Latest / Bloomberg Intelligence / BI Weekend: Delta Earnings, Musk Party, 10 Companies to Watch in 3Q

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BI Weekend: Delta Earnings, Musk Party, 10 Companies to Watch in 3Q · Bloomberg Intelligence

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Speaker 5: Bloomberg Intelligence.
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Speaker 2: On today's show, we dig inside the big business stories
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Speaker 5: Hn Every week we provide the in depth research and
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Speaker 5: hundred and thirty industries our analysts cover worldwide.
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Speaker 2: Today we'll look at like Tech Split, investors may be
1:01
Speaker 2: concerned about Cego Elon Musk's new political party.
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Speaker 5: Plus we're gonna look at Bloomberg Intelligence. There's ten companies
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Speaker 5: to watch in the third quarter of twenty twenty five.
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Speaker 2: But first we begin with the airline industry.
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Speaker 5: And this week Delta Airlines reported quarterly earnings and also
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Speaker 5: reinstated a profit outlook for the year. The company also
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Speaker 5: said travelers are coming back for more.
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Speaker 2: John Tucker and I were joined by George ferguson Bloomberg
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Speaker 2: Intelligence senior Aerospace, Defense and airlines analysts.
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Speaker 5: And first we asked George for his take on Delta's
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Speaker 5: recent earnings.
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Speaker 3: They reinstated guidance, but at a lower EPs than they
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Speaker 3: had initiated at the end of the year. I think
1:37
Speaker 3: the market still looks a little bit soft to us.
1:41
Speaker 3: For sure, fuel prices are giving airlines a bit of
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Speaker 3: a bolster on the bottom line. But I think what
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Speaker 3: we heard was on the demand side was more of
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Speaker 3: the continuing story, and that is that premium is holding
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Speaker 3: up really well, and Delta is going to do very
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Speaker 3: well because of their loyalty programs and such. Basic economy
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Speaker 3: isn't And if you look at Delta's you know, price
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Speaker 3: paid per mile flown for customer, it was down in
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Speaker 3: every single market that they served, or maybe flatish in
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Speaker 3: Latin America, but all the rest of the markets down
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Speaker 3: during the quarter. So to us, it looks like a
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Speaker 3: market that still needs to have capacity come out, and
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Speaker 3: some of it will.
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Speaker 5: See The CEO pointed to progress in trade talks between
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Speaker 5: the US and other countries and the potential for some
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Speaker 5: geopolitical conflicts to abate. I mean the flying public, really,
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Speaker 5: I don't know, are they really thinking about this when
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Speaker 5: they book a flight on Delta or any other airline?
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Speaker 3: Yeah, I mean, so when I think of that, I
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Speaker 3: think that's going to largely benefit his international business. I
2:49
Speaker 3: don't know, you know, I was polis to pick him
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Speaker 3: because I get to Paris for Paris Air Show, you know,
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Speaker 3: every other summer, and when I was in Paris, it
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Speaker 3: was teaming with Americans. So it didn't seem like, even
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Speaker 3: with protests going on around, it didn't seem like demand
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Speaker 3: was off for international travel, at least you know, anecdotally
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Speaker 3: and some of the places I've been to. So I
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Speaker 3: don't know. I mean, I think it takes a little
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Speaker 3: bit of demand off, maybe a very little bit, but
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Speaker 3: right now I think the international traveler seems to be
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Speaker 3: rolling right over top of that and going anyways.
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Speaker 2: George, how does an airline take capacity out of the
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Speaker 2: system is that just going from like ten flights between
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Speaker 2: Newark and Miami a day to I don't know seven
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Speaker 2: or eight.
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Speaker 3: I mean, I think ultimately you gotta park airplanes. I mean,
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Speaker 3: you know, it's a capital intensive business. You don't want
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Speaker 3: to buy those airplanes and not utilize them. You take
3:43
Speaker 3: your old stuff, you park it, you maybe retire it,
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Speaker 3: sell it off. But what I mean, what we're seeing
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Speaker 3: as three Q develops, and so we'll watch as closely
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Speaker 3: to see what it does to demand, is we're seeing
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Speaker 3: that the low cost carriers Spirit Frontier like they're taking
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Speaker 3: large portions out of their plan for three Q. Now
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Speaker 3: it may not hold. They may add some of those
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Speaker 3: those routes back, some of those seats back, but we're
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Speaker 3: seeing numbers down twenty percent in some of their capacity.
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Speaker 3: On the full service side, United in Delta is still adding.
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Speaker 3: United adding the most I think I want to say,
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Speaker 3: five is six is percent, Delta adding two three ish percent.
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Speaker 3: An economy that's not growing that fast. American look kind
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Speaker 3: of flat, meaning the economy is growing at rates, you know,
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Speaker 3: sub two percent. So it feels like the big full
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Speaker 3: service are going to push through here and try to
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Speaker 3: push through and continue to subsidize the back of the cabin,
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Speaker 3: that basic economy with the front of the cabin strength.
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Speaker 3: I feel like at some point they'll break that front
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Speaker 3: of the cabin. I think that's sort of how the
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Speaker 3: industry always works.
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Speaker 5: We'll see in none of these reports, do I see
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Speaker 5: anything mentioned about JEFT fuel prices? Should we'd be concerned
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Speaker 5: about that?
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Speaker 3: Well, I mean, right now it's a tailwind, and if
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Speaker 3: that reverses could be a problem. Right, But I mean
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Speaker 3: jet fuel prices are down because of slower global growth, right,
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Speaker 3: I mean, I think the geopolitical backdrop doesn't help it,
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Speaker 3: but it doesn't seem to have pushed prices up firm
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Speaker 3: or I think I saw Saudi's are talking potentially about
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Speaker 3: reducing some of the capacity ads they're coming on. I
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Speaker 3: don't know if that sounds strong enough yet, but if
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Speaker 3: jet fuel turns, that would be that would work against them,
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Speaker 3: because again, we've got an airline business. If you look
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Speaker 3: at Delta, they added three ish percent capacity or around
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Speaker 3: there for this quarter and revenues were flat. Right, So
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Speaker 3: they're adding capacity and revenues are flat. I generally don't
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Speaker 3: like that kind of backdrop.
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Speaker 5: Uh business travel.
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Speaker 2: Delta actually kind of called that out as perhaps corporate
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Speaker 2: travel is quote unquote strengthening. Are you seeing that across
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Speaker 2: the industry? And where I guess where's corporate travel versus
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Speaker 2: pre pandemic.
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Speaker 3: Yeah, so they're not telling us anymore, all right, And
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Speaker 3: usually you tell us when you're really excited about where
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Speaker 3: it is. Look, I think the summer flying seasons are
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Speaker 3: all about leisure. What I heard was that they that
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Speaker 3: they were having weakening, weaker pricing power in sort of
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Speaker 3: the off peak demand times. And my read through on
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Speaker 3: that is that summer leisure traveler where they know they
6:23
Speaker 3: got you right. All my friends call me, they go, hey, George,
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Speaker 3: I hear airfares are down, but I'm trying to travel
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Speaker 3: over July fourth week on vacation with the family, and
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Speaker 3: I'm paying a crazy price. And I'm like, yeah, because
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Speaker 3: you're going when everyone else in the world wants to
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Speaker 3: go somewhere.
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Speaker 2: Right.
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Speaker 3: So when I read off peak, I also think that's
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Speaker 3: probably a little bit of business travel, and so I
6:44
Speaker 3: don't know that it's going swimmingly and they're not. They're
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Speaker 3: not giving us numbers. What I heard was kind of stabilized,
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Speaker 3: but I didn't hear to me, I didn't hear something
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Speaker 3: that sounded like it was getting much better, and again,
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Speaker 3: Summer's about leisure.
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Speaker 2: Our thanks to George Ferguson Bloomberg Intelligence in your Aerospace,
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Speaker 2: defense and airlines analysts.
7:02
Speaker 5: And we moved next to the anti trust space.
7:05
Speaker 2: As the anti trust enforcement policies and President Donald Trump's
7:08
Speaker 2: administration takes shape, deal makers and large businesses hoping for
7:12
Speaker 2: relief could see a glimmer of hope in some areas,
7:14
Speaker 2: but not all.
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Speaker 5: That's according to Bloomberg Intelligence, which recently took a deep
7:18
Speaker 5: dive into what the anti trust space could look like
7:21
Speaker 5: during the second half of the year.
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Speaker 2: For more guest host Normal Linden, I were joined by
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Speaker 2: Jennifer Reed, Bloomberg Intelligence senior litigation analysts. Your first es, Jen,
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Speaker 2: what the anti trust environment is looking like under the
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Speaker 2: Trump administration.
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Speaker 6: You know, there was a lot of uncertainty going into
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Speaker 6: the election during the fourth quarter of last year, but
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Speaker 6: I think there are some really good signs for those
7:41
Speaker 6: companies that want to engage in big deals going forward.
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Speaker 6: And the main reason is because Trump's anti trust enforcers
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Speaker 6: are willing to accept settlements with a remedy to allow
7:51
Speaker 6: a bigger deal to close essentially meaning that if there's
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Speaker 6: an overlapping product and there'd be too much concentration in
7:56
Speaker 6: the market for that product, that product line could be
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Speaker 6: sold in the larger deal can get closed. And the
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Speaker 6: Buying administration essentially refused to do that. They thought, if
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Speaker 6: a deal was problematic, we're just going to sue it
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Speaker 6: and try to block it. And it led to a
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Speaker 6: lot of lawsuits, a lot of abandonments, and a lot
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Speaker 6: of deals that just didn't get signed to begin with.
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Speaker 6: So because we're seeing this sign that deals can get settled,
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Speaker 6: I do think we're going to start to see more
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Speaker 6: bigger deals getting signed up in the second half and
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Speaker 6: probably next year two.
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Speaker 2: So, you know, for all these agencies within Washington, they
8:29
Speaker 2: obviously feel the presence of President Trump very keenly. The
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Speaker 2: folks that are in charge of the Federal Trade Commission,
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Speaker 2: the Department of Justice, how much independence do you think
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Speaker 2: they have at this.
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Speaker 6: Point, you know, Paul, probably not very much. You know,
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Speaker 6: in the past, in particular, the Federal Trade Commission was
8:48
Speaker 6: supposed to be quite independent, and really it was because
8:51
Speaker 6: it had five commissioners, only three of which could be
8:54
Speaker 6: from one political party, and they needed a majority vote
8:57
Speaker 6: to take any action with a deal. But President Trump
8:59
Speaker 6: has hired the two Democrats, so we now have three Republicans,
9:03
Speaker 6: and we have three Republicans that very much are behind
9:05
Speaker 6: him and his political visions. So I think that they
9:10
Speaker 6: will essentially do what they think he wants done. And
9:13
Speaker 6: we have seen an example of that because they did
9:15
Speaker 6: clear a deal between two huge ad agencies, OmniComm and
9:19
Speaker 6: Interpublic with what we call a behavioral agreement, which they
9:23
Speaker 6: have said that they don't tend to want to take,
9:26
Speaker 6: agreeing that they wouldn't prevent advertisers from advertising a next
9:31
Speaker 6: to content that was right leaning or expressed conservative viewpoints
9:35
Speaker 6: that they might not agree with. So that was very
9:38
Speaker 6: much kind of in ligned with this administration and what
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Speaker 6: this administration wants. So I do think we're going to
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Speaker 6: see alignment in terms of what these remedies are and
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Speaker 6: the deals that get cleared with what Trump is saying
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Speaker 6: and with what Trump wants.
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Speaker 7: So Trump terminated two Democratic FTC commissioners back in the
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Speaker 7: first quarter of this year, and of course we know
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Speaker 7: this did raise some significant concept tutional concerns in terms
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Speaker 7: of the commission's historical independence and of course enforcement efforts.
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Speaker 7: What is this really signaled in terms of potential policy changes.
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Speaker 6: Well, you know, the thing is that, first of all,
10:15
Speaker 6: we do all of these challenges are going up to
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Speaker 6: the Supreme Court, and we do think that this is
10:20
Speaker 6: going to stick. We do think that because of some
10:22
Speaker 6: of the other decisions about other agencies, that even though
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Speaker 6: the two Democrats do have an ongoing lawsuit about their termination,
10:28
Speaker 6: we think that probably the Supreme Court is going to
10:31
Speaker 6: side with Trump and they are going to remain terminated.
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Speaker 6: For practical purposes. As I said, I don't think that
10:37
Speaker 6: there's very much impact here because you do need a
10:40
Speaker 6: majority vote to settle or to suit a block a deal,
10:43
Speaker 6: so you need three out of the five. In the past,
10:46
Speaker 6: we have seen that the FTCs operated on a very
10:49
Speaker 6: sort of bipartisan or nonpartisan basis. We usually have a
10:53
Speaker 6: unanimous or maybe a four to one decision, but it
10:55
Speaker 6: hasn't been that way. You know, starting with Biden, we
10:57
Speaker 6: were seeing a lot of three to two decisions were
11:00
Speaker 6: along party lines, right, So I think that we probably
11:03
Speaker 6: would have continued to see that even if the two
11:05
Speaker 6: Democrats were still there, you'd have the three Republicans. You'd
11:08
Speaker 6: probably get your three to two vote to do whatever
11:11
Speaker 6: it was that the Republican tinggent wanted. So from a
11:14
Speaker 6: practical standpoint, it's not going to have that much impact
11:17
Speaker 6: on the decision making for deals of this FTC.
11:20
Speaker 2: Are there any deals that are currently being held up
11:22
Speaker 2: or being scrutinized that maybe the participants are saying, oh,
11:26
Speaker 2: boyd now we're going to really sail through and we
11:28
Speaker 2: thought maybe on our Biden it could be a tough
11:30
Speaker 2: slide or anything we should keep an eye on, you know.
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Speaker 6: Paul, The one I'm really interested in is the Google
11:35
Speaker 6: Whiz deal. And I say that because we know this
11:38
Speaker 6: administration is no friend to big tech, and we know
11:41
Speaker 6: that they're staying really aggressive on the monopolistic conduct side,
11:44
Speaker 6: where Google and Apple and Amazon and Facebook have all
11:48
Speaker 6: been sued for monopolistic conduct. And to me, that deals
11:51
Speaker 6: very interesting because just from an anti trust perspective, I
11:54
Speaker 6: don't really think it poses anti trust concerns. You know
11:57
Speaker 6: that the concern would be that you have a cloud
11:59
Speaker 6: company that's marrying with a cloud security company and they
12:02
Speaker 6: could foreclose rivals. But I think that there's ample competition
12:05
Speaker 6: on both sides, both on the cloud side and the
12:07
Speaker 6: cloud security side. That you probably don't have a very
12:10
Speaker 6: strong theory of harm. But we know that this administration
12:13
Speaker 6: doesn't necessarily love Google. I'm going to be interested to
12:16
Speaker 6: see what happens there, but I suspect we're not going
12:19
Speaker 6: to learn in the second half. It's probably going to
12:21
Speaker 6: push into the beginning of next year.
12:23
Speaker 5: All right, Thanks to Jen Reed, Bloomberg Intelligence senior litigation analysts,
12:27
Speaker 5: and just ahead, we're going to look at what President
12:29
Speaker 5: Donald Trump's new tax bill means for the pharmaceutical industry.
12:33
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13:06
Speaker 5: I'm Paul Sweeney and I'm John Tucker filling in on
13:09
Speaker 5: Bloomberg Intelligence.
13:11
Speaker 2: We moved to some news in the tech space.
13:13
Speaker 5: And this week we heard that the AI cloud computing
13:16
Speaker 5: startup core Weave is acquiring the data center operator Core Scientific.
13:21
Speaker 5: It's an all stock transaction. It's valued at nine billion dollars.
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Speaker 2: For more. Guest hosts Lisa Matteo and I were joined
13:28
Speaker 2: by On a Rock Ranna Bloomberg Intelligence senior technology analysts.
13:31
Speaker 2: We're first to ask on a Rock how this deal benefits.
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Speaker 8: Core weave me and think about it, that they have
13:36
Speaker 8: capacity to process a summer of transactions, all the backlock
13:40
Speaker 8: that they have with this particular deal, they are expanding
13:43
Speaker 8: their infrastructure. I mean, it's a very simple deal as
13:45
Speaker 8: if you know, they're just buying more factories to produce
13:48
Speaker 8: what they do. So this is you know, it's it's
13:50
Speaker 8: as simple as that, all right.
13:52
Speaker 2: So this I'm not a tech person, so but I
13:56
Speaker 2: know this tell us what core Weave is. What did
13:59
Speaker 2: they do and why are they showing out nine billion
14:02
Speaker 2: dollars to get bigger?
14:03
Speaker 8: I guess so in the purest of pure reforms, they
14:06
Speaker 8: are just renting computing resources to anybody that wants to
14:10
Speaker 8: run an AI infrastructure. They are a very big Invidia shop.
14:13
Speaker 8: They basically buy GPUs from Nvidia. They create a network
14:17
Speaker 8: or an infrastructure, and they give it to people to
14:19
Speaker 8: go out and experiment or do whatever they need to
14:22
Speaker 8: do on that infrastructure. It's no different than what AWS does,
14:26
Speaker 8: but very heavy focus on GPUs rather than the CPU.
14:29
Speaker 8: So that's really the big difference between a pure play
14:32
Speaker 8: provider like Corevive versus Amazon Web Services.
14:35
Speaker 4: Now, if you can dig into some of the background,
14:38
Speaker 4: what kind of challenges has Core We've had in the past.
14:41
Speaker 4: I mean, didn't they have a pretty dismal IPO.
14:43
Speaker 9: Yeah.
14:44
Speaker 8: I think that's really the most important thing is, you know,
14:46
Speaker 8: the everybody thought when they're going to come out as
14:48
Speaker 8: the first pure play you know AI infrastructure IPO, it's
14:52
Speaker 8: going to be extremely popular, but it didn't happen. And
14:55
Speaker 8: the reason for that is because they need a large
14:58
Speaker 8: amount of upfront capital to build these data centers, and
15:01
Speaker 8: then the workload comes in over the next several years.
15:04
Speaker 8: So there's a lot of questions about whether there's going
15:07
Speaker 8: to be sustainability of this GPU demand going forward several
15:11
Speaker 8: years out. So that's why you were right. The IPO
15:13
Speaker 8: came at forty In a few days, it was down
15:15
Speaker 8: to thirty five, but now we're seeing you know, the
15:18
Speaker 8: stock closer too wants sixty before this deal was announced,
15:21
Speaker 8: so I you know, we have talked about it before that.
15:23
Speaker 8: You know, why aren't they doing a secondary when it's
15:25
Speaker 8: like one hundred and sixty bucks stock of What they
15:27
Speaker 8: did instead is they use their stock to go out
15:30
Speaker 8: and buy another competitor I shouldn't say competitor, but you know,
15:33
Speaker 8: another company in that space, so that it expands their capacity.
15:37
Speaker 8: And you know, I think they're doing the right thing
15:39
Speaker 8: by using stock at this point.
15:41
Speaker 2: Are there more core weaves out there on a row
15:44
Speaker 2: kind of more pure play AI stories, maybe the kind
15:48
Speaker 2: of the sausage of AI, if you will, the guts
15:52
Speaker 2: that somebody could take public.
15:54
Speaker 8: There are multiples of them there, but they are much
15:57
Speaker 8: smaller size in Kobe there, I would say there would
16:00
Speaker 8: be hundreds of them at this point, because you know,
16:02
Speaker 8: you go out, you buy the GPU, you go out
16:05
Speaker 8: and start renting it out in the in you know,
16:07
Speaker 8: in a long time ago, this high powered computing was
16:10
Speaker 8: used for bitcoin mining, and then you know, when that's
16:13
Speaker 8: not in favor, these guys are renting out their infrastructure
16:16
Speaker 8: for other reasons. So there are other plays out there.
16:19
Speaker 8: But almost all of them are much smaller than core
16:22
Speaker 8: Viv from a you know, pure play point of view.
16:24
Speaker 4: Now we digged into Krewey, what about core Scientific, what's
16:28
Speaker 4: the attraction to them?
16:30
Speaker 8: I mean, it's just they're expanding the number of you know,
16:32
Speaker 8: the capacity that they have to process the transactions in
16:35
Speaker 8: a sense that Corviev has a massive backlog right now.
16:38
Speaker 8: They have people wanting to use their services, and then
16:41
Speaker 8: these guys have to go out and lease it from
16:43
Speaker 8: you know, other companies like Courre Scientific in this case,
16:46
Speaker 8: they said, you know, they have an agreement with them
16:48
Speaker 8: to lease their facilities. They just said, you know, we'll
16:52
Speaker 8: buy it out and expand their size. And I think
16:54
Speaker 8: that's as simple as that, all right.
16:56
Speaker 5: Thanks to Anna rog Rana, Bloomberg Intelligence, Technology and List, we.
17:00
Speaker 2: Moved next to the news in the auto sector this week,
17:03
Speaker 2: shares a Tesla fell after recent news that CEO Elon
17:06
Speaker 2: Musk was forming a new political party.
17:08
Speaker 5: Well mus said he's going to take on Republicans and
17:10
Speaker 5: Democrats with the America Party, focusing on House and Senate
17:14
Speaker 5: seats for the next twelve months.
17:16
Speaker 2: For more guestos, Lisa Matteo and I were joined by
17:19
Speaker 2: Craig Trudell, Bloomber Global Autos editor. We first asked Craig
17:22
Speaker 2: why investors are concerned about Elon Musk.
17:25
Speaker 10: I think they see all sorts of risks here. You know,
17:28
Speaker 10: this is a matter of now, you know, not just
17:31
Speaker 10: alienating Democrats, but but also now going after Republicans and
17:37
Speaker 10: and you know, really sort of ticking off Donald Trump.
17:40
Speaker 10: And we've seen that with Trump going from you know,
17:43
Speaker 10: kind of biting his tongue when Musk was first attacking
17:47
Speaker 10: you know, the big beautiful Bill to really going after
17:50
Speaker 10: Musk in a more sort of pitched way. And you know,
17:53
Speaker 10: so so this is you know, a risk for him
17:57
Speaker 10: to to sort of make himself in anem and of
18:01
Speaker 10: both sides of the aisle in Washington potentially, but also
18:05
Speaker 10: you know, just a great big distraction after he's assured everybody,
18:09
Speaker 10: you know on multiple occasions, Look, I'm going to you know,
18:12
Speaker 10: sort of get back to business and and uh, you know,
18:15
Speaker 10: tend to to Tesla more than I have been, you know,
18:19
Speaker 10: since last year.
18:20
Speaker 2: So I have to ask this question, is there a
18:23
Speaker 2: board here at this company that Musk here?
18:27
Speaker 10: There is, you wouldn't necessarily know it from the actions
18:30
Speaker 10: of the board, right, Uh, you know, to the extent
18:33
Speaker 10: that we've heard from the board recently, it's been to say, uh,
18:37
Speaker 10: you know, Elon's are our guy. Uh, you know, they
18:40
Speaker 10: they batted down a report in the Wall Street Journal
18:44
Speaker 10: just in the last few months about you know, potential
18:46
Speaker 10: succession planning at the company. I think the sort of
18:51
Speaker 10: read of that, a close read of that story, it
18:54
Speaker 10: wasn't necessarily the case that what the journal was saying
18:57
Speaker 10: was that they are, you know, we're actively looking to
18:59
Speaker 10: replace Musk. It was potentially more of a matter of
19:03
Speaker 10: of you know, sort of doing the job that you
19:05
Speaker 10: would expect a board to do. I should sort of,
19:07
Speaker 10: you know, give them a credit in that regard that
19:10
Speaker 10: at least they're preparing for, uh you know, the potential
19:14
Speaker 10: of needing to look for a next CEO. But you know,
19:17
Speaker 10: Musk is very much in control of this company, and
19:21
Speaker 10: that was something that uh, you know, the Delaware Chancery
19:24
Speaker 10: Court judge who throughout his pay package, uh you know,
19:27
Speaker 10: really emphasized in her ruling last year when she said,
19:30
Speaker 10: you know, he's very much in control of this company
19:33
Speaker 10: and its board, and you know, on those grounds, uh
19:37
Speaker 10: you know, throughout his compensation package, which has created, you know,
19:41
Speaker 10: another mess and and you know, I think this, you know,
19:44
Speaker 10: political uh endeavors, you know, only only complicates the board's
19:50
Speaker 10: attempt to try and get him him compensated in a
19:54
Speaker 10: in a way that he's going to be happy with
19:56
Speaker 10: now quick.
19:56
Speaker 4: Not too long ago, we heard Elamas saying, you know what,
19:58
Speaker 4: I'm going to get back to it. I'm going to
20:00
Speaker 4: focus on tessel. This was after the last earnings and
20:02
Speaker 4: now we're seeing the shift, right, he's talking about this
20:05
Speaker 4: America Party. I mean, is this something that investors should
20:09
Speaker 4: be concerned about? These kind of going back on.
20:11
Speaker 11: His word there?
20:12
Speaker 10: Yeah, I mean I think you know some of the
20:15
Speaker 10: it's it's not the only way in which he's sort
20:17
Speaker 10: of undermined himself. And you know, potentially you made an
20:22
Speaker 10: investors question the things that he's been telling them because
20:26
Speaker 10: he also, you know, said to Bloomberg back in May
20:30
Speaker 10: that our sales are turning around, right, and that was
20:33
Speaker 10: not born out in the deliveries numbers that the company
20:36
Speaker 10: reported last week. They had a thirteen percent year over
20:38
Speaker 10: year decline in worldwide vehicle sales. That was almost bang
20:42
Speaker 10: on what they posted for the first quarter. So, you know,
20:45
Speaker 10: for him to say, you know that he thinks in
20:48
Speaker 10: terms of political spending, he's he's done enough that he's
20:52
Speaker 10: going to, you know, do a lot less of it
20:54
Speaker 10: in the future. You know, that was what he said
20:56
Speaker 10: in May, and this is is pretty much one hundred
21:00
Speaker 10: any degrees different from what he was saying.
21:02
Speaker 5: Then, all right, Thanks to Craig Trudell, Bloomberg Global Autos Editor.
21:06
Speaker 2: We move next to the biotech space. President Donald Trump
21:09
Speaker 2: recently signed a three point four trillion dollar budget bill
21:12
Speaker 2: into law, which includes an extension of tax cuts.
21:15
Speaker 5: The package represents a major political party victory for Trump.
21:18
Speaker 5: But what does this mean for the pharmaceutical industry?
21:21
Speaker 2: From more on this guest host Lisa Matteo and I
21:23
Speaker 2: turned to Sam Fizzelli, Bloomberg Intelligence, Director of Research for
21:26
Speaker 2: Global Industries and senior pharmaceuticals analyst. You first asked Sam
21:30
Speaker 2: what this bill means for the farm companies.
21:33
Speaker 12: So, the one big, beautiful bill had in it a
21:38
Speaker 12: couple of things, many things, obviously, I can't remember how
21:41
Speaker 12: many pages it was supposed to be. But for the
21:43
Speaker 12: farmer industry, I'm going to focus on two things right now.
21:46
Speaker 12: Right one is a good thing. So there is an
21:48
Speaker 12: orphan drug change that impacts the IRA and actually impacts
21:53
Speaker 12: some really big drugs. Here, what's an orphan drug. When
21:56
Speaker 12: you develop a drug for a patient population that less
21:59
Speaker 12: than two hundred thousand in the US, you called an
22:02
Speaker 12: orphan drug. You get a special exemption. It really helps
22:05
Speaker 12: you in terms of your duration of time that it
22:08
Speaker 12: can be on the market et irrespective of your patent expiry.
22:13
Speaker 12: It was all set up to help companies develop drugs
22:16
Speaker 12: for these underserved markets. Two undred thousand. Okay, it's not small.
22:20
Speaker 12: It's not big, but it's not that small. So it helped.
22:23
Speaker 12: One of the big drugs that had this was Cultruda,
22:26
Speaker 12: which is the biggest selling drug at the minute, and
22:29
Speaker 12: that's for cancer from merg So when IRA came along,
22:33
Speaker 12: it said, what we're going to do is say your
22:36
Speaker 12: drug twenty fourteen approval Fortruder under orphan drug. Great, if
22:42
Speaker 12: you're an ophen drug, you don't fall into IRA the
22:44
Speaker 12: renegotiation of price and all that. But as soon as
22:47
Speaker 12: you get another indication, then that clock starts from the
22:50
Speaker 12: original data of approval. So if you had a drug
22:53
Speaker 12: orphan drug in twenty fourteen and you get some other
22:55
Speaker 12: indication in twenty twenty two. They date back the count
22:58
Speaker 12: the clock counting to twenty fourteen. That was terrible. It
23:01
Speaker 12: really means that nobody would want to do multi indication tests, etc.
23:06
Speaker 12: So that's been changed once and Woven drug is you
23:11
Speaker 12: can keep that date. And so what does that mean
23:13
Speaker 12: for Ktruder from Merk one extra year before price negotiations
23:17
Speaker 12: by Medicare, And that's a twenty thirty billion dollar drug
23:22
Speaker 12: selling something like fifty percent of his revenues in the US.
23:26
Speaker 12: That's a huge win for the industry, Sam.
23:28
Speaker 2: Another big I guess component of this administration's policy has
23:33
Speaker 2: been cutting funding or maybe threatening the cut funding for
23:36
Speaker 2: research universities. And I have long experience with Duke University,
23:40
Speaker 2: which is a huge medical center and research area. Here's
23:45
Speaker 2: what's your industry saying about those potential cuts.
23:47
Speaker 12: Yeah, the industry itself is relatively quiet, Paul, because what
23:51
Speaker 12: they don't want to do is is I don't know
23:53
Speaker 12: whether the right phrases here, shake the target, tiger's cage
23:56
Speaker 12: or whatever, you know, rattle the whole set here. But
24:01
Speaker 12: in reality there is a I think what I heard
24:04
Speaker 12: the last number was a twelve percent increase in applications
24:08
Speaker 12: to some of the top universities in Europe versus what
24:11
Speaker 12: they were last year from the US. So that's folks
24:15
Speaker 12: that would have gone to or wanted to go to Harvard,
24:18
Speaker 12: they're now looking at Oxford, Cambridge, Sance, Pot etcetera. These
24:22
Speaker 12: very brilliant universities across Europe. So there's that issue. But
24:25
Speaker 12: remember in the OBBB, there's also another area where there
24:29
Speaker 12: is a cup to Medicaid spending. That's eleven million Medicaid
24:33
Speaker 12: covered folks that lose it. That will also have repercussions
24:36
Speaker 12: for pharma companies, healthcare in general. And of course you
24:40
Speaker 12: go to a hospital you don't have insurance, they're going
24:43
Speaker 12: to treat you. Who's going to pay for that. It's
24:45
Speaker 12: going to go on your premium? That's a tax on you.
24:49
Speaker 6: You know.
24:49
Speaker 12: Let's see how this all pans out. But not good
24:52
Speaker 12: there either.
24:53
Speaker 4: All right, Sam, I want to talk about the Medicaid cuts.
24:55
Speaker 4: I'm going to kind of put you on the spot there,
24:57
Speaker 4: but it's going to affect insurers who focus on Medicaid.
25:01
Speaker 4: They might lose customers. So what does this mean for like,
25:03
Speaker 4: let's say Elevant's Health, United Health companies that do deal
25:07
Speaker 4: with this.
25:08
Speaker 12: Yeah, So They are clearly under pressure and there's a
25:10
Speaker 12: risk for them, and one of the issues is exactly
25:14
Speaker 12: what you just said. You know, this is completely upsetting
25:18
Speaker 12: the card here for the insurance in general. The point
25:21
Speaker 12: is I'm not convinced that they will necessarily lose out.
25:25
Speaker 12: I mean, we have dedicated expert analysts who cover the sector,
25:28
Speaker 12: et cetera. But usually what's going to happen is that
25:32
Speaker 12: if they're not making money elsewhere, they're going to try
25:34
Speaker 12: and raise premium somewhere else, which is what I said
25:36
Speaker 12: to start with.
25:37
Speaker 5: All right, Thanks to Sam Fazzelli, Bloomberg Intelligence, the director
25:40
Speaker 5: of research for Global Industries and Senior Pharmaceuticals, and just ahead,
25:46
Speaker 5: look at Bloomberg Intelligences ten companies to watch in the
25:49
Speaker 5: third quarter.
25:50
Speaker 2: You're listening to Bloomberg Intelligence on Bloomberg Radio, providing in
25:53
Speaker 2: depth research and data on two thousand companies and one
25:56
Speaker 2: hundred and thirty industries. You can access Bloomberg Intelligence via
25:59
Speaker 2: b I go on the terminal.
26:00
Speaker 5: I'm Paul Sweeney and I'm John Tucker. This is Bloomberg.
26:11
Speaker 1: You're listening to the Bloomberg Intelligence podcast. Catch us live
26:15
Speaker 1: weekdays at ten am Eastern on Apple cocklay and Android
26:18
Speaker 1: Auto with the Bloomberg Business App. Listen on demand wherever
26:21
Speaker 1: you get your podcasts, or watch us live on YouTube.
26:25
Speaker 5: I'm Paul Sweeney and I John Tucker filling in on
26:28
Speaker 5: Bloomberg Intelligence. We move now to research from Bloomberg Intelligence
26:32
Speaker 5: titled Banking Booze and Double Sevens wheels Ten Companies to
26:37
Speaker 5: watch right Now.
26:39
Speaker 2: It discusses ten companies to look at a four in
26:41
Speaker 2: the third quarter of twenty twenty five. For more, guest
26:44
Speaker 2: host Norma, Linda, and I were joined by Tim Craig,
26:46
Speaker 2: head Bloomberg Intelligence, Chief Content Officer. We first asked him
26:50
Speaker 2: to break down his recent list of ten companies.
26:52
Speaker 9: These ten ideas are all part of a broader list
26:55
Speaker 9: of what we call focus ideas. Focus ideas are where
26:58
Speaker 9: are analysts around the cross regions cross sectors have high
27:03
Speaker 9: conviction fundamental points of view that they think are different
27:08
Speaker 9: from what the market thinks anti consensus, and importantly, they're
27:12
Speaker 9: catalysts coming up that we think can change market perceptions.
27:15
Speaker 9: And these ten all have important catalysts coming up during
27:19
Speaker 9: the third quarter. And just to put it out there,
27:24
Speaker 9: you can see all of these focus ideas on bi
27:27
Speaker 9: focus on the terminal.
27:28
Speaker 2: Tim, What I like about these ideas, you know, because
27:30
Speaker 2: people are always looking for ideas long and short. You
27:34
Speaker 2: guys have the ideas. And what I really like that
27:37
Speaker 2: this research format is you have the triggers, what's going
27:40
Speaker 2: to make what has to happen in order for this
27:43
Speaker 2: call to work on a particular stock, Aston Martin. I'm
27:46
Speaker 2: asking for Matt Miller, what's the call here on Aston Martin?
27:50
Speaker 9: So the call on Acid Martin. As much as I
27:54
Speaker 9: like the cars, and obviously this is where the double
27:57
Speaker 9: O seven reference comes from, They've got a really interesting
28:02
Speaker 9: new lineup of vehicles, but they're short on V twelves
28:08
Speaker 9: and notwithstanding the world of evs and all that sort
28:12
Speaker 9: of stuff, the high end V twelves from Ferrari and
28:15
Speaker 9: Lamborghini are hot. And you look at the inventory levels
28:20
Speaker 9: of Aston Martin on the lots, they're too high. We
28:23
Speaker 9: think that there's a capital infusion that's likely needed in
28:27
Speaker 9: coming months, and so we actually have a cautious view
28:32
Speaker 9: on Aston Martin from that perspective, Tim, you.
28:35
Speaker 7: Are always putting out super interesting stuff. I mean, we
28:37
Speaker 7: had fifty companies to watch in January and then we
28:39
Speaker 7: have the quarterly update in April and then of course
28:41
Speaker 7: now this story that's out loving the graphics here. How
28:45
Speaker 7: long did it take to put us together?
28:48
Speaker 9: Well, it's an ongoing process of working with our analysts
28:53
Speaker 9: in terms of where do we see these ideas coming from,
28:57
Speaker 9: and then you know, our friends in business weeek like
29:00
Speaker 9: to pull together the graphics on these things. It is
29:03
Speaker 9: a It is a good looking piece on the on
29:08
Speaker 9: Bloomberg dot Com.
29:10
Speaker 2: Booze Dagio. What's the story there, Yeah.
29:14
Speaker 9: The Agio it ties in a little bit with a
29:17
Speaker 9: couple of ideas here. You know, I mentioned Aston Martin.
29:20
Speaker 9: That's obviously a high end consumer idea. And even though
29:23
Speaker 9: we're concerned about Aston Martin specifically, the high end luxury
29:27
Speaker 9: vehicle market is good. Similarly with the Agio high end,
29:33
Speaker 9: high end, Booze high end spirits. They are the world's
29:35
Speaker 9: largest spirits manufacturer, is doing relatively well. You know, their
29:40
Speaker 9: recent sales trends have been robust. We think that's going
29:44
Speaker 9: to continue to show through. There has been concern about
29:48
Speaker 9: things like tariffs and what could be the impact, especially
29:51
Speaker 9: from a US consumer base. We're less concerned and we're
29:55
Speaker 9: optimistic another consumer higher end idea. You guys, know and
30:01
Speaker 9: love in the States is Dick's Sporting Goods. You know,
30:04
Speaker 9: this is a classic good old consumer's growth story where
30:09
Speaker 9: not only do you know the store, but you might
30:12
Speaker 9: have been in one of their new bigger formats where
30:16
Speaker 9: they have you know, that much more kit. Their sales
30:20
Speaker 9: trends continue to be quite good despite concerns about what
30:23
Speaker 9: are tear's going to mean for consumer here or there?
30:26
Speaker 9: So you know those are all those are all consumer ideas.
30:29
Speaker 9: There's certainly a common thread there.
30:32
Speaker 7: You mentioned Dixon. I'm looking at easy Jet, which of
30:35
Speaker 7: course we know is a low cost British airline, and
30:38
Speaker 7: we have a sunny outlook here, But what do you
30:40
Speaker 7: think will be the most surprising call here for readers.
30:44
Speaker 9: Yeah, it's interesting in this instance. Obviously this is not
30:48
Speaker 9: the high end consumer. This is everyday consumer. Is that
30:54
Speaker 9: this isn't so much about the demand, which actually demand
30:57
Speaker 9: for travel and experience continues to be pretty good. This
31:00
Speaker 9: is more of a story on an operational basis. They're
31:03
Speaker 9: replacing a lot of older planes with newer planes that
31:09
Speaker 9: have bigger capacity and much more fuel efficient, so this
31:12
Speaker 9: is a margin story. Easy Jet has historically lagged behind
31:17
Speaker 9: Ryanair at the other low cost carrier here in Europe.
31:21
Speaker 9: We think that that's set to change all right.
31:23
Speaker 5: Thanks to Tim craig Head, the Bloomberg Intelligence Chief Content Officer.
31:28
Speaker 2: We moved next to the digital media space.
31:30
Speaker 5: In late May, the TV advertising platform Mountain had its
31:34
Speaker 5: initial public offering, with shares trading on the New York
31:37
Speaker 5: Stock Exchange. It's under the ticker MNTN.
31:41
Speaker 2: For more on this recent IPO and the latest in
31:43
Speaker 2: the streaming business, guest host Lisa Matteo and I were
31:45
Speaker 2: joined by Mountain President and CEO Mark Douglas. The first
31:48
Speaker 2: asked Mark to talk to us about going public.
31:52
Speaker 11: It was about six weeks ago, and I'll tell you,
31:54
Speaker 11: six weeks ago it was not a given that you're
31:57
Speaker 11: going to take a company public is two years of planning,
32:02
Speaker 11: but seemed extremely last man. I'm talking hours before we
32:07
Speaker 11: started the road show. We were still with bankers Morgan, Stanley,
32:11
Speaker 11: City Avercurty siding on the timing, and we were like,
32:15
Speaker 11: are there is there going to be a jobs report
32:16
Speaker 11: next week?
32:17
Speaker 5: Is there going to be an inflat?
32:18
Speaker 3: Like?
32:18
Speaker 11: We just needed a clean window at time, and we
32:22
Speaker 11: got it done and I think it helped a lot
32:24
Speaker 11: of other a few other companies you know, kind of
32:27
Speaker 11: follow us. Like I like, I grew up in New
32:30
Speaker 11: York City. You know how New Yorkers will like throw
32:32
Speaker 11: their arm in between the elevator doors, like like to
32:36
Speaker 11: keep the elevator open. I feel like mounted that to
32:39
Speaker 11: the IPO market. We just threw ourselves between the doors,
32:43
Speaker 11: kept it open, and a few companies have followed us.
32:45
Speaker 5: Good stuff.
32:46
Speaker 4: I did that the other day. It didn't work for
32:47
Speaker 4: me when I threw the Yeah.
32:50
Speaker 11: You want to get your arm back by the time
32:52
Speaker 11: you get to the other where you're going.
32:55
Speaker 4: You guys do the ad business right, And we talk
32:57
Speaker 4: a lot about AI. How it's affecting, you know, companies
33:01
Speaker 4: and workers and just changing the corporate workspace. How is
33:04
Speaker 4: it affecting the ad business.
33:06
Speaker 11: It's having a really big impact and kind of two ways.
33:09
Speaker 11: One is I think as a company you have to
33:13
Speaker 11: be doing everything you can to leverage AI. So it's
33:16
Speaker 11: having a big impact on our sales, our marketing. Things
33:20
Speaker 11: like three quarters of our revenue now comes from inbound leads,
33:24
Speaker 11: partially because we're leveraging AI technology and make our marketing
33:27
Speaker 11: more efficient. We're doing the same thing for our customers sales,
33:33
Speaker 11: our sales headcount is very stable again because we're getting
33:36
Speaker 11: more productivity. But then it's also affecting the business. I mean, ultimately,
33:40
Speaker 11: our customers are looking for their next customer, so they're
33:44
Speaker 11: using Mountain on streaming TV, They're using Matter on social,
33:47
Speaker 11: Google on paid search in order to leverage digital marketing
33:52
Speaker 11: to pring, you know, put to promote their products or
33:55
Speaker 11: meeting our customers products. And we're using AI technology to
33:59
Speaker 11: help identify who their target customers. So those TV ads
34:03
Speaker 11: are super targeted specifically towards you because you show behavior
34:08
Speaker 11: that this might be a product you're interested in. So
34:11
Speaker 11: it's AI across the business, and I'll tell you it's
34:14
Speaker 11: I mean, if you're not doing that, you're losing right now.
34:17
Speaker 11: I mean, it's it's the intensity of it is pretty
34:19
Speaker 11: pretty is quite up there.
34:21
Speaker 2: Talk about where we are in this migration of ad
34:24
Speaker 2: dollars away from what i'll call traditional broadcasting cable television
34:28
Speaker 2: to some of the more streaming platforms out there. It's
34:32
Speaker 2: just been a sea change. Where are we in that
34:34
Speaker 2: sea change?
34:35
Speaker 11: Well, pretty far along if you go in the companies
34:37
Speaker 11: like Disney or Comcasts, NBC, Universal, Paramount. I was just
34:43
Speaker 11: in can Can Lion literally three weeks ago, which is.
34:47
Speaker 2: Potentially Lisa the biggest boon boggle on the several times,
34:53
Speaker 2: and I can say.
34:54
Speaker 11: That it's it's not terrible to be in the South
34:58
Speaker 11: of France while you're at a trade show. I would
35:00
Speaker 11: agree with that.
35:01
Speaker 2: By the way, Rose Krispies in the morning, well we.
35:07
Speaker 11: Had a billboard up that instead of saying Rose all day,
35:10
Speaker 11: said row As all day, return on ad spend all day.
35:15
Speaker 11: But I was just there meeting. I had a lot
35:17
Speaker 11: of meetings with some of these the biggest media companies,
35:20
Speaker 11: and they're they're only talk about streaming. It's it's like
35:25
Speaker 11: they're streaming first in terms of the way they think
35:28
Speaker 11: about their businesses. I'm talking again like a Disney and
35:32
Speaker 11: so the customers meaning at that event, the biggest brands
35:36
Speaker 11: traditionally now we're focused on the smaller brands, small mid
35:39
Speaker 11: sized businesses. Streaming is is their focus, and I think
35:44
Speaker 11: cable television I don't think they see a distinction. They
35:47
Speaker 11: just see it as we're going to meet people wherever
35:49
Speaker 11: they are, and where they are now is predominantly streaming.
35:52
Speaker 11: But if they're still on cable, great, we'll meet them
35:54
Speaker 11: there also. But it's a streaming world.
35:57
Speaker 4: It's kind of the I had cable and the only
36:01
Speaker 4: reason I have it is because my husband wants to
36:04
Speaker 4: watch sports. Yeah, right, so where does streaming stand with sports?
36:08
Speaker 4: Because we're hearing so many different things, right the ESPN
36:11
Speaker 4: MLB contract and what's happening with that? You know, could
36:13
Speaker 4: he go to streaming? Like what could that be a
36:15
Speaker 4: big drawn.
36:16
Speaker 2: To help for streaming.
36:17
Speaker 11: Yeah, So the year started those same kind of conversations
36:21
Speaker 11: with live sports. So last year live sports on streaming
36:24
Speaker 11: was very nascent and this year it's it's that's kind
36:28
Speaker 11: of the focus of a lot of these companies. So
36:31
Speaker 11: I think you look twelve months out, there won't be
36:34
Speaker 11: any distinguishing aspect. If you want to watch NBA Finals,
36:39
Speaker 11: it's available streaming live. It will be available cable live.
36:42
Speaker 11: That won't be any differentiating factor except one. The brands
36:48
Speaker 11: will prefer streaming because they get to be very targeted
36:51
Speaker 11: and who they deliver the ads to, and the more
36:54
Speaker 11: targeted they are, the more efficient that spend is for them.
36:57
Speaker 11: So the brands prefer streaming costs of the digital targeting capabilities.
37:03
Speaker 11: The consumer, you know, you should prefer whatever you like
37:05
Speaker 11: and whatever is easiest to turn on, and what we
37:09
Speaker 11: want to happen is we just want to see everyone
37:11
Speaker 11: watching TV. However, you like to conxhibit.
37:14
Speaker 2: All right, the NFL. Are we going to see a
37:16
Speaker 2: big Sunday package? Go to the NFL on a streaming Absolutely,
37:21
Speaker 2: and really because that's gonna be a sea change.
37:23
Speaker 11: Well, the other thing is is when you bring in streaming,
37:26
Speaker 11: you bring in Amazon to bid on it. You bring
37:29
Speaker 11: in Netflix, you bring and these are some of the
37:33
Speaker 11: literal I mean, Netflix is worth over half a trillion dollars.
37:37
Speaker 11: You know, I don't know Amazon's current market cap. I
37:40
Speaker 11: assume it's way up there. And so if you want
37:43
Speaker 11: the highest level competitions and media company, you're going to
37:46
Speaker 11: go streaming because that's where that money is.
37:48
Speaker 2: Yeah, I'm just gonna Netflix. I mean, another great year.
37:52
Speaker 2: There's Disney just thirty seconds of Is Disney the number
37:55
Speaker 2: two streamer out there? And is the room for three, four,
37:58
Speaker 2: five six?
37:59
Speaker 11: The Disney, I do perceive. I think both data and
38:02
Speaker 11: perception is number two behind Netflix. By the way, they
38:06
Speaker 11: if you talk to them, they're not They're not like
38:09
Speaker 11: happy and settled. They're a number two. They're definitely going
38:12
Speaker 11: for number one. I think there's room for three and
38:16
Speaker 11: a four, but there's clearly going to be a big
38:18
Speaker 11: consolidation for who takes that spot, all.
38:21
Speaker 5: Right, Thanks to Mountain President and CEO Mark Douglas.
38:25
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