Oracle’s Big Deal, Spider-Man’s Big Box Office

Spider-Man: No Way Home sets a few records with a $600 million opening weekend. Motley Fool analyst Jason Moser analyzes those stories and encourages investors to find ways to unplug from business news over the holidays.

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This video was recorded on Dec. 20, 2021.

Chris Hill: It's Monday, December 20th. Welcome to Market Foolery. I'm Chris Hill. With me, which he is pretty much every Monday, Jason Moser good to see you.

Jason Moser: Good to see you.

Chris Hill: We're going to talk about Spider-Man because the Box Office numbers are ridiculous, but we'll have to start with the deal of the day which is Cerner, the medical records check company. Cerner's being acquired by Oracle. This is a $28 billion deal, all-cash. I never thought of Oracle (ORCL -0.97%) as being a healthcare tech company, but I guess we have to now, don't we?

Jason Moser: Yeah, I suppose, antitrust, I guess regulators will give it a look. I'm sure. It's not a small deal by any means, but in the context of what Oracle does, I don't see any reason why this deal wouldn't go through. It does seem like I understand it's a very large market opportunity in Cerner (CERN) and it's the company geared toward where the market really needs to go and widespread electronic healthcare record adoption. That's what Cerner is, of course known formity. They automate and digitize medical records, this is going to help with avoiding unnecessary tests and medications, it can help clinicians avoid errors they can suggest treatments. It really can help maximize efficiency in the healthcare space and it around a $25 billion market cap or so. I think clearly the businesses has done something, right to this point. The deal seems fairly reasonable, with Cerner. You're now looking at one of these companies that doesn't have a PE because it doesn't have any E. They actually make money and they generate cash and a good bit of it, which is encouraging. Very attractive margin picture 80 percent gross margins with this business and they can realize a lot of cost savings down at the bottom line and so I think with Oracle, this is a nice way to diversify the business a little bit into a very reliable market opportunity with plenty of tailwinds. I think.

Chris Hill: If you're Cerner shareholder, are you happy that this deal is happening because for decades Cerner as a stock, is a long-term winner, but it seems to have not really flattened out. But over the last five years or so, it's growth as a business has been more modest. But it's not to say that look, you and I have talked about plenty of acquisitions where you're the shareholder of the company being acquired, you're popping champagne. Because the road ahead was looking brutal as a stand-alone company. That doesn't seem to be the case for Cerner, but I get that the growth is sort of tapered out.

Jason Moser: Yeah. I think you really keyed in for investors, at least the biggest issue with Cerner today growth is definitely slowing down. It's not the only one that does what it does and certainly healthcare can be very challenging just from a regulatory perspective. Not only from a national perspective, but also when you consider all of the states, healthcare is just a very convoluted market filled with a lot of red tape and challenges there. I think as a shareholder for Cerner, I'm not, I've never have been just you probably think maybe this is the best case scenario. You're right, it's been a winning investment. If you look back over the last five years, the stock is up 86 percent. The market is outpacing it though. If you look at the last three years, more of the same. Even if you look at 10-years, it's been outperformed by the market rather handily and so it's been an OK investment. It's not the greatest one in the world, of course, I think that with Oracle, you heard Larry Ellison there just the other day talking about with Amazon Web Services. Recent outages and issues there and Ellison, of course, took the opportunity to get there and tout Oracle's Cloud for a little bit. 

Said you know what we get a major telecommunications customer who says to us, we love Oracle's Cloud because it never goes down. Of course, you're waiting for the inevitable headline Oracle's Cloud service goes down at some point. But regardless, Oracle I think it's a good business with a very large standing in the Cloud market today, I think this is something where you're plugging a valuable service into a big network with a lot of expertise and a lot of history. It's back and so for Cerner shareholders this probably is the best. Maybe it prompts you to take that cash because it's important remember, this is an all-cash deal. Maybe it prompts you to just take that cash and try to go find another great investment idea.

Chris Hill: Last thing before we move on. Larry Ellison fueled the growth of Oracle through acquisitions. We've talked about some of these over the year. Netsuite, Sun Microsystems, PeopleSoft, those were big acquisitions. Those were all a third to a quarter of the size of this one. This is overwhelmingly the biggest deal Oracle has ever made. Larry Ellison has always struck me is one of those people who projects an impervious to pressure. But again, this is the big deal they've ever made and it's not even close and I'm wondering if they really need this one to work out.

Jason Moser: Well, of course you won't. You always want these types of deals workout and the bigger the deal, the closer look we're going to take at it. I feel like they're in a pretty good place though with this deal. Number one, because of what the business does in Cerner. But I also think, we often talk about businesses and what their customer base looks like and do they have the exposure to one customer particular? It's worth noting with Cerner, close to 20 percent of their revenue in 2020 came from US government agencies so they do have a very large standing with the United States government. That can be good and that can be bad. It can be good in that the longer you maintain that relationship the stickier gets, it can be bad in that you are typically going to be taking a little bit on the cost side there. Maybe you're not able to flex the pricing power muscle quite as much. But there's a reliability that comes from this, I think from that perspective alone again, I think given what Cerner does I really like the potential there and then the government customer standing there. Let's take that as a plus. I mean, that's a pretty big customer right there. They seem to be doing something right, because they maintain that relationship for a while.

Chris Hill: Spider-Man, No Way Home, took in $600 million at the Box Office worldwide over the weekend. This is the biggest domestic opening in December ever. It is the second biggest domestic opening ever and the third biggest worldwide. If Omicron wasn't happening, I think we would collectively say movie theaters are back, baby. But Omicron happening and I'm not sure what conclusion to draw for this. There are a couple of sort of smaller ones, but in terms of like a major headline, I guess I take comfort in the fact that I'm not the only one who surprised at how big the Box Office was for the opening weekend for this movie.

Jason Moser: Yeah, I got to say I was not really all that surprised. First and foremost, got it's got to suck to be Nightmare Alley. I don't know if you saw that. But man, holy cow, he got a decent amount of press here as it was getting released it with a fairly healthy lineup for Starz, making up the cast there. It did next to nothing. Then i saw where theaters are basically saying, we're going to go into cancel these Midnight Alley shows, or Nightmare Alley shows throw on a couple of extra Spider-Man shows. I think that this says a few things. Number one, we are not in the same place we were a year ago. There is a lot of fear out there in the headlines today and I think they could do everybody favor and try to pull that back a little bit. But 2021, despite its challenges, we are in a much different place today than we were a year ago. We have tools to deal with COVID and its variants. That's one thing right there. I think that because of those tools, I think that folks are assessing risk a little bit differently today. I know I certainly do and I think a lot of people do. 

I mean, we're seeing for all of these companies that continue to postpone going back to work, there are ten more companies that are out there doing business today. All it takes is going around and you can see, the country is still open, businesses are still open, people are still out there getting stuff done and I think a lot of that is just because we have an arsenal of tools today that we didn't have a year ago and that's causing people to assess the risk scenario a little bit differently today. Which I think resulted in a lot of people going out to the theaters because there was a movie that they really wanted to see. The other was really goes to show you the value and that IP. We talked about it often with Disney and Marvel and all of these franchises that have this IP that was very long lives and it allows them to branch out and tell other stories with different characters and it can really go on for long periods of time. Listen, I think it's great to see people getting out there feeling like they can go do more things. It's going to be a little bit like real estate, location, location, location. It's a little bit different where you are in the country and so some places people might feel safer than others. But generally speaking, it's nice to see and hopefully we'll see more of that in the New Year.

Chris Hill: You mentioned intellectual property, and I think the smaller headlines out of this story are with Sony and Disney. In the partnership that they have around this franchise, but also just Sony getting a win and Disney. Look, this is one of those things that isn't really tangible, and yet there's a tendency to think, well, this doesn't matter, but it does in the sense that every company is trying to tell a story about itself. When the media narrative fairly or unfairly is different than the story the company is trying to tell, then they have to spend time and energy and resources on that. I think in the case of Disney, there was a narrative going for at least a month or so of, boy, they really seem like they have hit the wall in terms of the content and certainly in terms of the tangible growth to Disney Plus subscribers, that sort of thing. Again, this is maybe a short-term thing, but a win like this, you got to be happy if you're Disney to be able to tell this story.

Jason Moser: There's no question about it. I think you're right. I think over the last several months we've seen that narrative with Disney play out that they are undergoing a monumental leadership change. With that comes all potential strategy changes, opportunities to focus on other parts of the business that maybe weren't necessarily getting their due attention before. There are a lot of unknowns that come with this big leadership change in Disney in exactly where this company goes over the course of the next five and 10 years. That IP is always going to be such a tremendous asset, and it's always going to be something that they need to continue to capitalize on, which I suspect they will and then it really just is a matter of distribution and where we are as a society, how people are getting that content. The nice thing as a consumer today, you just have a million different ways you can really get that content. l think we saw recently here with Disney and YouTube TV, there is that little struggle there on the negotiation. I don't know about you, but I saw a lot of folks on Twitter and whatnot really griping about the fact that they weren't getting that content as YouTube TV subscribers. It just goes to show you the bargaining power that Disney has in that position, it's not something to discount.

Chris Hill: Two things real quick before I let you go. First, you mentioned the leadership change. I was reminded of that this morning when I saw on Twitter, Bob Iger is doing some sit down interview because he comes off the board at the end of this year.

Jason Moser: I saw that.

Chris Hill: For the first time I thought to myself, "Is he going to do something else?" [laughs] I'm wondering, do you have any expectations that Bob Iger is going to do anything else in the entertainment business space? Because if he does in the entertainment business space, it will almost certainly be at least partially interpreted as a shot at his former company and the current CEO.

Jason Moser: There's no way it could be construed otherwise I would imagine. [laughs] I saw that. Honestly, probably the second thing I thought of was what you were saying. But the first thing that came to my mind was, this is the longest goodbye I've ever seen. [laughs] We've been talking about this for like seven years I think, he is going to retire, that he signed off for two more years, that he sign off for another year and now he's finally getting ready to fully part ways. That's probably to Disney's demise in the near-term. You cannot overstate the impact that he's had on that business and what he has done to put Disney the position that it's in today. Mr. Chapek certainly has some big shoes to fill. I personally feel like Mr. Iger is in a position. It sounds to me like he would rather do something a little bit more impactful for society so whether that is pursuing something in the political realm, or whether it's something focused a bit more on philanthropic efforts, I'm not sure. It wouldn't surprise me to see him go one way or the other there with that or perhaps some combination of both. But I would be surprised if he decided to jump back in and try to do something in the media space, building something back up. By the same token, I'm sure there are a lot of folks in that space that are thinking, hey man, it wouldn't be such a bad idea to get Iger on our board or in the executive suite for our business. Maybe there are some folks out there trying to entice him to stick around.

Chris Hill: This is not the last episode of Market Foolery before Christmas, but we are going to be off tomorrow. This is something you and I were talking about earlier today in part because this has been a roller-coaster ride for investors over the last couple of months. What do you do to unplug as an investor over the holidays? I will just speak for myself. I know recharging my batteries as an investor is going to help me have a better start to 2022.

Jason Moser: You definitely have to do that. Thankfully for us, the market tempers are a little bit with holiday closures. The market will be closed on Friday and then I think next week there's another day that it's closed. I think that's part of the day you just don't pay attention to it because it's not as active and it's not open as long. Though I understand they are talking about 24/7 exchanges here very soon, so we might not have that luxury anymore. Honestly, I think it's just having other outlets, having other things that you enjoy doing. I do some yard work around the house. I got out there on Saturday and I did much of yard work, planted some trees. You know that I paint, so sometimes when I'm feeling like I want to go and skip my mind, unplug to go do something else, I'll just go downstairs and paint for a bit. But that's it. I think the key is really just having other interests. Sometimes it's easy to unplug from those interests in times like these when every day it's new headlines and things going on. We have services that we're running, and members that we want to take care of, and things that we need to deliver. For us, naturally it slows down a little bit at this time of year, which is nice. That gives you an opportunity to unplug a little bit and just become reacquainted with some of those passions that maybe you've developed throughout your life.

Chris Hill: When you're painting, do you have music on? What is the scene? I'm not imagining you're like Picasso. Is it Picasso who had cigar and champagne while he was painting? Clearly, my knowledge of art history is tiny, but there was some famous painter who is just like, "I'm going to paint, but I've also got a cigar going and I've got a bottle of wine open."

Jason Moser: I'd be very down with the cigar and wine or champagne. I guess in my case it would be beer. My wife would have my head if I lit a cigar in the house, so I just can't get away with that one. Sometimes I'll listen to music, other times I just enjoy the silence, it just helps me think. There's no real standard there, it just depends. Most of the time, it's no music, just keeping quiet to the thoughts in my head and making sure that I can actually hear when someone else in the house is yelling at me to go do something.

Chris Hill: Jason Moser, always great talking to you. Thanks for being here.

Jason Moser: Thank you.

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 Market Foolery. The show is mixed by Dan Boyd. I'm Chris Hill, thanks for listening. I'll see you later in the week.