BI Weekend: Disney Earnings, Metsera Bidding War, Visa-Mastercard Deal

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1:32low-quality stocks driving this short-term rally. Bloomberg Intelligence. With Scarlett Foo and Paul Sweeney. On Bloomberg Radio, YouTube, and Bloomberg Originals. On today's Bloomberg Intelligence show, we dig inside the big business stories impacting Wall Street and the global markets. Each and every week, we provide in-depth research and data on some of the 2 ,000 companies and 130 industries our analysts cover worldwide. Today, we'll look at how Pfizer won a bidding war against the Danish drugmaker Novo Nordisk for an obesity startup. Plus, we'll break down how Visa and MasterCard reached a deal with retailers after 20 years of litigation.

2:05But first, we begin with earnings from the media and entertainment giant Walt Disney. This week, Disney reported fourth quarter sales that fell short of Wall Street estimates. The company also said expenses from a slate of big budget movies, including a new Avatar picture, will weigh on results for the coming quarter. For more, we were joined by Geetha Ranganathan, Bloomberg Intelligence Senior Media Analyst. We first asked Geetha for her take on Disney's most recent earnings report. It came off as a little bit of a lackluster report. I mean, everything, if you look at the fundamental drivers of the company, which is really the parks business, brings in about 60 percent of profits.

2:37Things seem to be going pretty strong there. We saw a 13 percent jump in operating profit for the fiscal fourth quarter. Again, the guidance for, you know, 2026 seems pretty good as well. But really, you know, Disney really has this very, very tough balancing act. So on the one hand, they have the parks business, they have the streaming business, which is doing really well from a profitability standpoint. But to drag it down, you have the linear TV networks and then you have the hit and miss nature of, you know, the Hollywood studio business. So, you know, they have to contend with all of those different moving parts.

3:09And I think that the drag down from the TV networks and the studios is kind of weighing a lot on the narrative. Keith, talk to us about some of their bundling of all their streaming services, particularly that ESPN app that really put a lot of the real valuable sports programming on that ESPN app. How are the early results in terms of subscriber growth? So they didn't give us any hard number there, Paul, in terms of the number of subscribers that they got on the ESPN Ultimate product, which is priced at$29.99 a month. But they did talk about, you know, in general, that the traction has been pretty good.

3:43They talked about the whole bundling strategy because that is where Disney really wins. I mean, if we've seen some of the numbers, you know, from Disney, we know that 40 percent of new subscribers actually take the Disney bundle. And this is really going to be the strategy for them going forward. Right. You get people in with the bundle and that's how you kind of stem churn. You're able to take price increases. So it's really going to be the main driver for earnings growth for them going forward. And that's exactly what they indicated. Paul, I can't remember who said this, but it's so true that the history of media is about bundling and unbundling.

4:16We went through this period where everyone cut the cord and everyone unbundled, and now we're back to bundling again, although it's in these discrete groups where Disney might bundle Disney Plus and ESPN Plus together, and then if you are a T-Mobile subscriber, you might get some other options. But here's my point. That's fine. Is the consumer better off? And my answer is absolutely not. It's too confusing. It's way too confusing. Amazing. Geeta, when it comes to bundling, how much more can they do, though? I mean, I see what you're saying about how it's paying off right now, but I mean, can they continue to innovate on their bundling or have we reached the limits of it?

4:51I don't think we've reached the limits at all, Scarlett. So I think what they're ultimately aiming for with their ESPN product, and they just introduced the streaming product a couple of months ago, I think ultimately they wanted to kind of become the premier sports destination. So ultimately, I wouldn't be surprised if you see a Fox or an NBC or, you know, even maybe an Amazon kind of feeding in all of their apps so that you go to this one-stop shop for, you know, ESPN and you're able to see all different kinds of sports content because you're absolutely right. There's way too much of fragmentation.

5:22It's becoming a great source of friction for, you know, the average consumer. And so I think they're going to seek out a lot more different bundling opportunities. We're already seeing them kind of do something with ESPN Ultimate and Fox One, which is Fox's streaming product that they also just introduced a few months ago. So they're going to look to partner with different media platforms across the ecosystem. And I think that is going to be a source of, you know, a great upside opportunity for them eventually. Is everyone willing to play ball on something like that, Geeta? Or is there someone who's going to say, you know what, you can't get me in here and I own or I have the rights over X number of NFL games?

5:59Actually, that's what we're seeing right now. There is the standoff going on between Disney and YouTube TV. And it's really all, again, it's just a game of chicken here. So when it comes to sports content, I have to say Disney has the upper hand a little bit. So if you just kind of look at sports viewing in the United States, Disney has about 40 % of sports viewing just with marquee rights tied to all major leagues, college football, NFL, NBA, MLB, they have it all.

6:32So I Again, never say never. All right, Keith, I'm reluctant to ask this question, but I feel like I have to. What's the latest on Bob Iger's succession plan? Yeah, this is the big thing that we're all looking at in fiscal 2026. So James Gorman, who's kind of heading up this whole succession planning committee, Paul, has said that, you know, the board will be out with the decision by the end of March. So Bob Iger's contract comes to an end by the end of 2026. So hopefully we do have some kind of clarity on that. Right now, it's really looking like it's going to be internal candidates. I mean, there was some, you know, rumors and buzz about whether they were looking externally, but I think they're going to kind of keep it internal.

7:13Our thanks to Geetha Ranganathan, Bloomberg Intelligence Senior Media Analyst. We move next to the retail space. And with the holiday shopping season now upon us, it is the most important time of the year for these retailers. For more on what we can expect in this sector, I was joined by Mary Ross Gilbert, Bloomberg Intelligence Senior Equity Analyst covering retail. I first asked Mary how the holiday season is shaping up and what companies are saying. If you look at how the holiday shopping is shaping up, I think it looks very positive. So I think we are going to see an increase, and particularly for apparel retailers, that's usually like the largest category that consumers, if you look at those that have been pulled by all the holiday surveys that have been conducted, including the National Retail Federation.

7:57And they have over 800, over 8 ,200 respondents in their surveys. And the other ones are pretty sizable, you know, relatively speaking around 5 ,000. So they're showing that there's definitely a higher percentage of shoppers wanting apparel and accessories for gifts. So that should be good news for apparel. But Gen Z is planning to cut back on their overall holiday spending. by 23%, millennials, just 1%. Wow. So the Gen Z, these are the younger folks, maybe tougher time finding a job, maybe student debt. Is that kind of the driver there? I think that could be part of it, yeah. It could be the job market situation that might be happening there because these are really like the 17 to 28-year-olds.

8:51So we have been hearing some, you know, talk about some of these latest graduates, you know, having a difficulty finding a job. I think it's just probably going to take longer because generally unemployment is still very low. But we're seeing resilience. If you look at the data so far with Bloomberg Second Measure for apparel retailers and department stores and off price, we're seeing good sales coming in for the third quarter. and they'll start reporting their numbers in the next few weeks. So I think we're off to a good start. And I think Black Friday sales are already happening. Macy's is out with 50 % off on their private label brand product.

9:32And they expect to have other drops every week. Wow. So everyone's focused on starting now. Yep. With the promotions. So Mary, you know, economists talk about a K-shaped economy out there. some consumers, maybe the ones that own assets like stocks and bonds and real estate, doing more than good. And kind of everybody else struggling a little bit, particularly with inflation. How does that get reflected in retail sales? Does it mean you just kind of, if you're an investor, look at, I don't know, the Amazon target where I can get some deals? Yeah. And that's actually what's happening. And that's why you see, let's say, pretty robust sales overall coming out of off price, you know, so think of TJ Maxx, Ross stores, and Burlington stores, and Burlington's at the very low end.

10:22If you look at credit card delinquencies, or, you know, those rates, and a lot of these companies that we're tracking represent the credit card holders for like department stores, and for some select apparel brands, such as Gap, etc. And when you you look at that data, delinquencies are actually lower this year versus a year ago, but not for the very low income, which kind of speaks to what you're talking about and inflation. Actually those are up in the teens, you know, for the very low income consumer. So think like under 50K. How about e-commerce, Mary? I know the pandemic folks are saying kind of pulled forward maybe four or five years of share shift from bricks and mortar to digital.

11:09What's the e-commerce growth story look like these days? You know, econ growth is looking strong. When we look at the data, like I said, for the third quarter that we're seeing from Bloomberg's second measure, it's showing actually online sales were stronger at the department stores, except for Kohl's. Kohl's their online business, but actually their credit customer is shopping less, like in the double digits less. So that's kind of an issue for them. But generally, we're seeing stronger pool with online sales there. Now, there is also a delineation between the type of consumer. If it's Gen Z, they tend to prefer shopping more in store.

11:54And we see that with Abercrombie and Fitch's Hollister brand. So they are about 70 % of their sales are generated online. And then it's the inverse when you look at their namesake brand, Abercrombie, because that consumer is, those are millennials and millennials prefer to shop online. So 60 % of their sales are being generated online versus in-store. That was Mary Ross Gilbert, Bloomberg Intelligence Senior Equity Analyst who covers retail. Coming up, we'll take a look at why Tyson Foods says it expects flat profits for 2026. You're listening to Bloomberg Intelligence on Bloomberg Radio, providing in-depth research and data on 2 ,000 companies and 130 industries.

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14:01It's a bid to catch up to rival drug makers after failing to compete with its own weight loss medications. For more, we were joined by Sam Fazelli, Bloomberg Intelligence Director of Research for Global Industries and Senior Pharmaceuticals Analyst. We began by asking Sam to tell us why Pfizer won this deal. Novo's deal had the risk of not being able to pass due to competition issues, FTC issues. And it sounds like the FTC had given Metzera a call saying, look, if you go with that, there is a risk you won't close. So do whatever you think is the right thing for your shareholders. And they did in the end.

14:33And Pfizer did up its bit. Right. So Novo Nordisk won in a way in that Pfizer is paying up more. Does that actually work in Novo Nordisk's favor? Or is it still as desperate as it was before to look for some new catalysts in the obesity market? I mean, I'm not going to call Nova desperate. I think they have assets in there. I think they wanted to add some more options to their sales reps' bags over time. So I wouldn't call them desperate, but obviously by going after this, they did say that we need more assets in our bag. And Lilly wasn't in the game. So it just gives you that flavor that they are.

15:17and I think the market's telling you that, look at the divergence of the share price performance of Lilly versus Novo Nordisk, that the market's favoring the drugs that Lilly's got on the market and to compete, they needed to get some more. So I think this is not the end for Novo at all in this space. There's lots of other interesting obesity assets coming up with different mechanisms. That's the thing that I think the company is now going to have to think about rather than trying to go after the same mechanism all the time. So, Sam, all these big, big cap pharmaceutical companies that you've covered for decades, I kind of always thought they were big diversified portfolios of lots of different drugs and therapeutics.

15:57And, you know, but when I look at your stocks this year, it seems like there's haves and have nots. If you have obesity exposure, the stocks are up. And if you don't, they're down. Is that kind of how your world's evolved into over the last several years? I would just give you one little caveat to that. AstraZeneca. AstraZeneca, I think, is doing fine. And then they have an obesity acid, but it's not their major game. Their big plays in oncology. Cardiovascular is there and they're adding it to it. So, yes, obesity has been the talk of this past 2025. I think it will still be the talk of 2026.

16:36But there's a lot more going on in pharma. Neuroscience, diseases of the brain, diseases of mental health are getting much more attention. Cardiovascular, aside from obesity, is getting quite a lot of attention and hard to treat hypertension, etc. I have to tell you, I don't think there's an area, perhaps antibiotics set aside, that is not getting a significant amount of progress across some pharma company somewhere. Is what happened with MetSera, NoandorDisc and Pfizer an unabashed victory for Eli Lilly? I mean, does it just kind of keep on moving forward or does any of this kind of hurt Eli Lilly's market position?

17:14No, I mean, at the end of the day, there'll be multiple players in this space, as there are now two, at least. And I think Eli Lilly is currently very well placed with the assets that they have to compete. And they're showing that they're competing very, very effectively and in some cases winning market share from Novo Nordisk. Our thanks to Sam Fezzelli, Bloomberg Intelligence Director of Research for Global Industries and Senior Pharmaceuticals Analyst. We move to news from the multinational food company Tyson Foods. This week, Tyson said it expects flat profits for 2026. This comes as the company's chicken segment continues to help offset its beef losses.

17:49So we had to check in with Jen Bartaschus, Bloomberg Intelligence Senior Analyst for retail staples and packaged food. We first asked Jen for her take on Tyson Foods' guidance for 2026. Novo's deal had the risk of not being able to pass due to competition issues, FTC issues. And it sounds like the FTC had given Metzera a call saying, look, if you go with that, there is a risk you won't close. So do whatever you think is the right thing for your shareholders. And they did in the end. And Pfizer did up its bit. Right. So Novo Nordisk won in a way in that Pfizer is paying up more. Does that actually work in Novo Nordisk's favor?

18:23Or is it still as desperate as it was before to look for some new catalysts in the obesity market? I mean, I'm not going to call Novo desperate. I think they have assets in there. I think they wanted to add some more options to their sales reps' bags over time. So I wouldn't call them desperate, but obviously by going after this, they did say that we need more assets in our bag. And Lilly wasn't in the game. So it just gives you that flavor that they are. And I think the market's telling you that. Look at the divergence of the share price performance of Lilly versus Novo Noticed. that the market's favoring the drugs that Lilly's got on the market.

19:08And to compete, they needed to get some more. So I think this is not the end for Novo at all in this space. There's lots of other interesting obesity assets coming up with different mechanisms. That's the thing that I think the company is now going to have to think about rather than trying to go after the same mechanism all the time. Sam, all these big cap pharmaceutical companies that you've covered for decades, I kind of always thought there were big diversified portfolios of lots of different drugs and therapeutics. And, you know, but boy, when I look at your stocks this year, it seems like there's haves and have nots.

19:40If you have obesity exposure, the stocks are up. And if you don't, they're down. Is that kind of how your world's evolved into over the last several years? I would just give you one little caveat to that. AstraZeneca. AstraZeneca, I think, is doing fine. And then they have an obesity asset, but it's not their major game. their big plays in oncology. Cardiovascular is there and they're adding it to it. So yes, obesity has been the talk of this past 2025. I think it will still be the talk of 2026. But there's a lot more going on in pharma. Neuroscience, diseases of the brain, diseases of mental health are getting much more attention.

20:22Cardiovascular, aside from obesity, is getting quite a lot of attention in hard to treat hypertension, et cetera. I have to tell you, I don't think there's an area, perhaps antibiotics set aside, that is not getting a significant amount of progress across some pharma company somewhere. Is what happened with MetSera, No Indoor Disk and Pfizer, an unabashed victory for Eli Lilly? I mean, does it just kind of keep on moving forward or does any of this kind of hurt Eli Lilly's market position? No, I mean, at the end of the day, there'll be multiple players in this space as there are now two at least.

20:58And I think Eli Lilly is currently very well placed with the assets that they have to compete. And they're showing that they're competing very, very effectively. And in some cases, winning market share from Novo Nordisk. Our thanks to Jen Bartasius, Bloomberg Intelligence Senior Analyst covering retail staples and packaged foods. We move now to quarterly earnings from the global fintech company Circle Internet Group. This week, shares of the company fell on concern that declining interest rates will weigh on future returns. And this overshadowed better than expected third quarter sales and earnings.

21:28For more, we were joined by Emily Mason, Bloomberg FinTech and crypto reporter. We began by asking Emily why lower interest rates from the Federal Reserve would be a concern for a company like Circle. So Circle issues USDC and they that's a stable coin peg to the U.S. dollar. And they maintain that peg by holding reserves in cash and short term treasuries. They keep the yield from the treasuries and that's kind of how they make money. And that's where most of their revenue comes from. So if interest rates go down, you know, that shows up in earnings and that causes some concern for investors and analysts.

21:59So what have their recent results been like? I mean, this is their second time reporting since going public. They, you know, benefited heavily from all the hype around Staplecoin, especially before the Genius Act was passed and their stock performed really well. It's kind of been down since their summer highs. And that's kind of because of the concern from the interest revenue, but also because of some of the distribution partners that they have. They have revenue sharing agreements with Coinbase, for example, who helps distribute their coin. So if this company for now is kind of a proxy for a money market fund because its earnings track short-term treasury yields, it must need to do more to diversify its revenue streams.

22:39What is it looking at? Yeah, that's what they're doing. And then if you talk to Jeremy Allaire, who's the CEO, he'll kind of say that lower interest rates are actually good for the company because it means that there's higher velocity of money. There's more investment. And then people want faster moving money like stable coins. And they also might want to use products like their Circle Payments Network, which recently is experimenting with like a stable coin payouts product, which helps people to pay out globally with USDC. And they're trying to move more USDC volume onto their own platform instead of working with distribution partners like Coinbase.

23:13And that kind of could help them as well. But they see the lower interest rates as a positive thing. And also the USD circulating supply is increasing very heavily as they add new partners. So that also kind of could potentially offset the lower interest rates. Emily, your beat is fintech and crypto reporter, two things that didn't exist even just a handful of years ago. Talk to us about broadly the kind of the intersection of the growing crypto market and applications like fintech. Yeah, I mean, I think what's kind of the most interesting right now is like fintech when it came onto the scene was sort of like building very sleek interfaces on top of his existing financial infrastructure.

23:55And then crypto's pitch is much more sort of like rebuilding the financial infrastructure with things like blockchains. And now the conversation is kind of about bringing the traditional world and the traditional financial infrastructure together with crypto rails. And Circle's really kind of sitting at the center of that and trying to bring Stavecoin and like integrate that with how traditional markets work. And that involves a coming together on both sides. Like traditional firms kind of have to upgrade and make their systems interoperable with crypto technology. And then crypto firms also have to kind of move into a regulated environment.