August 6, 2025 • 21 mins
Watch Paul LIVE every day on YouTube: http://bit.ly/3vTiACF.
Bloomberg Intelligence hosted by Paul Sweeney and Isabelle Lee
- Geetha Ranganathan, Bloomberg Intelligence Analyst on US Media, recaps Walt Disney earnings. Walt Disney Co. gave a mixed earnings report, highlighting strength in its streaming and parks business in the fiscal third quarter, while giving a tepid outlook for profit this year.
-Michael Halen, Bloomberg Intelligence Senior Restaurant and Foodservice Analyst, recaps McDonald’s earnings. McDonald’s Corp. sales picked up in the latest quarter, suggesting that pop culture-focused collaborations and budget meals are helping to offset diners’ economic anxiety.
- Woo Jin Ho, Bloomberg Intelligence Senior Technology Analyst, discusses SuperMicro earnings. Super Micro Computer Inc. lowered its fiscal-year revenue forecast to at least $33 billion, raising questions about sales and pricing pressures around powerful AI servers.
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Episode Transcript
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Speaker 1 (00:02):
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Speaker 2 (00:23):
One of my companies I used to cover the Walt
Disney Company Mickey Mouse. They reported some numbers, better than
expected numbers, so of course stocks down two point nine percent.
So the Walt Disney Company reported better than expected third
quarter earnings, with continued growth at its parks and streaming
business overshadowing a tough climate for movies and traditional TV.
Let's break it down with Keitha Rungino that she covers
(00:44):
all the media stuff for Bloomberg Intelligence. Keitha, it seemed
to me like on the service, a pretty good quarter
for Disney. What's the street a little concerned about?
Speaker 3 (00:55):
Yeah, really good quarter for Disney. Paul the beaten raise,
for sure, I think Elevator, you know, expectations might have been,
you know, slightly high, and the fact that they didn't
necessarily give us any specific guidance for fiscal twenty twenty six.
They did point to a raised guidance for EPs growth
for fiscal twenty twenty five eighteen percent now instead of
(01:17):
sixteen percent, But they didn't necessarily give us anything specific
for fiscal twenty twenty six. That could be a slight
source of disappointment. Other than that, the only other thing
that I think might be causing this reaction is that
they did say that they will stop disclosing Disney Plus
subscriber numbers. But again, this is not something totally unexpected.
I mean, Netflix has stopped doing this. We're seeing this
(01:38):
kind of move away from just subscriber numbers to a
greater focus and profitability.
Speaker 4 (01:42):
I want to zero in on parks because I'm still
scarred by how expensive it was when I visited a
couple of years ago as an adult. But how sustainable
is their strong parks performance given the divergent domestic and
international performance.
Speaker 3 (01:56):
Very sustainable, Isabell. So you know, we saw Domesta stick parks,
and I say that because you know domestic parks actually
coming into this year, Coming into this quarter, there were
a lot of worries, one of course, about the general
macroeconomic environment, but the bigger source of worry was really
the opening of Epic Universe, which is you know, Universal's
big Florida theme parke at traction. But the fact that
(02:17):
it had absolutely no impact at all, or very very
modest impact, if at all, is really amazing, and it
just kind of speaks to the resilience in Disney's business model.
They reported again very very strong per capita growth, you know,
in terms of food and beverages, in terms of concessions,
so all of that doing really well. And the reason
I'm so positive about this business going forward. First of all,
(02:40):
it contributes about fifty five to sixty percent of Disney profits.
Are really really important to their top line, to their
bottom line. Definitely, they have a lot of upcoming capacity,
So the biggest source of expansion over the next few
months is really going to be their cruise ships. They're
launching two new cruise ships, their biggest ever actually, which
is going to come on board in November, and this
(03:01):
one of them sets sail from Asia and that basically
takes the number of cruise ships to eight cruise ships,
effectively kind of doubling their capacity in a span of
just maybe two to three years. So that is going
to really buoy you know, both top line and bottom
line going into twenty twenty six, and then beyond that,
you really have this huge sixty billion capital expansion plan
(03:22):
that is really going to play out over the next
five to ten years. So we're going to see a
lot more attractions all over the world. We're going to
see that new Abu Dhabi park come out, So there
is really a lot of you know, a sustained momentum
that we can expect at the park's going forward.
Speaker 2 (03:36):
Kitha talked to us about that deal they just made
with the NFL. It seems like a really positive development.
Speaker 5 (03:42):
For the company.
Speaker 3 (03:44):
Yeah, it's really good. I think from a Disney from
an ESPN standpoint, that they're so closely aligned now with
the NFL. I mean, the NFL is absolutely the premium property,
the gold standard, Paul. You know this well when it
comes to you know, sports properties in the US. And
the fact now that they're going to be able to
use all of this content for their upcoming esp and
streaming launch, I mean that itself just kind of gives
(04:07):
it a tremendous boost, I think even before you know
it comes on board. So it's great for the product.
It's also great from a strategic standpoint because the NFL
is obviously one of the most important sports properties, and
this really gives them access or it at least definitely
gives them a little bit of an advantageous position compared
to let's say, an Amazon or a Netflix or an
(04:28):
Apple if they want to ever outbid you know, the
current media partners. So definitely, I think a strategically, very
very sound move on the part of Disney.
Speaker 4 (04:36):
So it seems like we had a good quarter. Runway
for growth is really just long and wide. What downside
risks remain then, especially around the macro uncertainty and Tiriff exposure.
Speaker 3 (04:45):
Do you see, Yeah, maybe a little bit of execution risks.
So we still really don't know how this whole. I mean,
obviously everybody is very excited for the ESPN product launch,
but we still don't know how exactly that's going to
play out. Again, a huge source of upside it is
going to be the streaming business. Everybody's expecting huge cost
savings when it comes to the integration of Hulu and
Disney Plus. But again, execution is a little bit of
(05:08):
a risk. And then you pointed out you know macro factors.
Remember Disney still obviously has huge exposure because of its
parks business, and anytime we see kind of a slowdown
in the economy, we do feel that in the parks
as well. And of course advertising also, so you know,
they do have a substantial exposure to advertising because of
their TV networks business. So there again we can see
(05:28):
a little bit of an impact. But overall, as it
stands right now, the business seems to be in really
good shape all right here.
Speaker 2 (05:34):
The problem childs though, are the broadcast networks and the
cable networks. What you know, just because of cort cutting
that they're just declining businesses. What's the company saying about
what they're going to do with those businesses.
Speaker 3 (05:46):
They haven't said anything explicitly, Paul. So a few years ago,
you know, this idea was floated that maybe they kind
of spin off ABC, their broadcast network, maybe they spin
off their linear cable channels, all of that. You know,
noise is kind of quietened down, you know, bar Biger
basically said, no, no, no, we need these businesses. They're
all kind of integral to the whole Disney story. So
(06:06):
we haven't heard anything recently that being said. Just this
whole deal with the NFL, the NFL kind of taking
an equity stake. It almost seems like they are prepping
for ESPN to kind of ESPN and maybe ABC to
kind of coast solo. Remember, Bob Biger only has a
few more months left, so the end of twenty twenty
(06:27):
six he leaves Disney, or at least that's what he says. Yeah,
we think, and I really think he kind of wants
to get this deal done so to separate ESPN because
it's not really core to the rest of the Disney properties.
But again it's a little bit of a wait and watch,
but nothing explicitly, you know, stated from Disney management about
(06:48):
what they want to do with the linear piece of
the business.
Speaker 4 (06:51):
So ESPN is getting a fresh spin with an August
twenty one launch. It will be thirty dollars a month
for the new streaming app. What do you make of
that price? You think people will pay up for it
or is that steep?
Speaker 3 (07:03):
It's a high price point, there's no doubt about it.
I think most people were kind of expecting somewhere in
the twenty three to twenty five dollars range. That said,
what we just ran a survey actually at Bloomberg Intelligence,
and what we found is that there's actually a lot
of interest in this product, so we think that the
updake will be fairly strong, and the Updake not so
much as a standalone product, but when you bundle it
(07:23):
with Disney Plus and Hulu, so they are running a
pretty attractive promotion. So for the first year, you can
get Disney Plus, Hulu and ESPN at a thirty to
thirty dollars price point, which which seems like really good value.
So I think we're going to see a lot of
people come in initially through the bundles at least.
Speaker 2 (07:43):
All right, great stuff as always, Keith I, thank you
so much for chatting with this.
Speaker 5 (07:47):
Keitha ranganof and she's the media Analyst.
Speaker 2 (07:49):
The media anamals the Bloomberg Intelligence covering all those fun
companies in the media space.
Speaker 1 (07:56):
You're listening to the Bloomberg Intelligence podcast. Catch us live
days at ten am Eastern on applecar Play and Android
Auto with the Bloomberg Business app. Listen on demand wherever
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Speaker 5 (08:09):
It's about Lee Paul Sweeney.
Speaker 2 (08:10):
We're live here in our Bloomberg Getter Active Broker Studio,
streaming live on YouTube and Ween've been reporting all morning
on the McDonald's print. Here, I look at something called
which the analysts look at, something called like same store sales,
sales sales at stores you have owned for you know,
like like like a year or so. That takes out
the fluctuations of buying and selling and opening and closing stores.
Speaker 5 (08:28):
So global sales at restaurants open at.
Speaker 2 (08:30):
Least thirteen months rose three point eight percent in the
second quarter, according to the company. And that's kind of
one of the headlines there. Michael Halen, he looks at
that stuff. He's a senior restaurant analyst at Bloomberg Intelligence.
Michael talk to us about McDonald's. It seems like if
whenever I see this company give me some positive same
store sales, it feels like it feels like a win.
Speaker 6 (08:51):
Yeah, it's definitely a win for you know, overall industry
same store sales. Because it's such a monster. It also
could be bad news for some of their competitors. With
fourteen thousand stores in the United States. Listen, man, they
know how to run run good restaurants right right now
in the US, they're starting to lap some easier comparisons,
(09:14):
and you know that's showing up in the you know,
that's helping their results. They're also you know, doing a
good job with you know the menu, right, they're bringing
back snack wraps, they're bringing back the mccrispy strip. They
just they debuted a daily double. They've been pressing on
value all year. That was a big thing since the
first quarter. And so you know, McDonald's has the scale
(09:38):
that they can you know, offer products a little bit
cheaper than their peers and still enfranchisees can still make
a little bit of money off of it. Right, So
you know, they they seem to really be hitting their
stride and they're lapping easy comps in the second half
of the year. So you know, we're looking at a
pretty good second half of McDonald's.
Speaker 4 (09:58):
And international markets led to companies growth. What regions of
the world did they really push aggressively towards.
Speaker 6 (10:06):
Yeah, they mentioned some really good strength in Germany. They
talked about some improvement in some markets that had been struggling,
like France and Australia, and so, you know, what they're
doing overseas is similar to the US playbook, right, but
they're probably ahead of the game, ahead of the US
in terms of providing everyday value their value messaging has
(10:30):
been on point, and it's really helped them grow internationally,
and that's why we've seen international grow faster than the US.
Speaker 5 (10:37):
For the last year or so.
Speaker 6 (10:40):
They also cited the fact that there's less competition overseas,
so they're really, you know, a pricing leader overseas. You know,
they can the same type of thing in the US
where they can offer price points that competitors just can't match.
And then they're also improving the operations, improving the quality
of the product, which has been an ongoing theme here,
(11:00):
proving the quality of the beef, better burgers, the way
they cook the burgers, their debuting the Big Arch, which
is a big, bigger sized burger in their lineup. They're
also expanding chicken overseas. So this company's humming along right now.
Speaker 2 (11:17):
What does the company say, Like when I think about McDonald's,
I think a lot of folks probably feel like the
low end, low income consumers, probably it's bread and butter there,
and maybe that consumer is more at risk in this
economic environment. What's the company saying about some of those
low end, low income patrons.
Speaker 6 (11:35):
Yeah, you know what I like about this call all
is that you know, they're talking about what they can control.
You know, they cited the fact that low income consumer
traffic is down double digits, right, versus a small gain
for middle income consumers and steady consistent gains with high
income consumers.
Speaker 5 (11:52):
So they are.
Speaker 6 (11:53):
Seeing, you know, weakness with low income consumers like everyone else.
That's why they push so hard on value. That's why
they have these you know, five dollars meals and buy one,
get one for a dollar, and why they put marketing
dollars behind that. That's part of the you know, the
beauty of the snack wraps. They're coming back at a
two ninety nine price point. We think that's going to
bring some low income consumers back into the fold, right,
(12:16):
So they understand that that people are very priced sensitive
right now, and you know, they're addressing it with the
price points. But they're also trying to give people better
quality and better service. At the same time.
Speaker 4 (12:29):
They also plan to taste new beverages and this includes
cold coffees and crafted sodas at more than five hundred
US locations. How much of a pull are beverages when
it comes to McDonald's offerings or is food really still king?
Speaker 5 (12:43):
Food? Is still king?
Speaker 6 (12:44):
But listen, beverages are hot. Beverages are hot everywhere, right,
dirty slages, energy and very high margin, right. And so
we think this is a very good opportunity for McDonald's.
I think this is kind of a problem for Sonic,
which has long done a really good job with their
(13:05):
drink offering. But yeah, we think this is something that
can help drive sales at McDonald's.
Speaker 5 (13:13):
Taco Bell.
Speaker 6 (13:13):
This is something Taco Bell's expanding as well. But we
think this is going to be more of a twenty
twenty six story for McDonald's.
Speaker 2 (13:21):
For McDonald's, Mike, what percentage of the revenue comes from
owned and operated stores versus franchise stores?
Speaker 6 (13:30):
Oh, they're ninety eight percent franchised. So there. Yeah, they're
heavily franchised. And you know, it's a beautiful model, man.
There's not a lot of operating leverage in the model.
They generate a ton of cash that they return to shareholders.
It really is a bu what's thing?
Speaker 5 (13:46):
So what's the royalty rate on?
Speaker 2 (13:48):
There's a franchise e paid McDonald's based upon revenue, based
upon net income, based upon how many Big Max say sale.
Speaker 5 (13:54):
How does that work? Yeah?
Speaker 6 (13:56):
Yeah, yeah, McDonald's is a little bit unique. They have
a five ish percent royalty rate, plus they own a
lot of the real estate, So a lot of franchises
in the United States are paying a rent, which is
typically you know, a ten inch percent of sales, we'll say,
and then they'll pay another three and a half to
four percent into the ad fun.
Speaker 2 (14:15):
I didn't know that until I saw the movie and
then that famous scene. Yeah, you're not in the hamburger.
Speaker 5 (14:20):
Business, you're in the real estate business. And that was
such a great scene. I learned a lot there.
Speaker 2 (14:25):
All Right, I can't let you go without crackerbrol and
I need my daily update, Country Boy Breakfast.
Speaker 5 (14:29):
How's that company doing?
Speaker 6 (14:32):
Listen, We're we're big fans of new CEO Julie Messino.
That stock's been a bit of a rollercoaster, not a
surprise since it's a small cap. It rows more than
one hundred percent off its April lows. Now it's in
the midst of a pretty aggressive downturn. It's probably lost
about a twenty five percent of its value in the
last couple weeks.
Speaker 5 (14:53):
But you know, we like it.
Speaker 6 (14:55):
We like Julie's plans to improve the operations, to spend
more and more efficient with their marketing spend. We think
this is a chain that had been you know, not
had been hadn't been taken care of, it hadn't been
run really well for the last decade, and so we
see a lot of low hanging fruit for the current
management team to turn things around and really drive strong
(15:17):
seam source sales through year end twenty twenty five and
well into twenty twenty six.
Speaker 5 (15:22):
All right, Mike, thanks so much for joining us.
Speaker 2 (15:24):
Michael Heylen, Senior restaurants food service Analysts for Bloomberg Intelligence.
Speaker 1 (15:29):
You're listening to the Bloomberg Intelligence podcast. Catch us live
weekdays at ten am Eastern on Applecarclay, and Android Auto
with the Bloomberg Business app. Listen on demand wherever you
get your podcasts, or watch us live on YouTube.
Speaker 2 (15:42):
Well here's another tech company that I totally missed. Had
no idea it even existed until it had already skyrocket.
Speaker 5 (15:48):
It's super micro Computer. I don't know. They make some
hardware stuff for chips on. You know, it's a tech thing.
Got the AI bug, it ripped.
Speaker 2 (15:55):
It's reported the company reported some numbers stocks down twenty
one percent, and I wonder if this is a time
for all the people that missed it to maybe take
a look. Here, I'll tell you who did not miss
it was Woojino Senior Technology, aannels for Bloomberg Intelligence. Wooge
just for our audience, just really quickly tell everybody what
super micro computer is and what happened with their quarter.
Speaker 7 (16:16):
Sure, hey, thanks, Paul. Super Micro is a leading AI
server manufacturer. They've been one of the beneficiaries from.
Speaker 1 (16:23):
This AI boom.
Speaker 7 (16:25):
Companies like x ai Core we've used or purchased AI
servers from them. And what has happened from the AI
boom is that they've seen the revenues go from three
billion three to four years back and they're on track
for about thirty three billion in fiscal twenty six. So
in terms of the quarter there, it's a sloppy explanation
(16:51):
in terms of they missed the guidance for the results
and their outlook came in a little bit light. Even
though the thirty three billion dollars sales guidance for physical
twenty six was ahead of consensus by by about ten percent.
One of the things is is that they had a
forty billion dollar view back in February that they pulled
(17:12):
off the table last quarter because of the trade wars,
and that thirty three billion dollars fell short of that
forty billion dollar view back in February, so, you know,
missed heightened expectations heading into the print.
Speaker 4 (17:24):
What about the lowered revenue outlook? Does that really signal
a deeper execution challenge and just really optimism when pessimism
when it comes to meeting AI server demand or is
it really more margin compression driven by price pressures?
Speaker 7 (17:39):
Yeah, you know, that's that's a good question. Like in
terms of the thirty three billion dollars, if we think
of it one way, right, fifty percent revenue growth on
really tough comps is still fairly impressive, right, and they
still have to close a lot of big deals. The
issue is is that they they raise a bi bar
(18:01):
so high that you know, meeting that would have been very,
very impressive. And that's what I think growth the stock
run up. Now. The margin compression question is very interesting.
I will tell you Consentus has them add about seven
percent margins for fiscal twenty For fiscal twenty six. Heading
(18:22):
into the print, they're guiding too about five to six
percent margins. I don't know if they'll get to seven
percent for the year. I mean, they'll lead to scale
up more. But the competition, the creditive landscape is pretty
pretty fierce right now, and I have a tough time
getting to seven percent. And you know, EPs on lower
(18:42):
revenues and lower margins doesn't get me above three dollars
per share.
Speaker 2 (18:48):
So Wiich talk to you mentioned competition here, who does
s SMCI Who do they really compete against here?
Speaker 7 (18:57):
Dell? Right, that's a yeah, Dell has really been breathing
down super Micro's neck. If you think about the big
deals that Tesla and Xai and Core we've you know
that super Micro has been in. Dell has actually won
(19:17):
their fair share. Look, they're going to report in a
couple of quarters from now. They booked about fourteen billion
dollars in orders last quarter, seven billion of it that
should be closed in this upcoming quarter. So they're winning
monster deals at low margins. And then they're going to
continue to be competitive in these deals.
Speaker 4 (19:37):
And given it to reliance on Nvidia chips, how exposed
to supermcro to bottlenecks or maybe just you know, prioritization
towards d video when it comes to their own chips.
Speaker 7 (19:46):
Yeah, I mean well, super Micro doesn't make their own chips.
They are going to be reliant on end video chips.
There is a pecking order in terms of who get
those GPUs. The hyper scale guys are going to be
the first ones to get those gp use and for
large parts, super Micro and Deell do not have that
exposure to the hyperscale customers. So the second order of
(20:08):
magnitude are going to be the tier two neo clouds
like Xai, Open Ai and the core weaves of the world.
And you know, it's all about execution in those sales.
I don't think I don't think it's going to be
an allocation issue. But if you win those deals, Jensen
(20:30):
will have the GPU ready for you. So let's see.
And it all comes down to a pricing war at
the end of the day, which affects gross margins.
Speaker 2 (20:38):
All right, Weich, thanks so much for joining us. Always
appreciate getting an update from you. Wujinhoe Senior Technology Channels
Bloomberg Intelligence from our Princeton, New Jersey campus down there,
like a lot of bi folks down there, and which
is part of that global technology research team that we
have at Bloomberg Intelligence, and we cover this industry from
a global perspective, so anyway, we'll see how it goes.
Speaker 1 (21:00):
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Bloomberg Audio Studios, podcasts, radio news. You're listening to the
Bloomberg Intelligence podcast. Catch us live weekdays at ten am
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Listen on demand wherever you get your podcasts, or watch
us live on YouTube.
Speaker 2 (00:23):
One of my companies I used to cover the Walt
Disney Company Mickey Mouse. They reported some numbers, better than
expected numbers, so of course stocks down two point nine percent.
So the Walt Disney Company reported better than expected third
quarter earnings, with continued growth at its parks and streaming
business overshadowing a tough climate for movies and traditional TV.
Let's break it down with Keitha Rungino that she covers
(00:44):
all the media stuff for Bloomberg Intelligence. Keitha, it seemed
to me like on the service, a pretty good quarter
for Disney. What's the street a little concerned about?
Speaker 3 (00:55):
Yeah, really good quarter for Disney. Paul the beaten raise,
for sure, I think Elevator, you know, expectations might have been,
you know, slightly high, and the fact that they didn't
necessarily give us any specific guidance for fiscal twenty twenty six.
They did point to a raised guidance for EPs growth
for fiscal twenty twenty five eighteen percent now instead of
(01:17):
sixteen percent, But they didn't necessarily give us anything specific
for fiscal twenty twenty six. That could be a slight
source of disappointment. Other than that, the only other thing
that I think might be causing this reaction is that
they did say that they will stop disclosing Disney Plus
subscriber numbers. But again, this is not something totally unexpected.
I mean, Netflix has stopped doing this. We're seeing this
(01:38):
kind of move away from just subscriber numbers to a
greater focus and profitability.
Speaker 4 (01:42):
I want to zero in on parks because I'm still
scarred by how expensive it was when I visited a
couple of years ago as an adult. But how sustainable
is their strong parks performance given the divergent domestic and
international performance.
Speaker 3 (01:56):
Very sustainable, Isabell. So you know, we saw Domesta stick parks,
and I say that because you know domestic parks actually
coming into this year, Coming into this quarter, there were
a lot of worries, one of course, about the general
macroeconomic environment, but the bigger source of worry was really
the opening of Epic Universe, which is you know, Universal's
big Florida theme parke at traction. But the fact that
(02:17):
it had absolutely no impact at all, or very very
modest impact, if at all, is really amazing, and it
just kind of speaks to the resilience in Disney's business model.
They reported again very very strong per capita growth, you know,
in terms of food and beverages, in terms of concessions,
so all of that doing really well. And the reason
I'm so positive about this business going forward. First of all,
(02:40):
it contributes about fifty five to sixty percent of Disney profits.
Are really really important to their top line, to their
bottom line. Definitely, they have a lot of upcoming capacity,
So the biggest source of expansion over the next few
months is really going to be their cruise ships. They're
launching two new cruise ships, their biggest ever actually, which
is going to come on board in November, and this
(03:01):
one of them sets sail from Asia and that basically
takes the number of cruise ships to eight cruise ships,
effectively kind of doubling their capacity in a span of
just maybe two to three years. So that is going
to really buoy you know, both top line and bottom
line going into twenty twenty six, and then beyond that,
you really have this huge sixty billion capital expansion plan
(03:22):
that is really going to play out over the next
five to ten years. So we're going to see a
lot more attractions all over the world. We're going to
see that new Abu Dhabi park come out, So there
is really a lot of you know, a sustained momentum
that we can expect at the park's going forward.
Speaker 2 (03:36):
Kitha talked to us about that deal they just made
with the NFL. It seems like a really positive development.
Speaker 5 (03:42):
For the company.
Speaker 3 (03:44):
Yeah, it's really good. I think from a Disney from
an ESPN standpoint, that they're so closely aligned now with
the NFL. I mean, the NFL is absolutely the premium property,
the gold standard, Paul. You know this well when it
comes to you know, sports properties in the US. And
the fact now that they're going to be able to
use all of this content for their upcoming esp and
streaming launch, I mean that itself just kind of gives
(04:07):
it a tremendous boost, I think even before you know
it comes on board. So it's great for the product.
It's also great from a strategic standpoint because the NFL
is obviously one of the most important sports properties, and
this really gives them access or it at least definitely
gives them a little bit of an advantageous position compared
to let's say, an Amazon or a Netflix or an
(04:28):
Apple if they want to ever outbid you know, the
current media partners. So definitely, I think a strategically, very
very sound move on the part of Disney.
Speaker 4 (04:36):
So it seems like we had a good quarter. Runway
for growth is really just long and wide. What downside
risks remain then, especially around the macro uncertainty and Tiriff exposure.
Speaker 3 (04:45):
Do you see, Yeah, maybe a little bit of execution risks.
So we still really don't know how this whole. I mean,
obviously everybody is very excited for the ESPN product launch,
but we still don't know how exactly that's going to
play out. Again, a huge source of upside it is
going to be the streaming business. Everybody's expecting huge cost
savings when it comes to the integration of Hulu and
Disney Plus. But again, execution is a little bit of
(05:08):
a risk. And then you pointed out you know macro factors.
Remember Disney still obviously has huge exposure because of its
parks business, and anytime we see kind of a slowdown
in the economy, we do feel that in the parks
as well. And of course advertising also, so you know,
they do have a substantial exposure to advertising because of
their TV networks business. So there again we can see
(05:28):
a little bit of an impact. But overall, as it
stands right now, the business seems to be in really
good shape all right here.
Speaker 2 (05:34):
The problem childs though, are the broadcast networks and the
cable networks. What you know, just because of cort cutting
that they're just declining businesses. What's the company saying about
what they're going to do with those businesses.
Speaker 3 (05:46):
They haven't said anything explicitly, Paul. So a few years ago,
you know, this idea was floated that maybe they kind
of spin off ABC, their broadcast network, maybe they spin
off their linear cable channels, all of that. You know,
noise is kind of quietened down, you know, bar Biger
basically said, no, no, no, we need these businesses. They're
all kind of integral to the whole Disney story. So
(06:06):
we haven't heard anything recently that being said. Just this
whole deal with the NFL, the NFL kind of taking
an equity stake. It almost seems like they are prepping
for ESPN to kind of ESPN and maybe ABC to
kind of coast solo. Remember, Bob Biger only has a
few more months left, so the end of twenty twenty
(06:27):
six he leaves Disney, or at least that's what he says. Yeah,
we think, and I really think he kind of wants
to get this deal done so to separate ESPN because
it's not really core to the rest of the Disney properties.
But again it's a little bit of a wait and watch,
but nothing explicitly, you know, stated from Disney management about
(06:48):
what they want to do with the linear piece of
the business.
Speaker 4 (06:51):
So ESPN is getting a fresh spin with an August
twenty one launch. It will be thirty dollars a month
for the new streaming app. What do you make of
that price? You think people will pay up for it
or is that steep?
Speaker 3 (07:03):
It's a high price point, there's no doubt about it.
I think most people were kind of expecting somewhere in
the twenty three to twenty five dollars range. That said,
what we just ran a survey actually at Bloomberg Intelligence,
and what we found is that there's actually a lot
of interest in this product, so we think that the
updake will be fairly strong, and the Updake not so
much as a standalone product, but when you bundle it
(07:23):
with Disney Plus and Hulu, so they are running a
pretty attractive promotion. So for the first year, you can
get Disney Plus, Hulu and ESPN at a thirty to
thirty dollars price point, which which seems like really good value.
So I think we're going to see a lot of
people come in initially through the bundles at least.
Speaker 2 (07:43):
All right, great stuff as always, Keith I, thank you
so much for chatting with this.
Speaker 5 (07:47):
Keitha ranganof and she's the media Analyst.
Speaker 2 (07:49):
The media anamals the Bloomberg Intelligence covering all those fun
companies in the media space.
Speaker 1 (07:56):
You're listening to the Bloomberg Intelligence podcast. Catch us live
days at ten am Eastern on applecar Play and Android
Auto with the Bloomberg Business app. Listen on demand wherever
you get your podcasts, or watch us live on YouTube.
Speaker 5 (08:09):
It's about Lee Paul Sweeney.
Speaker 2 (08:10):
We're live here in our Bloomberg Getter Active Broker Studio,
streaming live on YouTube and Ween've been reporting all morning
on the McDonald's print. Here, I look at something called
which the analysts look at, something called like same store sales,
sales sales at stores you have owned for you know,
like like like a year or so. That takes out
the fluctuations of buying and selling and opening and closing stores.
Speaker 5 (08:28):
So global sales at restaurants open at.
Speaker 2 (08:30):
Least thirteen months rose three point eight percent in the
second quarter, according to the company. And that's kind of
one of the headlines there. Michael Halen, he looks at
that stuff. He's a senior restaurant analyst at Bloomberg Intelligence.
Michael talk to us about McDonald's. It seems like if
whenever I see this company give me some positive same
store sales, it feels like it feels like a win.
Speaker 6 (08:51):
Yeah, it's definitely a win for you know, overall industry
same store sales. Because it's such a monster. It also
could be bad news for some of their competitors. With
fourteen thousand stores in the United States. Listen, man, they
know how to run run good restaurants right right now
in the US, they're starting to lap some easier comparisons,
(09:14):
and you know that's showing up in the you know,
that's helping their results. They're also you know, doing a
good job with you know the menu, right, they're bringing
back snack wraps, they're bringing back the mccrispy strip. They
just they debuted a daily double. They've been pressing on
value all year. That was a big thing since the
first quarter. And so you know, McDonald's has the scale
(09:38):
that they can you know, offer products a little bit
cheaper than their peers and still enfranchisees can still make
a little bit of money off of it. Right, So
you know, they they seem to really be hitting their
stride and they're lapping easy comps in the second half
of the year. So you know, we're looking at a
pretty good second half of McDonald's.
Speaker 4 (09:58):
And international markets led to companies growth. What regions of
the world did they really push aggressively towards.
Speaker 6 (10:06):
Yeah, they mentioned some really good strength in Germany. They
talked about some improvement in some markets that had been struggling,
like France and Australia, and so, you know, what they're
doing overseas is similar to the US playbook, right, but
they're probably ahead of the game, ahead of the US
in terms of providing everyday value their value messaging has
(10:30):
been on point, and it's really helped them grow internationally,
and that's why we've seen international grow faster than the US.
Speaker 5 (10:37):
For the last year or so.
Speaker 6 (10:40):
They also cited the fact that there's less competition overseas,
so they're really, you know, a pricing leader overseas. You know,
they can the same type of thing in the US
where they can offer price points that competitors just can't match.
And then they're also improving the operations, improving the quality
of the product, which has been an ongoing theme here,
(11:00):
proving the quality of the beef, better burgers, the way
they cook the burgers, their debuting the Big Arch, which
is a big, bigger sized burger in their lineup. They're
also expanding chicken overseas. So this company's humming along right now.
Speaker 2 (11:17):
What does the company say, Like when I think about McDonald's,
I think a lot of folks probably feel like the
low end, low income consumers, probably it's bread and butter there,
and maybe that consumer is more at risk in this
economic environment. What's the company saying about some of those
low end, low income patrons.
Speaker 6 (11:35):
Yeah, you know what I like about this call all
is that you know, they're talking about what they can control.
You know, they cited the fact that low income consumer
traffic is down double digits, right, versus a small gain
for middle income consumers and steady consistent gains with high
income consumers.
Speaker 5 (11:52):
So they are.
Speaker 6 (11:53):
Seeing, you know, weakness with low income consumers like everyone else.
That's why they push so hard on value. That's why
they have these you know, five dollars meals and buy one,
get one for a dollar, and why they put marketing
dollars behind that. That's part of the you know, the
beauty of the snack wraps. They're coming back at a
two ninety nine price point. We think that's going to
bring some low income consumers back into the fold, right,
(12:16):
So they understand that that people are very priced sensitive
right now, and you know, they're addressing it with the
price points. But they're also trying to give people better
quality and better service. At the same time.
Speaker 4 (12:29):
They also plan to taste new beverages and this includes
cold coffees and crafted sodas at more than five hundred
US locations. How much of a pull are beverages when
it comes to McDonald's offerings or is food really still king?
Speaker 5 (12:43):
Food? Is still king?
Speaker 6 (12:44):
But listen, beverages are hot. Beverages are hot everywhere, right,
dirty slages, energy and very high margin, right. And so
we think this is a very good opportunity for McDonald's.
I think this is kind of a problem for Sonic,
which has long done a really good job with their
(13:05):
drink offering. But yeah, we think this is something that
can help drive sales at McDonald's.
Speaker 5 (13:13):
Taco Bell.
Speaker 6 (13:13):
This is something Taco Bell's expanding as well. But we
think this is going to be more of a twenty
twenty six story for McDonald's.
Speaker 2 (13:21):
For McDonald's, Mike, what percentage of the revenue comes from
owned and operated stores versus franchise stores?
Speaker 6 (13:30):
Oh, they're ninety eight percent franchised. So there. Yeah, they're
heavily franchised. And you know, it's a beautiful model, man.
There's not a lot of operating leverage in the model.
They generate a ton of cash that they return to shareholders.
It really is a bu what's thing?
Speaker 5 (13:46):
So what's the royalty rate on?
Speaker 2 (13:48):
There's a franchise e paid McDonald's based upon revenue, based
upon net income, based upon how many Big Max say sale.
Speaker 5 (13:54):
How does that work? Yeah?
Speaker 6 (13:56):
Yeah, yeah, McDonald's is a little bit unique. They have
a five ish percent royalty rate, plus they own a
lot of the real estate, So a lot of franchises
in the United States are paying a rent, which is
typically you know, a ten inch percent of sales, we'll say,
and then they'll pay another three and a half to
four percent into the ad fun.
Speaker 2 (14:15):
I didn't know that until I saw the movie and
then that famous scene. Yeah, you're not in the hamburger.
Speaker 5 (14:20):
Business, you're in the real estate business. And that was
such a great scene. I learned a lot there.
Speaker 2 (14:25):
All Right, I can't let you go without crackerbrol and
I need my daily update, Country Boy Breakfast.
Speaker 5 (14:29):
How's that company doing?
Speaker 6 (14:32):
Listen, We're we're big fans of new CEO Julie Messino.
That stock's been a bit of a rollercoaster, not a
surprise since it's a small cap. It rows more than
one hundred percent off its April lows. Now it's in
the midst of a pretty aggressive downturn. It's probably lost
about a twenty five percent of its value in the
last couple weeks.
Speaker 5 (14:53):
But you know, we like it.
Speaker 6 (14:55):
We like Julie's plans to improve the operations, to spend
more and more efficient with their marketing spend. We think
this is a chain that had been you know, not
had been hadn't been taken care of, it hadn't been
run really well for the last decade, and so we
see a lot of low hanging fruit for the current
management team to turn things around and really drive strong
(15:17):
seam source sales through year end twenty twenty five and
well into twenty twenty six.
Speaker 5 (15:22):
All right, Mike, thanks so much for joining us.
Speaker 2 (15:24):
Michael Heylen, Senior restaurants food service Analysts for Bloomberg Intelligence.
Speaker 1 (15:29):
You're listening to the Bloomberg Intelligence podcast. Catch us live
weekdays at ten am Eastern on Applecarclay, and Android Auto
with the Bloomberg Business app. Listen on demand wherever you
get your podcasts, or watch us live on YouTube.
Speaker 2 (15:42):
Well here's another tech company that I totally missed. Had
no idea it even existed until it had already skyrocket.
Speaker 5 (15:48):
It's super micro Computer. I don't know. They make some
hardware stuff for chips on. You know, it's a tech thing.
Got the AI bug, it ripped.
Speaker 2 (15:55):
It's reported the company reported some numbers stocks down twenty
one percent, and I wonder if this is a time
for all the people that missed it to maybe take
a look. Here, I'll tell you who did not miss
it was Woojino Senior Technology, aannels for Bloomberg Intelligence. Wooge
just for our audience, just really quickly tell everybody what
super micro computer is and what happened with their quarter.
Speaker 7 (16:16):
Sure, hey, thanks, Paul. Super Micro is a leading AI
server manufacturer. They've been one of the beneficiaries from.
Speaker 1 (16:23):
This AI boom.
Speaker 7 (16:25):
Companies like x ai Core we've used or purchased AI
servers from them. And what has happened from the AI
boom is that they've seen the revenues go from three
billion three to four years back and they're on track
for about thirty three billion in fiscal twenty six. So
in terms of the quarter there, it's a sloppy explanation
(16:51):
in terms of they missed the guidance for the results
and their outlook came in a little bit light. Even
though the thirty three billion dollars sales guidance for physical
twenty six was ahead of consensus by by about ten percent.
One of the things is is that they had a
forty billion dollar view back in February that they pulled
(17:12):
off the table last quarter because of the trade wars,
and that thirty three billion dollars fell short of that
forty billion dollar view back in February, so, you know,
missed heightened expectations heading into the print.
Speaker 4 (17:24):
What about the lowered revenue outlook? Does that really signal
a deeper execution challenge and just really optimism when pessimism
when it comes to meeting AI server demand or is
it really more margin compression driven by price pressures?
Speaker 7 (17:39):
Yeah, you know, that's that's a good question. Like in
terms of the thirty three billion dollars, if we think
of it one way, right, fifty percent revenue growth on
really tough comps is still fairly impressive, right, and they
still have to close a lot of big deals. The
issue is is that they they raise a bi bar
(18:01):
so high that you know, meeting that would have been very,
very impressive. And that's what I think growth the stock
run up. Now. The margin compression question is very interesting.
I will tell you Consentus has them add about seven
percent margins for fiscal twenty For fiscal twenty six. Heading
(18:22):
into the print, they're guiding too about five to six
percent margins. I don't know if they'll get to seven
percent for the year. I mean, they'll lead to scale
up more. But the competition, the creditive landscape is pretty
pretty fierce right now, and I have a tough time
getting to seven percent. And you know, EPs on lower
(18:42):
revenues and lower margins doesn't get me above three dollars
per share.
Speaker 2 (18:48):
So Wiich talk to you mentioned competition here, who does
s SMCI Who do they really compete against here?
Speaker 7 (18:57):
Dell? Right, that's a yeah, Dell has really been breathing
down super Micro's neck. If you think about the big
deals that Tesla and Xai and Core we've you know
that super Micro has been in. Dell has actually won
(19:17):
their fair share. Look, they're going to report in a
couple of quarters from now. They booked about fourteen billion
dollars in orders last quarter, seven billion of it that
should be closed in this upcoming quarter. So they're winning
monster deals at low margins. And then they're going to
continue to be competitive in these deals.
Speaker 4 (19:37):
And given it to reliance on Nvidia chips, how exposed
to supermcro to bottlenecks or maybe just you know, prioritization
towards d video when it comes to their own chips.
Speaker 7 (19:46):
Yeah, I mean well, super Micro doesn't make their own chips.
They are going to be reliant on end video chips.
There is a pecking order in terms of who get
those GPUs. The hyper scale guys are going to be
the first ones to get those gp use and for
large parts, super Micro and Deell do not have that
exposure to the hyperscale customers. So the second order of
(20:08):
magnitude are going to be the tier two neo clouds
like Xai, Open Ai and the core weaves of the world.
And you know, it's all about execution in those sales.
I don't think I don't think it's going to be
an allocation issue. But if you win those deals, Jensen
(20:30):
will have the GPU ready for you. So let's see.
And it all comes down to a pricing war at
the end of the day, which affects gross margins.
Speaker 2 (20:38):
All right, Weich, thanks so much for joining us. Always
appreciate getting an update from you. Wujinhoe Senior Technology Channels
Bloomberg Intelligence from our Princeton, New Jersey campus down there,
like a lot of bi folks down there, and which
is part of that global technology research team that we
have at Bloomberg Intelligence, and we cover this industry from
a global perspective, so anyway, we'll see how it goes.
Speaker 1 (21:00):
This is the Bloomberg Intelligence Podcast, available on Apple, Spotify,
and anywhere else you get your podcasts. Listen live each
weekday ten am to noon Eastern on Bloomberg dot com,
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You can also watch us live every weekday on YouTube
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