Wall Street Lunch: Help Me George Lucas, You’re My Only Hope

Summary:

• Star Wars creator George Lucas supports Disney CEO Bob Iger in the proxy battle against activist investor Trian Fund Management.
• Nvidia stock under pressur post-GTC despite Wall Street enthusiasm.
• EV maker Fisker fights to survive as it secures financing and tries to avoid bankruptcy.

Listen below or on the go on Apple Podcasts and Spotify

Major Disney shareholder George Lucas backs Bob Iger in proxy battle. (0:16) Nvidia sees sell-the-news reaction to GTC. (2:30) EV maker Fisher halts production as it fights to survive. (3:11)

The following is an abridged transcript of the podcast:

Our top story so far

I’m Luke Skywalker and I’m here to rescue Bob Iger.

It looks like the Disney (NYSE:DIS) CEO can count on help from the Rebel Alliance. Star Wars creator George Lucas is backing Iger in the proxy battle between the company and activist investor Trian Fund Management.

Lucas, who is Disney’s largest individual shareholder with 37.1 million shares after selling Lucasfilm to Disney in 2012, told CNBC that he has “full faith and confidence” in Disney and Iger’s track record of “driving long term value.”

Lucas said he voted all of his shares in favor of Disney’s slate of directors and urges “other shareholders to do the same.” The Battle of the Death Star, or rather the shareholder meeting, will take place on April 3.

Disney and Trian did not immediately respond to a request for comment from Seeking Alpha.

And a little trivia for fellow Star Wars nerds, in the 2008 video game The Force Unleashed, there was a droid named Proxy

In today’s trading

The major averages are mixed, with the Dow (DJI) higher, but the Nasdaq (COMP.IND) lower.

Global rates are lower as traders assessed the implications of the Bank of Japan raising interest rates for the first time in 17 years.

February housing starts jumped 10.7% M/M to an annual rate of 1.521 million, well ahead of the 1.449 million expected and upwardly revised 1.374 million in January. Single-family housing starts came in at rate of 1.129 million, up 11.6% from the revised January figure of 1.012 million.

Building permits rose 1.9% M/M to 1.518 million, compared with the 1.5 million consensus and upwardly revised 1.489 million in January.

Odeta Kushi, deputy chief economist at First American, says: “The tale of two markets continues, as the new home market continues to outperform the existing-home market.”

“Lower mortgage rates should support more new and existing-home sales, but the single-family new home market will likely continue to outperform because unlike existing homeowners, builders are not rate locked-in.”

And in crypto Bitcoin (BTC-USD) is slumping. After setting an all-time high of $73,800, it is trading down around $63,000. Bitcoin’s market cap fell 14% in just five days, reaching $1.25 trillion.

Among active stocks

Nvidia (NASDAQ:NVDA) is seeing a sell-the-news reaction to its GTC conference despite a bevy of announcements that left many on Wall Street impressed.

Morgan Stanley analyst Joseph Moore, who has on Overweight on the stock, says: “It is clear from the GTC keynote that despite all that has happened in the last 18 months, Nvidia believes we are still early when it comes to unlocking the potential of generative AI.”

Super Micro Computer (SMCI) is under pressure for the second-consecutive session this week as it announced plans for a proposed underwritten registered public offering of 2 million shares of common stock.

The company also intends to grant underwriter Goldman Sachs a 30-day option to purchase up to an additional 300,000 shares.

Fisker (FSR) is halting production for six weeks as the cash-strapped EV maker shifts into overdrive trying to avoid bankruptcy by securing funds to keep its business running.

Its shares, which have been in freefall since it flagged going concern doubts, dropped 15.6% on Monday. The stock is down ~92% YTD. Fisker also secured a $150 million financing commitment from an existing investor, contingent on conditions including filing its delayed 2023 annual report and continuing deal talks with a large automaker for a potential investment and North America manufacturing.

And Mizuho launched coverage on of 15 companies in the Consumer Hardlines and Consumer Internet verticals. It took an optimistic view for the balance of 2024 due to the expectation for a stable spending backdrop. Top picks include Lowe’s (LOW) within core Consumer Hardlines and large caps, Wayfair (W) within our Consumer Internet coverage and Mister Car Wash (MCW) within small-caps.

Analyst David Bellinger pointed to broader spending measures that are firming up, despite some pressures on consumers. Mizuho’s outlook embeds a tepid retail spending environment characterized by low single-digit growth in comparison to the latest adjusted retail sales data for February.

And in the Wall Street Research Corner

With lots of chatter about how concentrated the stock market is, Goldman Sachs compares the valuations of the Magnificent 7 stocks – AAPL, AMZN, GOOG, META, MSFT, NVDA, TESLA) – with the leaders of renowned market bubbles.

Chief Global Equity Strategist Peter Oppenheimer says:

“While high stock market concentration may be a sign of a bubble, it does not necessarily mean there is one. For example, when Japan’s stock market briefly became the world’s largest, and reached a P/E of 67x, the biggest companies in the index were banks, but the market was not particularly concentrated.”

“Furthermore, while the biggest stocks in the US equity market are much bigger today, as a share of the market compared with the stock market bubble of 2000 current valuations are much lower than have been typical in other recent bubble periods, stretching back to the Nifty 50 era of the early 1970s, the Japanese bubble in the late 1980s, and indeed the technology bubble in 2000.”

Using a 24-month forward P/E, the peak valuations stocks in the different eras are:

Among the Magnificent 7, Tesla (TSLA) has the highest valuation at 40.3x. In the 2000 tech bubble it was Cisco Systems (CSCO) at 101.7x. Industrial Bank Of Japan was valued at 154.2x during the 1989 Japanese financial bubble. Back in 1973, the highest valued stock of the Nifty Fifty was Xerox (XRX) at 45.8x.

Editor’s Note: This article covers one or more microcap stocks. Please be aware of the risks associated with these stocks.

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