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Hatch Weekly: Disney's big bust

Disney takes on Netflix and Amazon

We’ve finally got the details on Disney’s (DIS) streaming play: last week CEO Robert Iger said its service would include Disney+ and bundle it up with Hulu and ESPN+ for just $12.99 per month. Hear that, Netflix (NFLX) and Amazon (AMZN)? Those are the winds of change, and they’re blowin’ on you.

Netflix should be worried

For the same price of Netflix, with the Disney bundle, you’re getting new TV episodes, all Disney, Pixar, and Marvel movies, and sports. Is this a match made in heaven? It's a great deal no matter how you slice it, and Netflix and Amazon Prime Video should be nervous. The gloves are off too with the company saying Disney+ will be the only platform to stream their 2019 movies.

No gain without pain

It’s looking promising, except for the fact that strategic transformation takes time and money, so Disney missed their most recent earnings expectations. The weak results were blamed on escalating streaming-service losses, under performing 21st Century Fox assets, and lower-than-expected theme park attendance. Disney missed Wall Street’s revenue expectations by roughly $1 billion, causing shares to tumble more than 3 percent last week. Star Wars: Galaxy’s Edge, a new area at Disneyland cost $1 billion to build, but attendance is below what the company had hoped it would be. Why? The price is a turn-off: admissions to Disneyland aren’t cheap! That said, Disneyland had 18.7 million visitors in 2018, up 2 percent from a year earlier. Maybe the Star Wars nerds are happier streaming movies than screaming on rides. Who knows! May the force be with them.

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Trade wars are old news. Currency is where it’s at.

The US has a history of accusing China of keeping the renminbi, the name of China's currency, artificially low. But has mostly held back from harsh action. Enter Trump. Last week, after China allowed the value of its currency to fall, President Trump called China a currency manipulator. The move added to the long-building trade tensions between the world's two largest economies.

Currencies 101

Currencies matter in international trade. When the value of our currency is strong, we can buy more foreign goods for our money. But it makes our goods more expensive for other countries to buy (exports). When the value of our currency is weak, we can buy fewer foreign goods for our money (imports). But it makes our goods cheaper for foreign countries to buy - which encourages exports - a good thing! Strong exports can fuel economic growth as well as jobs. But back to the trade war, a cheaper renminbi would hurt US exports into China and dilute the effectiveness of Trump's tariffs. It might seem counter intuitive, but a strong currency is not necessarily in a nation's best interests, and China knows it.

Why you should care

At a time when the global economy is slowing down, investors are nervous. Trump is not letting up with pressure on China, and it could have serious consequences. Like a recession. Many analysts feel that the escalation of the trade war, and market volatility, is set to continue for some time. So what's an everyday investor to do? Some are considering defensive shares. Others, treasury bonds (yes, we have exposure to those). Others feel that there are still many buying opportunities out there. Whatever your strategy, remember; keep your emotions in check!

Uber not so super duper

Uber (UBER) is smashing some records, but not always good ones. It's latest quarterly earnings results show that the company has had its biggest loss ever ($7 billion). While they warned 2019 would be an "investment year", wow Uber, that's a lot of dough!

Uber mixed

Uber's losses aren't helping those that continue to question their business model. And to fan the flames, its rival, Lyft (LYFT), posted better than expected losses in their earnings report. They also suggested they could achieve profitability soon than expected. But Uber's CEO, Dara Khosrowshahi, is focussing on the positives, including an increase in bookings and trips. Also, in July, their platform reached over 100 million monthly active consumers for the first time.

When in doubt, diversify!

A company known for disrupting how we get from A to B knows a thing or two. So it's no surprise it's investing in autonomous cars, public transit, expanding its bicycle and scooter business, and in its freight delivery platform. The company also plans to roll out more options for shared rides, such as car-pooling and public transit. As disrupters, naturally, they aim to replace public transit altogether. The ultimate plan is to become the Amazon of transportation: cars, bikes, scooters, buses and trains. Bold. But will it be profitable?


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