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Walt Disney saying that Josh Tomorrow will succeed Bob Iger as CEO of the company. This ends a three year search to replace its long serving leader, who had to come back after the first time around didn't quite work out.
Let's bring in Githa Ranganathen.
She is our US media analyst here at Bloomberg Intelligence. And I want to contrast what happened this time around with the succession planning Githa, with what happened in the past when Bob Chapek, also of the Parks division, was named CEO but didn't last too long on the job. Can you compare and contrast the different succession efforts.
Yeah, I think it was a very different time Scarlet. So remember he was appointed in February of twenty twenty. March twenty twenty, everything closes down, including you know, Disney Parks because of the pandemic. So it was kind of unfortunate. The timing was all wrong, I would say for Bob Chapek. And what happened then is, of course, you know, movies were shut down a big part of Disney's business, movies
as well as the parks again. But then what really kind of shot into prominence at that point was the streaming business, a business that Bob Chapik was not really very familiar with, and while he did have some experience in content, obviously it was not enough. And we had a whole bunch of different missteps with the content part of the business, which kind of led to the whole you know mess that we saw, you know follow I think this time we were in a very very different position.
I think at that point Disney was still kind of trying to figure out what it really was. Was it a TV company, was it a studio, was it a theme park company? Or was it really a streaming player? And I think now the pieces have kind of fallen
in place. We are on much more steady ground. I would say, you know, they have their clear mandates, whether it isn't streaming, whether it's in studio, you know, the clear what has really emerged clearly right now Scarlett is that parks is the main core growth engine of the company, and I think that is reflected in this choice today with Josh Tomorrow.
So Keithan.
Josh is a twenty eight year veteran of Disney running the parks. But of course the other big part of the company is it's you know, entertainment business. Dana Walden who runs the big part of that business, great reputation in Hollywood. It's important to keep her at the Walt Disney Company.
Are they going to be able to do that?
I absolutely think so. So, you know, they obviously this was a very clever move by the board to kind of create this new role for Dana Walden, make her the president and the chief creative officer. They've never had this before, but they specifically created this one for Dana Walden, so that I think really kind of I think dispels a lot of fears about what would happen from a creative perspective. You know, last time, this was the same problem that you know, many investors raised when Bob Japek
became CEO. So having her there in the creative role I think definitely plays very well with Hollywood, with the creative community. And ensures that, you know, Disney will still have a top tier content coming to its streaming platforms for the foreseeable future.
So Josh Deamarrow takes the job on March eighteenth, that's when the succession is effective. And we talked about how yesterday Disney came out with a forecast that was fairly tepid, and one way of looking at that is it kind of you know, clears the deck.
Lets him start off with the clean say.
And set expectations and kind of manage it for investors a way that he sees fit. At what point does he own everything that happens to Disney.
So actually a lot of the things that we're seeing right now with the Parks has been under Josh Tomorrow's watch. Remember once Bob Chapek was promoted to the CEO position, Josh Tomorrow assumed the role of chief of the Parks, and so all of the different initiatives that we've seen, you know, whether it's Lightning Lane, whether it's Genie, whether it's the sixty billion dollar expansion, a lot of that
has been you know Josh Tomorrow's doing. So yeah, I mean, of course we're you know, I think the street is definitely going to give him a few quarters to kind of settle in, But he has pretty much been the architect, along with Barb Aiger, I'm sure and the rest of you know, the management team in kind of instituting the strategy and making the parks a prominent, you know, part of the portfolio going forward. So very soon, you know,
the short answer, Scarlett is very soon. I think he owns pretty much all of this right away.
In fact, Keith I five Josh Tomorrow, day one of my tenure CEO. I would go and I would say, hey, explain to me why we are not spinning out are broadcasting cable networks. They are businesses that are in a secular decline. They're dragging down our multiple Let's cut them loose. Do you think that's even an option for the Walt Disney Company.
I think it is. I think everybody is considering that right now. I mean we've just seen what you know, Warner Brothers Discovery has been able to achieve by kind of separating out it's a studio and streaming from the TV network's business. So I definitely would not rule that out. I'm sure Disney will consider and Josh Tomorrow will consider all options once he becomes CEO.
What happens to Jimmy Pataro over at ESPN, I mean, does that become part of the spinouts as Paul was talking about it, Because there's different parts of Disney's media business that are slowing down that are no longer the crown rules the way they once were, whether you're talking about the network television, or whether you're talking about ESPN, or whether you're talking about the movie business.
Yeah, I think sports is still very core to Disney. I mean they are so if you just kind of look at the US sports landscape, ESPN actually owns majority of the marquee US sports right almost about forty percent of all sports viewing happens on ESPN platforms. So obviously it's still very core to the company. As far as
Jimmy Pittaro is concerned. Scarlett, I mean, yes, he was one of the you know, candidates that they were considering to take on this job, but I think he himself had many times indicated that he was not really interested in the top spot. I think he kind of carries on business as usual with ESPN. You know, it's a little bit of a wait and watch what exactly happens
with the strategy. It is really instrumental, I think, to their streaming business because you know, as they kind of mentioned even yesterday on their earnings call, you know a lot of people taking the bundle, the ESPN streaming plus the Disney plus the Hulle. So it is a critical portion of that. So I'm not really sure how exactly
a spinout Wood would work. But of course, again, you know, we are in a very very different time and age, and everybody is thinking about all possible options when it comes to a media.
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PayPal Holding said HP chief executive officer Enrique Lauris will take the top job from Alex Chris, whose turnaround plan failed to meet targets and streamline the payments business. The stocks down nineteen percent today, fifty two week low, off twenty seven percent year to date, off over fifty percent
over the trailing twelve months. This is a name I thought at the beginning of this whole fintech thing that this had This was a company that could really be a leader there, but that has not been the case.
Dick sa Garrett joins us.
She's a senior fintech and payments analyst for Bloomberg Intelligence Dix.
Not a good day for PayPal. What's going on here?
Yeah, definitely right, like two big headlines. Hit At once missed four Q expectations and then announced a CEO change. So on the print side, adjusted EPs was about a four percent miss and the revenue came in one percent lower, and I should highlight this is like their first miss in two years. But I think the bigger issue is forward looking branded checkout, which is the main core high margin business for PayPal that has slowed to one percent
in the fourth quarter. And PayPal is also flagging in earnings decline for twenty twenty six, So those were the key forward looking problem areas, and the CEO change definitely was a surprise. I mean, the guidance division was driven by their investments in some of the merchant business that they're doing, but I think the market reaction goes beyond that.
I think it goes more around some of the serious gaps that appear to have been discovered actually with Apple Bay and all the product advancements that the competition has come through, and I think, yeah, lots to unpack there today.
So just give us a sense of the competitive landscape of the businesses that paypals and the financial technology and kind of where do they fit in what are they maybe not doing right here?
So PayPal has two parts of the ecosystem. It works with the merchants where you see the PayPal button when you check out, and it works with the consumers through its app, the PayPal app and the Venmo app. What is very interesting is that management kept highlighting execution, discipline and prioritization, but honestly, like that is the main game. PayPal's biggest A value ad is the two sided network. They could not have afforded to either drop the merchant
or forget about the consumer. So it's been like it's a very competitive landscape. You have Stripe, Aden, Apple, pay Is you would have noticed recently revised their partnership from they moved from Goldman's to JP Morgan. So everyone is charging first there and PayPal needs to show up on that and I thought they were getting that. But I think this new CEO to change definitely puts a multi year transformation back in the play now.
So what do you think is the is the next step for this company here? I mean a can of kind of remain competitive in this business going forward? Does it need to think about a new structure or a new strategy.
What do you think needs to happen here?
Yeah, that's the million dollar question, Paul. I think so there are two things. One is, I think investors need really need clarity now on how PayPal reaccelerates hiscore checkout business. Is it conversion, is it pricing merchant value proposition, because
that's still the core engine. But I think secondly is whether the new leadership really signals of broader strategic shakeup, Like do they streamline initiatives, are they going to step up cost discipline or capital return or if it doesn't work out, maybe they'd consider like big assets like Venmo. You know, strategically, the performance doesn't inflect from that.
So what's the fintech landscape like these Daystally, it seems like it's very quickly evolving. Here, Just give us a sense of the lay of the land airs ore. You talk to anybody under the age of thirty, they ain't got any cash in their pockets.
So what's the whole new world out there?
Yes, I'm with you that, which is why it was quite interesting that they replaced Alex Chris is the CEO. I think the landscape is intensely competitive. The two key themes that are driving at the cutting edge of fintech is the innovation around agentic payments, agentic commerce where paper was showing up in a big way as well, and stable coins, which is again like moving transactions on the blockchain.
And things are moving really fast, Paul, because as you really pointed out, like nobody carries cash in their wallet. The younger generations want transactions to happen in the flip of a second. There is and you know, the base at pitch software and AI has moved payments needs to kind of keep pace with that. So and the regulatory regime obviously has supported that as well. So there is a lot going on, and I just worry that if Peopal is going to get left behind.
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Pepsi out with some numbers today.
The earnings beat estimates, But for me, the big thing is Pepsi's going to cut De Rito's prices by as much as fifteen percent to boost demand.
When you see that, I just can't remember.
Double did your price cut?
Well, I just don't think you remember the prices of sieyes one.
When all the supply chain stuff happened. Okay.
I could see how they were jacking up prices because a pandemic, but they don't come down after the stuff's over, do they. I mean, it's not like an avocado, which is a commodity.
I want to see this charted out what it looks like.
Yes, over time.
Ken Chay, senior consumer Products analyst, joins us here from Bloomberg Intelligence. Ken talk to us about Pepsi again. Came out with some earnings results and then some interesting topics about pricing some of their products.
Yeah, Hi, Paul, Yeah, PepsiCo's numbers today, as you alluded to, they beat their expectations by a little bit. But I think the broad takeaway for investors from today is that PepsiCo is committed to bringing better focus to this company. You know, I've covered this company a long time and it's it's primary competitors, Coca Cola, Cure, Doctor Pepper, you can say, Primal Water Monster. How they different from PepsiCo
is the much more focused particularly specific categories. But PepsiCo, with the urge of the activists urging them on, is bringing more focus to this company. And what I mean is they're rationalizing a lot of the SKUs that really aren't contributing much. They're consolidating plans, they are bringing more rationality to the trade spending. So when I hear things that like, you know, cutting prices, that's tactical. That's just a way to move the need a little bit with
near term sales. But I think the bigger picture is to bringing more focus to this enterprise, and I think that's what's behind a lot of the enthusiasm behind the share price today, right.
I mean, investors are excited about it strategy as opposed to just kind of moving forward with the way it's always been. When it comes to those price cuts, though, I wonder if this is going to spark any kind of price war, will other snack makers feel the pressure to also reduce prices, even if they've gone up quite a bit since the pandemic.
That's possible, Scarlett. In the case of free too lay though, they have such a dominant market share, and they have like sixty percent of the market in the in the measure channels, and when you have that much of a share, you deserve a premium. Particularly with Petsico's direct store delivery system.
What that means is that they help their retailers much more than a lot of their competitors, and that is they actually go to the store quickly, respond to out of stocks, they help you know, position the product, they create the end caps in the in the store. They do a lot more for the retailer than the competitors. And so that's how they are helped to get premium pricing. So, yes, they're rolling back some prices. You know, it's no secret that price increases have been up quite a bit since
the pandemic, and a lot of it's cost driven. Uh and and private label has encroached a little bit on PepsiCo share. But to answer your question directly, they are the dominant player. I would not expect them to give back too much over time. And while their competitors may cut price as well, I think retail would be alienating consumers if they pushed too hard on Petsico's price increases down the road.
I was just in the shop rate in Bellmart, New Jersey yesterday. Lots of private label stuff on the shelves. I mean, prominent shows.
How are you reaching for this?
I am in many cases. I am in many cases. Ken talk to us about Elliott Management.
They've been in this company, they've owned this stock here pushing for some change.
How much of an impact are they having.
I think on the margin there's an impact. Poll maybe to the degree that Petsico is hastening. It's moved to more focus, you know a lot of the things that it's been doing all along, and that is upbringing their portfolio with more functionality. This is some of the things we talked about in the past. They're bringing more protein to their mix, the poppy prebotic sodas, they're bringing i'm sorry,
more fiber, the probiotic sodus. They're bringing more protein by restaging muscle milk, so bringing more value to to the beverages. So they've always been doing that, but to your question, Elliott is pushing them to do things like, Okay, you can still do that, but also cut costs a little more aggressively. You know, maybe maybe you don't need all these plants, Maybe you can consolidate some. Maybe there's some SKUs, you know, some products that aren't selling, well you can
roll those back. Be a little more nimble when it comes to getting rid of some products that aren't winners, because at the end of the day, you have to grab as much shelf space as the retailer as possible, and when you have products on the shelf that aren't moving, you're not helping them, you know, with their business. So be more a little more aggressive with that. So it's helping and I think that's a positive thing for shareholders.
Is this a company that's going to have to separate its drinks business from its back business.
Well, that's the age old question we've been talking about for a while. And as I mentioned, if it can prove to the market that this increased focus that they have with just doing their you know, daily business or running these operations, they can improve them. I think the heat will be off for them to go to the
draconian measure of breaking up food and beverages. That's always, you know, the wild card I think down the road, and I think will be well received by the market quite frankly, but I don't think it's necessary at this point.
What are you consumer product products companies telling you ken about just the consumer out there?
Well, Altria just the other day. I mean, it's a different market with cigarettes, you know. They noted that consumers are still hesitant in paying up for premium products, and the cigarettes mentioned isn't the same category as salty snacks, but they do note that consumers are reaching for the private label, the low priced alternative, more than they've done in the past, and so the extent of that that
carries over to you know, sacks and beverages. I can see some parallel lines here, and as more companies, uh you know, release their numbers, I think that could be a common theme here that private labels encroaching and maybe there needs to be some more deceleration in the uh, you know, reliance on price increases to stimulate sales growth.
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It is earning season.
We're knee deep in it and big pharma is reporting, and let's start off with Pfizer. The shares are down about three point four percent. Pfizer is trying to break into the anti obesity market, the you know, the diet pills, we don't call it die pills, weight loss waits, yes, and not getting very far in it. They've made some big, big investments and it's time now to see how it's
all paying off or perhaps not. Sam Fizzelli is out our director of research for Global Industries and senior pharmaceuticals analysts, and he's in London right now with a jacket that says this.
BI drug Boss. BI is Bloomberg Intelligence.
And he's the drug Boss.
And he's the drug boss all right.
So your producer told me I can wear it, so if I shouldn't have, a very good friend of BI got this for me. So I thought that these ones I should hear it otherwise that's my boring jacket on next.
No, no, no, we welcome it, mister drug boss, So thank you for joining us again.
Sam.
Let's talk a little bit about these visor results because it feels like it's the you know, people aren't paying that much attention to what happened in the fourth quarter or even the reaffirmed full year guidance. It's all about, you know, the latest data on the obesity drug from met Sarah, which Vizer is purchasing.
Yeah, yeah, so look they paid ten point one billion dollars for this and the share price is down three percent. If it all to do with that, there is it people being reminded again that the next three four years there's a may headwind from generic drugs coming for there some of the key products on the market eyebrands, ex Standy, et cetera. So that's partly the issue. And you know, in order to deal with that, you need assets and drugs that are going to try and hopefully fill the gap.
And maybe this is the problem with the data. The thing is, we've looked at the data, as you know, we have very deep obousity analysis. We've looked at the data and it's not terrible. But as I said the other day when Rash reported there's some numbers, I think folks are getting over this percentage here, percentage there. You can only to the point going forward you can't, I mean unless you give out somebody that are thirty forty weights,
which of course nobody wants. So this is getting to a point where now it comes to the nuance, and unfortunately we don't have a lot of the nuance that we need to know about this data set tolerability. And it is good because it's a once monthly injection after the first few weeks, so it's well set up, but the market obviously doesn't like it because they're not getting enough information about how good actually it is. Sam.
It seems like if you want to be an investor in big cap farming, you really have to be a stock picker. I've got stocks like Pfizer and Bristol on a trailing twelve month basis that are down. But I've got stocks like Johnson and Johnson and Eli Lilly and abby.
V They're are big.
And is that just because they've got the right portfolio of drugs and the others don't.
Entirely entirely about that what is. What you don't want is looking into the abyss of generic drugs coming for your big earners with no obvious pipeline versus, let's take it Johnson and Johnson. In this case, they have a phenomenal set of drugs for the multiple miloma space or a whole you know, other oncology spaces. This is the powerhouse.
And of course they've also still got the other divisions medical devices growing quite nicely so and no massive I mean, there's one that's coming up, big hole that's coming in terms of generics, but they've still got these things that are growing at phenomenal speed. And one of their drugs, Dolllects, is very close to twenty billion dollars and that's just one indication in multiple myloma. So they've done everything right in that case, and that's what the market likes.
So in other words, Sam, this is something that can be managed. The fact that Pfiser hasn't managed this well raises a lot of questions here, because I mean it's not like just one day they woke up and oh, you know, there's suddenly a lot of competition for some of their best selling drugs, or people are no longer paying up for COVID treatments COVID vaccines. In terms of management, do investors need to question whether adviser has right management in place?
Yeah?
I mean, look, this is a tough game, right, not a game of course, this is a very tough set of issues to deal with. Creating pipeline takes a lot of effort. Let's take Eli Lilly. For years, nobody was paid too much attention to their potential margin expansion that was coming and they were arguing for it, et cetera. Maybe they were lucky they hit on these obesity drugs you get. Ask for Zeneca. It took quite a lot of pain for Pascal Soio. You should write that ship
when he took it. So management's part of it. Then you need to be lucky. You cannot have just one or the other and pipeline. You know, we'll see what Filer shows us over time. They have assets that are in earlier development that we need to start seeing their fruit.
Hey, Sam John from the Jersey Short times in any ass will AI have a meaningful impact on coming up with new drugs, new therapies?
Is this going to really be a game changer?
It will be. You need mich Colle Andrew galler on, because it's done a lot of work on this, and yes, the answer is it will be depending on what area you're looking at. We think it can cut the time to get a drug to market by a year or so in the next five to ten years. By the fact that you could use it for doing much better work in the very early stage, in the pre clinical stage,
you can shave some serious time of that. We talk to a lot of hospitals, a lot of clinicians, a lot of scientists, and they're all super excited by that. One of the key things that people are using is this thing called Alpha fold that was developed by Google's Deep Mind, and that is really making a difference to people hunting for drugs at that early stage.
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