Boneless Wings #27

**NOTHING HERE SHOULD BE CONSIDERED INVESTMENT ADVICE**

Good morning to all my wingmen and wingwomen out there. Here are a few noteworthy and tasty bites worth digesting. Enjoy!

Disney has long been known for fairy tales more so than dramas. But currently, Disney is experiencing nothing but drama!

It’s a tale as old as time. Where it’s out with the old (Bob Iger, long time Chairman/CEO who recently stepped down) and in with the new (Bob Chapek, who recently took over the reins). Old Bob, replaced with New Bob.

New Bob’s early missteps:

• Last year’s battle with Scarlett Johansson 

• Not speaking up against Florida’s “Don’t Say Gay” bill, leading to daily walkouts from employees

• Alienating majority of the company’s senior leadership at the business unit level by taking away all P&L (profit and loss) responsibilities from them and centralizing it under one person (Chapek’s right-hand man). This was obviously going to be received poorly!!

Given the rough start, maybe New Bob should reach out to Old Bob? But that doesn’t seem to be an option now as they aren’t on speaking terms. #awkward

New Bob is apparently upset that Old Bob made a comment to a news reporter that he wanted to help New Bob out during the Pandemic as he didn’t think it was fair to pass him the torch during such ugly times. New Bob took offense to this and didn’t like being made to look weak. (…..insert meme of New Bob with his shirt off, banging his chest with one hand while devouring a turkey leg with his other hand.)

Making matters worse for New Bob, Old Bob was generally beloved by employees from the front line all the way up to the C-suite. Old Bob also has strong relationships across the movie industry with writers, directors, and actors (Hence why Old Bob was not happy to learn that Scarlett was in a legal battle with New Bob.) On the flip side, New Bob has upset employees, celebrities/actors, directors and an entire demographic of people (e.g. the LGBTQ community).

All this drama is unfortunate for Disney, as they have navigated risk and threats quite beautifully over the last couple of years. And now all this drama seems to overshadow the great performance Disney (..particularly Disney+) has had both strategically, operationally, and financially.

As they say in the movie business, it’s hard to predict how dramas unfold (….I have no clue if that’s what they say in the biz.)

But Disney has proven two things for sure...

1. Replacing one Bob with another Bob doesn’t guarantee a fairytale ending.

2. And Disney+ is quickly being perceived as Disney minus!

Tesla stock experienced a slightly elevated range yesterday from $907.09 - $942.80. This tends to happen frequently with Tesla. Last Thursday, the stock had shot up nicely as well. What was the cause you may ask? In Tesla’s case, when in doubt you can just assume it was a tweet from Elon.

But, in this case…….it was also a tweet from Elon. A tweet specifically on Tesla Part 3. Elon literally just tweeted “Working on Master Plan Part 3” last week and that was enough to create more momentum for Tesla.

Now if you’re a Tesla superfan (….I am not) that could be very exciting. What does it mean? How should I interpret this? Are we going to Saturn?

Apparently, for those who are better tuned into Tesla can read between the lines on this. Here are the key takeaways for what that tweet potentially means for one of the most valuable companies, and richest man, in the world.

• Part 1 dates back to 2006 and called for a low-volume car that would be expensive but would help the company to build out some level of “medium output” (i.e. Model S and Model T). This was more about executing proof of concept.

• Part 2 dates to 2016 and was dubbed “Part Deux” (…. apparently, a shout out to the 2nd Hot Shots movie from the 90s) which was all about developing battery storage and launching new models (including a truck and SUV).

• Part 3, which made its debut last week, was further discussed yesterday as Musk stated how artificial intelligence and scaling the Tesla’s operations will dominate the next chapter.

His plan to scale includes scaling to the extreme and the Berlin, Germany Tesla plant being unveiled today is a big part of that plan. The $5B factory is expected to produce over 500,000 vehicles per year. And right in the backyard of the Volkswagen group, nonetheless.

Elon is very perplexing to me on so many levels. He’s a mad scientist and beats to a completely different drum. A role he seems to enjoy at least, so more power to him. But if Part 1 and 2 were any indication…. there’s no doubting Part 3 will end up working. Right??

Nike Just DID It. They restored confidence in the market and delivered another solid quarterly earnings report yesterday with a positive outlook for the quarter ahead. The market was reacting favorably as well after hours with roughly +5.5% at the time of writing this.

There are typically two main reasons for stock growth after earnings are released. First, the financials are either on, or above, target. Second, the company was able to showcase their prior strategy was paying off and they were still optimistic about what lies ahead.

Financially and strategically, Nike delivered this last quarter:

• Overall revenue was +5% sequentially for the quarter at $10.87 billion

• Net income came in at $1.40 billion, or $0.87/share…..better than expected.

• Nike Direct Segment (direct to consumer) sales saw growth of 17% vs year prior

• Driven by a large 22% gain in its digital business and Nike-owned physical stores boosting 14% revenue growth.

• As this strategy proves to pay off for Nike, we can all assume the opposite effect it will have on Foot Locker…..after Nike announced its shifting away from the middleman and go directly to its customers.

• Of course, there were head winds they dealt with (….Nike is down -22% YTD), including rising costs, continued supply chain disruptions and overall unfavorable inflation sentiment in North America specifically……which makes the quarter’s results even more impressive.

Nike continues to evolve as a company and has proven they can do it while maintaining brand loyalty. This is a positive sign for investors and now we wait to see how much higher this thing can go!

It’s not about doing it once, it about whether they can keep doing it…..in perpetuity. Come to think of it, maybe that’s why they went with “Just Do It”…..??

Deuces. ✌️