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Speaker 2: One of the names companies that reported numbers was Walmart
Speaker 2: came out some pretty darn good numbers in a stock
Speaker 2: market likes it.
Speaker 3: Likes it.
Speaker 2: Stock is up five point seven percent today, It's up
Speaker 2: about eighteen percent a year today. Let's check in with
Speaker 2: Jen Bartash as she covers all the retailers for Bloomberg Intelligence. So, Jen,
Speaker 2: what did you hear from Walmart with their earnings release?
Speaker 4: Yeah, it's you know, Walmart had another good quarter, and
Speaker 4: I think that it's very easy to attribute a lot
Speaker 4: of their success to just the value seeking behavior of
Speaker 4: consumers in this environment. But I think that would also
Speaker 4: be overlooking a lot of the investments they've made in
Speaker 4: things like convenience that is really spurring the e commerce growth.
Speaker 4: And that was really a notable takeaway from today's earnings release.
Speaker 5: Yeah, that e commerce aspect helps draw on higher income shoppers,
Speaker 5: So it's a larger pool of customers at Walmart now
Speaker 5: has access to and in our Bloomberg News reporting we
Speaker 5: indicate that the digital offerings now include luxury items like
Speaker 5: pre owned to Chanel bags. I had no idea that
Speaker 5: that kind of self was available on Walmart dot com.
Speaker 4: Well, you know, Walmart has done a lot to really
Speaker 4: expand its marketplace, and that includes bringing in items that
Speaker 4: you know will appeal to that higher income consumer, you know.
Speaker 4: And the tactic behind all of this is that the
Speaker 4: more people are integrated with e commerce in going to stores,
Speaker 4: they become sticky and they become loyal customers, so that
Speaker 4: when the macroeconomic backdrop fades, it really increases Walmart's ability
Speaker 4: to hang onto these customers going forward, and that just
Speaker 4: drives future growth. So it's a really interesting play out
Speaker 4: of how they're applying that tactic, Jen.
Speaker 5: I also want to get your take on Walmart transferring
Speaker 5: is listing to the NASAC that's going to happen on
Speaker 5: December ninth, and that of course is to reflect as
Speaker 5: focused on being a tech forward company. But I'm wondering,
Speaker 5: I mean, how much of this is really just about
Speaker 5: being included in the Nazak one hundred and therefore the
Speaker 5: QQQ etl Oh.
Speaker 4: Yeah, there's certainly part of that scarlet where you know,
Speaker 4: that's that's probably part of the motivation. I think that
Speaker 4: there is you know, obviously there's a perception with regards
Speaker 4: to being perceived more as a tech company, which Walmart
Speaker 4: in all truthfulness has evolved into a tech company, especially
Speaker 4: amongst other retailers. By being listed at NASDAK, you know,
Speaker 4: long term, maybe it helps the evaluation, you know, just
Speaker 4: in terms of having that perception of being more in
Speaker 4: you know, aligned with peers. You know, Amazon is listed
Speaker 4: on NASDAK, things like that. So I think that there's
Speaker 4: a lot of those components together combined, are really behind the.
Speaker 2: Move Jen Nobody arguably has a better finger on the
Speaker 2: pulse of the consumer than Walmart.
Speaker 6: What are they saying these days?
Speaker 4: Actually they seem relatively optimistic. You know, they talk about
Speaker 4: you know, spending holding study for kind of that middle
Speaker 4: income consumer, high end consumers seem to be spending pretty freely.
Speaker 4: A little bit of concern about some of the lower
Speaker 4: end consumer, but it does seem to be sort of
Speaker 4: evening out. And so when they were looking forward to
Speaker 4: the holiday season, which is you know, the most important
Speaker 4: thing with regards to the retailers that I cover, they
Speaker 4: seem cautiously optimistic that there will be a pretty good
Speaker 4: holiday season this year. We do think that they're going
Speaker 4: to people will prioritize spending on kids. That's usually what
Speaker 4: happens first if they're holding back in other parts of
Speaker 4: their of their budget. But all all, you know, all
Speaker 4: indicators right now seem that we're headed towards a reasonably
Speaker 4: solid holiday season.
Speaker 5: You know, Jen, we tend to look at Walmart as
Speaker 5: a shortcut for the consumer. But if this strong performance
Speaker 5: is really more result of strategy and execution over the
Speaker 5: longer term, how much of a read does it really
Speaker 5: provide on the state of consumer spending beyond the fact
Speaker 5: that Walmart has become this exceptionally well run, tech forward company.
Speaker 5: I mean, you just look at Target, for instance, which
Speaker 5: has a lower outlook.
Speaker 4: No, it's a good point, Scarlet. I mean, I think
Speaker 4: the thing is that nearly every household has some sort
Speaker 4: of interaction with Walmart during the course of a year,
Speaker 4: you know, whether it's in terms of frequency or not.
Speaker 4: And so Walmart has really evolved their ability to capture
Speaker 4: data about the customers that are spending in stores even
Speaker 4: though they don't have a formal loyalty program, and so
Speaker 4: they really do have that insight into sort of the
Speaker 4: motivations behind customers where they stand. You know, I think
Speaker 4: one of the interesting things with regards to just focus
Speaker 4: and discipline. Walmart talked today about apparel sales and their
Speaker 4: comparable sales for apparel was up five percent every month
Speaker 4: of the third quarter, and when you could trust that
Speaker 4: to Target, who reported yesterday they're still struggling with some
Speaker 4: of their discretionary categories. So it seems to be a
Speaker 4: story of execute and not only the consumer spending right
Speaker 4: where they are.
Speaker 6: Stay with us. More from Bloomberg Intelligence coming up after this.
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Speaker 2: Let's get back to this Nvidia story. Certainly a big,
Speaker 2: big player in this story in the market. Kun John
Speaker 2: Sobani joins us. He's a senior analyst. He covers the
Speaker 2: semi conductor companies for Bloomberg Intelligency Spased out there in
Speaker 2: San Francisco, Kujo, and I'm sure you've had the opportunity
Speaker 2: to a now only look at the numbers, listen to
Speaker 2: the conference call, but talk to institutional investor clients. What's
Speaker 2: the narrative coming out of this earnings release?
Speaker 7: Yeah, I mean this was one of the more bullish
Speaker 7: earnings we've seen from this name in a while, not
Speaker 7: just on the numbers of the three Q four Q guide,
Speaker 7: which they blew past even the lofty spyside targets, but
Speaker 7: just beyond that, the long term the twenty six sort
Speaker 7: of and going into twenty seven demands signals that they showed,
Speaker 7: namely the half a trillion of the pipeline, which we
Speaker 7: think now is a conservative number given the number of
Speaker 7: deals they have announced. If supply keeps on coming up
Speaker 7: as it has, and if their customers continue executing on
Speaker 7: these bills without any missteps, we think they are a
Speaker 7: significant upside to the current street numbers.
Speaker 5: Yeah, just looking through the numbers, clearly a beaten race report,
Speaker 5: but you know, the scale at which it can be
Speaker 5: in race is impressive. Although within the third quarter numbers,
Speaker 5: I did see that chips using gaming PCs missed analysts estimates,
Speaker 5: and I know that that's a shrinking part of the business,
Speaker 5: or at least it's not as big a part of
Speaker 5: the business, given that the data center is where the
Speaker 5: growth is really at. Are there any flaws in this
Speaker 5: earning support con John?
Speaker 7: Not really. I mean, look, the gaming is becoming so
Speaker 7: unimportant for analysts that the reliability of the dedictability of
Speaker 7: those numbers against which we're comparing the beat and miss
Speaker 7: for gaming is no longer as reliable. So no real
Speaker 7: face to really point out in this. We did see
Speaker 7: their supply commitments go up quarter work quarter and inventory
Speaker 7: is rising. I don't think that's a negative, while it
Speaker 7: might seem on the face that's just them gearing up
Speaker 7: and getting ready for that next wave to supply the
Speaker 7: chips in the next year.
Speaker 2: So Couldjohn what's the latest and gentsen Wong about how
Speaker 2: he viewsed China going forward?
Speaker 7: Nothing has changed on the China side. They still don't
Speaker 7: assume any revenues when it comes to data center AI
Speaker 7: China GPUs or the H twenty has been shipped into
Speaker 7: They do have the clearance licenses, so they could, but
Speaker 7: it seems because of the geopolitical issues China has basically
Speaker 7: been shut down. For American GPU providers or AS providers
Speaker 7: to be able to ship in the country, there is
Speaker 7: to be honest, no demands. So it seems, you know,
Speaker 7: because of geopolitical issues, the customers in China are not
Speaker 7: just reading and getting up to buy Nvidia chips right now.
Speaker 5: Jensenhang said that he from his vantage point, does not
Speaker 5: see anything like an AI bubble. We see something very different,
Speaker 5: and he says competitive pressures remain fairly low because this
Speaker 5: is a company with more than ninety percent of the
Speaker 5: market for those high end, super fast AI chips. Who
Speaker 5: is the closest competitor if there is one to Nvidia.
Speaker 7: Yeah, in terms of the size of the markets, the
Speaker 7: next closest competitor would be the AIA six chips, So
Speaker 7: Broadcom is one of the biggest providers of AI six chips,
Speaker 7: namely the TPU that Google uses. Another example would be
Speaker 7: Amazon'straanium chips, which are a differenti ACIC designer supplies. So
Speaker 7: in terms of revenues or units. In terms of the market,
Speaker 7: those are the next closest competitors. Within Nvidia's realm which
Speaker 7: it sells merchant gipus, AMD would be the second closest
Speaker 7: competitor in that.
Speaker 6: Stay with us. More from Bloomberg Intelligence coming up after this.
Speaker 1: You're listening to the Bloomberg Intelligence podcast. Catch us live
Speaker 1: weekdays at ten am Eastern on Apple, Cocklay and Android
Speaker 1: Auto with the Bloomberg Business app. Listen on demand wherever
Speaker 1: you get your podcasts, or watch us live on YouTube.
Speaker 2: Company news out here Today, Verizon announce the layoffs that
Speaker 2: will shrink the company by as much as twenty percent
Speaker 2: of its non union workforce.
Speaker 6: That's big and they have a big, big footprint in New.
Speaker 2: Jersey from the old Bell Labs in Bell Core days
Speaker 2: and so a lot of riz.
Speaker 6: And employees in the state of New Jersey. So that'll
Speaker 6: be a big issue for them.
Speaker 2: John Butler joins us here senior telecom analysts for Bloomberg Intelligence. John,
Speaker 2: What's what's this job cut announcement from Verizon? What does
Speaker 2: this mean for the company? What are they trying to
Speaker 2: do here?
Speaker 3: So, Paul, as you may know, there's a new CEO
Speaker 3: in town at dad Verizon named Dan Shalman. And I
Speaker 3: believe Shallman is really he's been on the board for years.
Speaker 3: I think he's looked at the organization and believes it's
Speaker 3: a little too heavy, little too bureaucratic. He sees room
Speaker 3: for ample cost cuts, and I think his whole message
Speaker 3: to the employee base is we need to move faster,
Speaker 3: and I think it's very tough to do that with
Speaker 3: a large bureaucracy. I also think he's cutting costs in
Speaker 3: order to free up funds and give them room to
Speaker 3: promote more. I think one of the reasons that Verizon
Speaker 3: has lagged its peers in subscriber growth is they're just
Speaker 3: not matching price promotions out there in the marketplace. And
Speaker 3: I think if they do that carefully wisely, I think
Speaker 3: if they become a little less discipline than they've been
Speaker 3: in promoting, they're going to find that they'll drive higher volumes.
Speaker 3: And you know, I think at the end of the day,
Speaker 3: Wall Street wants to see that that really is a
Speaker 3: report card for the telcos. That's sort of quarterly net
Speaker 3: editions number that all the telcods report.
Speaker 5: And Wall Street is okay with a loss and margin
Speaker 5: or an erosion of margin in order to get those numbers,
Speaker 5: those subscriber numbers, because it sounds like Verizon is getting
Speaker 5: ready to jump into participating in this price war in
Speaker 5: a more robust way than it had been.
Speaker 3: Yeah, good question, Scarlett. I think that's what these job
Speaker 3: cuts are all about. You can maintain margins. If you're
Speaker 3: cutting thirteen percent of the workforce, there's a big cost
Speaker 3: savings there. So you're getting leaner on the expense line,
Speaker 3: which gives you a little more room on the revenue
Speaker 3: line to begin to promote more and really step up
Speaker 3: and match competitors like T Mobile, which continue to be
Speaker 3: aggressive on price. And then at the lower end, of course,
Speaker 3: you've got the cable operators and their wireless brands. They
Speaker 3: have been promoting very hard on price in order to
Speaker 3: drive up their wireless installed base.
Speaker 2: John, I'm guessing if a lot of Verizon Communications investors,
Speaker 2: they're there for the dividend. It's got a yield of
Speaker 2: six point seven percent here. That is a serious yield.
Speaker 6: There.
Speaker 2: Talk to us about their dividend strategy, their commitment to
Speaker 2: the dividend going forward.
Speaker 3: So Showman, when he first joined Verizon reiterated a commitment
Speaker 3: to maintaining the dividend. I think with any carrier, as
Speaker 3: their stock price drops and the effective yield goes up,
Speaker 3: that dividend yield it becomes a target for potentially getting cut. Now,
Speaker 3: the flip side of that is, any telcode that's cut
Speaker 3: its dividend in the past will tell you there is
Speaker 3: a very heavy price to pay for that. You typically
Speaker 3: get a big price correction when you cut that dividend
Speaker 3: because of course, at least with the AT and T
Speaker 3: and Verizon, you're attracting a lot of investors to buying
Speaker 3: this dock based on the yield. So if you cut
Speaker 3: the yield, obviously you're going to lose some of those investors.
Speaker 3: So he's got a tightrope to walk here. Again, you're
Speaker 3: cutting thirteen percent of the organization as a first move.
Speaker 3: I think there are other cost cuts down the road
Speaker 3: and efficients to be efficiencies to be gained in not
Speaker 3: only network operations, but customer care as well, particularly with
Speaker 3: the advent of AI. So my hope is they're going
Speaker 3: to be able to sustain free cash flow, which will
Speaker 3: generate more than enough to sustain that dividend there.
Speaker 5: Okay, So in Dan Schulman's drive to make Verizon a simpler, leaner,
Speaker 5: and scrapier business, how do its competitors T Mobile and
Speaker 5: AT and T respond? Do they respond?
Speaker 3: They always respond Scorelet you know, it's it's it's that
Speaker 3: kind of market. Wireless is a very mature business. It's
Speaker 3: a saturated market. It's a zero sum game, and so
Speaker 3: I think what we've seen from the BIT, all the
Speaker 3: Big three recently is they are willing to promote heavily
Speaker 3: to protect that. BABS for Rising again has been the
Speaker 3: lagger there, but I think Shulman, who's very focused on
Speaker 3: subscriber volumes, is probably going to step up and play
Speaker 3: that game. So that's been the concern among investors that
Speaker 3: it can get ugly very quickly, and frankly I share
Speaker 3: that concern. So I'll have to see what the change
Speaker 3: in direction is going to be at Verizon with regard
Speaker 3: to promotion, But all indications so far is that they're
Speaker 3: getting ready to promote more.
Speaker 6: Say with us more from Bloomberg Intelligence coming up after this.
Speaker 1: You're listening to the Bloomberg Intelligence podcast. Catch us live
Speaker 1: weekdays at ten am Eastern on Applecarplay and Android Auto
Speaker 1: with the Bloomberg Business App. Listen on demand wherever you
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Speaker 5: Let's take a look at what's happening in the biotech
Speaker 5: and pharmaceutical space. There's a big, big M and a deal,
Speaker 5: Abbot Laboratories agreeing to buy the cancer screening company Exact Sciences,
Speaker 5: with a total deal value of about twenty one billion dollars.
Speaker 6: Yeah, pretty large.
Speaker 5: Let's get some perspective now from Matt Hendrickson, Bloomberg Intelligence,
Speaker 5: Senior medtech analyst. So, Matt, I guess this is this
Speaker 5: is a surprise, given that we're looking at Exact Science's
Speaker 5: shares moving quite a bit. This deal price represents a
Speaker 5: fifty one percent premium to its last close.
Speaker 8: Yeah, and you know this includes yesterday there Bloomberg News reported,
Speaker 8: you know, some of the initial rumors that there was
Speaker 8: this steel taking place. So the fact that it kind
Speaker 8: of materialized so quickly and with that type of premium
Speaker 8: is a little bit of a surprise, given kind of
Speaker 8: that it started leaking yesterday. But when you look at
Speaker 8: it from a multiple standpoint, you know it's trained. You know,
Speaker 8: it's the sales about seven times Exact Sciences twenty twenty
Speaker 8: five sales. Seems pretty reasonable for the growth that could
Speaker 8: be incorporated into Abbot's overall portfolio.
Speaker 2: And the banker's on the deal, Morgan Stanley, exclusive financial
Speaker 2: advisor to Abbot, fully funding this deal, So that's good
Speaker 2: for them. On the sales side, Centerview Partners and XS
Speaker 2: Capital Partners advising the seller there, so again more M
Speaker 2: and A fees there. I have no idea who Exact
Speaker 2: Sciences is, and I think I speak for most of
Speaker 2: our audience here. Who is Exact Sciences? Why what do
Speaker 2: they do?
Speaker 6: And why does Abbot want to pay such a big price.
Speaker 8: Well, you actually might know of them because they have
Speaker 8: been doing a lot of TV commercials for their cold
Speaker 8: Guard there.
Speaker 6: The Guard people. Yeah, so there we go.
Speaker 8: We so yeah, So it's it's it's you know, it's
Speaker 8: kind of one of those things where they're the ones
Speaker 8: that have been the pioneers and driving the force around
Speaker 8: that take home pre screening tests to kind of just
Speaker 8: help you know the continuum of cancer screening and to
Speaker 8: provide an easier access for that pre screening before you
Speaker 8: have to go into kind of more of the invasive,
Speaker 8: you know, colonoscopies to make sure you know you have
Speaker 8: that a you know, coal rectals cancer risk.
Speaker 1: Is there?
Speaker 6: That thing sat in my closet for like a year, like.
Speaker 5: Oh my god, I know it's one of those things
Speaker 5: you have to do, but you don't want to do
Speaker 5: I have to do it. So that what is there
Speaker 5: any reason to think that regulators may you know, raise
Speaker 5: their hand and say, hold on, let me just take
Speaker 5: a closer look at this.
Speaker 8: I mean, I'm sure they will, you know, cross their
Speaker 8: t's and dot their eyes. But just in general, with
Speaker 8: medtech acquisitions, it's usually a pretty straightforward unless there's a
Speaker 8: clear you know, one of the market maybe going to
Speaker 8: you know, one company, and in this case, the there's
Speaker 8: enough competition where I don't think that should be a
Speaker 8: hurdle for Abbot or Exact Sciences.
Speaker 6: And for such a big deal.
Speaker 2: I mean, Abbot stock is only down about one and
Speaker 2: a half percent today on the news. So presumably is
Speaker 2: this a deal you think is a good deal for Abbit?
Speaker 8: Yes, I think it checks off a lot of boxes.
Speaker 8: Potentially for Abbot one. It's once it becomes fully integrated
Speaker 8: and starts contributing to organic growth, it should be a
Speaker 8: creative to that organic growth that Abbot already has. I mean,
Speaker 8: they're already for a company that is you know, forty
Speaker 8: almost forty five billion in sales, they're generating seven and
Speaker 8: a half percent organic sales growth. Exact Sciences comes in
Speaker 8: with double digit sales growth, so that that's going to
Speaker 8: be a creative for them in the long run. You
Speaker 8: can also look at the gross margin profile. Abbott, you know,
Speaker 8: is around a fifty six fifty seven percent gross margin profile.
Speaker 8: Exact Sciences comes in at seventy two, improving to seventy
Speaker 8: three percent based off of consensus in twenty twenty six.
Speaker 8: And then lastly, you look at the expenses that Exact
Speaker 8: Sciences has because you know there's still you know, whether
Speaker 8: it's the merging growth story, so they're still investing a
Speaker 8: lot in their SG and a kind of commercial profile
Speaker 8: to help generate these growth We kind of expect Abbot
Speaker 8: to come in and be able to slash some of
Speaker 8: that SG and A costs to be able to make
Speaker 8: it more profitable overall for the Abbot once it kind
Speaker 8: of gets fully integrated.
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