← The Rundown
The Rundown
Netflix Buys WBD in Historic $83B Deal, Tesla Launches Affordable Model 3 in Europe
00:09:57
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Public.com presents the rundown, your daily market update in under 10 minutes. My name is Zaydad Mani, and Today is Friday, December 5th. In today's episode, we'll break down the blockbuster $83 billion deal between Netflix and Warner Brothers and how the market is reacting to it and why I think it's a terrible deal for Netflix. We'll also tell you about the moves that Tesla is making in Europe to revive their sales. Then stick around to the end of the show to find out how the winner of the World Excel Championship takes home in prize money. It's a lot less than I thought. We got a great show for you today. Let's go.
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Yesterday was a pretty slow day in the markets. The S P500 did edge out a 0.1% gain. The Nasdaq was up 0.2%. But small caps continued to outperform, with the Russell 2000 jumping another 0.7% and hitting record highs. You know, I said this on yesterday's show that we might see a rally in small caps because investors are convinced that the Fed will be cutting interest rates at their meeting next week on December 10th. And small companies tend to be more reliant on debt than larger companies. So lower rates means lower borrowing costs, which could have a meaningful impact on small companies. Bottom line. Now, the big macroeconomic headline this morning is that we finally got the delayed September PCE inflation report. You know, the PCE is the Fed's preferred inflation gauge. They like to look at that more than the CPI. And the PCE inflation in September was up 2.8, which is right in line with expectations. Now, obviously this data is pretty old at this point, but it's nice to see there wasn't any unexpected spike in inflation back in September. And we should be getting fresh November inflation and jobs data in about two weeks. The market seemed to like the PCE inflation report. I'm looking at the tickers right now, and it seems to be green across the board. In fact, we might close the day at record highs. So, yeah, the next couple weeks should be very interesting as we close out the year. As always, make sure you guys are locked into the podcast and tuning in every day to stay in the loop. Let's run through some headlines, starting with Netflix. Netflix is buying Warner Brothers discovery for $83 billion, making this Netflix's largest deal by far and the largest entertainment deal of the decade. Now digging into the details. Warner shareholders will receive $23.25 in cash and and $4.50 worth of Netflix stock So Netflix is dropping more than $50 billion in cash to buy the company. As part of this deal, Netflix will take ownership of the Warner Brothers movie studio, the studio lot, and also the streaming service HBO Max. Once this deal closes, Netflix will control some of the most valuable franchises in entertainment, including Superman, Batman, Harry Potter, Game of Thrones, the Sopranos. I mean, Warner Brothers has a massive and iconic catalog. And I guess that's why Netflix wanted to spend so much money to buy them. Netflix CEO Ted Sarandis said in a statement that netf mission has always been to entertain the world. And by combining Warner Brothers incredible library with Netflix's library and Reach, they can give audiences more of what they love. And what's crazy here is that Netflix isn't even buying all of Warner Brothers Discovery. See, Warner Brothers also owns a ton of cables, channels like tnt, CNN and the Discovery Channel. Those are being spun out into a separate company called Discovery Global. Now, that part of the business was already struggling. Revenues were down 23% last quarter. So Netflix obviously didn't want the cable business. They just want to take the good stuff for which is the movie studio and the streaming service. Now, this deal just got announced this morning. I'm still processing it. The market's initial reaction, though, hasn't been great. Netflix Stock is down 4% this morning. @ the time of this recording, you know, I'm kind of shocked that Netflix is moving forward here. Warner Brothers put themselves on sale back in October, and most of the rumors thought that Paramount or maybe Comcast would be the ones that buy them. They both put in a bit, but ultimately Netflix put in the best bid. Now it looks like Paramount is kind of upset that they lost out on this. They even sent a letter to Warner saying that the Netflix bid wouldn't even get approved by antitrust regulators. And what's funny is that Netflix even acknowledged the antitrust risk. But to get the deal over the finish line, they agreed to Pay Warner's a 5.8 billion dollar breakup fee if this deal gets rejected by regulators. So that's a massive breakup fee. They seem to be confident they're gonna get this deal to go through. Now, I'm still trying to figure out how I feel about this. Full disclosure, I own some Netflix stock. I bought some this year after seeing how obsessed my daughter was with K Pop Demon Hunters. You know, as a consumer, I think I like this deal because I subscribe to both Netflix and HBO Max. And if Netflix just absorbs HBO Max, then I might end up saving some money. But as a Netflix shareholder. I'm not loving this. This deal doesn't make that much sense to me. Like, I'm not sure why Netflix is even doing this. Why are they spending so much money to buy Warners? You know, there's data suggesting that a ton of Netflix subscribers already subscribe to hbo. Like, I'm one of those people. So Netflix acquiring HBO isn't going to net them a ton of new subscribers. Plus, Warner Brothers releases big budget movies in theaters, which Netflix doesn't do. So this deal is probably bad news for the Hollywood entertainment and movie theaters as well. Maybe Netflix will change their business model moving forward and start putting movies in theaters. But I think a lot of people working in Hollywood aren't going to like this because this means one less studio for actors and writers and directors to work with. Less competition isn't good for them. So, yeah, there's a lot to digest when it comes to this deal. If this deal does end up closing, it could reshape Hollywood and the entertainment industry at large. I just don't think that Netflix had to do it, though. Let's shift gears and talk about Tesla, because Tesla is rolling out a new Standard Model 3 in Europe as a more affordable option for buyers. And the price of this new Standard Model 3 will depend on which country you live in. It's $32,000 in Norway, but much higher in other countries like Germany. But Tesla really needs this model to be a hit because competition in Europe is brutal right now. Chinese automakers like BYD keep gaining ground because they offer cheaper cars. Like BYD has a new electric hatchback called the Dolphin Surf. It starts at 26,000 dol thousand dollars. So it's a much cheaper option than even Tesla's standard model 3. So I'm not sure if this new car is going to be enough for Tesla to win back market share in Europe. But you know, I've said this before, the cars don't matter anymore when it comes to Tesla. The success of the company will now depend on if they can get full self driving to work. Because if full self driving reaches full autonomy or close to it, then people will spend more money to buy a Tesla because they want that feature. Tesla's making a lot of progress there, but they're not fully there yet. And with the progress that Waymo is making, Tesla might be starting to run out of time. Let's talk about some stocks making moves today. Ulta shares are getting a nice boost this morning after the beauty retailer beat on earnings for Q3 and raised their full year sales outlook for the second straight quarter. The company has been making improvements to their product assortment and upgrading their stores and also improving their digital experience, and that seems to be paying off. Comparable sales jumped 6.3% and year over year in Q3. As a result, Ulta stock is up more than 6% this morning following the earnings. Now, Ulta CEO did acknowledge that consumer budgets are tight right now, but beauty products tend to be resilient, even in an economic slowdown. In fact, there's the famous Lipstick index, which shows that sales of makeup increase during an economic slowdown as consumers cut back on high ticket items and spend more on beauty products, which are more affordable. So investors are feeling pretty bullish about Ulta right now. Now, on the flip side, HP shares are sliding this morning after the enterprise tech company issued a weaker than expected outlook for the upcoming quarter. The issue for HP is that their AI server sales are getting pushed back. A lot of HP customers, especially sovereign governments, are placing orders with much longer lead times, which means that revenue is shifting into the second half of the year. HP even said that their AI server revenue will dip sequentially before picking up later next year. In fact, they expect Q1 revenues to come in below Wall street estimates. So investors are seeing that as a warning sign. And HP stock is down around 9% this morning. Let's wrap the show with a fun fact. The Microsoft Excel World Championship just wrapped up in Vegas this week, and it went way harder than I would have expected for a spreadsheet competition. I was watching some clips. These guys were doing WWE style intros. The crowd was really hyped. The energy was legit. There were 25 competitors competing for the championship and. And shout out to the champion, Dermund Early. He's a financial consultant from Ireland and apparently he's like the LeBron of competitive Excel. He takes home a trophy, a championship belt, and a $5,000 prize. I gotta say, if you're a finalist at this event, that has to go on your resume, right? Because everyone lies about how good they are at Excel on their resume. But these guys have the receipts to prove it. Honestly, I'm kind of surprised that the champion only gets a $5,000 prize. I'm not gonna lie. I kind of want to go to this event next year. Well, all right, guys. That's the rundown for today. That's the rundown for this week. Hope you guys enjoyed today's episode. If you did and you have like five extra seconds, consider giving us a five star rating on Apple, Spotify, YouTube, wherever you listen to your podcast. If you are listening on Spotify, don't forget to vote in today's Spotify poll. Leave us a comment on Spotify. All that engagement really does help us out and it helps help other people find the show. Also, as a heads up, we're posting a Deep Dive episode tomorrow and an awesome interview on Sunday morning with the CFO of oklo, the nuclear energy company that's making a lot of headlines recently. It was a great conversation I think you guys really enjoyed. So keep an eye on your podcast feed this weekend for that. Thank you guys again for listening, watching and commenting. Shout out to Mike and Connor for all the work behind the scenes and we'll see you guys back here.
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Tomorrow.
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