Deep Dive
Shownotes Transcript
Today, we're looking at two kinds of rides, roller coasters and robo taxis. You're listening to Motley Fool Money. I'm Mary Long, joined on this Wednesday morning by Mr. David Meyer. David, how's it going? Good to see you. It's going great. It's great to see you too.
So we will kick things off today with a trip to Disneyland. Shares of the company were up almost 11% last I checked this morning as they reported faster than expected growth, particularly in its parks and streaming business.
I want to focus on the theme parks piece of this to kick us off because that is a substantial part of the business. It makes up more than 50% of Disney's operating income. And, you know, if you just listen to financial media, you'd get the impression that folks were tightening their hold on their wallets and really bracing for an economic downturn. But you look at the parks business at Disney and they saw an increase in visitors to their California and Florida parks. Guest spending at those parks also increased significantly.
Interestingly, you see different trends at the domestic resorts versus international ones like Shanghai and Hong Kong. Those international resorts saw lower attendance. But again, why are we seeing such a burst in interest and attendance and spending at these domestic parks? What do you think is bringing people out there? And considering all the uncertainty in the macro environment, do you expect that trend to continue? My goodness, that's like 16 questions there. But no, I'm only teasing. So
Here's what I think based on my experiences going down to the parks over the years. The first thing to remember is this is an ordeal, right? These trips are likely planned in advance for quite a while. And in 2024, when it was, hey, it doesn't look like we're going to have a recession. It looks like inflation is coming down. I would imagine more people started looking ahead.
and booking their trips. Because also in my experience, the time between January and March is almost the absolute perfect time to go, right? It's warmer in Southern Florida, especially people have time off, they want to get away, there's spring break, there's all these things. So I think that's probably two big reasons. One,
plan planning trips in 2024 to take early in 2025 more people were doing it because consumer confidence was still relatively high then and people were feeling good about the economic situation
The other thing is, it just keeps getting more and more expensive to go there. So when you're in there and you want to get the experience, you're there for a vacation. You're there to just really take in everything that Disney has to offer, so you're willing to spend more money. And Disney is more than happy to raise its prices, which it continually does all the time. So combine a little more volume and a little more pricing, I think that's why you see very, very good results.
Does it continue? That is a great question because what have we seen recently? We've seen the consumer confidence start to wane a little bit. We see more worries about inflation or even hearing words like stagflation and recession.
So I think the answer is we will see. I'm a little bit more on the negative side for the economy and whatnot. But so don't just take my word and extrapolate it. But I would expect to see probably things flatten out a little bit. But again, this isn't one I follow a whole lot. That's just how I would think about it broadly.
It's not just the park segment that is doing well. Disney's streaming business was also another bright spot in this report. That segment brought in $293 million in profit after having lost $138 million only a year ago. To do this, Disney raised prices while also managing to post pretty modest subscriber growth, up 2.5 million subscribers across Disney Plus and Hulu.
Should investors be confident that Disney's streaming business will stay profitable moving forward? And how does the profitability of this business play into the ability to feed the parks business that we've spent so much time talking about today?
So a great question on where, basically where is Disney in terms of the scale of its streaming segment? It appears that it has in fact reached scale, right? And I think the other thing that I believe expectations were either for flat or maybe slightly down on the subscribers. So to come in with positive subscriber growth at a pretty high level is a good thing.
So, will they stay profitable? I think so. The reason that I think so is, so I am actually a Hulu Plus, Disney Plus, ESPN Plus subscriber. And what I have noticed over the last couple of years is that
The streaming experience keeps getting better and better and better, no matter if I'm watching a movie, no matter if I'm watching a sporting event. Most of the time I'm watching a sporting event. But for example, I love all the commentary that I get when I'm watching golf.
And I can hone in on like specific golfers that I want to watch. I don't have to just watch one broadcast that everybody else is watching. I can tune it to, you know, maybe I want to watch Victor Hovland one day. Maybe I want to watch Scottie Scheffler one day. And it's the similar thing. I watch a lot of soccer. They have soccer games from all around the world. They have great commentators. They have great before, during, and after in-studio shows. So again,
What Disney knows how to do is to create an experience and I think they are really starting to hit their own on the streaming being the medium that pretty much everyone is using. I will say I stream everything. I've been streaming everything for close to 10 years now. There's no way I'm going back to not streaming something and now that it's continuing to grow, it's huge, right? They have well over 100 million subscribers. I think the answer is yes.
What do they do? Well, in terms of does it come over to the parks? Maybe, maybe not, right? It's not the same type of characters where you can take something that you've created from Marvel or Star Wars or any of the other Disney characters and bring it to a park, but
You know, one of the things that we used to do is we used to go to soccer tournaments at the Disney Sports Complex while we were down there. Maybe there's some avenue there. Maybe that part of the business gets a little incremental lift. I'm not sure. But this is one where they have changed the way that they create content and the way it's distributed.
We'll see over time how they integrate it, but Disney also does have a history of figuring out how to integrate all their properties together. We'll move on to another company that focuses on a different kind of ride, and that is Uber. Their stock is moving in the opposite direction as Disney this morning, despite posting what seems to me to be a pretty impressive quarter. Uber missed the street's revenue expectations by just a hair.
But, David, apart from that, you tell me what the problem is in these numbers. 14% increase in monthly active users. That's totaling 170 million monthly active users. An 18% increase in trips booked. That number is 3 billion trips booked in the quarter. A net income of $1.78 billion up from a net loss of $654 million a year ago. What is not to like?
So I will say, yeah, maybe the slight miss on revenue expectation. The one thing that may have caught a lot of people's attention is their expectations for rides booked on a dollar amount was a little short of what analysts expect for the next quarter. Now, to your point, there's a lot of good stuff going on.
But sometimes the investment community can get a little worried if, hey, why are you saying bookings are coming down? Is it because volume is coming down? Is it because you're doing more promotion and you're not getting as much price? Basically, what's going on? So if you leave the investment community with a little bit more questions than answers,
Sometimes that can actually, you know, turn sentiment negative for a day. That said, to your point, I agree. There's a lot of good stuff in those numbers that you mentioned earlier.
A piece of the Uber news that might have been missed is that they announced taking an 85% ownership stake in Trendy Old Go, which is a food delivery service based out of Istanbul. This is interesting because just the other day, DoorDash, a competitor in the food delivery space, announced that it would be acquiring Deliveroo. That's a British food delivery service that specializes in and will expand DoorDash's presence in the Middle East. So Ricky and Samit talked about the Deliveroo DoorDash acquisition yesterday, and
The pattern here, right, is that both companies are expanding their food delivery services beyond the U.S. My question for you is like, is this just a battle of who can get to the most lucrative places first, can get to the most places first? Or as an analyst, are you looking at these international acquisitions and looking for something beyond just where are you going and how fast are you getting there and how in how many places around the world are you?
So another awesome question. I will say this. Many times in situations like this, they know the markets they want to enter first, and they typically do enter them first. So we're probably not in, hey, what's the best market that we need to go in? It's really more incrementally, what is the next best place for us to go? The other thing that...
If I think about how these market structures work, especially in international markets, there tends to be a little regional player that is doing this job.
Now you have to figure out, okay, not only does this area of the world have a demographic that I think supports long-term growth, but now instead of developing part of my network in that place, I have to actually buy somebody or buy a partial stake in somebody or partner with somebody. So it adds a little bit more complexity to the situation.
That being said, I'm confident that every deal that's looked at says, hey, how much incremental capital can I spend here? What do I expect to get from a return standpoint? And Uber must have figured out that for Trendy, I'll go, now is a good time, and this is a good price, and this is how much we want to own of you. So, yeah.
$700 million for a slice of that business is not a risk the company type investment. I don't have a problem with it. I think the thing to do, though, is to look and see post any acquisition, how do the incremental numbers fare and what is management's comments about the market that they just entered?
Like Disney, Uber's got a lot of different business segments, right? We pay sometimes closest attention to the ride-sharing service, the food delivery service. But on this most recent earnings call, we've got CEO Dara Khashoggi calling out that he's confident that autonomous vehicle technology is the single greatest opportunity ahead for Uber.
for Uber. We'll close things out by maybe tying these two stories together. Do you agree with Koshra Shahi that autonomous vehicles and robo-taxis are Uber's future, or do you see another growth opportunity for the company lying ahead?
So this is a very intriguing statement. First of all, we're still kind of a ways away from autonomous driving, not to mention autonomous vehicle technology from a fleet management standpoint. And I
I think I agree with what the CEO is saying. And basically, the way I see it is like this. If let's think about the adoption curve, right? The first people who are going to be taking these rides are really, these are your most excited people. Like, oh my gosh, I cannot wait to get into a driverless car.
Me personally, I'm not that person. I want to see a little bit more, a few more miles driven under the road. I want to hear about what people have to say about it. But people who I hear talk about being in a Waymo in California or in Austin, they're like, it is so cool. It's so surreal.
So you get past that and then what's the next thing, right? The next thing is from the early adopters is the early majority. How is Uber going to cross that chasm and get more and more people to get excited about driverless transportation on their network?
And it'll be interesting to see how Uber markets that because, you know, again, some of it will depend on how excited the early adopters are because they're going to use that as marketing to get people, the next group of people. It probably won't take much for me. If you offer me a $5 off coupon or something like that, I'd be more than willing to try it.
And then I think there's an opportunity for incremental growth, meaning you can might be able to get more utilization out of an autonomous fleet than one that has drivers in it.
It's really about cost. The more utilization you get, the lower your unit costs can be and the lower the maintenance. So I think that's the big investment is how do I get basically keep creating as much value I do and capture a little bit more of it based on the incremental investments within the new technology. So to get to your final question, which one is more attractive on a growth opportunity?
I think Disney's more in the turnaround situation. I think they have properties and they will keep making investments, but you're not going to see this huge jump to massively double-digit sales and sales growth or anything like that. So I think Uber probably has the bigger growth possibility ahead of it, given once I have a fleet that's established and if I can make it even better by having it be robotic or autonomous, then
What other things can I do once I have it created? So to me, that's also something we're not necessarily thinking about today, but it would be a very exciting future to have a fully autonomous fleet of vehicles that could do a wide range of things. David Meyer, always a pleasure. Thanks for coming on the show this morning. Great to talk with you. Thank you so much for having me, Mary.
There really is buried treasure at the bottom of the ocean, and it hides in rocks. Up next, Ricky Moldy talks with Jared Barron, CEO of The Metals Company, in the first of a two-part conversation about the political and environmental challenges of picking up deep-sea metals with robots. Hey, fools. We're going to take a quick break for a word from our sponsor for today's episode.
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It is an interesting time to talk to you. This is a company focused on mining or picking up rocks with nickel, cobalt, and manganese in the Pacific Oceans, Clarion, Clipperton Zone. A very interesting time to talk to you as there are political questions, environmental questions, future profitability questions about your company. I hope we can get to all of those
But I guess to set the table, I want to set the table politically first, because the U.S. is in an odd position right now where we get a lot of these rare earth minerals that I mentioned from China and we get them on land. So to set some context for our listeners, why does the West, why does the U.S. need deep sea mining for energy independence in your view? Well, thanks for having me today.
I think, let's go back to basics, and that is 70% of our planet is ocean. And what America has woken up to recently is that China dominates the critical mineral space, and that includes rare earths. And this new category of ocean metals is at the early stage. And like so many other metal categories on our planet, China dominates
is building a dominant position. And so it all kicked off with COVID when supply chains were interrupted and then geopolitical tensions were added. And now, of course, there are battle lines being drawn. And
People realize that if you're going to re-industrialize, if you're going to try and attract jobs back to the United States and industry back to the United States, then you need to have secure, reliable supply of these important critical minerals. Now, 70% of the planet is ocean and we don't take any metals out of the ocean yet.
But the biggest deposit of the metals like nickel and cobalt and manganese, and when I say the biggest, I mean like 70% of the known reserves of those metals lie in one deposit about 1,100 miles southwest of San Diego in the form of these polymetallic nodules.
The metals company had been focused on permitting that resource since 2011, so for more than 14 years. When we have been talking to the administration as we have for many, many years,
We were really talking to them about how we could bring those metals, those nodules to the United States for processing and refining so they could build an independent supply chain away from some other nations who they, you know, they had relations are up and down. At the moment, relations are pretty touchy, I would say. So critical minerals are an important topic of discussion. And of course,
You can't just magic up big deposits of these, firstly, because when you look around, you realize that China dominates some part of that chain, whether it's the ownership, the mining, or it's the processing. And so they're very clever. They've invested well ahead of the curve. And so there's not an easy way you can wrestle them out of that dominant controlling position
But this new category of ocean metals is a big opportunity for the United States. And quite frankly, it's a big opportunity for the metals company as well. You mentioned that it's touchy politically right now. And let's dig into that because you have an executive order encouraging deep sea mining in
Also, for some listeners, they may say, wait a second, why is an American executive order deciding what companies get to do in the deep sea? You also have the International Seabed Authority, which runs mineral rights in this zone, but the US isn't a part of that. There's a conflict there where you have the United States saying, go forth.
Go ahead, pull up those rocks with your robots and get us that cobalt. And you also have the International Seabed Authority saying, quote, exploration and exploitation activities in the area must be carried out under the authorities' control. It goes on to say, no state has the right to unilaterally exploit the mineral resources of the area outside the legal framework established by the UN Convention on the Law of the Seas. That sounds pretty touchy, Jared. What's going on? Are you allowed to pick up these rocks? What's happening?
We are. The International Seabed Authority, specifically the Secretary General, has got a little bit over his skis there because no one has sovereignty over the oceans. And if we wind the clock back to the 1970s,
The United States were the preeminent player when it came to developing this ocean resource. American companies were at the forefront when the Glomar Explorer was commissioned to go harvesting nodules from the CCZ, from the same area. And then, of course, what happened was the United Nations intervened and said, hey, we should join
make some agreement about how to handle these ocean metals in the area. But America never agreed to that. Many other countries did. Something called UNCLOS, the United Nations Convention of the Law of the Sea, was agreed in 1982. It was pretty unworkable. There was a lot of changes made to it. In 1994, a new version of it was agreed to. But America
Ronald Reagan was in charge in '82, and he was having none of it. He was like, "Hang on, I'm not going to join another multilateral organization where our voice, the United States, gets one vote." Instead, they became an objector, and they have remained a persistent objector to that treaty. America enjoys freedom of the seas.
And that includes access to those metals. It includes rights of navigation and the right to lay cables and other things. And so what America did in 1980 was put in place a regulatory environment. This is before UNCLOS was ever in place. America put in place a regulatory environment. It's known as DSHMR. It falls under the oversight of NOAA, the U.S. federal agency.
that allowed for the development of this very same resource. And under the rules of NOAA, five environmental impact studies were carried out by license holders in the CCZ.
One programmatic environmental impact study of the whole region was carried out by NOAA. The results of that were presented to Congress in 1995. The United States has a very rich history when it comes to this particular resource in this part of the ocean, the CCZ.
And so really, this is America just picking up the work it started way back in the 1970s. And of course, the current administration has made the supply and the security of supply a very high priority. And of course, we've seen critical minerals weaponized in some of the discussions that are going on now because of that dominant position that China have found themselves in.
And so this resource, a thousand miles off the coast of San Diego, is very attractive to the United States. It's also very attractive to China. And what people forget is that even though China currently dominates the critical mineral industry, they also suffer resource anxiety because they depend on a lot of other countries to secure those metals. And those countries...
may change the rules, they may nationalize assets, they may tell China they're not welcome anymore. Funny things happen. And so China also likes the idea of being able to pick up these rocks and send them straight to China without having to go through another country's ports or another country's government regulatory system.
So I think ocean metals are about to enter a golden era. So you are allowed to pick up these rocks by the United States. How close are you to getting, let's say, lithium from a rock in the Clarion-Clipperton zone picked up and then into a battery of a newly manufactured electric vehicle? Well, let's not say lithium because there are... Excuse me, cobalt. How about cobalt? Cobalt, nickel, copper. Sure. Well...
Since 2011, we have been out there moving through the permitting process. In fact, we've spent about $600 million. In 2022, we ran commercial collector trials with The Hidden Gem and our partner Allseas, and that successfully showed how our robot will move along the ocean floor, picking up these rocks, moving them to the production vessel, and then
And while we were doing that, we had 50 assets in the water observing environmental impacts. A big part of that $600 million has been spent on environmental research. Now, we are located in somewhere known as the abyssal plains. And if we think about our planet, about 50% of the entire planet is categorized as the abyssal plains and the abyssal hills. So it's about 10,000 feet and below.
under sea level. It's characterized by, of course, there are no plants, there's no sunlight there, there's not much life there at all. In fact, if you measure the amount of biomass down there, it's measured in grams per square meter, and it's dominantly single cell organisms living in the sediment. Now, it doesn't mean that life isn't important, and that's why we've been spending so much time and energy and money to study it. But when there's nothing else to study, you have to study what's there.
Because if this were compared to a land-based project, you don't go and study what's in the soil. And that's the equivalent of what we're doing. But what the results of all of that effort have been is the most compelling, comprehensive environmental ocean research program ever.
which we'll of course be presenting to the regulator. Now, of course, the regulator is NOAA. That will show what our impacts are, will show what the recovery rates are. Off the back of that very reliable data, we'll be able to forecast and the regulator will be able to assess our application.
So the good news is the metals company has been focused on that for the last 14 years. So we have an application ready to go. In fact, we have already lodged our application with NOAA. And the executive order gives us a fast track through permitting. And the reason why we went the United States way, of course, was because the International Seabed Authority said,
were struggling to agree the final rules because it's one of the things the United States didn't like about it. 169 countries now sitting around a table trying to agree something and they were just taking too long. They couldn't agree. And then, of course, environmental groups came in and started to make it a little bit more confusing because they had a different agenda.
So that all is leading to the answer to your question about when can we get these nodules up and turn them into metals. And so we haven't announced to the markets about when first production will happen. But what I can tell you is that we have our first production vessel, the Hidden Gem. We have somewhere to send the nodules for processing, and that is with our partner, Pamco, up in Japan. In fact, only a couple of weeks ago, we were hosting about 70 people
from all around the world, including analysts from New York, trading houses all over Japan, and other parts of Asia as well, because people are all of a sudden super interested in the metals that are going to come out of our nodules. And so I guess what I'm pointing to there is that we have all the pieces in place. The one part we're missing is the permit to go and do this. And what we're hoping is that with the help of the executive order,
that we can take all of that top quality, independent environmental research coupled together with our development to collect these nodules, our mind planning and everything else, and have a
an efficient move through the permitting process under the U.S. regulatory regime. And so I look forward to telling the market more about that, but I can confidently say it's probably going to be sooner than people were thinking we could move this into production.
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Motley Fool only picks products that I'd personally recommend to friends like you. For Motley Fool Money, I'm Mary Long. Thanks for listening. We'll see you tomorrow.