More Than 28 Million People Sign Up For Disney Plus Streamed Content.
CHATTERLEY: Welcome back to FIRST MOVE. I am Julia Chatterley live from the New York Stock Exchange and that was the opening bell, and as expected, we have a higher open for U.S. stocks this Wednesday morning. The NASDAQ, yes, that is hitting fresh record highs. I believe, the Dow also adding to Tuesday's 1.4 percent gains. Tuesday was the Dow's best day in terms of performance since June of last year, I believe. There are also reports that scientists are making progress on our coronavirus vaccine helping sentiment, but I think stabilization at least outside of China, the appearance of it at least is also perhaps filtering into sentiment hereto. But also, let's not forget the fundamentals, new numbers showing strong private sector jobs growth. Last month, the U.S. employers adding almost 300,000 jobs. That, in fact is the best monthly gain in more than four years, an interesting prelude ahead of non-farm payrolls on Friday. All right, let's take a look at our Global Movers today. Tesla -- as we've been discussing -- shares pulling back a touch here from that electrifying rally. Nice. The stock is lower after rising some 13 percent to a new record high on Tuesday. Tesla's value has more than doubled since the start of the year. In fact, Elon Musk's net worth has risen by $16 billion since January, losing a little bit today as you can see, nine percent, little relative to the rally that we've seen. Tesla's rivals Ford and GM also out with Q4 results. Ford falling after reporting weaker than expected profits. It's also lowered its 2020 outlook here. A tale of two halves though, GM higher. Its earnings beat expectations, but sales were softer than expected. Disney also in focus. The shares higher in the session. The entertainment giant reported stronger than expected profits and revenues. The streaming service though, Disney Plus, taking much of the attention. They now have more than 28 million subscribers gathered since that November launched. The theme park profits could drop, however, by almost $300 million this quarter. That was the warning indeed coming because of the coronavirus and the anti-government protests in Hong Kong. Let's talk all this through. Tuna Amobi is the media and entertainment analyst with CFRA Research, and he joins us now. Great to have you with us.</s>TUNA AMOBI, MEDIA AND ENTERTAINMENT ANALYST, CFRA RESEARCH: Thanks, Julia.</s>CHATTERLEY: All right, let's talk coronavirus and the Hong Kong impact first and then we'll talk more detail in the numbers here. Do you think they are being conservative in their estimates here for the potential impact for its theme park? But there's also cinemas and the like to, surely.</s>AMOBI: Well, you know, so the guidance they provided assumes that the parks will be closed for about two months in Hong Kong and in Shanghai Disneyland and what they said is that the impact of those numbers is going to be about 170 $million, give or take in operating income for the international parks.</s>CHATTERLEY: Yes.</s>AMOBI: So we knew there was going to be some disruption. What we weren't sure was how long this was going to last or if this is going to have a continuing impact. And to be fair, most of the companies that are being impacted by this coronavirus have really said that they're really -- it's really hard to get a good grip on how much impact ultimately or how long this could last.</s>CHATTERLEY: Yes, I mean, it's tough in terms of costs, closures, length of time here, ultimately, but relative to the revenue capabilities of this company, it's kind of a fraction.</s>AMOBI: I agree. I think investors right now are really focused on the good news in the parks. And a lot of the good news is coming from a domestic theme parks where they just opened, you know, both two Star Wars attractions in Florida as well as in California. And we're starting to see the impact of those attractions on attendance. So really, the story of the parks now is really a tale of two, you know, parks if you will. The domestic really doing a lot of the heavy lifting versus the international with the concerns about the coronavirus.</s>CHATTERLEY: We have to talk about Disney Plus, the streaming, the expectations here were for around 20 million subscribers. They blew those expectations out of the park here, 28 million subscribers. That's a strong number.</s>AMOBI: Oh Julia, I've got to tell you, those numbers were way above even the most optimistic analyst expectations. We had them coming in somewhere about 24 million to 25 million, and for them to say that in January alone, they added another two million to get to 28.6 as of Monday.</s>CHATTERLEY: Yes.</s>AMOBI: I mean, that's really off to a roaring start, and I really believe that this really is a sign of good things to come.</s>CHATTERLEY: Sixty to ninety million is their prediction for 2025.</s>AMOBI: I mean, I've got to tell you, Julia, 60 million to 90 million, investors don't even remember that that number is a global number.</s>CHATTERLEY: Yes.</s>AMOBI: And within that, they said about a third of that is coming from the U.S., so when you think that the U.S. alone has done 28.5 million in just literally two months and change and they had a set of five-year projection. I think you can see how conservative those numbers are with international launch still to come.</s>CHATTERLEY: So some of the obvious push back here the cost. This growth came at a huge price, and even when you bring in the Hulu bundle, the ESPN bundle, I mean that content streaming segment lost just shy of $700 million. The price $7.00 a month. They need to raise prices here or we're not worried about that yet.</s>AMOBI: I think we're not worried about that yet. The price of $6.99 that they came in, I think it seems to be just the right sweet spot, and remember, you can get Disney Plus, ESPN Plus and Hulu in a bundle $12.99 subscription. Our worry going into this quarter was that perhaps the bundling or the promotions is going to hurt the pricing power, but we saw ARPU for Disney Plus coming in even very respectable, you know, close to $5.00 and then ESPN Plus, that's the unspoken halo impact of Disney Plus. ESPN Plus is getting a huge benefit from being bundled together, almost doubling their subscriber numbers.</s>CHATTERLEY: And Hulu benefited here as well, as well.</s>AMOBI: And Hulu as well. So there's a hollow impact all along.</s>CHATTERLEY: Compare and contrast Netflix, because I was making the point earlier on the show it took a decade for Netflix to gather 69 million subscribers. Comparables, whether it's content spending, whether it's library, whether it's cost, whether it's subscriber ads here. Thoughts?</s>AMOBI: Well, I've got to say that so much has been made with Netflix having the first mover advantage.</s>CHATTERLEY: Yes.</s>AMOBI: But the launch of Disney Plus really is unprecedented, nothing like the industry has ever seen in terms of the content, in terms of the user interface, in terms of all of the product enhancements, and of course, in terms of the spending. So I have to say that this Disney Plus is really a game changer, unprecedented in terms of the impact that we expected to have. Now that being said, Netflix, I believe is going to be one of the ultimate winners because this is a secular trend that we're seeing migrating from traditional from linear to internet television. I believe Disney and Netflix will be among the beneficiaries.</s>CHATTERLEY: Right. So our summation here is basically Mickey Mouse Fantasia style waved away the first mover advantage, but Netflix is still in the right segment at the right time and can still be a winner here.</s>AMOBI: Especially on the international side. We're seeing more of the international story for Netflix play out where we're seeing the deceleration in the U.S. partly as a result of Disney Plus.</s>CHATTERLEY: Super quickly, we've just lost a bit of ground, I think we're down half a percent here now in Disney. Your price target $160.00, so we've got a room for upside here.</s>AMOBI: Indeed, I think Disney right now has truly a huge valuation on any kind of metric whether its cash flow or earnings and I think that premium is really justified based on the transition that they're making from, you know, traditional to direct to consumer and that really deserves a huge premium for investors.</s>CHATTERLEY: Fantastic to have you on. Thank you so much.</s>AMOBI: Thank you.</s>CHATTERLEY: Tuna Amobi there, media entertainment analyst for CFRA Research. All right, we're going to take a quick break here, but coming up, a feud well and truly on full display. The U.S. House Speaker tearing up the President's speech calling it a manifesto of mistruths. But was it? More on the dramatic moments from last night's State of the Union Address right after this. Stay with CNN.