Consumer Discretionary

Spotify Technology S.A. (SPOT) Q3 2024 Earnings Call Transcript Summary

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summary of the Spotify Technology S.A. (SPOT) Q3 2024 Earnings Call Transcript: Financial Performance: Spotify reported strong quarterly results with a 21% year-on-year growth in total revenue reaching EUR 4 billion. Premium revenue rose 24% year-on-year on a constant-currency basis, driven by subscriber growth and ARPU acceleration from price increases. Gross margin reached a record 31.1%, surpassing guidance by 90 basis points due to favorable content costs. Operating income reached a new record of EUR 454 million, driven by gross profit strength. Record free cash flow of EUR 711 million for the quarter, supported by improved operating income and net working capital favorability. Business Progress: Added 6 million net subscribers, reaching a total of 252 million, and MAUs grew by 14 million to 640 million, both surpassing guidance. Launch of new subscription tiers and expansion into audiobooks in Europe, alongside the advancement of video content on the platform. Forward-looking plans […]

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Spotify Technology Q3 Diluted Earnings, Revenue Increase; Q4 Guidance Set — Shares Rise

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Spotify Technology (SPOT) reported Q3 diluted earnings late Tuesday of 1.45 euro ($1.54) per share, up from 0.33 euro a year earlier. Analysts polled by Capital IQ expected earnings of 1.67 euros per share. Revenue for the quarter ended Sept. 30 was 3.99 billion euros, up from 3.36 billion euros a year earlier. Analysts surveyed by Capital IQ expected 4.03 billion euros. Spotify said it had 640 million total monthly active users in Q3, up 11% year over year. The company said it expects Q4 revenue of 4.1 billion euros. Analysts polled by Capital IQ expect 4.26 billion euro. Shares of the company were up more than 7% in recent after-hours activity.

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Estee Lauder’s Dividend Cut Implies Persistent Stress in Medium Term, BofA Says

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Estee Lauder’s (EL) quarterly dividend cut signals “stress continues to be persistent” on earnings and cash flow in the medium term, BofA Securities said Friday in a report. The 5% decline in fiscal Q1 organic sales, led by weaker-than-expected figures in China and Asia travel retail, compared with the firm’s estimate for a 4% decline. The firm slashed its earnings per share forecast to $1.50 for fiscal 2025 from $2.80 and cut the fiscal 2026 projection to $2.95 from $$4.55. The fiscal 2027 outlook fell to $3.50 from $5.20. The dividend cut “implies a return to $3.50 of EPS over time assuming a 40% payout ratio,” the report said. BofA lowered its price target for the stock to $75 from $100 and reiterated its neutral rating. “With China still decelerating and uncertain and a new CEO starting in January, it seems premature to ‘buy the dip’ at this point,” BofA

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Amazon Near All-Time High With AWS Growth, Retail Rebound

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Amazon.com stock approaches an all-time high after the company reported Amazon Web Services growth reaccelerating and a rebound in retail spending following some deceleration last quarter, Davidson analysts Gil Luria and Alex Platt say in a research note. The company’s commentary around AWS suggests that AI features are gaining considerable traction with customers, the analysts say. Management also suggests that AWS core services growth is healthy from new workloads and cloud migration initiatives, they say. Efforts to improve profitability on both the retail side and AWS are boosting the company’s operating margins, the analysts say. Shares rise 7.3% to $200, $1.20 from their all-time high.

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Amazon Web Services Takes Lead Among AI Hyperscalers

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Amazon Web Services is now the top dog among cloud providers for AI, Davidson analysts Gil Luria and Alex Platt say in a research note. Amazon.com has taken several steps to get products and features in line with those of its hyperscaler peers in AI, especially Microsoft Azure, they say. The Amazon cloud division now has a broad set of product offerings for generative AI-specific workloads, and sees strong adoption of AI features like Amazon Q or Bedrock, the analysts say. In 3Q, AWS took in almost twice as many total dollars quarter-to-quarter as Azure, with growth accelerating to 19%, they say.

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Amazon Funding Capex Increases With Stronger Margins

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Amazon is funding considerable increases in its capital expenditures with an even larger step-up in operating profit gleaned from tight cost controls, UBS analysts say in a research note. The company is controlling its headcount to keep operating expense growth low and expand margins, they say. The company’s capex jumped 80% to about $23 billion in 3Q as Amazon Web Services invests aggressively in AI infrastructure to meet high demand, Davidson analysts say in a research note. But Amazon’s cloud unit has a lot of price efficiencies in its chips that are less expensive to implement, they say.

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McDonald’s Can Recover From Short-Term Struggles, Analysts Say

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The E. coli outbreak that sickened dozens and international pressures will create near-term headwinds for McDonald’s, UBS analysts say in a research note. However, they predict trends will strengthen in the new year, thanks to new menu items, continued promotions and increased marketing. Same-store sales in 3Q and initial October trends show that the restaurant chain’s momentum was improving, prior to the recent food-safety incident. And while macroeconomic challenges persist overseas, the company is either gaining share or notching improvements in trends across all major markets. Analysts raise their price target to $345 and maintain their buy rating.

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Estée Lauder’s Visibility on Path to Recovery Is Reduced

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Estée Lauder’s latest results, coupled with its guidance withdrawal, further reduces its visibility on its path to recovery, Morgan Stanley analysts say in a research note. The cosmetics company’s incoming CEO Stéphane de La Faverie will likely need to add aggressive cost-cutting measures and reinvestments behind the company’s portfolio once he takes over the top job, the analysts add. “Bottom line, Estée Lauder is acknowledging incremental weakness in Asia travel retail in guidance, which drives weak second-quarter guidance and withdrawn full-year guidance.” Shares drop 19% to $71.01.

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Estee Lauder Investors Spooked As F2Q Guide Bleak

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Estee Lauder pulls guidance for its current fiscal year, but what insight it did provide for the current quarter spooked investors badly. The cosmetics company projects a F2Q sales drop between 8% and 6%, and adjusted EPS well below what analysts were expecting. The main culprit is the ongoing problems in China and the Asia retail market. While outgoing CEO Fabrizio Freda expects stimulus measures there to eventually stabilize the high-end beauty market, it’s going to take some time. Estee Lauder does buy some breathing room for new leadership, with a halved dividend to free up some resources. Estee Lauder plunges 23% premarket to $66.55.

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McDonald’s U.S. Orders Slowed While Spending Rose in 3Q

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McDonald’s logged a small gain in U.S. comparable sales during 3Q as it pulled in slightly fewer orders year-over-year but guests spent more on average with each order. The fast-food chain says effective value marketing of its core menu and growth in digital sales and delivery contributed to the 0.3% U.S. comparable sales increase. But analysts had been targeting a 0.7% gain, according to FactSet, thinking that the chain would outperform its U.S. competitors in a tight spending environment for eating out. McDonald’s slides 2.3% to $290.01 premarket.

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McDonald’s Overseas Sales Fell More Than Expected in 3Q

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McDonald’s recorded fewer comparable sales for 3Q due to shortfalls in its international markets that were worse than Wall Street had anticipated. Comps in the fast-food chain’s international operated markets were down 2.1%, led by poor sales in France and the U.K. The company’s international developmental licensed markets saw comps drop 3.5% due to the war in the Middle East and weakening sales in China, which more than offset growth in Latin America. Analysts had been expecting comps in both market groups to slip just 1.2%, according to FactSet. Investors had been bracing for some weakness overseas after Domino’s Pizza recently missed 3Q international sales projections.

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McDonald’s Fights for Struggling Consumers

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McDonald’s says that families and lower-income customers continue to feel pinched across many global markets, making for a challenging environment for fast-food. McDonald’s is pushing its international franchisees to offer more value options, and expects to stay conservative with any price increases. “Consumers are certainly remaining resistant to pricing,” McDonald’s CFO Ian Borden says during an earnings call.

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