1 00:00:02,720 --> 00:00:10,559 Speaker 1: Bloomberg Audio Studios, podcasts, radio news. You're listening to the 2 00:00:10,600 --> 00:00:14,560 Speaker 1: Bloomberg Intelligence podcast. Catch us live weekdays at ten am 3 00:00:14,600 --> 00:00:17,880 Speaker 1: Eastern on Apple, Cocklay and Android Auto with the Bloomberg 4 00:00:17,920 --> 00:00:21,040 Speaker 1: Business app. Listen on demand wherever you get your podcasts, 5 00:00:21,360 --> 00:00:23,080 Speaker 1: or watch us live on YouTube. 6 00:00:23,880 --> 00:00:26,960 Speaker 2: Oracle taking it on the chin today. You know, they 7 00:00:27,000 --> 00:00:29,160 Speaker 2: put us a big revenue numbers. I thought, I mean 8 00:00:29,200 --> 00:00:32,400 Speaker 2: thirty percent here, sixty percent here, but not enough for 9 00:00:32,600 --> 00:00:34,720 Speaker 2: the street. And same time with Jack up your capex, 10 00:00:34,760 --> 00:00:36,800 Speaker 2: and I think the street gets a little bit nervous 11 00:00:36,800 --> 00:00:38,720 Speaker 2: about that. So this dock is trading down pretty big. 12 00:00:38,960 --> 00:00:42,600 Speaker 2: Second with anarag Rana, he covers all the technology spased 13 00:00:42,600 --> 00:00:45,640 Speaker 2: in your technis for Bloomberg Intelligence. So on our why 14 00:00:45,680 --> 00:00:48,919 Speaker 2: do you think Oracle's selling offs so much today? 15 00:00:50,600 --> 00:00:52,360 Speaker 3: So there are a few things to keep in mind. 16 00:00:52,479 --> 00:00:55,480 Speaker 3: You know, the number one thing is cloud infrastructure growth. 17 00:00:55,800 --> 00:00:59,080 Speaker 3: Consensus was sixty nine percent, decame at sixty six. I 18 00:00:59,160 --> 00:01:02,600 Speaker 3: know it's a very big number. However, in the cloud world, 19 00:01:02,760 --> 00:01:05,800 Speaker 3: missing by even one percentage point is not good. So 20 00:01:05,800 --> 00:01:08,000 Speaker 3: that's first thing. But you know, there's a very logical 21 00:01:08,040 --> 00:01:10,280 Speaker 3: reason about it. Everybody can see the backlock, so it's 22 00:01:10,319 --> 00:01:12,560 Speaker 3: not as if they don't have a business there, but 23 00:01:12,680 --> 00:01:15,440 Speaker 3: converting that backlog into sales is an issue. Everybody knows 24 00:01:15,440 --> 00:01:18,000 Speaker 3: that there is a capacity constraints out there, whether it's 25 00:01:18,120 --> 00:01:20,920 Speaker 3: data center, whether it's networking, et cetera. Power is a 26 00:01:20,959 --> 00:01:23,440 Speaker 3: very big issue, for example. So that's one area of it. 27 00:01:23,520 --> 00:01:25,480 Speaker 3: But although I would say the management did not harp 28 00:01:25,520 --> 00:01:27,759 Speaker 3: on it as much as we would wanted them to be, 29 00:01:28,000 --> 00:01:32,039 Speaker 3: that to explain why the growth can improve going forward. 30 00:01:32,080 --> 00:01:34,720 Speaker 3: So that's one factor. But I think the biggest question 31 00:01:34,840 --> 00:01:37,640 Speaker 3: is something that we had discussed earlier. Also is everybody 32 00:01:37,680 --> 00:01:39,920 Speaker 3: is questioning that out of their big backlock, which is 33 00:01:39,959 --> 00:01:43,000 Speaker 3: over five hundred billion right now, three hundred plus billion 34 00:01:43,040 --> 00:01:46,000 Speaker 3: of that comes from open ai. Now open ai currently 35 00:01:46,200 --> 00:01:49,360 Speaker 3: or the order book is from open Ai. By the 36 00:01:49,480 --> 00:01:51,880 Speaker 3: end of this year, open ai will have a revenue 37 00:01:51,920 --> 00:01:54,840 Speaker 3: round it off about twenty billion. So everybody is saying that, okay, 38 00:01:54,960 --> 00:01:57,400 Speaker 3: well tell me, if you have revenue of twenty billion, 39 00:01:58,080 --> 00:01:59,760 Speaker 3: how are you going to spend three hundred billion just 40 00:01:59,800 --> 00:02:02,440 Speaker 3: with Oracle. So there's a big question mark. But then 41 00:02:02,440 --> 00:02:04,640 Speaker 3: your question is, well, why didn't this happened when they 42 00:02:04,640 --> 00:02:07,680 Speaker 3: first announced it? Well, their bottle was at the top 43 00:02:07,720 --> 00:02:10,440 Speaker 3: at that point, and right now Google's Gemini has caught up, 44 00:02:10,480 --> 00:02:13,760 Speaker 3: so people don't know what will Openaize future look like 45 00:02:13,840 --> 00:02:16,040 Speaker 3: two years from now, three years from now, and so forth. 46 00:02:16,200 --> 00:02:19,320 Speaker 3: So there are multiple factors that are going into this equation. 47 00:02:19,840 --> 00:02:22,720 Speaker 3: And not to mention something, you just remarked that capex 48 00:02:22,800 --> 00:02:25,519 Speaker 3: is going to go up by fifteen billion, So thirty 49 00:02:25,520 --> 00:02:29,000 Speaker 3: five billion going to fifty billion. So it's a big, big, 50 00:02:29,440 --> 00:02:32,880 Speaker 3: you know, change across four or five different vectors that 51 00:02:32,919 --> 00:02:34,280 Speaker 3: are having an impact on the stock. 52 00:02:34,919 --> 00:02:38,160 Speaker 4: So the cloud strategy of Oracle continues to evolve. What 53 00:02:38,280 --> 00:02:40,840 Speaker 4: is the next major inflection point for you when you 54 00:02:40,880 --> 00:02:46,840 Speaker 4: see these cloud companies really move towards more AI driven efforts. 55 00:02:47,720 --> 00:02:49,600 Speaker 3: So the big thing is that five hundred billion a 56 00:02:49,639 --> 00:02:52,720 Speaker 3: backlock needs to bleed into revenue. For that, they need 57 00:02:52,760 --> 00:02:55,800 Speaker 3: to open new data center. But even to open new 58 00:02:55,880 --> 00:02:58,840 Speaker 3: data center, they need more cash. So the big catalyst 59 00:02:58,919 --> 00:03:01,680 Speaker 3: for them is they need go out. Most likely they 60 00:03:01,720 --> 00:03:04,560 Speaker 3: need to create a special purpose vehicle where they can 61 00:03:04,800 --> 00:03:08,520 Speaker 3: raise funds with the help of private equity investors, private 62 00:03:08,600 --> 00:03:12,000 Speaker 3: credit and basically you know, keep that off Oracles balance 63 00:03:12,040 --> 00:03:15,880 Speaker 3: sheet and that will help pacify the fears that they 64 00:03:15,919 --> 00:03:18,760 Speaker 3: actually have the way, a way to finance this big 65 00:03:18,880 --> 00:03:19,760 Speaker 3: order book that they have. 66 00:03:21,200 --> 00:03:23,560 Speaker 2: All right, look, well you mentioned open Ai. Can you 67 00:03:23,639 --> 00:03:26,400 Speaker 2: refresh my memory? Because I have no idea where do 68 00:03:26,440 --> 00:03:28,960 Speaker 2: they get their money that they like? Where are they 69 00:03:28,960 --> 00:03:31,360 Speaker 2: getting the money? I don't do all this stuff. 70 00:03:32,040 --> 00:03:34,679 Speaker 3: So the single biggest is the consumer app right now, 71 00:03:34,800 --> 00:03:37,120 Speaker 3: That's where most of the money is coming in because 72 00:03:37,360 --> 00:03:39,280 Speaker 3: you know, if you want the best model, you're going 73 00:03:39,320 --> 00:03:41,080 Speaker 3: to pay twenty dollars a month. I mean, you can 74 00:03:41,080 --> 00:03:43,480 Speaker 3: get the free version of it. But that's one area. 75 00:03:43,520 --> 00:03:45,800 Speaker 3: They have over nine hundred million users right now, but 76 00:03:45,880 --> 00:03:47,960 Speaker 3: only a small portion of them are paying customers. So 77 00:03:48,000 --> 00:03:51,480 Speaker 3: that's one. Second is if you as a company, let's 78 00:03:51,480 --> 00:03:54,560 Speaker 3: say you're you know, let's call a hypothetical bank, and 79 00:03:54,600 --> 00:03:58,080 Speaker 3: you're creating a chat pot which needs intelligence or a 80 00:03:58,160 --> 00:04:01,760 Speaker 3: large language model, You're going to use APIs from open Ai, 81 00:04:02,280 --> 00:04:06,080 Speaker 3: and that gets embedded intelligence into whatever system that you're creating, 82 00:04:06,280 --> 00:04:09,680 Speaker 3: your chatboard that becomes smarter. They get paid from that. 83 00:04:09,960 --> 00:04:12,440 Speaker 3: So those are the two I think big elements or 84 00:04:12,480 --> 00:04:15,760 Speaker 3: the big sources of revenue for them. And there is 85 00:04:15,800 --> 00:04:20,039 Speaker 3: a huge you could say, looking ahead, all the enterprises 86 00:04:20,080 --> 00:04:23,480 Speaker 3: around the world will have some intelligence into their core applications, 87 00:04:23,720 --> 00:04:26,280 Speaker 3: and they're going to use model from somebody, whether it's Google, 88 00:04:26,520 --> 00:04:28,520 Speaker 3: whether it's Anthropic, whether it's open AI. 89 00:04:29,000 --> 00:04:31,239 Speaker 4: How are you thinking of the leadership in this company? 90 00:04:31,279 --> 00:04:34,440 Speaker 4: How will the company's direction be affected down the line. 91 00:04:35,520 --> 00:04:37,760 Speaker 3: I think they really need to talk a little bit 92 00:04:37,760 --> 00:04:41,280 Speaker 3: about their expansion plans. I think this concept of you know, 93 00:04:41,320 --> 00:04:43,440 Speaker 3: he went out and talked about I'm going to spend 94 00:04:43,480 --> 00:04:45,960 Speaker 3: a trillion dollars in data centers. Then he went to 95 00:04:46,000 --> 00:04:48,000 Speaker 3: the government and say, well, is there a backstop to 96 00:04:48,040 --> 00:04:51,720 Speaker 3: this needs a little bit more clear on its expansion strategy, 97 00:04:51,880 --> 00:04:53,320 Speaker 3: because if he goes out and say, you know what, 98 00:04:54,000 --> 00:04:56,200 Speaker 3: I don't, I'm not spending a trillion dollars maybe one 99 00:04:56,240 --> 00:04:58,240 Speaker 3: hundred two hundred million or so. I think they needs 100 00:04:58,279 --> 00:05:00,480 Speaker 3: to tone down that rhetoric a little bit. But I 101 00:05:00,480 --> 00:05:03,359 Speaker 3: mean otherwise or he has to show a lot of 102 00:05:03,400 --> 00:05:06,479 Speaker 3: revenue growth over the next one years to one year 103 00:05:06,560 --> 00:05:10,039 Speaker 3: to pacify this particular uncertainty that has cropped up. 104 00:05:10,120 --> 00:05:12,800 Speaker 2: Right now and around thirty seconds left, this is Oracle 105 00:05:12,839 --> 00:05:14,480 Speaker 2: News kind of highlight the risk of some of these 106 00:05:14,520 --> 00:05:15,719 Speaker 2: circular deals. 107 00:05:17,320 --> 00:05:19,800 Speaker 3: See, I think it's not so much the circular deal 108 00:05:19,839 --> 00:05:22,400 Speaker 3: when it comes to the entire space. But there is 109 00:05:22,440 --> 00:05:26,640 Speaker 3: a question mark between what Opening is doing along with 110 00:05:26,839 --> 00:05:30,479 Speaker 3: Oracle and an Nvidia. So it's this three people for 111 00:05:30,640 --> 00:05:33,640 Speaker 3: this particular aspect of it that people are questioning whether 112 00:05:33,800 --> 00:05:36,800 Speaker 3: this is going to lead any issues. Whether it's Microsoft 113 00:05:36,800 --> 00:05:39,480 Speaker 3: and AWS and Google. I'm not concerned about those three. 114 00:05:40,040 --> 00:05:43,160 Speaker 5: Stay with us. More from Bloomberg Intelligence coming up after this. 115 00:05:46,760 --> 00:05:50,440 Speaker 1: You're listening to the Bloomberg Intelligence Podcast. Catch us live 116 00:05:50,520 --> 00:05:53,919 Speaker 1: weekdays at ten am Eastern on Applecarplay and Android Auto 117 00:05:54,000 --> 00:05:57,080 Speaker 1: with the Bloomberg Business App. Listen on demand wherever you 118 00:05:57,120 --> 00:06:00,520 Speaker 1: get your podcasts, or watch us live on YouTube. 119 00:06:00,920 --> 00:06:03,200 Speaker 2: Isabelle sitting in for Scarlet Fu and Paul Sweeney Life 120 00:06:03,200 --> 00:06:06,600 Speaker 2: here on our Bloomberg Interactive Brokers Studio streaming live on YouTube. 121 00:06:07,120 --> 00:06:09,159 Speaker 5: We're still waiting to see what's going to happen. 122 00:06:09,040 --> 00:06:11,279 Speaker 2: With Warner Brothers Discovery. We're talking about a ninety billion 123 00:06:11,320 --> 00:06:14,200 Speaker 2: dollar enterprise value m and a trade going to hit 124 00:06:14,200 --> 00:06:17,000 Speaker 2: the tape. But we've got two suitors out there, and 125 00:06:17,080 --> 00:06:18,520 Speaker 2: I'm not sure what the sello wants to do. 126 00:06:18,600 --> 00:06:18,760 Speaker 6: Here. 127 00:06:18,960 --> 00:06:21,000 Speaker 2: Ethan Roung and Nathan joints that she's a US media 128 00:06:21,000 --> 00:06:24,360 Speaker 2: analyst for Bloomberg Intelligence. I guess the only new thing 129 00:06:24,440 --> 00:06:27,520 Speaker 2: I saw was President Donald Trump kind of weighing in here, 130 00:06:27,520 --> 00:06:29,719 Speaker 2: and he says, hey, whoever buys this thing, you got 131 00:06:29,720 --> 00:06:31,599 Speaker 2: to sell CNN or something like that. 132 00:06:33,080 --> 00:06:33,760 Speaker 5: What do you make of that? 133 00:06:33,800 --> 00:06:36,359 Speaker 2: I mean, CNN is like not even really relevant to 134 00:06:36,360 --> 00:06:38,919 Speaker 2: the entire company, is it not? 135 00:06:39,120 --> 00:06:43,880 Speaker 6: Really? But I think obviously Donald Trump has a huge 136 00:06:43,960 --> 00:06:49,800 Speaker 6: history with CNN, has despised the network always, so you know, 137 00:06:49,880 --> 00:06:51,800 Speaker 6: naturally he's kind of laying down this condition. But what 138 00:06:51,839 --> 00:06:55,279 Speaker 6: we think is it obviously complicates the deal a little 139 00:06:55,279 --> 00:06:58,960 Speaker 6: bit for Netflix. Remember Netflix is only buying the streaming 140 00:06:59,000 --> 00:07:02,760 Speaker 6: and studio portion of Warner Brothers Discovery, So obviously if 141 00:07:02,800 --> 00:07:05,520 Speaker 6: they are going to go with Netflix, you know, the 142 00:07:05,680 --> 00:07:10,000 Speaker 6: WBD team will have to find some way of offloading CNN, 143 00:07:10,000 --> 00:07:12,320 Speaker 6: which I'm not so sure how it's going to do that. 144 00:07:12,400 --> 00:07:16,440 Speaker 6: It obviously complicates the process with Paramount. That's not going 145 00:07:16,480 --> 00:07:19,080 Speaker 6: to be a problem because Paramount is buying the whole 146 00:07:19,160 --> 00:07:22,840 Speaker 6: company that includes the studio, the streaming platform, as well 147 00:07:22,880 --> 00:07:24,480 Speaker 6: as the TV network's business. 148 00:07:26,160 --> 00:07:28,800 Speaker 4: Talk to us why this deal is so polarizing. To 149 00:07:28,880 --> 00:07:31,840 Speaker 4: Paul's point, the President made a comment. Actress Jane Fonda 150 00:07:32,120 --> 00:07:37,440 Speaker 4: spoke out against a Netflix deal. Y. Both policymakers from 151 00:07:37,480 --> 00:07:42,840 Speaker 4: both aisles are also making comments. We will discuss that 152 00:07:42,880 --> 00:07:45,720 Speaker 4: comment later. I'm also interested, But Giza, why is it 153 00:07:45,800 --> 00:07:46,560 Speaker 4: so divisive? 154 00:07:48,280 --> 00:07:52,680 Speaker 6: It is divisive because this really will change or reshape 155 00:07:52,760 --> 00:07:56,320 Speaker 6: the whole media landscape. Isabelle, So, I think majority of 156 00:07:56,400 --> 00:08:00,880 Speaker 6: the content community, you know, writers, actors, talent, they're really 157 00:08:00,920 --> 00:08:04,400 Speaker 6: worried that if Netflix gets a hold of Warner Brothers 158 00:08:04,480 --> 00:08:08,280 Speaker 6: Discovery Studio, it kind of totally changes things, right, It 159 00:08:08,320 --> 00:08:11,600 Speaker 6: could potentially disrupt the theatrical model as we know it. 160 00:08:12,640 --> 00:08:16,040 Speaker 6: You know, all of the legacy media revenue streams are 161 00:08:16,160 --> 00:08:21,120 Speaker 6: at risk. It could potentially reduce output. Licensing from one 162 00:08:21,160 --> 00:08:24,400 Speaker 6: of the studios could be completely folded into Netflix's operation. 163 00:08:24,760 --> 00:08:28,080 Speaker 6: So there are obviously a lot of very many different risks, 164 00:08:28,520 --> 00:08:32,680 Speaker 6: very tangible risks that you know, could materialize in case 165 00:08:33,280 --> 00:08:36,719 Speaker 6: Netflix goes after or they're already after, in case they 166 00:08:36,760 --> 00:08:40,360 Speaker 6: win the Warner Brothers Studio asset. Now with paramount, I 167 00:08:40,400 --> 00:08:43,520 Speaker 6: think people generally see that more of a status quore, 168 00:08:43,640 --> 00:08:46,040 Speaker 6: just a continuation there. You know, they've obviously committed to 169 00:08:46,160 --> 00:08:49,760 Speaker 6: keeping the studio. We know David Ellison loves movies. He's 170 00:08:49,760 --> 00:08:52,440 Speaker 6: made a huge commitment to increase theatrical output. So I 171 00:08:52,440 --> 00:08:55,240 Speaker 6: don't think people necessarily view that deal as that much 172 00:08:55,400 --> 00:09:00,680 Speaker 6: more disruptive than the Netflix deal. The other political you 173 00:09:00,679 --> 00:09:04,160 Speaker 6: know issue there is obviously with CNN again, that's definitely 174 00:09:04,280 --> 00:09:09,400 Speaker 6: very polarizing considering you know, it's it's always kind of 175 00:09:09,440 --> 00:09:13,480 Speaker 6: been a little bit of an anti Trump kind of platform. Again, 176 00:09:13,640 --> 00:09:17,559 Speaker 6: everybody has a view on this deal from many different angles. 177 00:09:17,559 --> 00:09:18,760 Speaker 6: I would say it's about. 178 00:09:18,679 --> 00:09:20,839 Speaker 2: Hey, Keith, I've been reading some of the research from 179 00:09:20,840 --> 00:09:23,679 Speaker 2: your colleague Stephen Flynn is a credit analyst for Bloomberg 180 00:09:23,679 --> 00:09:26,040 Speaker 2: Intelligence looking at the media companies from the credit perspective. 181 00:09:26,640 --> 00:09:29,400 Speaker 2: Man if Paramount Wincessing, they're going to have a lot 182 00:09:29,440 --> 00:09:31,840 Speaker 2: of debt on their balance sheet, like a lot is 183 00:09:32,440 --> 00:09:34,640 Speaker 2: the equity folks, are they concerned about that? 184 00:09:36,320 --> 00:09:39,600 Speaker 6: So the way that Paramount has really framed this whole argument, 185 00:09:39,600 --> 00:09:42,520 Speaker 6: Paul is they're talking about a lot of synergies. Okay, 186 00:09:42,520 --> 00:09:45,240 Speaker 6: so they're talking about sixteen billion dollars in EBITDA. So 187 00:09:45,280 --> 00:09:48,160 Speaker 6: remember next year, paramounts Guida and standalone is going to 188 00:09:48,200 --> 00:09:50,440 Speaker 6: generate about three to three and a half billion dollars 189 00:09:50,480 --> 00:09:54,600 Speaker 6: in IBADA. If they do succeed in getting oneer Brothers Discovery, 190 00:09:54,679 --> 00:09:58,040 Speaker 6: they are promising about sixteen billion dollars in EBITDA, so 191 00:09:58,080 --> 00:10:01,840 Speaker 6: we're we're talking almost, you know, taking this fivefold, which 192 00:10:01,880 --> 00:10:04,520 Speaker 6: is why this DAL is so transformative. So yes, they 193 00:10:04,559 --> 00:10:07,400 Speaker 6: might have about eighty to ninety billion dollars in debt, 194 00:10:07,480 --> 00:10:10,400 Speaker 6: but their whole argument is that we can support it 195 00:10:10,520 --> 00:10:13,839 Speaker 6: just kind of given the amount of EBITDAD that we're 196 00:10:13,880 --> 00:10:16,520 Speaker 6: going to be generating free cash flow generator conversion from 197 00:10:16,520 --> 00:10:19,280 Speaker 6: ibadah is going to also be robust, So that's their 198 00:10:19,320 --> 00:10:21,720 Speaker 6: whole argument. Of course, I'm not so sure the street 199 00:10:21,760 --> 00:10:25,640 Speaker 6: is necessarily convinced because those synergy targets could be pretty aggressive. 200 00:10:26,040 --> 00:10:29,120 Speaker 5: Stay with us. More from Bloomberg Intelligence coming up after this. 201 00:10:33,080 --> 00:10:36,800 Speaker 1: You're listening to the Bloomberg Intelligence podcast. Catch us live 202 00:10:36,880 --> 00:10:39,920 Speaker 1: weekdays at ten am Eastern on Apple, Cocklay and Android 203 00:10:39,960 --> 00:10:43,280 Speaker 1: Auto with the Bloomberg Business app. Listen on demand wherever 204 00:10:43,320 --> 00:10:46,440 Speaker 1: you get your podcasts, or watch us live on YouTube. 205 00:10:47,320 --> 00:10:49,640 Speaker 7: One of the stock story's been following today's Eli Lilly 206 00:10:50,120 --> 00:10:53,480 Speaker 7: some Morgan news on some of their obesity work there. 207 00:10:53,559 --> 00:10:56,400 Speaker 7: The stocks up three point four percent today of thirty 208 00:10:56,440 --> 00:10:57,439 Speaker 7: three percent year to date. 209 00:10:57,480 --> 00:10:57,800 Speaker 8: I forgot. 210 00:10:57,880 --> 00:11:01,079 Speaker 2: This thing's got a monster market caply nine hundred and 211 00:11:01,160 --> 00:11:04,760 Speaker 2: seventy billion dollar market kept, so just extraordinary. There a 212 00:11:04,760 --> 00:11:05,240 Speaker 2: big winner. 213 00:11:05,400 --> 00:11:08,200 Speaker 5: Madison Muller, she is Bloomberg News reporter. 214 00:11:08,320 --> 00:11:11,319 Speaker 2: She's been following this space, Madison joints us here in 215 00:11:11,360 --> 00:11:13,160 Speaker 2: our studio, Madison, what's going on with Lily? Here? They 216 00:11:13,200 --> 00:11:14,479 Speaker 2: got some more good news today. 217 00:11:14,440 --> 00:11:16,240 Speaker 9: More good news for Lily. That's sort of been the 218 00:11:16,240 --> 00:11:18,640 Speaker 9: theme of the last year. I mean, Lily has really 219 00:11:18,760 --> 00:11:22,200 Speaker 9: surpassed its rival Novo Nordisk in terms of developing these 220 00:11:22,280 --> 00:11:25,480 Speaker 9: next generation weight loss drugs that can be potentially easier 221 00:11:25,520 --> 00:11:29,240 Speaker 9: to take, easier to manufacture, elicit more weight loss than 222 00:11:29,320 --> 00:11:31,600 Speaker 9: Wigovi and Zepbound, which are the shots that are currently 223 00:11:31,640 --> 00:11:34,079 Speaker 9: on the market. And so Lily has a shot or 224 00:11:34,160 --> 00:11:36,880 Speaker 9: a pill potentially coming next year. And then this shot 225 00:11:37,040 --> 00:11:39,760 Speaker 9: read a true Tide, which is a triple agonist. It 226 00:11:39,920 --> 00:11:43,160 Speaker 9: relies on three different hormones rather than just two or 227 00:11:43,200 --> 00:11:45,840 Speaker 9: one like GLP ones that we all know so well, 228 00:11:46,400 --> 00:11:49,560 Speaker 9: and so great results this morning for them, up to 229 00:11:49,720 --> 00:11:52,360 Speaker 9: twenty three percent weight loss in a study, which is 230 00:11:52,679 --> 00:11:54,960 Speaker 9: the most of really any of the shots that we've 231 00:11:54,960 --> 00:11:55,520 Speaker 9: seen yet. 232 00:11:55,600 --> 00:11:59,120 Speaker 5: I'm doing the math here twenty three. Wow, you make 233 00:11:59,200 --> 00:12:00,000 Speaker 5: John skinny again? 234 00:12:00,520 --> 00:12:02,800 Speaker 9: Yes, exactly right, I gues it's like it's a quarter 235 00:12:02,840 --> 00:12:04,200 Speaker 9: of someone's body weight almost. 236 00:12:04,200 --> 00:12:05,320 Speaker 5: It's pretty incredible. 237 00:12:05,520 --> 00:12:08,480 Speaker 2: Just give me unintended consequences there. I just feel like it. 238 00:12:08,520 --> 00:12:10,120 Speaker 5: I don't know it does. 239 00:12:10,480 --> 00:12:13,840 Speaker 4: In Madison story, it's said that participants on the highest 240 00:12:13,880 --> 00:12:16,480 Speaker 4: dose experience of more than sixty two percent reduction in 241 00:12:16,559 --> 00:12:18,840 Speaker 4: knee pain. And I feel like when people think of weight, 242 00:12:19,080 --> 00:12:22,439 Speaker 4: most of them associated with vanity or just looks, but 243 00:12:22,600 --> 00:12:27,120 Speaker 4: for others it could really mean health changes and lifestyle improvements, and. 244 00:12:27,040 --> 00:12:29,040 Speaker 9: Totally that's a really important part of this. 245 00:12:29,120 --> 00:12:29,760 Speaker 5: And the market. 246 00:12:29,800 --> 00:12:31,839 Speaker 4: In your story, also you say that it's expected to 247 00:12:31,920 --> 00:12:34,520 Speaker 4: hit one hundred billion dollars by twenty thirty. 248 00:12:34,360 --> 00:12:36,440 Speaker 9: Right, And a lot of that is exactly what you 249 00:12:36,480 --> 00:12:39,120 Speaker 9: were saying, that this is more than just I mean, 250 00:12:39,120 --> 00:12:40,880 Speaker 9: for some people, they are going out there and looking 251 00:12:41,040 --> 00:12:43,160 Speaker 9: to lose a couple of hoss. But in terms of 252 00:12:43,240 --> 00:12:46,000 Speaker 9: you know, reasons for why insurers should cover these drugs 253 00:12:46,000 --> 00:12:48,560 Speaker 9: and reasons why these drugs are expected to be such 254 00:12:48,559 --> 00:12:51,120 Speaker 9: a big market is because they are helping people with other, 255 00:12:51,640 --> 00:12:54,520 Speaker 9: you know, important health issues like heart disease, knee pain. 256 00:12:55,040 --> 00:12:58,480 Speaker 9: Lily's studying this drug in liver disease or kidney disease 257 00:12:58,559 --> 00:13:01,160 Speaker 9: and heart disease and all of these things that are 258 00:13:01,200 --> 00:13:03,880 Speaker 9: linked to weight loss. But there is also potentially some 259 00:13:04,000 --> 00:13:07,559 Speaker 9: weight loss independent reduction of inflammation and things like that. 260 00:13:07,640 --> 00:13:10,800 Speaker 9: So these drugs are working in pretty incredible ways. They're 261 00:13:10,800 --> 00:13:13,920 Speaker 9: also setting them now in addiction and things like alcohol 262 00:13:14,040 --> 00:13:17,080 Speaker 9: use disorder. So there's just so much here, and that 263 00:13:17,200 --> 00:13:18,480 Speaker 9: is a really important piece of this. 264 00:13:19,040 --> 00:13:21,920 Speaker 2: So I guess the end all be off for these 265 00:13:21,920 --> 00:13:26,400 Speaker 2: pharmaceutical companies asn't relate to this particular area. Is I 266 00:13:26,440 --> 00:13:28,679 Speaker 2: guess to get it into a form that more people 267 00:13:28,720 --> 00:13:33,679 Speaker 2: can use ipill, maybe reduce side effects, but most importantly 268 00:13:33,920 --> 00:13:37,040 Speaker 2: at an affordable cost. Is there an expectation that those 269 00:13:37,080 --> 00:13:38,959 Speaker 2: three things can happen at some point over the next 270 00:13:39,040 --> 00:13:39,600 Speaker 2: several years. 271 00:13:39,679 --> 00:13:41,840 Speaker 9: Yeah, and I mean they are starting to happen. That's 272 00:13:41,840 --> 00:13:44,400 Speaker 9: one of the things that Trump administration actually struck a 273 00:13:44,400 --> 00:13:47,120 Speaker 9: deal with Novo and Lily to lower the cost of 274 00:13:47,160 --> 00:13:51,240 Speaker 9: some of these medications beginning next year. There's also efforts 275 00:13:51,280 --> 00:13:54,640 Speaker 9: from the pharmaceutical companies themselves to lower the direct to 276 00:13:54,640 --> 00:13:57,800 Speaker 9: consumer cash pay prices so that people who don't have 277 00:13:57,880 --> 00:14:00,000 Speaker 9: insurance coverage for these drugs, which is still a lot 278 00:14:00,160 --> 00:14:03,720 Speaker 9: of people can get them metamore affordable price. So that's 279 00:14:03,720 --> 00:14:06,200 Speaker 9: brought down the costs from over one thousand dollars a 280 00:14:06,240 --> 00:14:09,280 Speaker 9: month to more like two hundred three hundred dollars a month, 281 00:14:09,559 --> 00:14:11,680 Speaker 9: and so there are some of those efforts. Part of 282 00:14:11,679 --> 00:14:14,800 Speaker 9: the Trump administration deal was also that the lowest dose 283 00:14:14,840 --> 00:14:17,000 Speaker 9: of the pills, which are expected to start rolling out 284 00:14:17,000 --> 00:14:20,080 Speaker 9: within the next couple of months next year, they'll start 285 00:14:20,080 --> 00:14:21,960 Speaker 9: at one hundred and fifty dollars a month. So that's 286 00:14:22,000 --> 00:14:25,600 Speaker 9: also pretty steep reduction from where the prices are at currently. 287 00:14:26,080 --> 00:14:29,400 Speaker 4: We see investors really cheer this move today. But how 288 00:14:29,480 --> 00:14:31,920 Speaker 4: high are the stakes is if they fail? Because it's 289 00:14:31,960 --> 00:14:35,400 Speaker 4: experimental and I'm not the expert on this, but it's still. 290 00:14:35,200 --> 00:14:37,800 Speaker 5: Experimental exactly, and the stakes are high. 291 00:14:37,840 --> 00:14:40,400 Speaker 9: And we've seen because the drugs that are currently on 292 00:14:40,440 --> 00:14:42,920 Speaker 9: the market with Goovi and Zebound are so good and 293 00:14:42,960 --> 00:14:46,240 Speaker 9: they work so well, that the stakes for developing next 294 00:14:46,280 --> 00:14:49,080 Speaker 9: generation drugs are higher. I mean, you have to get 295 00:14:49,200 --> 00:14:51,040 Speaker 9: more weight loss than the drugs that are currently on 296 00:14:51,080 --> 00:14:53,880 Speaker 9: the market. And at the same time, the safety risks 297 00:14:53,920 --> 00:14:56,600 Speaker 9: are really real. We don't want drugs that are going 298 00:14:56,640 --> 00:14:58,800 Speaker 9: to give someone even more health problems. I mean, of 299 00:14:58,800 --> 00:15:01,840 Speaker 9: course always, but the sort of risk benefit analysis with 300 00:15:01,880 --> 00:15:04,840 Speaker 9: weight loss drugs are different, and that's one of the 301 00:15:04,880 --> 00:15:06,600 Speaker 9: things that we begin to see too with some of 302 00:15:06,640 --> 00:15:10,480 Speaker 9: these next generation compounds. Amjin, for example, has a drug 303 00:15:10,520 --> 00:15:12,760 Speaker 9: that had really high rates of side effects. It's supposed 304 00:15:12,760 --> 00:15:15,880 Speaker 9: to be a once monthly drug, but investors haven't loved 305 00:15:15,920 --> 00:15:18,040 Speaker 9: that one because of the high rates of side effects. 306 00:15:18,760 --> 00:15:21,680 Speaker 9: In Lily's trial today, there were pretty high rates of 307 00:15:21,720 --> 00:15:24,560 Speaker 9: side effects as well. People were having some weird like 308 00:15:24,760 --> 00:15:29,240 Speaker 9: nerve pain tingling sensations and then the classic nausea, vomiting, 309 00:15:29,600 --> 00:15:32,120 Speaker 9: constipation that are seene with these drugs, and so that's 310 00:15:32,120 --> 00:15:34,160 Speaker 9: a really important piece to watch as well. 311 00:15:34,360 --> 00:15:37,080 Speaker 2: Thirty seconds and asking for a friend hair loss drugs 312 00:15:37,080 --> 00:15:38,520 Speaker 2: once that that's gonna be the next week. 313 00:15:38,960 --> 00:15:41,520 Speaker 9: I mean, they're kind of starting to be out there already. 314 00:15:41,520 --> 00:15:44,160 Speaker 9: A lot of these companies too, like Hymns and Hers 315 00:15:44,200 --> 00:15:46,680 Speaker 9: and a lot of these telehealth companies are really going 316 00:15:46,720 --> 00:15:48,080 Speaker 9: hard on the hair loss drugs. 317 00:15:48,600 --> 00:15:49,160 Speaker 4: Wow. 318 00:15:49,520 --> 00:15:51,040 Speaker 2: I mean I went to like had at dinner with 319 00:15:51,040 --> 00:15:53,160 Speaker 2: some of my high school buddies recently. It was grim. 320 00:15:53,640 --> 00:15:55,840 Speaker 5: It was grim. I mean, I'm just laying it out there. 321 00:15:56,000 --> 00:15:58,640 Speaker 4: They can go to Turkey, yes, or the hair loss 322 00:15:58,720 --> 00:16:02,000 Speaker 4: drugs they are gender neutral. Is that the right fra? 323 00:16:02,560 --> 00:16:02,760 Speaker 1: Yeah? 324 00:16:02,840 --> 00:16:03,360 Speaker 5: Yeah, yeah. 325 00:16:03,360 --> 00:16:05,320 Speaker 9: And there are some I mean Hymns and Hers has 326 00:16:05,360 --> 00:16:08,680 Speaker 9: some products that they've developed specifically for women and they 327 00:16:08,720 --> 00:16:12,480 Speaker 9: have different formulations like shampoo, whatever. So people are, you know, 328 00:16:12,720 --> 00:16:15,000 Speaker 9: more comfortable with different products. 329 00:16:15,680 --> 00:16:18,840 Speaker 5: Stay with us. More from Bloomberg Intelligence coming up after this. 330 00:16:22,720 --> 00:16:26,440 Speaker 1: You're listening to the Bloomberg Intelligence podcast. Catch us live 331 00:16:26,520 --> 00:16:29,600 Speaker 1: weekdays at ten am Eastern on Apple, Cocklay and Android 332 00:16:29,640 --> 00:16:32,920 Speaker 1: Auto with the Bloomberg Business app. Listen on demand wherever 333 00:16:33,000 --> 00:16:36,080 Speaker 1: you get your podcasts, or watch us live on YouTube. 334 00:16:36,880 --> 00:16:37,560 Speaker 5: Let's take a look. 335 00:16:37,720 --> 00:16:39,920 Speaker 2: One of the questions that I think the FED has, 336 00:16:40,000 --> 00:16:43,800 Speaker 2: I think investors have is how's the US consumer doing 337 00:16:43,800 --> 00:16:44,080 Speaker 2: out there? 338 00:16:44,080 --> 00:16:45,600 Speaker 5: And there's a lot of ways we try to get 339 00:16:45,640 --> 00:16:46,000 Speaker 5: to that. 340 00:16:46,440 --> 00:16:48,760 Speaker 2: We talked to Michael Halean he covers all the restaurants 341 00:16:48,800 --> 00:16:52,080 Speaker 2: for Bloomberg Intelligence to talk to analysts who cover different 342 00:16:52,080 --> 00:16:55,320 Speaker 2: parts of the economy and see how their companies are 343 00:16:55,440 --> 00:16:57,200 Speaker 2: kind of talking about the consumer. One of the folks 344 00:16:57,200 --> 00:17:00,280 Speaker 2: we like to talk to is Lindsay, Dutch consumer Hardlinei's 345 00:17:00,360 --> 00:17:03,720 Speaker 2: senior analysts for Bloomberg Intelligence think, you know, I think 346 00:17:03,760 --> 00:17:06,560 Speaker 2: companies like Best Buy, Dixboarding Goods, that kind of thing, 347 00:17:07,160 --> 00:17:10,360 Speaker 2: the hard lines, lindsay, talk to us about how your 348 00:17:10,400 --> 00:17:14,160 Speaker 2: stocks performed in twenty twenty five and what's the expectation 349 00:17:14,200 --> 00:17:16,520 Speaker 2: for twenty twenty six for some of those hardline rekillers. 350 00:17:17,680 --> 00:17:20,879 Speaker 8: Hi, Paul, thanks for having me. I think if you 351 00:17:20,960 --> 00:17:23,439 Speaker 8: look at, you know, the guidance for the rest of 352 00:17:23,480 --> 00:17:25,880 Speaker 8: the year, I think a lot of these big hardline 353 00:17:25,880 --> 00:17:29,040 Speaker 8: companies are baking in a lot of uncertainty with the consumer. 354 00:17:29,440 --> 00:17:32,000 Speaker 8: But the reality is that if we look back, you know, 355 00:17:32,520 --> 00:17:35,919 Speaker 8: to performance to date and results to date, results have 356 00:17:36,160 --> 00:17:39,520 Speaker 8: you know, largely been better than expected. And and a 357 00:17:39,520 --> 00:17:43,080 Speaker 8: lot of these retailers are sort of tracking to the 358 00:17:43,160 --> 00:17:45,960 Speaker 8: upper half of their guidance range for the year because 359 00:17:46,000 --> 00:17:49,080 Speaker 8: that consumer has stayed pretty pretty resilient. You know, we 360 00:17:49,119 --> 00:17:52,000 Speaker 8: see strength you know, continuing to come from that higher 361 00:17:52,000 --> 00:17:55,040 Speaker 8: income consumer, while the lower income might be you know, 362 00:17:55,080 --> 00:17:57,320 Speaker 8: continuing to pull back a little bit. And if you 363 00:17:57,359 --> 00:18:01,280 Speaker 8: think about companies like best Buy, All, Tom Williams, Sonoma, 364 00:18:01,680 --> 00:18:04,520 Speaker 8: Dick Spoarding Goods, you know they are bringing you know, 365 00:18:04,680 --> 00:18:08,760 Speaker 8: premium products, new products, exclusive products to that consumer, and 366 00:18:08,800 --> 00:18:11,199 Speaker 8: the consumers are willing to pay up for that. 367 00:18:12,040 --> 00:18:14,000 Speaker 4: What was the one trend that shocked you this year? 368 00:18:14,040 --> 00:18:14,800 Speaker 4: Now that you look. 369 00:18:14,680 --> 00:18:17,679 Speaker 8: Back, I think a lot of the trends have been 370 00:18:17,720 --> 00:18:21,679 Speaker 8: a continuation of what we've been seeing. I think, you know, 371 00:18:21,680 --> 00:18:23,960 Speaker 8: if we go back to late twenty twenty two, that 372 00:18:24,080 --> 00:18:28,000 Speaker 8: is when the first pullback in that discretionary spend has been. 373 00:18:28,480 --> 00:18:32,280 Speaker 8: But this is the first year that we've seen more newness, 374 00:18:32,320 --> 00:18:37,119 Speaker 8: and newness is really a key driver to getting consumers 375 00:18:37,160 --> 00:18:40,840 Speaker 8: in the store and to fueling transactions. So the best 376 00:18:40,880 --> 00:18:45,000 Speaker 8: retailers are getting both transaction and ticket growth. But I 377 00:18:45,040 --> 00:18:49,960 Speaker 8: think those innovation pipelines that maybe we're you know, settled 378 00:18:49,960 --> 00:18:52,920 Speaker 8: down a bit during COVID, they've picked up again and 379 00:18:53,240 --> 00:18:56,080 Speaker 8: bringing more newness is driving those transactions. 380 00:18:56,520 --> 00:19:00,879 Speaker 2: How promotional do you think retailers will be in twenty 381 00:19:00,920 --> 00:19:03,720 Speaker 2: twenty six to kind of drive the consumer to the 382 00:19:03,760 --> 00:19:05,680 Speaker 2: store or to the mouse to click. 383 00:19:07,040 --> 00:19:11,920 Speaker 8: So promotions are very important to bring shoppers to the store, 384 00:19:12,359 --> 00:19:15,080 Speaker 8: you know, especially for someone like a best Buy. You know, 385 00:19:15,119 --> 00:19:19,440 Speaker 8: promotions are very key, especially around holiday. We have seen 386 00:19:19,480 --> 00:19:22,480 Speaker 8: that promotions are about flat, you know, in twenty five 387 00:19:22,640 --> 00:19:25,399 Speaker 8: versus twenty four, and I would sort of expect a 388 00:19:25,400 --> 00:19:29,520 Speaker 8: continuation of that in twenty six unless we see a 389 00:19:29,600 --> 00:19:31,919 Speaker 8: huge spike in demand, in which case the retailers might 390 00:19:31,960 --> 00:19:34,480 Speaker 8: be able to pull back on that promotional lever a 391 00:19:34,480 --> 00:19:37,639 Speaker 8: little bit. But this year so far it's been about flat. 392 00:19:38,000 --> 00:19:42,840 Speaker 8: You do see companies like a William's Sonoma very select promotions. 393 00:19:42,880 --> 00:19:44,959 Speaker 8: This has been a strategy coming out of COVID. They 394 00:19:45,000 --> 00:19:48,320 Speaker 8: sort of have stuck with it. They're even sticking with it, 395 00:19:48,640 --> 00:19:51,400 Speaker 8: you know, through this season going into next year. Pottery 396 00:19:51,400 --> 00:19:54,200 Speaker 8: Barn was a big focus for them. You know, they 397 00:19:54,240 --> 00:19:57,040 Speaker 8: need a rebound in that brand and growth is slowly 398 00:19:57,119 --> 00:20:00,680 Speaker 8: coming back, but they are staying steadfast and keeping those 399 00:20:00,720 --> 00:20:02,200 Speaker 8: promotions very limited. 400 00:20:03,000 --> 00:20:04,760 Speaker 4: I was going through your notes and then I read 401 00:20:04,800 --> 00:20:07,960 Speaker 4: that many retailers are resuming or accelerating brick and mortar 402 00:20:08,000 --> 00:20:12,000 Speaker 4: expansion plants because this leads to installing online sales. And 403 00:20:12,040 --> 00:20:14,760 Speaker 4: that's just kind of the reverse trend that I was expecting. 404 00:20:14,840 --> 00:20:16,800 Speaker 4: But you made a point that gen Z shows a 405 00:20:16,840 --> 00:20:19,399 Speaker 4: strong preference for in person shopping. Can you talk to 406 00:20:19,480 --> 00:20:22,280 Speaker 4: us more about that and how each generation is different. 407 00:20:23,920 --> 00:20:28,000 Speaker 8: Sure, Yeah, in store shopping is definitely back and just 408 00:20:28,119 --> 00:20:32,080 Speaker 8: meeting the consumer where they are. So retailers, I think 409 00:20:32,160 --> 00:20:36,960 Speaker 8: are more focused on all channels, whether it's said whether 410 00:20:37,000 --> 00:20:39,800 Speaker 8: they have an app, they're online site, their brick and 411 00:20:39,840 --> 00:20:43,359 Speaker 8: mortar stores, but brick and mortar as a whole. You know, 412 00:20:43,400 --> 00:20:46,640 Speaker 8: we are seeing more openings than closings, and that has 413 00:20:46,640 --> 00:20:49,240 Speaker 8: been a trend for the past couple of years. But 414 00:20:49,320 --> 00:20:51,760 Speaker 8: when we think about sort of the retail real estate market, 415 00:20:51,920 --> 00:20:54,600 Speaker 8: the demand has been solid coming out of COVID and 416 00:20:54,640 --> 00:20:57,400 Speaker 8: so vacancy is starting to get low and there's really 417 00:20:57,400 --> 00:21:00,639 Speaker 8: no new properties being built. So these retailer was looking 418 00:21:00,640 --> 00:21:03,880 Speaker 8: to expand, which is great for their businesses. You know, 419 00:21:04,119 --> 00:21:06,520 Speaker 8: they really have to work hard to do so and 420 00:21:06,600 --> 00:21:09,119 Speaker 8: find good space to open stores because there's just not 421 00:21:09,600 --> 00:21:12,440 Speaker 8: that much of it. But best Buy has talked about 422 00:21:12,600 --> 00:21:15,760 Speaker 8: gen Z's preference for in store shopping, so has Alta 423 00:21:15,800 --> 00:21:20,199 Speaker 8: Beauty and and so we're definitely seeing that across the board, 424 00:21:20,240 --> 00:21:21,800 Speaker 8: but especially that younger generation. 425 00:21:22,000 --> 00:21:24,680 Speaker 2: There's plenty of retail space on Lexinton Avenue and fifty 426 00:21:24,680 --> 00:21:28,760 Speaker 2: eighth streetment. Lindsay John from The Highlands rights in and 427 00:21:28,880 --> 00:21:31,520 Speaker 2: you want to ask about the beauty segment Atlantic Islands. 428 00:21:31,560 --> 00:21:35,600 Speaker 5: Atlantic stones confuse the two the Atlantic Islands, Alta Beauty, 429 00:21:35,840 --> 00:21:38,439 Speaker 5: ELF Beauty. So for how how does that category look for. 430 00:21:38,440 --> 00:21:39,160 Speaker 2: Twenty twenty six. 431 00:21:40,760 --> 00:21:44,560 Speaker 8: So demand has showed a strengthening sort of in the 432 00:21:44,880 --> 00:21:48,159 Speaker 8: back half of twenty five. I think that momentum can 433 00:21:48,280 --> 00:21:51,480 Speaker 8: continue into twenty six. I think for Alta in particular, 434 00:21:51,640 --> 00:21:55,040 Speaker 8: they have done a great job, you know, bringing elevating 435 00:21:55,080 --> 00:21:58,440 Speaker 8: their assortment and bringing on exclusives and that has really 436 00:21:58,920 --> 00:22:02,640 Speaker 8: helped them. Comps are going to get tougher next year 437 00:22:02,760 --> 00:22:05,720 Speaker 8: and they need to continue to drive growth and I 438 00:22:05,840 --> 00:22:08,440 Speaker 8: think for them, you know, leaning into their salon services 439 00:22:08,520 --> 00:22:10,320 Speaker 8: could be a key way to do that. Leaning into 440 00:22:10,400 --> 00:22:13,399 Speaker 8: wellness is a key way to do that. There's multiple 441 00:22:13,520 --> 00:22:17,400 Speaker 8: levers that they can pull. The categories that are showing 442 00:22:17,440 --> 00:22:21,240 Speaker 8: the most strength is really fragrance and skincare, and we 443 00:22:21,280 --> 00:22:24,440 Speaker 8: would expect that demand to continue into next year. 444 00:22:25,800 --> 00:22:30,440 Speaker 1: This is the Bloomberg Intelligence podcast, available on Apple, Spotify, 445 00:22:30,680 --> 00:22:34,120 Speaker 1: and anywhere else you get your podcasts. 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