Prof G Markets: Is Target a Leveraged Buyout Candidate? + Comcast Cuts the Cord

Release Date: November 25, 2024

In this compelling episode of The Prof G Pod with Scott Galloway, hosted by Prof. G and Scott Galloway, the duo delves into several critical topics impacting the business and financial landscapes. From scrutinizing Jaguar's controversial rebranding to evaluating the contrasting performances of Target and Walmart, the discussion is both insightful and provocative. Below is a detailed summary capturing the essence of their conversations, enriched with notable quotes and structured into clear sections for ease of understanding.

1. Jaguar's Rebranding Controversy

[02:24 - 06:58]

The episode kicks off with a heated debate over Jaguar's new logo. Prof. G prompts Scott to share his thoughts on the rebranding, leading to a candid critique.

Scott Galloway expresses strong disapproval:

“This is more for a modern age and we need to update it… It’s a stupid fucking decision.”

He laments the departure from Jaguar's traditional image:

“He’s out, he’s hunting, he’s prey for his wife and his kids. He’s elegant, he’s sleek, he’s a jungle cat, jaguar. And then they go to this fucking thing that looks like it was created by AI…”

Prof. G concurs, highlighting the tagline "copy nothing" as a failed attempt to differentiate:

“Like, this is the only thing. But I look at that logo and it’s like you copied every single tech startup…”

The duo agrees that the rebranding lacks the powerful visual metaphor that made Jaguar iconic, criticizing it as a misguided move to appear contemporary.

2. Market Vitals Recap

[06:59 - 08:21]

Prof. G provides a snapshot of the current market environment:

• The S&P 500 exhibited volatility.
• The US dollar strengthened.
• Bitcoin surged to a new record above $98,000.
• The yield on 10-year Treasuries declined.

These movements set the stage for deeper discussions on antitrust actions and corporate strategies.

3. DOJ's Antitrust Case Against Google

[08:21 - 13:18]

A major focal point is the Justice Department's (DOJ) proposal to force the sale of Google Chrome as part of its antitrust case against Google.

Scott Galloway champions the breakup:

“It would be good for everybody… someone might come up with a search engine that is not trying to target young people or that screens out misinformation…”

He references a conversation with former Google CEO Eric Schmidt, who emphasized:

“Individuals should have almost limitless free speech, but computers should not have free speech.”

Prof. G remains skeptical about the effectiveness of forcing Google to sell Chrome, viewing it more as punishment than a constructive remedy:

“It just doesn't feel like a remedy… it feels more like a punishment.”

The hosts debate the potential economic and innovation benefits of breaking up Google's dominance in the search engine market, with Scott advocating for increased competition as a positive outcome.

4. MicroStrategy's Bitcoin Strategy

[13:18 - 19:22]

The discussion shifts to MicroStrategy, a company helmed by Michael Saylor, which has heavily leveraged its position to purchase Bitcoin.

Scott Galloway admires Saylor's visionary approach but questions the sustainability:

“MicroStrategy has become a levered bet on Bitcoin… There’s just no getting around it.”

He acknowledges Bitcoin's growing credibility as a store of value but remains cautious:

“Even crypto skeptics like myself have to acknowledge that Bitcoin has become a credible, tangible store of value.”

Prof. G notes:

“MicroStrategy's stock is outperforming Bitcoin itself, attributing this to the leveraged position Saylor has taken.”

The hosts express both admiration for the bold strategy and concern over the financial risks associated with such heavy leveraging.

5. Nvidia's Stellar Earnings

[19:22 - 31:23]

Nvidia reported outstanding third-quarter earnings, surpassing expectations with revenues over $35 billion—a 94% increase year-over-year.

Scott Galloway highlights Nvidia's unparalleled market influence:

“Nvidia’s market cap is greater than the entire stock market of countries like Germany… This is a phenomenon.”

Prof. G adds that Nvidia has become integral to global supply chains:

“The world relies on Nvidia in so many ways at this point. It has to be covered, whether or not it's interesting.”

They conclude that Nvidia is poised to be remembered as one of the great companies of our time, given its systemic importance and explosive growth.

6. Target vs. Walmart: A Tale of Two Retailers

[25:13 - 36:01]

A significant portion of the podcast analyzes the contrasting performances of Target and Walmart.

• Walmart reported a 5% increase in sales, raised its fiscal outlook, and saw a 3% rise in stock post-earnings.
• Target experienced a mere 0.3% sales increase, a 12% profit decline, and a 21% drop in stock value.

Scott Galloway suggests that Target is ripe for a leveraged buyout (LBO), given its undervalued stock (PE of 12) and strong brand:

“I think if I were to try and speculate what the problem is…the board should fire the CEO.”

He argues that Target's persistent underperformance makes it an attractive target for private equity firms looking to overhaul its operations.

Prof. G questions whether Target's management will acknowledge internal flaws or continue to blame external factors:

“Target's just done with it. The stock dropped more than 20%. They're just done with it.”

Scott reinforces the need for leadership change, predicting that Target’s board will soon replace the CEO to navigate the company back to profitability:

“After 10 years of really mediocre performance, he absolutely deserves to be terminated… I’d be shocked if that didn’t happen.”

The hosts draw parallels to other duopolies like Uber and Lyft, emphasizing the challenges of maintaining market share and innovation in highly competitive environments.

7. Comcast’s Strategic Spin-Off of Cable Networks

[43:52 - 55:13]

Comcast announced the spinoff of several cable TV networks into a new public entity, temporarily named Spinco. Assets moving to Spinco include MSNBC, CNBC, USA Network, Oxygen, E! Sci Fi, and the Golf Channel, while key brands like NBC and Peacock remain under Comcast.

Scott Galloway praises the move as a strategic realignment:

“The disposition or clarity around a brand architecture… is a very good move.”

He compares it to previous successful investments in distressed assets, such as Yellow Pages, highlighting how separating mature, cash-flow-generating units can unlock value:

“These companies are going to be making $68,000… these companies can spin a lot of cash flow.”

Prof. G computes the potential value of the spun-off assets, comparing them to similar public companies like Fox Corporation:

“This segment is probably worth ten and a half billion dollars… Wall Street hates cable in the same way that they hated Yellow Pages.”

Scott elaborates on the benefits of such spin-offs, including increased operational clarity and the ability to better manage declining assets without dragging down the overall company’s valuation.

8. Predictions and Future Outlook

[55:13 - 57:11]

In closing, Scott Galloway forecasts that the largest leveraged buyout (LBO) in history is imminent, potentially targeting giants like Intel or Target. He emphasizes the abundance of capital ready to deploy and the attractiveness of iconic companies currently trading at lower valuations:

“The biggest LBO in history is going to happen in 2025 and there’s a ton of capital on the sidelines.”

Prof. G echoes the anticipation of significant market movements, anticipating continued transformative deals in the near future.

The hosts wrap up by announcing an upcoming "Ask Me Anything" episode, inviting listeners to submit their questions for future discussions.

Notable Quotes with Timestamps

• [02:31] Scott Galloway: “This is a stupid fucking decision. This is the equivalent of putting shareholder money in the middle of the road and running over it in an XJR.”

• [13:03] Scott Galloway: “All of the innovation has been how to turn advertisers up by their heels and shake more money from them. It hasn’t been around consumer innovation.”

• [25:19] Scott Galloway: “The board should fire the CEO.… He absolutely deserves to be terminated… The last five years have not been strong.”

• [43:52] Scott Galloway: “This is a good move. It will be used potentially as a shell company to go and acquire other declining but high cash flow assets.”

• [55:33] Scott Galloway: “The biggest LBO in history is going to happen in 2025 and there’s a ton of capital on the sidelines. Some stuff is getting cheap. Great iconic companies, it’s getting cheap.”

Conclusion

This episode of The Prof G Pod offers a rich and engaging exploration of current market dynamics and strategic corporate maneuvers. Scott Galloway's incisive analysis, paired with Prof. G's thoughtful commentary, provides listeners with a nuanced understanding of the forces shaping today's business environment. Whether it's the potential LBO of Target, Comcast's strategic spin-offs, or the enduring dominance of Nvidia, the insights shared are invaluable for investors, business professionals, and anyone keen on staying informed about the evolving economic landscape.

Listeners are encouraged to stay tuned for upcoming episodes and participate in the forthcoming "Ask Me Anything" session by submitting their questions to deepen their understanding and engagement with Prof. G and Scott Galloway's expert perspectives.