Disney Shares Soar After Earnings, and S&P Closes in on 5,000 2/7/24

0:01Live from the Nasdaq market site in the heart of New York City's Times Square. This is Fast solar shares of Enphase seeing their biggest gain since July of 2022. Has the bottom really been put in for the struggling sector? And just how much higher can solar stocks rise? We raise the shares on that trade. And later, ready for a bounce, Dollar General and Bristol Myers have seen shares drop sharply over the past year. But the chartmaster says while shares may be down, they're certainly not out. We'll find out why and if the traders are buying in. I'm Melissa Lee coming to you live from Studio B at the NASDAQ on the desk tonight.

0:46Steve Grasso, Karen Feinerman, Courtney Garcia, and Carter Braxton Worth. And we start off with Disney's big post earnings bounce. The stock trading at nearly one-year highs after the company made a slew of announcements in its report, including an investment in Epic Games and details on the launch of ESPN's direct-to-consumer product. CEO Bob Iger sitting down with our own Julia Worson for an exclusive interview in just the last hour. She joins us now with the details. Julia. Yeah. Well, Melissa, Bob Iger calling this a quarter calling this quarter a turning point. This big earnings beat in guidance of at least 20 percent growth in earnings per share for the next year, saying it's a testament that this turnaround plan that he's been working on is working.

1:26He also announced a partnership and one and a half billion dollar investment in Epic Games to create an immersive game experience with Disney characters and characters from all of its different different IP, including Marvel and Star Wars, alongside Fortnite. I asked Iger if this progress was enough to address the concerns of activist investor Nelson Peltz. If you look at the results that we just announced and all the things that we're talking about, that is the result of a team that is motivated, that is focused, and now all of us are very optimistic. The last thing that we need right now is to be distracted in terms of our time, our energy by an activist or activists that, frankly, have a completely different agenda and don't understand our company, its assets, even the essence of the Disney brand.

2:19And I think I'll just leave it at that. Iger saying he has no plans to speak with Peltz. I asked him about Disney's new joint venture with Fox and Warner Brothers Discovery to launch a streaming sports bundle this fall. I asked whether it could accelerate cord cutting or cause conflict with their pay TV distributors. Take a listen. We've watched for years the decline of the basically the linear bundle on cable and satellite. And we've been preparing for a world where that business is not as strong as it used to be. launching Disney Plus as an example of that, the investments we've made in content, the Fox acquisition, the acquisition, what that did in terms of our ownership of Hulu.

3:02All of these things are prepared for us to pivot as well as the world changes, as the world is disrupted. And by the way, I'd rather be a disruptor than to be disrupted. And Iger is working on yet another response to that disruption with a new ESPN flagship chip streaming service that's going to go direct to consumer. He announced that the launch will be as early as August of 2025. Melissa, you can find more from my interview with Iger on CNBC.com. So much news from this exclusive interview, Melissa. Julia, the target of 4Q to fiscal year 2024 profitability for the combined streaming businesses, does that include this new streaming venture?

3:43So I don't know if that includes this new streaming venture, but remember that it's not going to be launching until this fall. But the idea about this new streaming venture is it really shouldn't negatively impact profitability. In fact, it should be accretive to profitability. And here's the key thing, is that Disney expects to get paid the same amount for ESPN and the other channels that are included in this new streaming joint venture as it would from, say, a regular pay TV provider. So if they're going to be making at least as much as they would if they were, say, offering that same channel through Charter Spectrum, then they're not going to be losing anything there.

4:17The question is whether they could use this joint venture to maybe get some new subscribers who weren't doing anything right now, sort of the cord nevers and the cord cutters. The question I posed to him is whether he thought this would accelerate overall cord cutting of the 55 million Americans who are still currently subscribing to a traditional pay TV bundle or some sort of pay TV bundle. But he said they see this more as an incremental opportunity. All right, Julia, thank you. Julia Borsten, who just spoke with Bob Iger. Karen, And I thought your thoughts on the quarter were really interesting in terms of you should have known this is going to be a big pop.

4:51I thought what I was saying. I can't believe how stupid I was. That was just kind of you and me. But no, I would say it more broadly than that. Yes, this in high. Obviously, it was a great quarter. A lot, a lot to like here. But just stepping back and looking at, OK, there's this proxy fight and this is the last earnings call they're going to have before the vote. Probably they want to put their best foot forward. And, you know, I'm not insinuating that they massaged the numbers, but I am saying that there is a little bit of sort of spin you can put on things. He did a great job in that interview.

5:25Julia did an excellent interview. There was a lot to like about it, but I am feeling kind of just dumb on that. All the directors are going to be running for re-election. So he's got the three activists. He's got all the directors that are going to be running for re-election in their April shareholder meeting. So there's a bunch of stuff that when Karen says, did they, what was the term you used? Massage, but I think everyone is always massaging earnings, right? You want to bring everything to the focus, to the front that you want people to focus on. I thought streaming numbers were going to be down because of the news yesterday.

5:59Now, when you look at what he's really talking about, he's talking about the buyback. He's talking about Fortnite. I'll be honest, though. My kids play Fortnite. I'm pretty sure Disney characters aren't going to be in the same theme as that. But that's where growth is going with Epic Games. So he had to do something with gaming. He had to do something. So as a value investor, how did you feel about the buyback? I mean, it was not that long ago that we were talking about their capital structure issues. So to have a big buyback, well,$3 billion, I believe, and then a dividend, which they had stopped doing for a while, that's pretty impressive.

6:38And they've gotten their balance sheet definitely in a much, much better place. Yeah, and I think what's interesting, too, is all eyes were really on streaming. In this case, their earnings were the same day that they come out with this new streaming service. And I think, to your point, that's probably why they came out with this now. They really want that to be the focus. It's interesting. They actually lost the amount of subscribers in their streaming, but the revenue per subscriber went up as their price went up, which I think is really strong for them. And I think that's going to be the shorter term story with Disney, which is really positive.

7:06Longer term, they're putting, I think it's like$60 billion over the next decade in their experiences. And we are seeing this trend with consumers where after COVID, this hasn't changed. Everybody still wants to travel and they want to do things. And I think longer term, you're going to see their parks, I think are going to continue to benefit them. They have this multifaceted business, which I think is still really good for a long term investor. Carter, I think your thoughts on this chart, at least, are pretty brief because you put out a note a while ago and you said you liked the shares and now you're like, you know what, stick with it.

7:36Yeah, you know, sometimes less is more. And so the note put out was Disney, no new thoughts, which is to say the prospects of a bottoming out formation continue not only to be very real, but are developing well. I think what's important about the Disney price action, not so much today in response to the news, is that it went all the way down to its COVID low. So you're talking about a stock that COVID was$79, rallies all the way to$200, and then just in the past six months revisited that COVID low, as of course the S &P is going up every day, every week, every month, and then holds those lows.

8:11And so this, by my work, has all the elements of a bearish to bullish reversal. And so upside remains well unknown, I think, very much the opportunity. And with this kind of post-earnings news-related pop, it just confirms that it's right to be long. All right. Before we get more on Disney, we do want to get to the big move in arm holdings in just the past 10 minutes or so. So shares of the semiconductor company surging as much as about 38 percent now off of those highs after posting a beat in the top and the bottom lines. Company also giving better than expected guidance for Q4. The conference call about nine minutes in right now.

8:48Let's get to Christina Parts Nevelis. She's got details. Christina. Yeah, well, it's the recovery in smartphones really helping Arm Holdings Q3 results given about, what, 40 percent of total revenues comes from mobile. Arm, for those that just need to recap, designs and license semiconductor intellectual property. its technology can be found in everything from smartphones to cars. The company pointing to three main drivers for the beat and improved guidance. Firstly, increased adoption of its new CPU architecture, which sells at a higher royalty price point. So think of it like the blueprint for building CPU chips.

9:20Secondly, increased market share in cloud, specifically because of AI and AI efficient systems, as well as increases in auto, something we didn't hear necessarily from other companies like Microchip that warned of auto weakness. And then lastly, a recovery in the broader semiconductor market. The call is underway, and I'm just reading right now one line. It's not only smartphones, but they're also seeing strength in other markets like infrastructure, and AI is really driving the momentum. And if you were to compare the share price right now of Arm and NVIDIA since September 14th, that would be when Arm IPO'd.

9:55You can see the massive, what, 96 % increase. The surge is actually higher than NVIDIA, which is not often you can say to beat NVIDIA shares. And so that means right now, Arm's market cap is roughly, give or take, about 100, yeah, over$100 billion, already beating out Micron, if you include after-hours trading. Tomorrow, we'll have Arm's CEO on CNBC on Squawk on the street. Look forward to that. Christina, thank you. Christina Parts Nevelis. Already today, we hit a new high in the SMH. We had another data point that is worth pointing out in the chip space, Monolithic Power, which provides the power management systems to NVIDIA GPUs they reported had good results and are up in the after hours.

10:36It seems like everything is coming up roses in chips, Steve. Well, last year we touched on the AI element to chips, and that's going to be the next leg or it could be the next five-year leg. But where Christina touched on about how much money they get in royalties, and then they start with a CPU structure that's a higher cost than their existing one. They need to have a higher structure because they're fixed. They own the whole market. They own smartphones. They own consumer. So they need another chip or another royalty injection, I should say, to do better. When you look at these numbers, remember that thing in 2020, NVIDIA tried to buy them for$40 billion?

11:17Could you imagine if NVIDIA, with all the stuff that we're talking about, NVIDIA runs that market. Now they tried to buy them in 2020 for$40 billion. But remember, SoftBank owns. It was that weird IPO where they still own 90 % of the company. So when you look at a pop like this, it took a little bit long to get momentum. But they are 99 % of the market share in smartphones. That seems like just a crazy outlandish number. And the margins are almost just as outlandish sounding. I mean, you were pointing that out. And it just sounds insane to say a margin of north of 97%. Well, when you're, you know, licensing revenue is really, really good.

11:53And when you beat by a lot on that, that's just extraordinary. It's taken a long time, though. I mean, we've had a huge, huge chip, not reversal, but more strength, just ridiculous strength. NVIDIA is still like two weeks away plus from earnings, right? That's a lot of like good news already baked in. I don't know if that it'll reach the top before. Or it almost it's getting to the point where it doesn't matter what they say. Can it be enough? Right. This would be good for them tomorrow. And so many other ones have been good for them. And are you shorting NVIDIA? Is that what I'm hearing? I'm scared.

12:30I'm long. I'm scared. And I'm so I sold some upside calls. Carter, should she be scared for NVIDIA? I mean, you know, of course, when something's just up and to the right, momentum's a powerful force, just as down and to the right like Pfizer. And usually you don't want to fool with it. If it's in an established downtrend, don't fool with it. And if it is established uptrend, don't bet against it. But at some point, and we know this to be the case, Tesla was great until it wasn't. Bitcoin was great until it wasn't. You can be full. Forget about, you know, expensive. Let's use a more sort of nuanced word full.

13:03Is NVIDIA full here? And interestingly, you know, the SOX index, of course, is not an all-time high. It's below where it was two weeks ago, even though SMH is. And there's nothing wrong with trimming a great winner. And we're clearly not seeing all this euphoria with artificial intelligence ending. I mean, that's definitely part of what you're seeing here with Arm. And I think what's kind of interesting, too, is they have such a presence in the mobile space, right, which everybody is expecting to slow down. And I wonder what that's going to mean for mobile in general and the demand going forward of the consumer.

13:35Is this actually stronger than we expected? So maybe that's actually a positive sign when you look at the consumer or the overall economy. All right, let's get back to Disney and bring in media industry veteran. Former NBC cable president Tom Rogers, he is now the executive chairman at Orbit Gaming and Entertainment. Tom, always great to see you. Great to see you, Melissa. What is your take on this new streaming service and whether or not Disney will actually make money from it? Well, this isn't the first time I disagreed with market reaction to a Disney report. I'm not quite sure what the euphoria is here.

14:08They have a struggling streaming business that lost subs. And they still are in a position relative to cutting costs when it comes to its streaming service to at all be at the point that Netflix was with a similar level of revenues to look like it's on a real path to profitability for that business. When it comes to the sports joint venture, I'm not really sure it solves for anything. I think we've got to ground ourselves here. There's only 1 % of U.S. households that watches more than 12 hours of ESPN a month. And there are only about 10 % of U.S. households that watch more than six hours of ESPN per month.

14:55So the number of super sports fans out there, I think, is overestimated. I think the bigger issue for the sports marketplace right now is where the fan bases are around local sports and the regional sports networks. And a huge issue in terms of access and pricing for them, this doesn't solve for that. The pricing of this, I think, is, well, nobody knows what the price is yet, but what's been out there, I think, doesn't necessarily bode well for mass distribution. And then you have what I think are probably going to be a lot of very cumbersome governance issues. Does everybody get a veto here? Is it by majority vote?

15:38Is the NFL going to be in a situation with this independent management that now controls distribution of football in a way that they don't have a direct relationship with an entity that has that kind of distribution cloud in the marketplace? A lot of issues here that I think are going to be problematic as they really get down to the details. Tom Skaren, thanks for being on. So about this joint venture, do you think this is sort of a trial balloon or do you think they're far along and they think this is really going to happen? Well, I think that's a great question, Karen, because if I had to guess, if Warner does not get renewal of its NBA rights, I have a hard time seeing this happen.

16:23Now, I'm sure Warner entered into this in part to have another revenue stream so it could bid more aggressively for the NBA rights. But if I'm Disney and Fox bringing football to the table, if Turner, which doesn't have football, isn't bringing basketball to the table, even though it does have some other sports, I have a hard time seeing that they're going to give it the clout in this venture that this contemplates. Now, I also would think that Comcast, which supposedly has some interest in the NBA package and does have a broadcast network, unlike Warner, could easily disrupt this thing in terms of binning the Warner Turner package away from it and Comcast NBC getting NBA rights.

17:12And I think if that happened in lieu of Warner getting those rights, there's a good chance this might not come together. So, Tom, when you look at the earnings and you look at how he came out, he was so loaded for bear. It was just one thing after another, a litany of processes that he was going through. Do you think that that headline yesterday about this bundle and do you think the way he came out so repetitive and acted strong? Obviously, your first comments were it wasn't that great of a report. Are we just looking at him just talking to the activists at this point? Was that what this was all about?

17:47Well, they delivered cost cutting, which delivered a nice earnings pop. But, you know, they're light on top line growth. And when you're not only facing a linear traditional TV advertising problem where all the major media companies are facing downtraps there. But look at Hulu. Hulu, the grandfather of advertising in the streaming space, as everybody is turning their attention to advertising in the streaming space. But it had a huge head start with all this streaming advertising inventory as Netflix, Macs, et cetera, are just building up ad-supported households. And ad revenue was down last year.

18:28It was down again this quarter in Hulu. And ad rates were down. So there are fundamental issues here in the strength of a streaming business, which is really what market has to look at in terms of reinventing this company. I do think the move to gaming was an important one. Look, kids spend more time with gaming than they do TV. How does a kids and family company not have a greater position in gaming? Smart move. We'll see what comes to it. As he said, there's a lot yet to come. But on the joint venture with sports, I was co-chairman of A &E History for 10 years, which was an NBC-ABC joint venture.

19:06And I'll tell you, the reason that one worked is we didn't have any competitive entities. Iger on that call was talking up ESPN streaming standalone relative to this new sports joint venture. When you have competitive issues that that misalign you with others in the venture, very tough for it to work. Yeah. Tom, thank you. Tom Rogers. Coming up, we'll break down the record setting day on Wall Street, plus more earnings shares of PayPal and Wynn Resorts, both on the move after reporting or bringing the details out of the quarters next. And Enphase finding its place in the sun on the back of its results.

19:41Could the dark days be over for this one? That is coming up.

19:48This is Fast Money with Melissa Lee, right here on CNBC.

20:01Welcome back to Fast Money and Earnings Alert on Wynn Resorts, a casino operator jumping after hours. On a top and a bottom line beat, Contessa Brewer joins us from Las Vegas with the details. Contessa. Yeah, what a quarter here, Melissa. As you said, beating the top and bottom line, the expectations were beat in Boston, in Vegas, in Macau. In fact, Wynn Resort set an all-time quarterly record for EBITDA. And in Las Vegas, that's particularly notable because it was a tough comp. They had set a record last year this time. On the call, CEO Craig Billings said F1 was a significant contributor in November.

20:36And then it just demonstrates that Wynn is setting the standard in Las Vegas for luxury guests. He conveyed lofty expectations for February results, too, with Super Bowl. You can see the stadium right over my shoulder. Chinese New Year, the strong convention calendar. He said that they have been programming the heck out of this place. His words. And you can see it's paying off. In Macau, Billings said Wynn is seeing structurally higher margins that are less reliant on the VIP segment, which he called volatile. But again, Melissa, what you're seeing is that investors really have not given Wynn credit for the reopening in Macau at all, much less the rebound that they've been seeing the shares going into the earnings report down year over year.

21:18Contessa, thank you. Contessa Brewer, you hear the headlines out of China about a consumer that's strapped, a consumer that's under pressure, a consumer that's lost a lot of money in real estate. You don't think about revival in Macau, and yet that's what we're seeing. Yeah, and I think it's the same kind of story you're seeing here where they're getting that higher end consumer. It's the person who's really not struggling as much, unfortunately, with the economy, and that's who they're benefiting from. So I think long term, that's going to continue to benefit when you look at Macau. Short term, I think Vegas is really interesting.

21:45I mean, they had just had F1, which clearly helped them last quarter. Now we have the Super Bowl coming in, which is definitely going to affect them now. So you're getting these, again, those higher income earners who are coming into the space. And that's one of the places they're going to go. So I think it's something that's going to continue to improve here. So I'm along Las Vegas and Las Vegas, you get Singapore, you get Macau and you get Singapore and MGM, MGM, you get Vegas when you get a slice of Vegas and you get Macau. So I cut out some of the noise. I like having Singapore. Oddly enough, Las Vegas doesn't have any exposure in Las Vegas anymore.

22:18So I'm banking on just price reversion to mean here on this space. But I think Macau is too much of a variable to really play this long. No one has any clue what Macau is going to do. So I throw in Singapore. It helps me mitigate my risk. All right. Meantime, markets jumping today with the S &P getting within a tenth of a point of the milestone 5 ,000 level. The S &P as well as the Dow both closing at new highs. The Nasdaq, which led the gains up nearly a percent, closing at its highest level in more than two years. Mark, it's seeming to breathe a sigh of relief after this afternoon's 10-year bond auction.

22:53The Treasury is selling a record$42 billion of 10-year notes at a lower than expected yield. Were these results an all-clear sign for stocks? I mean, this was a concern. We had four straight months of just not very well-received auctions, Karen. And so here we were. We're like, ah, thank goodness. Yeah, kind of, right, for a very big auction. It could have gone differently, which would have been terrible for the market. So that is one sort of obstacle that we've passed, which is very good. Yeah. Carter, I hate to ask you this question because I feel like I know the answer or the answer you're going to give me.

23:27Is 5 ,000 significant? No, no. I mean, there's this whole round number magnet thing. But, I mean, that's our budget. Is December 29th any different than Jan 4th? The year end is a year end. 4 p.m. The ball stops at a certain time and calendar years. Year to date, does that mean anything? If it's three days into the year, it means something if it's 11 months. A lot of this stuff is what it is. But what is notable, of course, is that since data has been tracked going back to 1990, 1991, Wall Street as an entity, as a group, strategists have never once predicted a down year. Every year they call for hire.