The Newsletter
The Transcript 11.16.20
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Succinct Summary: Pfizer announced that its vaccine is 90% effective and that gave a boost to market confidence. The vaccine could be great news for the industry and great news for society. Pfizer says that it will have over 1B doses ready next year. The vaccine could lead to some reflationary outcomes.
Macro Outlook:
Pfizer announced that its vaccine has 90% effectiveness
“It is a great day for science. It is a great day for humanity. When you realize that your vaccine has a 90% effectiveness. That’s overwhelming. You understand that the hopes of billions of people and millions and businesses and hundreds of governments were felt on our shoulders. Now, we can credibly tell them. I think we can see the light at the end of the tunnel.” – Pfizer (PFE) Chairman & CEO Albert Bourla
The company will have 50m doses ready this year and 1.3B next year
“We are already started manufacturing some time back. And as I said, we believe we should be able to have up to 50 million this year, 1.3 billion next year. These two were becoming gradually in the beginning, a little bit less than the first quarter more of a second-quarter more. And then we have a significant ramp-up in the second half of the year, deliver the 1.3 billion, but given how effective this vaccine is. And we are aware about the demand will be much higher than anything we can produce.” – Pfizer (PFE) Chairman & CEO Albert Bourla
It’s good news for the industry and great news for society
“I think that this morning’s news is if it continues to pan out, it’s very favorable for the industry. And if everybody can get the vaccines and the boosters by the end of next year, the recovery should – in the hotel space should accelerate in 2022, which is I think really good news and sooner than a lot of people are expecting. So, that’s good.” – Service Properties Trust (SVC) CEO John Murray
“We are very encouraged by the positive news earlier this week on the progress of potential vaccines.” – Walt Disney (DIS) CEO Bob Chapek
“…it’s great that we have seen that the Pfizer-BioNTech vaccine has this level of efficacy. And it bodes well for all the vaccines. Our vaccine, but the other competitive vaccines to the extent they are all targeting the spike protein. So that’s good news for the vaccine development. And we now know that COVID-19 is here to stay until we have a vaccine. So it’s good news for society overall. So we welcome those news and we celebrate that.” – Johnson & Johnson (JNJ) Vice-Chair Joaquin Duato
It could lead to some reflationary outcomes
“We have the potential for a vaccine that could give rise to some reflationary outcomes for the economy, perhaps even more than stimulus alone would bring. I think that’s good for the economy and inevitably will be good for banks in the context of perhaps a more slope to the yield curve” – Goldman Sachs (GS) CFO Stephen Scherr
International:
China advertising has returned to normal conditions, albeit some industry exceptions
“China advertising activity appears to have largely returned to normal conditions, albeit with a few industry exceptions lagging (for example, the travel industry), and with substantial changes in advertiser behavior (for example, toward retargeting and toward video format advertisements). We believe these changes, along with our own initiatives, have contributed to our increasing presence and relevance in China’s advertising market.” – Tencent (TCEHY) Chief Strategy Officer James Mitchell
Financials:
Covid has led to an acceleration in electronic payments
“The virus has been very interesting for payments. On one hand, it’s suppressing cash usage as people are worried about germs being spread via currency and so more people, even for small ticket items where they might have used cash in the past, are looking to use a debit card or a credit card.” – Visa (V) Chairman & CEO Albert Kelly
Consumer:
Consumer spending is up vs last year
“The good news is the consumers have stayed in the game. After a downturn in March and April, where the shutdowns really took hold, the consumers could have picked up their spending to the point that in October of 2020, versus October 2019, consumers spent more money at Bank of America. And year-to-date over $2.5 trillion of money going out of consumers’ accounts and doing things. They’ve actually spent about 1% more than last year. And so that means the consumers are in…And so they’re spending money just differently, in the aggregates more money.” – Bank of America (BAC) CEO Brian Moynihan
Disney+ has 73m subscribers in its first year
“I’m pleased to report that as of the end of the fourth quarter, Disney+ had more than 73 million paid subscribers, far surpassing our expectations in just its first year, and we’re continuing to see positive trends…We are going to continue to ramp up our investment in DTC. And we will be heavily tilting the scale from linear networks over to our DTC business, as we see that as we said in our opening comments our primary catalyst for growth as a company.” – Walt Disney (DIS) CEO Bob Chapek
Demand for fitness products is still high
“More states reopened gyms as the quarter progressed, yet the demand for home fitness did not waver. Overall, we continue to see signs of a prolonged and permanent new normal for the home fitness market,” – Nautilus (NLS) CEO Jim Barr
Technology:
Gaming is exploding
“Frankly, gaming is just exploding. It’s a $200 billion a year industry. And so kids, adults, male, female, young, old, whatever it is, are games. And so that drives that demand profile, which we love to see. I think we’ll continue to see supply shortages as we head into the post-holiday quarter, so Microsoft’s Q3, calendar Q1” – Microsoft (MSFT) Xbox CFO Tim Stuart
The shift towards video advertising
“I think with the advertising industry, if you look globally, then there’s an enormous shift in how advertisers are spending online. And generally speaking, there’s a shift toward video format, and there’s a shift toward retargeting. Well, if you look at, let’s say, Google’s results for the third quarter, then I think that their search revenue grew $1-point-something billion year-on-year, which is great, but their YouTube revenue also grew $1-point-something billion year-on-year, which is amazing given YouTube is from a much smaller base than search. And that speaks to both of those phenomena: that YouTube is a natural home for video advertising; and in the last 2 years, Google has allowed advertisers to retarget from prior search queries and other sort of intent-based activities into advertising within YouTube.” – Tencent (TCEHY) CEO Pony Ma
Demand outlook is good for semiconductors
“The demand outlook for semiconductors remains very strong, driven by IT infrastructure, digital transformation of businesses, and an acceleration of longer-term technology trends, especially Al…” We’re at an inflection point in the industry relative to how you drive the technology forward. One of our biggest customers two months ago, talked about their roadmap beyond 2020 to double energy-efficient computing every two years.” – Applied Materials (AMAT) CEO Gary Dickerson
Healthcare:
50% effectiveness would be a good threshold for the vaccine
“So the FDA has asked for at least 50%, and the European Agency actually said recently on the record that they will be willing to approve a vaccine with less than 50%. It’s, of course, extremely difficult to guess the efficacy until you have the data because it’s science.” – Moderna (MRNA) CEO Stéphane Bancel
Industrials & Transports:
Domestic travel has recovered but international travel not yet
“Domestic travel really has been what’s bolstering the recoveries that we’ve been seeing. So that steady improvement that we’ve seen in our own business is really driven by domestic travel, which floored out at down 86% in April, down around 43% in September, and every months getting better. But you can see international travel is stuck, right? So there’s been a slight improvement from the floor. But until we really get international travel moving, this number will stay down.” – Samsonite International (SMSOF) CEO Kyle Gendreau
Business travel may not recover quickly even after the vaccine
“I think that I have heard it from the finance team here how much savings have occurred at RMR as a result of less travel and entertainment and more videoconferencing and I think probably every finance and accounting team in corporate America and worldwide is looking for some of the silver linings in what’s been going on. And I think that there is going to be a lot of pressure to keep T&E expenses from increasing dramatically once the vaccines are out and available and people are trying to get back to normal. So, we don’t think that business travel is going to recover as quickly as some people maybe projecting.” – Service Properties Trust (SVC) CEO John Murray
We can be efficient without traveling
“I haven’t traveled in eight months, and I’m a guy who traveled 80 percent of the time. And I feel like as much as I feel a bit locked down from time to time, I feel like I’ve been pretty efficient. And I think all of us, as business leaders, have realized that perhaps we had people taking trips that might not have been necessary, or we sent too many people on a trip, or we sent somebody to give a presentation for an hour and a half and sent them around the world, and that cost money and it cost time, which is money, and now realize that, boy, a lot of that stuff can be done on any one of these video platforms that work darned well. So I do think there is going to be at least a medium-term adjustment in the amount of business travel.” – Visa (V) Chairman & CEO Albert Kelly
