🎧 Spotify Makes No Profit

1) Exxon Mobil Set To Acquire Pioneer, 2) Pepsi’s Earnings Visualized, 3) Spotify Is Struggling, and more!

Author

Carbon Finance
October 10, 2023

Hello!

Earnings season is right around the corner. Over the next few weeks, all major companies will be reporting earnings and we’ll be able to get a great idea on how they’re handling the current macro environment.

In today’s newsletter:

  • 🛢️ Exxon Mobil Set To Acquire Pioneer

  • 🥤 Pepsi’s Earnings Visualized

  • 🎧 Spotify Makes No Profit

Let’s dive right in!

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🛢️ Exxon Mobil Set To Acquire Pioneer

Exxon Mobil is in the final stages of discussions to acquire Pioneer Natural Resources, a prominent producer in the lucrative Permian shale basin, in a deal potentially worth $60B.

This acquisition, which would be Exxon's largest since 1998, aims to expand its operational footprint in a key U.S. oil region, providing more established oil-producing land and thereby mitigating the risks associated with developing unproven areas.

While Exxon CEO Darren Woods has committed to investing in carbon reduction and green initiatives, the prospective acquisition of Pioneer, and the recent purchase of CO2 pipeline operator Denbury, indicates a sustained focus on Exxon's traditional oil-and-gas operations.

🥤 Pepsi’s Earnings Visualized

PepsiCo reported a rise in third-quarter earnings and revenue, exceeding analyst expectations with a profit of $2.24 per share and a revenue of $23.5B. Despite concerns about the impact of new weight-loss drugs like Ozempic on the beverage industry, the company anticipates a 13% increase in annual core earnings per share and maintains its previous guidance for a 10% rise in full-year organic revenue.

CFO Hugh Johnston emphasized that while it's still early days for these weight-loss drugs, the company is vigilantly monitoring trends and is ready to adapt, focusing on consumer demands for smaller portions and lower-calorie options. PepsiCo is strategically emphasizing portion-controlled packages, zero-sugar beverages, and nutritious foods to align with evolving consumer preferences.

🎧 Spotify Makes No Profit

Spotify, which started as a modest startup in Stockholm in 2008, recently turned 15 years old, and has transformed into the world’s predominant music streaming platform, boasting 551M active users and 220M premium subscribers by mid-2023.

Despite its impressive user growth and a current valuation of about $31B, Spotify has struggled with profitability, reporting a net loss of $455M last year. The financial viability of the streaming model is under scrutiny, as musicians earn on average $0.0033 - $0.0050 per stream, and the platform seems to inadequately compensate smaller artists while favoring major labels and top-tier artists.

Furthermore, Spotify has spent over $1B investing into podcasts, involving high-profile deals with celebrities and acquisitions of podcast studios, but most shows have not been profitable resulting in significant losses. This has led to staff and programming cuts and a refocusing on more selective original content.

Recently, there has been rumors circulating that Spotify is reportedly preparing to launch a “Superpremium” service, as indicated by details found in the app's code, including a new logo and an expanded feature list that includes 24-bit lossless audio, AI playlist generation tools, advanced mixing tools, additional audiobook listening hours, and a personalized feature named “Your Sound Capsule.”

Will these features be enough to help Spotify operate more efficiently? No one knows for sure, but it will definitely be no easy feat for Spotify to diversify its offerings and improve its financial performance while managing the ongoing discontent among artists.

💊 Mirati Acquisition. Bristol-Myers Squibb $BMY will acquire Mirati Therapeutics for up to $5.8B, enhancing its oncology portfolio with drugs like Krazati. [CNBC]

🐭 Peltz Returns. Nelson Peltz, whose fund has a $2.5B investment in Disney $DIS, is launching a second board challenge, seeking multiple seats after a 30% stock drop. [R]

🔋 Tesla Struggles. Tesla $TSLA stock declined following the Chinese Passenger Car Association's report of a drop to 74,073 units delivered in September from around 84,000 in August. [B]

🎮 Unity CEO Leaves. Unity Software $U CEO John Riccitiello is set to retire following backlash from game developers over a controversial fee rollout, with James Whitehurst stepping in as interim CEO. [MW]

Notable Companies Reporting Earnings This Week:

  • Tuesday:

    • PepsiCo ($PEP)

  • Thursday:

    • Fastenal ($FAST), Delta Airlines ($DAL), Walgreens ($WBA), Domino’s Pizza ($DPZ)

  • Friday:

    • UnitedHealth Group ($UNH), JPMorgan ($JPM), BlackRock ($BLK), Citigroup ($C), Wells Fargo (WFC)

All of the companies that are reporting earnings this week can be viewed here.

Major Trades Published Week of 10/2. Trades may be those of family members. [Source: 2iQ]

Buys:

  • John Curtis (R)

    • Company: Palo Alto Networks ($PANW)

      • Amount Purchased: $1K - $15K

    • Company: Eli Lilly ($LLY)

      • Amount Purchased: $1K - $15K

  • Lloyd Doggett (D)

    • Company: The Home Depot ($HD)

      • Amount Purchased: $1K - $15K

Sells:

  • Virginia Foxx (R)

    • Company: Vector Group ($VGR)

      • Amount Sold: $50K - $100K

  • Max Miller (R)

    • Company: Vanguard S&P 500 ETF ($VOO)

      • Amount Sold: $15K - $50K

  • Michael Burgess (R)

    • Company: Microsoft ($MSFT)

      • Amount Sold: $15K - $50K

    • Company: Blackstone ($BX)

      • Amount Sold: $15K - $50K

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