Disney Jumps After Earnings, and Lilly Posts a Record Close 11/8/23

0:01Live from the NASDAQ market site in the heart of New York City's Times Square, this is Fast Money. Here's what's on tap tonight. A big beat for Disney. The company major gains at theme parks, a sharp rise in streaming subscribers, and billions more in cost-cutting than expected. But will it be enough to offset the ad declines in legacy media? We'll debate that. Plus, obesity breakthrough. The FDA approving Eli Lilly's blockbuster drug, Monjaro, for weight loss. Paving the way for a pop in prescriptions. The details and the impact for the sector are coming up. And later, the Chartmasters here with a new call on crude and energy stocks will give us the long and short of his technical take straight ahead.

0:36I'm Melissa Lee coming to you live from Studio B at the NASDAQ. On the desk tonight, Steve Brasso, Carter Worth, Guy Adami, and Julie Beal. We start off with Disney earnings. Shares of the entertainment giant slightly higher in the after hours, beating earnings estimates and raising its cost-cutting target revenues, though did fall short of expectations. CNBC's Julie Morrison spoke with CEO Bob Iger in just the last hour about the quarter and the future of ESPN and much more. Julia, what's the latest? Well, Melissa, Disney reporting a big beat in earnings thanks to expanding its cost-cutting target by$2 billion to$7.5 billion.

1:10The company also dramatically reducing its losses in its direct-to-consumer division, while its subscribers in that division were a big beat. CEO Bob Iger announcing in our interview that they are launching a beta test of Disney Plus integrated with Hulu next month. Take a listen. We do expect subscriber growth to continue, but we're mostly focused now on delivering profitability by the end of fiscal 24. We had a great quarter, as you just noted, adding 7 million core Disney Plus subs. That was really the result of great content, particularly three strong movies, Guardians of the Galaxy 3, Elemental and Little Mermaid.

1:50Disney Plus is proving to be extremely popular and in demand, and we feel very bullish about its future. Disney's commitment to cost cutting was one reason that Nelson Peltz dropped his proxy battle back in February. But that appears to perhaps be restarting with former Marvel Entertainment chair Ike Perlmutter. I asked Iger if he'd heard from Peltz. I had a call from him, but I must say I don't I don't have specifics about what Nelson is really after or what he will ask for. I will say that, as has been the case in the past, that management and the board is always willing to listen to what shareholders have to say.

2:33You know, we're in lockstep with the board in terms of our opportunities and our challenges and our strategic direction. We all feel very optimistic about the future of the company. Iger told me he was bullish about Disney's parks business, despite some weakness in Florida. And he also said that he is hopeful about a resolution coming soon in the Screen Actors Guild strike. And, Melissa, you can find much more of my interview on CNBC.com. Julia, thank you. Julia Boorstin. I feel like the question you have to ask at this point is, did we see the worst of it? Are we starting to see the other side of this Disney turnaround?

3:10Yeah, that's exactly what I'm trying to, because I've said that before and it's been wrong. It's a couple of things. So the free cash flow number was good, three and a half, three and a half billion dollars or so. I mean, this is now pre-COVID levels-ish. So good for them on that front. Seven and a half billion dollars up from five and a half billion dollars of cost cutting. Good for them. I'll say this. You know, this stock, and Carter can speak to this, series of lower highs and lower lows, seemingly forever. That stopped in early October. We traded down to 79, bounced to 86. This recent sell-off didn't get us through those lows.

3:41It got us right back to 79, and here we are at 86. Technically, you get a close above 86.5, 87. It all starts looking pretty interesting for the first time in a long time. Going into earnings, you said a small long, right? Yeah, we put out a note for chance. And, you know, it was what you said. I was very concerned about ad declines in legacy media. That's a joke. No interest in that. The point is that the point is what Guy referred to, we were right at the COVID low, literally to the penny. So here's a stock that is at a point in time when the whole world had stopped. Right. And so do you make a small bet, not a big bet, that it holds here at those lows?

4:22That was the bet. So we get a little pop today. But I think if you traded it before this, I would just take it money and run. So if you look at it, he lost subscribers last time around. They gained subscribers this time around. But I thought the important line was 2024 profitability. If that's what the analysts are going to gauge now, then we have some barometer for success. But I agree with Guy. If you get above 88, 90, the story substantively changes. But it's in a show me state. I need it to do something on the stock chart before I buy it. Yeah. Julie, do you think that the Disney story in terms of the challenges it faces in the legacy media, in terms of ESPN's declining metrics, particularly operating margins on a decline?

5:09Does that reverse with this quarter in your view? Those are the big overhangs, right, going into this quarter. Does this quarter, did it change anything? You know, it's good progress. I don't think it's, you know, bad progress. At least we're, I think, in a more stable position, which I think is good. What's really difficult to know is what does this business look like as we start to kind of pull it apart? Who is going to be a buyer for some of these media assets? What is this future of sports? You know, their language that they use around sports in particular, to me, it sounds like a software business in terms of its aspirations of what it can be.

5:44And that always makes me a little bit nervous because it doesn't feel like there's a lot of structure to explain how you really make the sports business reach its full potential. And that's hard because it's just so much more competitive than it used to be. So I think overall, I think this is a positive quarter, a step in the right direction. But the underlying fundamental challenges of this business are still there. Competition is still a huge problem. And profitability out in 2024, it's great to put a marker in the sand, but that's a long way off and a lot can happen in between now and then.

6:13like maybe a recession. Yeah, all fair points. No, listen, absolutely all fair points. She makes, Steve said it as well, you wait for it to prove itself. The question is, you know, do you get ahead of that potential proving itself like a lot of the market participants are doing with the broader market? I actually think you can. And I'm with, listen, Carter can say you take the money and run. That's probably the right thing to do. But it has a different feel technically now. Again, close above 87. And I think you're going to start to gain momentum off the back of what was a pretty good quarter for them.

6:44Yeah, we're watching Disney, you know, kind of go a little bit higher in the after-hours session, up 3 % gross. So, you know, we almost forget the difficulty that Disney had in reaching a deal with Charter Communications not too long ago and the huge concessions that it had to make and how maybe Disney reached a peak in terms of what it can charge, what it can exact from the cable carriers. I'm starting to look at, just forget about that aspect of it. How about the reach a peak of what people are willing to pay because now all my streaming products cost me more than my linear TV, cost me more than what the cable companies were charging me.

7:20So they're hitting a wall on pricing and I think they need to actually break through that wall to show more profit. Having said that, when you look at what they're charging now, you have the ad tier, you have their non-ad tier, and then also they took a page out of Netflix. They said now they're going to crack down on password sharing. So maybe you're going to get to Guy's point. Maybe the story will reflect it in the stock chart. But think about the parks. You have Shanghai and you have Hong Kong. Geopolitical. Those are a lot of headwinds. You brought it up. Recession. These tickets are not cheap.

7:57And if you're talking about a family getting on a plane, going to see one of these parks, there's a big caveat there. There's a huge gray area. To Julie's point, to my point about the 2024 profitability, a lot can happen. Are people going to dip in their pocket and spend the money to do that? And it's still and maybe you guys can disagree. It's probably still just about streaming. Right. Forget about the 28 billion from parks and products and whatever else. Right. So for someone who bought it today, what would you do tomorrow? If you bought it today, I would say let it ride. Let it ride out. You can't break price.

8:33I it's too that's too short term for me. I wouldn't lock in a profit of three percent. For more on Disney's quarter, let's bring in Puck News's Matt Bellany. Matt, good to see you. Is this popular seeing, you know, basically better than expected cost cutting goals, some gains of subscribers? I mean, what is fueling this rise in your view? I think it's cost cutting. I mean, the street has been pretty clear for the most part of this year that it wants to see profitability in streaming. It wants to see some significant cost cuts and Iger going up from five and change billion to seven and change billion.

9:11That's a message. And I think the strikes have helped where they have, you know, they've reduced costs, their free cash flow because of that has increased. But I think that just the gesture of putting it out there that they are going to aggressively manage costs at Disney is what is causing this. Do you think that we hear anything about ESPN on this call with analysts? I think it's unavoidable. I mean, ESPN is the 800 pound gorilla of Disney, or it has been for the past two decades. And it's pretty clear that it's challenged. They have been in the market looking for a deep pocketed investor to come in to help supercharge ESPN and allow it to compete for some of these big sports rights that are coming up, particularly the NBA.

9:58That's going to be an extra large check that ESPN is going to have to write. And they're going to have to manage this transition over to streaming. And Iger says he wants ESPN to be the premier digital outpost for sports. That is not easy when you are competing with Apple, Amazon, Google, all of them. It's really going to be tough. And you're trying to rein in costs. I'm curious how you think Nelson Peltz factors in. December is when he's cleared to start nominating his people for the board of directors. It's unclear how many seats he is after. He had some impact before. It does seem, though, that Bob Iger has a list of goals, and he's sort of working toward them at this point.

10:46So what's your sense of how that factors in? Well, two things. First, I do think the cost cutting is due to some of the activism by Nelson Peltz and Ike Perlmutter and some of the others who have criticized Disney for the spending. But Iger is setting up a very nice contrast here because he's putting forth four specific goals that he has for this company and a way to do it where it's managing the costs in film, figuring out the future of ESPN, you know, making sure that they are cutting costs in other ways. Nelson Peltz isn't putting forward that specific plan. So it's a nice contrast for Bob Iger to say, I have a plan and I'm executing.

11:31What are you saying we should do? Do you think that we will look back on these days, you know, these past few months, whatever time period and say that was the worst period for Disney? and will be on the other side. And this quarter marks that. Yeah, you know, it's tough to be able to say that because there are some still significant challenge. They're releasing a movie this weekend, The Marvels, that is not expected to do very well. And that's part of the Marvel Cinematic Universe that has been untouchable until about the past year or so. They have to figure that out. They've got to figure out what they're doing with Lucasfilm and Star Wars.

12:08They have not had a Star Wars movie in five years. There's some tremendous creative challenges, especially in the film side. And on streaming, we don't really know what's going to happen between now and the end of 2024 when Iger says that he's going to reach profitability. Like you guys have said, if there's a recession, if there are other factors in the market that change the calculus there, that could be a big miss. Matt, great to have you with us. Thank you so much. Matt Bellany of Puck News. It sounds like that there are a lot of bigger challenges. Cost cutting is great for the here and for the now.

12:42But in terms of the long term strategic trajectory of the company, these other big issues that Matt had outlined, creative content, ESPN, legacy media, these are all much bigger things to tackle, Guy. You can't cost cut your way to, you know, a brand new Disney without question. I think we understand that. I don't think Matt's saying that either. I will say I'm reading. I don't know if this is true, but I'm seeing that there's talk about potentially reinstating a dividend here and they guided for free cash flow. So you're trying to, I think in terms of this stock, it's been so decimated for all the right reasons, by the way.

13:15It deserved to be where it is. But if this is, in fact, an inflection point, which it feels to be, with that said, I thought it was a couple quarters ago as well. But if you get above 87, 88 or so, then the technical start to kick in. We can wake up a month from now. This is a$98 stock without batting your eye. Meantime, the S &P and Nasdaq barely eking out gains to extend their winning streaks. The Nasdaq now up nine days in a row. The S &P higher eight straight days, the Dow, meantime, breaking a seven-day run, ending the day lower by just about one-tenth of a percent. Check out the move in the 10-year yield, touching a four-and-a-half percent after the Treasury's latest auction of$40 billion in bonds.

13:51Rick Santelli gave it the equivalent of a failing. I think it was like a C or a D. Failing. Terrible. For you, a C is failing. In my household, correct. No, no, no. But not good. Not good. A C is, forget it. A B is failing. That's just crystal clear. Yeah, exactly. You move up from there. Steve has been talking about yields going lower. They've gone lower. I mean, Carter and I had a conversation last Monday when Courtney was hosting. I thought the TLT could get up to 88.5, 89. It did that earlier this week, and it did that again today. The move, the speed of the move has clearly caught me off guard.

14:28But Carter will say this as well. There's going to come a point where lower rates is not going to be good for the equity market. Lower rates are going lower because something as bad is happening in the economy. And it's still a market that's driven by fundamentals. So we might be at that line of demarcation of 4.5 percent where it all starts to flip a little bit. We're holding in, though. We're holding in despite this very quick snapback in rates. Yes. So if you think about the precondition before some of these recent moves, you have a very steep dollar. You have a very steep crude oil market.

14:56And you have a very steep 10-year yield at 5 percent. Yields are cracking. Oil is cracked. And the dollar, after cracking, is sort of backing and filling a bit of a pair, too. So the question is, ultimately, do equities give way? A lot of people say, all the things you just said are the reasons for equities to go higher. They are until they aren't. And so our thinking is that ultimately equities will join the softness story rather than something else. Julie, you agree with that? Yeah, I mean, I think there's a lot of pressure, downward pressure. And if I think about things, fundamentally speaking, it's really hard to get enthusiastic about this consumer.

15:31It's really hard to feel super sanguine on the level of credit. It's really hard to feel great about the level of leverage in some of these weaker businesses that were kind of zombie businesses in the pandemic. The only thing that really gives me a lot of confidence that it's not all going to fall apart is that we don't have the level of crazy euphoria that you typically have in big recessions, where everyone is spending money like it's going out of style and there's just so much confidence. We don't have that. Earnings calls are timid. That's how I would describe Q3. So at least we have that kind of as a buffer.

16:02Although, Grosso, you think MAG 7 hangs in. So if MAG 7 hangs in, it's a decent shot that the S &P will do OK. And you also have seasonality on your side as well. So as long as we don't have unemployment skyrocketing from here, the consumer is still in good shape. I think if the consumer is still in good shape, then the market is still in good shape. And for all the things that Guy and Carter said, rates going down right now are a tailwind until they're not. But I don't see that not coming until maybe the first quarter of the new year. This is a very bullish seasonality issue that we're dealing with right now.

16:37I'm curious, Carter. How do you view seasonality? Well, I would put that in the category of sort of data mining. You can get data to make any case you want, right? There's something called the Stock Traders' Almanac. I've handled it since I was 22 years old. and you can find, for instance, if the market goes up nine days in a row, what happens on the 10th day? You're all waiting. Would you bet a whole lot on that? It's a little bit of just numerology maybe. So it's bogus. Well, I think it has patterns to it, but I wouldn't bet a whole lot of money on season. It's good until it isn't. All right.

17:12All right. Coming up, more moves in the after-hour session. Results for Arm, Instacart, MGM, and Lyft all filtering in. We'll bring you the details from those names next. And speaking of earnings, a few names on the move. after results this morning, how you should trade W.K. Kellogg, Kellen Nova, and Ralph Lauren. Don't go anywhere. Fast Money's back in two.

17:35Welcome back to Fast Money. We've got a pair of after-hours earnings movers for you. Lift lower despite a top and a bottom line beat. We start off with Arm's first earnings report as a public company. CNBC's Christina Parts Nevelis has got the details. Christina. Thank you. Well, What we're seeing is a double-digit revenue growth and the beginning signs of diversification away from mobile, where it's heavily concentrated, and towards PC, data center, and automotive. But the stock is reacting negatively, down about 7 % to weak revenue forecasts for this current quarter we're in right now. Shares are actually trading below its IPO price.

18:06Recall that it went public just on September 14th. Arm's royalty revenue, which is a major stream, fell about 5 % year-over-year, but licensing sales were up about 106 % during that same time frame, indicating maybe that Arm is selling increasing amounts of its technology to current customers, which is a key metric watched by a lot of analysts right now. Arm's CEO on the earnings call saying that the most recent set of export rules, these are the export rules for China, don't have a large impact for Arm given their international presence. Management also saying they have good visibility of its licensing pipeline for the second half of their fiscal year, although there is uncertainty regarding the exact timing of some of those deals.

18:42Nonetheless, you can see shares dropping even more as the earnings call progresses. All right. Christina, thank you. Christina Parts Nevelis. Guy Adami, what do you think of this quarter? Well, the quarter, I mean, quarter is whatever. The guide is what should scare people a lot. And we had this conversation when they became a publicly traded company. I mean, at one point, this was a$70 billion market cap. We pointed out it was probably trading 27 to 25 times-ish revenue, which is absurd in my opinion. Even at current levels, it's still an expensive stock. For a company that's basically, it does$3 billion of revenue for the last three years.

19:14So you don't have a lot of growth. The guide is significant. I think it should scare people at this valuation. They should have the commensurate growth to back it up, and they don't. And this is their first quarter as a publicly traded company out of the chute. I don't think that's particularly good. And they have to diversify away from smartphones. That's what Christina was talking about, about licensing fees and everything else. Remember the headline with NVIDIA that they were working on an ARM-based chip for the PCs? That was a huge tailwind for ARM when it first came out. I think everyone forgets about that because they have not diversified away from smartphones.

19:52So at this point, there's not a lot of historic data to look at a chart on ARM. So you have to sort of shoot from the hip in semiconductors. Do you feel bullish or do you feel bearish on them? You have NVIDIA. You have AMD. You have Intel. You have Micron. You have a lot of other areas to go than placing a bet on an unknown name. I mean, that's exactly right. So you don't have a lot of price history, so there's no price to interpret. But what we do know is something that used to happen in the past when there were specialists. The specialist firms and the market makers would never allow a stock to break IPO price.

20:24They would defend it at all costs because it was egg on the face. Also, you've disappointed investors whom you've just placed this issue in their accounts. But all of those things are off now, and breaking price is just that, another mess up. All right. Let's move on to another after-hours mover. Shares of Lyft dropping despite strong results guidance also coming in better than expected. The earnings call is underway. CNBC's Deidre Bosis got the latest. Debo. Mel, the stock is pairing losses. It was down as much as 5 % after the results. Adjusted EBIT outlook, as you said, it was better than expected.

20:58But perhaps some questions about market position weighing. Since the new CEO David Roescher took over, he's been more aggressive on pricing. And that has won Lyft back some of the market shared that it conceded to Uber over the last few years. Still, though, revenue this quarter grew 10 % versus Uber's 33 % mobility growth. In active riders, they came in lower than the street expected. Now, the company did give some color on the current quarter so far, describing a, quote, terrific October. They said they set records in terms of gross bookings, rides, and driver hours in the weeks in and surrounding Halloween.

21:30Now, the call kicked off about 20 minutes ago. CEO David Risher, he talked about their relatively new advertising business, which he called still small and early, but where he sees a ton of potential. Guys, it's kind of funny. Every gig company is now building a high margin ad business to help pay for what has turned out to be low margin cores. Tomorrow, we're going to talk more to CEO David Risher in the 10 a.m. Eastern hour. He'll give us more information, more highlights from the quarter. Mel? Deidre, I got to ask you about the move in Instacart. It was up as much as it was plus percent today, and then it gave up most of the gains.

22:04What happened? I'm just looking at it right now. Yeah, it gave up a lot of those gains. I'm not sure because I was on the Lyft call, but let me look into this. I know that advertising was seen as a strength. It was up some 19 percent on the quarter, but I have to assume that it was something set on the call. So I'll check in on that one now. All right. Thank you, Dee. Deebo, who's always all over it. All right. So what do we make of this? By the way, it's called Maple Bear. That's why it's up there. I saw that and I thought it was going to be, I didn't know about the maple bear, you know. But isn't this a test we just heard from two companies that beat, it was good.

22:37There's no such thing as good or bad earnings. There's only earnings. And it's how the stock reacts. And guess what? They're both down. So whatever they said, you don't even get on the call. It's bad. That's it. They're back down. Bad. Yeah. So when you look at Lyft, everyone always compares Lyft and Uber. And obviously the market, it's actually pretty fun or ironic or however you want to say it. Uber is up 100 % year to date. Lyft is down 3 % year to date. If you look on a one-year basis, Uber is up 80 % and Lyft is down 2%. So to Carter's point, the market has interpreted, the market has ruled on this.

23:17Uber is the winner. They have a lot more levers to pull. They have a lot more scale, a lot more size. So if they're basing it on an ad revenue basis, they're going to be a lot more successful than a Lyft is going to be at this point in their existence as public companies. Julie, just quickly on either Lyft or Instacart. I love the point about all of these companies are using advertising as a way to make business models work. It's not even just, you know, gig work. Amazon, too, is one of the largest ad marketplaces. And it's fascinating to me that those are the economics that we're seeking after the promise of these wonderful new business models.