WYNN - Wall Street Lunch: Disney Town Hall In Focus

2023-11-20 11:41:00 ET

Summary

• Disney CEO Iger to hold a company-wide town hall next week to discuss future opportunities.
• Moody's raises SoftBank's credit outlook from negative to stable.
• Goldman strategist David Kostin says that rate cuts probably won’t happen until late 2024.

Listen below or on the go on Apple Podcasts and Spotify

Iger will look to encourage investors at a town hall on Nov. 28. (0:15) Casinos can cash in when the A's move to Vegas. (2:25) Hundreds of Open AI employees threaten to qui t. (3:03)

This is an abridged transcript of the podcast.

Our top story so far

Pressure is mounting on Disney ( DIS ) CEO Bob Iger, who took the helm exactly a year ago. The stock price has drifted, missing the broader rally, and box office has been lackluster.

Iger's will hold a company-wide town hall on Nov. 28 where he will discuss future opportunities.

Disney is off more than 3% since Iger retook the helm on Nov. 20, 2022, and began an overhaul that included job cuts and making streaming profitability a priority.

Disney's Content Sales/Licensing and Other unit hasn't seen positive earnings since Q2 2022, when Bob Chapek was still in charge. The unit includes the theatrical business, home entertainment, and selling content to third-party services.

The last town hall was after Iger's return in 2022, in which he said profitability at streaming would be the goal rather than flooding it with new content.

Addressing the recent film slate on the latest earnings call, Iger said, "I'm mindful that our performance from a quality perspective wasn't up to the standards we set for ourselves. We're working to consolidate—make less, focus more on quality."

In today’s trading

Stocks are higher after a sluggish premarket, with the Nasdaq ( COMP.IND ) leading the S&P ( SP500 ) and Dow (DJI). Trading could be volatile with lower volume in the holiday-shortened week.

Rates are a little higher. The 10-year Treasury ( US10Y ) is above 4.45%.

The Conference Board said its measure of leading economic indicators fell 0.8% in October. That is a little more of a drop than economists were predicting.

The Conference Board says it expects “elevated inflation, high interest rates, and contracting consumer spending—due to depleting pandemic savings and mandatory student loan repayments—to tip the US economy into a very short recession."

Among other active stocks

Ratings agency Moody's lifted SoftBank's ( SFTBY ) credit outlook from negative to stable , citing lower leverage and increased transparency in its investment portfolio following the IPO of British chip designer Arm Holdings (ARM).

The Oakland A's Major League Baseball team is officially on the move to Las Vegas after the owners voted unanimously to approve the relocation of the team from the Bay Area.

Macquarie analyst Paul Golding says this move represents an incremental catalyst for Las Vegas as a whole that will bolster the entertainment draw of the city, benefiting casino operators such as MGM (MGM), Caesars (CZR), Wynn (WYNN), and Golden Entertainment (GDEN).

Six Flags ( SIX ) pushed higher in early trading after Jefferies upgraded the theme park stock to Buy from Hold. The firm says the merger of Six Flags and Cedar Fair ( FUN ) materially increases value for SIX holders. Analyst David Katz recommended snapping up shares.

In other news of note

More developments in the OpenAI leadership story you heard about this morning

OpenAI's chief scientist says he "deeply" regrets his participation in the actions of OpenAI's board of directors.

Ilya Suskever tweeted, "I never intended to harm OpenAI. I love everything we've built together, and I will do everything I can to reunite the company."

Following the tweet, Wired reported on a letter signed by nearly 500 OpenAI employees, stating they have threatened to quit unless the board steps down and reinstates Sam Altman as CEO.

Wedbush analyst Dan Ives said this morning that hiring OpenAI co-founders Sam Altman and Greg Brockman put Microsoft ( MSFT ) in an even stronger position in artificial intelligence .

But with Microsoft invested in OpenAI to the tune of more than $13 billion, they may be forced to let Altman and Brockman return to prevent a mass employee exodus.

And in the Wall Street Research Corner

Goldman Sachs is less confident than the futures market that the Fed will start cutting rates this spring.

Strategist David Kostin says that cuts probably won’t happen until late 2024, putting a cap on next year’s stock market valuations.

He says, "With no benefit from valuation expansion, earnings growth will drive returns."

And he recommends "S&P 500 stocks with balance sheet strength, stable sales and earnings growth, high return on equity, and low historical drawdown risk."

Among the stocks in their recommended basket includes Enphase Energy (ENPH), Eli Lilly (LLY), Nvidia (NVDA) and Lululemon (LULU).

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