Closing Bell - Closing Bell Overtime: Exclusive Interview With Disney CEO Bob Iger After Epic Games Investment, Strong Earnings 2/7/24

Episode Date: February 7, 2024

Disney CEO Bob Iger joins Closing Bell Overtime in a exclusive interview, sitting down with our Julia Boorstin to talk a strong quarter and the company’s $1.5B investment in Epic Games. Other earnings include PayPal, Wynn, Arm and Mattel. Plus, immediate analyst reactions to PayPal and Disney. 

Go ahead. Not quite 5,000 on the S&P 500, but still record highs. A lot of green in the major indices as the Dow and S&P do quite well today. That's the scorecard on Wall Street, but winners stay late. Welcome to Closing Bell Overtime. I'm John Fort with Morgan Brannan. Well, tech and consumer discretionary stocks leading the charge today. Consumer staples the only sector to end in the red for the S&P 500. But now get ready for another wild hour of earnings.

Instant analysis of results from Disney, Arm Holdings, PayPal, Mattel and Wynn are just moments away. And then Disney CEO Bob Iger is going to be here exclusively to break down his company's results before he gets on the call with analysts. But as we wait for that, let's bring in our market panel. Joining us now is BD8 Capital Partners CEO Barbara Duran and CNBC's

Senior Markets Commentator Mike Santoli. Barbara, we didn't quite make $5,000 on the S&P. And the Russell, I mean, the Russell didn't really participate in the celebration here. It's still very much about tech and larger tech. Microsoft, NVIDIA, Meta, Broadcom, among those outperforming the overall indices. Yeah, I think, you know, what we're seeing here is last year was really, and the market worried last last year, particularly in the second half. And I think that was about PE expansion. I think this year is really about earnings, because I think we pretty much accept that the Fed is not likely to raise

rates. We don't know when they're going to cut. And with the economy as strong as it is, it doesn't look like they have any rush to do that. And so I think right now you're seeing earnings. And you see that with Eli Lilly, who did gangbuster earnings and the stock has been nonstop. So I think you're seeing that the mega cap names are still roaring because the earnings are so dramatically higher. You saw that Navidi and Meta, Palo Alto. So it's nerve-wracking here because the hardest thing for a portfolio manager is when do you sell? And the last month, every time you sell, it's been a mistake. But you have to keep trimming. You have to just simple risk management because you don't know when.

And let yesterday look like could be the beginning of a little bit of a correction. But it was just a buying opportunity. Yeah. Speaking of chips, arm earnings are out. We are going through them. The stock is spiking after hours of double digits, more than 10 percent at the moment. So we'll get you those numbers as soon as we've looked through them. Mike, this is not a broad rally. And, you know, whether you're rich or you're working class, everybody seems to have something to grumble about. Yeah, it does seem that's the case, John.

And it's not that unusual. It's a spotty rally. It's uneven. But it also is not just the small handful of talks and just tech. I am focused on industrials. You know, health care is up three and a half percent in a week. These are at 52 week highs, too. If they weren't being kind of outshined by the monstrous additions of market cap by NVIDIA and Meta and the rest, you'd say, oh, those look like pretty reasonable little uptrends that we're riding right here. So I think it's a matter of framing.

Okay, we've got win earnings out. Contessa Brewer has those numbers. Contessa. Yeah, win with the win, Morgan. Revenues coming in with a beat, $1.84, or I should say $1.84 billion, against the consensus of $1.7 billion. A beat on earnings per share, that's $1.91 adjusted against the expected $1.15 per share. Wynn set an all-time record here for profits, adjusted property EBITDA of $630.4 million. That

beats estimates by more than $100 million, three times more than what we saw the same quarter of the previous year. Macau, a beat. Las Vegas, a beat. Boston, a beat. Now, over the last year, shares of Wynn Resorts are negative, but investors are just not crediting the company with the reopening in Macau, nor the continued strong performance in Las Vegas. The stock, as you can see now, up 2% in the extended trade. Morgan? Got to wonder if they're going to credit them now. Place your bets. Contessa Brewer, thank you. Barbara, want to get your thoughts on that, given the fact that overall in the last couple of days, we've had some pretty strong readings on the consumer,

particularly where things like services and activities and events and experiences are concerned. Yeah, I mean, you heard this this morning from Darrow and Uber. I mean, services and this this morning from Darrow and Uber. I mean, services and consumer spending continues strong. I mean, it's flummoxed all the traditional economic models, but it really comes down to wages, plenty of jobs. You're still at 3.7 percent unemployment, savings and consumer confidence. You had a big jump a few weeks ago, has business confidence. So people are ready to spend.

But I think the lower income, which is often a pressure. Got to interrupt you there because we do have those arm numbers ready. Christina Parton-Nevels has them. Christina. Yeah, a strong quarter for the company. They did post a top and bottom line, be 29 cents EPS earnings per share. That's higher than the street with revenues of 824 million. But it's the guidance that is really surpassing expectations. Guidance for earnings per share coming in in a range between $0.28 to $0.30. The street was anticipating $0.21. So definitely a lot higher there, contributing to that 20%

stock jump. Same thing for Q4 revenue guidance, $850 to $900 million range, much higher than what the street was anticipating. The company saying in their shareholder letter, I was just skimming it right now, saying it's the highest ever record. Keep in mind that this company is not that old. It hasn't IPO'd for too long. Highest royalty revenue they've seen, three reasons. People are adopting their new architecture, the V9. They're gaining market share in cloud and auto. And lastly, they're seeing a recovery in the semi-market and that's helping their shares given they licensed the IP and technology to build these chips. John? Very different from what we've heard from some other semiconductor industry constituents.

Christina, thank you. Meantime, don't miss the First on CNBC interview with Arms CEO Rene Haas. That's tomorrow, 10 a.m., squawk on the street. All right. $49.99.m. squawk on the street. All right. Forty nine ninety nine point eight nine. That's where we got in terms of a new intraday record high for the S&P 500. We've got those blue chip earnings from Disney to get to, though. So Barbara Duran and Mike Santoli, thank you for kicking off the hour with us. As I mentioned, Disney earnings are out. Julia

Borson has the numbers. Julia. That's the right, right, Morgan. Disney reporting a big beat in terms of earnings, revenues, missing expectations slightly falling right in line with last year's adjusted earnings, but we last year's revenues, but adjusted earnings of a dollar and 22 cents per share. That is a big beat from the 99 cents per share that analysts expected. That's also what the company reported a year ago. So big beat from the year ago numbers. That earnings beat follows cost cutting. The company is saying it's on track to meet or exceed its $7.5 billion savings target for 2024. Disney also giving some rare earnings guidance, saying they expect full year 2024 EPS to increase by at least 20 percent to $4.60. Disney also announcing a new share repurchase program

targeting $3 billion in repurchases in fiscal 2024, as well as declaring a 45 cent per share cash dividend payable in July. That's an increase of 50% from the last dividend that was paid in January. Now, Disney also announcing it expects to reach streaming profitability by the fiscal fourth quarter of this year, and also saying that the direct-to-consumer entertainment division's operating income, I'm sorry, operating losses have improved dramatically, improved by nearly $300 million from the prior quarter, a loss of $138 million versus a nearly billion-dollar loss in the year-ago quarter.

Now, Disney Plus core subscribers did decrease sequentially by 1.3 million, but that's pretty much in line with expectations. Disney does forecast a rebound, though, in their direct-to-consumer subscribers. The addition of 5.5 million to 6 million Disney Plus core subscribers forecasted for the second quarter. So this all gives us a lot to talk about with Disney CEO Bob Iger, who joins me now in an exclusive interview. Bob, thanks so much for joining us. Thank you, Julia. Nice to be here.

So, Bob, we have a lot to cover. We, of course, want to get to the big news about your new joint venture in the streaming sports space. But we want to start with this earnings beat. What is behind not just the beat for the quarter, but the outlook for this next year? Well, I think, first of all, for the quarter, you have across the board success. All of our business is doing really well. You just noted the improvement in streaming, which has been dramatic, not only quarter to quarter, but from a year ago.

And that's the result of just a tremendous amount of hard work in terms of completely reorganizing the structure of that business raising prices of course reducing expenses and and and really turning into a business that we believe not only can be profitable but a growth business for the company parks and resorts continuing to do extremely well particularly the international parks it's parks. It's just a very solid quarter overall for the company that gives us reason to be very, very optimistic about the year ahead. Now, you've certainly benefited from these cost cuts, particularly in the streaming division, but revenue is flat. What do you see as the growth catalyst for revenue in this next year?

You're not giving revenue guidance, but give us some insight into what do you think will be driving revenue growth? Well, by the way, first of all, let's not ignore the impact of the cost cuts. The cost cutting initiatives that I announced a year ago, I think on the earnings call of seven and a half billion, which we're on track not only to meet, but probably to beat, impacted the bottom line very positively this quarter. In fact, $500 million positively to the bottom line very positively this quarter. In fact, $500 million positively to the bottom line because of the cost reductions.

So that's really significant. Obviously, it bodes well for the year ahead. In terms of revenue, we expect with the sub-growth guidance that we gave for the next quarter and the price increases that we took recently, we expect obviously that to have an impact in terms of revenue for that business. Movies, the next quarter, relatively quiet because we're coming out of the impact of the strike. I think if you look at the year and you look at the slate that we have with Planet of the Apes film and Inside Out 2 and Deadpool. And then the end of the year is really the next fiscal year. But if you look at the calendar year, you'll see

improvement revenue wise as well in our film slate because of the Mufasa, the Lion King at the end of the year. And we're announcing today that we're actually turning what was a Moana TV series into a Moana feature that will come out in November. A theatrical release. Yes, correct. So the revenue from the studio, at least for the calendar year, is likely to be strong, too. And I understand you have a big announcement that you're going to break on our air of a new strategic investment and partnership you're making. Yes. and partnership you're making? Yes, we've entered into a strategic relationship with Epic Games, the maker of Fortnite,

to not only invest in the company Epic, which took a minority stake, billion, $500 million investment, but we're also creating with them a huge Disney universe that will be for gaming and for play and for watching and even for shopping, for digital goods and maybe ultimately physical goods,

that will live alongside Fortnite but be completely interconnected with Fortnite. And this represents probably our biggest foray into the game space ever, which I think is not only timely but an important step when you look at the demographic trends and you look at where Gen Alpha and Gen Z and even millennials are spending their time in media. It's pretty dramatic in terms of the amount of time spent in games. In fact, almost equal to in some demographics or equal to or greater than how people are spending their time on movies and television. Yeah, I mean, Disney has a number of big popular movie franchises that you've turned into games, but this is a very different move to decide to invest in and partner with a company like Epic Games.

What do you see as the monetization opportunities down the line? Is this more about marketing your characters and making sure this younger demographic is engaged with your IP, or is it about the revenue you're going to be generating from the transactions that happen on the platform? Well, it's primarily driven by the fact that we think we can turn this into a good, solid business in terms of the bottom line. We're not giving guidance on that, but we do expect it to be nicely accretive for this company once we launch this universe. That said, it's also another way that our great intellectual property, the characters and the stories, can be expressed in a different way. We've been great about doing that in parks and resorts and in cruise ship business around the world. This is obviously another example of how we

leverage the great IP that we create in other platforms and other media. And when again, when you look at those demographic trends, I think it's critical for us to continue to stay relevant and continue to basically create ways that consumers can interact the way they want to with our storytelling and our characters. Can you give us a launch date for this partnership? I can't give you a specific launch date. I'm not even going to speculate right now. It's not going to be immediate. It takes a while to build this. It's not years, you know, maybe a couple of years, but we'll see. So your stock is up about seven and a half percent. You just forecast 20 percent growth in earnings for the rest of this fiscal year. You're announcing

this big partnership. Do you think this will be enough to assuage the concerns of Nelson Peltz? Look, when I came back just over a year ago, I discovered a company that was really struggling. We had issues creatively with our studio. We had a streaming business that was losing a huge amount of money and there was no path to profitability. We had a questionable balance sheet, no ability to do what you talked about, which is things like stock buybacks, which we haven't done since 2018, or increase the dividend, which we had suspended at COVID. There were many issues. Morale was bad. And, you know, typically when I face what I'll call considerable challenges, I approach them

with great patience. It was clear to me that the ability to be patient was non-existent. We had to be impatient. We've assembled a great team. We've built on that team, adding Hugh Johnston as our CFO. That team is acting with a sense of urgency. And I think if you look at the results that we just announced and all the things that we're talking about, that is the result of a team that is motivated, that is focused, and now all of us are very optimistic. The last thing that we need right now is to be distracted in terms of our time, our energy by an an activist or activists that, frankly, have a completely different agenda

and don't understand our company, its assets, even the essence of the Disney brand. And I think I'll just leave it at that. But some of the things that you've been talking about today directly tie to what some of Nelson Peltts' concerns and recommendations are. For instance, he said that Disney streaming should target Netflix-like profitability margins of 15% to 20% by fiscal 2027. Is that possible? We are aiming to not only turn that business into a business that's profitable, but to turn that business into a business that delivers margins that we feel good about, that we expect from all of our businesses.

I'm not going to speculate about when that will be. But I think what you just raised is just interesting. Netflix had an over 10-year head start on us. We launched Disney streaming just over four years ago. It's still a nascent business in many respects. Very successful when you look at the number of global subs that we signed up right away and then obviously since then. But when you think about Netflix, when you think about what they've done on password sharing, which we're going to get to later this year, won't be in fact impacted, won't impact us till 2025. You look at their customer acquisition and retention costs, the technology they have that lowers churn, the global content

that they've amassed, including locally, that enables them just to be stickier and offer more to their customers. All of those things are things that not only do we aspire to, but that we're working toward in terms of delivering. You don't snap your fingers and get there. And as I said a moment ago, I'm not suggesting we're patient about it. We've got a lot of work to do. Some of it takes time. The fact that we're guiding to profitability by the end of this year, and that I'm not suggesting we're patient about it. We've got a lot of work to do. Some of it takes time. The fact that we're guiding to profitability by the end of this year, and that I'm saying to you, we're going to turn that business into a business

that we're proud of in terms of margins, we know a lot more about it and how to do that than any outsider is going to tell us or educate us about. So have you spoken to Mr. Peltz, and are you planning on talking to him about these results ahead of your big April 3rd shareholder meeting? I have not spoken to Mr. Peltz and are you planning on talking to him about these results ahead of your big April 3rd shareholder meeting? I have not spoken to Mr. Peltz in a while. I have no plans to speak to him. I'll leave it at that.

Well, we should, of course, get to the other big news, which you announced yesterday. This joint venture with Warner Brothers Discovery and with Fox to create a new streaming skinny bundle of your linear sports assets. Why does it make sense to do this? Are you at all concerned that this could drive accelerated cord cutting or even challenge and cannibalize your Hulu with live TV business? Look, I think if you're a sports fan, if you're a sports league, if you're an advertiser, even if you're a distributor, you want to engage with ESPN in some form. ESPN has always made a promise to sports fans that it will serve them wherever they are, whenever they want. This is clear, and they've done a great job doing that. I think one of the secrets to their success, not a secret, is that they serve the sports fan so well. This is a big step in that direction, to serve the sports fan that has not signed up for

the multi-channel linear TV or that maybe was disenfranchised and didn't want it. This is a way to do that. We've watched for years the decline of basically the linear bundle on cable and satellite. And we've been preparing for a world where that business is not as strong as it used to be. Launching Disney Plus is an example of that. The investments we've made in content, the Fox acquisition, the acquisition, what that did in terms of our ownership of Hulu. All of these things are prepared for us to pivot as well as the world changes, as the world is disrupted. And by the way, I'd rather be a disruptor than to be disrupted. The linear

business is still a business that serves us well in that it's profitable for us. And we intend to continue to be in it. We're investing in it in terms of the channels that we own, running them more efficiently, but we're still in that business. But we also have to be mindful of where the consumer is now and where the consumer is going. But if this product is priced, say, between $40 and $50, isn't there a risk that not only it would drive accelerated cord cutting, but also put you into more conflict with the pay TV operators like Charter, who are already concerned that you are taking ESPN direct to consumer?

I've not discussed this with any of those operators. I think they probably in many ways either would understand or should understand that what we're creating here is a distribution mechanism to reach consumers, you know, where they are today, basically app-based entertainment. And, you know, I think this was a step that we felt was one that we not only wanted to take, but the one that we really should take, given what we know sports fans want and given what we see with the current multi-channel ecosystem. How does this impact your plans to bring ESPN flagship direct-to-consumer as an alternative to ESPN+, but bring your traditional linear flagship direct-to-consumer, which you have told me was going to happen before the end of 2025. How does this impact that? And how does this all impact your negotiations with those pay TV operators? Well, I can tell you that our plan now is to bring so-called flagship to the market

probably in the fall, maybe as early as late August of 2025. We're going to do that. It is a different product. It's singular in that it is ESPN. It will have many more features and provide a much more immersive experience for the sports fan than this bundle has. This bundle is really a channel bundle that I think will be very user-friendly because it's more app-based. but ESPN flagship or whatever, I guess we'll just call it ESPN, will have features like integrated betting, fantasy, much more personalization, customization, probably some shopping in some form,

much deeper in statistics and those sorts of things, kind of the sports lovers delight. And it will live on its own and side by side with what we just announced. You know, we've been saying for a while that we're looking for partners for ESPN to help us take ESPN in a direct-to-consumer business. What we announced yesterday is with two partners that are helping to do that in one way, bundled with their services, and what we'll do when we launch ESPN, where we will continue to look for partners and we've been engaged in some good discussions with some possible partners,

is another step in the direction of just reaching the consumer in more ways. Going where the consumer is and giving what the consumer wants. Before we're out of time, I want to make sure to ask you about your parks business. Obviously a huge part of Disney. We saw strength internationally, but you have fascinating insight here into the consumer around the world based on bookings, especially for things like spring break and looking ahead to the summer. What are you seeing right now, and what's your outlooks for the parks?

Well, let's just talk about the quarter first. You have to look at the parks globally now. Obviously all were profitable in the quarter first. You have to look at the parks globally now, obviously all more profitable in the quarter. What's happening in Hong Kong and Shanghai and Paris and in Tokyo is just extraordinary in terms of the numbers. We open up Frozen in Hong Kong in November and Zootopia Land in Shanghai in December. Tremendous reception to those. And the combination of those with the domestic parks, whose business is, I think, more than twice what it was before the pandemic, is just an extraordinary business for

us. Add to that the cruise ship business. You know, we now have five ships. We're building three more. Also tremendous in terms of near-term performance and also long-term outlook. I won't get specific about what we're seeing in bookings, except in general, our parks business is healthy domestically. Again, you have to look at it in light of where we were before the pandemic, the fact that it came roaring back and has stayed really strong versus just looking at sort of one isolated quarter. Before we let you get off to your earnings call, I have to ask you about Elon Musk tweeting overnight that after funding a lawsuit from a fired Mandalorian actress against Disney, that he will fund any Disney employee that wants to sue you. What's your response to this? None. Then I'm going to ask you one more. Do you have any update on succession?

That's an easier one. There's a succession committee of the board. They meet regularly. They've had some really good, I think, productive sessions. It's probably the board's number. It is the board's number one priority. I'm confident we're going to find a successor to me in due time and in the right time. And again, I think the commitment of the board, the attention to the process is all very, very healthy. Well, we will leave it there. Bob Iger, CEO of Disney, thank you so much for joining us. Ahead of your earnings call to bring so much different pieces of news with us, from the Epic deal to the fact that ESPN flagship is going to launch ahead of the football season in 2025.

You heard it here first. Thank you so much. You're welcome. Guys, back over to you. Julia Borson, our thanks to you for a fantastic interview and our thanks to Bob Iger, as well as shares of Disney's Surge. After hours here, I mean, wide-ranging is an understatement, John. We just had

succession. We talked about box office and parks, activist investor pressure. Remember, Peltz isn't the only activist in this name. The gaming partnership with Epic Games. Streaming path to profitability, the JV Sports Bundle and then, of course, mid-2025 for ESPN.

Disney boosts its cash dividend 50%, targets a $3 billion buyback in the midst of all that. Confidence and detail from Bob Iger here, not hand-waving, clearly building up the case that he doesn't need other people outside Disney coming in and giving him advice. But this epithing is big because if you know Fortnite, you know there are already Disney characters, Marvel characters in it. I've watched my boys get really engaged in that in Fortnite. They've got some staying power there.

So it'll be interesting to see what they do. $1.5 billion in that Disney stake in Epic. Move over Metaverse. Let's talk Disneyverse. We'll see. All right. PayPal earnings, meantime, are out. Kate Rooney has the numbers.

Kate. Hey, Morgan. So it was a beat for PayPal's fourth quarter. But if you look at guidance and account growth, that was disappointing. And really what's weighing on the stock here, it's been moving around here after hours. On the fourth quarter, though, in terms of those numbers, top line, that revenue number is better than expected, $8 billion. It was up 9% year over year. The bottom line, that adjusted EPS number was a $0.12 beat, $1.48. And then payment volume also came in better than expected, $409.8 billion. On that account slowdown and growth slowdown,

it had 426 million active accounts at the end of the year. That is about a million short of expectations. It was down 2% year over year. They did start disclosing monthly active users as well. There's no comp to that, but it was up 1%. And then operating margins, a take rate was a beat. Guidance, though, that is the weak spot today for PayPal. Forecasting full-year EPS of $5.10.

That is 38 cents below expectations. Q1 EPS is set to grow in the mid-single-digit range. Street was looking for growth of 8.7% there. I did catch up with CEO Alex Chris, who took over PayPal about four months ago. He says, quote, we are being conservative in the guidance. He said, we want to see points on the board and we want to actually execute before we put anything into our forward guidance. He said the majority of new innovations are not in the guidance and they, quote, have a new mindset around profitable revenue growth and

an improvement on transaction margins. Guys, back over to you. All right. Great insight there, Kate. And for a different overtime play, let's get. All right. Great insight there, Kate. And for a different overtime play, let's get to Mattel earnings with Kate Rogers. Kate. John, the stock is higher despite the results out here for Q4 for Mattel. EPS missing 29 cents adjusted. That is lower than the 31 cents that analysts were looking for. Revenue is also lower than expected, 1.62 billion for the quarter, lower than the 1.66 billion the street was looking for. Revenue is also lower than expected, $1.62 billion for the quarter, lower than the $1.66 billion the street was looking for. The company says it sees adjusted EPS of between $1.35 and $1.45 versus $1.37 estimated for the full year of 2024. And I also want to call your attention to gross margin of 48.8% for Q4. That's lower than expected. So

this earnings miss is not just on disappointing sales for Mattel. It's also a margin miss, too, because that gross margin is about 90 basis points below analyst consensus for the quarter. Back over to you, Morgan. OK. Shares hanging on to slight gains here, up one percent right now. And after hours, Kate Rogers, thank you. Shares of PayPal falling after reporting a Q4 beat, but guidance came short of expectations, as you just heard Kate Rooney break down. Joining us now to discuss further, Dan Dolove from Mizuho. Dan, earlier, well, last month, I guess now, ahead of the Innovation Day, you downgraded PayPal.

You've been bearish. Your thoughts on what we just heard in terms of account slowdown, growth slowdown and a big miss on guidance. Hey, you know, I always hate taking a victory lap, but it feels a little bit like that right now. Look, if you think about this, I look at two or we look at very two important KPIs. That's branded checkout, which decelerated 5% versus 6% in the last quarter. And unbranded, which was sort of the claim to fame up until now, that's where they were going against Audion, that also decelerated a couple of points. It's at 29 now. So to me, and obviously what Kate was saying about EPS being really, really weak for the guide, I guess not enough, you know, cost cutting or what have you. But to me, those two KPIs are the most important ones because they're deep fundamental and they show you kind of how they can compete with Apple Pay.

Okay. I mean, when it comes to PayPal, this is a turnaround story, right? You've got a new CEO at the helm. He's been there for a couple of months. So in terms of guidance, there's really nothing to lose if you're looking to helm a new turnaround strategy to be conservative with guidance. So to play devil's advocate here, could this potentially be a bottom for this name? When will we know that's the case? I think we will know that if we start seeing kind of more clarity on, you know, why branded checkout is slowing, right? Because the bottom for the stock will be when we figure out that whether or not they could actually, you know, offset some of the headwind from Apple Pay.

This is the biggest overhang on the stock. And until that gets resolved, I don't think we're going to get a bottom in the stock because it'll just be a value trap. So we want to see why growth is decelerating and why they're not really guiding to a revenue number unless I missed it. I just saw an EPS number, but I only have a few minutes to look into that. Dan, it's not just Apple that I'm concerned about, Apple Pay. It's Klarna, a firm which I know that you like because they're looking at faster online checkout options, not just for the convenience aspect, but to be able to use data more effectively to steer retailers into using their services. To what degree is PayPal able to compete there, do you think? And to what degree do they face risk from names like that? I think they face a lot of risk because at the end of the day, and this is a great question,

at the end of the day, you know, I can't talk about Clarno, they're private, but Affirm, they take credit risk, right? So they're in the business of taking credit risk and they're the lost mile relationship essentially paypal is sort of a middleman between you and your bank or you and your credit card so you know the fate of all middlemen is to get squeezed and that's why it's going to be increasingly harder for paypal to go and compete against the firm because they're getting sort of a competitive edge in understanding risk. And that last mile relationship is enormously important. And this is what is sort of going away from PayPal over time because of the age demographic issue that we highlighted, that young people don't really use it as much as older

people. Like PayPal is eBay and Affirm is Amazon, in effect. Interesting. You put it in a very, very good way. Of course, we get firm earnings tomorrow as well. So we'll see how all of this shakes out in the next 24 hours. Dan Dolove, thanks for joining us. My pleasure. Up next, a top analyst will give us his take on the big news we just heard from Disney CEO Bob Iger. The company announcing a new investment in collaboration with Epic Games. What this could mean for the bottom line. Plus, the CEO of F5 at his company's new service that helps customers protect their AI-powered applications. Overtime will be right back.

Welcome back to Overtime. Shares of Oscar Health up sharply right now in overtime. It's Q4 loss smaller than expected, but revenue about in line. Very strong full year guidance. That's really what's pushing the stock higher. The CEO saying, quote, we have a clear line of sight into consolidated adjusted EBITDA profitability in 2024. And you can see those shares are up 20 percent right now. Allstate, that's going in the other direction.

That's despite a revenue number coming in above analyst estimates. Net premiums written and earnings both missing expectations. Those shares are down about 3% right now. Two different 20% moves so far in overtime. Okay, shares of Arm Holdings, which I just mentioned, they're up 22, 23% at the moment in overtime. Up next, Mike Santoli is going to look at whether the recent outperformance of semiconductor stocks versus software is sustainable. We'll be right back. Well, it's a strong flex for Arm Holdings. Those shares are soaring thanks to a beat on third quarter results.

Mike Santoli is back with a look at semiconductors versus software stocks. Mike? Yeah, John, the last couple of years has been a big turnabout in terms of investor preference, one over the other. If you remember, you know, 2020, 2021, that was really the software as a service mini bubble. And software really outperforms semis. And actually, what's interesting is they sort of moved in tandem up until that point, roughly around the time when a lot of that speculative cloud type stuff started to fall away. And then we've lifted off in terms of semis. Obviously, the AI boom and just the general CapEx velocity running through semis seems to be what's animating this. You see that the software ETF IGD is not even back up to

the previous high. Part of the reason for this is it's not fully market cap weighted. So Microsoft and Salesforce and such are somewhat underrepresented in it. But still, it does show you a bit of a difference. And it's also visible in the relative valuations here because software is always traded at a premium. It's an amazing business. The margins are high and sustainable. And you see that has been consistent, but it's been compressed a little bit, especially relative to the overall S&P 500, whereas semis now trade at a rare premium to the S&P 500 by about 20 percent as a whole. Once again, it's very top heavy and it's hard to see. But semis down here, remember, they were mostly near the market multiple, now trading close to a 20 percent premium. Obviously, software still got a generous valuation, but less so. So we'll see if this can persist for a while, Morgan. All right. Mike

Santoli, thank you. We have more breaking news on Disney. Let's get back to Julia Borson for that. Julia. Breaking news on Disney and Taylor Swift. CEO Bob Iger just announcing in Disney's earnings call that they will be bringing the Taylor Swift Heirs Tour movie to Disney Plus as of next month. And so Disney Plus will be the exclusive home for the streaming version of Taylor Swift's concert. So the concert movie that debuted in theaters last fall now coming to Disney Plus. We'll get more details, I'm sure, later in the call. But big news out of Disney. That stock is up 7.5% after the company reported better than expected earnings and earnings guidance.

Back over to you. It came loaded for bear today, all these earnings and all of these news announcements. Julia Borson, thank you. Joining us now, by the way, I'm going to strap in my seatbelt. I got a 7-year-old. Oh, this is going to be on all the time in my house. Barton Crockett, senior research analyst at Rosenblatt, joins us now to talk about all of this news coming out of Disney.

Barton, I guess let's start right there with the fact that there was a lot of content news out of Disney, whether it is ESPN launching next year as early as the summer, whether it's now Taylor Swift, whether it's some of the conversions and details around the box office or the JV for the sports bundle. I mean, pick your poison. Oh, and of course, Fortnite. How does all of this speak to this plan that's rolling out amid activist investor under Iger? Well, I think that the big picture here is you have a lot of energy that Disney's putting out to, you know, basically throw some spaghetti against the wall and see what sticks. You know, do we have a lot of confidence that this new sports bundle is the answer?

No. The pricing's probably a difficult, you know, needle to thread. Is Fortnite what it was a few years ago? No. you know, needle to thread. Is Fortnite what it was a few years ago? No, you know, it suffered a little bit from, you know, being its impasse with Apple on the iTunes store. You know, will Disney, you know, be able to resolve that part of it? No, but can the content resonate perhaps? You know, these are interesting. Is it great to have Taylor Swift? Yes. Will the movie slate get better in a few quarters? Yes. But, you know, but there are some things here that are very hopeful in the quarter. And the hopeful thing is, is that they

were able to improve their profitability picture substantially and really deliver on those cost cuts. And I think the real question here is, can they grow the top line again? And that was flat. And the real question is, can you get enough out of streaming to really offset the headwinds that are clearly still there and probably building on traditional pay TV? You sound very cautious for a man that has a buy rating on Disney stock right now. How much does free cash flow matter? And I ask that because the new free cash flow guidance of eight billion dollars for the current fiscal year starts to return Disney closer to the types of levels that we saw before the pandemic? Look, I think the free cash flow story is great. And I think that the willingness to kind of commit that to shareholder returns is very encouraging. I mean, I was not expecting

a shareholder purchase for a couple of more years. So they're announcing one now. They're executing it. That's great. They brought back the dividend at a little bit better level than I would have anticipated. These really kind of push back against some of the fears that built around what were they going to have to pay Comcast for Hulu and how much were they going to have to sink into streaming to really make it work. So the cost side, the shareholder returns, those are great. What we need to see is the consolidated entity put up growth on the top line. That's really what it's going to come down to. Cost will only take you so far. Barton, you bring up an interesting point about Epic's issues with Apple. And I wonder if you think that Bob Iger can have a positive influence on Fortnite versus Apple the way he did with

Pixar versus Disney, especially because Disney now has skin in this game and they've traditionally been one of the earlier adopters, supporters of Apple's platforms, kind of the opposite of the attack that Epic is taking now. Well, look, I would hope so, because you'd want to see a functioning Fortnite, you know, for this to matter for Disney. And Fortnite, you know, isn't really functional if it's not fully kind of represented in the app store. So hopefully, you know, maybe this is a sign that the worst is behind us on that. And, you know, but we'll have to see, you know, Iger, if anyone could bring, build a bridge, you know, Iger certainly could in this situation, I would think. Is this yet another reason for Bob Iger to extend his tenure as CEO? I mean,

now he's announcing these new things, Taylor Swift, you know, epic, you know, investment. The thing he had the least to say about was the last question on succession. Yeah, look, I think the succession issue has been pushed back a little bit. It's not going away because he's not immortal. I mean, we have to, you know, he has to pass the baton. And, you know, fingers crossed, hopefully they can get it right. Third time's the charm. All right. Barton Crockett, thanks for joining us.

Shares of Disney up 7.5% right now. Still to come. We're breaking down all the biggest earnings movers in overtime, and there are quite a number of them. Plus, we're counting you down to the conference calls. Key themes every investor needs to be listening for ahead. Overtime. We'll be news alert. U.S. Central Command announced a drone strike in Iraq killed one of the commanders responsible for attacks on U.S. soldiers at a base in Jordan two weeks ago. The Pentagon first launched retaliatory strikes in both Iraq and Syria last week following that attack, which killed three U.S. soldiers. We've got more Closing Bell

Overtime after this. Semiconductor manufacturer Monolithic Power up nearly 5% in overtime. The company giving first quarter guidance that's well above what analysts expected and increasing its dividend by 25%. And O'Reilly Auto falling right now. Revenue coming in light and reporting a CapEx figure well above estimates. That's higher costs. Comparable store sales increased 3% versus last year. Is that 0.3? We'll check on that.

Now, up next, CEO of F5 on his company's new security tools that try to help customers protect their AI-based products. We'll be right back. Welcome back to Overtime. We're getting some news on Warner Music Group. Steve Kovach has the details. Steve. Hey, Morgan. Yeah, some job cuts at Warner Music Group here,

cutting 10% of their workforce. They put out an announcement just now. That's about 600 employees, and they're saying to expect about $140 million in a one-time charge related to these layoffs. You see shares up just shy of 1.5%. They also reported earnings today. John, I'll send it back over to you. All right, Steve Kovach, thank you.

And let's see, for more on today's big day of earnings, we're going to bring back CNBC Senior Markets commentator Mike Santoli. Mike, Julia Boorstin had a busy day. Yesterday, Snap reported she had Evan Spiegel on earlier today and just spoke with Bob Iger. A common theme across those two are a couple of common themes. Challenges with content and costs. Right. Disney trying to make the case that through partnerships and through discipline, it's a good bet. What are your takeaways? Right, and the distinction, I guess, in terms of investor reaction is,

is the company, generally speaking, operating from a position of strength where you have some confidence in the run rate of revenues and you're trimming and you're optimizing as opposed to, you know, just sort of cutting to seem like you're doing something, which I think is the case with Snap. Snap has not really proven, honestly, its relevance as a as a business, as a financial entity. And, you know, doesn't really have a path toward making sustainable money. So therefore, cost cuts just seem like an acknowledgement of a difficult spot.

Disney and really the rest of the larger, more successful companies, I think, are out there giving hope that margins can be preserved, that first quarter earnings estimates, of course, we're only a month or so into the quarter, look like they're plausible. And I think that's been the whole game getting through earnings season to make sure that, in fact, the companies can get on top of things. It also, I think, is maybe we'll back into a sort of a benign, perhaps softening of the labor market. I don't know if those layoffs are really going to start to show up in the aggregates anytime soon, but it's something to watch. You know, that's exactly where I was going with you, Mike, because whether it's Warner Music, whether it's PayPal ahead of its earnings, and of course, we're seeing a lower than expected

EPS guidance for that company, despite some of those cost cuts that are now being enacted, or some of the other names. I mean, layoff mentions on earnings calls are at the highest level since the pandemic. It's going to make something like jobless claims, which we get tomorrow morning, all the more important to watch. And we know there's been maybe a little bit of noise there with some of the weather impacts around the country. But in general, coming off of a week with a lot of Fed speak so far, how much is that going to factor in? It's funny. I think it's a bit of a puzzle, Morgan, to try and figure out if we're really seeing economy-wide a big wave of job reductions or if big public companies, as they finish their

year end, you know, kind of summing up and budgeting for the year forward, are sending the signal that they're trying to tighten belts. Now, companies are also required to announce when they have a certain level of layoff. So it seems like this drumbeat. So I don't know is the question. There is a bit of a of a lift in productivity in general going on. I've even heard a little bit of an inverted logic as to why the overall economy hasn't been suffering when you have a lot of white collar layoffs, which is generous severance and a relatively tight job market. People can maybe find something else.

And in a way, they got a raise because the severance didn't run out before they got another paycheck. Who knows if this is going to be proven out by the stats? Well, I got to go back to something that we talked about earlier in overtime, and that is ARM. Hopefully, we can put that chart up. It's now up 38.5% after hours. Seems to have taken another leg higher now. As we were telling you earlier, it was already up 20-something.

But this is a significant move here. I don't know if there's a short squeeze involved at all here, but it's after hours. They did report solid numbers, but this is a super micro style move here, Mike. I wonder, have we been seeing this kind of thing? I wouldn't say as a rule we've been seeing this kind of thing. It definitely sort of shows you that expectations were low. I think the conventional wisdom on this company was, you know, fine, it's a necessary kind of piece of the overall semiconductor design world,

but maybe not much of a grower and the IPO is a little bit underwhelming. So all that stuff probably fed into the idea that you'd be surprised that you got this pretty good step function higher in guidance in terms of revenue and earnings. So perhaps that accounts for the after hours action. Also, I wouldn't necessarily discount the idea that this market's been rolling. Anything that sort of runs up against AI and semi-investment has been very hot. And so you probably have a little bit of, you know, of money chasing those trades that look like they might be short term easy. Some of the silly stuff has started to move. I'll put an arm in that category. But as the rally rolls on, you're going to get that. Okay. And of course, we did get a new closing high for the S&P 500, just shy of 5,000 today as well. So we're on watch for that tomorrow. Mike Santoli, thank you. That's going to do it for us here at Overtime. Fast Money starts now.