🥊 Disney's Desperate W

Activist investor Nelson Peltz lost the war against Disney. April 4, 2024 | Peel #681 In this issue of the Peel: - ❓How tf are job additions rising alongside the unemployment rate? - 😡 Spotify is getting more expensive… inflation has gone too far… - 🚩 Activist investor Nelson Peltz lost the war against Disney. Market Snapshot 📸 Banana Bits 🍌 - Leading into Friday’s highly anticipated release, the U.S. job market might be [even stronger than we thought](=) - VCs are still wallowing in the aftermath of their digital asset disaster, making them [slow to get on board with Generative AI](=) - Powell continues to want you to be [poor and jobless](=) - Swing state data in the U.S. is pulling in one [clear direction so far](=) Smart Resumes, Smarter Careers = Elevate your first impression in the finance world with WSO Academy's smart resume services. Harness the power of AI to craft resumes that don't just list your experiences but highlight your potential. Our AI-driven approach analyzes and optimizes every detail, ensuring your resume speaks directly to finance industry leaders. Combine this with our AI-enhanced LinkedIn profile reviews, and you're set for a smarter, more strategic career path. Step into the era of intelligent career tools with WSO Academy. [Click here to join the WSO Academy Waitlist. Limited slots only.](=) Macro Monkey Says 🐒 Counting Is Hard Reading is boring, thinking is a force, and most of all, counting is hard. Just ask the U.S. government. For months, we’ve wondered how tf it could be possible for the U.S. to rack up job additions like the boys are returning from WWII again while the unemployment rate is somehow ticking higher. Now, I think we have our answer and a whole lot more to come with it. Let’s get technical for a second and, as always, let’s get into it, The Numbers The math ain’t mathin’, as the kids would say, for the U.S. labor market in recent months. This comes with a BIG caveat that the nation’s employment participation rate has remained largely the same throughout all of 2023 and into 2024. So, what the hell is going on? According to the WSJ, immigration is what’s going on. Millions of individuals illegally migrating into the U.S. in the same time period could be accounted for in one part of the Employment Situation Report but potentially not in others. The BLS counts job additions and unemployment in different surveys. These are the Household and Establishment surveys, with the Household survey going out to individuals to self-report their employment status. Then, the Establishment survey goes out to non-farm businesses. And you don’t have to exactly be a scholar to understand how this issue might be created… [Source](=) The issue here is the estimate of total employment, from which the unemployment rate is partially derived. According to the Census, the U.S. population grew 0.5% in 2023, but per the CBO, it grew 0.8%. If the population is higher than the BLS expects, then the unemployment rate should be lower alongside all these enormous job additions. Bang. Once famous for saying, “Give us your tired, your poor, your huddled masses,” the U.S. now struggles to know exactly how tired, poor, or huddled those masses are. Who Cares? Yesterday, we began getting the previews for Friday’s jobs report via the monthly ADP private payroll report. According to ADP, the U.S. added 184k jobs in March, much higher than the 150k expected. Why they don’t put that in a chart format is beyond my comprehension, but this report hints at a continuation of strong growth in the U.S. labor market. And, if job growth really is that strong, that means Powell has little to worry about going forward when it comes to rate cuts. We just found out that GDP growth in Q4 was stronger than expected, inflation continues to retreat via the March PCE data, and the final piece of the puzzle, strong job growth, confirms a solid macro underpinning. But the thing is—you’re supposed to only cut rates when the economy is weak. Cutting into growth is exactly what causes inflation and, whenever you’re cutting rates, you’re removing firepower you might need the next time growth slows or contracts. The Takeaway? [Source](=) Markets are still pricing for just one rate cut in the first half of 2024, but I’d like to introduce a new phrase to JPow’s lexicon. It’s an original—I just came up with it, and someone needs to tell him that “if it ain’t broke, don’t fix it.” But, that’s just on the real economy side of things. Obviously, all of our purpose’s in life are to support the shareholder and create as much shareholder value as possible. A steepening yield curve (which we’ll discuss tomorrow) has something else to say about that… So, even more than usual, stay tuned. What's Ripe 🤩 Spotify (SPOT) 📈8.2% - Now inflation has gone too far—it’s coming for your music. Reports emerged yesterday that Spotify plans to raise its prices. - By the end of the month, subscriptions will increase by $1-$2/month. Plus, Spotify is adding a new “basic” $11/month plan, which is the same cost as Premium is now. - The firm claims this will help cover the cost of audiobooks, so it’s exciting stuff. This should help cover legal and “tax” costs imposed by King Apple as well. Paramount Global (PARA) 📈15.0% - Didn’t someone else already win the streaming wars? What are we doing here? Oh that’s right, that must be why Paramount owners are so close to selling. - Skydance Media and Shari Redstone, heiress to Paramount Global and controlling shareholder, are now in exclusive sale talks. - Shares popped but remain well below the 52-week high of $24/sh. Deal talks are “tentative” right now, but I think we can smell what they’re stepping in. What's Rotten 🤮 Ulta Beauty (ULTA) 📉15.3% - Just like their (ostensibly former) customers, Ulta Beauty shares were uglier than ever on Wednesday as the firm’s CEO voiced demand concerns. - A classic mistake of being too honest, CEO Dave Kimbell expressed that a previously expected slowdown in demand is happening a lot sooner. - Consumers in the U.S. have pulled back on discretionary items in recent months, and apparently, makeup is at the top of that list for some. Intel (INTC) 📉8.2% - Just way too much honesty out of Wall Street today, with Intel falling victim to the same trap. Their foundry business isn’t as hot as expected. - Yesterday, Intel dropped their long-awaited 8-K accompanying 2023’s 10-K, giving investors their first glimpse at the firm’s latest chip production. - And then, everyone threw up. The $18bn in sales was expected, but a $7bn operating loss in this segment is even uglier than Ulta’s (former) customers. = Thought Banana 🤔 Still (Don’t) Got it We all know Disney movies have fallen off a cliff in recent years. But 81-year-old Nelson Peltz was finally the first guy to have the guts to do something about it. The activist investor that founded and still runs one of Wall Street’s highest-testosterone firms, Trian Partners, recently waged a war on CEO Bob Iger’s leadership and pretty much every decision the company has made in recent years. But he lost. And badly. What Happened? In the past 5 years, Disney’s stock has achieved a meteoric return of… 3.46%. [Source](=) An economic shutdown along with the explosion in the value of IP via streaming, the rise of sports betting, and so many more hot trends in that time have been right within Disney’s wheelhouse. But, the company isn’t getting much credit for it. And that’s largely because until the last 2-3 years or so, Disney has been more or less out of the game. They waited way too long to launch Disney+, seemingly didn’t want to get in on gambling, and had a worse succession plan than Logan Roy. So, Peltz decided enough was enough and that his firm had to step in to help out one of America’s most iconic brands. And… he was rejected… by a lot. [Source]( For more than the past year, Peltz has been pushing for a seat on Disney’s board to affect the changes he sought. 75% of Disney’s retail investor base voted against Peltz, with 94% total voting to keep Iger and 63% voting to hold the seat Peltz was seeking. The proxy battle turned out to be one of the most expensive in the history of Wall Street, racking up a combined ~$70mn in costs on both sides. Some of the changes Peltz sought to make included: - Making Disney+ more like Netflix in terms of content production, - Revamping the company’s creative unit, - ESPN acting like the powerful brand that it is, and - Figuring out a non-horrendous succession plan. But, even without winning board seats, it’s clear the pressure enacted by Peltz had an effect anyway. Disney has since made changes to their movie production studio unit, leaned into gambling with the recent launch of ESPN Bet, and is working on a succession plan that isn’t just Iger picking another guy named Bob. The Takeaway? The message from Peltz isn’t limited to just Disney stock, either. In the post-ZIRP and post-pandemic era, companies can’t afford to make as risky, pie-in-the-sky decisions as they have over the past decade or so. Just like how it’s a stock picker’s market, it’s a project-picker’s market for these high-six-figure earners at larger corporations like Disney. As always, let the best investments win. 💭 The Big Question 💭: Will 81-year-old Peltz finally call it quits after this? If not, what company is next? What kind of effects will this proxy fight have on all of Corporate America? Banana Brain Teaser 💡 Previous 🗓 Set X consists of eight consecutive integers. Set Y consists of all the integers that result from adding 4 to each of the integers in set X and all the integers that result from subtracting 4 from each of the integers in set x. How many more integers are there in set Y than set X? Answer: 8 Today 🕐 Thabo owns exactly 140 books, and each book is either paperback fiction, paperback nonfiction, or hardcover nonfiction. If he owns 20 more paperback nonfiction books than hardcover nonfiction books, and twice as many paperback fiction books as paperback nonfiction books, how many hardcover nonfiction books does Thabo own? Send your guesses to vyomesh@wallstreetoasis.com Wise Investor Says 🤓 “Risk comes from not knowing what you’re doing” — Warren Buffet How Would You Rate Today's Peel? 😁[All the bananas](=) 😐[Meh](=) 😩[Rotten AF](=) Happy Investing, David, Vyom, Jasper & Patrick [ADVERTISE]( // [WSO ALPHA](=) // [ACADEMY]() // [COURSES]() // [LEGAL](=) [Unsubscribe]( IB Oasis Corp. (aka "Wall Street Oasis") 20705 Saint Charles St Saratoga, California 95070 United States (617) 337-3353