Comcast Dumps Struggling Cable Biz & Is Target in Trouble?
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Good morning Brew Daily Show. I'm Neil Freiman. And I'm Toby Howell. Today, you'll never believe how much a banana duct taped to a wall just sold for. Then Bullseye the Bull Terrier might be out of a job soon after Target reported some shaky Q3 earnings. It's Thursday, November 21st. Let's ride. ♪

The McRib is coming back. McDonald's semi-mythical sandwich containing boneless pork, barbecue sauce, onions and pickles is returning to participating stores nationwide on December 3rd for a limited time. The McRib wasn't around in 2023 at all and was supposed to be on its farewell tour in 2022. So let's hope its comeback goes better than Mike Tyson's.

But Toby, apparently there's something called the McRib effect that says during periods when the McRib is available, the stock market posts higher returns. Is this true at all? Yeah, this is big news, not just for your taste buds, but potentially your brokerage account as

According to analysis from the finance blog of dollars and data, when the McRib is available, the S&P 500 has a higher average daily return than days when it's not available. When you annualize this, when you add it all up, the difference amounts to 19% a year. So it is significant. Now, I do have to say that the blog post goes on to use the McRib effect to remind us that correlation does not equal causation and that causality in financial markets is pretty hard to determine.

If you just isolate one single factor. But to all that, I say, pass me the barbecue sauce and let's make some money, baby. And now a word from our sponsor, Yahoo Finance. Neil, yesterday and really the last month has been a wild time for news. Corporate breakups, cabinet appointments, crypto going to the moon. It has been a lot. And it's easy to get lost in endless push notifications or your social media feeds where you're just inundated with headline after headlines.

That's where Yahoo Finance can step in to help cut through the noise. Instead of bopping all around the internet to stay up to date with financial news, it brings it to you all in one place. Market data, analyst insights, news sources you can trust. It's all there. It's one of our regular stops as we prep for this show every morning. We don't call it our purple prince for nothing. If you want to check out the best hub for financial news on the internet, head to yahoofinance.com. That's yahoofinance.com.

The times, they are a-changin' in the media business. The media conglomerate Comcast is cutting loose most of its cable television networks and re-conglomerating them into a new publicly traded entity it is for now calling SpinCo. On the chopping block are channels including MSNBC, CNBC, and USA, as well as some of Comcast's digital properties like Fandango and the review aggregator Rotten Tomatoes.

Other parts of its media business are staying put, though, including the golden child streaming service Peacock still basking in some post-Olympics glow, as well as its NBC broadcast network and Universal Properties. Oddly enough, Bravo was one of the only channels to avoid the spinoff Don't Sleep on Real Housewives, I guess. And even though Comcast is separating these channels from the mothership, it probably thinks the castaways can still be successful in their own right.

Look, cable TV is a dying business, but even in a shrinking industry, scale matters. And analysts have predicted that Comcast could be eyeing other companies' cable networks to fold into the new entity, especially under a more M&A-friendly administration.

But at the end of the day, Comcast is shedding its cable networks for exactly the reason you'd expect. The number of people paying for cable drops every year, 4 million in the first six months of this year. So it is looking ahead to what can be by far

unburdening itself by what has been. Right. If Comcast really wanted these channels, it probably wouldn't be spitting them off. I do think you can look at this in two ways, though. Comcast is dumping some problem assets, some of these non-growth assets because cable is dying. Or this is an opportunity for some pretty strong observances

media names and media franchises to finally get their time in the sun after so much time and so much money was focused into streaming. MSNBC, CNBC, these are pretty big name media properties, well-established brands that maybe haven't gotten a ton of investment recently. But I do think it's probably a little hard to avoid the first interpretation. Cleaving off a whole business unit usually says,

indicates about that business that you don't really want it around anymore. Yes, these channels and cable are going to still be around for a long time, but it's probably just not a growth business. Like a zombie business a little bit. And they're still very profitable. Cable TV is very profitable for these companies, but they just see no growth trajectory. And it is also a win for shareholders. Remember, a couple weeks ago, we were talking about an activist investor wanting to break up Honeywell because it was

It's a big conglomerate that contains all these constituent parts that don't trade at a value of the sum of its parts. They think it trades at what's called this conglomerate discount. And Comcast thinks it's getting this conglomerate discount. And by shedding what has been known as a financial albatross, which are these cable TV channels, it thinks that shareholders will pump the stock.

And the big question now is, what does this mean for the broader media business? What are these other companies going to do now that Comcast has essentially rang the starting bell on potentially a big cable TV purge? What is Disney going to do? What is Warner Brothers Discovery going to do? What is Paramount going to do? Those questions are going to be...

asked a lot over the next few months and years. Paramount and Warner Bros. Discovery, you just mentioned, took a combined $15 billion in write-offs earlier this year related to its cable business. Disney also took one as well, although it was a little bit smaller. They were basically telling investors that we are less valuable than we used to be. So Comcast's peers have definitely thought about offloading some of its media businesses. But part of the issue with offloading these properties is who is going to buy them? It was...

like we said, it is not a growth business. Yes, they are cash flowing. So these companies are said, yes, these businesses are getting less valuable, but we do don't mind the cashflow. Like they still bring in money, but now Comcast has, I mean, you said rung the starting bell. Someone had to do it first. Maybe this is going to be the spin co is going to be, uh,

kind of buying those properties or saying, hey, we'll take your dead weight. We want to scale this thing up. Or maybe they'll sell off some of these properties in SpinCo to these other companies. We're not knowing for sure, but it does seem to be this is just the start of some M&A activity in the future. It does seem like there's going to be a ton of consolidation. Already, SpinCo seems to be eyeing

documentaries and food TV channels to bundle together into a more compelling product there. So this is very big changes in the cable TV business and the media business overall. So very exciting, honestly. Remember how earlier this year, Judge Amit Mehta ruled that Google had an illegal monopoly in Internet search?

Well, now he's got to figure out how to make it not a monopoly. And last night, the DOJ, which brought the monopoly case, proposed some ideas, one of which is a total whopper. It asked the judge to force Google to sell Chrome, the most popular browser in the world. If the judge accepts, it would present massive changes for Google's business and possibly rejigger the Internet as we know it.

As far as the DOJ sees it, Google Chrome is a key access point for people to use Google Search. As all of us who use Chrome know, you type in something in the URL bar that's not a URL, you are querying Google Search. If forced to hive up Chrome off, Google would have far less visibility into the activity from users who sign into the browser, making it harder to target them with advertising, which is Google's main line of business.

Google, of course, is not feeling lucky about this. The company's VP of regulatory affairs said the DOJ is pushing, quote, a radical agenda that goes far beyond the legal issues in this case. And in a likely plea to incoming President Trump, she added that a forced sale of Chrome would harm American technological leadership at precisely the moment it is most needed. Toby, the DOJ is swinging for the fences here in a way it hasn't done since it tried to break up Microsoft over 20 years ago.

Yeah, it would really break up Google as we know it and almost the modern internet as we know it. Let's dive into Google's argument against all of this. Yes, it handles more than 90% of online search queries, but it says that all that success is not due to a monopoly. It is due to the fact that its products are very quality, uh,

people choose it over other products out there. And it says that it does face tougher competition in the sector, especially like the advertising market as well with rising powers like Amazon. And it does have some grounds to stand on here. Google's lawyers say that spinning off Chrome would actually harm consumers because there are very few other companies out there that have the scale, that have the resources to maintain a secure browser and offer it to the market for free. So if you're

there's not that many out there really like Apple Safari maybe would do it, but providing browsers at cost for free to consumers, they say is actually something that consumers really benefit from and getting rid of that would end up harming them. Okay. But let's game this out. Let's say the judge doesn't buy that argument and this is not going to happen until 2025 when this is just a proposal. They, the judge still has to approve it. What, what,

could happen to Chrome. Well, analysts are now valuing it. And it's certainly an estimate because we don't know anywhere between 15 to $20 billion. So someone's got to have that amount of cash to come and buy Chrome, which is the world's most popular browser. Who could it be? Uh,

SpinCo. SpinCo. Definitely SpinCo could be eyeing this. But potentially a lot of other big tech names, but who knows if they would be allowed to buy it. Certainly not in the current regulatory environment. One name that's been floated is OpenAI because OpenAI has developed a bunch of search tools. And you can see how a browser would absolutely complement ChatGPT and ChatGPT search would adjust, which adjusts

So that is one potential name that has been floated out. And again, this is a long way from happening. But you have to think of the potential suitors should Google sell Chrome. I mean, it's an unbelievable asset, but it doesn't generate any money on its own. It has to be paired with other services that make money for it to be worth anything.

Right, though it is what is called a loss leader that feeds into Google's search business and its advertising business that does actually generate the vast majority of its revenue. But you are right, though. One final question mark on this case, though, is the incoming administration, because the Biden administration has been very favorable to these

anti-trust crusades against big tech. Who knows what will happen under Donald Trump's administration? Will they take a more lenient approach to Google? Will they keep up the drumbeat against big tech, anti-trust, these powerful tech companies? So that is the final question mark in this case that is still very much full of question marks.

Target's logo is a bullseye, but it missed the mark with its latest earnings report, sending its stock plummeting a whopping 21% yesterday to a new 52-week low. Disappointing third quarter sales missed Wall Street expectations by 20%, and Target also cut its full-year profit guidance, an abrupt change from three months ago when it actually raised its forecast. So why is it getting eaten alive? Target's bread and butter is discretionary items.

Its business thrives when you're making those sometimes impulsive purchases of toys or appliances or home goods. But Target said those categories showed weakness this quarter, even as its rival Walmart reported positive results in its discretionary division. Digital and in-person traffic actually did increase 2.4%, in part thanks to thousands of price cuts that Target rolled out. But it wasn't enough to keep up with high-flying rivals Costco, Amazon, and Walmart. So Neil, it all led to Target's

largest single-day stock wipeout in more than two years. Seems like consumers in Target aren't really vibing right now. No, I mean, Walmart earnings on Tuesday, then Target earnings on Wednesday. I mean, it was like watching the Celtics play one night and then watching the Sixers play the next night. Just a total different story. Walmart is absolutely crushing it thanks to its grocery business, which accounts for 60% of its revenue, as you mentioned. Target has just not invested in grocery, and the

That was fine for it in the past, you know, before the pandemic, because grocery has terrible margins. They're very thin. And you get much higher margins on things like groceries.

really expensive candles and sofas and other things that Target sells. So that was doing fine for it until inflation happened and people started not buying those discretionary goods that are Target's bread and butter and they started gravitating to those need-to-have items that Walmart sells and

So right now, Walmart is just kind of eating Target's lunch, breakfast, and dinner. It really felt like Target was turning a corner. It posted a string of very weak results and then finally showed some success last quarter. It was very ebullient. Everyone was very happy because it raised its profit outlook for the rest of the year. But then it comes right around and just crumbles.

completely reverses that direction. Target has been trying everything. They've been throwing the kitchen sink at this. They've cut prices on 5,000 items. By the end of the year, they expect to cut prices on 10,000 items, and they are getting people through the door, but the problem with cutting prices is that it just doesn't lead to as much revenue. So it's one of those things where they're trying to drive up foot traffic. They're trying to get people back

through the door, but it's just not translating to those top line revenue gains that you want to see. And they're just competing with Walmart on reputation. Walmart has reputation for those everyday low prices. It gets people in the door with its grocery business. And in an inflationary environment, you just tend to gravitate towards the place where you think you can get the best deal. So a lot of headwinds that are kind of conspiring against Target. Oddly enough, though, you zoom out to the

to the broader retail industry. And TJ Maxx, another one of those kind of discretionary spending, lower price places, beat Wall Street estimates and raised its full-year profitability guidance. So they said they're seeing a strong start to the holiday shopping season. So anywhere you look, you can find different interpretations of what's going on in retail. But it does seem like people do want good prices, especially when they're

kind of recovering from such an inflationary past couple of years. Up next, I really thought it'd never come, but it's finally time for Neil's Numbers!

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Welcome to Neil's Numbers, the segment where I share three stats from the week's news that will feel like updating your brain to the latest operating system. For my first number, I'll begin with a question originally posed by Lucille Bluth. It's a banana, Toby. How much could it cost?

Well, we have the answer. $6.2 million. The banana in question is a conceptual art piece, a banana stuck to a wall with silver duct tape. It sold at a Sotheby's auction yesterday for $6.24 million to crypto entrepreneur Justin Sun, who beat out six other bidders for the potassium prize. It's the work of Italian artist Maurizio Catalan, who called it a sincere commentary and a reflection on what we value.

The auction house seems to agree, calling the duct tape banana a masterpiece that single-handedly prompted the world to reconsider how we define art and the value we seek in it. We've seen this banana before. Catalan debuted it at Art Basel Miami in 2019, causing chaos in the art world.

crowds grew so heavy that the gallery had to rip it off the wall, which is not that hard, and hide it from public view. Now, I should mention, Sun won't take possession of the original banana. That thing is long gone, obviously. Instead, he'll get the banana, a roll of duct tape, a certificate of authenticity, and instructions on how to install it. Toby, this piece of art, nobody knows what it means, but it's provocative. I mean, I'm just looking at it right now, and it is

provocative. It is a banana taped to a wall. Just imagine that in your mind. You got it. I do want to dig into where this banana came from, though. It's a dull banana, and it was bought earlier that day from a fruit stand on the Upper East Side of Manhattan for $30.

$0.05. I feel like the fruit stand, whoever was operating that, maybe got a little shafted here because, you know, $6.2 million, $0.35. He could have just taped it to his little umbrella and said, yeah, this is worth $10 million. That's some pretty good margins right there. You know what I think would be funnier, though? Because as you said, you're not buying the actual banana. You're just getting the right to reproduce that work of art.

But I think that you should have to keep the original banana taped to your wall for as long as possible. Then that is performance art because that thing starts shriveling up, starts leaking down your wall. That to me is worth a million, five million, six million dollars right there. But yeah, sure. This banana is whatever you want it to be. You can get deep and analyze it. I mean, the fruit does have energy.

For my second number, the most expensive shopping street in the world has been crowned

Via Monte Napoleone in Milan beat out New York's Fifth Avenue to become the first street ever in Europe to be named the priciest, according to a report by Cushman and Wakefield. On Via Monte Napoleone, a square foot sells for $2,047, up 11% from last year. Meanwhile, Fifth Ave's prime square foot price stayed flat at

knocking it from the number one spot it held last year. So why is this street so expensive? Well, first, Milan is experiencing a luxury tourism boom and the uber wealthy are descending on the city in droves to take advantage of generous tax incentives. Second, it's a matter of supply chain.

in demand. I don't know if anybody has been on the street, but it is really short, which makes retail space more competitive and drives up prices. Gucci's parent company caring about a $1.4 billion building on Via Monte Napoleone this year, joining other luxury brands on the street, including Hermes, Versace, Cartier, and Bottega Veneta, all places I have definitely shopped at.

Very well done pronouncing the street name. So I've been looking to maybe buy an apartment in New York City recently. And the spaces I'm looking at are modest, maybe 750 square feet. If they are priced at via Monte Napoleone prices, I'd be looking at paying a nice $1,500

million a year in rent. So these are just astronomically expensive prices. You're right, though. It is a short street. Milan is becoming this it destination for the fashion world. So it makes sense that prices are going skyrocketing. But still, $2,047 per square foot is just astronomical. How could this possibly be profitable for them? For my final number, we have to talk about the cult of lamb chop

Among dogs. If you are a pup owner, you know what I'm talking about. According to The Atlantic, stuffed animal versions of the puppet from the 1960s TV show Lamb Chop are somehow the pet store Chewy's most popular plush dog toy and its second most popular dog toy period.

More than 20 iterations of Lamb Chop toys exist, including Nautical Lamb Chop, Tie-Dye Lamb Chop, and Mini-Sized Lamb Chop, and all dogs seem to be obsessed with them. One reason for Lamb Chop's popularity? They're so versatile, depending on what kind of dog you have. If you have a gentle pooch, they love cuddling with the plush lamby. Lamb Chop is also easily rippable and devourable for your more active hunting dogs. Still...

This is very hard to explain. As The Atlantic put it, is it really possible that dogs, which can be big or small, playful or shy, hunters or herders, could nevertheless share a preference for the same exact plush toy? I guess so. I guess so. One reason that they did give for why Lamb Chop Mania is sweeping through the dog world is that dogs are very attenuant.

tuned to what you, their owner, are feeling. So if you are excited about a toy and you hand them the toy and they clearly see that there's some joy on your face, maybe in some of these micro expressions, then of course they're going to want to play with that toy as well. But also, you're right, the versatility of it is pretty good. I mean, you can absolutely destroy it if you want, if you have like a high hunting instinct, or you can cuddle with it. I'm speaking as if

You, the listener, are dogs, but this is what dogs are going through. You can cuddle it. You can rip it apart. You can play tug-of-war with it. So it is pretty versatile. Although I talked to 10,000 other dog owners, and they said ball was their favorite dog's toy. So you could say ball mania is sweeping or rope mania is sweeping. But yeah, Lamb Chop, I mean, I don't want to be too cynical right here. It looks like a fun toy. And if I were a dog, maybe I'd play with it as well.

OK, let's sprint to the finish this Thursday with some final headlines. Elon Musk and Vivek Ramaswamy want federal workers back in the office. In a Wall Street Journal op-ed outlining their plan to curb government waste, the co-heads of the newly created Department of Government Efficiency, or DOGE,

wrote that they want to ban federal employees from working from home and compel them to return to the office five days a week. Musk and Ramaswamy wrote, American taxpayers shouldn't pay them for the COVID-era privilege of staying home, and if workers don't comply, it would result in a wave of voluntary terminations that we welcome. Should this be adopted by the Trump administration mandating fully in-person work for the country's largest workforce, 2.3 million people could set off fierce battles with federal worker unions. Yeah, let's...

dive into more things that this op-ed said, because it was pretty long. Right. They went through their whole plan, their whole plan. One big thing that people pointed out was that they actually pointed to a lot of Supreme court rulings as kind of guidings. Remember the Chevron doctrine that was recently actually overturned by the Supreme court.

it stripped federal agencies of some of the significant power that they used to have to kind of make these sweeping regulatory decisions. So they're saying like that is one thing that they want to use as a blueprint for their, you know, department of government efficiency, trying to strip the government down to a little bit less than its current, you know, gargantuan size and budget. Another thing that they said is that they're going to rely heavily on executive action,

to pursue this agenda. Remember, this is not technically a government agency. It's like government adjacent agency. So they will be trying to skirt Congress, not rely on Congress, go through executive action. But yeah, if you are curious as to what the heck Doge is actually going to do, this Wall Street Journal op-ed really dove into the nitty gritty of it. And I linked to it in the Morning Brew newsletter this morning. You linked to it as well. But probably the headline news is going to be the fact that they are requiring

Maybe they want to. They want to require. And they want people to leave their jobs as a result. That seems to be the main. Right. That kind of quiet quitting type of approach.

While the fun times kept on rolling for the world's biggest company, Nvidia reported earnings yesterday, and what do you know it, it saw revenue growth of nearly 100% compared to last year. But like the kid who always hid in the same place during hide-and-go-seek, the market has come to expect Nvidia's excellence, and its stock remained pretty much unchanged in after-hours trading. One thing that might explain the market's

tepid reaction is Nvidia's forecast for fourth quarter sales, it was a good deal lower than the higher end of analysts' expectations, though Jensen Huang did emphasize that demand for their next-gen Blackwell chip is, quote, incredible, end quote, coming from a lot of different places. Yeah, everything...

All of the attention around NVIDIA right now is focusing on Blackwell, which is their newest processors that are 2.5 times faster when training large language models and five times faster when running those models in real applications. So everything going forward for NVIDIA when you're thinking about their earnings or how their stock price is doing is going to hinge on Blackwell. That's just the one name to know.

A bombshell fraud accusation hit the wires yesterday afternoon. Gautam Adani, one of the world's richest people and chair of Adani Group, was charged by U.S. prosecutors with participating in a massive bribery scheme in which more than $250 million was sent to Indian government officials to obtain lucrative solar energy contracts.

Adani and other defendants were charged in New York federal court for fraud, accused by prosecutors of lying about their plan when raising money from U.S. investors. This is sending shockwaves through India this morning, where Adani is the most powerful businessman and a close ally

ally of Prime Minister Narendra Modi. And if you've heard the Adani name before, it probably was because in early 2023, the short-selling firm Hindenburg Research, who goes after companies that they think are accused in some shady practices, they accused Adani Group of

engaging in, quote, brazen stock manipulation and accounting fraud scheme over the course of decades. So this is kind of lending some validity to their interest into Adani. Adani did push back. They released this 400-page report saying, no, we didn't do anything you accused us of. But now the U.S. is getting involved for this bribery scheme. So we'll see how it kind of plays out on a global scale at this point.

Finally, if you are heading to the theaters to see Wicked this weekend, be prepared to have some awkward conversations about your fellow moviegoers' lack of pitch. Early viewers of the movie musical have complained that theaters were filled with people who wouldn't stop singing, drowning out Ariana Grande and Cynthia Erivo with their passionate and often off-tune crooning. Neil, I feel like you and our listeners definitely

Right, like I get the argument here and people say you would never sing in a Broadway theater. So why would you sing in a movie theater? These are world-class singers. You should let them do it. If you want to sing, go along to a movie theater.

just listen to the soundtrack at home or just watch it at home. That said, I was just thinking about myself going there and like, how could I stop myself from singing or humming along? And it'd take a lot of discipline because songs are amazing, you know, every single word. So I totally get it, but I'm just putting myself in the position. Like, it would just be hard to have that self-restraint. That said...

A lot of movie theaters are going to be holding sing-along versions where you are encouraged to sing, kind of like the Taylor Swift Eras Tour where you're supposed to go have a party. Those are starting December 25th. Other movie theaters like Alamo Drafthouse are holding more interactive sessions where you're supposed to just kind of be a part of it. And who cares if you can't hear the lead singing because you can always watch it again or listen to the soundtrack. But...

Personally, maybe this will lend itself to multiple viewings. One, you go, it's more of the Broadway performance where you hear them. The other is more of that communal experience. And I can see both ways. I think it's smart for people not to fight each other in the theater to just separate them. Neil, if you start singing and we go see Wicked together...

I am leaving. You're I mean, you're a great singer, but unfortunately, Ariana Grande is a little better than you. So I am all out on this trend of singing just a little bit better than me. Can't wait for that movie. OK, let's wrap it up there. Thanks so much for starting your morning with us and have a wonderful Thursday. It's finally raining here in New York, which is great news because on Monday, the city declared its first drought warning in 22 years. Plus, I got nowhere to go outside.

For any questions, comments, or feedback, send an email to morningbrewdaily at morningbrew.com. And I'm just a podcaster standing in front of a loyal audience, asking them to love MBD by sharing it with your family, friends, or coworkers. Toby, who should our listeners send the pod link to today? Okay, so we've talked a lot about conglomerates and reconglomeration and deconglomeration. I want you to conglomerate a group of listeners today.

probably in a group chat, call it the Morning Brew Daily Conglomerate. Reconglomerate everyone. Let's get some listeners in a group chat together because, you know, everything is better when you share it with your friends. Let's roll the credits. Emily Milliron is our executive producer. Raven Liu is our producer. Olivia Graham is our associate producer. Uchenua Ogu is our technical director. Billy Menino is on audio. Hair and Makeup has stolen the company credit card and is on a plane to Milan. Devin Emery is our chief content officer and our show is a production of

morning brew. Great show today, Neil. Let's run it back tomorrow.