In this episode of MarketFoolery, Chris Hill chats with Motley Fool analyst Tim Beyers about the latest headlines and earnings reports from Wall Street. They discuss the latest generation of iPhones and other industry players whose hardware these devices are using. They go through the quarterly results of a health insurance giant, and finally, answer a listener's question about forgotten old stocks and much more.
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This video was recorded on October 14, 2020.
Chris Hill: It's Wednesday, October 14th. Welcome to MarketFoolery. I'm Chris Hill, joining me today, our man in Colorado, it's Tim Beyers. Good to see you.
Tim Beyers: Good to see you, Sir.
Hill: We have got the latest from UnitedHealth (NYSE: UNH). We are going to dip into The Fool mailbag, but we're going to start with yesterday's event that Apple (NASDAQ: AAPL) held.
Apple unveiled four new versions of the iPhone 12, including the Mini, the Pro, the Pro Max. Tim Cook said this is the beginning of a new era. And this, from an optics standpoint, Tim, [laughs] this appeared to be very much about not just the new phones, but 5G. The CEO of Verizon, Hans Vestberg, joined Cook on stage from a safe social distance. We'll get into the phones themselves in a second, but what did you think of the 5G messaging that was coming out of Apple yesterday?
Beyers: Oh, it was amazing messaging, if only it were as accurate as the hype was making it out to be. So, my headline on this, Chris, is that this is an amazing announcement for a lot of people, but not necessarily Apple. Here's the problem with the 5G news, if you put cardboard in front of a millimeter wave 5G device then that 5G device is essentially, it is stopped from doing any kind of 5G broadcasting. It's not that Apple has done anything bad here, it's that they're touting 5G in a way that makes you believe that as long as you have a phone that says 5G, you are going to get 5G speeds; that's just frankly not true. The real thing that has to happen here, there has to be a massive build out of the network. So, Verizon being on stage, that's a good thing. What it tells me is that very likely, the first network that's going to make your iPhone 12 5G compliant device work like an actual close-to-5G device is probably going to be Verizon. Although, that's really going to depend on where you're located. If you're in a big city, like, if you're in New York, if you're in San Francisco, odds are you're probably going to get that kind of connectivity a lot sooner.
But millimeter wave is a funky technology that we could go under the hood on, and I'm not going to unless you ask me about it ...
Hill: [laughs] ... I'm not.
Beyers: Yeah, I didn't think so. But the bottom-line here is that if you're buying this phone because you believe it's going to give you 5G, please don't.
Hill: In terms of the phones themselves, you know, there have been events in the past where Apple has come out in the Fall, they've unveiled the latest-and-greatest iPhone. And to my untrained eye, I sort of look at it, and you know, there are always new features, but in the past, a lot of times I have looked at whatever is the newest version of the iPhone and I've thought to myself, well, this is probably going to be something that the Apple enthusiasts are going to rush out to buy. That was not the case this time, actually, with the phones that they had.
I looked at the Mini, which is the least expensive of them. And I looked at that and I thought, boy! I bet for some people who are price-conscious or just don't want a larger phone, I think that is going to appeal to them. And then in terms of the Pro and the Pro Max, I think that's going to appeal to media professionals. So, I see this as, I'm not saying that this is going to be the most successful event in terms of new sales, but I see the targeting that they're doing and I think it could be a hit, particularly with the Mini.
Beyers: I think you're right. Because here's the thing, I have a -- what is it now, four-year-old Apple iPhone SE. I think where this really wins for Apple, if it really wins, but let's say you're right -- and I think you're thinking right about this, Chris, Apple is betting on that iPhone 12 Mini to be, kind of, like the upgrade path, maybe the skip a generation upgrade path for somebody who has, like, an iPhone SE. If they can get you into a $699 phone from where you were at an iPhone SE or let's say at, like, an iPhone 8 or even an XR, they win, they win. They do not need to sell very many of these iPhone 12 Maxs, which is like, it's got so many superlatives in it it's like its own sporting event. I mean, it really is, it's something. But the Mini is a really interesting device. And didn't you find it interesting that when you cut between -- so, you have the iPhone 12, you have the iPhone 12 Mini, and those are $699, $799. Then you have the iPhone 12 Pro and the iPhone 12 Pro Max, and those, there's $100, like, $999, and $1,099. But what's interesting is there's a $300 delta between the two. And it's not the 5G stuff, basically it's the screen and the camera.
And so, what basically Apple has told you is that, our mainstream product is basically this Mini. Like, just buy the Mini and we're going to be happy. And you know who's super-happy about that? Taiwan Semiconductor, because they're going to be making all of those chips, this A14 Bionic, they have just loaded up. The other one who is really happy about this, sort of, applauding in the background, is Jensen Huang, the CEO at Nvidia, because he's looking at a $40 billion bet on Arm chips, and Apple is the biggest producer of Arm chips in the world. So, you got to figure he's backstage just, like, whooping it up, because this is millions of new Arm chips that are going to go into those phones.
Hill: A last thing and then we'll move on. You know, what we did not see yesterday from Apple, a foldable phone. Which was, you know, not that I thought they were going to come out with a foldable phone, but I've never really seen it with what Samsung [laughs] is trying to do there, but, you know, who knows ...
Beyers: Would have been a new generation, though, definitely would have made Tim Cook's new generation comment valid.
Hill: Absolutely. UnitedHealth: third quarter profits and revenue came in higher than expected. The health insurance giant also raised guidance for the full fiscal year, but it was interesting, Tim, David Wichmann, the CEO, he kind of pumped the brakes [laughs] a little bit in terms of 2021, saying, look, we're still dealing with a pandemic, and that's going to make it difficult to predict where things go next year. You know, the stock is down a little bit today, but this was another strong quarter from UnitedHealth.
Beyers: No doubt. And it's particularly strong because costs are up. And I think the reason for that 2021 guidance that might be a little bit soft is, they are modeling in, to their credit, I think, some higher costs. Because the more you're going to see visits, the more you're going to have to work with doctors, manage claims, those costs are going to go higher. And you know what, modeling for that, it's just smart, it's just conservative, you may as well do that anyway.
And what they did say is that, just looking at the results overall, they did say, there were some significant increases in the number of Medicare Advantage and Medicaid members, which does not surprise me in the least, and should surprise exactly no one. It is very likely that you're going to see increased visits and increased investments here, and what's interesting, I don't know if you've seen this, Chris, but I saw this yesterday, and I thought it was interesting that this came on the heels, or actually came just ahead of the UnitedHealth earnings. I got an email from our provider, which happens to be UnitedHealth, yesterday here at The Fool saying, hey, why don't you sign-up for virtual visits? Which is an incredibly smart move. Because if you're going to manage costs and you expect costs to rise, what's the one thing you could do to make sure you're actually serving your patients, but doing it in a cost-effective fashion. Increasingly, I mean we've been seeing this with Teladoc and others, getting virtual visits on the book. And interestingly enough, it is Teladoc that is enabling those virtual visits. So, I thought that was interesting.
This is going to be a very interesting 2021, but as I come out of this, Chris, I'm thinking about it, like, UnitedHealth just set itself up for a really strong fiscal 2021 so long as the pandemic goes the way it expects, and pandemics have a way of going the way we completely, you know, un-expect, you know, [laughs] nobody can predict a pandemic.
Hill: Our email address is MarketFoolery@Fool.com, you can also follow the show on Twitter @MarketFoolery is the handle on Twitter. I got a question on Twitter from Erin in Arizona. She writes, "I was just listening to Tuesday's episode, which got me wondering. I have five shares of Disney (NYSE: DIS) that my parents bought me in 1993, (we forgot about them for a long time) is there something better I should do with those shares than continue to let them sit where they are? Thanks."
First of all, thank you, Erin, and second of all, shout-out to Erin's parents for [laughs] buying shares of Disney in 1993 when it was in the low-teens and is currently around $130/share. So, Erin is sitting on some shares that are up, at a minimum, 7X 8X in value. You know, Jason Moser and I talked the other day about Disney, this reorganization that they've done. And sort of implicit in Erin's question is, sort of, you know, where do you see Disney going over the next 10 years?
Before we get to that, her question reminds me [laughs] of a line I always associate with David Gardner whenever the question comes up, should I sell this stock? It's like, well, what are you going to do with the money? Like, if you have a better place for the money, then yeah, maybe you should sell the stock. That said, I don't know, as a Disney shareholder, I like the moves that Chapek made, and I feel pretty bullish about the next 10 years.
Beyers: I do too. And you know, time to level-up the holiday gifts, for Erin, for your parents there. My goodness! Man! I mean, just think about it this year. You can't go see them, right? You're not going to go on the airplane to go see them, unless you're living nearby. But, yeah, Prime Day is here, go ahead and level-up those Christmas gifts, because, my goodness, boy! They did you a solid on that Disney purchase. But I agree, I mean, over the next 10 years, essentially what you're going to see is, a little bit of distinctiveness between the theme parks business and the hard assets business and the streaming business. And Disney is doubling down on the streaming business. And you know what, that is exactly what they need to do.
The only thing they really had to fix, Chris, inside the Disney business model is the distribution mechanism. That's what streaming does, is it fixes the distribution model, so that you can broadcast ESPN, you can broadcast Disney+ and you could take advantage of all those assets. So, as long as they keep doubling down on improving the distribution mechanism, I think they're going to be fine. In fact, I would say they're probably going to be No. 1 and No. 2. I still believe Netflix is No. 1 here, but I believe Disney is getting itself in a position to be the strong No. 2 worldwide over the next 10 years. So, yeah, hold on to those shares.
Hill: Yeah, and you know, we talked for a while about all the different options people have with streaming services, most people are picking more than one. Netflix really seems like the default. And I think that with the moves that Bob Chapek announced, it's a very clear signal that [laughs] Disney wants to position its streaming services as either 1A or a very close second. And then, you know, HBO Max, Peacock and everybody else gets to fight, [laughs] you know, for relevancy in terms of being also included in people's packages.
Beyers: It's hard to imagine Disney not being one of your top three choices when you are buying, because let's just say the future include some real flexibility with how you make purchasing decisions around content and entertainment, if that's the way it is, just forget about the way that you get them, just figure that you're going to have some choice here. I can't imagine that Disney is not a top three seller in that equation.
Hill: Tim Beyers, I really appreciate you being here, thanks for doing it.
Beyers: Thanks, Chris.
Hill: As always, people on the program may have interest in the stocks they talk about, and The Motley Fool may have formal recommendations for or against, so don't buy or sell stocks based solely on what you hear.
That's going to do it for this edition of MarketFoolery. The show is mixed by Dan Boyd, I'm Chris Hill, thanks for listening, we'll see you tomorrow.
Chris Hill owns shares of Walt Disney. Tim Beyers owns shares of Apple, Netflix, Taiwan Semiconductor Manufacturing, and Walt Disney. The Motley Fool owns shares of and recommends Apple, Netflix, NVIDIA, Taiwan Semiconductor Manufacturing, Teladoc Health, Twitter, and Walt Disney. The Motley Fool recommends UnitedHealth Group and Verizon Communications and recommends the following options: long January 2021 $60 calls on Walt Disney. The Motley Fool has a disclosure policy.
The views and opinions expressed herein are the views and opinions of the author and do not necessarily reflect those of Nasdaq, Inc.