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- Kudos | February 7th, 2024
Kudos | February 7th, 2024
TOGETHER WITH
Today’s report is brought to you by Kudos, double your credit card rewards with a single click.
[ good morning ]
Here’s everything you need to know today
It’s winners and losers season, folks! We’re almost exactly halfway through earnings season and the main trends are brands need to be perfect or they will get killed by this market.
Winners in any given industry are taking all the gains while underperformers are experiencing double-digit cuts to their market cap. While investors are finicky at this stage—there’s still a lot to be positive about.
With CPI data set to print next week—bond yields are staying resolute above 4.1% while oil prices are holding steady. Despite continued pressure from the bond empire—equities are holding strong so long as they continue posting efficiency.
That means we need to keep our focus on the extended outlook as short-term noise—both positive and negative—can distract the price action from a stock’s true trajectory.
So, let’s explore how the media space is set to transform in the next year and how the automotive industry is adapting to lower EV demand. There’s a lot of signal to find in all this noise—let’s get into it.
Markets at a Glance
*Market data based on standard trading hours and calculated close to close
[ streaming ]
ESPN Teams Up with Fox and Warner Bros for New Sports App
And who said basic cable was dead?
BREAKING NEWS
ESPN, Fox, and Warner Brothers Discovery have announced are teaming up to launch a new sports streaming app. With the likes of Apple, Amazon, and Netflix encroaching on the live sports market, this is sending shockwaves through the live sports market.
WHAT HAPPENED
With the streaming wars turning into a huge race to lose as much money as possible—live sports is the last real bastion of growth in the media space. ESPN, Fox, and Warner will take equal ownership of a new company that allows the three of them to broadcast content from their various sports networks in a centralized location.
This would include broadcast rights the three own on all major sports leagues—everything including the NFL, NBA, WNBA, MLB, NHL, NASCAR, UFC, PGA TOUR Golf, Grand Slam Tennis, the FIFA World Cup, Cycling and College Sports. No price has been set for the new service.
UNITED FRONT
This is honestly a brilliant move as live sports are the last bastion of profitability in media right now and companies like Amazon and Netflix could easily start outbidding traditional media players for expanded broadcast rights. Putting up a united front is a solid move for maintaining control of the live sports market.
WHY IT MATTERS
Of course, this joint venture is basically just these traditional media players reinventing cable. Aside from that irony—this is a major move that will reshape the streaming wars and the media landscape once the new company launches this fall.
Keeping live sports all in one location makes a lot of sense as it helps starve streaming-first players for potential content. This new joint venture could be a major lifeline for the likes of Fox and Warner Brothers Discovery. However, the market seems to think Disney is getting the short end of the stick here by mixing ESPN up in this venture—as investors dropped Disney stock by 1% in early trading. Fox and Warner Brothers added low single-digits to their market cap in the same period.
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Sectors at a Glance
| Sector | Day | Month | Year |
|---|---|---|---|
| Communications | -0.31% | 8.44% | 36.57% |
| Consumer Disc. | 0.61% | 1.71% | 16.89% |
| Consumer Stap. | 0.23% | 2.58% | 1.26% |
| Energy | 0.32% | 0.41% | -2.94% |
| Financials | 0.21% | 2.83% | 6.82% |
| Health Care | 1.09% | 3.46% | 9.50% |
| Industrials | 0.90% | 4.36% | 13.37% |
| Materials | 1.77% | -1.78% | 0.04% |
| Real Estate | 1.52% | -2.90% | -5.62% |
| Technology | -0.46% | 9.04% | 43.86% |
| Utilities | 0.37% | -6.15% | -11.37% |
*Market data based on standard trading hours and calculated close to close
[ social media ]
SNAP Nosedives as Growth Lags Competitors
Despite narrower losses—SNAP just can’t grow fast enough
BREAKING NEWS
SNAP stock dropped double digits this morning as the social media company could only mildly narrow their quarterly loss while posting a much weaker outlook than expected.
WHAT HAPPENED
Despite a blockbuster quarter for the likes of Meta—ad revenue growth is slowing over at Snapchat. SNAP brought in $1.36 billion in revenue when The Street expected to see $1.38 billion.
SNAP beat on a lot of other metrics—they managed to activate 414 million daily active users and keep EPS growth higher. However, average revenue per user fell to $3.29 in Q4 as SNAP simply cannot figure out how to generate revenue from their users at the scale Meta can.
STALLING OUT
The real deathblow came from SNAP’s Q1 guidance. Management expects that adjusted EBITDA will swing to a loss of $55 million to $95 million after generating positive adjusted EBITDA for the last two quarters.
Before this call, SNAP also announced layoffs for 10% of their staff as they attempt to streamline operations in order to push back toward profitability. But a swing that sharp is simply too much for the market to stomach.
WHY IT MATTERS
SNAP is making the right long-term moves to stay alive as they try to operate more efficiently and stay ahead of the competition. Snapchat’s subscription service now has 7 million subscribers—jumping 2 million in a single quarter. With Snapchat+ driving $249 million in annualized revenue for 2023—the company has a much stronger revenue foundation moving into 2024. The market is simply punishing SNAP for not being able to generate revenue from their users at the same scale Meta can. That unfair comparison cost SNAP nearly $9 billion of their market capitalization as investors dropped SNAP stock by more than 30% in early trading.
[ automotive ]
Ford Surges on Higher Profit Projections
Henry’s house has fully shrugged off the fallout from UAW strikes
BREAKING NEWS
Things are looking brighter in Detroit as Ford shined on higher profit guidance for 2024 despite narrower profits in 2023. Let’s explore their path from here.
WHAT HAPPENED
Ford crushed The Street’s expectations by generating a respectable $1.1 billion operating profit from $46 billion in revenue. This time last year—Ford netted a $2.6 billion operating profit, but analysts are still impressed that Ford was able to mitigate the losses they suffered from the UAW strike.
COST CONTROLS
Despite higher labor costs—Ford also is projecting that they’ll be able to generate profits as high as $12 billion, way above The Street’s initial estimates. This is especially impressive considering that Ford expects their EV division’s losses to expand to over $5 billion in 2024. Despite lower EV demand and those expenses becoming an ever-widening money pit, Ford projects that their next-generation vehicles coming in 2025 will have a much faster ramp to profitability.
WHY IT MATTERS
Ford’s results are a great sign that this market can stomach higher labor costs and still generate efficiencies. Ford is still aggressively pushing toward their transition to a more EV-centric model and their next-gen projections are really promising. This was enough good news to bring investors back to Ford—lifting their stock over 7% in early trading.
Extra Moby Snacks
Chipotle stock is also up big after restaurant traffic grew 7.4% this quarter. The company has gotten costs under control in a big way and now management is talking about massively expanding their number of locations.
Despite blowing past Wall Street expectations in yet-another quarterly report—e.l.f Beauty only notched modest gains in early trading as the beauty brand has finally found a level where they can’t accellerate growth as much. After a brilliant 140% run-up in the last year, e.l.f. only tacked on 3% more lift in early trading.
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