Prof G Markets: Third Quarter Review — with Aswath Damodaran | The Prof G Pod with Scott Galloway

Intro

In this episode of “The Prof G Pod with Scott Galloway,” Scott Galloway and Aswath Damodaran discuss the highlights and insights from the third quarter earnings season. They also touch on various topics such as real estate, streaming services, Tesla, and the impact of GLP1 drugs on social media addiction. Join them as they provide valuable analysis and engaging commentary on the current market trends.

Main Takeaways

Real Estate and Market Updates

• The National Association of Realtors and several brokerages were fined 1.8 billion dollars, potentially lowering the cost of home buying in the US.
• WeWork filed for Chapter 11 bankruptcy, marking the end of an era for the company.
• Saudi Arabia is set to host the 2034 World Cup, the only country to show interest after Australia decided not to bid.
• Disney agreed to purchase Comcast’s remaining one-third stake in Hulu for $8.6 billion, giving Disney full ownership over the streamer.
• Airbnb reported third-quarter results that beat on revenue, but the stock fell around 3% on weaker than expected guidance for the rest of the year.

Disruptive Business Models

• WeWork’s bankruptcy marks the end of an era, and the bondholders who will seize the company’s assets and declare bankruptcy are likely to make money.
• Masayoshi-san disrupted the office space industry with WeWork.
• Four Seasons operates on a successful licensing model.
• Saudi Arabia’s investment in sports is an ultimate branding move.

Streaming Services and Valuations

• Disney’s consolidation around streaming, movies, and parks makes sense for them.
• Airbnb’s consolidation is a good move, but its valuation is uncertain due to potential travel restrictions from the war in the Middle East.
• Netflix looks overvalued while Disney looks undervalued in the current market.
• The streaming market is still figuring out how to make a sustainable business model work.

Tesla and the EV Market

• Tesla’s software business is worth $50 billion, and the robot taxi business, which doesn’t exist yet, is worth $200 billion according to the speaker’s valuation.
• Legacy automobile companies are struggling to keep up with the EV market, and it’s unclear if they have a good endgame.
• Energy companies like Chevron and Exxon may still provide fossil fuels for 98% of the world’s automobiles, making them potential investment opportunities.

Intangible Assets and Company Valuation

• Valuing intangible assets is crucial for accurate company valuation.
• Intangibles like brand name, management, and cultural impact can contribute to a company’s value.
• The value of a company can be affected by the intangible qualities of its leadership, such as with Tesla and Elon Musk.

Market Trends and Economic Factors

• The “ozempic effect” refers to companies like McDonald’s, General Mills, and PepsiCo seeing stock performance growth while obesity rates in America have also increased.
• Alternative energies have not made a significant impact on the percentage of energy we get from fossil fuels.
• The war in the Middle East may impact oil prices and companies that depend on oil.
• GDP growth hit 5%, fossil fuel expansion in two years, interest rates remain steady.

Technology and Business Tools

• Atlassian offers software to keep teams connected and moving together towards shared goals.
• Mercury is a financial technology company that makes banking easy for startups.
• AI may become ubiquitous in every company’s toolkit, but it may not change the way businesses operate for the bulk of companies.

Summary

Real Estate and Market Updates

In the real estate sector, the National Association of Realtors and several brokerages were fined 1.8 billion dollars, potentially leading to lower costs for home buyers. WeWork filed for Chapter 11 bankruptcy, signaling the end of an era for the company. Saudi Arabia’s successful bid to host the 2034 World Cup showcases its commitment to sports branding. Disney’s acquisition of Comcast’s stake in Hulu solidifies their control over the streaming service. While Airbnb reported strong revenue for the third quarter, concerns about future travel restrictions impacted its stock performance.

Disruptive Business Models

WeWork’s bankruptcy highlights the flaws in its business model and the potential profitability for bondholders. Masayoshi-san’s disruptive approach to the office space industry with WeWork has reshaped the market. Four Seasons’ successful licensing model sets it apart from traditional hotel chains. Saudi Arabia’s investment in sports serves as an ultimate branding move for the country.

Streaming Services and Valuations

Disney’s consolidation around streaming, movies, and parks aligns with their long-term strategy. Airbnb’s consolidation efforts are commendable, although uncertainties surrounding the war in the Middle East impact its valuation. Netflix’s high valuation raises questions, while Disney’s undervaluation presents potential opportunities. The streaming market is still experimenting with sustainable business models.

Tesla and the EV Market

Tesla’s software business and potential robot taxi business contribute significantly to its valuation. Legacy automobile companies struggle to keep up with the electric vehicle market, raising concerns about their future. Energy companies like Chevron and Exxon remain relevant due to their dominance in providing fossil fuels for the majority of automobiles.

Intangible Assets and Company Valuation

Valuing intangible assets, such as brand name, management, and cultural impact, is crucial for accurately assessing a company’s value. The intangible qualities of leadership, exemplified by Elon Musk’s impact on Tesla, can significantly influence a company’s worth.

Market Trends and Economic Factors

The “ozempic effect” reflects the stock performance of fast food and processed food companies despite increasing obesity rates. Alternative energies have not made a substantial impact on reducing fossil fuel consumption. The war in the Middle East may impact oil prices and companies dependent on oil. GDP growth, fossil fuel expansion, and steady interest rates contribute to the current economic landscape.

Technology and Business Tools

Atlassian’s software facilitates seamless collaboration and goal alignment within teams. Mercury simplifies banking for startups, allowing them to focus on building their companies. While AI may become prevalent in businesses, its transformative impact varies across industries.

Conclusion

This episode of “The Prof G Pod” provides valuable insights into the latest market trends, disruptive business models, streaming services, Tesla’s position in the EV market, intangible assets’ impact on company valuation, and various economic factors. Listeners gain a deeper understanding of the current business landscape and potential investment opportunities. Don’t miss out on the engaging analysis and informative discussions presented by Scott Galloway and Aswath Damodaran.