Weekly StockWatch: Disney+ Launches Ad-Supported Tier, FTC Sues Microsoft, Airbus Lowers Deliveries Projection & More
Disney Ad-Supported Tier
Disney's latest financial results last month had disappointed markets, as both its top and bottom lines were worse on a quarterly basis. Subscriber figures in the ever important streaming services were impressive, allowing it to broaden its recently-achieved lead over rival Netflix.
Despite the strong user growth, especially on Disney+, the Direct-to-Consumer (DTC) business is operating at a loss, which widened to $1.5 billion in the fourth quarter of Fiscal 2022 (period ended October 1).
These results have put pressure on the entertainment giant to produce profits and along with other factors, had put the CEO on a hot seat. Disney recently decided to oust mr Chapek and actually replace him by his predecessor, in a move that turned heads.
In a town hall meeting with employees just day's after his reappointment as CEO, Mr Bob Iger's stressed the importance of delivering profitability, over chasing subscribers, according to Reuters [1]. A key part of this, is the offering of lower-priced plans with the inclusion of advertisement, which I have long maintained could be the future of streaming.
This week, Disney launched its long awaited ad-supported subscriber tier in the US, with more than 100 advertisers. The new plan starts at $7.99/month only for Disney+, whereas the bundle along with Hulu and ESPN+ costs $12.99. [2]
The entertainment giant had announced the move a long time ago, but rival Netflix was able to beat it to the punch, as the massive loss of subscribers forced it to rethink its strategy and act fast. Netflix launched its ad-supported tier a month ago, undercutting Disney in both timing and pricing, with a cost of $6.99/month. [3]
DIS.us had slumped to the lowest levels since March 2020 after last month's earnings report. Despite the subsequent rebound, it remain close to these levels, heading towards a losing week.
FTC Seeks to Block the Microsoft-Activision Deal
At the start of current year, Microsoft had announced a deal to buy Activision Blizzard, the video-game publisher and developer responsible for coveted titles, such as Call of Duty [4]. A completion of the $68.7 billion acquisition, could transform the video game industry and definitely poses a threat to SONY's PlayStation console.
The deal was also bound to draw scrutiny by regulators, especially in the US, where the Federal Trade Commission (FTC) under Ms Khan is very sensitive in M&A activities and any potential threats to competition.
On Thursday, the FTC sued to block Microsoft's acquisition of Activision Blizzard, alleging that it would "suppress competitors" of its Xbox gaming consoles and its cloud-gaming offering [5]. Brad Smith, the tech giant's vice chair and president talked of concessions offered to the FTC, "giving peace a chance", but expressed confidence regarding the outcome of the lawsuit. [6]
Microsoft entered into a 10-year commitment to bring Call of Duty to the consoles of rival gaming giant Nintendo and has made such an offer to SONY as well, according to Mr Smith. [7]
MSFT.us comes form a strong November, but faces difficulties during the final month of the year, running a negative week, despite Thursday's rebound.
Airbus Lowers Delivery Target
The European aviation conglomerate dropped its target of 700 commercial aircraft deliveries in the current year, saying on Monday that this figure is now out of reach. This came after the firm handed over 68 planes in 40 customers last month, bringing the total deliveries to 565 units in 2022 so far. [8]
Airbus talked of "complex operating environment" that will persist longer than expected, but reaffirmed its 2022 profit guidance for around € 5.5 billion of EBIT Adjusted.
At the time of writing, embattled rival Boeing Co. had not published its November figures, but looks like it will spend another year behind Airbus, having 363 deliveries as of the end of October. [9]
The two competitors essentially form a duopoly in the passenger aircraft market, since they are by far the two biggest manufacturers. China has now enter into the arena, with the C919 jetliner, built by the newly-formed Commercial Aviation Corp of China (COMAC).
It is looking to rival the Airbus A320neo and the Boeing 737Maxm with the first C919, having been delivered today to China Eastern Airlines. [10]
AIR.fr is running a strong quarter thank to October's rally. The current week is nixed, as it covers the losses from the news around its delivery target.
Uber Robo-Taxi
Uber (UBER.us) launched a robo-taxi service, in partnership with autonomus vehicle company Motional, as part of a recent 10-year agreement for autonomus ride-hailing delivery. The firm's self-driving vehicles will be available on Uber's X and Comfort Electric services, starting in Las Vegas, before expanding to Los Angeles. The two firms have already been conducting autonomus deliveries on the Uber Eats, the food ordering and delivering network. [11]
However, Motional is also working with Lyft (LYFT.us), Uber's rival in the ride-hailing market. In fact, Luft had started offering the driverless rides, back in August. [12]
It remains to be seen how fast we can see a wide adoption of driverless transportation and deliveries, but it does not look like such a development is right around the corner. Firms of the industry would definitely want to proceed at pace, since this would also help with the changing regulatory environment of the gig economy.
In one of the latest developments, the U.S. Department of Labor had published a proposal that could open the door to the reclassification of gig-workers as employees. This would afford them more benefits and could lead to increased costs for companies such as Uber and Lyft. [13]
UBER.us sheds nearly 7% since Monday amidst a bad week for Wall Street.
Costco Underwhelming Earnings
Costco Wholesale is a US multinational membership-only retailer, which currently operates 847 warehouse. The vas majority of the I locates in the United States, but its network spans into more counties, such Canada, the United Kingdom, Australia and more.
The firm released its financial results for Q1 FY2023 (period ended November 20) on Thursday, after mostly encouraging reports from other firms of the sector, such as Walmart. Costco reported Net Income of $1.364 billion, which was roughly unchanged from a year ago. Revenues grew 8.1% year-over-year to $53.44 billion, but both those figures missed market expectations. [14]
Costco's stock faces pressure in today's premarket after the financial results. COST.us is having a bad month so far with losses of around 10%.
Nikos Tzabouras
Senior Market Specialist
Nikos Tzabouras is a graduate of the Department of International & European Economic Studies at the Athens University of Economics and Business. He has a long time presence at FXCM, as he joined the company in 2011. He has served from multiple positions, but specializes in financial market analysis and commentary.
With his educational background in international relations, he emphasizes not only on Technical Analysis but also in Fundamental Analysis and Geopolitics – which have been having increasing impact on financial markets. He has longtime experience in market analysis and as a host of educational trading courses via online and in-person sessions and conferences.
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