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One of the names companies that reported numbers was Walmart came out some pretty darn good numbers in a stock market likes it.
Likes it.
Stock is up five point seven percent today, It's up about eighteen percent a year today. Let's check in with Jen Bartash as she covers all the retailers for Bloomberg Intelligence. So, Jen, what did you hear from Walmart with their earnings release?
Yeah, it's you know, Walmart had another good quarter, and I think that it's very easy to attribute a lot of their success to just the value seeking behavior of consumers in this environment. But I think that would also be overlooking a lot of the investments they've made in things like convenience that is really spurring the e commerce growth. And that was really a notable takeaway from today's earnings release.
Yeah, that e commerce aspect helps draw on higher income shoppers, So it's a larger pool of customers at Walmart now has access to and in our Bloomberg News reporting we indicate that the digital offerings now include luxury items like pre owned to Chanel bags. I had no idea that that kind of self was available on Walmart dot com.
Well, you know, Walmart has done a lot to really expand its marketplace, and that includes bringing in items that you know will appeal to that higher income consumer, you know. And the tactic behind all of this is that the more people are integrated with e commerce in going to stores, they become sticky and they become loyal customers, so that when the macroeconomic backdrop fades, it really increases Walmart's ability to hang onto these customers going forward, and that just
drives future growth. So it's a really interesting play out of how they're applying that tactic, Jen.
I also want to get your take on Walmart transferring is listing to the NASAC that's going to happen on December ninth, and that of course is to reflect as focused on being a tech forward company. But I'm wondering, I mean, how much of this is really just about being included in the Nazak one hundred and therefore the QQQ etl Oh.
Yeah, there's certainly part of that scarlet where you know, that's that's probably part of the motivation. I think that there is you know, obviously there's a perception with regards to being perceived more as a tech company, which Walmart in all truthfulness has evolved into a tech company, especially amongst other retailers. By being listed at NASDAK, you know, long term, maybe it helps the evaluation, you know, just in terms of having that perception of being more in
you know, aligned with peers. You know, Amazon is listed on NASDAK, things like that. So I think that there's a lot of those components together combined, are really behind the.
Move Jen Nobody arguably has a better finger on the pulse of the consumer than Walmart.
What are they saying these days?
Actually they seem relatively optimistic. You know, they talk about you know, spending holding study for kind of that middle income consumer, high end consumers seem to be spending pretty freely. A little bit of concern about some of the lower end consumer, but it does seem to be sort of
evening out. And so when they were looking forward to the holiday season, which is you know, the most important thing with regards to the retailers that I cover, they seem cautiously optimistic that there will be a pretty good holiday season this year. We do think that they're going to people will prioritize spending on kids. That's usually what happens first if they're holding back in other parts of
their of their budget. But all all, you know, all indicators right now seem that we're headed towards a reasonably solid holiday season.
You know, Jen, we tend to look at Walmart as a shortcut for the consumer. But if this strong performance is really more result of strategy and execution over the longer term, how much of a read does it really provide on the state of consumer spending beyond the fact that Walmart has become this exceptionally well run, tech forward company. I mean, you just look at Target, for instance, which has a lower outlook.
No, it's a good point, Scarlet. I mean, I think the thing is that nearly every household has some sort of interaction with Walmart during the course of a year, you know, whether it's in terms of frequency or not. And so Walmart has really evolved their ability to capture data about the customers that are spending in stores even though they don't have a formal loyalty program, and so they really do have that insight into sort of the
motivations behind customers where they stand. You know, I think one of the interesting things with regards to just focus and discipline. Walmart talked today about apparel sales and their comparable sales for apparel was up five percent every month of the third quarter, and when you could trust that to Target, who reported yesterday they're still struggling with some of their discretionary categories. So it seems to be a story of execute and not only the consumer spending right where they are.
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Let's get back to this Nvidia story. Certainly a big, big player in this story in the market. Kun John Sobani joins us. He's a senior analyst. He covers the semi conductor companies for Bloomberg Intelligency Spased out there in San Francisco, Kujo, and I'm sure you've had the opportunity to a now only look at the numbers, listen to the conference call, but talk to institutional investor clients. What's the narrative coming out of this earnings release?
Yeah, I mean this was one of the more bullish earnings we've seen from this name in a while, not just on the numbers of the three Q four Q guide, which they blew past even the lofty spyside targets, but just beyond that, the long term the twenty six sort of and going into twenty seven demands signals that they showed, namely the half a trillion of the pipeline, which we think now is a conservative number given the number of
deals they have announced. If supply keeps on coming up as it has, and if their customers continue executing on these bills without any missteps, we think they are a significant upside to the current street numbers.
Yeah, just looking through the numbers, clearly a beaten race report, but you know, the scale at which it can be in race is impressive. Although within the third quarter numbers, I did see that chips using gaming PCs missed analysts estimates, and I know that that's a shrinking part of the business, or at least it's not as big a part of the business, given that the data center is where the growth is really at. Are there any flaws in this earning support con John?
Not really. I mean, look, the gaming is becoming so unimportant for analysts that the reliability of the dedictability of those numbers against which we're comparing the beat and miss for gaming is no longer as reliable. So no real face to really point out in this. We did see their supply commitments go up quarter work quarter and inventory
is rising. I don't think that's a negative, while it might seem on the face that's just them gearing up and getting ready for that next wave to supply the chips in the next year.
So Couldjohn what's the latest and gentsen Wong about how he viewsed China going forward?
Nothing has changed on the China side. They still don't assume any revenues when it comes to data center AI China GPUs or the H twenty has been shipped into They do have the clearance licenses, so they could, but it seems because of the geopolitical issues China has basically been shut down. For American GPU providers or AS providers to be able to ship in the country, there is
to be honest, no demands. So it seems, you know, because of geopolitical issues, the customers in China are not just reading and getting up to buy Nvidia chips right now.
Jensenhang said that he from his vantage point, does not see anything like an AI bubble. We see something very different, and he says competitive pressures remain fairly low because this is a company with more than ninety percent of the market for those high end, super fast AI chips. Who is the closest competitor if there is one to Nvidia.
Yeah, in terms of the size of the markets, the next closest competitor would be the AIA six chips, So Broadcom is one of the biggest providers of AI six chips, namely the TPU that Google uses. Another example would be Amazon'straanium chips, which are a differenti ACIC designer supplies. So in terms of revenues or units. In terms of the market, those are the next closest competitors. Within Nvidia's realm which it sells merchant gipus, AMD would be the second closest competitor in that.
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Company news out here Today, Verizon announce the layoffs that will shrink the company by as much as twenty percent of its non union workforce.
That's big and they have a big, big footprint in New.
Jersey from the old Bell Labs in Bell Core days and so a lot of riz.
And employees in the state of New Jersey. So that'll be a big issue for them.
John Butler joins us here senior telecom analysts for Bloomberg Intelligence. John, What's what's this job cut announcement from Verizon? What does this mean for the company? What are they trying to do here?
So, Paul, as you may know, there's a new CEO in town at dad Verizon named Dan Shalman. And I believe Shallman is really he's been on the board for years. I think he's looked at the organization and believes it's a little too heavy, little too bureaucratic. He sees room for ample cost cuts, and I think his whole message to the employee base is we need to move faster, and I think it's very tough to do that with
a large bureaucracy. I also think he's cutting costs in order to free up funds and give them room to promote more. I think one of the reasons that Verizon has lagged its peers in subscriber growth is they're just not matching price promotions out there in the marketplace. And I think if they do that carefully wisely, I think if they become a little less discipline than they've been in promoting, they're going to find that they'll drive higher volumes.
And you know, I think at the end of the day, Wall Street wants to see that that really is a report card for the telcos. That's sort of quarterly net editions number that all the telcods report.
And Wall Street is okay with a loss and margin or an erosion of margin in order to get those numbers, those subscriber numbers, because it sounds like Verizon is getting ready to jump into participating in this price war in a more robust way than it had been.
Yeah, good question, Scarlett. I think that's what these job cuts are all about. You can maintain margins. If you're cutting thirteen percent of the workforce, there's a big cost savings there. So you're getting leaner on the expense line, which gives you a little more room on the revenue line to begin to promote more and really step up and match competitors like T Mobile, which continue to be aggressive on price. And then at the lower end, of course,
you've got the cable operators and their wireless brands. They have been promoting very hard on price in order to drive up their wireless installed base.
John, I'm guessing if a lot of Verizon Communications investors, they're there for the dividend. It's got a yield of six point seven percent here. That is a serious yield.
There.
Talk to us about their dividend strategy, their commitment to the dividend going forward.
So Showman, when he first joined Verizon reiterated a commitment to maintaining the dividend. I think with any carrier, as their stock price drops and the effective yield goes up, that dividend yield it becomes a target for potentially getting cut. Now, the flip side of that is, any telcode that's cut its dividend in the past will tell you there is
a very heavy price to pay for that. You typically get a big price correction when you cut that dividend because of course, at least with the AT and T and Verizon, you're attracting a lot of investors to buying this dock based on the yield. So if you cut the yield, obviously you're going to lose some of those investors. So he's got a tightrope to walk here. Again, you're cutting thirteen percent of the organization as a first move.
I think there are other cost cuts down the road and efficients to be efficiencies to be gained in not only network operations, but customer care as well, particularly with the advent of AI. So my hope is they're going to be able to sustain free cash flow, which will generate more than enough to sustain that dividend there.
Okay, So in Dan Schulman's drive to make Verizon a simpler, leaner, and scrapier business, how do its competitors T Mobile and AT and T respond? Do they respond?
They always respond Scorelet you know, it's it's it's that kind of market. Wireless is a very mature business. It's a saturated market. It's a zero sum game, and so I think what we've seen from the BIT, all the Big three recently is they are willing to promote heavily to protect that. BABS for Rising again has been the lagger there, but I think Shulman, who's very focused on subscriber volumes, is probably going to step up and play
that game. So that's been the concern among investors that it can get ugly very quickly, and frankly I share that concern. So I'll have to see what the change in direction is going to be at Verizon with regard to promotion, But all indications so far is that they're getting ready to promote more.
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Let's take a look at what's happening in the biotech and pharmaceutical space. There's a big, big M and a deal, Abbot Laboratories agreeing to buy the cancer screening company Exact Sciences, with a total deal value of about twenty one billion dollars.
Yeah, pretty large.
Let's get some perspective now from Matt Hendrickson, Bloomberg Intelligence, Senior medtech analyst. So, Matt, I guess this is this is a surprise, given that we're looking at Exact Science's shares moving quite a bit. This deal price represents a fifty one percent premium to its last close.
Yeah, and you know this includes yesterday there Bloomberg News reported, you know, some of the initial rumors that there was this steel taking place. So the fact that it kind of materialized so quickly and with that type of premium is a little bit of a surprise, given kind of that it started leaking yesterday. But when you look at it from a multiple standpoint, you know it's trained. You know, it's the sales about seven times Exact Sciences twenty twenty
five sales. Seems pretty reasonable for the growth that could be incorporated into Abbot's overall portfolio.
And the banker's on the deal, Morgan Stanley, exclusive financial advisor to Abbot, fully funding this deal, So that's good for them. On the sales side, Centerview Partners and XS Capital Partners advising the seller there, so again more M and A fees there. I have no idea who Exact Sciences is, and I think I speak for most of our audience here. Who is Exact Sciences? Why what do they do?
And why does Abbot want to pay such a big price.
Well, you actually might know of them because they have been doing a lot of TV commercials for their cold Guard there.
The Guard people. Yeah, so there we go.
We so yeah, So it's it's it's you know, it's kind of one of those things where they're the ones that have been the pioneers and driving the force around that take home pre screening tests to kind of just help you know the continuum of cancer screening and to provide an easier access for that pre screening before you have to go into kind of more of the invasive, you know, colonoscopies to make sure you know you have that a you know, coal rectals cancer risk.
Is there?
That thing sat in my closet for like a year, like.
Oh my god, I know it's one of those things you have to do, but you don't want to do I have to do it. So that what is there any reason to think that regulators may you know, raise their hand and say, hold on, let me just take a closer look at this.
I mean, I'm sure they will, you know, cross their t's and dot their eyes. But just in general, with medtech acquisitions, it's usually a pretty straightforward unless there's a clear you know, one of the market maybe going to you know, one company, and in this case, the there's enough competition where I don't think that should be a hurdle for Abbot or Exact Sciences.
And for such a big deal.
I mean, Abbot stock is only down about one and a half percent today on the news. So presumably is this a deal you think is a good deal for Abbit?
Yes, I think it checks off a lot of boxes. Potentially for Abbot one. It's once it becomes fully integrated and starts contributing to organic growth, it should be a creative to that organic growth that Abbot already has. I mean, they're already for a company that is you know, forty almost forty five billion in sales, they're generating seven and a half percent organic sales growth. Exact Sciences comes in with double digit sales growth, so that that's going to
be a creative for them in the long run. You can also look at the gross margin profile. Abbott, you know, is around a fifty six fifty seven percent gross margin profile. Exact Sciences comes in at seventy two, improving to seventy three percent based off of consensus in twenty twenty six.
And then lastly, you look at the expenses that Exact Sciences has because you know there's still you know, whether it's the merging growth story, so they're still investing a lot in their SG and a kind of commercial profile to help generate these growth We kind of expect Abbot to come in and be able to slash some of that SG and A costs to be able to make it more profitable overall for the Abbot once it kind of gets fully integrated.
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