Power Lunch - Disney’s Dilemma, and It’s Almost Football Season 7/13/23

Episode Date: July 13, 2023

Disney just gave CEO Bob Iger more time on the job, extending his contract through 2026. And one of his key moves could be taking ESPN direct-to-consumers. We’ll explore what it all means for the stock and the company.Plus, we’re just 2 months from the kickoff of football season. NFL Commissioner Roger Goodell will join us to discuss the future of streaming, sports betting, TV rights and much more. Hosted by Simplecast, an AdsWizz company. See pcm.adswizz.com for information about our collection and use of personal data for advertising.

Welcome to Power Lunch, back with Kelly Evans. I am John Ford. Coming up, Disney gives Bob Iger two more years, extending his time on the job, at least two. We'll see what it ends up being. One of his key moves could be taking ESPN direct to consumers, much more on what this means for the stock and the company. Plus, we're only about two months away from the kickoff of football season. NFL Commissioner Roger Goodell about to join us. What does he think about that potential major move by one of its big partners? that streaming, gambling. And Kelly, I know you've got some questions about Aaron Rogers. Kind of a long-running joke here with the Jets fans in the building. But first, let's get a check on the market. Speaking of your green, there is the Dow up 45 points today. The S&P up 28 to 4,500, and the NASDAQ up 183 or 1.3% today. Fourth day in a row of rallies, new 52-week high for the Dow. Bob Eiger, not the only big name on CNBC this morning. Exxon, Delta, Pepsi, also with some news today. We'll hear from those CEOs and get the trades in these names. coming up in three-stock lunch. And Alphabet, up 4%.

Morgan Stanley and Cowan both bullish on the stock and raising their price targets today. Cowan, though, pointing out YouTube is losing mobile share among young users over to TikTok. Still, John, the shares are up 4%. Yeah, well, Disney CEO Bob Eiger making headlines today, as we mentioned, saying linear TV is not core to Disney's business, but he carved out ESPN from that,

discussed potential plans for sports and the network. Here's what he told our David Faber. There is an inevitability, by the way. You raised it to taking ESPN and direct-to-consumer. We haven't said when, but we do know that it will happen. Is it sooner than you had thought, let's even say, seven months ago? No, I think I'm much more certain about when, but not prepared to say when that is. I won't say whether it's sooner or not, but I'm enthusiastic about it.

For more, we're joined by Susie Welch, leadership professor. at NYU Stern School of Business and Alan Gould, managing director at Loop Capital Markets. He has a buy rating on Disney, $110 price target. Alan, Disney kind of in this weird situation, deja vu, Iger back. I don't know who thought he was only taken two years. He's taken four, at least. Is that good that they still can't figure out succession and Bob Iger is back, fixing what Bob Iger and others maybe didn't get right the first time?

Well, it's not great that they can't figure out succession, but it's good to have Bob Iger back. I mean, he is the world-class CEO. Did a great job with Disney when he stepped up as CEO in 2005. That 15 years was one of the best runs any media company has had. The industry is going through a lot of challenges as Bob laid out this morning, and I think he's the right person to take them forward. Susie, Eiger is one of the great, if not the great media CEO of our era because of what he's built in part, you know, Marvel, Lucasfilm, putting all that together. But on the efficiency side, what's his record like and how important is that in a market like this?

Well, it's getting better. I mean, I think he understands that that's one of the priorities. I'm not sure that's what the board was thinking when they got him to sign up probably in their minds forever. or they would like him to stay around with. He is their guy. They love his vision. They believe he's the only person who can get them from point A to point B. And they're going to be behind him.

And one of the things about him is he's so completely linked to the company. He is, I think the board's got to place with the feeling that he is the only CEO who can make those efficiency changes, which everyone is aware need to occur. But Susie, so much top level, and by top, I mean right under Eiger, talent has churned out of Disney, say over the past decade, because he's kind of, he's going out, but then he's not, and he's in, and he's out and he's in. And even after what happened with Chepec, I can't imagine who thinks there's going to be a smooth handoff the next time. How much of a challenge is that for the board and for management to think that they've got any shot at rising up higher than

they are already? Well, I think at this point, it's a great question. I think at this point, there's still actually very good people there. I don't think everybody has left. I think there is great talent there. Otherwise, the company wouldn't be doing what it's doing, facing some very significant challenges in a very complicated industry. I think that there will be a handoff. If I could ask the board to do one thing, it would be to stop this sort of every two years thing and just say, look, he's here for the next five years and give him the runway that he needs to develop the right person. I believe that there will be a smooth transition. They're just not ready for it yet. The right person's not there yet. And the complexity is at a point.

where the switching costs are just too high. And look, it's an industry where there's a lot of turn and talent anyway. And I think that there's somebody in the ranks there who will stay because they think they have a shot at it. Alan, you know, have they kind of shot themselves in the foot with succession planning? Should they have allowed, you know, kind of a new leadership years ago to avoid some of these problems? Or is Bob Eiger the right person to lead the company through this tumultuous time? I mean, I think he's the right person to lead the company. But I mean, listen, Dana Walden running the studio is terrific.

And the content side, Josh Tamari at the theme parks has done a great job. So I think there's plenty of talent inside. I don't think they're losing big talent because of fear that Bob is controlling the whole place. Yeah, Susie, what do you think? I totally agree. I'm completely with you. I think there's great people inside. And some of them probably have been told that they're in the running.

I think that he shows up at conferences with this talent, sort of signaling that he's looking at this talent. And I think the board, and probably he agreed that the time is not now and that they're waiting and they're learning and they're taking it in the right time for the company. Why rush it? He's there. He obviously loves the job and wants to do it and they love him.

And so why rush the succession planning? He's up to the task. Alan, I thought that Iger's comments on sports, in particular, we're really interesting because the costs are so high and getting higher. We're about to talk to Roger Goodell about that. But he seemed to be focused on what else you can build around that core once you've got those franchises in place. The youth of the audience, the size of the audience, at a time when he's trying to be efficient with streaming, but also build DTC businesses, also maintain that sports franchise while perhaps spinning.

out TV networks. How do you get that balance right? What are we going to have to watch for as investors, you know, our viewers are going to have to watch for as investors, to see how and whether he's nailing that? Yeah, John, great question. I mean, two things in my career. Movie costs go up every year and sports costs go up every year. Sports has been the strongest asset. It's what viewers are staying or tuned into. TV ratings are plummeting for general entertainment. Sports is holding up. Iger has always talked positively about ESPN. About six months ago, they said they are going to carve out ESPN as a separate reporting area. I think that is the predecessor to or the preview to them converting ESPN first to a hybrid linear streaming, linear end

streaming business, and then eventually to 100% streaming business. Susie, if I could kind of, you know, take the focus off of Disney to some extent and ask, you know, this is a tremendous time for media companies, broadly speaking. The fact that Bob Eiger is even thinking about some of the moves that he kind of hinted at tells you that there could be a lot of change in the next few years. Walk us kind of strategically speaking through the kinds of things we should be thinking about that could reshape the landscape. Well, right now with media companies, the whole idea of where content is coming from

and who's creating it and how much they're going to pay for it is obviously the big open question. You know, the idea that writers could go on strike and that, I mean, right now there's tons of content around. And so companies, media companies are able to play a waiting game, but that moment's going to come where they're going to need to create new content. So that's one of the really big questions. The whole idea of what the fallout is in streaming is another one. And so I think it's an uncertain, you know, I remember five, six years ago thinking, oh, there's just no visibility in the media space anymore. And the visibility gets less and less and less. What that brings me back to, though, is the makeup of the Disney board and some of the other boards of the media companies is they have

on them, people who have weathered a lot of storms. And the Disney board is case in point with Mary Barra and Carolyn Everson and other board members who have seen industry go up and down. And at the point that we're at where there is such limited visibility saying, look, we're just going to ride this storm out. And whatever comes, if we've got a leader who understands the company in its details and can do both short term and long term at the same time, which of course is the challenge for every leader, then we're just going to stay the course. And it's something. Something could come out of left field. It could just blow up the whole space.

Again, some new technology that we haven't even thought of. Look how AI has turned every other industry upside down, and it's going to turn media upside down, too. Or like AR and VR, as Bob was at the Apple Worldwide Developers Conference. He was there with Steve Jobs when they were bringing his shows onto an iPod, and now he's there with the VR goggles. Yeah, and I take everybody's point that in Sun Valley, this is where you start to have interesting conversations about, you know, kind of reshaping this landscape. By the way, real quickly, before we go, a price target on the stock, Alan? Yeah, price targets $110 to share.

I mean, you're buying the stock because this company has the best franchise in the media business, one of the best management teams in the media business. You know, the next couple of quarters may be challenging, but that's more cyclical. Iger's going to figure out the movies again. the theme parks may be weakening a little bit domestically. They're doing great internationally. They'll keep coming back. Keep in mind domestically, as good as they were last year,

they were still, attendance was still 19% below the 2019 level. So all the growth has come from pricing. There's still a lot of room for growth in the theme park business as well. All right. And DPC will get profitable. Alan Gold, sticking with his optimism. Susie Welch, thank you so much for your time as well, discussing Disney today. We appreciate it.

Now to some major news coming out of the Fed. St. Louis Fed President James Bullard is stepping down, apparently to take an academia job. Steve Leesman joining us with details. Hi, Steve. Hi, Kelly. James Bullard, one of the longest serving bank presidents on the Federal Market Committee is stepping down today. And he is taking a job at the Mitchell Daniels Business School at Purdue. He has been at the Fed. I'm just double-checking the release here because it's a long time. He's been there 33 years, but he's been president since 2008.

And as you know, Kelly, we have a relatively new crop of bank presidents. And Bullard was, I have not been able to confirm if he's the longest-serving president, but certainly one of the longest-serving presidents on the FMC. And he's going to be dean. He's stepping down today going to be advising the board at St. Louis Fed and the bank. until August 14th, and then August 15th, he starts a job. It's fairly unusual, I want to say, for this kind of immediate departure. Usually the bank president's staying in place until a replacement is found.

Sometimes they leave, and a replacement is found later. And these process of replacing them can take a long time. I think they're still looking for a president at Kansas City after Elizabeth, sorry, George stepped down. And right now, it looks like Kathleen O'Neill Piz, I guess, will take his place. She is the chief operating officer and first vice president. Bullitt is not a voter now. It looks like thing Lewis next time of the vote in 2025.

Steve, how does Bullard's absence, coming absence from the room, shift perhaps the tenor of the conversation at the Fed? I mean, voting member or not, he's been a presence for so long. You're familiar with the position that he's had on rates recently and the sort of Fed speak that he has delivered. How is it going to shift the tone of things? So, Jim has been very much a forward thinker, sometimes too forward for some of his colleagues. But he has pioneered a lot of different thinking. I think when it came to raising by 75 basis points, Jim was. one of the first ones to lay it out there. He also laid out a controversial look at the Taylor

Rule that showed that the funds rate may need to go from 5 to 7 percent. And that's, I guess, it's been necessarily not necessarily confirmed, but been part of the conversation. He has led the way, and he's sort of led you astray every now and then, but he's always done what he's done based on research, I want to say, and some form of economic principle behind it. He was the first guy, as I recall, to not put in a longer-term Fed funds forecast because he suggested there are potentially multiple equilibriums out there. I don't want to say he's a hawk. He's been very hawkish in this recent hike, but he also was among the first when it came to being doveish for the pandemic and times before that. So I don't think he's diet.

in a diet in the wool hawk. He's been extremely hawkish through this process here, and he's been one that said the Fed need to keep raising rates in this process. But I think I could definitely point to other processes where Jim has been more douged than your average Fed member. I agree with that, Steve. I'm seeing a lot of takes about, you know, the Fed immediately loses its biggest talk. He's not certainly always been that way. Would you say that's the case right now that he's even the most hawkish member?

I think so. I will say this. When Jim put out that look at the two different Taylor Rules that showed the range of 5 to 7 percent, I have continuously asked him about where we are with those calculations of his, and he's suggested that as inflation has come down, that top line number of 7 percent has come down as well. So he's not maintained this Uber-Hawkish idea. I think right now he's been very, very insistent. And at the beginning of the process, the reason why he was advocating,

18-baceted 75-bases-point hikes was because he felt as if if the Fed did more at the beginning, it would have to do somewhat less hiking at the end. And so he talked about the need for the Fed to get out in front of the rate hikes and get out in front and it was behind the curve at the time and to perhaps do less damage to the economy. He's also been pretty upbeat on how the economy is weathering this. And he's suggested that we are not necessarily headed for recession. So I think he felt pretty good about his policy stance, and I don't think it's been wrong. All right, Steve, thank you. We appreciate you joining us on the newsline. Steve Leesman on the news that the St. Louis Feds, James Bullard, is stepping down to take a position with Purdue University.

Meantime, media moguls are gathering out in Sun Valley, Idaho, this week, and it comes as talk about the future of ESPN is very much in focus now. Streaming, of course, continues to have a big impact on leagues, including the NFL. The NFL brought Sunday ticket to YouTube in that groundbreaking deal last December and is wrapping up the first season of Thursday night football on Amazon. Joining us now from Sun Valley, Idaho, our own Julia Borson, with a power lunch exclusive interview with NFL Commissioner Roger Goodell. Welcome to both of you, Julia. Thanks, Kelly and Commissioner Goodell.

Thank you so much for joining us here in Sun Valley. We sat down here last year, and the big question was where were you going to make a deal for Sunday ticket? As Kelly just mentioned, the deal went to Alphabet, to its YouTube, which is really a big shift away from DirecTV towards YouTube. What are your expectations for the deal and for Sunday tickets? Viewership now that you're going to be over at YouTube this fall? Well, I think first it's it's good for our fans and it gives greater access for our fans to a much broader universe. We're thrilled with YouTube TV and YouTube and Google. The technology, the innovation,

the desire to really use this to expand and elevate their platform, we think it's going to be a terrific product. We know it will be. And it's a challenge when you're shifting platforms. Awareness, making sure our fans know where to get it and to get them to make that move when there's no content up today. It won't be until September. So that's a big effort for us.

Speaking of shifting platforms, you did shift Thursday night football over to Amazon. the viewership there did decline. What is your expectation for season two? And do you think that was more about the transition? Or do you think it's just more about shifting onto a more fragmented digital universe? No, Julie, this is a long term. We don't make those decisions on the basis of one year deals.

And so for us, the streaming platform on Prime Video is going this way. And so this is a long-term play for us. We are thrilled with what what we had last year. We've made some changes to the schedule. We've all have a basis from the first year. I expect that that will continue to grow

in a very popular way. And I think they'll bring their technology and their innovations. And this platform allows our consumers and fans to do things that you can't do on the linear feeds. Another one of your big platforms is of course ESPN. And you have the longstanding partnership with ESPN and Bob Eiger.

Bob Eiger saying on our air to David Faber that He's long-term committed to sports and to ESPN, but he does see the inevitability of bringing ESPN direct-to-consumer, focusing more on that streaming business. What does that mean for you in the NFL? Well, it's positive for us. You know, when our partners are continuing looking to innovate and trying to find the platforms that are going to continue to grow

and have the greatest potential for growth, we've recognized that by going to Thursday Night Football on Amazon Prime and also with you, to. So we contemplated this in the context of our ESPN deal when we did that a few years ago. So we think this will be a positive change for our consumers. And, you know, I think our content is going to be a big part of that. Kelly, you want to jump in here? Julia, thanks, Commissioner Goodell. I'm not sure if we've had a chance to speak. So I welcome the opportunity. Thank you so much. And I was going to pick up on that point that Julia made about

content. I guess thank you on behalf of viewers for for Hard Knocks because Aaron Rogers and, you know, There's been a little resistance, I know, amongst some of the teams, but look at what's happened with Formula One and tennis and all of these sports as a result of this scrutiny. Could you just comment a little bit, maybe even for some of the players who feel like they're kind of being dragged through it? But why is this such an important part of your strategy? Well, we talked a little bit of this morning on our panel. To me, game content is obviously we know the value of that. We know how important that is. But the non-game content is something that we're really investing in.

We have a joint venture with Skydance to create more non-game content across all platforms, theatrical and streaming and television. We want to bring more of our access to our players, to our coaches, to our game in general. And this is a great way to do that. And I think this is a great thing for our fans where they'll have that ability to see the inside, see what's happening. And it's something we've been investing in over the last several years, but I think Skydance to hopefully take us to another platform. And that's across all sports. That's just not football.

Interesting. You know, my other question is kind of a little bit different, but relates to the other big growing part of this business, which is sports betting. And the fact that players themselves are allowed to bet, you know, you wonder if that's really in their best interest, right, at some point, or if it's fair to allow them to bet, even though a lot of the rest of the staffers and people at the organization can't.

Should we expect this policy to evolve in the next couple of years or to stay the way that it is? No, I think all our policies will evolve particularly in this area as we have more and more states that clearly are going to be legalizing sports betting. This has all been an adjustment to the Supreme Court decision. We obviously, number one for us, is protecting the integrity of our game. But we're also believing in educating our players, our coaches, our employees. everybody involved with the NFL about the importance of that, and then also being very transparent and also being relentless

and making sure that we do everything to protect that. Roger, I almost hate to do it, but I want to take you back a decade ago. We were talking about when it comes to the NFL a concussion controversy, and then after that, the kneeling controversy. When it came to culture wars, sports, and particularly the NFL, was right at the center of it.

I mean, now Iger's in the hot seat. We're not talking about that with you. But what did you learn during that period? Are there processes that the NFL has developed that are going to shield you when inevitably an issue like this comes up again? No, I don't think there's such a thing as a shield. You know, when you have the popularity and we have 200 million fans, you have a lot of different constituents, right? You have a lot of different people who have different viewpoints. People want a piece of that platform.

We see it every year at the Super Bowl. at some point in time someone's going to raise an issue or try to discover some aspect of our operations. We know the type of transparency. We know the type of platform we're in. We operate at the highest possible standards. We're not perfect, but we strive for that every time. So we do what we believe in. We work with our players. We work with our clubs. We work with our partners. And we try to make sure that we represent them. We represent their viewpoints. And we believe in allowing them to express themselves, recognizing that everyone has a responsibility to be good citizens and be respectful of others of viewpoints. The NFL certainly plays a big role in American culture, but it also plays an essential role in the TV ecosystem.

You know, going back 10 years just as John was, sports was considered the core of what was holding the TV bundle together. Now we see overall TV subscriptions declining. You have ESPN talking about going direct to consumer. and you are making more deals, bringing your games and having more digital-only games direct-to-consumer. How do you see the role of the NFL and the TV bundle as you make more of these digital and streaming deals? Yeah, Julie, I think the NFL and its content, because of the popularity of it, I think we've had a vital role in creating new content platforms and new distribution platforms. You go back and you look at broadcast television.

That was a great partnership for us in the 60s, 70s, 80s. As we got in the 80s, cable came along, and we went to ESPN originally and Turner. We helped make those platforms more popular. We had Sunday ticket on satellite, and that was a new platform. Now streaming is coming along. We'll play, I think, a vital role in how that continues to evolve. For us, our philosophy is we need to reach as many fans as possible. We want the ecosystem to support that.

Well, reaching as many fans as possible isn't just about streaming, but it's also about international expansion. Can you give us an update on your international expansion plans? Will there be a new division? And how do you think about international investment amid all of this conversation and controversy around Saudi ownership of some of those golf assets? Well, we believe that we want to share our game with the world. And every time we do, we get an incredible reaction.

We have five games in Europe this year, the most ever. Those five games sold out in a matter of minutes. And so we believe that our future growth and a real important opportunity for us is that international growth. So we're going to continue to invest in that. Our clubs are committed to that. We're committing our content. We're moving games. When we expanded our season, there was a commitment on behalf of the entire NFL to play international games and regular season games.

So I see that continuing. Where it goes as far as the franchise being located over. overseas or a division. Those are things that we're excited about. We're not there yet, but we're going to continue this growth. And I believe it will continue to be, and it will be a global sport. And just a quick follow on that question of foreign potential foreign ownership. What's your perspective on that now?

I know Adam Silver has come out saying he does not want any Saudi ownership of teams. What's your sense of things? Well, right now, we do not have any kind of public ownership of any of our teams. We have private investment. We haven't made the move as other leagues have to any kind of public investment. It's something we'll contemplate at some point in time. But we really like our basic model now where we have private ownership and those owners are in the meeting room. They're part of the league and they're part of our success. Well, thank you so much for joining us here in Sun Valley. I know you have a lot of meetings down at the lodge with all of your

many partners who are here. And thanks for talking to us ahead of some big changes. this fall. NFL commissioner Roger Goddell, Kelly. John, I'm going to send it back over to you. I'm trying to do the math. Are we about six weeks out from pre-s? We're getting close, you know, end of August, early September. Don't ask me about sports calendars.

I'm useless. Two months from opening day, our experts tell me. Thank you. Good to know. Julia Borson, thank you. Of course, our thanks to Commissioner Roger Goodell as well. Speaking of the business of sports on July 25th in Los Angeles, California, CNBC and Boardroom host game plan, a high-powered event bringing the most

influential leaders across the sports landscape, including athletes, owners, investors, and innovators. They'll talk sports and business. Learn more at CNBCEvents.com slash game plan. Now coming up, the FTC is ready for a fight on all fronts. The regulator now taking a look at chat GPT and open AI over the technology's potential impact on consumer privacy. You're right back. Welcome back to Power Lunch. Another tame reading on inflation from the producer price index, sending stocks higher, and bond yields low. Rick Santelli joins us from Chicago with more. Rick. Hey, John. Yes, it was a big day, but it's really been a big week. If you consider where we were on Jobs Friday, well, let's look at a two-year note yield starting on the 6th of July. We're hovering at 511, the intraday high, 511. You see where we're at now, 461. And one of the main reasons for that outside of the notion that the Fed may be done.

is that it failed to close above on this chart. You see that big high there? Well, that high in early March was 507. Okay? And the reason that's such a key level, let's open the chart up, is because it was rejected. The day we traded up to 511 intraday, we settled below 507.

Remember family feud? It was technically rejected. And that's one of the main reasons the rest of the curve has been more. moving lower and percentages for the set meaning are well below their 28 to 30% they were hovering at just several days ago. And if you look at the 2's 10 spread, this is since July 6th as well, it has basically moved 20 basis points in favor of the spread tightening up, meaning 2's and 10s are 20 basis points closer. That's significant and it happened in six sessions. Finally, if you look at the big chart of twos to tens, we have a double bottom there at 108.

Just because it's a spread doesn't mean they're not looking at the technicals. It's worked like a champ. And finally, the dollar index. We all know when interest rates go down, that's a huge negative for the currency of that country. Well, there you go. In living chart color, it's at the lowest levels, potentially on its close, in 15 months. Wow. Kelly, back to you.

Rick, thank you. We appreciate it. Rick Santelli. Kessa Brewer now for the CNBC News Update. Katessa? Kelly, President Biden has labeled Senator Tommy Tuberville irresponsible for objecting to hundreds of military nominations. The Republican senator blocked the appointments to protest the Defense Department's reproductive health care policy.

It provides paid time off and travel expenses to service members seeking abortions. The senator's actions disrupt what is typically a routine confirmation and affects more than 200 senior military officers. Tuberville told NBC News today he'd consider ending the holds, but only if the Senate agrees to put that health care policy to a vote and agrees to rescind it if it fails in the Senate. The Biden administration is urging Pfizer, Moderna, and Novavax to price their updated COVID vaccines at a reasonable rate. The companies are set to release the shots this fall, and the government is planning to launch a $1 billion bridge access program that helps distribute vaccines to people who don't have insurance. We don't know what the manufacturers plan to do on pricing just yet. About 100 million Americans are sweltering under the current heat wave.

Forecasters expect temperatures to shatter records throughout the southwest, with conditions expected to get worse over the weekend, especially in Arizona, where temperatures regularly have topped 110 degrees over the last two weeks. Kelly, John, as you know, it's not that 110 is that hot for Arizona. They see that almost every summer. What's unusual about this is that long stretch of uninterrupted heat. Yeah, it's brutal. It's like their winter.

You can't go outside. I've experienced it. It's not fun. Contessa, thank you. Sure. Ahead on Power Lunch, we'll hear from the CNBC Suite. Delta CEO at Bastion saying premium demand is paying off. Pepsi's CFO speaking out after raising full year guidance.

The CEO joining Swak on the street tomorrow. And Exxon CEO, Darren Woods, announcing a nearly $5 billion acquisition. All those and more. three-stock lunch. Welcome back in time for today's three-stock lunch. We're taking a look at stocks with the top news of the day, and we'll start with ExxonMobil, announcing earlier on they'll buy Denberry in an all-stock transaction to get access to the largest carbon dioxide pipeline network in the U.S. The stock is still down 6% for the year. Here's what CEO Darren Woods had to say on Squawk Box about the changes his company is facing. The challenge that we have in this is we're

The industry as a whole, frankly, society as a whole, is working to establish a brand new business which is the carbon reduction business, and there has to be incentives in place to do that. That has been lacking. The IRA has provided some additional incentives, which gives this, catalyzes the opportunity to go in and make this acquisition and do it with a return. So it's an important part to get it going, but I would say we as an industry, and I think society more broadly, have to move from what I would call our economy. government subsidized investments to market forces, market-driven investments. And so I think the world's going to achieve its objectives to reduce emissions. We've got to move to a point where the market will pay to reduce those emissions.

Are investors on board with that? Here with our trades today is Jerry Castellini. He is president and chief investment officer at CastleArk. Good to see you. Jerry. Are you a buyer of Exxon? I'm very much fun. In fact, the weakness this year has been a welcome opportunity.

the stock has been doing quite well. And this is the time now where, as you see this acquisition, what he isn't going into is how creative it is and how cash flow positive this will be to the company. And yet it gives them another monopoly. Exxon loves them. Now they monopolize CO2 transportation right around the markets that they are going to be able to address as a profitable business. So it's another niche that Exxon's in and it actually sits behind these other massive. projects that are going to drive earnings and cash flow for the next five years better than any large oil company. And frankly, with a risk-adjusted balance sheet, I don't see anything touches it. Huh. Well, next up, Pepsi shares slightly higher today after the beverage giant beats

earnings estimates for the second quarter and raises its full year outlook. But the company's volume did fall as a result of higher prices. Here's what CFO Hugh Johnson had to say about it. Keep in mind, commodities for us right now, we don't think they're actually going to be going down in price. We think the rate of inflation is going to be reducing, but we don't see the basket of commodities going negative anytime soon. So we're going to continue to need to take pricing, just probably not at the levels we've seen in the recent past. And that's why we're doing more of this pivot to productivity, to drive margins through productivity. And we've been pretty successful at it. Jerry, should this stock be the choice of a new generation of investors?

You know, this has been the best in class of all the packaged food and consumer-related products companies. Twenty-three times earnings is not probably pricing in anything more than a recession, though. I would have to say this is one of the best defensive plays you can own, but it's just executed so well in face of declining volumes in most of their geographies. I just don't think if they're acknowledging that there's more headwinds on pricing, and more cost issues, that they're going to be able to sustain that valuation or improve it. And I would keep it in my hold in the event of a recession type of box.

They have taken an incredible amount of price, but the kind of bull case would be that consumers have really taken and accepted that kind of price the last couple of years. Jerry, all right, let's move on to Delta. Speaking of strength, posting record revenue earnings for the second quarter highest ever, hiking annual forecasts on the travel boom. The stock is up 45% in the last three months. And CEO at Bastion said he sees the momentum continuing from here. Take a quick listen.

I think it's going to be more of the same. I think the international business is going to continue, what we can tell, stay really strong. It's going to be a long summer to Europe. We're going to be flying the summer schedule longer and hotter than anything we've ever flown. So September, October, great times to go to Europe. I think the corporate demand for travel is going to start to pick up a bit more. We're here now from corporate travel managers. as offices are starting to return back their employees.

Companies are starting to mandate. They get back to the office. That's the real driver. Do you think people should stick with Delta, Jerry? Yeah, so this is a comment. Ironically, three names that are all dominant in their industries all have news today. And in a lot of ways, kind of summarize the kind of stocks that I think people should be focused on. You can buy the dominant airline in the world at seven times.

earnings, you can buy the greatest oil company at nine or ten times. And Pepsi deserves this multiple, and I don't disagree with it, but it's kind of rich. What's interesting about Delta in that mix is the fact that they can't see the end of the runway, so to speak, on demand for overseas and domestic travel. And they're the best in the business. They would know. They would give you reason to pause if there were one. And so far they've thrown massive price increases at this universe. of buyers and travelers and people aren't flinching. And we are up against a capacity constraint. And if you noted the way the stock traded this morning, they came out and said, you know, we won't be able to get to all of the potential flyers that are out there because we're

going to hit a max capacity level. That's a great thing for an investor to have on his, at his back, because now the investor gets to say, if things slow down again, they'll go back and claim the market they never had. And I would tell you, at the earnings levels that they're now seeing. They're at all-time high margins. They've wrung out all the inefficiencies that the big pandemic caused. And I would, again, I would give them a little more runway. All right, to use a phrase. Jerry, thanks so much for all your time today. We appreciate it. Still to come shares of Viassat having their worst day ever down 29% at their now functioned with one of its satellites. Details after the break. Welcome back. California-based satellite firm Vyazat,

disclosing its recently launched comm satellite suffering a major malfunction. The stock having its worst day ever, it's the NBC space reporter Michael Sheets, here to discuss. Michael, I mean, I understand malfunctions. 29% seems like a big drop. Why? Well, this was the Viasat 3 satellite that was supposed to provide broadband service to all of North and South America. It was supposed to be a part of three satellites that gave the company new global broadband coverage. Now, the reflector on the satellite is malfunctioning, which means they

might not be able to provide that service. My understanding is that Northrop Grumman made that reflector, as well as the boom that's extending from it, and they're investigating alongside via sat to see if they can recover it, or whether this is going to be a very hefty insurance claim and a big setback to the company's plans. Yeah, so what's the option here? You just launch another satellite, or that's not cheap, but it's cheaper than it used to be. It is cheaper than it used to be. But when we're talking about satellites of this class, we're talking about some of the largest ever built and constructed. So this would be a great undertaking to replace. We're talking about eight years in development just to get this one up.

They have another two that are close to being finished. What they could choose to do is reallocate some of that asset, maybe sacrificed some of their coverage elsewhere in the world. But for now, they're going to have to do without until they can come up with a solution. Now, why are we still here, right, with satellite launches where there's one, it's big, it's risky, and it's just up there. It seems like there have been so many little launches lately that we'd have like a cluster of 200 satellites up there doing what this does that are sort of fault tolerant. Is that what's coming, or do we have years to come of this same hope it works scenario? John, that's a great question. And the simple bottom line is that it's about the demand for data and broadband.

There's so much demand right now that there's a really broadening and scope of how people provide that data from space. This is more of the traditional route that we're seeing with Viasat. They've been in business and they IPOed back in 1996. Today's their single worst stock drop since that day. And this is all really about the more traditional player trying to beef up their existing capabilities. but there's others like SpaceX's Starlink, Amazon's Project Kuiper, that are taking a different approach to providing that service and targeting different customers going after directly more on the consumer side of the business

as opposed to larger enterprise. I mean, it's amazing. I'm taking a look at the chart. You know, 2020, that drop, and then recently in summer of 22, it dipped below the levels where it dipped today. But given everything that's been happening with space launches and satellite technology, investors, certainly investors who are long would have expected different. Michael Sheets, thank you. Yeah, we appreciate it.

Coming up, Elon Musk says FTC overreach has gone absurdly far beyond the legal mandate granted by Congress. We have those details in today's tech check. We'll be right back on Power Lunch. Welcome back. It's a super busy day for the FTC. The agency

first of all filing its appeal to pause the Microsoft Act Division deal after its court loss. It's also reportedly opening investigation into opening AI over consumer harm. While this morning, Chair Lena Khan appeared before the House Judiciary Committee, Steve Kovac is here to break it all down for us, and there's much to break down today in tech. Yeah, I'm going to do it in 90 seconds for check it out. So Kahn spent hours under questioning today in the Republican-led House Judiciary Committee, question on everything from the FTC's investigation

into Twitter's alleged violations of a privacy settlement with the agency and Kahn's losing record in all those antitrust cases in court. Also coming out today, Washington Post and others reporting the FTC as open an investigation into open AI. That's the company behind CHAT GPT. Now, while Khan didn't comment directly on an open investigation, she did talk about her broad concerns the harm AI can cause. Here's what she said. There are no checks on what type of data is being inserted into these companies. And we've heard about reports where people's sensitive information is showing up in response to an inquiry from somebody else. We've heard about, you know, libel, defamatory statements, flatly untrue things

that are emerging. That's the type of fraud and deception that we're concerned about. Now finally, here's the big one, the FTC last night, appealing its loss in the case against Microsoft's $69 billion acquisition of Activision this week, asking the Ninth Circuit to keep the temporary block on the deal in place. The appeal complicates Microsoft's timeline to close the Activision deal by the July 18th. deadline. Microsoft has options, though, including renegotiating with Activision to extend the deadline, or can just walk away guys and pay that $3 billion break fee. Sure seems, Steve, like the FTC kind of works better when you fear it. And we're in a paper tiger situation now where people

will accuse Lena Con and the FTC of taking ideological stands and then trying to construct a legal basis afterward, right? And so our company is really going to be afraid. She was counting on that on companies trying not to do these deals because they were afraid of what the FTC would do. And boy, was she grilled about that today. And then my question becomes, look, if she keeps racking up these losses, let's say the appeal does not work out in their favor again, what happens to company? When do companies start pivoting? We hear about this chilling effect on mergers. When do we start hearing the opposite? Okay, she's not holding up these cases in court. Therefore, let's go ahead. It's party time again, merger mania. I don't know. It still takes time. It's still slow

things down. You know, you have to go through a process that might still have an uncertain. Look at what Microsoft's going through. They give themselves 18 months to close this deal, knowing they were going to be heavily scrutinized, and it is going right down to the wire. Absolutely. Less than a week left to go. Yeah, there's more attempted deals that might, that timeline might get stretched even more. Steve, thanks. Thanks. All right, we have just enough time left for a nightcap. How about a bubbling box office? It's closing time on the other side of this brink. Welcome back. Just two minutes left. in the show and two more stories you need to know.

First, Ripple's XRP coin surging after getting a huge win against the SEC. A judge in the Southern District of New York ruled that it's not necessarily a security on its face, with many saying the outcome will no doubt have direct and indirect implications for crypto regulation here in the U.S. We've been watching this case for years to set a precedent. The fact that they said it could potentially be a token is a huge deal. You're seeing all sorts of other, I guess we can call them tokens take off. A lot of confusion, excuse me, still about this ruling where they seem to put institutional

investors in one class retail in another. That said, look at Bitcoin today, which is now up to over 31,000, a 3% rally ether. Look at Solana. I mean, this is really a curveball that will support the crypto industry for a little while longer, it seems. Meanwhile, the next week or so could be the most important period for the box office in its, well, entire history. It's been hard for the industry to regain its footing after COVID.

Most big name movies are underperforming, or at least not running away with sales. Jones, Transformers, all case and point. But we have three huge names on deck now. Mission Impossible, Oppenheimer, and Barbie. All within a week. Mission Impossible, a $16 million opening day expected could be a strong weekend. Then next week, Barbie and Oppenheimer have huge momentum behind them, thanks to these viral TikTok memes encouraging people to see the Barbenheimer double feature.

Stars are jumping on the trend, too. Margot Robbie and Tom Cruise showing each other's support by watching each other's movie for these blockbusters. That's nice. but Tom Cruz. I agree with you, by the way. If I could only pick one of the three. It was the movie of the pandemic that made people realize.

We need to watch in theaters again. And like good old fashion movies. My kids are excited about MI7. If I had to pick one of the three, it would also be that one. And Kernan was talking about it this morning. Maybe Tom Cruise will save America or at least save the box office. Putting his body at risk. Thanks for watching Power Lunch.

Closing bell starts right now. Thank you.