Amazon should be divided. ViacomCBS turns into Netflix.
Disclaimer: when we talk about, that something has grown, we mean a comparison with the same quarter a year earlier. Since all issuers are from the USA, then all results in dollars. When creating the material, sources were used, inaccessible to users from the Russian Federation. We hope, Do you know, what to do.
«Amazon, Delhi(Smiling)!»: shareholder(s?) asks the internet giant section
Investor-activist Dan Loeb, whose Third Point fund do you remember from its anti-Shell campaign, hinted at a meeting with investors, that Amazon (NASDAQ: AMZN) split into two independent companies: online retail and cloud business (AWS).
The key word is "hinted". There were no open calls to divide Amazon from Loeb, but the general idea was, that individually different Amazon divisions will cost more, than together: the value of AWS as an enterprise could be as much as $1.6 trillion — slightly more than the $1.54 trillion market cap of a single Amazon. Amazon retail business Loeb estimates in the region of a trillion.
Since September 2021, Loeb's Third Point has increased its stake in Amazon from 608 to 784 million, which makes the company one of the largest assets of the fund. In a message to the fund's investors regarding the increase in Amazon's stake, Loeb said: "We are convinced that, that Amazon is at a major crossroads, while the new management of the company reflects on the long-term plan for its further development, which may include several bold initiatives, which are the object of investor gossip in the market”.
In the context of growing antitrust pressure on Amazon, I think, that Loeb is cautiously hinting at the possibility of a company split. I already spoke about the possibility and even the desirability of implementing such a scenario for investors last November. The upside potential of the independent AWS - and its shares will have to be received by the shareholders of a single Amazon - exceeds the potential of a single Amazon. Very similar, that Loeb wants that too. But convincing management and other shareholders of this will not be easy..
The motivation of Amazon management is simple: low-margin and balancing on the verge of loss retail efforts of the company can be paid mainly only by profitable and high-margin AWS.
Why does Amazon management need to persevere, worthy of a better use, dragging the retail business by the ears is a separate issue, but the matter, certainly, not only and not so much in economic motivation, after all, as a retail business, Amazon is of dubious value. Rather, it is about the satisfaction of their own ambitions by the leaders of the company.: "Amazon in every city and home".
There is a possibility that, that Amazon, after reaching a certain ceiling, will be able to increase prices and margins. But highly doubtful, what can she do: Amazon has not yet achieved an absolute monopoly, already under serious attack..
And even more so, we have a negative example. In China, the local Alibaba seems to have become "Amazon, who could": the company has taken a larger share of the online commerce market in China, than Amazon in the US, And, among other things, due to this, she made her retail business very profitable. But Alibaba's success still drew unwanted attention from regulators., who ended up clipping her wings.
Extremely doubtful, that it will be easier to build a monopoly in the USA, than in China. But so far, Amazon has not experienced really massive pressure - so its leadership, probably, will persist in this regard.
As for shareholders, then most of them are fascinated by the history of Amazon quotes, which "proves", that Amazon would rather remain a single company. To make an activist investor's campaign a success, the stock of the target company must not only fall sharply, and even after that, quite a noticeable time to stagnate. And this is not yet: Amazon quotes go from victory to victory. This explains Loeb's caution.: massive campaign against Amazon will not meet the support of the main mass of investors. Anyway, Right away.
Third Point campaign against Shell, where Third Point also demanded the separation of the company, although it did not bring immediate positive results, but contributed to a significant improvement in the situation for the shareholders of the company: she began to spend more money on the needs of shareholders and went on reforms for the benefit of investors.
Therein, as for Amazon, Loeb said, that he was very pleased with the following developments around the company:
- That, that the company started from January 2021 the buyback of shares - for the first time in 10 years. Share buybacks push prices up., artificially increasing the demand for shares and reducing the supply level. So far spent about 1.3 billion, but there is an opinion, that shareholders should expect big Amazon spending in this area.
- That, that Amazon is now publishing a more detailed breakdown of its operations - in particular, advertising revenue.
- That, that Amazon details the cost of renewal of fixed assets by category.
And even if Amazon does not split, then, in order to forestall the dissatisfaction of the shareholders, it will also undertake some movements. So that, as football hooligans say in such cases, "if you fought, you haven't lost yet.".
A Prime Twist: ViacomCBS becomes Paramount Global
Media conglomerate ViacomCBS rebrands as Paramount Global (NASDAQ: PARA) as part of the reorientation of the entire company to the streaming business. The company's tickers will change: Class A shares will be called PARAA, and class B shares will be called PARA.
Paramount+'s streaming service just added 7.3 million new subscribers in the past quarter, bringing the service's total subscriber count to 32.8 million.. But it's not the company's only streaming service.: still have Showtime and BET. If you count with them, the total number of streaming subscribers ViacomCBS and Paramount reached 56 million.
This result turned out to be better than expected.: the company intended to achieve it only by the end of 2022. At this rate, she will reach 2024 plans of 70 million subscribers by the end 2022, and by 2024 it is planned to reach 100 million subscribers.
We published an investment idea on ViacomCBS, based on assumption, that the company will be bought by a larger streaming player. The investment idea worked anyway, gave 40% behind 5 Months, but the company, How are you, I guess, could have noticed, still not bought. Furthermore: the company not only does not intend to sell its streaming service or itself, but now plans to independently develop as a streaming business.
Paramount plans to release original content of various kinds, but Paramount's collaboration with Taylor Sheridan seems to me the most promising. He may be familiar to the public watching series for supporting roles in many series., like Sheriff Hale in Sons of Anarchy. But about eight years ago, he retrained as a screenwriter. And he became very successful.: according to his scripts, they filmed the dilogy "Sicario" and he received an Oscar nomination for the screenplay "Any Cost".
In 2018 Paramount Studio, assessing his experience and achievements, allowed him to do a series about yellowstone ranchers with Kevin Costner, who, quite unexpectedly for everyone, achieved the widest success inside the United States. During the New Year holidays, the fourth season finished airing - and by this time the series had become one of the most popular in America., The last episode was watched by more than 11 million people at the time of release..
At the same time, "Yellowstone" is not available on Paramount's streaming services.: she had previously licensed it to competitors from Comcast. But it's okay: Sheridan is churning out new series for Paramount - and taking place in the same universe. Already released "1883" and "Mayor of Kingstown", Four more series are in the works.
Certainly, Paramount has an extensive and forward-thinking content library, like the South Park and Star Trek series. But the "Sheridan universe" seems to me the most promising direction.. Here's why.
Sheridan makes films about "one-story America" with a minimal amount of progressive left-liberal agenda - and the demand for it, surprisingly, in America there is. And even big.
From a commercial point of view, this approach has shown itself to be very, very promising.: on a smaller scale compared to Sheridan, but some independent studios outside of the Hollywood system were successful in principle making money, making films about and for conservative Americans, - how, for example, Dallas Saunier.
I would expect, that due to the influx of right-wing conservative viewers, Paramount Global's streaming service could grow strongly. Finally, No one, except Paramount+, no longer produces such content in such quantity and with such quality - this is a very promising niche. And the growth of Paramount + can make the whole company more attractive to a third-party buyer - the benefit of Paramount shareholders is very hopeful for this.: from the news about the reorientation of the company to streaming, its shares fell significantly.