Closing Bell - Closing Bell Overtime: Dow Component Disney Reports Earnings; Former ESPN CEO On What’s Next For Streaming Giant

Episode Date: August 9, 2023

Averages fell sharply in the final hour of trading, closing near the worst levels of the day. BD8’s Barbara Doran and Gabelli Funds’ Kevin Dryer break down the market action, including earnings from Disney, Wynn and Trade Desk. Big news on the China front: the White House directing Treasury to regulate investment in Chinese tech sectors. Former ESPN CEO Steve Bornstein reacts to Disney earnings and what’s ahead for ESPN. Isaac Stone Fish, Strategy Risks CEO, on what the new Chinese investment rules mean. Third Bridge’s Jamie Lumley on the most important parts of the Disney call. Wedbush’s Sahak Manuelian on his earnings season takeaways.  

Well, tech weighing on the major averages today, but energy was a bright spot. That is the scorecard on Wall Street, but the action is just getting started. Welcome to Closing Bell Overtime. I'm Morgan Brennan. John Ford is off today. Two key reads on the consumer are coming this hour when Disney and Wynn Resorts report earnings. We'll have full team coverage of those numbers in just a moment. But first, breaking news out of Washington on China. Eamon Jabbers has the details.

Eamon. Hey there, Morgan. The Biden administration is announcing a much more narrow than expected set of proposed rules around investment in China at this hour. In an executive order, the president will direct Treasury to propose new rules regulating U.S. investment in three technology sectors in China, quantum computing, semiconductors, and artificial intelligence. Now, some investments in those sectors will be prohibited entirely, and others will just be subjected to mandatory disclosure. There will

not be any new proposed restrictions outside those high-tech sectors, though, and that's what makes this more narrow than many had expected, as someone on Wall Street feared that restrictions could be coming on a much broader array of investment categories. A senior administration official also said today they're considering exemptions for investments in publicly traded companies in China, which even more narrowly tailors today's move to the venture capital and private equity industries and the like. The reason for that, they said, is that the White House recognizes

that the Chinese already have access to lots of money. What they don't have is know-how, according to senior administration officials, and it's the intangible benefits that come along with private investments that can transfer know-how, such as introductions to key experts, partnering with other portfolio companies,

and that sort of thing that they're trying to get a hold of here. And while they were careful to say that they can't predict the Chinese reaction to today's move, they also revealed that Treasury Secretary Janet Yellen briefed Chinese counterparts on this move when she was in China in July. So Beijing has had some notice that this is coming. These new rules will go through the Treasury Department regulatory process,

so they won't take effect for some time now. And Morgan, it's worth noting that the choreography of all this is always intentional with the White House. We're not going to see President Biden doing a big signing ceremony here today. In fact, he's in New Mexico today where he's just given a speech about the economy, not mentioning this detail. So you can get a sense that this is not something that the administration wants to have front and center in the headlines out of the White House today. Yeah, I mean, I mean, the technologies that you just laid out there are all technologies that have direct military application. So it sort of speaks to this national security component and perhaps why it's so targeted.

But but the the lack of commentary from President Biden that's expected this afternoon, the fact that this is narrower than had originally been anticipated. How much of that is a reflection of the fact that this administration has been looking to at least optically or at least rhetorically ease tensions and reinstate some lines of communication with China? Yeah, I mean, you've seen this like revolving door, a series of cabinet secretaries going to China for visits and talks, trying to ratchet down those tensions. They say here on this one, also, they've reached out to hundreds of stakeholders in this process. So they talk to industry extensively, they say, about what is and is not a good idea here. And officials at the White House today were eager to portray this as a national security step, not an economic step. So they don't want this to be seen

as part of the overall decoupling narrative of the two economies. They want this to be seen as a narrow and targeted effort to restrict access to information flows and capital flows on certain technological sectors. So they see this as very tailored to military specific things that could benefit the Chinese effort militarily, not an

effort to weaken the overall Chinese economy. At least that's how they're presenting it here. We'll see what Beijing has to say about this when they do react. Yeah. Very quickly, Eamon, just to confirm, this is only for new investments, right? Not existing? That's right. Okay. Eamon Javers, thank you. And private equity and venture capital are what they're talking about here. They say there might be a specific exemption for investing in publicly traded companies in China. That's still TBD. A lot of this is still yet to be worked out. The regulatory process will begin today. All right. Eamon Javers, thanks for bringing that breaking news to us. You bet. We're going to talk much more about the story and the impact on China and investors when we're joined by China expert and strategy risks CEO Isaac

Stonefish. That's coming up in just a few moments. Meantime, when earnings are out, Contessa Brewer has the numbers. Contessa. Hi there, Morgan. We have a beat here on top and bottom lines. Let's start with earnings. Ninety one cents adjusted versus the fifty nine cents that the street was expecting. And on revenue, they're coming in with one1.596 billion, very specific here, a beat when the street was expecting $1.54 billion. And again, in gaming, what we're looking at is adjusted property, in this case, EBITDA, because of the sell of the actual facilities under Encore Boston Harbor. We've got a beat on all counts. We've got a beat in Macau.

We've got a beat in Las Vegas. We've got a beat in Macau, we've got a beat in Las Vegas, and we have a beat in Boston. And in fact, in the news release, it says CEO Craig Billings is declaring a second quarter record for the company. The call starts in just about 25 minutes. We'll want to hear more about the strength of the consumer, not only domestically in Las Vegas and in Boston, but in Macau as well. Morgan? All right, Contessa, those shares are popping 2.5% right now. Let's get over to Julia Borsten, who has Disney results. Julia. That's right, Morgan. Disney missing revenue expectations, reporting $22.33 billion in revenue versus the $22.5 billion estimated. Now, this is the company's second revenue miss in the past

four quarters, but the company did beat expectations on the bottom line with adjusted earnings of $1.03 per share versus expectations of $0.95 per share as the company makes progress with cost cutting. CEO Bob Beiger saying in the release, quote, his efforts to creating a more cost-effective, coordinated, and streamlined approach to our operations has put us on track to exceed our initial goal of $5.5 billion in savings, as well improved our direct-to-consumer operating income by roughly $1 billion in just three quarters. Now, the company's direct-to-consumer streaming business, which is, of course, under a lot of scrutiny, it did report a much smaller operating loss than expected, $512 million versus the $759 million loss anticipated. Well, revenue for the division did fall short of expectations, and the total number of streaming

subscribers was a miss at about 146 million. That's about $5 million lower than expectations. But if you exclude the lower value hot star subscribers the total disney plus subscribers inched up from the prior quarter we see shares um are trading about around the the flat line right now there's a lot more detail here on the parks and i'll be back with that in just a minute back to you morgan all right it's always a big company with many details to comb through julia borsten thank you all right well up, we're going to get a reaction to Disney's results and the company's new sports betting deal with Penn Entertainment when we are joined exclusively by former ESPN CEO Steve Bornstein.

But, my gosh, we've had so much breaking news, and we're only seven minutes into the hour. Let's bring in our market panel, shall we? Joining us now, Barbara Duran from BD8 Capital Partners and Kevin Dreyer from Gabelli Funds. Kevin, I'll start with you. Whether it's the earnings we just got, whether it's the China investing news we just got, or the fact that the market continues to pull back here,

your thoughts on what we're seeing in terms of investor sentiment? Yeah, I mean, the Disney results I don't think are a big surprise. They've got a lot going on. Obviously, a very interesting deal that they announced with Penn yesterday. They need to end up making money in streaming, which is a big task for them. I think from our perspective, companies like Warner Brothers Discovery, which is already knocking at the door of making money in streaming, might be a better bet within media that as they generate cash and pay down debt,

the equity could probably be worth a lot more than where it is today. Okay. Barbara, I want to get your thoughts on Disney here as well. I mean, we did see a narrower than expected operating income loss for the direct-to-consumer property for Disney+, but those subs certainly raised some questions. Yeah. And I think, you know, you're looking at a company that has an incredible collection of great brand name assets, but they're under pressure in every area of their business. And I think they beat when we really look at it is part of this five point five billion dollar cost initiative that Bob Iger had announced earlier. And that seems to be showing up in different areas of the business. But even the theme parks, you know, attendance was weaker June, July.

We want to hear more about that. We also we know all the problems with linear TV versus streaming and the theme parks. Attendance was weaker June, July. We want to hear more about that. We know all the problems with linear TV versus streaming, and the streaming sub's not surprised that they're down. We have to see what he's going to say about his broader strategic portfolio in terms of de-levering assets. We saw the ESPN news today. What's he going to do with the Hulu and Disney Plus? There's a lot of questions we need to know. I mean, I think the big uncertainty with Disney and certainly it's been de-risked is really we don't know what the long term earnings are going to be. We don't know what the long term growth is going to be. And I don't think we're going to know for a while. So I think that, you know, we'll be hanging on every word to get some clarity, but I don't think it's going to lead

to a higher stock price anytime soon. Yeah, of course, it shines a light on the ad tech business too. When you're talking about some of a light on the ad tech business, too, when you're talking about some of these streaming platforms. Trade Desk, those earnings are out. Kate Rooney has the numbers. Hi, Kate. Hey, Morgan. Yeah, speaking of ad tech,

it looks like a better-than-expected quarter here for Trade Desk. Let's start with EPS here. 28 cents was the adjusted number. Two-cent beat there. Street was looking for 26 cents. Revenue also stronger than expected, 464 million. That was up 23% year over year. It's looking like Q3 guidance is also stronger than expected. We don't see full year guidance quite yet here. Quote from the CEO talks about

advances in areas such as retail and identity. They talk about the world's largest brands and media buying more and helping some of the revenue growth. Despite that beat, Morgan, it looks like stock is down more than 6% here after hours. Back to you. All right. Kate Rooney, thank you. Kevin, you mentioned Warner Brothers Discovery. When I think about Gabelli Funds, I do think about a formidable media investing history at the company as well.

That's been the core competency for us. Yeah, exactly. So I guess, what do you think of some of the secular trends we're seeing more broadly in the industry and whether it is a Warner Brothers discovery or something else? What does that mean in terms of opportunities? Yeah. So like I said, I think, first of all, we're bottom-up investors. So we really look for those companies that have something unique going on. So WBD is one of those situations. The companies were just put together. They're paying down debt. You know, Zaslav's doing a great job there. But there are other underfollowed companies like Ategna. It's a broadcaster. They're going to do really well with political advertising next year. So that should be good for them. We're going to be bought out by Standard

General. The deal fell through. Stock came back. They're buying back stock. Other bidders could come back. So, you know, that would be another one that's probably not talked about as much on TV like some others. Got it. Barbara, I want to get your thoughts on the gaming landscape. I mean, we did just get those results from Wynn. It was a beat across the board, including Macau, including Vegas, including Boston. We did just get that deal that was struck by Penn and ESPN, which I think even just a couple of years ago probably would have been somewhat unthinkable. I guess, is there opportunity here for investors right now or has has the boom or the run up, the gold rush, anticipated gold rush in gambling and gaming already played out? Well, I think the land landscape has shifted significantly with the announcement of this deal because ES ESPN is a high quality, in fact, the leading name in sports.

And combining that with Disney's power and going into the gaming, I think they're going to be a significant player and taking share. So from the DraftKings of the world. So I think that you're going to see some downside to some of the existing players as this deal and as they start implementing and getting traction. Because I think it's going to be a powerful combo. Okay. Kevin, just want to get your thoughts here on the fact that we have seen, more broadly, a strong run-up in the S&P this year, but it's been led by these mega cap tech names. There's a lot of talk about rotation and the fact this is expanding out. You mentioned bottom-up value investing. Is there a lot of value in this market?

I think there is if you look for it. So, yeah, tech. I mean, I think that Magnificent 7 has driven the bulk of the returns for the market. There's a lot of companies, especially small to mid cap that are under followed that we think, you know, could could make a lot of money in. One of my favorites now is Bellring Brands, BRBR. They make the premier protein shakes. It's growing like a weed, up 20% last quarter. They're expanding capacity. I think in a couple of years, they could be bought out and at a much higher price than it is today at 37. Okay. Kevin Dreyer and Barbara Duran, thanks for kicking off the hour with us. The S&P ending the day down 7 tenths of one percent, 44.67. The Dow down

almost 200 points. Let's get back to Julia Borsten for more on Disney's earnings. Julia. Morgan, I just want to dig in a little bit here to some of these key sections. I know that Bob Iger mentioned that he was interested in perhaps selling or spinning off the linear TV business because it is so challenged. That linear TV division did fall short of expectations, both in terms of the top and bottom line. Just want to mention that there was a 7% decline in revenue year over year and a 23% decline in operating income for linear TV. Now, in terms of the parks business, parks experiences and products, greater revenue than expected, also greater operating income than expected,

a small beat there. But just there's sort of a mixed bag of numbers in here. Now, the domestic parks saw four percent increase in revenue, international parks and 94 percent increase in revenue. And a lot of that was tied to the reopening of the park reopening in China and comparisons to the year ago period. But there are some questions here about profitability, because domestic park operating income declined by 13 percent year over year. I mean, it had been up 10 percent in the prior quarter. And also, Disney often mentions guest spending on in-park spending or hotel rooms as a driver. And what they said here is that guest spending growth was due to an increase in average ticket prices. So I think it'll be interesting to hear a little bit more about what's going on with the trends here in terms of the domestic parks. And it'll be very interesting to hear what Iker says on this call, Morgan. Yeah, and whether there's broader read-through to the state of the consumer in general.

Julia Borsten, thank you for bringing us that latest information from Disney. Well, let's bring in Senior Markets Commentator Mike Santoli for more on the blue chip name. Mike? Yeah, Morgan, these results hit with the stock at a pretty interesting spot. Obviously, nothing in the results has caused a major reason for people to believe that it's going to bounce hard from this level. But I do find it on a 10-year chart. This mid-80s area goes all the way back to 2014. It's also kind of where we bottomed a couple of times here.

So not to say that's going to define the low end of the range for a while, but it's just pretty stark that this is where Disney finds itself nine years later at this point. Now, the result is that at least on a surface level, the stock is less expensive than it has been for most of recent history. Take a look at the enterprise value of Disney versus its cash flow. That valuation compared to the S&P 500. So the relative price to cash flow here, you see it's back below one. So it's cheaper on this measure than the broad S&P 500. The average over the 10-year span is more like a 20 percent premium to the S&P 500. What's fascinating is you see this huge jump there. That was when Disney acquired those Fox

assets, took on a lot of debt, also issued some stock to do that or, you know, in exchange for the Fox assets that ramped up the enterprise value in excess of the of the castle. And then, of course, during the pandemic, the market just didn't care. It was giving a growth Netflix type valuation to Disney simply because Disney Plus was growing relatively fast. And that obviously looks like it's almost entirely been unwound. So you can say it's at a discount. Obviously, the business is more troubled than it has been in the past. But certainly the market is not building in great expectations to the stock at this point. All right. Always delivering with the charts. Mike Santoli, we'll see you later this hour. Thank you. Let's get to a couple more big

earnings movers. Applevin and Sonos. Pippa Stevens has the numbers. Hey, Morgan. Well, starting here with Applevin, which is surging 21 percent in extended trading. The company beat on the top and bottom line, earning 22 cents per share. That was more than triple the 7 cents analysts were expecting. Revenue coming in at $750 million against forecasts of $724 million. The company's Q3 revenue guidance was also between $780 and $800 million, above the $741 million that analysts were expecting. The company noted the successful rollout of its latest AI-based advertising engine as behind the successful results for the quarter. Moving over to Sonos, that stock is also rising in extended trading.

The company's reporting a lower-than-expected loss of $0.18 per share. Analysts were forecasting a 20 cent loss. Revenue coming in at 373 million ahead of the 334 million estimate. The company also raised its full year EBITDA guidance. However, CEO Patrick Spence did note a challenging environment and said that they have not yet seen conditions in their categories return to normal. Still, that stock up now, Morgan, 11%. Back to you. All right, Pippa Stevens, thank you.

Okay, we're going to talk much more about Disney's quarter and about ESPN's entry into sports betting when we're joined by former ESPN CEO Steve Borenstein. Overtime, it's back in two. Welcome back to Overtime. Disney shares are moving lower right now after releasing earnings. Shares are down about 1 percent. Joining us now is Steve Bornstein, former ESPN CEO and Rain Group senior advisor. It's great to have you on the show. Welcome. Thank you. It's good to be here.

So we did just get these results. And one nugget to pull out here is that despite the fact that there is ongoing weakness in linear and we're seeing some results that are perhaps disappointing on the streaming side, ESPN, it looks like, saw an increase in ad revenue that helped to offset some of that weakness and some of these other properties right now and some of the non-sports properties. How does it speak to not only the strength and resilience of ESPN specifically, but also to sports programming overall? Well, I think it's a great indicator. I mean, the bottom line is that sports programming is still the only content out there that is still appointment viewing that people must have. And that makes sense that advertisers would flock to that because it's the only place where you can aggregate large audiences. You know, given ESPN's litany of high quality sporting events, I think they're really well positioned. I'm going to play a soundbite from Bob Iger, CEO, Disney CEO Bob Iger, recently in an interview on CNBC where he talked a little bit about ESPN

and specifically the possibility of strategic partnerships. Have a listen. We have a great brand. We've had a great business. And we want to stay in that business. That said, we're going to be open-minded there, too, not necessarily about spinning ESPN off, but about looking for strategic partners that could either help us with distribution or content. But we want to stay in the sports business. What could strategic partnerships look like? And would you expect to hear more about this on the conference call today? Well, I can't comment on what they're going to say or not say, but as witnessed by the deal they did

this morning with Penn, I think they are looking to explore new avenues of revenue and new potential partners to serve the sports fan. But, you know, again, I'm just going to say it's going to be tricky for any of these linear networks to migrate off of the bundle as it continues to decay. But Disney and ESPN in particular are probably the best position to survive and figure out the new model going forward. Were you surprised to see Disney striking a deal for ESPN with Penn for a sportsbook? I think this space, the betting space, is a really lucrative opportunity for ESPN. So no, I'm not surprised. I'm very much encouraged by it. I think it also kind of speaks to how cord cutting is up ending sports, the sports media landscape more broadly, too. How do you think all of this evolves,

not just in terms of streaming entities and a push towards profitability, ESPN or otherwise, but also in terms of some of these more creative, outside-of-the-box alternative revenue streams, like, for example, sportsbooks? Well, I think what you're seeing, what's happening with the regional sports networks today is really just the precursor or harbinger of what's going to happen to all linear networks. The bundle is decaying. They need to come up with a new revenue model. It is an evolutionary process, and I think they're going to be incredibly well positioned. You know, the people involved at ESPN today are probably the best executives I've ever come

across. You know, Jimmy Pataro, Kevin Mayer, Bob Iger, and Tom Sags, they're going to figure out this problem and how to solve it. When do you think ESPN actually migrates, fully migrates over to a streaming entity? Yeah, I think it's unlikely that you'll ever see ESPN fully or exclusively a streaming-only delivered service. I think the trick that ESPN has to navigate going forward is how they can maintain a presence on the cable bundle as it evolves and to explore the new platforms and making their distribution omnipresent. We've seen a number of deals in recent months around sports, and it speaks to just, I guess, the ongoing strength of live sports programming overall right now. Is your expectation that we continue to see more deals get made or even some M&A or consolidation, given the fact that this is a bright spot in media?

Well, I think that there will certainly be continuing consolidation in the media space. In the sports space, I don't anticipate any fall off in the high-profile sporting events. You may see some of the more emerging sports suffer a bit, but for the most part, you know, the footballs and the basketballs and the soccers, I see that nothing but a bright future and increased revenues. All right. Steve Bornstein, thanks for joining me. My pleasure. Thank you. Penn Entertainment CEO will discuss its new sports betting deal with ESPN tonight. That is coming up at 6 p.m. Eastern on Mad Money.

OK, Illumina earnings are out as well. Pippa Stevens has those numbers. Hey, Morgan. Well, the company posted a big beat, but the guidance is what's sending the stock tumbling now down 5%. So starting here with Q2 results, EPS came in at 32 cents on an adjusted basis. That was 30 cents ahead of expectations. Revenue was largely in line with analyst estimates. But the company said that its second-half revenue will be negatively impacted by customers remaining more cautious in their purchasing, as well as a protracted recovery in China. And so for the full year,

the company sees its revenues up 1% versus the prior estimate of 7.1%, and they see full-year EPS between 75 and 90 cents. That was well short of the 131 that Wall Street was looking for. Again, that stock now down 5 percent. Morgan. OK, Pippa Stevens on triple duty today. Up next, turning up the heat on Beijing.

We're going to discuss the Biden administration's new crackdown on investments in China with Isaac Stonefish from Strategy Risks. Stay with us. Welcome back to Overtime. Disney shares are lower after reporting earnings down about 1% right now. When has been alternating between gains and losses? Both companies earnings calls are about to begin. We're going to monitor for any breaking news. We'll bring that to you as it comes. Meantime, let's get to CNBC News updates with Steve Kovach. Steve. Hey, Morgan. Yes, the FBI shot and killed a man during a raid in Utah while attempting to serve arrest and search warrants. Charging documents obtained by NBC detailed that agents were investigating alleged threats the suspect made against politicians and public figures. That includes President Biden and Manhattan D.A. Alvin Bragg. No agents were injured.

The president is scheduled to arrive in Salt Lake City tonight ahead of a veterans health care event tomorrow. And Amtrak is exploring high speed train service in Texas. Amtrak and Texas Central Partners are seeking federal grants for the rail service between Dallas and Houston. The proposed route would take less than 90 minutes to travel between two of the largest U.S. metropolitan areas. And TikTok has been testing full-length podcasts. The Verge reports a new feature lets users import full shows through their RSS feed and link them to shorter clips. This could potentially be a new way to boost discovery of new content on the platform. TikTok confirms it's

testing the podcast feature with some users here in the U.S., but wouldn't share further details. Morgan, I'll send it back to you. All right. Steve Kovac, thank you. We just heard from our Amon Jabbers earlier this hour, the White House announcing much more narrow than expected set of proposed rules around investment in China. In an executive order, the president will direct Treasury to propose new rules regulating U.S. investment in some technology sectors. So let's bring in Strategy Risk's CEO, Isaac Stonefish. Isaac, it's great to have you on the show. I do want to get your reaction to this, especially since it does seem like it's very specific, very targeted technologies like quantum or technologies tied to AI, for example, where there are very real,

very not only not like very military applications, real-time military applications, and thus the national security risks associated with this. Is this what you anticipated, or does it speak to the fact that there had been much wider ranging, bigger, broader, sweeping investment policies that just couldn't get across the finish line. And this is where we've gotten. There will be some Congress people who are quite disappointed to see the narrow aperture here. What I will say, though, is even though the order is pretty restricted, the Chinese military is quite broad. China is a very different military than the United States.

It's an arm of the Chinese Communist Party. So actually removing oneself from a military investment is a lot more difficult than it sounds. Okay. So does this executive order, as it stands or as it's proposed right now, does it actually mitigate that in terms of tech investment from the U.S.? So with sanctions, which this is somewhat similar to, banks, insurers, investors tend to be overcautious and stay far away from any sanction entity. It's still too early to say if investors are going to say, well, let me err on the side of caution or if they're going to have a more aggressive strategy. And I think early enforcement actions against people who violate or seem to violate this order will play a really big part in changing investor behavior.

Okay. What could some of those changes of investor behavior actually entail? I'm just wondering if there's unintended consequences or there's potential beneficiaries tied to this. So unintended consequences are making it more difficult to partner with Chinese state-owned enterprises. Bank of China, ICBC, companies like that are part of the party state, and we may see them being less attractive as an investment or a partnership destination. We also might see some big investment companies, you know, the Black Rocks and Vanguards of the world, being a little bit more hesitant when they decide to allow investors to allocate capital towards certain sensitive Chinese entities. But your early question is right. I think this is a

lot less than a lot of people were expecting and hoping. So maybe it's not the broad decoupling that had been initially anticipated. But does this increase the geopolitical risk premium of investing in China in general? It depends what your base case was. If you're coming at this from two years ago, absolutely. But this week to next week, because this is probably milder than people was expecting, I don't think this really changes things. OK. And we know the Biden administration has been walking a tight rope in terms of at least optically looking to ease some of the tensions and increase some of the lines of communication with China in recent months. Does this undo that process or is this something that because it is so narrow in scope, it continues to forge ahead with that policy

and thus maybe not be going back to this risk premium, not be something that is an unintended consequence for global companies that operate in China. Optically, yes. Actually, though, the Biden administration does want to contain China, and they're facing a lot of pushback from the business community. It's fascinating to watch the difference between where average Americans are on China. I think a recent poll saw half of them see China as the greatest threat that America faces, and so many people in the business community who want this to be business as usual. The Biden administration is caught among Main Street, Wall Street, and the Republicans, many of which, especially those who aren't supportive of Trump, would really like to see for much more decoupling between the United States and China. So I think a

lot of them in their heart of hearts understand that investing in China poses a great risk to America, especially as tensions rise over Taiwan and elsewhere. But they're walking in the middle as much as they can. Yeah, that's a conversation we're going to continue to have more and more, I think. And the policy, to your point, has kind of carried over from one administration to the other. Isaac Stonefish, thanks for joining us. Tech stocks are having a very rough start to the month, with the Nasdaq 100 down more than 3% so far in August. Up next, Mike Santoli.

He's going to put that pullback into a longer-term context. And take another look at some of today's after-hours movers. It's a mixed board in front of you, but Disney's down 1%, Trade Desk is down 5%, and Wynn Resorts is hanging on to gains, for now at least. We'll be right back. Welcome back to Overtime. Natural gas prices popping today after workers at two major liquefied natural gas facilities in Australia reportedly voted to strike. Australia is one of the world's largest LNG exporters. That news coming just a day after the Energy Information Administration, the EIA, projected natural gas production and demand will hit record highs this year here in the U.S.

Those tailwinds for prices helping fuel gains for natural gas giants Chenier Energy and EQT, which both finished the day up more than 2%. Reminder, NatGas tends to move around temperatures as well, and we are in the thick of summer. Let's send it back to Mike Santoli with a look at the action in the NASDAQ 100. Hi, Mike. Yeah, Morgan. NASDAQ 100 was probably overheated, now cooling off down 5% from its highs. This chart shows the last decade in the NDX relative to the equal weighted S&P 500. So kind of to the average large cap stock. As you can see, very long term uptrend in place. In fact, it dates to even before this, roughly 2014. I think that's about when Jim Cramer coined FANG as a category of stocks.

You see what's happened to that general group since then. We had massive overshoot during the pandemic, as we all know, in the big tech winners. Then the payback last year, where they kind of took care of some of that long-term kind of distortion. And now we're back into this long-term trend path. There's nothing magic about it. It doesn't have to stay this way. But it does show you there's plenty more to give back of that recent outperformance before you kind of break through that longer term tendency, that angle that we've been going up at for a while. That probably would make it tough for the overall S&P to continue to perform. The choreography has to be perfect if the huge cap stocks in the Nasdaq are not performing. But in the moment, it still seems like kind of a sloppy

rotation going on, although not all the slack being taken up by the rest of the market. All right. Mike Santoli, thank you. Disney's earnings call is underway. We're going to ask an analyst what he wants to hear from the company when Overtime returns. Welcome back to Overtime. We're watching shares of Disney, which are slipping back towards the flat line here, down slightly. Earnings call is underway right now. We're monitoring that. In the meantime, let's bring in Third Bridge analyst Jamie Lumley. Jamie, I want to get your thoughts on the results we got here,

because at first glance it does seem like this beat was very much driven by the cost-cutting we've seen at the company. And there's a lot of mixed results if you parse through some of these different segments. There certainly is a lot to unpack, and I think there are a couple of areas to first take a look at. One is, of course, there's a lot of interest around streaming. How necessarily is that road to profitability going? And Disney is making a lot of progress trimming that loss, moving in the right direction. But then also seeing a couple of challenging things in different markets, seeing a major erosion of that international base with Hotstar in India,

and then also seeing flat to down across ESPN Plus and Hulu and Disney Plus in the U.S. markets. So definitely a couple of challenges there. But then for looking at a couple of areas where there have been some positives within parks, one of the big stories of the summer has been the ongoing question of what exactly is attendance looking like. So far in terms of revenue, it seems that they're able to still see growth over the previous year period and get some encouragement from that. And then, of course, looking over at the linear business, which has been a major discussion

concerning around what sort of role this will play for the business going forward. While it is continuing to face pressure with that 7% decline across both domestic and international channels, it's not the double-digit losses that they were seeing at the beginning of the year. So some encouraging signs there as well. Yeah, I do want to dig into parks a little bit more, though, because it does seem like some of the strength, the top-line growth we've seen, particularly on the domestic side in parks, that that does seem to be slowing. And more notably, operating income actually fell 13 percent year on year. This has been an area of strength and profitability for Disney, and it's enabled them to pull that lever to help sustain the streaming business and some of the other efforts that are afoot at the

company. Does this change things? It's definitely a good question. And certainly looking at that business, the overall questions have been okay. Looking at the price increases that Disney put in place for its parks, what would the response be when it comes to foot traffic? And then also overall, how does that cost structure change with the ongoing impact of inflation and dealing with that on top of the numerous investments that Disney has been making into this portion of the business? Certainly, it's interesting to look at this segment in comparison with, say, Comcast Universal, to understand what necessarily is happening with foot traffic, because there are, of course, some other macroeconomic trends here, such as changing leisure habit behavior as we start to ease out of that pent-up post-COVID demand,

which was seeing huge numbers of people attending parks in that initial period, as that starts to wane and people start to consider necessarily where they want their leisure dollars to be going, that's another thing to keep in mind here. As you pointed out, operating income from parks is under pressure. And whether or not they're going to be able to move out of this at Disney as they continue to look towards what necessarily is the flexibility around pricing and getting those parks up to full capacity is a big question. Yeah. When do you think streaming actually reaches profitability? And I ask that because it does seem like the losses are narrowing,

but there's still a ways to go. And there's still questions about some of the other entities like Hulu, which there is a belief out there they're going to acquire the remaining stake from Comcast for before the year is out? Absolutely. So there are a couple of key things to look at here. One is Hulu, which you definitely mentioned with that upcoming option to buy the remaining stake from Comcast, which considering the minimum of almost $30 billion for that valuation for Hulu is definitely going to be a big decision to make. But from what we've been hearing overall in this streaming segment is that that 2024 expectation, which Bob Iger has talked about for profitability, is increasingly looking to be challenging. We have

the ongoing dual strike in Hollywood, which has stopped all production of any new content made in the U.S., which will make it hard to necessarily pull more users to Disney's various platforms. And then also just some of these overall harder trends about overall slowdown in subscriber growth domestically and some challenges overseas as well. So from what we've been hearing from experts, it's more likely that 2025 is when Disney could start to see profitability in streaming. But there are a number of things in flux here as the total effect of the strikes remains to be seen. And then also overall, how effective the cost-cutting measures will be when trying to also manage the line of being able to see subscribers not trail off dramatically in the coming months. Yeah. And of course, I should note that Comcast is the parent company of CNBC as well. The stock's

slipping in after-hours trading right now. Is it a buy here or is this still a wait and see or show me story? So I think looking at Disney, there are a couple of things which are really important to understand. I mean, the big question around what's going to happen with Hulu and what's going to happen. I'm sorry I'm going to interrupt you because speaking of we have details from the call from Julia. We're going to go back to Julia. Yeah, that's right. On Disney's earnings call just now, CEO Bob Iger announcing that the ad supported Disney Plus here is three point three million subscribers, saying he's optimistic about the long-term advertising potential on streaming,

noting that 40% of new Disney Plus subs have been selecting this option. Now, with that, Iger saying that they are raising prices to better reflect the product offerings, announcing that they're expanding ad-supported offering in Canada and several European countries, and also for the first time launching a bundling of an ad free Disney Plus and an ad free Hulu. This will be launched starting September 6th for $20. Now, perhaps most important, though, is these price hikes, particularly for the ad free streaming apps. They're raising the price of ad free Disney Plus to $14 from $11, ad free Hulu to $18 from $11, ad-free Hulu to $18 from $15, and Hulu with live television is going up from $70 to $77. He also mentioned that they're continuing to evaluate taking ESPN direct-to-consumer. Now,

to me, the fact that they're raising prices specifically on those options that do not have ads really indicates that they're continuing to push their consumers more towards these ad-supported options where they do have that additional revenue stream. You see Disney shares now down about 2%. Back over to you, Morgan. Julia, thank you. Jamie, I'm going to get your response to that and whether you see it the same way. You see higher prices for non-ad streaming services pushing more people into the ad support. And if so, how lucrative is that opportunity? So what we've been hearing from experts is really just looking at Disney, looking at Netflix, when it comes to the ad supported tiers, the economics there are quite strong for the streamers because on top of that subscription base, they're able to generate fairly strong ARPUs from an ad

standpoint, which oftentimes can actually exceed some of the cheapest ad freefree tiers that these streaming companies can have. So, and also looking at Disney, which has the experience with Hulu, is this long background and having that ad-supported model, it makes sense that as they start to really work out the economics of this model, there might be some playing around with the prices to really drive the behavior and drive users to those tiers, which can ultimately be incredibly helpful for that bottom line. As we look at the industry at large, pricing is certainly an interesting question

because as we go into this fall season, where again, the impact of the writers and actors strike can definitely continue to be felt and might start to hit some of those streaming numbers. The cost is something which is, you know, a big consideration for consumers that decide where the entertainment spend to go. All right, Jamie Lumley, thanks for joining. Up next, well, you know, a big consideration for consumers that decide where the entertainment spend to go. All right. Jamie Lumley, thanks for joining. Up next.

Well, actually, first, we're going to go back to Julia Borsten, who has even more detail for us. Hi, Julia. Hi, that's right. CEO Bob Iger talking about how they're working to figure out how to crack down on password sharing. Notably, this comes after, of course, Netflix has made password sharing a key growth driver for its business. Now, Bob Iger is saying this is something that is a top priority for them as well. I also just want to clarify some of the dates of these changes in price hikes. September 6th is the day that the new Disney Plus Hulu bundle will launch. But then the new pricing, the higher prices for Disney Plus Hulu and ESPNorted and ad-free plans. That will happen on October 12th.

So Disney clearly here looking for new revenue streams, higher prices, focus on advertising, and then crackdown on password sharing is coming up as well. Back to you, Morgan. Yeah, it all speaks to this broader path to profitability that we know Iger is on. Julia, thank you. Up next, much more on this wild hour of earnings, including some of the other big after hours movers that absolutely need to be on your radar. Stay with us. Up next, what tomorrow's key inflation reading means for the market and your money. We're not done yet. Stay with us.

Welcome back to Overtime. Some big data coming out in the next two days. Tomorrow, we get the Consumer Price Index. And on Friday, we get the producer prices and also consumer sentiment. Let's bring in Wedbush Securities Managing Director, Sahak Manuelian. Sahak, great to have you on the show. Disinflation seems to be the word of the week and really the word of the summer in terms of the market right now. What's priced in here ahead of CPI and what do you expect? Yeah, so we expect to see more disinflationary forces playing out as they have been. Some of the regional manufacturing numbers have been showing the prices paid component coming down.

So, you know, CPI and then PPI Friday morning, we think will continue the trend lower. And I think that really a lot of this stuff is starting to get priced into the market. And we see the market kind of bouncing around this 44, 50, 4500 area, having a tough time as we get through most of Q2 earnings. But expect to see further disinflationary forces play through. And to that end, we've seen the Treasury, the yield curve actually starting to steepen, which is more proof of this happening and continuing to stay course. So what does that mean in terms of how to be positioned and how to invest through the rest of the year? Yeah, I think that most importantly, as investors start to look at the year to date gains we've seen in the markets, looking into the second half of the year or into

the end of the year. The playbook will be more sector rotation and more money or flows coming out of some of the tech and communication services that have outperformed the first half of the year or year-to-date and really looking at some of the industrials, materials, energy, and certainly certain areas of health care which have been showing real signs of improvement. Okay. Any other sort of key catalysts? Quickly, because we're at the end of the hour, but any sort of key catalysts that you're watching here through the end of the summer? More on the earnings, more sideways trading.

It'll continue to be a very tough chop, I think, into the end of the summer. But really, looking Q3 and Q4, we should just see more sector rotation and more of the early laggards starting to show some relative performance into year end. And again, we like health care and we like some of the financials here. And then also industrials and materials should continue to perform well. And we've seen some great prints from Caterpillar, Sherwin-Williams, Schlumberger, et cetera. All right. Sahak Manuelian from Wedbush. Thanks for joining me here to wrap up the hour. Disney has turned positive. It's up about one and a half percent. The market, though, ended the day lower. That's going to do it for us here at Overtime. Fast money begins right now.