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- [00:03]
Podcast Host
Bloomberg Audio Studios Podcasts Radio news. You're listening to the Bloomberg Intelligence Podcast. Catch us live weekdays at 10am Eastern on Apple CarPlay and Android Auto with the Bloomberg Business app Listen on demand wherever you get your podcasts or watch us live on YouTube.
- [00:24]
Paul Sweeney
Walt Disney saying that Josh D' Amaro will succeed Bob Iger as CEO of of the company. This ends a three year search to replace its long serving leader who had to come back after the first time around didn't quite work out. Let's bring in Geetha Ranganathan. She is our US Media analyst here at Bloomberg Intelligence. And I want to contrast what happened this time around with the succession planning, Geetha, with what happened in the past when Bob Chapek, also of the parks division was named CEO but didn't last too long on the job. Can you compare and contrast the different succession efforts?
- [00:59]
Geetha Ranganathan
Yeah, I think it was a very different time. Scarlet so remember he was appointed In February of 2020, March 2020, everything closes down, including, you know, Disney parks because of the pandemic. So it was kind of unfortunate. The timing was all wrong, I would say for Bob Chapek. And what happened then is of course, you know, movies were shut down, a big part of Disney's business, movies as well as the parks again. But then what really kind of shot into prominence at that point was the streaming business, a business that Bob Chapek was not really very familiar with. And while he did have some experience in content, obviously it was not enough and we had a whole bunch of different missteps with the content part of the business which kind of led to the whole mess that we saw follow. I think this time we're in a very, very different position. I think at that point Disney was still kind of trying to figure out what it really was. Was it a TV company, was it a studio, was it a theme park company or was it really a streaming player? And I think now the pieces have kind of fallen in place. We are on much more steady ground. I would say. You know, they have their clear mandates whether it is in streaming, whether it's in studio. You know, the clear what has really emerged clearly right now, Scarlett, is that parks is the main core growth engine of the company. And I think that is reflected in this choice today with Josh tomorrow.
- [02:24]
Paul Sweeney
So Geetha, Josh is a 28 year veteran of Disney running the parks. But of course the other big part of the company is its, you know, entertainment business. Dana Walden, who runs the big part of that business, great reputation in Hollywood. It's important to Keep her at the Walt Disney Company. Are they going to be able to do that?
- [02:48]
Geetha Ranganathan
I absolutely think so. So, you know, obviously this was a very clever move by the board to kind of create this new role for Dana Walden, make her the president and the Chief Creative Officer. They've never had this post before, but they specifically created this one for Dana Walden. So that I think really kind of, I think dispels a lot of fears about what would happen from a creative perspective. You know, last time, this was the same problem that many investors raised when Bob Chapek became CEO. So. So having her there in the creative role, I think definitely plays very well with Hollywood, with the creative community, and ensures that, you know, Disney will still have a top tier content coming to its streaming platforms for the foreseeable future.
- [03:32]
Paul Sweeney
So Josh Tomorrow takes the job on March 18th. That's when the succession is effective. And we talked about how yesterday Disney came out with a forecast that was fairly tepid. And one way of looking at that is it kind of, you know, clears the deck, lets him start off with a clean slate and set expectations and kind of manage it for investors the way that he sees fit. At what point does he own everything that happens to Disney?
- [03:58]
Geetha Ranganathan
So actually, a lot of the things that we're seeing right now with the parks has been under Josh Tomorrow's watch. Remember, once Bob Chapek was promoted to the CEO position, Josh Tomorrow assumed the role of chief of the parks. And so all of the different initiatives that we've seen, you know, whether it's Lightning Lane, whether it's Genie, whether it's the $60 billion expansion, a lot of that has been, you know, Josh Tomorrow's doing.
- [04:26]
Paul Sweeney
So.
- [04:26]
Geetha Ranganathan
Yeah, I mean, of course, you know, I think the street is definitely going to give him a few quarters to kind of settle in. But he has pretty much been the architect along with Bob Iger, I'm sure, and the rest of the management team in kind of instituting the strategy and making the parks a prominent part of the portfolio going forward. So. So very soon, you know, the short answer, Scarlett, is very soon. I think he owns pretty much all of this right away.
- [04:51]
Paul Sweeney
In fact, Keith, if I were Josh Tomorrow, day one of my tenure as CEO, I would go and I would say, hey, explain to me why we are not spinning out our broadcast and cable networks. They are businesses that are in a secular decline. They're dragging down our multiple. Let's cut them loose. Do you think that's even an option for the Walt Disney Company?
- [05:11]
Geetha Ranganathan
I think it is. I think everybody is considering that right now. I mean, we've just seen what, you know, Warner Brothers Discovery has been able to achieve by kind of separating out its studio and streaming from the TV networks business. So I definitely would not rule that out. I'm sure Disney will consider, and Josh tomorrow will consider all options once he becomes CEO.
- [05:33]
Paul Sweeney
What happens to Jimmy Pitaro over at espn? I mean, does that become part of the spin out as as Paul was talking about it? Because there's different parts of Disney's media business that are slowing down, that are no longer the crown jewels the way they once were. Whether you're talking about the network television or whether you're talking about ESPN or whether you're talking about the movie business.
- [05:54]
Geetha Ranganathan
I think sports is still very core to Disney. I mean, they are. So. So if you just kind of look at the U.S. sports landscape, ESPN actually owns majority of the marque U.S. sports rights. Almost about 40% of all sports viewing happens on ESPN platforms. So obviously it's still very core to the company as far as Jimmy Pitaro is concerned. Scarlett, I mean, yes, he was one of the, you know, candidates that they were considering to take on this job, but I think he himself had many times indicated that he was not really interested in the top spot. I think he kind of carries on business as usual with espn. You know, it's a little bit of a wait and watch what exactly happens with the strategy. It is really instrumental, I think, to their streaming business because, you know, as they kind of mentioned even yesterday on their earnings call, you know, a lot of people taking the bundle, the ESPN streaming plus, the Disney plus, the Hulu. So it is a critical portion of that. So I'm not really sure how exactly a spin out would, would work. But of course, again, you know, we are in a very, very different time and age and everybody is thinking about all possible options when it comes to media.
- [07:00]
Paul Sweeney
Stay with us. More from Bloomberg Intelligence coming up after this.
- [07:08]
Podcast Host
You're listening to the Bloomberg Intelligence podcast. Catch us live weekdays at 10am Eastern on Apple CarPlay and Android Auto with the Bloomberg business app. Listen on demand wherever you get your podcasts or watch us live on YouTube.
- [07:22]
Paul Sweeney
PayPal holdings said HP Chief Executive Officer Enrique Llores will take the top job from Alex Kriss, whose turnaround plan failed to meet targets and streamline the payments business. The stock's down 19% today, 52 week low off 27% year to date, off over 50% over the trailing 12 months. This is a name I thought at the beginning of this whole fintech thing that this had a, this was a company that could really be a leader there. But that has not been the case. Dick Sugar joins us. She's a senior fintech and payments analyst for Bloomberg Intelligence. Dick said not a good day for PayPal. What's going on here?
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Dick Sugar
Yeah, Paul, definitely right, like two big headlines hit at once, missed 4Q expectations and announced a CEO change. So on the print side, adjusted EPS was about a 4% miss and the revenue came in 1% lower. And I should highlight this is like their first miss in two years. But I think the bigger issue is forward looking branded checkout, which is the main core high margin business for PayPal that has slowed to 1% in the fourth quarter and PayPal is also flagging an earnings decline for 2026. So those were the key forward looking problem areas. And the CEO change definitely was a surprise. I mean the guidance revision was driven by their investments in some of the merchant business that they're doing. But I think the market reaction goes beyond that. I think it goes more around some of the serious gaps that appear to have been discovered, especially with Apple Pay and all the product advancements that the competition has come through. And I think, yeah, lots to unpack there today.
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Paul Sweeney
So just give us a sense of the competitive landscape of the businesses that PayPal's in, the financial technology and kind of where do they fit in? What are they maybe not doing right here?
- [09:20]
Dick Sugar
So PayPal has two parts of the ecosystem. It works with the merchants where you see the PayPal button when you check out, and it works with the consumers through its app, the PayPal app and the Venmo app. What is very interesting is that management kept highlighting execution, discipline and prioritization. But honestly that is the main game. PayPal's biggest value add is the two sided network they could not have afforded to either drop the merchant or forget about the consumer. So it's been like it's a very competitive landscape. You have Stripe, Adyen, Apple Pay. As you would have noticed recently, they revised their partnership from, they moved from Goldman to JP Morgan. So everyone is charging full stead and PayPal needs to show up and that. And I thought they were getting there, but I think this new CEO change definitely puts a multi year transformation back into play now.
- [10:19]
Paul Sweeney
So what do you think is the, is the next step for this company here? I mean a can of kind of remain competitive in this business going forward? Does it need to think about a new structure or a new strategy? What do you think needs to happen here?
- [10:34]
Dick Sugar
Yeah, that's the million Dollar question Paul? I think so. There are two things. One is I think investors need, really need clarity now on how people reaccelerates its core checkout business. Is it conversion, is it pricing? Merchant value proposition? Because that's still the core engine. But I think secondly is whether the new leadership really signals a broader strategic shake up. Like do they streamline initiatives, are they going to step up cost discipline or capital return? Or if it doesn't work out maybe they'd consider like big assets like Venmo. You know strategically the performance doesn't inflect from that.
- [11:08]
Paul Sweeney
So what's the fintech landscape like these days? Dictionary? It seems like it's very quickly evolving here. Just give us a sense of the lay of the lanyard. Boy, you talk to anybody under the age of 30, they ain't got any cash in their pocket. So it's a whole new world out there.
- [11:24]
Dick Sugar
Yes, I'm with you. Which is why it was quite interesting that they replaced Alex Kris as the CEO. I think the landscape is intensely competitive. The two key themes that are driving at the cutting edge of fintech is the innovation around agentic payments, agentic commerce, where PayPal was showing up in a big way as well and stablecoins which is again like moving transactions on the blockchain. And things are moving really fast Paul, because as you really pointed out like nobody carries cash in their wallet. The younger generations want transactions to happen in the flip, a flip of a second. There is and you know the pace at which software and AI has moved payments needs to kind of keep pace with that. So and the regulatory regime obviously has supported that as well. So there is a lot going on and I just worry that if people is going to get left behind.
- [12:21]
Paul Sweeney
Stay with us. More from Bloomberg Intelligence coming up after this.
- [12:28]
Podcast Host
You're listening to the Bloomberg Intelligence podcast. Catch us live weekdays at 10am Eastern on Apple CarPlay and Android Auto with the Bloomberg business app. Listen on demand wherever you get your podcasts or watch us live on YouTube.
- [12:42]
Paul Sweeney
Pepsi out with some numbers today. The earnings beat estimates but for me the big thing is Pepsi is going to cut Doritos prices by as much as 15% to boost demand. When do you see that? I. I just can't remember.
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A double digit price cut.
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Yeah, I just don't think you.
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Ken Shea
Well, I remember raised the prices initially.
- [12:59]
Paul Sweeney
So are we back to square one when all the supply chain stuff happened? Okay, I could see how they were jacking up prices because they're post pandemic but they don't come down after the stuff's over, do they. I mean, it's not like an avocado, which is a commodity.
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I want to see this charted out what it looks like. Yes, over time.
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Ken Shea, senior consumer products analyst joins us here from Bloomberg Intelligence can talk to us about Pepsi again. Came out with some earnings results and then some interesting topics about pricing some of their products.
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Ken Shea
Yeah. Hi Paul. Yeah, PepsiCo's numbers today, as you alluded to, they beat their expectations by a little bit. But I think the broad takeaway for investors from today is, is that PepsiCo is committed to bringing better focus to this company. You know, I've covered this company a long time and its primary competitors, Coca Cola, Keurig, Dr. Pepper, you could say primo water monster. How they differ from PepsiCo is they're much more focused, particularly on specific categories. But PepsiCo, with the urging of the activists urging them on, is bringing more focus to this company. And what I mean is they're rationalizing a lot of the SKUs that really are contributing much. They're consolidating plans, they are bringing more rationality to the trade spending. So when I hear things that are going to cutting price, that's, that's tactical. That's just a way to, you know, move the need a little bit with near term sales. But I think the bigger picture is to bring in more focus to this enterprise and I think that's what's behind a lot of enthusiasm behind the share price today.
- [14:33]
Paul Sweeney
Right. I mean, investors are excited about its strategy as opposed to just kind of moving forward with the way it's always been. When it comes to those price cuts though, I wonder if this is going to spark any kind of price war. Will other snack makers feel the pressure to also reduce prices even if they've gone up quite a bit since the pandemic?
- [14:53]
Ken Shea
That's possible. Scarlet in the case of Frito Lay, though they have such a dominant market share, they have like 60% of the market in the, in the measure channels and we have that much of a share. You're the, you deserve a premium. Particularly with PepsiCo's direct store delivery system. What that means is that they help their retailers much more than a lot of their competitors. And that is they actually go to the store, they're quick to respond to out of stocks, they help, you know, position the product, they create the end and end caps in the, in the store. They do a lot more for the retailer than their competitors. And so that's how they are helped to get premium pricing. So yes, they're rolling back some prices. You know, it's no secret that price increases have been up quite a bit since the pandemic. A lot of it's cost driven and private label has encroached a little bit on PepsiCo share. But to answer your question directly, they are the dominant player. I would not expect them to give back too much over time. And while their competitors may cut prices as well, I think retail would be alienating consumers if they push too hard on PepsiCo's price increases down the road.
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Paul Sweeney
I was just in the shop right in Belmar, New Jersey yesterday. Lots of private label stuff on the shelves, I mean prominent shelves.
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Are you reaching for those?
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I am in many cases. I am in many cases. Can talk to us about Elliott management there. They've been in this company, they've owned this stock here pushing for some change. How much, how much of an impact are they having?
- [16:28]
Ken Shea
I think on the margin there's an impact, Paul, maybe to the degree that PepsiCo is hastening its move to more focus. You know, a lot of the things that it's been doing all along and that is upgrading their portfolio with more functionality. This is some of the things we talked about in the past. They're bringing more protein to their mix. The poppy prebiotic sodas, they're bringing, I'm sorry, more fiber. The prebiotic sodas, they're bringing more protein by restaging Muscle Milk. So bringing more value to the beverages. So they've always been doing that. But to your question, Elliott is pushing them to do things like, okay, you can still do that but also cut costs a little more aggressively. You know, maybe, maybe you don't need all these plants, maybe you can consolidate some, Maybe there's some SKUs, you know, some products that aren't selling well, you can roll those back, be a little more nimble when it comes to getting rid of some products that aren't winners because at the end of the day you have to grab as much shelf space at the retailer as possible. And when you have products on the shelf that aren't moving, you're not helping them, you know, with their business. So be more, a little more aggressive with that. So it's helping and I think that's a positive thing for shareholders.
- [17:46]
Paul Sweeney
Is this a company that's going to have to separate its drinks business from its snack business?
- [17:52]
Ken Shea
Well, that's the age old question we've been talking about for a while. And as I mentioned, if it can prove to the market that this increased focus that they have with just doing their, you know, daily business or running these operations, if they can improve them, I think the heat will be off for them to go to the draconian measure of breaking up food and beverages. That's always, you know, the wild card, I think down the road and I think will be well received by the market, quite frankly. But I don't think it's necessary at this point.
- [18:22]
Paul Sweeney
What are you consumer products companies telling you, Ken, about just the consumer out there?
- [18:29]
Ken Shea
Well, Altria, just the other day, I mean, it's a different market with cigarettes. You know, they noted that consumers are still hesitant in paying up for premium products. Now cigarettes is in the same category as salty snacks. But they do note that consumers are reaching for the private label, the low priced alternative, more than they've done in the past. And so the extent of that that carries over to, you know, snacks and beverages. I can see some parallel lines here. And as more companies, you know, release their numbers, I think that could be a common theme here, that private label is encroaching and maybe there needs to be some more deceleration in the, you know, reliance on price increases to stimulate sales growth.
- [19:14]
Paul Sweeney
Stay with us. More from Bloomberg Intelligence coming up after this.
- [19:20]
Podcast Host
You're listening to the Bloomberg Intelligence podcast. Catch us live weekdays at 10am Eastern on Apple CarPlay and Android Auto with the Bloomberg business app Listen on demand wherever you get your podcasts or watch us live on YouTube.
- [19:34]
Paul Sweeney
It is earnings season. We're knee deep in it. And Big Fish Pharma is reporting. And let's start off with Pfizer. The shares are down about 3.4%. Pfizer is trying to break into the anti obesity market. The, you know, the diet pills. We don't call it diet pills. Weight loss.
- [19:51]
Weight loss pills.
- [19:52]
Yes. And not getting very far in it. They've made some big, big investments and it's time now to see how it's all paying off. Or perhaps not. Sam Fazelli is our director of research for global Industries and and senior pharmaceuticals analyst. And he's in London right now with a jacket that says Paul, what does this B.I.
- [20:09]
Drug boss. B.I. is Bloomberg Intelligence.
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And he's the drug boss.
- [20:13]
And he's the drug boss.
- [20:14]
All right.
- [20:14]
Sam Fazelli
So your producer told me I can wear it.
- [20:17]
Ken Shea
Sure.
- [20:18]
Sam Fazelli
If I shouldn't have a very good friend of BI got this for me. So I thought at least once I should hear it. Otherwise I'll put my boring jacket on next.
- [20:26]
Paul Sweeney
No, no, no. We welcome it, Mr. Drug Boss. So thank you for joining us again, Sam. Let's Talk a little bit about these Pfize results because it feels like it's the, you know, people aren't paying that much attention to what happened in the fourth quarter or even the reaffirmed full year guidance. It's all about, you know, the latest data on the obesity drug from that Sarah, which Pfizer is purchasing.
- [20:49]
Sam Fazelli
Yeah, yeah. So look, they paid $10.1 billion for this and the share price is down 3%. Is it all to do with that or is it people being reminded again that the next three, four years there's a major headwind from generic drugs coming for their, some of their products on the market, Ibrands, Xtandi, etc. So that's partly the issue and you know, in order to deal with that you need assets and drugs that are going to try and hopefully fill the gap. And maybe this is the problem with the data. The thing is we've looked at the data, as you know, we have very deep obesity analysis. We've looked at the data and it's not terrible. But as I said the other day when Roche reported some numbers, think folks are getting over this percentage here, percentage there. You can only disappoint going forward. You can't, you know, unless you give out somebody 30, 40% weight loss, which of course nobody wants. So this is getting to a point where now it comes to the nuance and unfortunately we don't have a lot of the nuance that we need to know about this data set tolerability and it is good because it's a once monthly injection after the first few weeks. So it's well set up. But the market obviously doesn't like it because they're not getting enough information about how good actually it is.
- [22:05]
Paul Sweeney
Sam, it seems like if you want to be an investor in big cap pharma, you really have to be a stock picker. I've got stocks like Pfizer and Bristol on a trailing twelve month basis that are down but I've got stocks like Johnson and Johnson and Eli Lilly and Abbey V. They're up big. And is that just because they've got the right portfolio of drugs and the others don't?
- [22:25]
Sam Fazelli
Entirely, entirely about that. What is, what you don't want is looking into the abyss of generic drugs coming for your big earners with no obvious pipeline versus let's take a Johnson and Johnson in this case. They have a phenomenal set of drugs for the multiple myeloma space or a whole, you know, other oncology spaces. This is a powerhouse and of course they've also still got the other divisions, medical devices growing quite nicely. So. And no, massive. I mean, there's one that's coming up, big hole that's coming in terms of generics, but they've still got these things that are growing at phenomenal speed. And one of their, one of their drugs, Darzalex, is very close to $20 billion and that's just one indication in multiple myeloma. So they've done everything right in that case and that's what the market likes.
- [23:17]
Paul Sweeney
So in other words, Sam, this is something that can be managed. The fact that Pfizer hasn't managed this well raises a lot of questions here because, I mean, it's not like just one day they woke up and oh, you know, there's suddenly a lot of competition for some of their best selling drugs or people are no longer paying up for Covid treatments, Covid vaccines. In terms of management, do, do investors need to question whether Pfizer has. Right. Management in place?
- [23:44]
Sam Fazelli
Yeah, I mean, look, this is a tough game, right? Not the game, of course, but this is a very tough set of issues to deal with. Creating Pipeline takes a lot of effort. Let's take Eli Lilly. For years, nobody was paying too much attention to their potential margin expansion that was coming and they were arguing for it, etc. Maybe they were lucky. They hit on these obesity drugs. Look at AstraZeneca. It took quite a lot of pain for Pascal Sorio to right that ship when he took it. So management's part of it then you need to be lucky. You cannot have just one or the other. And Pipeline, you know, we'll see what Pfizer shows us over time. They have assets that are in early development that we need to start seeing. Bear fruit.
- [24:29]
Paul Sweeney
Hey, Sam. John from the Jersey Shore chimes in and he asks, will I have a meaningful impact on coming up with new drugs, new therapies? Is this going to really be a game changer?
- [24:40]
Sam Fazelli
It will be. You need my colleague Andrew Galler on, because he's done a lot of work on this and yes, the answer is it will be. Depending on what area you're looking at, we think you can cut the time to get a drug to market by a year or so in the next five to 10 years by the fact that you can use it for doing much better work in the very early stage, in the preclinical stage, you can shave some serious time off that. We talk to a lot of hospitals, a lot of clinicians, a lot of scientists, and they're all super excited by that one of the key things that people are using is this thing called AlphaFold that was developed by Google's DeepMind, and that is really making a difference to people hunting for drugs at that early stage.
- [25:21]
Podcast Host
This is the Bloomberg Intelligence Podcast, available on Apple, Spotify and anywhere else you get. Your podcasts listen live each weekday 10am to noon eastern on bloomberg.com the iHeartRadio, Apple Tune in and the Bloomberg Business app. You can also watch us live Every weekday on YouTube and always on the Bloomberg Terminal.