3 Big Scoops

Hello Folks,

Happy Thursday!!

Here’s what’s on the menu for today:

👉 Disney’s earnings

👉 China’s economic crisis and

👉 MicroStrategy’s Bitcoin bet

Disney Spikes Post Q4 Results

Shares of Disney are up over 3% in pre-market trading today following its fiscal Q4 (ended in September) of 2023 results.

It reported:

• Revenue of $21.24 billion vs. estimates of $21.33 billion

• Earnings per share of $0.82 vs. estimates of $0.70

• Total Disney+ subscribers stand at 150.2 million vs. estimates of 148.15 million

The House of Mouse has underperformed the broader markets in the past decade, and shares of the company are currently trading 58% below all-time highs.

But valued at a market cap of over $150 billion, Disney is among the most recognizable brands in the world and enjoys significant pricing power.

In recent years, Disney has been wrestling with a high cost base and elevated inflation, driving profit margins lower. It is also investing heavily in the online streaming business, which is a massive drain on cash flows.

Disney now aims to manage this cost base aggressively and expects to save $7.5 billion, an increase of $2.5 billion over its previous guidance.

Here are the key takeaways from Disney’s Q4 earnings:

👉 Disney is open to selling its TV assets

👉 It added over seven million subscribers on Disney+

👉It is the first time since 2018 that Disney has missed revenue estimates in two consecutive quarters

Microsoft Stock Trades at Record Highs

The ongoing year has been unbelievable for Microsoft. Shares of the tech company have surged over 60% due to its stellar financials and early mover advantage in AI. Further, it just closed the big-ticket acquisition of Activision Blizzard.

Valued at $2.7 trillion by market cap, Microsoft is among the largest companies globally. It has invested $30 billion in OpenAI’s ChatGPT, now worth over $90 billion.

Further, ChatGPT has hit 100 million weekly users and recently announced a slew of updates garnering widespread interest.

Priced at 35x forward earnings, MSFT stock is quite expensive. But it leads several growth markets such as AI, gaming, public cloud, and enterprise software.

Analysts remain bullish and expect shares to surge over 20% in the next 12 months. It is forecast to grow adjusted earnings by 14.3% annually in the next five years.

China’s Economy Continues to Struggle

China’s consumer prices fell 0.2% year over year in October, higher than the 0.1% decline forecast by the National Bureau of Statistics.

It’s quite evident that China is in a deflationary environment as domestic demand remains sluggish. Moreover, China's ongoing real estate crisis is weighing heavily on consumer sentiment.

Two of China’s largest real estate developers are struggling to make regular interest payments. This sector accounts for 30% of the country’s economy.

MicroStrategy Breaks the Bank for Bitcoin

Valued at $6.68 billion by market cap, MicroStrategy provides enterprise analytics software and services. But it also invests heavily in Bitcoin, and the performance of MSTR stock is tied to BTC prices.

In June 2023, MicroStrategy purchased 12,333 BTC at an average price of $29,668.

To fund the purchase, it issued new stock, which diluted existing shareholder wealth.

Generally, companies raise equity capital to fuel their expansion plans. Is MicroStrategy a Bitcoin-holding company now?

Headlines You Can’t Miss!

Sony’s operating profits fall 29% in Q3

SoftBank’s losses total $6 billion

Snap layoffs members from its product team

Polestar cuts revenue guidance

Will FTX get acquired?

Chart of the Day

Temporary jobs are a canary in the coal mine where the labor market is concerned. When companies sense growth, they boost their temp staff as a first step, and when they sense a slowdown, they tend to slash those job costs first.

That’s what we’ve seen playing out recently in the key US monthly jobs data, and it’s a worrying sign. See, when interest rates rise sharply, as they’ve done in the past year, the effects ripple across the economy in waves, and the employment sector is typically the last to feel the brunt.

And as you can see in the chart, dips in temp jobs (red arrows) often happen just ahead of a recession (gray-shaded areas).

That’s because, as job numbers start to tumble, wallets snap shut, and the decline in consumer spending hits company profits, nudging firms to tighten belts and hand out more pink slips, fuelling a negative cycle.

DISCLAIMER: None of this is financial advice. This newsletter is strictly educational and is not investment advice or a solicitation to buy or sell assets or make financial decisions. Please be careful and do your own research.