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Speaker 1: Bloomberg Intelligence with Scarletfoo and Paul Sweeney on Bloomberg Radio,
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Speaker 3: I'm Paul Sweeney and I'm marm Melinda filling in for Scarlettfoo.
Speaker 2: On today's Bloomberg Intelligence Show. We dig inside the big
Speaker 2: business stories impacting Wall Street and the global markets.
Speaker 3: Each and every week, we provide in depth research and
Speaker 3: data on some of the two thousand companies and one
Speaker 3: hundred and thirty industries are analysts cover worldwide.
Speaker 2: Today, we'll look at why the cloud based software company
Speaker 2: Salesforce gave a strong outlook for sales in the current quarter.
Speaker 3: Class well dive into why shares of the aerospace company
Speaker 3: Airbus plunged and how this might affect the delivery of
Speaker 3: its newly produced jets.
Speaker 2: But first we begin with some news in the casino
Speaker 2: and gaming space.
Speaker 3: This week, New York Mets owner Steve Cohen won approval
Speaker 3: to operate a casino next to City Fields and Queens.
Speaker 2: It's one of the three projects select different gambling licenses
Speaker 2: in New York City, and this was done by the
Speaker 2: State Gaming Commission's Facility Location Board.
Speaker 3: Cohen, the Hedge Fund Mobile submitted an eight billion dollar
Speaker 3: casino proposal with partner hard Rock International and was picked
Speaker 3: alongside genting groups Resorts World and Ballys. These three projects
Speaker 3: are expected to generate significant revenue and create thousands of
Speaker 3: jobs for.
Speaker 2: More and all. This guest host Alex Simonova and I
Speaker 2: were joined by Brian Eggert, Bloomberg Intelligence senior Gaming and
Speaker 2: launching analysts. We first asked Brian to talk about what
Speaker 2: the licenses represent and where we go from here.
Speaker 5: So this is a fairly protractive process involving ultimately di
Speaker 5: selection of three recipients. By the way, the only three
Speaker 5: left in the running after a few others were limited
Speaker 5: and dropped out, and really it authorized resort casinos for
Speaker 5: the downstate New York area, mostly in New York City.
Speaker 5: And as it turns out, the three qualified casino applicants,
Speaker 5: if you will, really are are in New York City
Speaker 5: but outside the Borough of Manhattan itself.
Speaker 4: Brian, just looking at your note on these license approvals,
Speaker 4: you write that they face a narrow path to decent
Speaker 4: returns on investment. Can you please talk to us a
Speaker 4: little bit more about that idea?
Speaker 5: Sure? So, what we assume for those resorts is they
Speaker 5: will get what I would call a gaming revenue premium
Speaker 5: and room rate premium of ten twenty percent to other
Speaker 5: kind of high end urban area resorts such as the
Speaker 5: Burgata and Atlantic City wins Encore in Boston. However, are
Speaker 5: concerned if in terms of the return prospects are that
Speaker 5: development costs are quite high and perhaps some of the
Speaker 5: targeted non gaming contribution elements might be a bit ambitious.
Speaker 5: So for that reason, when we worked the numbers, we
Speaker 5: came up with something like a ten percent return on investment,
Speaker 5: which is certainly a bit less than most operators would
Speaker 5: expect to attain in these regional markets.
Speaker 2: So I'm thinking here I mean again, I'm just thinking
Speaker 2: about Steve Cohen's I was looking at his plans in
Speaker 2: conjunction with his city field. He obviously he owns the Mets.
Speaker 2: City field is out there, the National Tennis centers out there.
Speaker 2: We had the world's fair situations, so there's a ton
Speaker 2: of opportunity out there. It seems like these are going
Speaker 2: to be more retail hotel than casino. How do you
Speaker 2: think the mix of revenue is going to be there?
Speaker 5: So this certainly is I think when we work the numbers,
Speaker 5: we assume that with respect to either food and beverage
Speaker 5: or retail entertainment revenue, those will be fairly sizable chunks
Speaker 5: of the overall revenue PI probably cuatively close to half,
Speaker 5: which is true of many kind of gaming resorts in
Speaker 5: attractive environments get a lot of non gaming revenue. I
Speaker 5: think the same will be true here. The question is
Speaker 5: will it be enough and will be margins which we
Speaker 5: take to be about thirty percent, be sufficient to get
Speaker 5: a good return. But certainly, you know the logic of
Speaker 5: having at nexas city field makes a lot of sense.
Speaker 5: You know, the other locations valleys and a golf course
Speaker 5: in the Bronx. You know, the the resorts world in
Speaker 5: Queen's pretty much expanding and existing facility all have their merit.
Speaker 5: The question is will be enough to get a decent return,
Speaker 5: But certainly some of these locations have rational prospects.
Speaker 4: What does this victory for these three companies mean for
Speaker 4: their competitors like Sands MGM, When where do they go
Speaker 4: from here?
Speaker 5: So to be queer, You know, Sans exited this process
Speaker 5: back in April. When exited in May, it's Hudson York
Speaker 5: project because of community opposition at MGM in October because
Speaker 5: of the licensed terms. But bear in mind that they
Speaker 5: do have other prospects. You know, when is developing a
Speaker 5: UAE resort of its own, gm is building in Osaka, Japan.
Speaker 5: They all can buy back in their own stock. So
Speaker 5: I think they're weighing this particular opportunity relative to other
Speaker 5: development prospects.
Speaker 2: So we're going to get the licenses by year end.
Speaker 2: What's the time taime if anybody any of these three
Speaker 2: licensed winners lay out of timetable for getting a shovel
Speaker 2: in the ground and maybe even opening the doors.
Speaker 5: So I think it'll vary by operator. But the expectations
Speaker 5: that these resorts will generally open by twenty thirty or so.
Speaker 5: It'll take a few years to develop. There was always
Speaker 5: the possibility of construction challenges, but that's the target. And
Speaker 5: of course our related to concerns since you mentioned MGM
Speaker 5: was MGM Ballely's Caesars O operaate casinos in Atlantic City,
Speaker 5: and you know, the proximity to Alantic City of resorts
Speaker 5: with casino elements at this caliber certainly presents a potential
Speaker 5: competitive challenge to Atlantic City itself.
Speaker 2: AC. That's tough. That's tough because I would see you know,
Speaker 2: on the parkway, Brian, I know you see it too.
Speaker 2: We have for years, for twenty thirty years, we've seen
Speaker 2: the limousines from New York City going down the Parkway
Speaker 2: to AC. That's going to get it impacted, isn't.
Speaker 5: It It will? I think you know, some operaters Burgata,
Speaker 5: for example, a hard rock may hold up better than others.
Speaker 5: But you know, there's always a challenge when you've got
Speaker 5: this much additional gaming capacity with resort elements opening up
Speaker 5: in relative close proximity to a to a key Atlantic
Speaker 5: City feeder market.
Speaker 3: Our thanks to Brian Eger, Bloomberg Intelligence Senior Gaming and
Speaker 3: Lodging analysts.
Speaker 2: We move now to the retail space.
Speaker 3: This week, the department store chains Macy's posted better than
Speaker 3: expected results last quarter. However, shares dropped if the company
Speaker 3: pointed to a potential for soft demand from low income
Speaker 3: shoppers for the current quarter.
Speaker 2: For more, Nora and I were joined by Mary Ross
Speaker 2: and Gilbert Bloomberg Intelligence senior equity analyst covering retail.
Speaker 3: We first asked Mary to break down Macy's most recent quarter.
Speaker 6: We saw, actually, I think great results coming out of
Speaker 6: Macy's see but the company put out conservative fourth quarter
Speaker 6: guidance and that's really what they always do. They seek
Speaker 6: to beat their numbers, and so that guidance came in
Speaker 6: very close, you know, at the high end. It's right
Speaker 6: around where analysts are because they already saw strong results
Speaker 6: come in from other retailers. But we think, when we
Speaker 6: think about it, we think there's upside here. So we
Speaker 6: really view the results as look Macy's name plate because
Speaker 6: of all the changes that they're making, and what that
Speaker 6: means is they're bringing in more relevant brands that are
Speaker 6: resonating with their consumer. Not only that, but the stores
Speaker 6: look brighter. There's really kind of exciting music in the stores.
Speaker 6: The store associates are more engaged with the customer. We've
Speaker 6: noticed that on our channel text, particularly on Black Friday,
Speaker 6: we saw more traffic in the store than we've seen
Speaker 6: in years past. So we think that the changes that
Speaker 6: CEO Tony Sprain is making and he's really making his
Speaker 6: cues from what he's done at Bloomingdale's, it's resonating, it's working,
Speaker 6: and so we think this momentum is building and we
Speaker 6: certainly saw it in the third quarter numbers with comp
Speaker 6: sales two point seven percent for the Go Forwards stores,
Speaker 6: and so with that, I mean that's a big improvement sequentially,
Speaker 6: and so we think that's building, you know, going into
Speaker 6: the fourth quarter and just with you know, the constant
Speaker 6: improvement that we're seeing there.
Speaker 3: So when most people think about the retail space right now,
Speaker 3: a lot of people think about the transition to e commerce,
Speaker 3: but it sounds as though, from what you're explaining, a
Speaker 3: lot of people are going there in person. I mean,
Speaker 3: I'm looking at Coals, I'm looking at Dillard's. What are
Speaker 3: they doing in particular that's really attracting customers to come
Speaker 3: through the doors. Is it also collaborations with celebrities by chance?
Speaker 6: Yes, you raised a valid point, and it is. It
Speaker 6: does include collaborations. So for example, they Aqua you know,
Speaker 6: they're under their Bloomingdale's brand currently has a collapse going
Speaker 6: out with a designer out to move on and so yes,
Speaker 6: these collaborations also even you know, they'll have some events.
Speaker 7: But all of that is is certainly drawing.
Speaker 6: In new customers and I think Macy's nameplate could certainly
Speaker 6: do more on that end. They had their first collab
Speaker 6: with their on thirty fourth brand this year, but we
Speaker 6: think we're going to see more next year because if
Speaker 6: you look at what Dillard's has been doing over the
Speaker 6: last few years, and they have a different business model
Speaker 6: than Macy's does. They're not really promotional. For example, for
Speaker 6: Black Friday, they just had clearance sales and it was
Speaker 6: pretty comparable to last year, so that didn't mean that
Speaker 6: the rest of the merchandise was on sale.
Speaker 7: Macy's the you know, is far more promotional.
Speaker 6: But by doing collaborations, you know, by getting celebrities involved.
Speaker 6: So for example, for the holiday, they have Jennifer Hudson
Speaker 6: that's you know, fronting their campaign for the holiday, and
Speaker 6: they're also engaging with social influencers. Yes, all of that
Speaker 6: is resonating. We're seeing it with other brands, like for
Speaker 6: example with American Eagle, which just tapped Martha Stewart and
Speaker 6: that that's appealing to gen Z.
Speaker 3: Oh wow, so one.
Speaker 6: Yeah, so these bold campaigns that these brands are doing,
Speaker 6: Macy's is also getting involved there and they're dipping there
Speaker 6: to I would say, they're dipping their toe in the water.
Speaker 6: But I think we're going to see that increase, you know,
Speaker 6: and build as we get into twenty twenty six. And
Speaker 6: when you talk about the digital business, because of course
Speaker 6: you're always hearing let's say, stronger growth on digital. For example,
Speaker 6: when we looked at Black Friday, you know, over the
Speaker 6: weekend through Cyber Monday, the sales strength was really led
Speaker 6: by digital. Digital was up double digits versus you know,
Speaker 6: load to mid single digits for in store.
Speaker 7: So I think that's really positive there.
Speaker 6: But so when we look at Macy's, a third of
Speaker 6: their sales come from digital, so still in the store
Speaker 6: is very big, but it's also omni channel well, the
Speaker 6: ability to buy online, take back in store, or buy
Speaker 6: online pickup in store.
Speaker 2: Just real quick, thirty seconds, what's macy saying about the
Speaker 2: consumer out there.
Speaker 6: Yeah, So they're saying that the lower end consumer is
Speaker 6: really feeling pinched, and that's where they're seeing some challenges
Speaker 6: on some of the price increases on their lower price
Speaker 6: point items. But the higher middle income, in the higher
Speaker 6: income consumer is resilient and they haven't flashed or batter
Speaker 6: DENI with higher prices that they took to offset tariffs,
Speaker 6: and they're still buying.
Speaker 2: Thanks to Mary Ross Gilbert Bloomberg Intelligence, senior equity analyst
Speaker 2: covering retail.
Speaker 3: Coming up, we continue in the retail space and look
Speaker 3: at earnings from the discout retailer dollar.
Speaker 2: Tree listening to Bloomberg Intelligence on Bloomberg Radio, providing research
Speaker 2: and data on two thousand companies and one hundred and
Speaker 2: thirty industries.
Speaker 3: You can access Bloomberg Intelligence via b I go on
Speaker 3: the terminal. I'm normal Linda, and I'm Paul.
Speaker 2: Sweeney, and this is Bloomberg.
Speaker 1: This is Bloomberg Intelligence with Scarlett Foo and Paul Sweeney
Speaker 1: on Bloomberg Radio.
Speaker 3: I'm Paul Sweeney and I'm normal Linda, filling in for
Speaker 3: Scarlet Foo.
Speaker 2: We continue into retail space. This week, dollar Tree reported
Speaker 2: better than expected profit and raised its full year outlook.
Speaker 3: It's a sign that the discount retailer is capturing more
Speaker 3: spending from stretched shoppers. For more of this, Paul and
Speaker 3: I were joined by Lilly Meyer, Bloomberg Retail reporter.
Speaker 2: First ass Lily to break down Dollar Tree's most recent quarter.
Speaker 8: Yeah.
Speaker 9: So Dollar Tree did well this quarter at matt expectations
Speaker 9: on revenue and same store sales, and it raised its
Speaker 9: profit outlook for the year. I think they really have
Speaker 9: hit a niche in being able to capture consumers, both
Speaker 9: lower end consumers who need cheaper goods and then high
Speaker 9: income consumers who are looking to trade down.
Speaker 3: So, I mean, what do we think about elasticity of
Speaker 3: the lower end consumer right now? Because I mean, if
Speaker 3: you think about Walmart, I used to think of this
Speaker 3: as a company that you know, was a cheaper place
Speaker 3: to show, but it seems as though it's appealing to
Speaker 3: multiple consumer types. But it seems as a dollar Tree
Speaker 3: really is a great place for the lower end consumer.
Speaker 9: Yeah, and actually recently dollar Tree has been looking to
Speaker 9: kind of break into that higher income shopper as well.
Speaker 9: So it has this pricing strategy, so it has some
Speaker 9: products that are still cheaper, but then it has some
Speaker 9: it's getting more products that are more expensive.
Speaker 2: What is Dollar Tree saying about its core consumer out there?
Speaker 2: Who is that core consumer and how are they behaving?
Speaker 9: Yeah, so I think it's core consumer is still a
Speaker 9: lower income shopper. Eighty five percent of their products are
Speaker 9: two dollars an under, so they really still have a
Speaker 9: lot of value.
Speaker 3: So they're seeing.
Speaker 9: Those shoppers continue to go in. But this quarter they
Speaker 9: saw traffic down and they attributed that to tariff increases.
Speaker 3: But what's the takeaway in terms of the outlook. I mean,
Speaker 3: you talked about tariff still being a drag here.
Speaker 9: Yeah, so tariffs will really dragged this quarter. They said
Speaker 9: that's going to lessen, So I think this was the
Speaker 9: quarter where we're really seeing the biggest tariff impact. It'll
Speaker 9: be really interesting to see what they predict for consumers
Speaker 9: next year. I'm interested to hear about that and also
Speaker 9: what they see for holiday if they continue to see
Speaker 9: hire income shoppers trading down for gifts.
Speaker 2: Is the dollar stores do they see a surgeon sales
Speaker 2: seasonal surge and sales from holiday sales that Do they
Speaker 2: see that like a department store would.
Speaker 9: Yeah, I don't know if it's the same surge, but
Speaker 9: you know, they sell a lot of gift wrapping and
Speaker 9: gift bags and some of those smaller gifts stocking stuffer,
Speaker 9: so I think they see a lot of that around
Speaker 9: the holidays.
Speaker 3: So what are we seeing in terms of just the
Speaker 3: broader read on the retail space? This kind of gives
Speaker 3: us a picture of the lower end consumer, But what
Speaker 3: are you seeing across the board?
Speaker 9: So broadly, we're really still seeing consumer spend, So there
Speaker 9: hasn't been that massive pullback that I think some of
Speaker 9: us were imagining might happen. We're still seeing consumer spend,
Speaker 9: but they're really value driven, so they're looking for the
Speaker 9: best deals they can get. They're trading down when they
Speaker 9: need to, They're stocking up on essentials.
Speaker 2: How promotional are retailers right now? Because I'm in I know,
Speaker 2: talk to Punham Gooile, the retail analyst Bloomberg Intelligence. She says,
Speaker 2: you know, the more promotions you see out there, that's
Speaker 2: going to be that goes right to the margins, the
Speaker 2: profit margins of some of these retailers. What are we
Speaker 2: seeing this season?
Speaker 9: That's a good question. So this season, we've actually seen
Speaker 9: some retailers pull back on deals to protect their margin.
Speaker 9: So some companies are doing that as part of a
Speaker 9: broader strategy, and then some are having to do that
Speaker 9: because of tariff. So, you know, for Black Friday, typically
Speaker 9: they'd offer big discounts and some are pulling back or
Speaker 9: not offering discounts at all.
Speaker 3: So consumers have still been broadly spending in the retail space.
Speaker 3: What are they spending on? Is it? You know, are
Speaker 3: we spending money on essentials right now? Skipping this lurging? Yeah, yeah,
Speaker 3: that's exactly it.
Speaker 9: So Black Friday, we talked to a lot of folks
Speaker 9: who were saying they're going to just get essentials this
Speaker 9: Black Friday. So instead of buying, you know, a Lake Crusette,
Speaker 9: Dutch oven, they were We talked to someone who instead
Speaker 9: was going to buy like three bags of forty pounds
Speaker 9: dog food.
Speaker 2: Oh that sounds okay.
Speaker 7: Yeah, So really.
Speaker 9: Using you know, deals to get things that they need
Speaker 9: for themselves rather than getting that big ticket item they
Speaker 9: waited for.
Speaker 2: What I learned from talking to retail folks is omni
Speaker 2: channel retail, which is you use both the online and
Speaker 2: the bricks and mortar, and maybe you look at something online,
Speaker 2: then you want to go touch and feel it, or
Speaker 2: maybe you order it then you pick it up at
Speaker 2: the store. Omni channels that still a thing.
Speaker 9: Yeah, Yeah, So we were out there on Black Friday
Speaker 9: and some of the stores, and you know, while a
Speaker 9: lot of people have switched their holiday shopping to be online,
Speaker 9: we still saw a ton of people in stores, especially
Speaker 9: at stores with really good deals and stores that have
Speaker 9: appealed to young shoppers. So brands like Addicted and Princess
Speaker 9: Paul that are in malls were really flooded with young people.
Speaker 3: Our thanks to Lily Meyer, Bloomberg Retail reporter, move next.
Speaker 2: To quarterly earnings from the cloud based software company Salesforce.
Speaker 3: This week, the company reported third quarter earnings that beat
Speaker 3: analyst expectations. Salesforce also gave an outlook for revenue in
Speaker 3: the current quarter that topped Wall Street estimates.
Speaker 2: This suggests that the software company is persuading customers to
Speaker 2: buy it AI tools. For more on this, Nornite were
Speaker 2: joined by anarag Rana, Bloomberg Intelligence technology analyst.
Speaker 3: We first asked Aniog for his take on the most
Speaker 3: recent earnings report from Salesforce.
Speaker 10: Yeah, the sack.
Speaker 11: The results did come in, I mean almost in line
Speaker 11: with how we were looking at it in terms of
Speaker 11: that the core business is still struggling. But when it
Speaker 11: comes to some of their AI products that has started
Speaker 11: to do well, they've gained momentum. But when you look
Speaker 11: at somebody like a salesforce, when you have a revenue
Speaker 11: base of forty one billion dollars, it takes a lot
Speaker 11: to move the needles. So even though these products are
Speaker 11: very small and you know, growing triple digits, but they
Speaker 11: are not you know, right there in order to take
Speaker 11: down what is happening on the core business, which is
Speaker 11: a decline in seat growth or the less addition of
Speaker 11: seats because of macro IT spending, and that is probably
Speaker 11: going to be the story, at least for the near term.
Speaker 3: So it seems as though analysts are still generally positive
Speaker 3: on in terms of AI adoption trends when we think
Speaker 3: about this company though.
Speaker 11: Yes, absolutely, and that's you know, one of the things.
Speaker 11: We saw really good numbers on both the data cloud
Speaker 11: side of it and also the agent force. But when
Speaker 11: you look at the stock reaction and finally people have
Speaker 11: when you really scrape the numbers and see that their
Speaker 11: commercial remaining performance obligations, which is the order book for
Speaker 11: next quarter, which they expect to grow about thirteen percent
Speaker 11: in constant currency four percentage of point of that is informatica.
Speaker 11: So when you strip that out, you will see that
Speaker 11: that particular backlock number goes from eleven percent this quarter
Speaker 11: to let's say nine or ten percent. So the core
Speaker 11: is still declining or the core is still under pressure.
Speaker 2: So the stock down twenty seven percent year to date
Speaker 2: on a rock that does that reflect the fact that
Speaker 2: it's just it budgets are tight, or that AI poses
Speaker 2: an existential threat to certain providers like a Salesforce.
Speaker 11: I don't think that's the case, because it's going to
Speaker 11: be very difficult for an established Fortune two thousand company
Speaker 11: to get rid of their core system of record, you know,
Speaker 11: whether that's an HRS sales customer service and just deploy
Speaker 11: a model in there. At least we are not there yet.
Speaker 11: Maybe you know, five years down the road we may
Speaker 11: see a scenario like this. But that's not really why
Speaker 11: Salesforce is struggling. It is basically, we are the largest
Speaker 11: provider of sales automation tool and customer service tool to
Speaker 11: Fortune two thousand companies. It's those companies that are not
Speaker 11: hiding at that same rate that they used to because
Speaker 11: outside of AI and AI infrastructure, everything else is still
Speaker 11: weak at this.
Speaker 2: Point our thanks to anaag Rana Bloomberg Intelligence technology analysts, we.
Speaker 3: Move to some news in the aerospace sector.
Speaker 2: This week's shares of the aerospace company Airbus plunged after
Speaker 2: revealed a quality issue on some fuselage panels of its
Speaker 2: A three to twenty airliner. This came just days after
Speaker 2: Airbus flagged a software glitch on about six thousand jets.
Speaker 3: As a result, Airbus must inspect hundreds of its best
Speaker 3: selling A three twenty jets for potential quality flaws in
Speaker 3: the aircraft's body, and this could risk slowing down delivery
Speaker 3: of newly produced jets.
Speaker 2: For more on this guest host Alex Semonova and I
Speaker 2: were joined by George ferguson Bloomberg Intelligence. Your aerospace, defense
Speaker 2: and airlines analysts first asked George to talk to us
Speaker 2: about why it seems Airbus has been able to fly
Speaker 2: under the radar until just recently.
Speaker 8: I think they've also had their challenges in the supply
Speaker 8: chain along the way, just throwing challenges were so much
Speaker 8: greater that they stole the spotlight, if you will. But
Speaker 8: I mean, look, the aerospace supply chain is a bit
Speaker 8: thin right, It doesn't have the same redundancy as like
Speaker 8: you'd get in an auto supply chain, and so when
Speaker 8: you just have some little problem at one of your suppliers,
Speaker 8: you know, it can really interrupt your ability to deliver airplanes.
Speaker 8: And I think right now what you're seeing is that
Speaker 8: Airbus already has a really tall order to meet the
Speaker 8: something like eight hundred and twenty airplane guidance or delivery
Speaker 8: guidance they've got for this year. We don't think they're
Speaker 8: gonna make it. I think they need seventy plus a
Speaker 8: three twenties in the last two months of the year
Speaker 8: in November December. We think that's pretty hard given they've
Speaker 8: kind of delivered fifty five ish most months of in
Speaker 8: the last couple, you know, for months, and so I
Speaker 8: think a quality problem here probably really places in doubt
Speaker 8: their ability to make that guidance, and that's going to
Speaker 8: hurt their profitability for the year.
Speaker 4: George, you mentioned that really ambitious target for eight hundred
Speaker 4: and twenty aircraft deliveries by the end of this year.
Speaker 4: How disappointed could investors get if it fails to meet
Speaker 4: that target. On top of the headwinds that this company
Speaker 4: is already facing well.
Speaker 8: I mean, so I think you're starting to see, you know,
Speaker 8: the disappointment here. Again, I'd be surprised if most investors
Speaker 8: weren't already concerned that the target was too high. I
Speaker 8: think Airbus has really put out a bunch of very
Speaker 8: ambitious build rate targets right the I think our latest
Speaker 8: number in A three twenty is that we would be
Speaker 8: going to something like seventy five a month, and that's
Speaker 8: consistently throughout the entire year, right by the end of
Speaker 8: twenty twenty six, which to us just seems far too high.
Speaker 8: And I feel like Airbus keeps trying to lead the
Speaker 8: supplier base by pushing these higher numbers out and trying
Speaker 8: to pull the supplier base along, and then over time
Speaker 8: lowers some of these expectations. So look, I think anything
Speaker 8: they miss now isn't going away. It gets pushed into
Speaker 8: the next year and the next year, and again, I
Speaker 8: think the bigger challenge here is investors have to ask themselves,
Speaker 8: are a lot of these Airbus targets for delivery rates?
Speaker 8: Are they just too ambitious? And don't we have to
Speaker 8: sort of knock them down when we build our consensus
Speaker 8: for what we think the company's going to be able
Speaker 8: to do.
Speaker 2: Because George, I mean a number like seventy seems really
Speaker 2: high to me because when we talk about Boeing, it's like, Gee,
Speaker 2: I hope they can get the forty maybe to fifty.
Speaker 2: Is that does Boeing typically run that far behind on
Speaker 2: a production schedule than a Airbus.
Speaker 8: So I would say that if you would consider normal
Speaker 8: the end of the last decade when both were building
Speaker 8: and Boeing wasn't having the problems with mcas Airbus was
Speaker 8: up in the higher sixties and Boeing was in the
Speaker 8: higher fifties, and so we have traditionally seen Airbus be
Speaker 8: able to put out more airplanes than Boeing. I think
Speaker 8: their supply base maybe a little bit more robust, and
Speaker 8: I think they have sort of multiple final assembly areas
Speaker 8: around the world. I think those are some of the
Speaker 8: reasons why Airbus can just has the infrastructure to put
Speaker 8: out more airplanes, more narrowbody airplanes per month.
Speaker 2: Our thanks to George Ferguson Bloomberg Intelligence senior Aerospace, Defense
Speaker 2: and Airlines analysts.
Speaker 3: Coming up, we'll take a look at US data centered
Speaker 3: power demand and just how quickly the sector is expanding.
Speaker 2: You're listening to Bloomberg Intelligence on Bloomberg Radio, providing in
Speaker 2: depth research and data on two thousand companies and one
Speaker 2: hundred and thirty industries.
Speaker 3: You can access Bloomberg Intelligence be a B I go
Speaker 3: on the terminal. I'm normal Inda, and.
Speaker 2: I'm Paul Sweeney, and this is Bloomberg.
Speaker 1: This is Bloomberg Intelligence with Scarlet Foo and Paul Sweeney
Speaker 1: on Bloomberg Radio.
Speaker 3: On Paul Sweeney and I'm normal Linda filling in for Scarlettfoo.
Speaker 2: We move next to the real estate Space nor Nite.
Speaker 2: We're joined by Jeff Langbaum. This week, Bloomberg Intelligence Senior
Speaker 2: US REET analyst.
Speaker 3: Jeff discussed research on real estate investment trusts or reads
Speaker 3: as his outlook for them. In twenty twenty six.
Speaker 2: We first asked Jeff how reads have been performing this year.
Speaker 12: They haven't performed well in twenty twenty five, that's for sure.
Speaker 12: I mean, basically, you know, kind of flats to slightly
Speaker 12: down on an aggregate basis, but relative to the S
Speaker 12: and P underperformed significantly. And that's going on three years now. Obviously,
Speaker 12: you know, you had the rising rate cycle that was
Speaker 12: pretty damaging. You had some difficulties especially in the office sector.
Speaker 12: But as we sit here looking ahead to twenty twenty six,
Speaker 12: the fundamental backdrop looks okay. And especially if you get
Speaker 12: rates falling, if that ten year yield starts to drop,
Speaker 12: and you know, that has cascading effects on evaluations, it
Speaker 12: has cascading effects on cost of capital and and really
Speaker 12: would be a boost for the sector going forward.
Speaker 3: We are you seeing to be some bright spots right
Speaker 3: now in the reat sector, Jeff Senior.
Speaker 12: Housing, That is the that I didn't look at you.
Speaker 12: I'm looking at you, Paul, the I mean, that's that's
Speaker 12: the clear winner right now. The fundamental backdrop, driven by
Speaker 12: demographics is huge and growing. There's an incredible coming need
Speaker 12: for housing for the aging baby boomers, and you know
Speaker 12: there's nothing, nothing being built, so the supply demand uh
Speaker 12: dynamics in that space are incredible. And you know there's
Speaker 12: a couple of roots that play in that space, Well
Speaker 12: Towers the biggest one. They're growing like crazy and the
Speaker 12: stock is reflecting it.
Speaker 2: All right, So what's the aside from folks, you know,
Speaker 2: old folks housing, which is I'm going to say, because
Speaker 2: you know, I'm there, I'm there, I'm in the demo
Speaker 2: what else is working here? What is is it? Is
Speaker 2: there a replay on all this AI data center stuff.
Speaker 12: So the you know, there's there's a couple of different
Speaker 12: ways to answer that. The direct impact of AI on
Speaker 12: on reads is the two big data center reads Equinics
Speaker 12: and Digital Realty, and they are playing in that space
Speaker 12: right now. It's kind of unclear exactly where they fit.
Speaker 12: There should be a significant amount of demand for their space,
Speaker 12: especially for the stuff that they're looking to build, but
Speaker 12: they have to raise a ton of capital in order
Speaker 12: to fund that that that development, you know, and you
Speaker 12: see capex numbers coming out from all the hyperscalers that
Speaker 12: are astronomical, and you know reads, you know, investors in
Speaker 12: reads don't necessarily love the concept of raising a ton
Speaker 12: of money to deploy it in kind of risky assets
Speaker 12: that you need to then go lease up. So the
Speaker 12: demand should clearly be there, but it's going to be
Speaker 12: interesting to see how it plays out over the next
Speaker 12: couple of years as that demand filters through.
Speaker 2: The other issue with AI, though, is there.
Speaker 12: Is a kind of a concern that AI is going
Speaker 12: to impact demand for office space, and you know, as
Speaker 12: companies get more efficient, they need less headcount, they need
Speaker 12: less office space. Haven't really started to see that play
Speaker 12: out yet, but it's definitely a sentiment that is out
Speaker 12: there and is impacting the stocks to a degree. You know,
Speaker 12: just as we got past the whole work from home
Speaker 12: thing and concern over whether offices we're ever going to
Speaker 12: have people back in them, now we have concerned that
Speaker 12: the robots are going to replace the people.
Speaker 3: So of course we do have the income in New
Speaker 3: York City Mayor saying that he wants to freeze rents
Speaker 3: on rent stabilized apartments in New York City. What's the
Speaker 3: latest in terms of the apartment rate space right now?
Speaker 12: Yeah, I mean it's unclear exactly what he's going to
Speaker 12: be able to do on rent stabilization freeze capping rents.
Speaker 12: But the reats that own own residential in New York City,
Speaker 12: names like Avalon Bay Equity Residential, they own stuff that's
Speaker 12: not subject to those caps. It's it's largely newer market
Speaker 12: rate stuff, and so they're not going to be directly impacted.
Speaker 12: And so you know, at the end of the day,
Speaker 12: if there is less new the net result of of
Speaker 12: caps like that is less new stuff, get less stuff
Speaker 12: getting renovated, less stuff getting built, and and that just
Speaker 12: you know, keeps supply down and as long as demands
Speaker 12: stays elevated, then that should flow through to the ability
Speaker 12: to keep buildings full and keep rents rising to a degree.
Speaker 12: So I think that in the in the near term,
Speaker 12: you know, that that should be it should be fine
Speaker 12: for names like like those that play in the in
Speaker 12: the city, you know, the the it's it's those that
Speaker 12: own the kind of the lower tier space that maybe
Speaker 12: are a little bit more exposed are.
Speaker 3: Thanks to Jeff'slingbam Bloomberg Intelligence senior US re analysts.
Speaker 2: On Bloomberg Intelligence, we often look at research from Bloomberg
Speaker 2: and EF previously known as New Energy Finance.
Speaker 3: They have a team at Bloomberg that tracks and analyzes
Speaker 3: the energy transition from commodities to power, transport, industries, buildings,
Speaker 3: and agriculture sectors. This week we took a look at
Speaker 3: US data center powered demand and just how quickly that
Speaker 3: sector is expanding.
Speaker 2: For more on this guest host Alex Semonovan and I
Speaker 2: were joined by Helen co b Nf, head of US
Speaker 2: Power Markets Research. We first asked Helen if we have
Speaker 2: the power necessary to power all the data centers we
Speaker 2: keep hearing about.
Speaker 10: What we're seeing is quite an unprecedented acceleration of data
Speaker 10: center demand, driven largely by AI and at BNF. What
Speaker 10: we see and expect is that data center power demand
Speaker 10: is going to reach roughly one hundred and six gigawatts
Speaker 10: by twenty thirty five.
Speaker 2: Where are we today, just for example.
Speaker 10: Today, we are definitely a lot lower in capacity, so
Speaker 10: roughly half of that right now. What we also know
Speaker 10: is that that one oho six gigawats by twenty thirty five,
Speaker 10: that's thirty six percent higher than our outlook just six
Speaker 10: months ago. So we've increased that forecast quite a lot
Speaker 10: since these last six months. What we've seen is a
Speaker 10: flood of early stage projects getting announced, which results in
Speaker 10: a much larger pipeline, and therefore our forecast has also
Speaker 10: increased quite a bit to power these data centers. What
Speaker 10: we know is that there's a lot of new build
Speaker 10: of power supply coming online to try to reach this
Speaker 10: overall power demand.
Speaker 4: Helen, we're obviously in the early innings of this build
Speaker 4: out of data centers. What signs are you seeing already
Speaker 4: of any kind of strains on resources on electricity?
Speaker 10: What we know is there are certain regions that are
Speaker 10: hitting a tipping point in terms of actually being able
Speaker 10: to power this overall supply. What we know is that
Speaker 10: Northern Virginia is still the largest kind of market for
Speaker 10: data center demand based on our forecast, and we are
Speaker 10: seeing a lot of growing concern in that PEG region.
Speaker 10: What we project in PGM is that data center capacity
Speaker 10: is going to hit roughly thirty one gigawatts by twenty thirty.
Speaker 10: And what we do is when we adjust that overall
Speaker 10: kind of like what power demand looks like in PGM
Speaker 10: relative to supply, what we expect is there might be
Speaker 10: a nine point five gigawatch shortfall of overall power supply
Speaker 10: by the end of the decade if we assume that
Speaker 10: all of this data center demand is going to come online.
Speaker 2: If all this data center demand comes online, obviously the
Speaker 2: need for electricity or power is just extraordinary. I'm a
Speaker 2: big fan of nuclear, A small mobile reactor, modular reactor here,
Speaker 2: there's SMR type things talk to us about that is
Speaker 2: that a viable technology solution at some point.
Speaker 10: So we know that there has been a lot of
Speaker 10: company announcements around small modular nuclear as well as just
Speaker 10: nuclear in general. And there has been several different new
Speaker 10: power purchase agreement and surround nuclear by major hyperscale companies
Speaker 10: as well. What we see within BNF is that in
Speaker 10: the near term what is likely going to power data
Speaker 10: center demand is actually going to be gas, and nuclear
Speaker 10: is a much more longer kind of like long term
Speaker 10: play in terms of how you power data center demand.
Speaker 10: But what we expect is that the major ramp up
Speaker 10: in overall demand is coming over these next three years,
Speaker 10: and gas is likely what's going to meet that overall demand.
Speaker 4: What kind of measures are being taken to limit any
Speaker 4: kind of potential power outages from this build.
Speaker 10: Out, Well, we do see that there's been a lot
Speaker 10: of different regulations that are evolving real time around data
Speaker 10: center demand. What we know is that Georgia adopted new
Speaker 10: rules pushing grid connection costs onto large users like industrial users.
Speaker 10: Ohio now requires data centers to pay for at least
Speaker 10: eighty five percent of the energy they request each month,
Speaker 10: even if it is underutilized, and so policies are kind
Speaker 10: of being put in place to kind of navigate rising
Speaker 10: and growing demand.
Speaker 2: Are we building these data centers too quickly? Is there
Speaker 2: a risk for an overbuild? It just feels like it's
Speaker 2: too much, too fast, but all the projections say we're
Speaker 2: going to need all that compute.
Speaker 10: It's a really great question, something as an analyst I
Speaker 10: think about quite a bit. At BNF. What we've done
Speaker 10: is we've benchmarked our data center forecast relative to a
Speaker 10: whole bunch of other third party forecasts out there, and
Speaker 10: what we see is that our forecast is relatively conservative
Speaker 10: compared to other third parties because our data center forecast
Speaker 10: does include and analyze some of the additional power constraints
Speaker 10: as well as like project development timelines of data center development.
Speaker 10: And what we found is that it roughly takes seven
Speaker 10: years to develop a data center, and even that we're
Speaker 10: seeing quite a bit of new capacity come online. That
Speaker 10: is a result of just fundamentals around AI demand, whether
Speaker 10: that is company announcements of data centers as well as
Speaker 10: just like the underlying growth and trend around AI.
Speaker 4: I can't help but wonder how are data centers addressing sustainability?
Speaker 4: Are they using clean energy? What measures are they taking.
Speaker 10: A lot of these hyperscalers that are building out data
Speaker 10: centers do have sustainability goals and clean energy commitments. However,
Speaker 10: like within the data center's outlook. What we mostly focused
Speaker 10: on is just what is the additional capacity and activity
Speaker 10: around data center demand within the United States, And we
Speaker 10: also did a small analysis on specific markets that are
Speaker 10: likely going to have constraints in the market around power supply,
Speaker 10: and within URCOTT and PGM, which is our two larges
Speaker 10: power market region that expects high data center demand growth,
Speaker 10: what we're seeing is that the likelihood of what's going
Speaker 10: to meet that supply is going to be gas, and
Speaker 10: so we don't specifically look at sustainability commitments, but what
Speaker 10: we know is that a lot of what's supplying data
Speaker 10: centers will be gas in the narature.
Speaker 3: Our thanks to Helen co be Any, head of US
Speaker 3: Power Markets Research.
Speaker 2: That's this week's edition of Bloomberg Intelligence on Bloomberg Radio,
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Speaker 2: and one hundred and thirty industries.
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