Warner Bros. Discovery Splits In Two, Apple’s WWDC Flops, & Tesla Gets Downgraded

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Today's number, 5,000. That's how many bars of soap Sidney Sweeney will be selling that contain drops of her own bath water.

The euphoria actress said, quote, when fans start asking for your bath water, either ignore it or turn it into a soap. That is the kind of business-minded thinking that we love on this podcast.

I'm in full support. And honestly, Sydney, you've inspired me.

We've been getting a lot of the same requests, actually and so I would like to formally announce today the launch of ProfG body wash straight from the bathtub of Scott Galloway and if that sounds creepy to you well that is your opinion I am simply giving the people what they want

Welcome to Prof G Markets. I'm Ed Elson.
It is June 10th. And today,

it is our very first episode of the Prof G Markets daily show hosted by me. Some context on this new format.

We've been getting a lot of feedback from you that the show isn't timely enough and we agree. News is breaking every day.
It's all moving very fast and we want to stay on top of it.

So here's how the new format is going to work. On Monday, you get your regular show with me and Scott.
and we review everything that happened in the previous week.

On Tuesday, I host and review everything that happened the day before and you'll get a little bit of Scott and you'll hear from some analysts too. On Wednesday and Thursday, we do the same thing.

And then on Friday, we finish the week with an interview episode where Scott and I will interview a special guest. So that's the new format, one episode every weekday.
We're very excited about it.

As always, keep giving us feedback. Let us know what you didn't like.
Let us know what you liked. And I hope you enjoy it.
And with that, let's check in on yesterday's market vitals.

The S ⁇ P and the NASDAQ inched higher as US-China talks kicked off in London. The Dow closed the day nearly flat.

The yield on tenured treasuries dropped as investors await details on those trade conversations set to continue this morning. The dollar dipped.

Bitcoin climbed nearly 4% through the afternoon, continuing its four-day rally. And finally, Tesla stock jumped 4.5%

after Trump wished Elon well and said the White House would keep using Starlink. That gain reversed some earlier losses that were triggered by two analyst downgrades.
More on that later.

Okay, what else is happening? Warner Brothers Discovery is splitting in half. This comes just three years after the merger that combined Warner Media with Discovery Inc.
And now they are

unmerging that merger. The company will be split into two companies, one for the cable assets such as CNN and TNT and TBS.
That will be run by the current CFO, Gunnar Wiedenfels.

And then the other company will be for the streaming assets like HBO Max. And that will be run by the current CEO, David Zasloff.

Shares jumped as much as 13% yesterday morning, and then they came back down. They closed the day down 3%.

So WBD has finally thrown in the towel. We've seen several semi-admissions this year from management admitting that the past three years have been a disaster for the company.

I think the most obvious one, the most famous one, was that rebrand where they went from HBO Max to Max and now back to HBO Max. But this move, this is essentially the nail in the coffin.

This is David Zasloff saying, yep, we tried to combine these two companies. We tried to pretend that cable television wasn't a dead business.
But here we are in 2025. We recognize our sins.

We're sorry. And we're now going to undo everything we've been working on for the past three years.
So initially, Wall Street liked it. It rose 13%.

And then, as I said, came crashing back down, down 3% on the day.

But this is all a little bit irrelevant because when you take a longer perspective view, when you look back to when this company first merged back in April 2022, it is down around 60%

since then. So still, things are not looking great for Warner Brothers Discovery.
Lots to unpack here, but I'm going to throw it over to Scott Galloway because Scott actually predicted this.

He's been predicting that something like this would happen for a very long time, and I know he's going to be very excited to talk about this. So let's give Scott a call.

Scott, how's it going? It is going very well, Ed. It is going very well.
So just to clarify how this works, I'm recording this aftermarket close, but Scott's living in London, which means it's 10 p.m.

on Scott time. So the way this works, we're going to have Scott call in from his phone.
And right now, it looks like he's pacing around his basement, but that's how it's going to work.

And this way we get a little bit of Scott. A little bit of dog, a little bit of salsa for that Edward ship.
That's right. It's 10 o'clock.
So the kids are asleep. And I am post-dinner pre-edible.

So you're catching me at a good time.

Yeah, excited about this. Congratulations on going daily.

The world just can't get enough of you after all your boring around with Katie Tour and MSNBC and whoever else will ask you to come on cable TV, you promiscuous little bitch.

Jesus Christ, I have created a monster. I love it.
That's my market's observation for today. You've created a monster.
I love the screen.

Give me a little tour of the studio here, better known as my kitchen.

Okay. These are the beers I drank, Ed.
Those are the beers I drank. Are you drunk now, or was that from a while ago? What's going on? It's called a Monday night.
All right, Ed, get on.

What's the question? We're talking business. We do these.
Where in the world is Scott? Thanks. This is our first one.
Yeah, it's very good.

I'm sure you've seen this news from Warner Brothers Discovery.

I'm sure I don't have to remind you what happened. I first have this prediction that you made back in September of 2023 that we're going to get your reaction to.
Let's play that clip.

There needs to be recognition that cable TV assets are no longer teenagers that are going to keep growing, that they're in fact

nana and pop-up and need to be made comfortable and they need to be managed for cash flow, not starved of investment, but stopped the hallucination that these things are ever going to reignite growth again.

So my prediction is you're going to see one or more players shed their assets into a different hold code to clean up their story and also for consolidation and scale and unmuck or

unfuck the story that is media companies now that have growth but also have declining assets in the same portfolio.

Okay, before you react to that, because I know you're going to be very happy and brag about that, I have another prediction that you made back in last December when Warner Brothers split into two units.

It split into its streaming and studio business and then also its cable linear television network business. And this is what you said.

He's setting the table for a spin and that is he's creating distinct operating units such that the spin will be more elegant and easy.

And the fact that the stock is up 15% now today is basically the market saying, oh, you're flirting with a spin. Well, come on over here.
This means the spin, in my opinion, is going to happen.

Two for two. Yeah, well, my observation on the first prediction is I'm awesome.
And my

observation on the second was I'm ridiculously fucking awesome. Anyways, I'm very much enjoying this so far.
Okay, so this was an easy one. Yep.
We have,

you know, a 24-year-old living with a 72-year-old.

I don't know where I got that.

I'm with you. It makes sense.
It's just not a clean story.

It's not a clean story. So this is a clean story.
It's often referred to as good bank, bad bank. What was interesting is who gets to take the debt with them? They have about $34 billion in debt.

And it looks like the bad bank is going to take the assets or the debt. Because, I mean, I knew that Zaslov was going to get to go with the fun young party, right?

He was going to get to go and do Warner Brothers, HVO, because that's more fun. And he's on top.

And any guy that talks shareholders into what was a ridiculously fucking stupid merger to begin with is totally focused on his own lifestyle, not on shareholder value.

So the CFO is going to run the declining assets. Now, the bad bank might be the better buy based on valuation, because if you can cut costs faster than revenue declines, you end up increasing EBITDA.

And these can be good assets.

Zaslav will get a higher multiple on fund assets and get to go to the Vanity Fair Oscars party.

But the real winner here has been this kind of carousel of bankers, lawyers, and management compensation.

Since AT ⁇ T acquired Warner Brothers and then sold it again, the bankers and the lawyers have garnered about a half a billion dollars in fees.

And then you add in a third of a billion in compensation for Zaslov, despite the fact this company has seen its shareholder value cut in half.

You have almost a billion in fees to bankers who talk these people into doing this and said, hey, David,

you're going to get to get or justify a massive pay increase when you when you take this thing and merge it and shareholders here have been left in the cold what do you think was the conversation in the boardroom because this is a hard message to put out there to merge these two companies as we saw in 2022 warner brothers merging with discovery and they made a whole pitch about that not really acknowledging the fact that the cable assets were in decline and this is essentially an admission that they were wrong they're coming out saying never mind we're just going to undo everything we did three years ago.

What do you think that the pitch was in the boardroom? How are they justifying that? Well, they'll come up with all sorts of narratives for why the market has changed. This was a Frankenstein.

Warner, it's really interesting. Time Warner has been at the center of the worst acquisitions in history.

They agreed to sell themselves when they had real assets to AOL, which was literally plummeting in value.

And then they pulled in AOL and they sold their assets as they were about to go into structural decline into

ATT, who loved the idea of going vertical because they just saw, you know, they thought, okay, we need some point of differentiation and we can capture people.

And if they buy an ATT phone, give them Game of Thrones. That never materialized.

And then they got to pull a Time Warner and sell their declining assets at a premium to Zaslov and his crew, who convinced people that it would be worth. billions of dollars to let him move to LA

and buy Jack Warner's phone. So in sum, there's no fiduciaries here.

My guess is Brian Roberts and Comcast, to the extent they're allowed to have probably advised on the post-split structure to make it easy for them to merge with their Comcast assets.

And basically the CFO, who I think is kind of the adult in the room, is going to spend the next three years consolidating like CNN

and MSNBC's newsroom. And basically,

Unless you're in front of the camera, unless you're Anderson Cooper,

you know, be careful.

Your job is on the block here because this is going to be this entire company strategy is going to be to cut costs faster than the structural revenue declines they're all experiencing.

And then David Zaslov is going to have to have a story around growth and HVO. I wonder at some point when the investment market just says to Zaslav, hey, buddy, you're full of shit.

It's never going to happen. That's what I think.
Never going to happen. Okay.
Well, thank you for joining us, Scott. I've G Markets daily.
Every day. Every day.
Daddy is this. Daddy is the Salsa.

Ed is the chip. That's right.

See ya, man. See ya.

Up next, Apple's Worldwide Developers Conference kicks off, and Tesla's stock gets hit with a couple of downgrades. Stay with us.

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We're back with ProfView Markets. Apple kicked off its Worldwide Developers Conference yesterday.
This is their annual conference where they announce all of their new products and services.

It's a four-day event, but the opening day is the most important day.

The conference was highly anticipated by Wall Street, and not because investors were necessarily excited, but more because they were anxious. Remember, this has been a pretty bad year for Apple.

The iPhone sales are down 2% on the year. They lost significant market share in the smartphone market.
They also announced Apple Intelligence at last year's conference.

They tried to launch that and it failed. And so far this year, year to date, the stock is down 17%.

So this was Apple's moment to prove itself to Wall Street. This was the time to show investors, yes, it was a slow year, but we're still the number one tech company in the world.

We're the ones who made the iPhone. We're the ones who made the Mac.
And look what else we've got in the pipeline today. So what do they have in the pipeline? What did they announce?

Let's just take a look at some of the main product product announcements that apple gave us one

real-time ai translated captions for calls and texts two an apple visual intelligence update which allows users to analyze screenshots with chat gpt

three a digital id feature in apple wallet and four in the iMessages app users will now be able to create custom backgrounds and polls in conversations. That, ladies and gentlemen, is the new Apple.

That is the company that built the iPhone. If it wasn't clear before, it is very clear to me now.
Apple has lost its edge.

I made this point last year when they announced Apple Intelligence at last year's conference. And I said, this really isn't that impressive.
And here we are a year later.

And I don't know about you, but I'm thinking the exact same thing.

And I would also highlight that every single one of those products that I just announced to you right there, all of them have already been created by a competitor.

You look at the AI translation, for example. Google already did it.
So did Samsung. Google has also already done the visual intelligence.
They've also already done the digital ID feature.

And WhatsApp already did the custom backgrounds and the polling feature as far back as 2020. So not only are these features unimpressive, they're also not new.
I mean, they literally already exist.

So I was, obviously, you can tell I was not impressed. Wall Street was not very impressed either.
The stock dropped 1.5% after the announcement. But we wanted another opinion.

So our producer, Claire, spoke with tech analyst Ray Wong, who was on the ground at WWDC. He broke down the market's reaction and he explained why he's still bullish on the stock.

I mean, we've got basically headwinds that are around tariffs, taxes, and they wanted a big bang AI announcement and Apple wasn't ready to deliver that.

But what we know is it's a good buying opportunity because we've got a distribution channel unmatched. We've got an ecosystem that's worth $400 billion and growing.

And if you think about it that way, you look at it, well, all AI is going to move to the edges. It's going to be on your phones.
It's going to be on the outside.

It's not going to be a centralized LLM or a big blob where you go out and you query an LLM in a chat bot. It's going to be better than that.

And so the question you have to ask is, is this going to add to the services number? Is it going to add to that TAM? And the short answer, yes, it will.

But all these features don't get released into September. And of course, there's a lot of announcements, a lot of competition out there.
People are wondering, well, Google come up with something?

Will OpenAI come up with something? Will Facebook come up with something? But at the end of the day, if you have the data, the devices, and the network, you're going to win. It feels like...

The narrative hasn't really changed then. I feel like the story we've gotten since they unveiled Apple Intelligence is that it's just going to take time.

Like, how long can we afford to be patient with Apple on this? Well, if you look at the cash on hand and you look at the stock, they can afford to be patient for quite some time.

But I think it's a different issue, right? It's a consumer brand. It's about trust.
And if they launch it and it's awful, what would happen? The market would tank even further.

And so in their case, they have to get it right

almost to a level of perfection that nobody else is going to expect. I mean, this is like the equivalent of any large company that's, you know, 1% to 2% of any index, right?

If they screw up, the entire economy screws up.

That's a huge burden on them. Well, look, Ray said a lot in there that I do agree with.
This is clearly an incredible company.

He mentioned just the sheer volume that they have in terms of data, in terms of devices, the fact that it is a $400 billion ecosystem. That's how much money they make in revenue per year.

They also generate $100 billion in profit. They just bought back $100 billion worth of shares.
As he says, Apple has a lot of cash. It's an incredible company.

But I don't think that means it's an incredible innovator. And this is the core of my problem with Apple.
And this is where I disagree with Ray here.

I think this is a mature company that is cosplaying as a young growth company. And so far, I think it's got Wall Street's number on that front.

It's trading at 32 times earnings, which is a growth valuation. You compare that to Google, which trades at 19 times earnings.

So I believe this is the beginning of the end of the growth era for Apple. And I believe that that multiple 32 times, I believe that multiple will come down significantly this year.

That doesn't mean that it's a bad stock and it doesn't mean that it's a bad company.

I just think investors need to recognize sooner rather than later that this is no longer the tech forward company that it used to be. This is a mature company.
Claire and Ray said it.

We have to be patient with this company. We have to wait.
And that's fine. It's fine to be a mature company.

And as Aswat Demodarin has told us many times on this podcast, getting old is a part of life. It's not an issue.
But we all have a choice. We can either run away from getting old or we can embrace it.

And at this point, I think it's clear to all of us, Apple is old. It deserves a mature valuation, not a growth valuation.
This isn't a company that is this young buck that just came in on the scene.

This isn't OpenAI. This is an old company that has lost its ability to innovate in the same way it did 10, 20, 30 years ago.
Apple is old. Let's stop pretending it isn't.

Our final story. Tesla stock got hit with two downgrades from Wall Street yesterday.
Equity research firms August Research and Baird both cut their Tesla ratings from buy to hold.

And that was, of course, a reaction to this insane feud that has unfolded last week between Elon Musk and President Trump, which led to Tesla's largest one-day drop ever, falling 14%.

It had a bit of a rebound on Friday, rebounded a little bit more yesterday, but it's still down 11% since all this drama went down.

So clearly, Wall Street is pretty spooked about this Trump situation. Clearly, investors feel that something has changed.

And I think the question is, or the question that I have, what exactly has changed? So to answer that question, Claire spoke with Bill Selesky, senior research analyst at August Research.

He's one of the analysts who downgraded the stock yesterday. Yeah, we did it because, and keep in mind, we didn't downgrade it to a sell.
We downgraded it from a buy to a hold.

And basically what we did,

we just thought that the riskiness of the stock basically got amped up with the debate, so to speak, that went on last Thursday between Elon Musk and a president of the United States.

So we saw that situation developing, and it kind of got ugly for a a few minutes there. Basically, at its most simplest, you know, Elon Musk versus the president of the United States.

Who's going to win that war? It seemed like the market loved it when he was finally like, okay, I'm backing out of Doge. I'm leaving the government.
I'm going back to Tesla 24-7.

Do you think the concern here is that, like, he's obviously still thinking about the government and Tesla is not his priority?

Yeah, it looks to me like, you know, the blow-up blow-up is starting to slowly, you know, dissipate.

And I hope, and I hope it does, but that there's no guarantee that it couldn't start up again in a hurry.

And if that's the case, you know, then I don't necessarily think that, you know, Tesla is in a position to tell a president of the United States where to go or what to do.

You know, they're at the mercy of the president. So I think they have to play ball with them, you know, play nice.
And, you know, hopefully everything will work out.

For the time being, we believe it's, it's kind of neutral-ish. We kind of see the stock trading sideways for a while.

And basically, it should, you know, pick up once we get some more clarity on how Robotaxi's doing and what his plans are for Optimus rollout, you know, in the future.

So we do think there's value there. We just think in the meantime, you have to sit tight and kind of get through a couple of things first.
So here's where I land on this.

And obviously, this story has been everywhere. Everyone's talking about it.

To me, this whole drama, when you look at it from both a political perspective and from a markets perspective, this whole thing is a giant distraction from the things that actually matter.

I can break it down on the political side. This is a distraction from all the things that matter, which would include the big beautiful bill.

which is going to run up trillions of dollars in more deficits and decimate the economic prospects of my generation of young people. We've talked about that.

It's a distraction from the tariffs, which are going to reintroduce inflation, which is going to further harm poor people.

It's a distraction from the fact that we have ruined our reputation as a reliable trading partner. It is a distraction from all of the things that actually matter.
This is just a tiff.

It's just a fun story. Now, where do I land on this from an investment perspective? I see it as the same thing.

The way I see it is Tesla is a car company that is trading, even after this dispute, at 162 times earnings. And that is over 400% higher than the average PE multiple across the auto industry.

So the only thing that could justify a valuation that high, irrespective of everything that's happened, The only thing that justifies it is if Tesla can prove that it can create an additional significant revenue stream.

And right now, its best bet is the robotaxi. That's what matters here.
That's what decides if the valuation is somewhat appropriate or completely insane.

And the good news is, we're going to find out in two days because June 12th is the official launch date of the RoboTaxi.

That's when we'll see RoboTaxi in Austin on the streets, or at least that's when they say it'll be out in Austin on the streets.

And that's when we'll learn if this thing is legit and if this valuation is fair game.

But anything that happens in the interim, anything that moves the stock 5, 10, 15%, whether it's the CEO doing ketamine or not doing ketamine or showing up with a black eye or getting into a tweet fight with the president, all of that is fluff.

And by the way, as we saw, as soon as Elon or Trump says anything nice, suddenly the stock comes ripping back up. It goes up, it goes down, it goes up, it goes down.
You have to focus on what matters.

And what matters for Tesla here isn't a fight with the president. What matters for Tesla is the Robo-Taxi.
Specifically, is it going to work? That is the trillion dollar question.

And we won't have an answer to that question until June 12th. So until then, I'm not looking at the stock.
It can go up, it can go down, it can go sideways, we can get re-ratings.

Personally, I don't really care because if that Robo-Taxi doesn't blow us away, in two days on Thursday, if that Robo-Taxi launch doesn't go as planned, then suddenly all of this this price movement, all of this drama, all of this fighting, it's moot.

It won't matter anymore.

That's it for today. Thanks for listening to Profit Markets from the Vox Media Podcast Network.
I'm Ed Elson. I will see you tomorrow.

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