Ford Shares Surge After Earnings, and Can China’s Rally Continue? 2/6/24

0:01Live from the Nasdaq market site in the heart of New York City's Times Square this is Fast Coming out right now, or David Faber will be here with the latest. Plus, China rising. The Shanghai Composite seeing its best day in nearly two years, while ETFs tied to the region surged, too. Can the moves by Beijing meaningfully help Chinese stocks rebound? We'll debate that. And later, just sell it? The chartmaster is out with a bearish call on Nike shares of the shoe giant. We're up nearly 3 % today. He'll tell us why he doesn't think this swoosh higher will last. I'm Melissa Lee coming to you live from Studio B at the NASDAQ.

0:44On the desk tonight, Tim Seymour, Karen Feinerman, Dan Nathan, and Guy Adami. And we start off with two big earnings movers after the Bell shares of four jumping after the automaker. Topped estimates for the first quarter. Snap, on the other hand, plunging as much as 30 percent after it gave weak guidance for Q1. We'll get to those numbers in just a bit. But we do want to start off with the breaking news in the media space. ESPN, Fox, Warner Brothers teaming up to launch a sports streaming platform this year. Let's get straight to David Faber, who's got all the details right now. David. Yeah, Melissa, this could be something that you can actually download as soon as the fall.

1:17At least that seems to be the hope of the three key partners here who will be contributing all of their sports programming to this yet-to-be-named entity. Now, I am told they're going to come up with a name soon. They're also going to have to come up with a price, of course. The idea here is to appeal to the ever-growing number of people who no longer have a cable subscription, particularly perhaps young men who like sports but don't want to pay$150 a month to have cable. And so wherever the price is, it obviously will be far below that number. And then they obviously as well, these consumers conceivably would also have their entertainment options via other direct to consumer apps that we know well.

1:56The two or three parties, my understanding is, have been talking for a bit of a period of time. Disney and Fox appear to agree to an initial deal. And in fact, Fox has something at least somewhat similar in Australia, is my understanding. called KO, which has brought together a number of sports programmers to distribute something in an app somewhat similar. They brought in Turner as well. And now you've got something that conceivably will appeal to a wide variety and breadth and depth of sport fans, given they're going to have all hockey, pro football, basketball, baseball, all the playoffs, of course, of those college sports in terms of almost all the big leagues, most of the NCAA tournament, golf, tennis, cycling, soccer, and on from there.

2:45Each of the partners will own a third of the entity, but important to point out here as well, that doesn't mean that they'll each get a third of the revenues. It's my understanding that, for example, ESPN, which has higher fees and pays more to sports leagues, will get, as it flows through, a higher percentage of the revenues, conceivably from the new app. So while it will each be owned a third, that is the entity itself, the revenues will flow through to each of the partners in a different proportion. And the entity will not be bidding on sports rights on its own. It is simply an aggregation of the properties and a distribution mechanism to bring in more people.

3:29But each of the actual networks, ESPN, Turner, Fox Sports, will continue to bid on various sports rights. So not perhaps something that hasn't been thought about, but they are bringing this to fruition. The parties do seem quite enthusiastic, as you might imagine. And again, they hope to bring it as soon as this fall. It does not, Melissa, impact the continued conversations that ESPN Proper is having with potential equity investors. It's something we've talked about for some time, for example, with the NFL, which might contribute some of its cable networks at some agreed-upon valuation for a percentage ownership of ESPN.

4:13It's my understanding those talks continue. And it also doesn't impact the future plans that Disney has to have a direct-to-consumer offering of ESPN on its own. We may get more details, in fact, tomorrow when Disney reports earnings after the bell in terms of the timing. My understanding is the introduction of that product could be, let's call it, roughly a year or so away, and it would be sort of a different product than this one. But certainly an important moment. Melissa, that's the news as we have it right now. Seems pretty confusing, David, at least at first blush. I mean, if these entities are going to be bidding on sports rights individually, you know, the first reaction that I think many people had to this news was that this would put sort of a lid on how high those prices were getting.

4:56But if each entity is going to bid themselves, well, first of all, would they still keep the lid on because they're bidding against each other and eventually it feeds into this one app, which they to some level share? Or are they going to still be bidding in a very fierce and heated way because you earn those sports where you buy the sports rights and then you can put that on the linear channel as well? That, I think, is the expectation. But I think your question is a good one. And you do have to wonder. Now, remember, they are also competing against the likes of Amazon and increasingly even perhaps Apple as well on certain of these sports rights.

5:33But my understanding and again, why I made the distinction between the ownership structure and the revenue flow through is that if you're paying more for certain sports, you're going to get a bigger percentage of the overall revenue from wherever this thing is priced in terms of the subscription fee. if you're ESPN, for example, as would be the case right now. And over time, that may change. So that may perhaps also be impetus to continue to bid, not to mention, of course, being able to feed your linear networks, which are still of importance. David, it's Karen. I'm a little bit confused. I thought at the top you said that they are contributing all of their sports, each of the three contributing all of their sports.

6:13But then you talked about ESPN, I think, being still a standalone. Yes, it will be. In other words, if you have a cable subscription, you're still going to get ESPN. You're still paying for it. You're still getting it. So, but everything on ESPN will be available to the purchaser of this app, along with every sports that Fox offers and every sport that is offered by Warner Brothers Discovery, broadly speaking. All right. Dave, we're going to let you go. I think it, I know Karen's, her look is a little puzzled. I think we'll try and sort this out with Rich Greenfield, who's waiting in the wings.

6:51David, we appreciate your reporting. Keep us posted. I will. I'm sorry I left you confused. Rare. Never happens. David Faber. Let's bring in Rich Greenfield of Lightshed Partners. Rich, maybe you can shed some light on this. I mean, wow. We love shedding light, Melissa. Let's first shed the light. I think this is a$30 to$40 product. So let's start with price point. I know David was asking that question. I think this is going to be something that's quite expensive. You know, you're talking about a lot of sports networks. And remember, this is not Hulu. So like this is not Hulu for sports, meaning it's not like it's only going to work when the sports are on television.

7:31I believe what this is, is taking the linear networks, whether we're talking Fox, whether we're talking Fox Sports, whether we're talking ESPN or TBS and TNT. I believe all of those networks are going to be part of this. And so while the focus is obviously sports, I believe all of the content on those networks will be on this service. You're talking, you know, because you have to have affiliates and pay affiliates like Retrans. This is going to be an expensive service, not YouTube TV expensive, which crossed eight million subs today. But this is still going to be much more expensive than the Hulu's, Disney Plus's, Netflix's of the world because of all of those sports rights that are bundled in here.

8:10The real question is, you know, if I think about winners and losers right now, this is obviously, you know, a nice positive step for fans. It's going to make it a little bit easier to access just the content they want if they don't care about a lot of the non-sports cable networks out there or even some of the smaller channels that are out there. It's clearly not a good thing for companies like Paramount who are not being included in this. I'd say it's not good for NBC, although obviously within the size and scale of Comcast, I think it's less of a negative than it probably is for Paramount, which has been obviously the subject of a lot of M &A speculation recently.

8:47Rich, November 8th, Disney reported fourth quarter. Amongst many things Bob Iger said, we're committed to building ESPN into the preeminent digital sports platform. Is this part of that vision or is this sort of coming out of left field to you? I mean, it actually seems like sort of a pivot from there, doesn't it? I mean, it actually sounds like, hey, something that we've been talking pretty openly about is that having a single sports service, meaning ESPN on its own. Yes, I love Monday Night Football. I like college football a lot. But, you know, the ratings are very heavy, certainly focused around football season.

9:24How do you build something that people subscribe to all year? I think that's sort of what this acknowledges, that it's hard to have a service with just what ESPN has. So, yes, as David pointed out, I certainly think there'll still be an ESPN direct-to-consumer. But I feel like this is an acknowledgment that for sports to really work, you need a larger bundle than what any one company sports can achieve. And I think if you were to talk, you know, I mean, think about what Fox. Fox for years has resisted launching its own streaming service saying, we don't think a Fox streaming really works direct to consumer.

9:59They've waited, obviously, and are now putting it into this bundle, which I think is sort of what ESPN probably should have done from the beginning. It's hard to be on your own in the sports world because there isn't that sort of year round viewership. Sports are very seasonal and very tribal. And so I think this makes a lot of sense to work together. Why they didn't include NBC and CBS obviously is a big question for these companies in the weeks ahead. Hey, Rich, it's Tim. But who gets pulled up here? And it seems to me like Warner Brothers of the three gets pulled up and it gets into this. Pardon the pun on this, too.

10:31I mean, the flow through is not going to be linear in terms of the linear TV dynamic. In other words, so we know that they're not going to get paid equal amounts. But it does seem to me the other side of this is that I worry about Disney Plus, where there's a lot of people that had that bundle. And sure, they had Disney Plus, they had all the Disney stuff, but they really wanted more the access to the sports. But they took everything for a little bit more of a price. I would be worried about that. Look, I think the we're talking, you know, WBD. I think this is definitely a surprise that they're put into this group.

11:04You know, they don't have major NFL rights. And so I think that was sort of a piece that people were looking at it going without football. Are they as important? You know, I think there's been a lot of conversation. Does WVD need to merge with NBC Universal ultimately to basically have the power of the NFL? So this is really interesting that they're included. I think this is definitely a win for Zaslav to be included in this triumvirate that's going after the sports problem. Now, I will say, Tim, at a$30 to$40 price point, and it doesn't have CBS, NFL rights, doesn't have some of the Big Ten stuff that's on there, doesn't have EPL, doesn't have Sunday Night Football.

11:44Yes, you can sign up for Peacock and Paramount Plus separately. But I do wonder, how appealing is this service? I think that's sort of the missing question is like it isn't really the everything sports service. It's getting in the right direction. I think it's a tremendous step forward for the three management teams to actually start this and try to move forward with something innovative and different. I do have a question of like, what does this mean for Charter, Comcast, DirecTV? Like, how are they going to react? And they're going to say, why can't we bundle this exact same product? I think there's, you know, my guess is there's going to be a lot of questions being asked on conference calls over the course of the next few weeks about how can this actually be achieved relative to existing agreements.

12:27Hey, Rich, it's Karen. Thanks for coming on. Is this something that would need antitrust approval? Meaning to work together. Yeah. I mean, it's a fascinating question. Karen, no one has asked me that, obviously, in the last 20 minutes. It's an interesting question of, you know, is there going to be any sort of attack on this is like working together? It's not the leagues themselves. Obviously, the companies have already done something like Hulu. So there's certainly precedent for working together. And I would say, you know, there's certainly this is certainly not comprehensive in its control of sports rights.

13:01So it would surprise me if there was. But I would never say never. The one winner that I think we should be talking about, though, this would seem to be a huge win for the NBA and Adam Silver, because if this really helps, as you mentioned before, this is helping WBD be part of this. You have to believe that that means that WBD is going to retain rights for the NBA. Like, people were worried, we were worried, that they would lose those rights. I can't imagine they're going to be part of this joint venture and not retain NBA rights. And so it probably means that both WBD and ESPN are paying up to retain NBA rights, which is clearly going to be a nice win for Adam Silver and the NBA.

13:42Hey, Rich, it's Dan. Like, just let's say this thing launches for NFL. You mentioned the term NFL a lot. I was just looking at my YouTube subscription. It's$73 a month. I pay$11 a month for ESPN+. I kind of have everything I need there, and it's all streaming. It's all over the top. It seems like this is going to be a very confusing offering, and depending upon how far ahead of time they get it out before the NFL, is this thing DOA? Is it just to the point we weren't confused by David's reporting. We were confused by all the offerings and why it needs to exist and why it needs to exist the way you just described it without a bunch of other stuff that you already get on YouTube TV?

14:23The answer is yes. So I'm going to first say you're right, Dan, 100%. Two, I would say you do take YouTube TV and you don't have regional sports networks, right? So there is sports content that isn't there. You couldn't watch the NFL, the Travis Kelsey peacock game. You couldn't watch on your YouTube TV. You had to get peacock. And so the need for multiple services, this fragmentation of sports is a problem. Now, I think it is a positive that sort of the sports rights that are being owned by the three companies are being put into here. So incremental Big Ten streaming service, ESPN Plus is all being put in.

15:01So it isn't separate. But you're 100 percent right. This does not solve the one stop shop for all sports rights for a sports fan. YouTube TV is still better. It's obviously more expensive. But even there, you said you're subscribing to ESPN Plus in addition. So there is no magic bullet for sports. I think the one clear standout here is the loser is going to be basic cable entertainment channels that are not part of this package are going to have yet one more headwind and create even more challenges for these legacy media companies that don't have their channels in here. Rich, thanks so much for joining us.

15:40We appreciate it. It's exhausting and confusing. It really is. It really is. By the way, don't miss an exclusive interview with Disney CEO Bob Iger. That's tomorrow, 4 p.m. Eastern time, right here on CNBC when Disney reports earnings. So let's start off with that. Why is Disney the one that's trading lower, Tim? Well, first of all, the intrinsic value or the sum of the parts on Disney and what they were going to do with Disney at one point was a real catalyst to Disney shares, to ESPN. So what was ESPN going to be worth? And as Guy pointed out, I mean, Bob Iger's made it clear that there was a very strategic dynamic here.

16:14I think that's part of it. I think to the extent that some of the differentiation of Disney to me is that product. And so when they've started to merge. But I don't know where I can come up with the quantitative analysis on this. It's only qualitative. But I do think that the Disney Plus bundle that includes ESPN Plus is something that pulls in a lot of sports fans that might not otherwise have Disney. And I'm one of them. At the same time, Rich made an interesting point that sports is tribal, right? So you like a certain thing and you have a certain app because you like that season of sports.

16:45It's hard to build a year-round product. They're creating a year-round product. So if sports, if you're only going to watch certain sports for certain seasons, you're still not solving for that problem because why would you pay for everything else if you don't normally watch everything else? Well, so I guess this cannibalization problem, right? If this is the one-stop shop, do you need the half-stop? Right? I don't understand. It's not like I'll subscribe to this and I'm going to start watching whatever it is besides college football. You know, I don't know. Maybe that happens, but it seems like to Rich's point, people like what they like.

17:21They want to follow the teams that they want to follow. They want to follow the leagues. They want to follow certain seasons. And you subscribe accordingly. Yeah, and I'll go back to the question you asked, Tim, because that's what I'm sort of honing in on. Like, this doesn't happen without ESPN. There's no way, right? So Disney obviously had to get involved. So the question is, why would they do that if ESPN, I'm not saying they're the crown jewel, but clearly they wanted to build upon that last quarter. Something has changed, I think, over the last month and a half that obviously it's, you know, way beyond my pay grade.

17:50I'll say this. Disney's traded pretty well since that last quarter. It was trading 84 into the quarter, got up to 99 today. Now they really have to answer some questions tomorrow. You know, it's interesting. David Faber mentioned that this is going after maybe a demo. So younger men who just like a lot of sports and they're also doing a lot of sports gambling. And so when I hear this all the time, I'm not a sports gambler, but you hear about the streaming services. That's surprising to me, by the way. Well, actually, I went through. I did gamble a little bit on the NFL. He knows. I went 33, 10 and three in the last month of these.

18:20Oh, I mean, OK, pretty good. I'll document on my DraftKings account. But I'll just say this. But but here's the deal. There's a latency problem with the streamers. Right. So when you're watching it through traditional cable, so people don't like it because there's a lot of in-game gambling and the like here. So to me, I think that's a kind of really interesting issue. If you're going after that demographic, that demographic, they want to be watching it on TV. They don't want to be watching it on a streamer. Maybe they're sweating out against Disney. All these three are sweating out against Amazon, Apple, and Google.

18:52I mean, the world of the sports media landscape is changing a lot, and that may be part of this too. I just think it would be hard to wrestle these three to a deal, right, where they each have their different revenue streams, they each have their different contributions. They've got to figure out how to – The revenue streams would presumably change, you know, potentially quarter to quarter, season to season, whatever it is. And that's going to adjust every single time. It seems kind of complicated for a one-third, one-third. I'll say this. You know, you watch the World Series and you have to go from TBS one night over to ABC one night, Fox another.

19:25I mean, that's madness. But the good news is if you're a Mets fan, you don't have to watch. Well, hold on. Just really, really quickly. I know you guys want to get out. Guys, but this is actually what Apple TV does well. This is what those aggregators do well. They're all logged in there. So it is serving as an interface. So we're back to the bundling, unbundling, bundling, bundling. And now it's getting a lot more confusing. Mets, by the way, in a World Series in 2015. Yanks last in 2009. Yeah, we won in 2009. We talked the truth here. Anyway. Coming up, a number of names on the move in the after-hours session.

19:52Four jumping after reporting results. A burrito blowout. Ooh. Or Chipotle and Snap shares plummeting after its earnings report. We'll go inside all the numbers. More Fast Money in two. This is Fast Money with Melissa Lee right here on CNBC.

20:16Welcome back to Fast Money. We've got an earnings alert on Ford. Shares are popping after the automaker topped earnings and revenue estimates for the latest quarter. The company also giving strong guidance for the year. Phil LeBeau joins us with all the details. Hey, Phil. Hey, Melissa. A very nice report if you are a Ford investor, especially when you look at the guidance for 2024. We'll talk about that in just a bit. Let's look at the Q4 results. Better than expected, beating the street on the top and the bottom line by a wide margin, earning 29 cents a share. Street expecting 14 cents. Revenue,$3 billion better than expected.

20:47And the businesses, when you look at each of them, two of the three delivered nice numbers. First of all, commercial vehicles, we have said this time and again, Ford Pro is killing it. And they once again delivered in the fourth quarter$1.81 billion profit. ICE and hybrid business,$813 million. EVs, they continue to lose money there,$1.5 billion. By the way, CFO John Lawler just said on the conference call they expect to lose money on EVs this year as well. But here he is last hour talking to us about his view of where the market is right now in Ford's position. We have an incredible commercial business, which was up 20 % this year.

21:25We expect it to grow again in 2024. Our ICE business, Ford Blue, is doing very well. It grew the last two years. Profits were up. And, you know, we at Ford have an incredible position because we can offer our consumers choice across all powertrains, ICE, HEVs, and electric vehicles. So we cover the broad spectrum of what consumers want. All right, here's the guidance for 2024. adjusted EBIT range of$10 to$12 billion. Free cash flow this year expected to come in$6 to$7 billion. CapEx between$8 and$9.5 billion. And as you take a look at shares of Ford over the last year, two other notes here. If you are a Ford shareholder, you've got two dividends coming your way.

22:06One in the first quarter for$0.15 a share, and then a special dividend. The company has just announced it'll also be awarded in the first quarter, a little bit later on in the quarter,$0.18 a share. Any way you look at this, Melissa, this is the kind of report that Ford investors were looking for. Some reaffirmation in terms of both the commercial vehicle as well as the ICE hybrid business. That's where they've made their money, and they're planning to make real big money in those two areas this year as they continue to do that pivot towards EVs or away from EVs but more towards hybrids because that's where the demand is.

22:40I thought it was interesting, too, Phil, that Ford said they're going to defer certain capital investments in EVs until demand justifies it. So they're acknowledging it in terms of the spend that they had planned. Yeah, and they already said, what, a couple of months ago, that they were going to defer about$12 billion in EV investment to some point in the future. And they said at that time, which they reiterated today, which is we are going to be very judicious when it comes to making EV investments. Not giving up on EVs, but if the market's not there, they're not just going to pour money into it.

23:13Yeah. Phil, thank you. Phil LeBeau. So let's say interest rates were an issue for a lot of the automakers and they've peaked. Let's say labor costs were a big question mark. But now the strike is settled. So you had two major headwinds in 2023 and they're in the rearview mirror, so to speak. Well, there's a couple of things. And as a fourth shareholder, I do like a two and a half percent div yield. Now, when you add in that interim div is what it works out to me. It also seems like the other companies have been we're holding back some goodies from the unions during a pretty painful and pugnacious exchange.

23:46I think it's a case where if you look at this company on those cost savings, they're talking about two billion in global cost savings. And you look at the free cash flow that they've got it for. It's adjusted free cash flow. So I don't know what it's adjusted for. But six to seven billion or six and a half billion in the middle on a 48 billion market cap means this is a really high free cash flow yield for a company that people thought was really inefficient. They're talking about an ROIC of 20 percent up from 14. So this is a new age for a company that a couple of years or about a year, year and a half ago, you know, clumsily told us what they were doing wrong.