Hulu and Woo Hoo?

Comcast is going its separate way from Hulu in a long-anticipated deal to sell Comcast's 33% stake in Hulu to Disney [The Daily Peel... ]() October 17, 2023 | Peel #565 Silver banana goes to... [CapLinked. ]( In this issue of the Peel: - According to preliminary data from the University of Michigan’s October Consumer Sentiment survey, the vibes are off, and consumers are becoming more pessimistic about the economy. - Lululemon Athletica and Charles Schwab had a ripe day, whereas Vista Outdoor and Rite Aid fell into the red following certain unraveling events. - Comcast is going its separate way from Hulu in a long-anticipated deal to sell Comcast's 33% stake in Hulu to Disney at a minimum valuation of $27.5bn. Market Snapshot Happy Tuesday, apes. Hope you weren’t feeling the Monday blues yesterday… we could taco ‘bout it over some Chipotle since it is Taco Tuesday. Anyways, you (and your portfolios) probably felt better after yesterday’s market performance. Equity markets had an absolute day for themselves and printed nothing but green. The Nasdaq rose 1.2%, while the S&P grew by 1.06%, reversing most of the losses from the day before. All 11 sectors posted positive gains, with Consumer Discretionary leading the way at a 1.65% return. Seems like the recent earnings outperformance has gotten investors upbeat about earnings szn. On the other hand, treasury yields spiked as investors sold off on fixed income. The 10-year steadily increased until it settled just under 4.8%, while the 2-year traded up and down before ultimately ending at 5.1%. The dollar followed a similar trajectory, closing around 106.39 via the DXY. Let’s get into it. Forget Free Drinks. CapLinked is Hooking Clients Up With Supercars. [image]( You know what’s better than going to happy hour with a VDR sales guy? Zipping around in a supercar that you didn’t have to pay for. And CapLinked is making it happen. Anyone who opens an Enterprise-level Data Room before October 31st also unlocks a supercar of their choice for the weekend.* CapLinked knows your time is valuable — and they’re not here to waste it with superficial meetings. Instead, they’ve created a VDR that is engineered for speed with features like... - Cutting-edge activity tracking for personalized, hyper-efficient follow-ups - Advanced Q&A functionality that automates due diligence - Simple permissioning tools to expedite decision-makers access to key info - Turbocharged upload speeds & 99.9% Uptime SLA for seamless deal management Ready to trade in mundane drinks meetings for a high-speed thrill? [Open an Enterprise Plan before October 31 to claim your supercar.]( *Terms and conditions apply. [Contact CapLinked for details.](mailto:sales@caplinked.com) Banana Bits - Snap is on the up and up as CEO Evan Spiegel seeks to get employees (and investors) [excited again.]() - The most obvious headline of the day award goes to [the WSJ]( in telling us the housing market has been slow this year… thanks, guys! - The devil is in the details, and so is all the juicy gossip we know you’re dying to hear about when [FTX figured out it was all over.]() Macro Monkey Says Run This Economy Pop quiz: when Rihanna pondered in a 2009 hit song, “Only thing that's on my mind (What's up?) is who's gon' run this town tonight”, what was the answer? That’s right: We are, and we can thank Jay-Z for the answer. Little did these two musical billionaires know at the time, but in those lyrics, they were actually describing the post-pandemic relationship between the U.S. economy and its consumers. Maybe that’s where they made those extra few billion? Anyway, it’s unequivocally true—consumers drive the U.S. economy and accounted for 68.1% of GDP in the second quarter of 2023. From 1947 through Q2, that number averaged around 63.3% and only moved higher in the meantime, meaning consumers are only getting more important. "... consumers drive the U.S. economy and accounted for 68.1% of GDP ..." So, despite the fact that surveys are about as useless in forecasting as those Alcohol Awareness classes are to college students, let’s check in on how the consumer is feeling. Spoiler alert: it’s not good. According to preliminary data from the University of Michigan’s October Consumer Sentiment survey, the vibes are off. Economists had expected a reading of 67.2 following September’s official 68.1 figure (higher is better). So, when UMich dropped a 63 bomb on us, we were immediately reminded that it was definitely spooky season already. [image] [Source]() In Michigan’s sentiment readings, there are basically two factors to consider throughout the 50-question survey: how the economy is doing now and how it’s expected to do over the next year. Both were down compared to September, but the real scare came in the jump in inflation expectations. After expecting 3.2% annual inflation in September, that figure leaped to 3.8% this month, a 19% monthly increase in inflation expectations. Damn. Inflation is one of those things where expectations become a reality—expecting higher prices essentially equates to manifesting higher prices, to use Gen Z-certified lingo. But, although this is just a survey, hard data around consumer spending has recently confirmed this trend as well. In recent weeks, we’ve learned that: "Inflation is one of those things where expectations become a reality ..." - Total card spending has declined 0.2% seasonally adjusted, [per BofA data]( - Excess savings built during the pandemic have been [drawn down by $1.9tn](=) - Student loan repayments have come back online, with an [average of $38k owed per borrower](=) - Interest rates on (everything) mortgages and [credit cards]() have skyrocketed - Child care and elder care costs have [ballooned]( as well So, we can see that the continued strong spending we’ve seen in the post-pandemic era is showing signs of relief. Not to mention, wage growth has slowed in 2023 as well, thanks to a slow but real normalization of the labor market, but real growth is still positive over inflation. Consumers absolutely run the economy, just like Rihanna and Jay-Z deduced in their 2009 absolute banger. But, the consumer spending picture—and their feelings about spending—aren’t moving in the right direction. Maybe those two could lend us all a few million and help save the economy like Taylor Swift is attempting to do. What's Ripe Lululemon Athletica (LULU) ↑ 10.31% ↑ - Just like LeBron James coming right out of high school in 2003, Lululemon is officially getting called up to the big leagues. The stock is joining the S&P 500. - The athleisure brand with more Amazon knockoffs than damn Rolex has exploded to success in recent years, trading at a market cap of ~$50bn. Given its success, profitability, cap structure, and a few other factors, Standard & Poor’s has added the name to the world’s most-watched index. - And that’s about as good of news for the stock as seeing that Applebee’s Dollaritas are back is for you. Now, index providers have to buy up shares in order to maintain their ability to match and/or track the S&P 500 index. - Lulu will be replacing Activision Blizzard in the index now that the game maker is owned by Microsoft, and if that’s not making lemons out of lemonade, I don’t know what is. Charles Schwab (SCHW) ↑ 4.66% ↑ - Unlike J.P. Morgan of JPMorgan or Morgan or Stanley of Morgan Stanley, the man behind Charles Schwab is actually still alive. His name? Yup, you guessed it… - Charles Schwab announced earnings Monday that markets took too like a moth to a flame. Earnings of $0.77/sh beat estimates for $0.74, but the report was far from an A+... just like your last stats test. - Revenue fell 16% annually while the firm’s base of bank deposits continues to fall as well. Even with Monday’s gains, the stock remains about -34.44% year to date, largely still thanks to lingering SVB-PTSD and other nonsense. - Whether the firm can turn things around quickly is anyone’s guess, but shares appear to be trading higher thanks to quarterly figures coming in less garbage than expected. Remember, apes, no one cares about what happened, only how enticing the story around what will happen is. What's Rotten Vista Outdoor (VSTO) ↓ 23.72% ↓ - Talk about shooting yourself in the foot on this one. Shares in Vista Outdoor, a large supplier of 41 separate outdoor, sporting, and shooting brands, announced plans to sell itself alongside a down-bad update to 2024 sales forecasts. - Vista announced that it is now selling its Sporting Products brand portfolio and business line to Czechoslovak Group (CSG) for $1.9bn. Despite that being higher than the firm’s market cap following yesterday’s move, investors are pissed. - And that’s largely because the firm announced weaker guidance for next year at the same time. Sales expectations are down dramatically, even for the Outdoor Products business line that legacy Vista will maintain. The deal isn’t expected to be completed until next year, however, so stay tuned for any changes or interruptions from Lina Khan. Rite Aid (RAD) ↓ 16.81% ↓ - Does anybody out there know how to play the bugle? Rite Aid and its shareholders need some taps to play ASAP. - The major U.S. drug store announced Friday that they are officially filing Chapter 11 bankruptcy. Fortunately, however, Chapter 11 is the good bankruptcy that essentially just allows a firm to restructure its debt obligations rather than close its doors for good. - Obviously, shares still tanked because despite being the good kind of bankruptcy, investors tend to prefer no bankruptcy at all. Another bold take from yours truly at The Daily Peel! Thought Banana On the Hu-Loose It’s the biggest threesome that you’ve ever heard of. Disney, Comcast, and Hulu have all been in bed together for just about the entire life of the streaming service that most of us forget about when there’s no new episode of Dave coming out. Now, that bed is going to have one less person in it. Comcast is going its separate way from the two firms in a long-anticipated deal that—given their investments in Peacock—we’d bet they’ve been looking for a way out of for quite a while. As early as November 1st, an option in the joint ownership contract between Comcast and Disney allows either party to trigger a sale of Comcast’s minority stake in Hulu to Disney. Based on recent actions by both firms, the sale seems like the obvious choice. CNBC reported late last week that both firms had brought in valuation specialists to figure out how much cash Disney is gonna have to shell out to take full ownership of the streaming service. "... the minimum valuation Hulu can sell for is a cold $27.5bn." According to addendums to the original deal signed in 2019, the minimum valuation Hulu can sell for is a cold $27.5bn. But that doesn’t mean Comcast will get all that cash. The cable and broadband giant owns a 33% stake, meaning their minimum cashout will be a cool $9.167bn. Still not bad. But Comcast CEO Brian Roberts described his thoughts on Hulu as “way more valuable today.” I'm glad to see our Chief Executives are doing their diligence and being as specific as possible in terms of dollar amounts, but Disney will certainly be pulling on the other end of the argument to try and get Hulu as cheaply as possible. "... Disney will certainly be pulling on the other end of the argument to try and get Hulu as cheaply as possible." It’s one of those funny instances where the company that will actually hold the assets is trying to convince us that the asset in question is actually trash and not worth much money. On the other hand, Comcast is making itself look equally foolish by hyping up an asset it wants to get rid of. That’s the kind of corporate comedy we love to see. Still, JPMorgan and Morgan Stanley are set to be the real winners here as the two banks running the sale. Essentially, those two will begin “independently” working to come to their respective valuations of Hulu. If their figures are within 10% of each other, the company will take the average of the two values, and the sale will be executed at that price. The big question: How much will Comcast sell Hulu to Disney for? What will Disney do with its streaming empire once it has full control of the domain? Banana Brain Teaser Yesterday — A carpenter was in a terrible hurry. He had to work as quickly as possible to cut a very heavy 10-foot plank into ten equal sections. If it takes 1 minute per cut, how long will it take him to get the ten equal pieces? Answer 9 minutes. It only takes nine cuts to get ten equal sections. Today — A man is biking on a 40-mile trip. He travels the first half of the trip at a speed of 15 miles per hour. If he wants his average speed to be 20 miles per hour, at what speed should he travel during the second half? Shoot us your guesses at vyomesh@wallstreetoasis.com Wise Investor Says “The best time to buy a house is always five years ago” — Ray Brown How would you rate today’s Peel? [All the bananas]() [Decent]() [Rotten AF](=) Happy Investing, Patrick & The Daily Peel Team Was this email forwarded to you? [Be smart like your friend.](=) [ADVERTISE](=) // [WSO ALPHA]() // [COURSES]( // [LEGAL]( Don't want The Daily Peel? [Unsubscribe here](. Click to [Unsubscribe]( from ALL WSO content IB Oasis Corp. 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