Disney’s Next Deal

Good morning.

What did you eat in the Value Wars, daddy? 

Starting today, McDonald's is launching its new McValue menu in US locations, which will include "buy one, get one for $1" offers among other deals. The promotion comes a week after Dunkin unveiled a new winter menu including a $5 meal deal. And not to be left out, Subway on Monday announced a new "Meal of the Day" promotion that puts a new menu item on sale each day of the week, such as a $6.99 six-inch sub with a small drink, and two cookies or a bag of chips. Even so, the older (if stockier) Value War veterans among us still pine for the days of $5 footlongs.

Even as the midwest and mid-Atlantic were treated to snow and bitter cold by Winter Storm Blair on Monday, 401ks were potentially being taken off the ice.

Monday saw the Dow, S&P 500, and Nasdaq touch one-week highs. Record earnings from a crucial assembler of Apple and Nvidia products and much-disputed news that the incoming administration might water down its plans for tariffs highlighted core themes likely to dominate the year.

Chip Off the Old Stock

The S&P 500 rose 23% last year thanks to a dip in inflation and soaring big tech stocks fuelled by the promise of artificial intelligence. The Magnificent Seven — Alphabet, Amazon, Apple, Meta, Microsoft, Nvidia, and Tesla — accounted for more than half of the index's total return, and now make up roughly a third of its total weight, up from a fifth two years ago.

So when Taiwan's Foxconn, which assembles Apple and Nvidia products, announced a record $64.7 billion in quarterly revenue for its latest three-month period, it was little surprise that Nvidia rose 3.4% and Apple 0.7%, nudging the S&P 500 0.5% higher. Rideshare giants Uber and Lyft both surged after Uber unveiled its $1.5 billion buyback plan — both are up over 5% in the young year partly on the promise of AI, as they're set to introduce robotaxis in 2025.

But the encouraging uptick doesn't mean a repeat of 2024:

• The consensus price target for the S&P 500 is 14% higher than where it closed at the end of 2024, according to FactSet, suggesting investors see room to grow but not as much as during the historic run of the past two years.
• Promises of tax cuts and deregulation from President-elect Donald Trump have sparked optimism for dealmaking and markets, but that's been weighed against the prospect that tariffs could stoke inflation. Wall Street got excited by a Washington Post report Monday that said Trump's transition team is toying with the idea of softening his proposed tariffs on foreign goods. Trump, however, called it "fake news."

Warning Shot: Federal Reserve Governor Lisa Cook played the role of naysayer Monday, issuing a stark warning during an address in Michigan that equities are dangerously overvalued. "Valuations are elevated in a number of asset classes, including equity and corporate debt markets, where estimated risk premia are near the bottom of their historical distributions, suggesting that markets may be priced to perfection and, therefore, susceptible to large declines, which could result from bad economic news or a change in investor sentiment," she told an audience at the University of Michigan Law School. Indeed, the S&P 500's high price-to-earnings ratio led Goldman Sachs analysts to forecast in the fall that it would produce an annualized nominal total return of just 3% for the next decade. Now that's cold.

Written by Sean Craig

Different sociologists will have different terms for the stages of the curve, but in essence, there are a few cohorts.

There are the innovators — early adopters that gravitate to new ideas and aren't bothered by bugs.

There are the pragmatists — open to new things, but aren't willing to bend over backwards.

And there are the skeptics — actively hostile to new tech.

While politicians aren't necessarily known for their propensity for innovation, one presidential candidate casually mentioned a new tech that some people believe could change the world (no, it's not AI).

The Motley Fool has 7 stock ideas they think could benefit from this tech's rise.

Join Motley Fool to get the report.

On Monday, Disney entered a marriage of convenience with its one-time legal foe, joining forces with Fubo, the cable-like internet-connected Pay TV provider. 

The deal puts an end to Fubo's ongoing lawsuit that sought to block Disney's efforts to build Venu Sports, its sports-only streaming joint venture with Fox and Warner Bros. Discovery.

Game On

Cable cord-cutting is table stakes in today's TV industry. But some people — mostly a few million sports fans desperate to retain access to live broadcasts — still want cable-like services. They just don't want them from traditional cable providers. Enter services like Fubo, YouTube TV, and Hulu+ Live TV, which essentially offer cable-like linear TV packages over the internet (at increasingly cable-like prices).

In fact, the market for sports-starved cable-cutters proved large enough that last year Disney, Fox, and WBD moved to service the cohort collectively via the yet-to-be-launched Venu Sports. The streaming JV will package together each media company's sports-centric linear TV channels — so Fox Sports 1, the ESPN family of channels, and so on — in a livestreaming bundle priced at a skinnied-down $42.99, or roughly half the typical price for a standard cable package. It's designed to be the perfect package for anyone wondering why they're paying for 200 TV channels when they really only watch baseball and basketball. Soon after the Venu announcement, the sports-centric Fubo filed a lawsuit alleging that the creation of Venu Sports would violate antitrust law. By August, a US judge imposed a temporary injunction on the launch of Venu.

But with Monday's announcement, Fubo's lawsuit came to an end as it prepared to make a big splash by combining with Disney's Hulu+ Live TV:

• The new company will have 6.2 million subscribers, making it the second-largest internet Pay TV provider behind YouTube TV, which Google says has more than 8 million subscribers.
• The properties will be held by the Fubo company, which will be 70% owned by Disney; on a call with investors Monday, Fubo executives said they expect revenue of around $7.5 billion by 2028, up from around $6 billion now, as well as $550 million in EBITDA. The Venu trio will also be paying Fubo an aggregate cash payment of $220 million to end the legal dispute, with Disney also offering a $145 million term loan in 2026.

What Channel is the Game On? For now, at least, Fubo says its service and Hulu+ Live Sports will remain seperate services. Venu, which will have much of the same content, will also presumably launch sometime this year. Disney also promises to launch a standalone ESPN streaming service in the near future. Which of course is not to be confused with streamer ESPN+, which can currently be bundled with Disney+ and Hulu. Which, of course, is not the same as Hulu+ Live TV — though it can all be bundled together. That's progress, right?

Written by Brian Boyle

Freshly squeezed is something you want to apply to your carton of OJ, not your wallet.

Alico, one of America's biggest orange growers and a major supplier to Tropicana, announced Monday that it is sunsetting its citrus business in the Sunshine State. Florida, which has been famous for its oranges for over 150 years, has taken a devastating hit to its citrus crops in recent years, and Alico decided there's just nothing left to squeeze.

Orange You Glad You're Not Florida

Florida oranges have been an iconic US crop, but recent years have left them severely bruised. According to United States Department of Agriculture (USDA) data, the Florida citrus crop has shrunk by 92% over the past 20 years. In December, the USDA forecasted Florida's harvest for 2024 to be 33% lower than the year before. For Alico, last year marked the final straw, as it said it'll wind down its citrus division after the 2025 crop and will instead focus on becoming a "diversified land company."

Florida's ongoing citruspocalypse is due to a couple of factors, including increasingly frequent hurricanes and a bacterial infection called citrus greening disease or Huanglongbing (HLB). The spread of citrus greening has already driven up US orange juice prices: 

• In June 2024, the price of orange juice stood at $4.26 per 16 ounces, up 80% from June 2020.
• Orange juice futures have continued to climb since then, rising 27% from June 2024 to January 3 of this year. 

Florida isn't the only US state with an orange-growing business. California has boosted its citrus production to fill the gap in the market. However, it faces some of the same challenges with extreme weather events placing uncomfortable limits on yield growth. Per an October report from trade publication Fruitnet, the 2024 harvest for California's navel oranges was only forecast to rise 2% year-on-year due to a heat wave.

Just Peachy: Florida oranges aren't the only iconic US fruit having a tough time. In both 2023 and 2024, Georgia lost between 80% and 90% of its peach crop. Keep an eye on those peach cobbler futures, folks.

Written by Isobel Asher Hamilton