Decoding the Tech and Media Landscape: Insights from Goldman Sachs

In a captivating discussion at the Goldman Sachs Communicopia and Tech Conference, Yahoo Finance Executive Editor Brian Sozzi and Catalysts Host Madison Mills sat down with Goldman Sachs senior equity research analyst Michael Ng to delve into the state of media and tech companies, from Apple (AAPL) to Disney (DIS).

Unlocking the Future: A Comprehensive Analysis of the Tech and Media Sectors

Apple's Unveiling: Navigating the Expectations and Implications

Apple's (AAPL) highly anticipated "It's Glowtime" event in Cupertino, California, on Monday unveiled the company's newest product offerings. According to Ng, the event "delivered in line with investor expectations," noting that historically, the company has underperformed the S&P 500 by 70 basis points on announcement days, and following the event, it underperformed by about 100 basis points. Ng explains that this performance was "in line with historical events," and the individual product announcements "came in mostly as expected."Ng reiterates his Buy rating on Apple, arguing that "there's an underappreciated uplift in their normalized earnings power as more people start to upgrade their iPhones." He believes that the industry has historically thought about Apple iPhones at a normalized sell-through rate of around 225 to 230 million units, but with the introduction of AI and new product features over the next few years, that normalized run rate could increase to 250 to 260 million units. While there is debate among investors as to whether AI will be the demand driver for Apple, Ng remains bullish on the technology. He also highlights that hardware changes, such as increased screen sizes, thinner devices, and the potential for a foldable iPhone 18, will drive an upgrade cycle.

Warner Bros. Discovery: Navigating the Challenges and Opportunities

Turning to Warner Bros. Discovery (WBD), Ng believes that the company is managing its video business holistically. He acknowledges that the linear TV network business is facing challenges, with "cord cutting" and paid TV subscriber declines continuing to occur. However, Ng points out that this business is "incredibly cash-generative" and helps to fund growth investments elsewhere in the Warner Brothers portfolio.Ng highlights the momentum in Warner Bros. Discovery's streaming platform Max, and argues that the company's "crown jewel" lies in its film and television studio. Despite the challenges in the linear TV network business, Ng believes that Warner Bros. Discovery is taking a comprehensive approach to managing its video offerings, leveraging the strengths of its various divisions to drive growth and innovation.

Disney's Succession Planning: A Critical Juncture

Ng believes that one of Disney's (DIS) biggest challenges will be its succession planning. Investors have praised the company's growth under CEO Bob Iger, and Ng notes that before Iger's return to the company, Disney faced "a few missteps," especially in its film and TV divisions. Ng emphasizes the importance of this transition, stating, "I think there's a tremendous amount of focus on what that succession planning looks like."Ng highlights that Disney has "an incredibly deep bench of talented executives across each of their business lines, theme parks, film and TV studios, and obviously at ESPN." This depth of talent suggests that Disney may have a strong pool of candidates to consider for the next CEO, but Ng acknowledges the significance of this decision and the potential impact it could have on the company's future direction.As the tech and media landscape continues to evolve, the insights provided by Goldman Sachs' Michael Ng offer a valuable perspective on the challenges and opportunities facing industry leaders like Apple, Warner Bros. Discovery, and Disney. By understanding the nuances of these companies' strategies and the broader trends shaping the sector, investors and industry observers can better navigate the complexities of this dynamic environment.