. Economy Fumbles
Long story short, the U.S. economy is all over the place—if a team performed like the U.S. economy did in the first quarter, the coach would have already lost his voice and thrown his headset on the ground. Here’s the not-so-big magic number: U.S. GDP grew just 0.5% in the first three months of 2016. This is the country’s worst performance in two years. Let’s not panic, though: the GDP figure will be revised two more times this year, and the recent trend has featured slow first quarters. Luckily for the team and the economy, there’s plenty of game left.
Comcast and Goliath
Step by step, Comcast is getting there. Now mere inches away from competitor Disney, the mass media firm jumped up a few steps yesterday by acquiring DreamWorks Animation for $3.8 billion in a long-awaited attempt to expand its entertainment portfolio. DreamWorks will join Comcast’s Universal Studios and Fandango with hopes of branching out to the consumer product and theme park businesses—if that sounds like a direct challenge to Disney and the game it invented, it should. Someone’s got to do it. Why not Comcast?
A Hearty Purchase
Yesterday, healthcare giant Abbott Laboratories went all in—throwing its cash on the table with a massive $25 billion purchase of St. Jude Medical. This fat deal happens to be the biggest healthcare merger this year, and there’s plenty of logic behind the billions: St. Jude’s expertise in heart-related repair devices will fortify Abbott’s position in the cardiovascular market (winning the hearts of new customers, if you will). And let’s not forget: the healthcare industry is undergoing major consolidation, and Abbott doesn’t want to be left behind. With a more diversified product line, the hope is to attract more hospital customers (Abbott’s main purchasers) despite growing competition. It’s a jungle out there.
Amazon On Cloud Nine
Who said Amazon isn’t capable of making profits? Last quarter, the e-commerce giant delivered an all-time record high profit of $513 million, and on sales that grew 28% year-over-year. If you think it’s Amazon Prime powering the way, you’d actually be wrong (but don’t get us wrong, Prime is still killing it). The real cash cow? Amazon Web Services, the company’s 10-year-old cloud computing business that rents computing capacity to all sorts of startups—and a number of large companies too. It has higher margins than Amazon’s e-retail business, and we probably don’t have to tell you how much cloud data storage is all the rage these days. Investors were just happy to see a positive in the earnings column, and shares jumped 12% after hours.
- Priceline CEO out over affair with employee
- AbbVie buying cancer drug startup Stemcentrx for $10.2 billion
- Uber finally explained why it refuses to include a tip button in its app
- HP’s Chromebook 13 is the MacBook Air of the Google world
- Monday: Xerox Earnings (-); New Home Sales (-)
- Tuesday: Apple (-), Twitter (-), AT&T (+/-), Procter & Gamble (+/-), eBay (+), Chipotle (-), Coach (+), 3M (+/-), Lockheed Martin (+/-), Aflac (+), JetBlue (+), Spirit Airlines (+), Office Depot (-), Buffalo Wild Wings (-), Panera (+), Hershey (+/-), Fiat Chrysler (+), BP (+/-) Earnings; Durable Goods Orders (+/-); S&P Case-Shiller Home Price Index (+); Consumer Confidence (-)
- Wednesday: Facebook (+), Comcast (+), PayPal (+), Boeing (-), Barclays (+/-), Hilton (+), Marriott (+) Earnings; Fed Meeting Announcement; Pending Home Sales (+)
- Thursday: Amazon (+), LinkedIn (+), Gilead (-), Amgen (+), Altria (+), MasterCard (+/-), UPS (+), Time Warner Cable (+), Ford (+), Groupon (+), Pandora (+), Sony (-), Deutsche Bank (-), Viacom (-), Celgene (+), Baidu (+), Dow Chemical (+), Dunkin’ Brands (+) Earnings; U.S. Q1 GDP; Weekly Jobless Claims
- Friday: Exxon Mobil, Chevron, Sanofi, Phillips 66, Seagate Earnings; Personal Income and Outlays; Employment Cost Index; Consumer Sentiment
THE LATEST IN OLD NEWS
Self-driving cars are officially old news. Just ask a recent survey of over 8,000 vehicle owners conducted by J.D. Power (see below). The latest: Fiat Chrysler is in late stage talks with Alphabet’s self-driving car division to join forces. Alphabet has spent six years and over 1.5 million miles of real-world testing developing its self-driving car technology—but has no interest in building cars itself. All the fun, none of the work. That’s where Fiat Chrysler comes in. Now let’s take a look at some of the survey results:
- Breaking it down by age: 56% of Gen Y buyers (born 1977-1994) said they trust self-driving cars, compared to 41% for Gen X buyers (born 1965-1976) and 23% of Baby Boomers (born 1946-1964).
- Those who trust the driverless car are all about it. In fact, over one-third of Gen Y buyers would pay $3,000 or more for an automated system.
- Self-driving cars are all about accessorizing. Some of the most popular items associated with self-driving cars are a camera-based rear-view mirror ($300), predictive traffic ($150) and smart parking ($100). How do you ride?
INTERVIEW QUESTION OF THE DAY
Why can’t you use EV/Earnings or Price/EBITDA as valuation metrics? (Answer)
BUSINESS TERM OF THE DAY
Antitrust Laws — Antitrust laws are the laws that apply to virtually all industries and to every level of business. They prohibit a variety of practices that restrain trade. As will happen with the Comcast-DreamWorks acquisition, the Federal Trade Commission and Justice Department review transactions to prevent illegal practices such as price-fixing and mergers that reduce competition in particular markets.
FOOD FOR THOUGHT
The tablet market is sinking fast. In the first quarter of 2016, worldwide tablet shipments fell almost 15%. However, “detachables” like the Microsoft Surface are posting triple-digit growth. Maybe keyboards aren’t going out of style after all.