Dividend Cuts, Drone Deliveries, and Disney Plus



Happy Monday. I'll believe you if you say it's Monday. They all do together as we have discussed before it's Day I know it's Day and I think it's not weekend. That's that's how I measure the days now not weekend day night. Three categories so Dan. Let's talk some. Gm less toxic dividends less toxic drones and as we wrap things up. Let's talk about something that you just wrote about Disney plus in whether or not it can save Disney stock but let's begin with the market now at the time of our taping here midday Monday all the major indices up slightly in this as part of a month Dan. This has just been an incredible month for the Dow. Snp THE NASDAQ ALL UP. Big having their best month in years so I want to start there as an investor. Are You thinking about this market? Because we have the market just chugging along this month and at the same time we have most states still under stay at home orders so I don't think about the market in the short term and right now. It's so emotional. So if there's a tiny little hint if like a village in Alabama says it's going to reopen a gym the market bounces up in and has a good day Which which I like that that there is sort of an appetite for optimism. Because we've been through such a miserable time that said I'd be looking at companies that are going to do well during this and after or companies that you really liked beforehand that you believe will bounce back when this is over. So I'm not looking to sort of ride out these trends or see what's going on or figuring out where the bottom is a. I think we've got some reckoning left to come but that's just a guess okay. So let's talk about some of those companies. Gm General Motors announcing its suspending. Its dividend and stock buybacks now shares. Gm down around forty percent for the year Dan. Gm has stopped producing cars. It has not yet announced a timeframe for when it will resume production. Gm is producing ventilators and personal protective equipment. What do you make them the GM news that it will suspend its dividends and stock buybacks? Yeah I think it's smart to preserve your cash when you're not selling any product. I understand I got some blowback on the live show from people saying Oh but you know we count on those dividends. I get it but you can't count on a dividend if a company goes bankrupt so I would rather GM stays in business longer puts itself in a situation where it has more cash long and a longer runway because eventually Americans will need cars this will end and people who were putting off a purchase will buy prices are really good so if you need a car it's actually a pretty good time to buy a car But I am in favor of taking being cautious as you can be right now. If you're a company okay. So along those lines I want to ask you about Disney. Disney has taken some heat for not suspending. Its dividend. What do you think yeah? I think it's a mistake. Look Disney's in a good position in terms of their available cash but they've also borrowed quite a bit of money. I mean. They borrowed the money for the Fox purchase. So to be paying cash. When you're not operating it seems like an artificial way to prop up your stock price. And I'm just not concerned about Disney's stock price in the short term. I'm I'm guessing. Executives are who often have bonuses tied to Stock Price? Okay well we're GONNA talk more Disney at a bit. But first I wanNA talk about a new development in the world of social distancing. Ups on Monday announcing that CVS and ups will start using drones. Yes drones next week to deliver prescription medication to the villages retirement community in Florida. Now Dan you are in Florida. The villages is the biggest retirement community in the country now. The drones will drop off prescriptions to a location near the community and a truck will finish the delivery. So this isn't door to door but this is going from. Cvs to somewhere near where people live. Yeah I mean. They've been testing this it. I think it's actually in Virginia in some rural town with the idea that you could bring prescriptions right to the door and you're gonNA see combinations of this and Robo trucks and other things delivering but the villages a unique place. These are generally stand alone homes or row houses And it's an entire community over one hundred thousand people that are all at least fifty five plus generally a lot older. So there's a lot of reason to minimize contact for these people. But I'm not entirely sure how drone to a truck to the door. Minimizes contact that. That seems to be the same amount of contact of driving the truck to the community and bringing it to the door. I it's a little strange for me but that said I think you're GONNA see Niche use of drones doing things like this drone isn't going to like bring you a Burrito and put it in your hand but it might leave your cvs box at your door or on your balcony or some other location if you live someplace. That isn't densely packed city. Okay so when you look over the next five to ten years in someone who studies the retail landscape when you look at the role of drones are you bullish or bearish. I know you say they're not gonNA be delivering burritos. But what's the role going forward? It's going to be niche. It's going to be filling. It's going to be a supplement in rural places where it doesn't make sense to send a truck it might sense and it's obviously state ver- to send drones but I don't think New York City or Alexandria. Virginia wants a sky filled with drones. That seems like a recipe for disaster. So they will be used. They will have a place but drones are much more likely to be used and are being used by say Walmart in a warehouse to take inventory. That is a much safer. It's it's it's not gonNa hit a you know a random person walking by. There's going to be a lot of commercial uses for drones but it isn't going to be to replace the Pizza Guy. Okay and no beer and wine up. Maybe some here in wine but probably I don't WanNA drone delivering a wine bottle. Have you ever had to why not if you're stairs? It's not fun now. That just seems fraught with issues. I mean I don't. I don't think you could do that. You know what daretodream dare to dream of a day and let's Talk Disney. We talked a little earlier but I want to talk about a few different developments here including something you just wrote about but first Disney today announcing big plans for May fourth now may fourth They will begin. Streaming Star Wars. The rise of skywalker. That'll be two months earlier than they planned. And then Disney also announcing that the final episode of the Clone Wars and the first episode of the mandatory and documentary will be available on May fourth so with all that in mind. You just wrote a piece this weekend. Dan Entitled Canned Disney Plus Save Disney stock. So can it. Yeah and. That's a very melodramatic headline I will. I will put out that. The goal of headlines are to get readership because I actually believe Disney. We'll be fine. It's other businesses. We'll be okay but what I want to really point out is. People are underplaying. Just how BIG DISNEY CAN BE A? When they last reported they went from ten million to fifty million subscribers that wasn't even based on corona virus growth that was based on adding a few new countries like eight or nine countries. Netflixing one hundred eighty one hundred somewhere in that ballpark. Disney plus is probably at seventy five million. Now wouldn't shock me. If in year there at one hundred twenty five one hundred fifty million and their cost structure is dramatically lower than Netflix. Netflix has to produce like two hundred series of quarter and throw them at a wall. They have to pay huge money to comedians. A Disney can pick and choose a few series based on its named intellectual property. You're GonNa Watch the new show starring one of the avengers. You're going to watch a new STAR WARS SHOW. You'RE GONNA watch when rise of skywalker is released. They don't have to spend the money. Net flicks does. This thing is going to be a cash cow quickly. Okay so I want to ask you more about that. And specifically the net flicks piece of that when you talk about their cost structure. How long can net flicks play that game? They're going to have to play that game. It lessens as they get into every market and they've localized content. They don't have the expense of having to record dialogue and new languages. They'll have some shows in each market. Eventually they're in a position where they can may be cut their contents bent in half but their content spend six to eight billion dollars a year whereas Disney pretty much everything Disney puts out on Disney. Plus that's original to the service is going to be a guaranteed hit when when you're watching a show in the Star Wars universe. It is not a big surprise that star wars fans. Watch it So Disney is really in a position where they can keep costs under control there also in a position where they can raise the price pretty easily six ninety nine a month. That's a great introductory price. But do you really think families are going to drop it if it goes to nine ninety nine over the course of the next three years Netflix too. I think can go up to about nineteen ninety nine and that will help some of their deficit but these are the two winners in the space and for Disney this is going to be its biggest segment. Maybe as soon as as well this year it'll probably be its biggest segment because others are closed but in a normal year this will be Disney's biggest segment if not in two thousand twenty one possibly almost certainly by two thousand twenty two and Dan Netflix. Still growing like a weed for the last quarter. They added almost sixteen million subscribers. So one hundred eighty three million subscribers now for Netflix When you look in as we're talking here we're talking about Disney on Netflix. Do you think there's room for both Disney plus and Net flicks to succeed over the next five to ten years or if this were wrestling is essentially a cage match. Were only one of them. Comes OUT ALIVE? No these two already one. It's a case of whether there's a market for HBO Max and Peacock and all the other services out there. Those are going to be harder cells but remember as people cut the cord and they're still eighty something million Americans who pay for cable. That's a hundred to two hundred dollars comes available to some of those people already have netflixing Disney plus so they'll probably dabble in ad one or two secondary services. But I think right now. This is a battle for the bronze medal. I if somebody can establish themselves in third place. That's a strong position to be in. I'm SORTA not counting. Who which is a Disney owned property because who was gonNA get bondholders by a lot of people with Disney plus and it's probably going to do reasonably well and be a driver for Disney. There's not a of original content being produced on on who so it's not that biggest spend But Yeah Disney a net flicks have have already lapped everybody. What about Amazon? Should we include them in the Disney Net flicks discussion? How many shows do you watch Amazon? you know we. I think we we watch a fair amount on Amazon prime. I think really I forget it exists Amazon is the Ebay of streaming services. How you know you forget. They exist and a lot of stuff. That's really hyped. When you actually dig into the research and find out how many people are watching it. It's like three hundred thousand people and they have some shows I've been interested in. I hear good things about the boys. I think that's what it's called and generally I've tried a few things on Amazon and nothing has struck. You're not paying for it. I don't precisely see where it's a particularly big value add. Would you cancel prime if they got Yeah No. I'm not cancelling prime. Yeah it makes no sense to cancel prime because right now. I don't know I'm delivering getting deliveries from. I was like four times a day. Like that's I think of something. I go in and put an Amazon Order. And now you have this fun. Amazon of will show up as opposed to previously when it would come the next day so I just don't think it's a relevant service. I don't precisely understand why they pay for it. Frankly okay okay so. I'm going to count you skeptical of. Do you have a Netflix? Or Disney plus recommendation for me. Well if you haven't watched the mandatory and you should absolutely watch the delorean oriented so right that I also on Netflix. This is a bit of a sleeper but I really liked glow It's based on the eighties women's wrestling group very very campy. The original show actually a little dark and vicious really well done. It's one of those things where you could say. Well I'm not a pro wrestling fan. It's not really about wrestling. It's about the relationships between the people And my wife didn't like it so that that's I would say women would like it but in case of my life that wasn't true and my wife really really really likes ozark and I have not been able to make myself watch it yet. Okay Good Ozark and glow there you go okay for our desert poll as we wrap up here over the next five years. You're on a desert island and you have to you have to buy one of these stocks and hold it. So let's go. Gm Disney net flex. Let's throw in. Cvs and UPS Disney without a shadow of a doubt. Cvs would be attractive if they didn't just by a health insurance company which absolutely is is something that makes me a little bit nervous but Disney has the number one theme park brand families are GonNa come back to Disney up. Whenever they put out the next Disney movies avengers Pixar or whatever it is people are going to go see those. I'm not worried about that company in the long term at all. Okay well there. You have it Dan Klein. Thanks for joining me. Thanks for having me

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