DIS – 2 Ways Disney's Big Bet on Streaming Could Still Disappoint Investors

By most measures, The new project is firing on all cylinders. Walt Disney‘s (NYSE:DIS) streaming service Disney+ added another 16.2 million subscribers during the quarter ending on Oct. 3, bringing its total to 73.7 million. That’s incredible, given that it only launched in November of last year, but it’s also only the beginning. Industry analytics outfit Digital TV Research estimates Disney’s flagship streaming product will serve more than 194 million customers by 2025, making it second only to Netflix (NASDAQ:NFLX).

Shareholders lauding Disney’s expanded bet on streaming, however, may want to prepare for the worst even as they hope for the best. The pricing power Walt Disney enjoys with Disney+ has yet to be truly tested, and streaming service’s bottom line may never fully replace the income currently being generated by the very movies and cable television business it’s helping to displace.

Man with his thumb pointed down.

Image source: Getty Images.

Disney management facing a pricing Catch-22

The company’s stock price lately suggests that investors appreciate Walt Disney’s potential for growth outside of a COVID-crimped environment, and most shareholders cheered management’s recent decision to prioritize streaming. That certainly seems to be where the film and television industry’s future lies.

Still, Walt Disney’s accounting team is arguably undercharging for its Disney+ product.

The company reports it collected, on average, $4.52 per month per subscriber for Disney+ during its fourth fiscal quarter (which ended in October). That’s less than the cost of $6.99 per month cited at the Disney+ website and even less than the $5.83 per month charge when dividing the service’s full-year subscription price of $69.99 by 12 months. The discount reflects the pro-rated Disney+ portion of a bundle that includes ESPN+, Hulu, and Disney+ that sells for $12.99 per month. More important, that dirt-cheap effective price of only $4.52 per month makes Disney+ the lowest-priced streaming service of its kind. The cheapest plan Netflix offers starts at $8.99 per month, and at that price, consumers don’t get much. Its top-tier service sells for $17.99 per month. AT&T‘s (NYSE:T) new HBO Max is priced at $14.99 per month.

Priced at under $5 per month apiece, Disney’s streaming services collectively drove sales of $16.9 billion in its recently completed year. But it still took an operating loss of $2.8 billion.

Both were improvements, for the record. The top line was up 40% year over year, and the operating loss was $171 million less than the loss from the comparable quarter a year earlier. And given its young age, perhaps a more relevant comparison would be this year’s second calendar quarter numbers. Those aren’t especially more encouraging, though. For the three-month span ending in June, Disney’s direct-to-consumer service and its international division turned $3.9 billion worth of revenue into an operating loss of $706 million. The top line sequentially improved 23%, but the loss only narrowed by 18%.

Walt Disney's streaming business is still losing money despite strong subscriber growth.

Data source: Disney investor reports. Chart by author. All dollar figures are in millions.

Fans of Disney’s new focus will argue that its streaming services simply need more scale — more paying customers — to cover relatively fixed costs like production and promotion. Digital TV Research’s estimate that Disney+ subscribers could reach 194 million in the near term would do the trick. A higher price would work just as well.

Both ideas present challenges, though. A higher price would make its streaming services less marketable to an unknown degree. But to procure more members at a lower price point, it may have to spend more on content.

Income cannibalization

Investors should also keep in mind that every streaming customer Walt Disney brings on board is a customer who is less likely to remain a cable TV subscriber or even a moviegoer.

That trend is already in place. Leichtman Research Group suggests the linear cable television industry in the U.S. lost around 1 million customers last quarter. That’s another million cable customers that no longer contribute to the carriage fees Disney charges cable customers for access to its programming.

It matters simply because cable television is still the company’s biggest and most profitable business. For the full year ending in September of last year, media networks accounted for $24.8 billion of the company’s $69.6 billion worth of revenue and $7.5 billion of its operating income of $14.9 billion. Studio entertainment added $11.2 billion to the top line and generated $2.7 billion in operating income. This past year’s cable business produced full-year revenue of $28.4 billion and operating profits of $9.0 billion.

As previously noted, Disney’s streaming business drove sales of $16.9 billion in its recently completed year. Not bad. But with an operating loss of $2.8 billion, it’s difficult to see it replacing the level of earnings produced by the very same cable TV and film business it’s ultimately aiming to displace.

Disney's media networks and movies produce much more income than its streaming business does.

Data source: Disney investor reports. All dollar figures are in millions. Chart by author.

Keep the bigger picture in mind

Sure, Walt Disney may somehow be able to orchestrate streaming growth that doesn’t completely displace its media networks business while also selling streaming services at prices that fully replace the operating profits produced by its TV and film arms. Anything’s possible.

But it’s not likely, and that could be a problem. Until the company clarifies its streaming growth plans and streaming’s impact on other ventures, investors should be thinking about companywide trade-offs and not remain singularly focused on its best growth engine.

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IMBI – iMedia Brands Reports Third Quarter 2020 Results

MINNEAPOLIS, Nov. 24, 2020 (GLOBE NEWSWIRE) — iMedia Brands, Inc. (the “Company”) (NASDAQ: IMBI) today announced results for the third quarter ended October 31, 2020.Third Quarter 2020 Summary & Recent HighlightsActive customer file grew by 4% year-over-year, driven by a 31% growth in new customers.Q3 net sales were $109.0 million, a decline of 5% compared to same prior-year period, which was the best year-over-year quarterly net sales performance in more than two years. This success was primarily driven by 49 exciting new brands launched so far this year that have generated approximately 21% of our year-to-date net sales, the highest percentage in any nine-month period in the Company’s 30-year history.Q3 gross margin was 37.4%, a 130-basis point improvement over the same prior-year period. Year-to-date gross margin was 37.2%, a 370-basis point improvement over the same prior-year period.Shaq kitchen products launched in over 2,000 Target and Sam’s Club stores in October 2020.Completed an oversubscribed common equity raise in August 2020, increasing institutional ownership and strengthening the balance sheet as the Company positions for growth.Q3 net loss was $4.7 million, a $2.0 million improvement over the same prior-year period. Year-to-date net loss was $10.5 million, a $27.4 million improvement over the same prior-year period.Q3 adjusted EBITDA was $6.4 million, a $7.4 million improvement over the same prior-year period. Year-to-date adjusted EBITDA was $15.5 million, a $24.7 million improvement over the same prior-year period.Float Left’s OTT SaaS proprietary platform, Flicast, generated a 100% year-over-year increase in demand¹ in Q3 as it continues to launch high quality OTT apps for clients on over 12 different internet-based video platforms.Company’s newest consumer brand, J.W. Hulme, premiered on both ShopHQ and ShopBulldogTV during Q3 and exceeded internal sales forecasts by offering customers an engaging assortment of men’s and women’s accessories.CEO Commentary“Q3 was another strong performance from our entrepreneurial-minded employees and vendors,” said Tim Peterman, CEO of iMedia Brands. “We are passionate about capturing our opportunities, and it shows.”Third Quarter 2020 ResultsLiquidity and Capital ResourcesAs of October 31, 2020, total unrestricted cash was $19.0 million, an increase of $8.7 million from prior-year end. Net debt at the end of Q3 was $33.6 million, a $25.1 million reduction from prior-year end. The Company also had an additional $11.3 million of unused availability on its revolving credit facility.OutlookIn Q4, iMedia Brands anticipates posting adjusted EBITDA in the mid-to-high single-digit millions. The Company also continues to believe that the pandemic’s effect will be reduced because it has a direct-to-consumer revenue model that serves customers who seek to buy goods from the comfort of their own homes, and it is not dependent on the traditional advertising dollars from national advertisers who are impacted by the continued disruption of the brick and mortar shopping experience._____________________________¹ Demand defined as total value of new contracts during the period.Conference CallThe Company will hold a conference call today at 8:30 a.m. Eastern time to discuss its third quarter 2020 results.Date: Tuesday, November 24, 2020Toll-free dial-in number: (877) 407-9039International dial-in number: (201) 689-8470Conference ID: 13712618Please call the conference telephone number 5-10 minutes prior to the start time. An operator will register your name and organization. If you have any difficulty connecting with the conference call, please contact Gateway Investor Relations at (949) 574-3860.The conference call will be broadcast live and available for replay here and via the Investors section of the iMedia Brands website at www.imediabrands.com.A replay of the conference call will be available after 11:30 a.m. Eastern time on the same day through December 8, 2020.Toll-free replay number: (844) 512-2921International replay number: (412) 317-6671Replay ID: 13712618About iMedia Brands, Inc.iMedia Brands, Inc. (Nasdaq: IMBI) is a leading interactive media company that owns a growing portfolio of lifestyle television networks, consumer brands and media commerce services. Its brand portfolio spans multiple business models and product categories. Its television brands are ShopHQ, ShopBulldogTV, ShopHQHealth and LaVenta. Its media commerce services brands are Float Left Interactive and i3PL. Its consumer brands include J.W. Hulme, Live Fit and Indigo Thread. Please visit www.imediabrands.com for more investor information.Contacts:Investors:Gateway Investor RelationsCody SlachIMBI@gatewayir.com(949) 574-3860Media:press@imediabrands.com(800) 938-9707(a) Transaction, settlement and integration costs for the three and nine-month period ended October 31, 2020 includes consulting fees incurred to explore additional loan financings, settlement costs, and incremental COVID-19 related legal costs. Transaction, settlement and integration costs, net, for the three and nine-month period ended November 2, 2019 includes a $1.5 million gain for the sale of our claim related to the Payment Card Interchange Fee and Merchant Discount Antitrust Litigation class action lawsuit, partially offset by costs incurred related to the implementation of our ShopHQ VIP customer program and our third-party logistics service offerings of $721,000.Adjusted EBITDAEBITDA represents net income (loss) for the respective periods excluding depreciation and amortization expense, interest income (expense) and income taxes. The Company defines Adjusted EBITDA as EBITDA excluding non-operating gains (losses); executive and management transition costs; restructuring costs; non-cash impairment charges and write downs; transaction, settlement, and integration costs, net; rebranding costs; and non-cash share-based compensation expense. The Company has included the “Adjusted EBITDA” measure in its EBITDA reconciliation in order to adequately assess the operating performance of its television and online businesses and in order to maintain comparability to its analyst’s coverage and financial guidance, when given. Management believes that the Adjusted EBITDA measure allows investors to make a meaningful comparison between its business operating results over different periods of time with those of other similar companies. In addition, management uses Adjusted EBITDA as a metric to evaluate operating performance under the Company’s management and executive incentive compensation programs. EBITDA and Adjusted EBITDA are both non-GAAP measures and should not be construed as an alternative to operating income (loss), net income (loss) or to cash flows from operating activities as determined in accordance with generally accepted accounting principles (“GAAP”) and should not be construed as a measure of liquidity. Adjusted EBITDA may not be comparable to similarly titled measures reported by other companies. The Company has included a reconciliation of the comparable GAAP measure, net income (loss) to Adjusted EBITDA in this release. Safe Harbor Statement under the Private Securities Litigation Reform Act of 1995This document may contain certain “forward-looking statements” within the meaning of the Private Securities Litigation Reform Act of 1995. Any statements contained herein that are not statements of historical fact, including statements regarding the expected impact of COVID-19 on television retailing are forward-looking. The Company often use words such as anticipates, believes, estimates, expects, intends, seeks, predicts, hopes, should, plans, will and similar expressions to identify forward-looking statements. These statements are based on management’s current expectations and accordingly are subject to uncertainty and changes in circumstances. Actual results may vary materially from the expectations contained herein due to various important factors, including (but not limited to): variability in consumer preferences, shopping behaviors, spending and debt levels; the general economic and credit environment, including COVID-19; interest rates; seasonal variations in consumer purchasing activities; the ability to achieve the most effective product category mixes to maximize sales and margin objectives; competitive pressures on sales and sales promotions; pricing and gross sales margins; the level of cable and satellite distribution for the Company’s programming and the associated fees or estimated cost savings from contract renegotiations; the Company’s ability to establish and maintain acceptable commercial terms with third-party vendors and other third parties with whom the Company has contractual relationships, and to successfully manage key vendor and shipping relationships and develop key partnerships and proprietary and exclusive brands; the ability to manage operating expenses successfully and the Company’s working capital levels; the ability to remain compliant with the Company’s credit facilities covenants; customer acceptance of the Company’s branding strategy and its repositioning as a video commerce Company; the ability to respond to changes in consumer shopping patterns and preferences, and changes in technology and consumer viewing patterns; changes to the Company’s management and information systems infrastructure; challenges to the Company’s data and information security; changes in governmental or regulatory requirements; including without limitation, regulations of the Federal Communications Commission and Federal Trade Commission, and adverse outcomes from regulatory proceedings; litigation or governmental proceedings affecting the Company’s operations; significant events (including disasters, weather events or events attracting significant television coverage) that either cause an interruption of television coverage or that divert viewership from its programming; disruptions in the Company’s distribution of its network broadcast to customers; the Company’s ability to protect its intellectual property rights; our ability to obtain and retain key executives and employees; the Company’s ability to attract new customers and retain existing customers; changes in shipping costs; expenses related to the actions of activist or hostile shareholders; the Company’s ability to offer new or innovative products and customer acceptance of the same; changes in customer viewing habits of television programming; and the risks identified under Item 1A(Risk Factors) in the Company’s most recently filed Form 10-K and any additional risk factors identified in its periodic reports since the date of such Form 10-K. More detailed information about those factors is set forth in the Company’s filings with the Securities and Exchange Commission, including its annual report on Form 10-K, quarterly reports on Form 10-Q, and current reports on Form 8-K. Investors are cautioned not to place undue reliance on forward-looking statements, which speak only as of the date of this announcement. the Company’s is under no obligation (and expressly disclaim any such obligation) to update or alter its forward-looking statements whether as a result of new information, future events or otherwise.

BA – Alaska's Relatively Modest New Deal For 13 More Boeing 737 MAXs Sends A Clear Message To Markets & The Industry

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Now that the FAA has lifted its grounding order against the Boeing 737 MAX the airplane maker – and … [+] largest exporter in value of U.S.-made goods – has 450 already made planes that it must deliver, including more than 100 for whom no buyers have been lined up. Alaska Airline’s deal to lease 13 MAXs from Air Lease Corp. announced Monday is the first order placed for MAXs since the un-grounding on Nov. 18. (David Ryder/Getty Images)
Getty Images
Somebody had to be the first one to do it.
And it somehow seems appropriate that it was Seattle-based Alaska Airlines who became the first airline in the world to acquire new Boeing 737 MAX jets just three business days after the controversial MAX officially was released from its 20-month grounding by the Federal Aviation Administration. After all, Alaska is “home team” for Boeing, which though headquartered in Chicago since 2001 long has been an institution in the Seattle area, where its 737s are made.
Now, technically, Alaska – a distant No. 5 in the rankings of U.S. airlines by size behind American, Southwest, Delta and United – isn’t ordering new MAXs directly from Boeing. Rather, it cut a deal with Air Lease Corp., a large airplane leasing company run by the father of modern aircraft leasing, Steven Udvar-Hazy
Hazy, whose family fled to the United States when he was 12 to escape the Soviet occupation of their native Hungary, ranks 179th on the FORBES 400 list with an estimated worth of $4.1 billion. Air Lease Corp. originally ordered 139 MAX jets, in various size versions, 15 of which it had taken delivery of prior to the global grounding of MAX planes in March 2019.

Acquiring just 13 planes – which at an estimated price of around $125 million each makes the deal worth about $1.6 billion when calculated by theoretical sales price – does not qualify as a particularly large deal by industry standards. But make no mistake about it, Alaska’s move to quickly acquire 13 737 MAX 9s, which will be added to the 32 MAXs it already has in its fleet or on order, is still very much a big deal for both Alaska and Boeing.
It will it help Boeing bit in whittling down the global inventory of 837 built-but-out-of-service MAXs. Of those, 387 had been delivered to customers before the grounding 20 months ago. Another 450 or so were built after the grounding. And more than 100 of those 450 built-but-not-delivered MAXs currently parked at various Boeing facilities around the state of Washington are so-called “White Tails;” planes that are not sold or even promised to particular customers.

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Thus, even though the MAXs that Alaska will be getting from Air Lease Corp., won’t come from Boeing’s pool of homeless airplanes, Alaska’s acquisition sends a loud message that the MAX continues to be a strong competitor to rival Airbus’ A321neo and other versions of the A320 family of single-aisle planes.
The A321neo was built as a direct competitor to the largest and longest-range versions of the MAX. The full breadth of the A320 family of planes – now augmented by the smaller A220 – competes head-to-head against the full range of Boeing 737 family of planes. Since the grounding, Airbus has landed a huge percentage of sales the 120- to 220-seat narrow body segment. Though narrow body planes lack the enormous price tags, seating capacities and flight ranges of big widebody planes used mostly on international routes, they are the economic backbones for both Airbus and Boeing.
Historically, far more narrow bodies have been sold than wide bodies, especially to U.S. carriers. Big conventional airlines need hundreds of narrow body planes each to bring passengers from huge swaths of the nation to their hubs, where those traveling to foreign destinations can transfer to widebodies for long haul flights over oceans. Without all those narrow body “domestic” planes, there would be need for the grander, sexier wide bodies. Furthermore, with only a few exceptions, mold-breaking discount carriers stick with single-aisle planes because they typically target price-sensitive travelers flying within domestic or “near international” markets, where smaller capacity planes are ideal for meeting demand and doing so at relatively lower costs. As a result the 60-year-old 737 line of planes and the 33-year-old A320 line of planes are seen, respectively as Boeing’s and Airbus’s bread-and-butter products.
In Alaska’s case, between the 13 MAX 9s it will lease from Air Lease Corp., the 32 MAXs it has on order, and additional MAX planes it is almost certain to order in the near future, it will be able to once again become an all-Boeing operator in just a few years. It was an all-Boeing airline until it acquired Virgin America in 2016 and took on its fleet of A320s and A319s, plus the A321neos that Virgin America had on order at the time.
The process of replacing Aibus planes with Boeing MAX planes will begin late next year when Alaska will sell of its A320s to Air Lease Corp. and take delivery of 13 MAXs between the fourth quarter of 2021 and the end of 2020. The plan calls for Alaska then to lease those same A320s back into its fleet on a short-term basis until enough additional MAXs become available for those 10 Airbuses to leave Alaska’s fleet permanently. This new deal, along with Alaska’s decision to park permanently all of its A319s and some of its A320s this summer, will leave the airline with just 39 A320 and 10 A321neos in its fleet after 2022, and those planes will be phased out thereafter as more MAX planes joins the fleet.
Airbus officials see the current demand environment, which has been greatly disrupted by the Covid-19 pandemic, as an opportunity for it, as something of a niche competitor, to expand its reach into new and existing markets by offering more seats to leisure travelers. Because of the fear of coronavirus and companies’ aversion to the physical and financial risk related to putting their employees on the road, business travel demand has plummeted by 80% over from what it was pre-pandemic. But Alaska, like a number of other smaller airlines, view the situation as an opportunity to use their nimbleness that stems from not having complex international route networks and fleets to shift quickly to aim more at leisure travel markets. The 13 MAXs Alaska is leasing from Air Lease Corp., the 32 it already has ordered from Boeing, and additional MAXs it is likely to order in the near future will allow it grow in those markets with its preferred aircraft type.
The deal shows just how intense the A320/321neo vs. 737 Max (which comes in four versions) will be over the balance of the decade. Both families of single aisle jets are being marketed as super-efficient types for future competition in large population markets like the domestic U.S. market, the intra-European market, China’s domestic market, the Southeast and Southern Asia markets, the domestic Australian market and the intra-South American market. Not only do both lines offer fuel cost efficiencies of 15% or more over their predecessor aircraft, the also tend to be larger than the earlier generations of A320 and 737 aircraft. That means they can carry even more passengers at lower fuel and  operating costs.
The Alaska deal announced Monday also shows that Boeing very much remains as a strong Airbus competitor. Of course, that was always going to be case, assuming the MAX was ever approved to fly again, because neither manufacturer has enough capacity to meet 100% of global demand for such planes. In fact, both would struggle to meet even 60% of global demand for single aisle airliners, even at today’s Covid-19-depressed levels of demand. But plenty of investors and some travel industry analysts fretted prior to the un-grounding of the MAX planes that Boeing might be forever compromised as a maker of single aisle planes, or even as a maker of widebodies, too.
To be sure, Boeing faces enormous financial and engineering challenges ahead. No only must it find a way to recover from the billions of dollars in sales it lost during the grounding – and likely will continue losing while it gears back up during a time of pandemic and dramatically reduced travel demand. It also must win back the trust of airlines, some of which switched orders and their allegiance to Airbus during the grounding period.
Boeing also is likely to begin work at some point in the next few years on its next generation of narrow body jets to begin the natural process of replacing the MAX generation of jets. That design effort promises to be both difficult and expensive because the base 737 design, which dates back to the mid-1960s, probably has been stretched and altered about as much as it can be. Thus, its eventual replacement is likely to be an entirely new design that will need to incorporate potentially radical new design concepts, materials and process, all of which will increase the cost, time and risk involved in bringing such a plane to market. Whether Airbus will need to match that move to remain competitive in the decades ahead, or if it can further modify the younger A320 design to continue competing without as large a future investment is not yet clear.
But clearly, in the short term Alaska’s decision to jump back on the MAX bandwagon so quickly after the FAA gave the plane its wings again will give other airlines around the world the public relations and investor relations cover they may need to begin ordering MAXs again.
That does not mean necessarily that Airbus will see its orders for A320 family planes slack off as some carriers begin ordering Boeing planes again. It does, however, point to continued and likely long-term marketing battles between the world’s two big aircraft makers. And, assuming no further major design problems or groundings impact either company, it likely also will serve as a huge roadblock to any future successes for China’s COMAC and Russia’s United Aircraft Corporation.
Both state-controlled companies have struggled for decades to develop single aisle airliners that can compete with Boeing and Airbus products in terms of mechanical quality, comfort and, especially, operating economics. Now the two companies are working together on the CRAIC CR929, a joint venture widebody plane that could seat between 250 and 320 passengers and that the two companies hope will be ready to enter service by 2029.
Both COMAC and UAC say their planned widebody is aimed at breaking up the Airbus-Boeing duopoly. But without much success at selling their respective single aisle aircraft, it’s not clear how the two companies could afford – short of massive government investment that would run afoul of international competition rules – to create the kind of cutting-edge widebody they would need to make a serious impact in that market. Nor is it clear how they will be able to convince airlines around the world to gamble on their planned new widebody plane when their track record in the production of narrow body jetliners has been poor.

GPS – Should You Invest In Gap Inc's Stock Now?

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LONDON, UNITED KINGDOM – 2020/08/22: American worldwide clothing and accessories retailer, Gap logo … [+] seen in Central London. (Photo by Keith Mayhew/SOPA Images/LightRocket via Getty Images)
SOPA Images/LightRocket via Getty Images
Gap Inc’s stock (NYSE: GPS) gained more than 10% last week while the S&P 500 fell nearly -1%. Nearly a month ago we argued that Odds Are That Gap Inc’s Stock Will Go Up. Turns out that Gap’s stock has climbed nearly 25% in the month of November. While positive developments regarding a Covid-19 vaccine played their role, there is more to Gap that can sustain its momentum. Why do we say this? Because its fundamentals as well as our AI engine, that analyzes past patterns in stock movements to predict near term behavior, suggest so. Let’s see what might be in store for Gap’s investors.
What the AI engine says – Based on past pattern analysis, our AI engine predicts expected return for of 3.6% for Gap’s stock over the next 1 month. The expected return for 3 months and 6 months is significantly higher at 12.3% and 21.6%, respectively. Our detailed dashboard highlights the expected return for Gap given its recent move, and can also use this to understand near-term return probabilities for different levels of movements.
But what about the fundamentals? Our dashboard Big Movers: Gap Moved 10.6% – What Next? lays this out, suggesting that the more probable way for Gap Inc’s stock now is up.

Despite the impact of Covid-19, Gap’s stock price has increased nearly 38% this year. This is, in fact, at odds with how the stock behaved between 2017 and 2019, suggesting that the worst might be over for investors. At the beginning of this year, Gap’s trailing 12 month P/S ratio was 0.4. This figure decreased -20% to 0.32, before ending at 0.35. Compared to Gap’s P/S multiple of 0.35, the figure for its peers FL, and CASY stands at 0.71 and 0.77, respectively, indicating significant room for growth. If we look historically, we find that Gap’s P/S ratio has remained above 0.5, which again reinforced the likelihood of multiple expansion as the demand bounces back. The underlying growth, except for margins, supports this. Gap’s revenue has increased 3.3% from $15,855 Mil in 2017 to $16,383 Mil in 2019, although margins declined from 5.3% to 2.1% during the same time frame. The last 12 months show a completely different picture but that was expected, and temporary, due to Covid-19 restrictions. Overall, we believe that Gap could be still be a good investment.

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TDOC – Teladoc Is the No. 1 Telehealth Stock to Buy

Well before the novel coronavirus brought social distancing and the new normal to our cultural lexicon, Teladoc Health (NYSE:TDOC) was well on its way to sparking a rethink in healthcare. As Amazon (NASDAQ:AMZN) did with commerce, the beauty of TDOC stock stems from the underlying company’s leveraging of connectivity innovations toward compelling solutions for our high-pace world.
Source: Piotr Swat / Shutterstock.com

Before the pandemic, many major urban center dwellers found it incredibly difficult to take time out for annual checkups and other medical consultations. From our busy work schedules to fighting traffic, the loss of time can add up quickly. Also, an average patient can expect to wait around 18 minutes at a healthcare facility before being seen by a doctor, further compounding the inconvenience problem.
Of course, all attention is now on the escalating health crisis. According to the latest read from the Centers for Disease Control and Prevention, new daily coronavirus cases hit nearly 193,000 on Nov. 20, bringing the seven-day moving average to almost 165,000 cases. Obviously, this is a terrible outcome for the nation, especially heading into the coldest months of the year. Cynically, though, this raises the profile of TDOC stock.

Since Covid-19 cases started exponentially infecting people inside our borders, Teladoc shares have generally tracked the ebb and flow of new infections. It’s not a perfect correlation by any means; after all, as a publicly traded company, there are other factors involved beside a potential demand uptick. Still, TDOC stock has enjoyed extreme relevancy at a time when other industries are facing an existential crisis.
At the same time, while coronavirus cases have been skyrocketing since late October, TDOC stock has charted — up until recently — a downtrend. It begs the question of whether the pandemic will continue to be a positive catalyst for shares.
Frankly, it’s a fair question. Like any health-related crisis in human history, this too shall pass. But Covid-19 can still facilitate bullishness in Teladoc, even if the crisis fades away. Let me explain.
TDOC Stock to Benefit from a Cultural Rethink
For one thing, the present massive surge in coronavirus cases only disincentives visits to healthcare facilities for all but the most urgent reasons. According to the peer-reviewed medical journal The Lancet, concerns still exist about Covid-19 infections, whether personal protective equipment is used or not:

Compared with front-line health-care workers who reported adequate availability of PPE, those with inadequate PPE had an increase in risk. However, adequate availability of PPE did not seem to completely reduce risk among health-care workers caring for patients with COVID-19.

About the only sure way of avoiding the coronavirus is to not put yourself at risk in the first place. Thus, as infections continue to jump to ridiculous levels, the narrative for TDOC stock should improve. With telehealth services, the only virus you have to worry about is the digital kind.
More importantly, though, irrespective of whether this is the last surge or not, we could see at least a semi-permanent cultural shift in how we view infectious diseases. For instance, a combination of flu epidemics in early 20th century Japan and the practice of the greater good principle resulted in the country’s embrace of face masks well before the SARS-CoV-2 outbreak.
True, Americans are very individualistic; hence, some of the wild conflicts and behaviors among the never-maskers crowd. Still, it’s very much possible that social distancing and/or mitigation practices could become commonplace in the decades ahead.

While I don’t think older Americans will ever embrace the greater good principle seen in Asian countries, a high likelihood exists that Generation Z will catalyze a new way forward. According to The Washington Post, an “economic crisis in your teens can alter your behavior for life.”
Given that the coronavirus pandemic is both a health and economic calamity, it’s hardly unreasonable to believe that a cultural paradigm shift will materialize. If so, that puts TDOC stock in the driver’s seat for the long haul.
Teladoc Enjoys a Brand Awareness Advantage
Another point to consider for Teladoc Health is the psychological fear prospective patients have about visiting the doctor. According to NBC News, many people are crippled with anxiety about the idea of seeing a medical professional for an evaluation:

If you’ve experienced something similar, you’re not alone. In fact, it’s a pretty common experience to feel reticent about going to the doctor, said Dr. Barbara Cox, a psychologist based in San Diego. She explained that while this fear has many triggers — including having iatrophobia, the medical name for fear of doctors that affects just 3% of the population — the primary culprit is anxiety triggered by a fear of getting bad news.
“Many people feel anxious because they fear the unknown, and they let their imagination run wild,” she says. “They may imagine a worst-case scenario, when in fact going for, say, an annual check-up is the best prevention.”

Of course, iatrophobia is a general tailwind for the telehealth industry, which includes American Well (NYSE:AMWL) and Reliq Health Technologies (OTCMKTS:RQHTF). Over time, I believe the narrative will be more than big enough to support these rivals.
However, in my view, Teladoc was in the right place at the right time. Further, the coronavirus pandemic established its brand as the go-to platform for contactless medical consultations. With the likely cultural shift about to take place, TDOC makes a strong argument for being the number one telehealth stock to buy.
On the date of publication, Josh Enomoto did not have (either directly or indirectly) any positions in the securities mentioned in this article.
A former senior business analyst for Sony Electronics, Josh Enomoto has helped broker major contracts with Fortune Global 500 companies. Over the past several years, he has delivered unique, critical insights for the investment markets, as well as various other industries including legal, construction management, and healthcare.