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First Move with Julia Chatterley
Nancy Pelosi Ripping Up President Trump's State Of The Union Speech Moments After He Finishes; Passengers Trapped After Multiple Coronavirus Cases Found On Board; More Than 28 Million People Sign Up For Disney Plus Streamed Content. Aired 9-10a ET
Aired February 05, 2020 - 09:00 ET
THIS IS A RUSH TRANSCRIPT. THIS COPY MAY NOT BE IN ITS FINAL FORM AND MAY BE UPDATED.
[09:00:12]
JULIA CHATTERLEY, CNN INTERNATIONAL ANCHOR: Live from the New York Stock Exchange. I'm Julia Chatterley. This is FIRST MOVE, and here's your need to
know.
No love lost. Nancy Pelosi ripping up President Trump's State of the Union speech moments after he finishes.
Quarantine to cruise. Passengers trapped after multiple coronavirus cases found on board.
And Disney's big plus. More than 28 million people sign up for their streamed content.
It's Wednesday. Let's make a move.
Welcome once again to FIRST MOVE where we have a rip roaring show coming up for you today.
Firstly, global markets are on, well, I might say Nancy Pelosi style tear here. Okay, I'll stop now.
Look. Take a look at a sea of green for global equities recovering some of the recent losses. U.S. futures right now higher by one percentage
premarket. NASDAQ set to open at a fresh record.
Europe also higher up by around one percent across the board here. Chinese stocks also clawing back some of Monday's eight percent drop.
The Shanghai composite rising some 1.25 percent today. Sentiment I think being helped here by reports of a coronavirus vaccine, perhaps. We'll
discuss the state of the outbreak momentarily, but for now let's discuss the state of politics in Washington, D.C.
The bitterness between Nancy Pelosi and Donald Trump on display as the U.S. President gave his last State of the Union address before the November
election. House Nancy Pelosi breaking decades of congregational tradition by introducing him as the President of the United States, with none of the
usual fanfare.
Just listen to how the then impeached President Bill Clinton was introduced back in 1999, and then compare and contrast with last night's introduction.
(BEGIN VIDEO CLIP)
UNIDENTIFIED MALE: Members of Congress, I have the privilege and the distinct honor of presenting to you, the President of the United States.
[APPLAUSE]
REP. NANCY PELOSI (D-CA): Members of Congress, the President of the United States.
[APPLAUSE]
(END VIDEO CLIP)
CHATTERLEY: The President then seemingly declining to shake hands with the House Speaker before his remarks, and then after the address, Pelosi ripped
apart a copy of the speech right behind his back.
The President never mentioning of course, the word impeachment in his address, all this before today's Senate votes in the impeachment trial.
Joe Johns is live at the White House for more. Joe, we can talk about the theater of last night and the stance that the two in particular took here,
but I also want to talk about the content of the speech here, and President Trump laying the path here to the 2020 elections.
JOE JOHNS, CNN SENIOR WASHINGTON CORRESPONDENT: Well, that's what's very interesting. Typically, during an election year, the State of the Union
address is an opportunity during primetime for the President of the United States to address the entire country, both Democrats and Republicans and
everyone in between.
And it's also an opportunity for the President to lay out what he has done and to talk about his agenda for the future going into November, which, of
course, is the election in the United States.
But this speech by President Trump was clearly a political device. He was reaching out as he often does to his base, and he was unapologetic to his
critics. So that's one of the things that made it very different.
Also, very important to say that this country is deeply divided, and you could see it right there and the symbolism of the relationship between the
Speaker of the House, the President of the United States, the failure to shake hands, the tearing up of the speech.
All of the things play into today, with the impeachment trial coming to its clear and apparent ending, an ending that we knew it would come to over the
last weeks and months, that being the acquittal of the President, which almost certainly he will claim to be an exoneration of his alleged
wrongdoing in the Ukraine affair.
So a long way to go to November. This country is deeply divided and polarized, and it clearly signals at least the potential for a very ugly
election, and the run up to it. Back to you, Julia.
CHATTERLEY: Absolutely, and first things first. That expected acquittal in the Senate vote later. Joe Johns, fantastic to have you with us. Thank you
so much for that.
And you can tune in to CNN later on today for our ongoing coverage of that impeachment trial, too. Plenty more to discuss on that point too, and we
will do that later on in the show.
But for now, let me bring you up to speed on our other top story today.
The coronavirus outbreak has hit Hong Kong and Japan; cruise ships quarantined at sea outside of Tokyo and Hong Kong.
Worldwide, the death toll now has risen to almost 500 with more than 24,000 cases reported. David Culver is in Beijing and has been working tirelessly
to keep us updated with what's happening there.
David, just talk to us because I heard you speaking earlier on our programming, more and more cities now coming under lockdown and these very
intense attempts by Beijing and the central government here to shore up the medical response here for those affected.
DAVID CULVER, CNN CORRESPONDENT: No question, Julia, and as the numbers of those infected and impacted, and even the death toll continues to rise, so
to the number of folks who are included in these lockdown zones.
As you mentioned, more and more cities are part of this lockdown. It's a widening perimeter that's continuing to expand with each passing day, and
we're also seeing an increased effort to boost the capacity of healthcare here.
By that I mean, we've seen two new hospitals coming on board. One was finished construction-wise today. It's expected to open to patients
tomorrow.
The other opened earlier this week, on Monday, that held about a thousand, the other one, 1,600, but that's not enough. They are now looking to open
three field hospitals.
So they're essentially turning sports stadiums and exhibition halls into these hospital settings. But when you look at it, I mean, they're just
essentially rolling out cot after cot, really tight quarters.
It shows in some sense, a bit of a desperate situation that they're trying to accommodate as many infected patients as possible.
Meantime, you mentioned Hong Kong, a neighboring territory there. It seems that healthcare workers are continuing on with their strike. This is the
third day of their strikes and 4,600, according to the union went on strike and that includes some 300 doctors and then the rest being nurses.
So it's a significant impact for those who are trying to treat the epidemic in Hong Kong, and it seems like Chief Executive Carrie Lam was hoping to at
least ease some of the concerns by suggesting that they're moving forward with a policy that would essentially require a quarantine for folks who
come from Mainland China.
So if I were to go over to Mainland China, it would be 14 days to Hong Kong in quarantine that you would have to wait out, but they didn't really
specify where that quarantine would take place.
There's some details still missing there, and it seems like healthcare workers, Julia, are not satisfied with that.
CHATTERLEY: Yes, absolutely. I mean, the pressure that Carrie Lam here is coming under to prevent any further travelers from the Mainland here, but
also what we've seen as well, the last passenger flight from China to the U.K. as well with nationals of the United States as well, bringing their
nationals home.
Just explain to us how all of this is being portrayed in China here, particularly by the media. What are they saying about the sort of
international response here to still?
CULVER: It is very interesting that you mentioned that. I mean, for the first time today, we did notice that some of our coverage was blacked out
here. The censorship, but we've seen that in the past with other stories that's considered sensitive, including talking about the protest, for
example, in Hong Kong.
However, we are also seeing that there's frustration with the Chinese government and other governments, particularly with the U.S. I mean,
earlier this week, they were essentially lashing out at the U.S. and their big concern was that they suggested these evacuation flights for example
are requiring usage of Wuhan's Airport.
Well, why do they need that airport capacity? They say they need to bring in badly needed medical supplies which we can attest to. We've spoken to
the doctors and nurses on the front lines who say there is a dire need.
And they felt like the first flight from the U.S. was essentially taking up space. It didn't bring in any supplies, whereas you had Japan and South
Korea and their early flights and follow up flights, brought in a lot of medical supplies that was badly needed and it met some of those demands.
The U.S. had a shift, it appears according to Secretary of State Mike Pompeo. They did move forward with bringing in supplies on the two most
recent flights that took off, and it's likely they'll continue that kind of an exchange of goodwill, in a sense, with the flights that are expected,
Julia, to take off tomorrow with more Americans leaving.
CHATTERLEY: David Culver there in Beijing. Thank you for being there. Great job.
All right, let's continue with this story because in Japan, thousands of people are quarantined at sea outside at the Port of Yokohama. Ten
passengers, in fact on that cruise ship testing positive for coronavirus. Kaori Enjoji has the full report.
KAORI ENJOJI, JOURNALIST: More than 3,700 passengers and crew members aboard the luxury ship will remain at sea, unable to dock here at the Port
of Yokohama for at least another two weeks as officials worry about contagion aboard the ship.
[09:10:12]
ENJOJI: Earlier this morning, 10 people who tested positive for the Wuhan coronavirus were led off one by one. They were covered in blankets and they
were taken to hospitals nearby.
We're still waiting to hear if some of the other tests have come back. It's taking a few hours before the results come in, and there are questions
being asked about why all the other people on board are not being tested more thoroughly.
There's growing frustration in Japan about whether the government is doing enough.
I spoke to one doctor who remembers a flu epidemic here in Japan a couple of years back and people with the slightest of symptoms would rush to
hospital, and that seems to have worsened the problem.
This time, there's still no vaccine, and there's already a run on masks.
CNN has communicated with a passenger on board. That passenger said it's peaceful. There's food and they're being asked to remain in their cabins.
The ship is expected to dock briefly on Thursday morning here in Yokohama to refuel and load supplies.
But the 3,700 plus passengers will remain on board quarantined for at least another two weeks.
From Yokohama, I'm Kaori Enjoji for CNN.
CHATTERLEY: And more and more companies now being forced to respond about the potential impact of the coronavirus outbreak. Disney among them.
They said that profits of their Chinese parks could take a $280 million hit this quarter. Some have been shut indefinitely because of the coronavirus
outbreak, but recent protests in Hong Kong have also hit takings as well.
It followed a pretty strong call today with revenues up some 36 percent. Frank Pallotta joins us now on this story.
Frank, as I mentioned there, the coronavirus impact. The Hong Kong tests as well, and that impact taking some of the sparkle out of what seemed to be a
pretty solid quarter here. Talk us through the numbers.
FRANK PALLOTTA, CNN MEDIA REPORTER: So yesterday, the big highlight was the amount of subscribers that Disney Plus really brought in. Everything else
was pretty much a win across the board.
Its revenue beat expectations. Its studio had a big year, more than a hundred percent growth from the year prior. Same thing with its direct to
consumer unit, which is kind of not fair because it really didn't have a direct to consumer unit last year.
But the big, big number that everyone was talking about was 28.6 -- that is how many subscribers Disney Plus brought in.
It also brought in a lot of growth to the other streaming services in the Disney bundle, so-called Disney bundle, which is ESPN Plus and Hulu Plus,
which saw some growth as well.
CHATTERLEY: Yes, I mean, the big question I think that investors have been asking as Disney is launched here, particularly at a low relative price
point is, to what extent do they challenge Netflix and it took what -- Netflix a decade to get 68 million subscribers, and Disney is halfway there
already. So it's pretty astonishing. However, that comes at a cost.
PALLOTTA: Yes. So you make a really good point. You know, Netflix is the leader of all of streaming, and this is something that is going to cost
everybody billions of dollars.
It doesn't matter if our parent company Warner Media and HBO Max, or if it's NBC Universal's Peacock, or Quibi, or even Netflix itself, streaming
costs money, but these companies are making a bet that this is the future of the business.
Now, for Disney, they have projected that they're going to have 60 to 90 million subscribers by 2025.
So look at it this way, they are already halfway there, somewhat halfway there. It's a good start. But in streaming just like life, it's not about
how you start, it's how you finish.
CHATTERLEY: Yes, I couldn't agree more. I just wonder whether they're actually being a bit conservative there on how long it takes them to get to
those subscribers and whether they're perhaps looking at it and going when you pull in the bundle, the likes of Hulu and ESPN Plus, perhaps, they are
thinking here, actually, we need to raise the price.
PALLOTTA: Yes, I mean, I feel like eventually what we're doing -- they all kind of started at a low price point.
But look at something like Netflix. Netflix is the template. Netflix has raised their prices over years and their subscriber base has taken somewhat
of a hit every time they kind of done that.
Will Disney do that? Will Apple which is even cheaper than Disney? Will, you know, HBO Max and Peacock down the line?
I would assume maybe, but we don't know that yet. But at this price point, in terms of becoming profitable, that price needs to go up as much as the
growth globally needs to go up as well.
But again, Disney is off to a good start. If it was under 20 million, which is where Wall Street was kind of expecting it, the stock would be in the
tank this morning.
CHATTERLEY: Yes. Frank Pallotta, great job. Thank you so much for joining us on that story.
All right, let me bring you up to speed now with some of the other stories that we are following around the world. Still incomplete. Iowa caucus
results show Pete Buttigieg taking a slim lead over Bernie Sanders, followed by Elizabeth Warren and then Joe Biden.
The vote tallies are a major boost for the former mayor, but only 71 percent of the precincts have reported so far. It's actually still not
clear who won the Iowa caucuses. It's perhaps more clear who lost.
[09:15:19]
CHATTERLEY: Thirty one people have been killed in two avalanches in eastern Turkey according to the Turkish Disaster and Emergency Management
Authority. Rescue workers were among the dead. They were helping those caught in the first avalanche.
The wife of the Prime Minister of Lesotho has been charged with murdering her husband's former wife. Maesaiah Thabane is accused of killing Lipolelo
Thabane who was shot dead in 2017.
Prime Minister Thomas Thabane has announced he will resign, but haven't yet stepped down.
A bodyguard protecting the former British Prime Minister David Cameron is under investigation amid reports that he left a loaded handgun in a toilet
on board a commercial flight from New York to London.
It is Mr. Cameron's passport was also left behind. A passenger discovered the gun and alerted the crew.
Wow. All right, we're going to take a quick break here on the FIRST MOVE, but coming up, Tesla's turbo powered stock price send Wall Street on a wild
ride, but is it good for the long haul?
Plus, aside from the made for TV moment in the State of the Union, what the U.S. economy really telling us right now. We'll discuss. Stay with us.
(COMMERCIAL BREAK)
CHATTERLEY: Welcome back to FIRST MOVE live from the New York Stock Exchange. We're counting down to the market open this morning and it's
expected to be a strong one.
Stocks indicating they could open some one percent higher. The NASDAQ also set to hit fresh records.
All the major averages in fact having their strongest day of trading in months. In Tuesday's session, tech stocks, the NASDAQ rose more than two
percent, in fact. We're seeing a calming, I think, of sentiment with regards the coronavirus also, perhaps supported by rumors of a potential
vaccine, too.
[09:20:12]
CHATTERLEY: We also have blockbuster private sector job numbers today, which I think is helping non-farm payrolls on Friday coming up as well.
Take a look at the oil markets as well. This is an important one, also seeing that moving higher today amid some speculation that perhaps OPEC
could hint that a production cut is coming.
BP, one to watch. They said the growth in oil demand could plunge some 40 percent this year, as the coronavirus pressures global economies. Oil did
in fact fall into a fresh bear market earlier this week. Coronavirus, clearly still a highly uncertain factor here.
But there's other things to discuss. If you ever needed evidence that Tesla is on a tear, then this is it. Year-to-date, its stock price up some 117
percent. What a ripper.
Dan Ives is Managing Director of Equity Research at Wedbush Securities. The stock is not down, the ripper. Talk to me about what's going on in this
stock.
DAN IVES, MANAGING DIRECTOR OF EQUITY RESEARCH, WEDBUSH SECURITIES: It's parabolic and I think there's really three reasons.
I mean, one front and center is China and that is the fuel in the engine for Tesla. That really changes -- this dynamic change that could be 150,000
units over the next year and I think that's definitely put fuel in the bull engine.
Two is profitability. The keyword is key. Now that trajectory $25.00 to $30.00 of long term earnings potential.
And three, I mean, the straw that broke the camel's back for the bears is really something of this panic sonic, you put it all together, inflection
EV demand. It's a historic short covering for a real buy in, too.
CHATTERLEY: I think for some people and those that are very much focused on Tesla will understand the panic sonic news. What was it specifically about
that that you think that was the sort of final thrust here that saw the share price rise?
IVES: That was the missing piece in the puzzle.
CHATTERLEY: Yes.
IVES: That strategic partnership. The fact that that was so bullish in terms of the conference call and the profitability. Now, you could
trajectory it out.
It looks like upside for numbers, and it really looks at this point, EV demand starting to inflect and that's why Tesla just comes down too many
investors missed Amazon e-commerce, Netflix streaming, Apple thought smartphones will never be successful. They don't want to miss Tesla on this
EV demand train.
CHATTERLEY: You're making some really bold comparisons there. Are you comfortable with that? Is this for you, that turning point perhaps in terms
of valuation, I think to where we go, we don't make the comparison with Tesla and other automakers anymore in terms of valuation as well.
We go, actually, we are looking at a broader company here, a technology company perhaps rather than anything else.
IVES: You know, it's a great point as always, because I think what you hit on is it's not an automotive company. I think that's the first line in the
sand.
And in terms of -- it's a fork in the road, because ultimately this year, there are going to be that parabolic growth where you could see a $500
billion or a trillion dollars in next 10 years or hit a speed bump. It becomes another soap opera for Tesla.
I don't see that happening. This feels real. For someone that's followed Tesla for many years, it feels like it's a real EV inflection, especially
with China.
CHATTERLEY: Is 500,000 units a year feasible? I mean, you talked about the 150,000 in China in particular, I'll weave in coronavirus here in the
potential impact of factory shutdowns, of worker resource restrictions. Can you quantify the risk perhaps and does that matter?
Particularly given, we're talking about a parabolic which always makes me nervous, rise in the share price?
IVES: Yes, I mean, even if you have a lot of coronavirus nervousness, even as you see some of the news this morning. I mean, you're talking maybe one
to two percent of units that can be shift out.
When you look at capacity, not just in the U.S. or frame on Giga. Shanghai, that's the key. Giga 3 is the linchpin from a capacity perspective. Now, in
Europe and Berlin, they're building that out as well.
Now ultimately, they'll have capacity for really a million units if you look out 18 to 24 months, so it's really not going to restrict them.
It comes down to demand and that's why right now, global EV demand is starting to inflect. Two and a half percent of all automotive, Tesla is the
main play. That's why you're seeing the bears go into hibernation mode.
CHATTERLEY: Wow, so you've gone neutral looking at the share price today. I think Canaccord Genuity as well said, look, we're actually looking at the
valuations here and going, okay, this has gone a long way in a short space of time as well.
I think the stock price is down to just over six percent today, but in light of the rally that we've seen that's nothing. Is it too much too soon?
Because your max case here, your bull case here is $1,000.00, but again, you know when I look at that share price, I kind of think Bitcoin and I
think that massive squeeze that we saw in 2018 with Volkswagen and Porsche, something about this feels queasy and we know the short interest in this
was very high.
IVES: It's a Bitcoin like sort of move, it feels frothy, but I do think this is not a bubble. I just want to separate them.
CHATTERLEY: The fundamentals are there.
[09:25:06]
IVES: Now, do I think the stock has maybe gotten ahead of itself? Which is our view because of some of the good news? Yes. But as an investor right
now, you look at this, and there's going to be opportunities.
But I think longer term, there is an inflection point. But that's why as analysts, we're trying to quantify base best case. We do not use a bubble.
That's why we do the thousand hours bull case, there's going to be a lot of opportunities here in terms of the volatility where you can own the stock.
CHATTERLEY: You know, I think what we need to see here is institutional investors, because when you're looking at this kind of valuation for a
technology company, which is what this valuation represents, you start looking at its market cap and saying it should be in the S&P 500, and that
brings institutional money in.
To what extent if any, are you speaking to institutional investors here that are going, hang on a second, do we need to be involved in this? We're
involved in this, do we need to take profit?
IVES: I've talked to more institutional investors deep diving Tesla in the last two weeks, in the last six to nine months because now it becomes a
real institutional story.
CHATTERLEY: Right.
IVES: Those, I think, there's all retail buying. Those are the same that thought Mahomes is not going to be a good quarterback, so to me it just
comes down to this is real. It's an inflection.
Okay, stocks eye the beholder, but there's definitely a change in terms of the story.
CHATTERLEY: Very quickly, if it comes down, do you buy more?
IVES: You buy more and that's why -- I think especially if this thing starts to selloff, you know, below 700 that's where you get aggressive.
CHATTERLEY: Dan Ives, great to have you with us. Thank you so much. From Wedbush Securities there.
We are counting down to our market open. As I've mentioned, a stronger open expected for US markets following the green that we saw in Europe, and in
the Asia session as well.
Plenty more to come. We're going to be talking State of the Union and more, later on in the show. Stay with us. The market open is next.
(COMMERCIAL BREAK)
[09:30:00]
CHATTERLEY: Welcome back to FIRST MOVE. I am Julia Chatterley live from the New York Stock Exchange and that was the opening bell, and as expected, we
have a higher open for U.S. stocks this Wednesday morning.
The NASDAQ, yes, that is hitting fresh record highs. I believe, the Dow also adding to Tuesday's 1.4 percent gains. Tuesday was the Dow's best day
in terms of performance since June of last year, I believe.
There are also reports that scientists are making progress on our coronavirus vaccine helping sentiment, but I think stabilization at least
outside of China, the appearance of it at least is also perhaps filtering into sentiment hereto.
But also, let's not forget the fundamentals, new numbers showing strong private sector jobs growth.
Last month, the U.S. employers adding almost 300,000 jobs. That, in fact is the best monthly gain in more than four years, an interesting prelude ahead
of non-farm payrolls on Friday.
All right, let's take a look at our Global Movers today. Tesla -- as we've been discussing -- shares pulling back a touch here from that electrifying
rally. Nice. The stock is lower after rising some 13 percent to a new record high on Tuesday.
Tesla's value has more than doubled since the start of the year. In fact, Elon Musk's net worth has risen by $16 billion since January, losing a
little bit today as you can see, nine percent, little relative to the rally that we've seen.
Tesla's rivals Ford and GM also out with Q4 results. Ford falling after reporting weaker than expected profits. It's also lowered its 2020 outlook
here.
A tale of two halves though, GM higher. Its earnings beat expectations, but sales were softer than expected.
Disney also in focus. The shares higher in the session. The entertainment giant reported stronger than expected profits and revenues. The streaming
service though, Disney Plus, taking much of the attention. They now have more than 28 million subscribers gathered since that November launched.
The theme park profits could drop, however, by almost $300 million this quarter. That was the warning indeed coming because of the coronavirus and
the anti-government protests in Hong Kong.
Let's talk all this through. Tuna Amobi is the media and entertainment analyst with CFRA Research, and he joins us now. Great to have you with us.
TUNA AMOBI, MEDIA AND ENTERTAINMENT ANALYST, CFRA RESEARCH: Thanks, Julia.
CHATTERLEY: All right, let's talk coronavirus and the Hong Kong impact first and then we'll talk more detail in the numbers here. Do you think
they are being conservative in their estimates here for the potential impact for its theme park? But there's also cinemas and the like to,
surely.
AMOBI: Well, you know, so the guidance they provided assumes that the parks will be closed for about two months in Hong Kong and in Shanghai Disneyland
and what they said is that the impact of those numbers is going to be about 170 $million, give or take in operating income for the international parks.
CHATTERLEY: Yes.
AMOBI: So we knew there was going to be some disruption. What we weren't sure was how long this was going to last or if this is going to have a
continuing impact.
And to be fair, most of the companies that are being impacted by this coronavirus have really said that they're really -- it's really hard to get
a good grip on how much impact ultimately or how long this could last.
CHATTERLEY: Yes, I mean, it's tough in terms of costs, closures, length of time here, ultimately, but relative to the revenue capabilities of this
company, it's kind of a fraction.
AMOBI: I agree. I think investors right now are really focused on the good news in the parks. And a lot of the good news is coming from a domestic
theme parks where they just opened, you know, both two Star Wars attractions in Florida as well as in California. And we're starting to see
the impact of those attractions on attendance.
So really, the story of the parks now is really a tale of two, you know, parks if you will. The domestic really doing a lot of the heavy lifting
versus the international with the concerns about the coronavirus.
CHATTERLEY: We have to talk about Disney Plus, the streaming, the expectations here were for around 20 million subscribers. They blew those
expectations out of the park here, 28 million subscribers. That's a strong number.
AMOBI: Oh Julia, I've got to tell you, those numbers were way above even the most optimistic analyst expectations. We had them coming in somewhere
about 24 million to 25 million, and for them to say that in January alone, they added another two million to get to 28.6 as of Monday.
CHATTERLEY: Yes.
AMOBI: I mean, that's really off to a roaring start, and I really believe that this really is a sign of good things to come.
CHATTERLEY: Sixty to ninety million is their prediction for 2025.
AMOBI: I mean, I've got to tell you, Julia, 60 million to 90 million, investors don't even remember that that number is a global number.
CHATTERLEY: Yes.
AMOBI: And within that, they said about a third of that is coming from the U.S., so when you think that the U.S. alone has done 28.5 million in just
literally two months and change and they had a set of five-year projection. I think you can see how conservative those numbers are with international
launch still to come.
[09:35:06]
CHATTERLEY: So some of the obvious push back here the cost. This growth came at a huge price, and even when you bring in the Hulu bundle, the ESPN
bundle, I mean that content streaming segment lost just shy of $700 million. The price $7.00 a month. They need to raise prices here or we're
not worried about that yet.
AMOBI: I think we're not worried about that yet. The price of $6.99 that they came in, I think it seems to be just the right sweet spot, and
remember, you can get Disney Plus, ESPN Plus and Hulu in a bundle $12.99 subscription.
Our worry going into this quarter was that perhaps the bundling or the promotions is going to hurt the pricing power, but we saw ARPU for Disney
Plus coming in even very respectable, you know, close to $5.00 and then ESPN Plus, that's the unspoken halo impact of Disney Plus.
ESPN Plus is getting a huge benefit from being bundled together, almost doubling their subscriber numbers.
CHATTERLEY: And Hulu benefited here as well, as well.
AMOBI: And Hulu as well. So there's a hollow impact all along.
CHATTERLEY: Compare and contrast Netflix, because I was making the point earlier on the show it took a decade for Netflix to gather 69 million
subscribers. Comparables, whether it's content spending, whether it's library, whether it's cost, whether it's subscriber ads here. Thoughts?
AMOBI: Well, I've got to say that so much has been made with Netflix having the first mover advantage.
CHATTERLEY: Yes.
AMOBI: But the launch of Disney Plus really is unprecedented, nothing like the industry has ever seen in terms of the content, in terms of the user
interface, in terms of all of the product enhancements, and of course, in terms of the spending.
So I have to say that this Disney Plus is really a game changer, unprecedented in terms of the impact that we expected to have.
Now that being said, Netflix, I believe is going to be one of the ultimate winners because this is a secular trend that we're seeing migrating from
traditional from linear to internet television. I believe Disney and Netflix will be among the beneficiaries.
CHATTERLEY: Right. So our summation here is basically Mickey Mouse Fantasia style waved away the first mover advantage, but Netflix is still in the
right segment at the right time and can still be a winner here.
AMOBI: Especially on the international side. We're seeing more of the international story for Netflix play out where we're seeing the
deceleration in the U.S. partly as a result of Disney Plus.
CHATTERLEY: Super quickly, we've just lost a bit of ground, I think we're down half a percent here now in Disney. Your price target $160.00, so we've
got a room for upside here.
AMOBI: Indeed, I think Disney right now has truly a huge valuation on any kind of metric whether its cash flow or earnings and I think that premium
is really justified based on the transition that they're making from, you know, traditional to direct to consumer and that really deserves a huge
premium for investors.
CHATTERLEY: Fantastic to have you on. Thank you so much.
AMOBI: Thank you.
CHATTERLEY: Tuna Amobi there, media entertainment analyst for CFRA Research.
All right, we're going to take a quick break here, but coming up, a feud well and truly on full display. The U.S. House Speaker tearing up the
President's speech calling it a manifesto of mistruths. But was it?
More on the dramatic moments from last night's State of the Union Address right after this. Stay with CNN.
(COMMERCIAL BREAK)
[09:41:19]
CHATTERLEY: Welcome back to FIRST MOVE. The feud between President Trump and House Speaker Nancy Pelosi well and truly on show at last night's State
of the Union speech.
The House Speaker broke congressional tradition when she introduced the President, then he seemingly ignored her handshake offer, and then right
after his speech ended, she ripped apart a copy of his remarks.
The President meanwhile focusing on the U.S. economy in particular during his address.
(BEGIN VIDEO CLIP)
DONALD TRUMP (R), PRESIDENT OF THE UNITED STATES: Since my election, we have created seven million new jobs, five million more than government
experts projected during the previous administration.
[APPLAUSE]
TRUMP: The USMCA will create nearly 100,000 new high paying American auto jobs and massively boost exports for our farmers, ranchers and factory
workers.
[APPLAUSE]
(END VIDEO CLIP)
CHATTERLEY: Lanhee Chen joins us now. He is Director of Domestic Policy Studies at Stanford University, and a former policy adviser for Mitt
Romney. Lanhee, great to have you on the show.
We can talk about the drama, perhaps no surprise, in light of the backdrop here with impeachment. But what did you make of the President's speech
here? How well did he lay a path here to the November elections?
LANHEE CHEN, DIRECTOR OF DOMESTIC POLICY STUDIES, STANFORD UNIVERSITY: Well, I think the President did exactly what he needed to do last night, if
the goal was to speak to his electoral base. I think that the speech was squarely aimed at that base.
If you look at the themes in the speech, the economy, immigration, talking about cultural issues here in the United States, those are the kinds of
things that the President needed to do to, to really gin up that base.
And I thought as a speech speaking to that base, it was highly effective. Now, obviously those who disagree with the President will find a lot in the
speech to disagree with, but as a campaign speech, as a kickoff, as it were for his reelection, I think the speech hit all the right notes.
CHATTERLEY: Yes, I mean, the economy, clearly a point of strength. And we know and we've talked a lot on the show about how important the
unemployment rate in particular is, for a President going in for reelection here.
But I just wanted to play some of the talk that he made about healthcare because this is also incredibly important for both sides here.
(BEGIN VIDEO CLIP)
TRUMP: But as we work to improve Americans healthcare, there are those who want to take away your healthcare, take away your doctor and abolish
private insurance entirely.
DEMOCRATS: You.
(END VIDEO CLIP)
CHATTERLEY: This is clearly very personal for Nancy Pelosi and for the Democrats here. It's a bone of contention clearly among the Republicans
too, but also I think pivotal, running into these elections and beyond. What did you make of what he said? And can you compare and contrast with
what some of the Democratic nominees -- candidates -- are basically saying about healthcare, too?
CHEN: Well, you're absolutely right. Healthcare is going to be one of the top, if not the top issues in this false campaign.
Here in the U.S., this has been a big point of contrast between the Democrats and the Republicans, what they want to do on healthcare.
Now, it's interesting, the President is really setting this up in his broader socialism versus capitalism theme, because you see a lot of
Democrats, particularly Bernie Sanders and Elizabeth Warren, who have embraced fundamental changes to the U.S. healthcare system, so-called
Medicare-for-All or single payer systems.
You have other Democrats like Pete Buttigieg, Joe Biden and Mike Bloomberg. They are proposing what might be considered more moderate public option or
adding a government run backstop type plan, and that's in contrast to where President Trump has been.
President Trump has really been about taking the current system and trying to inject more choice and competition, but really not making any
fundamental changes.
[09:45:07]
CHEN: So this is going to be a big issue. You may recall when we had midterm congressional elections here in 2018, healthcare was the single
biggest issue that catapulted Democrats to victories in many congressional districts and states.
So this contrast between the Democrats and the Republicans on healthcare is going to be the basic most fundamental one, I think, as we head towards the
November election.
CHATTERLEY: Yes, and it's not even just about Republicans versus Democrats on this. To your point as well, because I know you've done the analysis and
it was eye opening for me.
For those candidates, the voters or the candidates themselves believe are relatively centrist here, be it a Bloomberg, be it a Biden, be it a
Buttigieg, if they don't want to significantly ramp up the deficit here, it's going to mean tax hikes to fulfill their plans and not just tax hikes
on the wealthy, but also tax hikes on the middle class.
Can you give us a sense of the numbers here? Because for me this was a wowser when I read your report.
CHEN: Yes. Well, it was a wow kind of moment when we studied the fiscal and tax implications of the public option proposals, the ones that had been
painted as the more moderate proposals, Julia, frankly.
If you look at those proposals, what you find is that over 10 years, the government here in the U.S. has to spend about $700 billion to facilitate
that plan.
Over a 30-year period, the public option becomes the third most expensive U.S. government program behind Medicare and Social Security. And in order
to keep the deficit down, what has to happen is you have to see tax increases either the imposition of a new 4.8 percent payroll tax or the
alternative, big hikes on the marginal income tax rates of all Americans.
So this is something I think the Democrats are eventually going to have to confront, which is, even with a public option style proposal, how do you
pay for it? Maybe the answer is you don't, that seems to be the thing that's in vogue in the U.S. these days, just create programs and not pay
for them.
But if you want to address the deficit implications, it's going to be massive.
CHATTERLEY: Yes, I see a potential avenue here for President Trump to be calling those that believe they're centrist socialist and communist based
on plans for healthcare alone here, quite frankly.
But Lahnee, I do want to get your views on Iowa -- winners and losers here. Who do you see as the big winners here? Is it Buttigieg and perhaps
President Trump and the loser is Biden, even with partial results here?
CHEN: Yes, I see three winners. One is Pete Buttigieg, obviously, because he was able to actually win the Iowa caucuses and demonstrate that
viability, and you know, the Democrats have traditionally tried to pick candidates who kind of make them swoon.
You think back to Barack Obama performing well on the Iowa caucuses in 2008 during his first campaign. Pete Buttigieg, I think demonstrated that he can
be a strong candidate.
Now we'll see if he's able to carry that on to more diverse states, Iowa is predominantly white. Buttigieg has done well with that audience. We'll see
if that continues.
The second winner, obviously, Donald Trump, because of all of the challenges in getting the Iowa caucus numbers out, makes the Democrats look
a little incompetent, quite frankly. I think Donald Trump benefits from that.
And the third person I'd argue, Julia, that benefits is Michael Bloomberg because he was able to avoid Iowa, avoid that sort of morass that it
became, and instead really focused on trying to consolidate that moderate vote down the road.
We'll see if it works for him. But so far, his strategy seems to be paying off.
CHATTERLEY: Yes, I knew I missed a B in there. Thank you so much, Lanhee. Great to get your wisdom and more. We'll get you back. There's going to be
plenty more to discuss over the coming months.
Lanhee Chen there. Thank you so much, once again.
All right, we're going to take a break, but up next, companies from Apple to McDonald's count the cost of the coronavirus. We'll take a look at some
of the bottom lines. Stay with us.
(COMMERCIAL BREAK)
[09:51:12]
CHATTERLEY: Welcome back to FIRST MOVE. Companies around the world counting the potential cost of the coronavirus to their businesses.
Over the past 24 hours, carmaker, Hyundai stopped production lines in South Korea. The Hong Kong airline, Cathay Pacific has asked staff to take unpaid
leave, and the company that owns Versace and other luxury brands has also issued a profit warning.
Clare Sebastian joins us now. Clare, I mean, we've heard from numerous companies -- Apple, another one of course impacted here. Just talk us
through what some of these companies are saying.
CLARE SEBASTIAN, CNN BUSINESS CORRESPONDENT: Yes, Julia, it started off, you know, when this outbreak started that they were saying let's wait and
see. We don't know. It's all very unset.
Now, it seems to be getting real. The phrase we're hearing from several companies is material impact that includes Capri Holdings which owns
Versace, Jimmy Choo, Michael Kors. China is a huge market for them. They have now said that they expect a $100 million hit to revenues for the
fiscal 2020 year which ends in March.
They say that 150 of their 225 stores in China remain closed. That 225 by the way, is about 17 percent of their global store base. So China is a huge
market.
Of course, the Lunar New Year, extended holiday and the fact that people weren't traveling really hit traffic at those stores.
And another company that's using the phrase material impact today is Nike. They are saying that -- warning investors that when they report their next
earnings, they will see a material impact to operations in China. They say about half of their stores remain closed.
And this of course, a huge market for them as well. China was about 18 percent of sales in the last quarter. It's by far their fastest growing
region and what they haven't mentioned Julia, which is another thing that could hit multiple companies is the fact that they also produce a lot of
what they sell in China. So that could be a double whammy for them.
So that's what we're seeing in terms of consumption demand, traffic issues for companies.
CHATTERLEY: Yes, you raise a great point. This is a double whammy here. It's not just about potential consumption here with people simply aren't
going out and shopping.
But it's also workers, labor shortages. I mean, I mentioned Apple. The Nikkei Asian Review saying actually, or at least reporting potential labor
shortages for Apple. It's balancing the two things here.
SEBASTIAN: Right. And you know, personnel is a big issue as we look at the supply chain impacts which are sort of mounting up.
Hyundai, the South Korean carmaker says as you said that they are suspending production lines in South Korea. That happened very quickly,
Julia, after the end of this planned although extended Lunar New Year holiday.
So you can see that the impact is being felt very quickly. Airbus have also said that they are extending the closure of their final assembly plant in
Tianjin.
Apple, another one which manufactures a lot of its products, particularly the iPhone in China. They have already closed their 42 stores.
And then we get into the travel industry, which is, of course, the sharp edge of all of this. Cathay Pacific taking a very serious move when they
are asking employees to take three weeks of unpaid leave. They have already cut their flights to China by 90 percent. That cuts into the overall
flights by about 30 percent.
Don't forget, they are also already suffering from the impacts of the protests in Hong Kong last year, so a double whammy for them.
So some very serious measures being taken by big multinational companies -- Julia.
CHATTERLEY: Yes, absolutely. I mean, it's perhaps better than losing your job. But how can anyone live with without three weeks of pay? Terrible.
Clare Sebastian, thank you so much for that update there.
All right, let me bring you up to speed with today's Boardroom Brief, too.
U.S. retail giant Macy's says it is closing 125 stores, nearly one fifth of its network over the next three years. Two thousand staff will lose their
job as a result.
U.S. department stores have been battered by the growth of Amazon with Macy's rival, Sears going bust in 2018.
Online mattress seller, Casper Sleep has slashed its target IPO price. Originally, shares were set at a price range of $17.00 to $19.00, but that
was lowered to just $12.00 to $13.00.
[09:55:09]
CHATTERLEY: That would value the company just half a billion dollars, well below what it said it was worth last week. The startup is expected to begin
trading on Thursday.
Tesla CEO, Elon Musk skipped the boardroom and asked his Twitter followers if the electric car maker should build a new Giga factory in Texas? He gave
two options, "Hell yeah" and "Nope."
More than 150,000 users voted with a whopping 80 percent in favor of the new factory. Tesla just opened a Giga factory in China and announced plans
for a new one in Europe.
All right, that just about wraps up the show. Time for me to start -- oh great, yes, here we go. Yes. More. Here we go. Yes. They are all my notes
by the way. All my notes.
You're watching FIRST MOVE, time to go make yours. See you tomorrow.
(COMMERCIAL BREAK)
[10:00:00]
END
