Bloomberg Audio Studios, Podcasts, radio news. You're listening to the Bloomberg Intelligence Podcast. Catch us live weekdays at ten am Eastern on Apple Card playing Android Auto with the Bloomberg Business App. Listen on demand wherever you get your podcasts, or watch us live on YouTube.
The story again today is Nvidio stock trading up on the back of that really good earnings we had earlier in the week, and obviously had that big surge yesterday, but it's up a few percent here today. I'm looking at this stock again, trailing twelve months, up over two hundred and forty up sixty percent, just a year to date two point zero two trillion dollars. Let's check in with man Deep Singh. He's a senior technology analyst for
Bloomberg Intelligence and he knows all about this kind of stuff. So, Man Deep, you know, I think we've broken down the quarter. We know that business is good. We had gene Monster on in the last hour for a couple segments there. He remains uber uber bullish here and he says that this AI is just below electricity in terms of how it's going to impact our lives and well above the Internet. Man. That's bullish. Do you have any sobering thoughts as it relates to AI and in video Here I.
Concur with him. I think this is, you know, something transformational multi year. The only thing that as an investor you have to be cognizant of is clearly and video is compounding, you know, at fifty percent, and because it's a multi year trend, they can do that. What is
the price you pay for getting in this dock? And what is a multiple that you know discounts for the growth going far out beyond you know three to four quarters, which I think they have great visibility on And so that's where you know there there is always a price for you know, even a high quality stock like in VideA where the fundamentals are great, but it's not infinity. And so that's the I think part where clearly you
know they're writing the momentum. It's it's great, I mean, they had a blockbuster earning Siattra game, but it's we know it's not forever.
And the price.
That's why we look at prices, multiples and you know, valuation, and I think that's the part that market still is figuring out what is the right multiple for stock like in Video.
Mande, let's just come back for a second to what in Video's technology actually is. It says here that they dominate the market for graphics chips designed for complex computing tasks needed to power AI applications. So in plain speak, how does somebody like me make use of that?
Well, so think of you know, all the processing that was done in the last thirty thirty five years. It was used a CPU central processing unit, and CPU works in a certain way in terms of the instructions you pass through the processor, the way it does the processing, and the way results are split out. That was the same even with data centers, even though the CPU and data centers is a lot more powerful within media because they've focused on graphics and gaming related processing, that's a
different type of chip altogether. And now they've been able to bring that to AI computation, which is all matrix space. So we're talking about you know, vectors and matrix multiplication and you know, billions of dimensions in terms of the data that you're dealing with, and that's a very different
operation than what CPU is designed to handle. That's why they've had such a great headstart because they've been doing this for you know, twenty five plus years in terms of that gaming processor that is being used for AI, and that's why I think others are finding it hard to catch up. But at the end of the day, it's still a hardware company that makes chips, so it's not a recurring revenue and that's something to be mindful of that others are trying to build the capabilities that they have.
All right, Mandy, let's switch gears a little bit. We've i think beaten that one to death in Nvidia, but certainly it's certainly worth talking about. But we've actually had another piece of news that really caught my attention. Reddit is looking to go public. They foiled their IPO. Can you tell us, for those of us that don't use Reddit exclusively, tell us kind of what Reddit is, kind of what their business model is, and kind of how you think this might be received by the market.
Yeah, so it's an online network. I mean, I would lump it with the social media network companies, even though it's more community based and interest based. And look, they've got seventy three million daily active users. Think of you know, all the large angled models. What are they trained on? They're trained on user generated content and in reddits case,
it's all text content. The parallel that I have on the video side is YouTube has a lot of user generated video content, TikTok has a lot of user generated video content. Reddit is your text repository for user generated content, and that's what large angreid models are using to train these models so that they can generate you know, right kind of text because they have so much context from these Reddit posts. I mean, we're talking about one billion
posts you know that Reddit generates in a year. So clearly Reddit has the scale. They have created a niche within this large social network community where Meta dominates with three billion daily active users, but Reddit has seventy three million, and these are pretty engaged users. I mean, the business model isn't fleshed out because even though it's ads driven, we're talking about a billion dollar run rate. And now they're opening another line data licensing that all these large
and A model companies are going to pay for. So that's going to be probably a mid to high single digit revenue contributors this year. I think that's the part that's going to accelerate because you need to retrain these models every few months, and Reddit is the best data that you can train on.
So Reddit's really like a forum for a lot of communities to gather. You know, they're like these different threads on there, and people get like really hyped on different ideas. Obviously, the meme stock rally really just originated so much from these different Reddit communities. Can you just explain mandeep, like where the value is going to come in generating you know, investor you know value from some of these different threads.
I guess, like I'm just having a hard time imagining where that value proposition comes from.
Yeah, so these threads are all user interaction, and that's quite powerful. How do you train the machines to behave like users? You train it on actual user data and this is you know, communities coming together who share similar interests, and that's what you use to train the machines. The one problem I have found with Reddit's business model is advertisers are leary of putting their ads on a platform where there is hate or you know, other kind of
stuff because they are brand conscious. You know, they don't want to show their ads next to something that is paid or something like that. And that's where they haven't had a lot of traction. I mean it sounds to be very similar to Twitter. Twitter is a great platform for engagement, but they haven't been able to monetize it because of all these aspects. So brand safety is huge that Reddit needs to solve for if they want to
scale on the ad side. But as I said before, you know, on the data licensing side, this is the data set that every foundational, large angrege model company wants to train their models on. Because this is all user generated.
Content, it sounds like, I mean, you know, from an advertising perspective, it's you know, it's Meta, it's you know, it's Google, it's Amazon now maybe even you know some others. But I mean, this is too small to be a player in the advertising space. So in order for me to buy this IPO, I have to buy off that it's also a I guess AI play as well, don't I?
It absolutely is, and look, ads can be fixed. I mean, I compare it to Pinterest. So Pinterest has got twenty three million daily active users in the US. Reddit has got thirty seven million daily active users in the US, so it actually has higher daily active users question and Pinterest is four times the size of Reddit in terms of revenue run rate, So Pinterest is close to four billion, Reddit is a billion. So in terms of runway, clearly,
you know, Reddit is under monetizing the engagement. But the reason for that is advertisers still don't feel like spending you know, five ten billion dollars on the platform because of brand safety issues and all the type of post or discussions they have on Reddit. So they need to clean up that part. I'm sure the advertisers that you know, they're advertising dollars of well spend, offer measurement, etc. But
this is fixable. I mean, we've seen Beta do so much in terms of ad measurement and ad targeting and look at what they have done this year. So clearly there is a long runway for Reddit, and the data licensing part has a lot of upside because of all the generatord ai interests.
All right, Mandy, thanks so much for joining us. A man deep seeing he's a senior technology analyst Bloomberg Intelligence joining us via zoom there. So again, Reddit, it's interesting, it's it's an ipo. We like to see more of those hitting the market. It's a good signed for the market, so the IPO buyers will be happy, and it's another kind of social media play. But as Mandeep was saying, it's got this AI angle to it as well.
I feel like every time we have a topic here on the radio where we're talking about AI, I have to ask, like, how is this like somebody like me going to use these tools? Because, like, you know, we talk about the impact, and sometimes it's hard to imagine something that's really going to impact your life more than the Internet or a cell phone, and like, is this really accessible to the mass market?
Exactly so, But I mean you'd listen to every company in s and P five hundred saying AI is can to impact our business. You're going to go up to a drive through and it's going to be a different experience, of better experience thanks to the technology. And so we'll see, you know, but that's clearly what we're a lot of the bulls are banking on.
You're listening to the Bloomberg Intelligence Podcast. Catch us live weekdays at ten am Eastern on applecard Play and Android Auto with the Bloomberg Business app. You can also listen live on Amazon Alexa from our flagship New York station just Say Alexa playing Bloomberg eleven thirty.
You know, I don't know what to do with this market, Moley, Maybe I just is it just all in Nvidia all the.
Time, all teams like all Ta AI or nothing.
Al Tech exactly AI or nothing. But let's talk about this market a more broad sense. Lauren Gilbert can help us do that. She's a seat of wealth Wise Financial, joining us via zoom from I believe Houston, Texas on behalf of Houston, Texas. I'll call out WTI cud oil is off about two percent today, seventy seven dollars. I think that people in Houston care about that stuff.
I think they do a little bit.
Lauren, thanks much for joining us here. What do you make of what we've experienced over the past few days, in a few weeks as it relates to AI and in Vidia and what it means for the tech space and the market overall. I haven't seen anything like this in a long time.
Right, Well, we are in the age of AI, which is similar to the age of the Internet when it came to be. Although this is going to transform really every sector in every business, and so it is a huge story. It is the catalyst of the market and will continue to be in The good news from Nvidia yesterday really was that it spread across the semiconductor space as all of these different companies are looking to get
some market share. And so while we still don't know who the winner is right now, certainly in Vidia has been, but we like the whole space, so semiconductors and also what it's going to do to other sectors as well, So that is the catalyst.
How are you feeling right now about earnings in general?
Loreen, And I mean, obviously there's a lot of positives to take from these AI stocks, but what about elsewhere?
Yeah, So with over eighty percent of the SMP having reported, we're having a good earning season. We've clearly come out of an earnings recession with year over year growth over five percent. So we're in pretty good space there with earnings, and we do see opportunities in other areas of the market. Communications services is one that we like quite a bit as well as healthcare is another sector that we like.
Just with inflation continuing to come down, and so the story is that the backdrop is there with inflation coming down, with the FED that's going to make a move sometime this year. We're still holding on to the idea of May maybe the first rate cut, even though probability has come down to twenty one percent now for a May rate cut, we still think, you know, it's sooner than later with a rate cut, which is going to help the many items, especially even housing and home builders for
the second half of the year. So we do see a lot of optimism in areas of the market.
Laurie and I to see that you like preferred stock, and we don't talk about preferred stock preferred stock market opportunities with preferred stock. Why in some markets it's a real advantageous vehicle. How do you think about preferred stock.
Yeah, the way that we're thinking about right now is the yield is good and it helps us mitigate duration risk on fixed income, and so it's a nice play between the stock and the bond and looking at preferred stock as a way to capture some yield and mitigate some risk.
Well, how are you thinking about the broader fixed income space right now? You know you just said that your that is sooner rather than later for a FED rate cut, which seems like is not what a lot of FED officials are saying these days.
Right, And there's always what is being said and what will ultimately be done. But you know, so having some duration is good, but not extending too far. We're you know, just right pretty close to the benchmark as far as duration is concerned. On fixed income, we do like fixed income, and we do think that fixed income is going to be a good part of a portfolio this year as we don't see necessarily a straight line in the equity markets, and so having some fixed income there will be good
to moderate risk on the equity side. We're also looking at the earning zeald on stocks right now is not that attractive, you know, compared to ten year treasury, so you know, looking at that idea. So once again, blended portfolio we think is going to be a good story this year. And of course, just depending on somebody's risk tolerance,
where will that blend be. But not being all equity or not all fixed income, but having a blend, we think it's going to be provide some some decent returns this year.
Hitherin you hear from your clients about their interest in I guess alternatives, whether it's private equity, private credit, maybe hedge funds. What's the interest level there and kind of how do you steer them?
Yeah, we like alternative investments. We hold alternative investment in the spaces you know, you've mentioned a number of them, and there's liquid alternatives and there's non liquid alternatives, and that's really the conversation to have with investors is you know, how much liquidity do you need? And certainly what the public markets offer us is liquidity, and that's important. And then there are ways to drive more alpha, more excess returns versus what might be expected, and that those are
some of those non liquid alternatives. So I think a combination of both is important, and once again looking at investors to see what kind of liquidity they actually need.
So it sounds like tech's a good place to be right now.
You've mentioned you also like some communications stocks. Where else are you looking in terms of the industry breakdown?
Like I was mentioning in healthcare, we like biotech as well, just because that is an area that as inflation wanes, tends to be positive for that area of the market. Those also tend to be oftentimes smaller companies, and while we're still seeing a dominance of the large cap space, we think there will be a reversal to that trend this year and we'll see benefits from smaller cap companies as rates start to come down. So that's another area that we like.
All Right, Lurene, thank you so much for joining us. Really appreciate getting a few minutes of your time with Loreen Gilbert, CEO of wealth Wise Financial, joining us via zoom from Houston, Texas.
You're listening to the Bloomberg Intelligence Podcast. Catch us live weekdays at ten am Eastern on Apple car Playing and Broud Auto with the Bloomberg Business app. Listen on demand wherever you get your podcasts, or watch us live on YouTube.
Or news coming out of Washington as it relates to Ukraine in Russia, the US today unveils its biggest sankets package on Russia since the war began. A drone maker and a payment system company are among targets of penalties. Secretary Yellens as Russia's economy is showing quote signs of weakness. Let's break it down with Dan flat Lake, national security reporter for Bloomberg News, joins is to via zoom from Washington, DC. Dan, what's in this sanctions package?
Well, there's a lot of stuff in it.
We're talking about, you know, all told about six hundred or so targets, but a lot of them aren't really household names, so you're looking at primarily Russian companies with or individuals no ties to the US financial system. But they are getting shipments and they're getting some goods in from third countries that are helping kind of keep the
war machine going. So the idea here is basically to kind of ratchet up some pressure on the Russian economy, kind of clamp down on some of the places where things are still getting through, and then really kind of you know, look forward to potentially some other measures that may be taken, you know, in the next few months.
Dan tell us how effective, if at all, the sanctions up to date have been, because you know, the IMF and your story said that Russia's economy is actually on track to grow almost three percent this year and it's really seems to be holding up pretty well by and large.
Yeah, there's no question that, you know, as far as the strategic goal of.
Getting putin to you know, give up the invasion and withdraw from Ukraine, that obviously hasn't happened, and we're now two years into this conflict. There have been some effects, you know, on the Russian economy. Growth is a little bit slower, at least it was initially. Now, as you mentioned, the IMF projects that it will be close to two point six or three pert, you know, up to three
percent this year. So it's it's blowing the economy, uh, you know, not as much as the US would have hoped, but it has forced Putin to sort of turn economy into a wartime economy, to basically kind of turn his entire manufacturing sector over to producing stuff for the war, and the hope is obviously over. Of course, that doesn't really help Ukraine now, and that's where we get into some of the funding battles that are happening here in Congress.
Oh, thank you very much, Hey Dan. We had Deputy US Treasury Secretary Wally Adayamo on Bloomberg Surveillance television this morning, and Jonathan Farrow asked him about India because Indian India has been one of those countries that it's kind of been a little bit loose with its relationship with Russia. How does the administration think about India and its placed kind of geopolitics and how it may be interacting with Russia maybe against some of these sanctions.
Yeah, it's a huge, huge problem some of our colleagues from Bloomberg Economics have done a great analysis on sort of the ten Lessons from the Russia Ukraine War that was out yesterday, and you know, they look at sort of the rise of this block of countries that are really rivaling the US and its allies, not necessarily in terms of size of economic weight or power in terms of global GDP, but certainly as an alternative to the US led kind of financial system.
And that's India, and that's China, and when it.
Comes to Russia, those countries are really keeping Russia propped up to a large extent.
India is buying Russian.
Oil, China is buying Russian oil, China is sending technology and other goods onto Russia. Russia is also getting weapons from Iran and North Korea and other places. So there's kind of a whole rival faction that has cropped up that is going to be very hard to counteract, especially when you're talking about India, which is an ally the US in so many other ways.
Yeah, Dan, you know, you and I had talked about this a bit time ago last year. The idea of export controls is that what we're alluding to here, Like basically, when you know, some of these countries that you know, like India maybe in this case that aren't being directly sanctioned by the US, but can still you know, kind of work with Russia behind the scenes and help get around these sanctions and maybe a bit more of an indirect way.
Yeah, I mean, it's a really it's a huge issue right now, just from a policy perspective. If you think about sanctions and the history of sanctions, the way sanctions work, they really leverage the financial system.
Which you know it works. It's technology, so you can see payments moving through the system.
It's very easy for banks to know that they you know, if they violate sanctions, they're going to get hit with big fines. Export controls is a totally different game because you're talking about boxes and microchips and things that are moving through sometimes a more informal economy, and it's harder
to track that sort of thing. And I've talked to folks in the last week or so that say, you know, once that stuff hits Hong Kong, once it hits Turkey, or once it hits some of these certain countries, we lose all all visibility of them. We don't really know where it's going, so how do you stop that from happening. It's just not as well developed as sanctions.
So Dan, we had Admiral Sturritis on earlier today, the former NATO Supreme Commander, four star admiral retired US Navy. He was saying, boy, they need the weapons now, the Ukrainians now, And you know, it's really at a critical time here. You get a feeling within DC that there's a belief that that this is a critical time or is this simply a political game at this point?
You know, it's a good question. It's hard to say exactly.
I think that there are some folks on Capitol Hill who.
Do feel the urgency.
Senator Schumer, the Senate majority leader, is in Kiev today as we speak, visiting with Ukrainian leadership.
Republicans have gone as well. In the past.
Mitch McConnell has certainly been pushing for Ukraine a The Senate did pass a package that will provide Ukraine with weapons and other financial support, but it's.
Stuck in the House.
And that's where it gets into a much stricier political situation because you have the former President Donald Trump really pushing against this kind of package. You have some isolationists in the Republican Party who say, you know, why are we spending all this money in Europe when we should
be spending it on the southern border. There's a lot of things that are happening there in an election year that makes it very hard for something that ordinarily would get you know, a majority support and really probably would and put it on the floor of the House, makes it much harder to get done.
So that's that's a real sticking point right now.
When we're talking about sanctions, though, Dan, is that something that would be subject to the same kind of approval process as Ukraine aimed, would be as going through Congress in that same kind of way.
Well, I think this is one of the things.
One of the reasons why sanctions, the use of sanctions is up like one thousand percent over the last two decades or two and a half decades, is because you don't have to spend a ton of money to wield them, don't necessarily need.
Approval from Congress.
Every time you want to levy su sanctions, you do you want to spend you know, fifty sixty seventy billion dollars if you want to reinvigorate the Defense Industrial Base. If you want to do all these things that actually matter on the battlefield, you need Congress, you need the purse strings, and you know, so that's a much harder sell.
But sanctions, you know, I won't say they're easier to wield necessarily, but they are more efficient in the sense that the administration can do it on its own without having to go to Congress for authorization.
All right, Dan, thanks so much for joining us. Really appreciate getting your thoughts and analysis there. Dan Flatley, a national security reporter for Bloomberg News, joining us via zoom from Washington, DC.
You're listening to the Bloomberg Intelligence Podcast. Catch us live weekdays at ten am Eastern on applecar Play and Android Auto with the Bloomberg Business app. You can also listen live on Amazon Alexa from our Flag New York station just say Alexa playing Bloomberg eleven th.
Our c SUEE conversation today. Kevin Butler Joints, and he's the CEA of Excellent ex C is a ticker to put into your Bloomberg terminal here at Utility Company. But I want you to tell us just start off, Calvin, thanks so much for joining us, but tell us about your company, what you guys are doing, and don't get into kind of the meat of it.
Absolutely, and good morning and thank you for having me so. Excellent is the largest transmission and distribution utility in the country.
We have the privileged and responsibility to serve approximately ten point five million customers across some of the most diverse and largest cities in the United States through our utilities Commonwealth Edison in Chicago, Baltimore Gas and Electric and of course Baltimore Pico out of Philadelphia, Pepco Holdings, which is sitting in our nation's capital, VC del Marble Power and
Light in Wilmington, Delaware, and Atlantic City Electric. So when you look at that scale and size, Excellent is positioned well to lead this energy transfer and that's who we are and how we show up for our customers.
So you guys just had earnings a couple of days ago, right, Yeah, So tell us about the latest quarters, some of the highlights, and what you're looking forward to in the year or.
So to come.
No, thank you for asking, as Wednesday was a good day, and I say that because we beat our fourth quarter expectations and we exceeded expectations for the twenty twenty three, and I was just so proud of the team that we were able to deliver on our commitments that we made in twenty twenty three despite all the challenges, and when I say challenges, when you look at in Pennsylvania had one of the warmest winters that had in the last fifty years, and being a distribution company the gas
company that we do there, we continue we overcame those headwinds and still met the number. And in addition to that, despite the challenges in our regulatory environment, because of our skill, we will continued to able to shift capital around our platform to invest in the things that are most important to our custos.
So it was a good day, all right.
My analyst of Bloomberg Intelligence that covers your stocks, she writes, since she says, ask them about Illinois, so talk about some regulatory headwinds. It seems like Illinois in the news and not always for the right reasons, but anyway, talks about doing business in Illinois.
You know, KMET is the largest hutility in Illinois, having the privilege of serving Chicago, and your analyst is right on, Illinois is a difficult jurisdiction for us, right Now, we had a ruling on December fourteenth, and that ruling set I think their efforts to decarbonize and to move forward on transportational electrification that they were on. But we are committed to working with all of our stakeholders, including the Commission, to get to where we have a shared vision to
move Illinois forward. But it was it was a December fourteenth I remember it well. It was a tough day. But what you've seen now is we've reduced about one point four billion dollars in capital in Illinois.
But more importantly because of this, this.
Cost of decision, and what really hurts is that the sitence of Illinois, their transition to a clean energy stacking is going to slow down. And we had to lay off nine hundred contractors that's direct contractors, and impacted by that was roughly two thousand indirect jobs. Now that's just us, so you could imagine the other utilities, the other electric utilities and gas utilities had to do the exact same thing. But we have a path forward and we continue to work with the Commission to right.
Size this and obviously you guys are looking to do you know, switch over to clean energy and other markets as well. So how does Illinois maybe give you a bit of a blueprint for how to approach these other markets.
Well, I would tell you that the same day, although there was a bad outcome in Illinois, we had a solid outcome in Maryland exact same day. So it just goes to show you when you have a shared vision of how to get there. We don't expect the commissions to give us everything we're asking for, but if we have a shared vision and a mutual understand the mutual benefits, you can do it. And I always say, in my golf parlance, you know, Maryland, you know we hit it.
It was a part, it wasn't a party, and we're working on that. So it is a shared vision across and each jurisdiction is different because you can imagine in Illinois they're saying we're going all electric sooner rather than later, Maryland doing the exact same thing. Pennsylvania we like our gas, you know, we're saying gas is going to be part of that portfolio in Pennsylvania, and it's up to us to understand what those jurisdictions want and determine how to get there with those mutual benefits.
So that's how I was going to ask you, how do we to the extent that we move this economy to a more greener fashion, including on any energy grid. Who drives the bus? Is that you guys saying this is how we're going to invest our capital in our plant. Or is it more of the municipality saying we want to go this way, we want to stay gas, we want to go green, or is it kind of a I guess partnership.
It has to be a partnership. So you know, by us not owning generation, what I can tell you is we are brought to the table more often than not now because they don't few I have a vested interest. By me not owning, no longer owning nuclear, wind or solar, my job is delivered to you. So once they understand that and really get it, I'm now a trusted partner. Now having said that, what I can tell them is that here's the cost to achieve what you're trying to achieve.
Give you an example. In Maryland, we had a jurisdiction that wanted to go all electric, and we said, look, I'm an electric and gas I'm going to benefit. I can do that for you sooner rather than later. But this is what it's going to cost the average customer in your city if you do that. And when you put those costs in front of them, they're like, Okay, let's slow it down a little bit, let's be more pragmatic about it, and let's do a balanced approach. And that's what we're finding.
Well, that's what I was going to come to you next about is that.
I'm sure a lot of people would you know, if given the choice, would probably say, yeah, cleaner energy, let's do it.
But then what does it cost?
And so are you saying then that this is like is it markedly more expensive than gas? And is that just because it's a new technology it's going to take some time or even once it's further developed, this is still a more expensive energy alternative.
It will be more cast you know, it will be more costly in the short run. Why because the infrastructure to handle when solar and increased renewables, you have to build this infrastructure to do that. So that substation that's in your right around the corner from your home, it's not equipped to handle that amount of load if you were to convert directly to electricity sooner rather than later, so you have to build up that infrastructure. But I do believe technology is going to catch up and balance
out the costs. And my responsibility as the CEO is to ensure that this transition is done equably. Those of us who can afford it, you know, they're not going to miss a beat. But what about those communities that are struggling to pay their bill today? When you start going down this path quicker, they're going to be the ones most impacted.
How do you your company Excellent? Do you grow via acquisition? And if so, how do you think about acquisition related growth?
Yes, so when you think of Excellent, Excellent was formed in two thousand with the combination of Commonwealth Edison out of Chicago and Pico out of Philadelphia. So Excellent formed via acquisition. In twenty twelve, we bought Constellation Energy, which was Baltimore Gas and Electric. In twenty sixteen we bought Pepco Holdings, which was Pepco, d C, del Marva and Atlantic City. So we're conglomeration. I think the industry will continue to move that way because scale matters when you
go to costs and affordability. For us, at this point, that is not a priority because we're investing over thirty five billion dollars over the next few years. That has to be our priority right now.
How do you think about it? I'm sorry, I'm just looking at the FA function, my financial analysis function, free cash flow. Is it all go to the dividend? And or do you say, yeah, you have a four percent dividend field a little bit high than a four percent dividend yield. How do you balance the dividend versus maybe using cash for acquisitions.
Yeah, we have a rule of thumb that we try to target sixty percent dividend payout with earnings. So we target that and we look at issuing equity as well to our capital investment. Our equity plan is forty percent of our capital investment. That's what we rolled out on our earnings call. So we're going to issue about one point two billion dollars of equity over our LRP to
fund that dually a long range plan. I'm sorry, Yes, So twenty twenty four through twenty twenty seven, we're going to invest thirty five billion, and that's about three point seven million in new capital, and we're going to fund that forty percent with new equity. So we balance that and also the earnings. You know, our debt ratio is on the lowest in the industry, our CFO to debts, So those are all the things we look to to fund opportunities.
Yeah, it looks like you guys just had a bond offering earlier this week almost two billion dollars, so that helps, but that's mostly refinancing data.
Looks like it was and it was the best spreads we've received in the past fifteen years. So people understand the value proposition of Excellon.
Okay, real quick, thirty seconds. You're based in Chicago, right, Yes, Chicago today?
How Chicago today? Chicago. It's a city that's struggling, like many urban cities. But I always tell people it's one of the greatest cities from June to October. But it is. It's a wonderful city and it's vibrant and that's that. And I tell you, you know, when we get to serve some of the best cities in the nation and we are community partner.
So all right, Calvin, thank you so much for Jordan's really appreciate it. Calvin Butler, here's the CEO of Excellon. E XCA is a ticcker to put into your Bloomberg terminal there, joining us here in a Bloomberg Interactive broker studio. They recently reported some earnings. They were in the market, as Molly was saying, with a bond offering this week. So busy times for the good folks at Excellent based in Chicago, one of my all time favorite cities.
You're listening to the Bloomberg Intelligence Podcast. Catch us live weekdays at ten am Eastern on applecar Play and Android Auto with the Bloomberg Business App. You can also listen live on Amazon Alexa from our flagship New York station. Just say Alexa playing Bloomberg eleven thirty.
So let's get the ethera wrong, Aanathan, because she is the media analyst and there's a lot going on in the media space. Warner Brothers Discoveries is one of those companies that was put together by Warner Brothers merger with Discovery Communications. Everybody felt like, Okay, now this company's got some scale, some size, and they could make that transition
into streaming. Well, their latest results came out and it's just kind of confirming not so fast it stocks down eleven percent today, down twenty five percent year to date, down forty six percent on a trailing twelve month basis really really tough out there for the traditional media companies. KEITHA. Rong Anathan joins us. She's a media anols for Bloomberg Intelligence. ETHA. What you take away or what does the market not like about what they heard from their conference call?
Yeah, really really tough, Paul. I mean it's it's lower earnings and you know, earnings pressure that's kind of dominating the whole narrative for Warner Brothers Discovery. So you know, their EBITDA for twenty twenty three came in way below guidance. They had guided to somewhere between ten and a half to eleven billion dollars in EBITDA. It actually came in
at ten point two billion. And I think what's worse and what kind of really spooked investors was there was absolutely no guidance whatsoever for twenty twenty four, a kind of you know suggesting, I mean, consensus had twenty twenty four estimates at about ten and a half billion. I
think it's going to be way below ten billion. And if you just kind of look at the commentary for the TV networks business, remember more than fifty percent of their revenue comes from their TV networks business, you know, networks like TNTTBS. Again, advertising is really in the doll drums, So you know, nothing to really cheer about right now.
How much of this GITA is really just coming out of those Hollywood strikes last year, just you know, it's going to take a little bit of time or there's really more of a longer term issue at play here.
The Hollywood strikes, Molly definitely had a huge impact and they weighed that. Those strikes definitely weighed on ebitdah. So so the numbers that we kind of talked about, the ten point two billion versus eleven billion, a lot of that was from the Hollywood strikes. The flip side was the Hollywood strikes did have a positive effect on free cash flow, so you know, the free casual numbers of this company throughout were obviously huge. But again that's going
to reverse once content production restarts. But I think you know, it's not just the content pipeline, right We're looking at a business model that is very, very challenged right now because of cord cutting. You know, you look at a PATV ecosystem that has lost about thirty percent of its base and that is really having some huge ramifications for this company. So, you know, we spoke about fifty percent of its revenue coming from the TV networks, ninety percent
of its EBITDAH comes from that TV network's business. So we're seeing a steady ten to fifteen percent decline every year because of cord cutting, because of pressures, and that's not going to go away.
All right, Keitha. We're looking waiting for the President. Biden is about to speak in Washington, DC, so we may have to cut away from that. So Keitha, say, we have President Bond walking up to the lectern, I believe, So we'll have to see how this plays up down in Washington, DC, some comments from the President, So we'll have to wait and see how that plays out. KEITHA, Real quick is a merger between Warner Brothers Discovery and
Paramount something that could happen, should happen. It seems like two relatively weak companies, two relatively levered balance sheets.
Yeah, Paul, I mean there is a lot of strategic rationale, you know, and Warner Brothers Discovery has been really good at extracting synergies. They got out almost four and a half five billion dollars from just that combination of Warner and Discovery, so they obviously could do that again with Paramount. The thing is, I just don't think the market has any appetite for more debt. I mean, we have Warner Brothers with forty five billion dollars in dead we have
Paramount with about sixteen billion. I don't think investors will like it.
And let's look at it.
I mean, let the subscriber here looks like those actually came in above analyst estimates. But I mean, is that I feel like that's normally something that would drive a bit more optimism here. But Lake, you said, everything else across the board is just like really just so negative.
Yeah, I mean streaming subscribers. Yes, that used to be a metric that investors used to kind of get excited about. Not any more. We're really looking more for profitability. And at the end of the day, yeah, they could add you know, a million, two million, even three million subscribers,
but it's really not going to move the needle. I mean, yes, you have them at about ninety seven million subscribers for their max platform, but it's still a very far cry from Netflix, which has two hundred and sixty million from Amazon Prime, which again has maybe about two hundred million, from Disney, which has one hundred and fifty million. So they will always kind of be that tier two player. And so then it's going to come down to, Okay, what is their place going to be in this new
streaming world? And we're still kind of uncertain about that.
Hey, keith it Tom Keene asked me a good question this morning. He noted, reminded me that John Malone is a big, big owner of Warner Brothers Discovery, and he doesn't have a whole lot of patients. What do you think his intentions are with Warner Brothers Discovery? Is David Zaslov the CEO? Is his job in jeopardy? Do you expect John Malone to exert some pressure on this company to enhance shareholder value? How do you think that dynamic might play out?
I think twenty twenty four Paul is definitely going to be a difficulty or for media all across the board. That's it. They do have certain things in place. So they do have this new Skinny sports app that they're working with both Disney and Fox that's going to come out in the fall. So you know, that's a positive. I really don't know what kind of impact it's going to have on earnings just yet, but they are definitely
trying to hedge their bets. But going into twenty twenty five, I mean they're still talking about you know, streaming profitability and things like that. Again, I'm not sure whether it's enough to kind of offset the linear TV pressures. So I'm not sure what kind of pressure John Malone is going to be exerting on them. But I don't necessarily see anything major happening at least in twenty two twenty four from both an m and A perspective or from
a financial perspective. Right now, it's all about you know, organic opportunities for WBT, So it's there's really no major catalyst as far as I can see.
Yeah, Well, my good friend Laura Martin, she's meeting anost over and need him and company, and she's one of the top adamsts out there, a lot of experience. She's keeping her hold on this company. She says, you know, twenty twenty four is an investment year, not a free cash flow growth year, so she's waiting for revenue growth to come, which might be might be next year, So she's staying on the sidelines at least.
You know, when I see an earnings report like this, Githa, when you see like something that's like free cash flow was like so overwhelmingly positive and everything else not so great, I feel like this is like case in point of like why bondholders and shareholders care about different things. So is there gonna is this maybe something where if you're a debt holder of Warner Bros. Discovery today, you're just like, praise be, They're gonna pray down, They're gonna pay down debt.
This is a great deal leveraging story, or like you can't even take.
That kind of an angle.
Well, it is a good deal leveraging story, and they've done a great job. I mean, they paid down more than five billion dollars in debt Molley through twenty twenty three. But then you know, they had some pretty ambitious leverage targets. So we ended twenty twenty three at three three point nine x. You know, their goal was to get to a two and a half to three times leverage ratio by the end of twenty twenty four. They're obviously not going to get there. I think, you know the way
that bondholders are going to look at. This is obviously the EBITDA guidance or the lack of guidance kind of speaks volumes at this point. You know, the earnings pressure is just tremendous right now for this company. I think once we get to below three times a leverage ratio, I think that's when the stock will really kind of start to work, both on the equity side as well as on the credit side.
All Right, gith thanks so much for joining us. Well,
we appreciate it. Eithan wrong Andothan. She covers all the media industry, all the companies there for Bloomberg Intelligence really leads our effort there, and we appreciate getting a few minutes over time, just a real time of transition in the media space here as the industry tries to transition from what was the traditional media model where you bundled everything up in a cable package and you paid your eighty year one hundred bucks a month and everybody made
money all throughout the ecosystem. That was a very very good business for shareholders and for bondholders. Now let's transition to streaming. The economics are uncertain at best, and investors are just saying I'm going to wait on the sidelines before we get back.
Well maybe you know, NASA shoot my own horn.
But I did just get cable for the first time in my life really in my new apartment. It's part of our maintenance fees that we get a deal with RCN.
So maybe I'll be helping them in why because you're a what spectrum cable just like millennial? Yeah that's the label.
Yes, okay, so wow, I mean A'm millennial getting into the pad ecosyst that that is a It's a story in and of itself.
This is the Bloomberg Intelligence podcast, available on Apples, Spotify, and anywhere else you will get your podcasts. Listen live each weekday ten am to noon Eastern on Bloomberg dot com, the iHeart Radio app, tune In, and the Bloomberg Business app. You can also watch us live every weekday on YouTube and always on the Bloomberg Train.