TMT & Consumer Independent Equity Research Analyst, Obex Capital Research

Aaron Gabin

TMT & Consumer Independent Equity Research Analyst

TMT & Consumer Independent Equity Research

Obex Capital Research

“Obex” is Latin for Barriers to Entry. Obex Capital Management’s investment philosophy is driven by an intense focus on which business model’s Barriers to Entry are able to withstand the ever increasing competitive disruption in the TMT and Consumer Sectors.

Equity Bottom-Up

<p>If we look back at 2020, we’ll see a year unlike any other. Had we been told at the beginning of the year with the S&amp;P at 3250 that there would be a cataclysmic global pandemic that would shock the world’s economy…and that the market would return 12%, you might be confused. And if we told you that this cataclysmic pandemic would eviscerate the travel and tourism business, eliminate sports for most of the year, and slash advertising budgets…and Disney…whose entire business was these exact things…would be 19%, and up more then 105% from the March lows…well, you probably wish you had 20-20 hindsight back then…back when Disney+ had 27M subscribers, and estimated that in 5 years it might have 60-90M subs. They will end 2020 with 90M.</p>
<div class="content-highlight">
<p>Obex’s fundamental research process is focused on secular change in the TMT and Consumer sectors. We seek to differentiate between fundamental business analysis and security analysis. Before deciding if a security’s pricing and positioning merit a long or short position, we analyze the four pillars of business fundamentals (Secular Factors, TAM, Competitive Advantage, Business Model) in order to determine if this is a “good” or “not so good” opportunity.</p>
</div>

If we look back at 2020, we’ll see a year unlike any other. Had we been told at the beginning of the year with the S&amp;P at 3250 that there would be a cataclysmic global pandemic that would shock the world’s economy…and that the market would return 12%, you might be confused. And if we told you that this cataclysmic pandemic would eviscerate the travel and tourism business, eliminate sports for most of the year, and slash advertising budgets…and Disney…whose entire business was these exact things…would be 19%, and up more then 105% from the March lows…well, you probably wish you had 20-20 hindsight back then…back when Disney+ had 27M subscribers, and estimated that in 5 years it might have 60-90M subs. They will end 2020 with 90M.

Obex’s fundamental research process is focused on secular change in the TMT and Consumer sectors. We seek to differentiate between fundamental business analysis and security analysis. Before deciding if a security’s pricing and positioning merit a long or short position, we analyze the four pillars of business fundamentals (Secular Factors, TAM, Competitive Advantage, Business Model) in order to determine if this is a “good” or “not so good” opportunity.


<p>The focus, as expected was on the streaming services. Which continue to exceed expectations. At the end of its first fiscal year, Disney+ ended with 74M subs…kind of mind blowing given the initial guidance of getting to 60-90M subs by 2024.</p><div class="content-highlight"><p>Obex’s fundamental research process is focused on secular change in the TMT and Consumer sectors. We seek to differentiate between fundamental business analysis and security analysis. Before deciding if a security’s pricing and positioning merit a long or short position, we analyze the four pillars of business fundamentals (Secular Factors, TAM, Competitive Advantage, Business Model) in order to determine if this is a “good” or “not so good” opportunity.</p></div>

The focus, as expected was on the streaming services. Which continue to exceed expectations. At the end of its first fiscal year, Disney+ ended with 74M subs…kind of mind blowing given the initial guidance of getting to 60-90M subs by 2024.Obex’s fundamental research process is focused on secular change in the TMT and Consumer sectors. We seek to differentiate between fundamental business analysis and security analysis. Before deciding if a security’s pricing and positioning merit a long or short position, we analyze the four pillars of business fundamentals (Secular Factors, TAM, Competitive Advantage, Business Model) in order to determine if this is a “good” or “not so good” opportunity.

<p>We have been longtime fans of Netflix the product and Netflix’s management team can rightfully be described as visionary. They had the vision to have the public markets fund an experiment in business models that may eventually breakeven on FCF at some point in the future. We have said for the past two quarters that Netflix is a good relative short given Deceleration in Subscriber Growth, Rising Churn, and Rising FCF burn. As we detail below, the stock tends to not work when subscriber growth decelerates. Admittedly, the rising FCF burn hasn’t played out….yet. Once production opens up post virus, we expect Netflix to resume its cash burning ways.</p><div class="content-highlight"><p>Obex’s fundamental research process is focused on secular change in the TMT and Consumer sectors. We seek to differentiate between fundamental business analysis and security analysis. Before deciding if a security’s pricing and positioning merit a long or short position, we analyze the four pillars of business fundamentals (Secular Factors, TAM, Competitive Advantage, Business Model) in order to determine if this is a “good” or “not so good” opportunity.</p></div>

We have been longtime fans of Netflix the product and Netflix’s management team can rightfully be described as visionary. They had the vision to have the public markets fund an experiment in business models that may eventually breakeven on FCF at some point in the future. We have said for the past two quarters that Netflix is a good relative short given Deceleration in Subscriber Growth, Rising Churn, and Rising FCF burn. As we detail below, the stock tends to not work when subscriber growth decelerates. Admittedly, the rising FCF burn hasn’t played out….yet. Once production opens up post virus, we expect Netflix to resume its cash burning ways.Obex’s fundamental research process is focused on secular change in the TMT and Consumer sectors. We seek to differentiate between fundamental business analysis and security analysis. Before deciding if a security’s pricing and positioning merit a long or short position, we analyze the four pillars of business fundamentals (Secular Factors, TAM, Competitive Advantage, Business Model) in order to determine if this is a “good” or “not so good” opportunity.

<p>Last week, we wrote about how Third Point's Dan Loeb wrote a letter to Disney urging it to spend more on content. Within days, the company announced a major reorganization of its content creation and distribution strategy, with an emphasis on focusing on DTC (streaming). We applaud the move...and think Disney becomes an even more compelling long as it plays catchup to the rest of the "COVID winners" from its position in the COVID loser camp. We have a catalyst path to follow now...earnings in November, Analyst Day on December 10th. Stock will be $150 by then. </p><p></p><div class="content-highlight"><p>Obex’s fundamental research process is focused on secular change in the TMT and Consumer sectors. We seek to differentiate between fundamental business analysis and security analysis. Before deciding if a security’s pricing and positioning merit a long or short position, we analyze the four pillars of business fundamentals (Secular Factors, TAM, Competitive Advantage, Business Model) in order to determine if this is a “good” or “not so good” opportunity.</p></div>

Last week, we wrote about how Third Point's Dan Loeb wrote a letter to Disney urging it to spend more on content. Within days, the company announced a major reorganization of its content creation and distribution strategy, with an emphasis on focusing on DTC (streaming). We applaud the move...and think Disney becomes an even more compelling long as it plays catchup to the rest of the "COVID winners" from its position in the COVID loser camp. We have a catalyst path to follow now...earnings in November, Analyst Day on December 10th. Stock will be $150 by then. Obex’s fundamental research process is focused on secular change in the TMT and Consumer sectors. We seek to differentiate between fundamental business analysis and security analysis. Before deciding if a security’s pricing and positioning merit a long or short position, we analyze the four pillars of business fundamentals (Secular Factors, TAM, Competitive Advantage, Business Model) in order to determine if this is a “good” or “not so good” opportunity.

<p>This week, Third Point's Dan Loeb wrote a letter to Disney urging it to spend more on content. We agree. Disney's stock has languished this year due to the havoc COVID has unleashed on its business model. Longer term, we think Disney's streaming service could be worth more then the stock today. </p><p></p><div class="content-highlight"><p>Obex’s fundamental research process is focused on secular change in the TMT and Consumer sectors. We seek to differentiate between fundamental business analysis and security analysis. Before deciding if a security’s pricing and positioning merit a long or short position, we analyze the four pillars of business fundamentals (Secular Factors, TAM, Competitive Advantage, Business Model) in order to determine if this is a “good” or “not so good” opportunity.</p></div>

This week, Third Point's Dan Loeb wrote a letter to Disney urging it to spend more on content. We agree. Disney's stock has languished this year due to the havoc COVID has unleashed on its business model. Longer term, we think Disney's streaming service could be worth more then the stock today. Obex’s fundamental research process is focused on secular change in the TMT and Consumer sectors. We seek to differentiate between fundamental business analysis and security analysis. Before deciding if a security’s pricing and positioning merit a long or short position, we analyze the four pillars of business fundamentals (Secular Factors, TAM, Competitive Advantage, Business Model) in order to determine if this is a “good” or “not so good” opportunity.

United States

The Walt Disney Company is an entertainment company that conducts operations in media networks, studio entertainment, theme parks and resorts, consumer products, and interactive media. The Company produces motion pictures, television programs, and musical recordings, as well as books and magazines.

Price Gauge
52-week Range	0.00 - 0.00
Market Cap (USDm)	0.00
P/E	0.00
Dividend (Yield)	0.00

The Walt Disney Co (DIS US)

Disney Analyst Day: Hindsight Is 2020

Disney’s Analyst Day turned out to be the surprise blockbuster event of the holiday season. So many disclosures and so many competitive angles to...

Aaron Gabin

Disney 4Q20: We’ll Get Back to You

Disney produced another solid subscriber add figure this quarter...but do all subs count the same? We'll give the benefit of the doubt for now.

Aaron Gabin

Netflix 3Q20: Still Chill?

We reiterate our view that Netflix will have a hard time making subscriber #s for the next few quarters due to the massive pull-in from 1H20. When...

Aaron Gabin

Disney: They Listened to Loeb (Quickly!)

Disney's reorganization announcement of its content and distribution organizations is signal that management has been listening to investors.

Aaron Gabin

Disney: Listen to Loeb

Disney's stock has languished this year due to the havoc COVID has unleashed on its business model. It should use the opportunity to spend more on...

Aaron Gabin

Price Gauge

52-week Range

Market Cap (USDm)

P/E

Dividend (Yield)