November 7th, 2022
Last week’s market summary (October 31st-November 4th, 2022):
- S&P 500: -2.87%
- Dow: -1.07%
- Nasdaq: -5.02%
- Bitcoin: +2.26%
Amazon took a swipe at Spotify last week by making its entire catalog of music free for Prime members to stream with no ads. It was also a busy week on Wall Street as hundreds of companies reported their Q3 earnings.
Here's a quick look at everything we're covering today.
- Amazon Music's “Free” Tier Now Includes Its Entire Catalog
- Pump Pain for Consumers = Record Profits for Oil Companies
- Airbnb Just Had Its Best Quarter Ever (But Investors Are Still Wary)
- Starbucks Raised Drink Prices This Year — Fans Didn't Blink
- Meta's Stock Price Hasn't Been This Low Since 2015
By the way, if you don't see this until Tuesday, don't forget to get out and vote! You can finish reading this while you're waiting in line ?
What Everyone’s Been Buzzing About
1. Amazon Music's “Free” Tier Now Includes Its Entire Catalog
Until last week, Amazon Prime members could play about 2 million songs for free (free if you don't count your Prime membership fee) on Amazon Music's Prime tier. That number of songs is now 100 million as Amazon's entire music library is now included.
It's important to note that subscribers to Amazon Music's Prime plan can't play any specific song. It's all shuffle. If you want on-demand control, you'll have to upgrade to Amazon Music Unlimited for $8.99/mo. So basically this is like Spotify's Free plan, but (importantly) without any ads. Amazon is also removing ads from a lot of its podcasts, including every podcast from Wondery (which it purchased in 2020).
This is the latest development in the audio streaming wars that have been heating up lately. At this point, every platform basically has the same songs available to stream. So differentiating yourself really comes down to two things: (1) a great experience and (2) extras that subscribers can't find elsewhere (podcasts, audiobooks, etc.).
Both Amazon and Spotify have been working hard on #1 by creating original shows and signing exclusivity deals with podcasters. But Amazon took a big step forward in the experience department by removing ads from its free tier. People hate ads. Amazon knows that. And it can remove them since Prime listeners are already monetized through their membership fee. But Spotify doesn't have that luxury. Amazon knows that too.
2. Pump Pain for Consumers = Record Profits for Oil Companies
Their latest round of earnings reports have shown that oil companies are raking in record amounts of cash this year. In a report last week, PBS noted that, “ExxonMobil pulled in nearly $20 billion in profit. Chevron took in more than $11 billion, Shell $9.5 billion, BP over eight billion. And…Saudi Aramco, reported making $42 billion this quarter.”
President Biden, meanwhile, has accused the oil corporations of “war profiteering.” He's also threatened to institute a windfall tax if they don't take steps to cut gas prices at the pumps. But Big Oil CEOs aren't backing down and contend that their profits are being redistributed to shareholders via stock buybacks and dividend hikes.
Biden says that these stock moves don't benefit the typical household. And on Tuesday, his special presidential coordinator said that the White House wants the oil biz to invest more of its profits into increasing production instead.
Related >>> Should You Invest in Oil Stocks?
3. Airbnb Just Had Its Best Quarter Ever (But Investors Are Still Wary)
As the travel industry continues its post-COVID recovery, Airbnb is flying high. Q3 2022 was the most profitable quarter in the company's history. The $1.2 billion in profit it reported was 46% higher than the year prior.
Still, Airbnb's stock fell the next day. What gives? The main reason for investors' lukewarm response to its earnings reports was the soft guidance that it gave for Q4. While summer was strong, there are concerns that growth may be decelerating.
And while hitting record numbers are great, it's important to understand that future growth is already priced into Airbnb's stock level. It's currently trading at 45x earnings. In order for those lofty share prices to ever become justified, Airbnb needs to see a lot more growth in the quarters and years ahead.
4. Starbucks Raised Drink Prices This Year — Fans Didn't Blink
As Starbucks lovers celebrate the launch of its new lineup of holiday drinks (like yours truly), the company is celebrating its strong financial performance.
Same-stores sales grew 11%, mostly due to customers paying more per order. Despite raising prices about 6% this year, Starbucks stores still saw their traffic increase to 95% of their pre-COVID levels. Membership in its loyalty program also reached an all-time high of 28.7 million caffeine fanatics.
The coffee giant's performance shows that discount brands aren't the only ones that can perform well during economic slowdowns. By building a loyal customer base that skews young and wealthy, Starbucks has shown amazing resilience in a year when inflation pressures have hampered other companies.
5. Meta's Stock Price Hasn't Been This Low Since 2015
At the close of the market on Friday, Meta's shares were trading at $90.79. That's a devastating collapse of more than 70% from its September 2021 high.
The last time Meta was trading at this level was in 2015 when the company earned just under $18 billion in revenue for the entire year. Fast forward to today and Meta earned over $27 billion in Q3 alone. Revenue for the last 12 months, meanwhile, is right at $118 billion.
Granted, profits are dwindling thanks to the billions that Zuckerburg is pouring into his metaverse (pipe?) dream. And, yes, that dream may never become a reality. But with its core businesses still printing cash, it causes one to wonder if investor pessimism towards Meta has gotten a tad carried away.
More On the Metaverse >>> 8 Best Metaverse Stocks to Invest In Today
What To Keep Your Eye on This Week
Here are a few noteworthy economic events that are coming up this week:
- Monday, November 7th: Consumer Credit Change | September
- Tuesday, November 8th: NFIB's Small Business Optimism Index | October
- Wednesday, November 9th: United States Wholesale Inventories | September
- Thursday, November 10th: Consumer Price Index | October
And here are a few of this week's notable earnings calls:
- Tuesday, November 7th: Walt Disney Company (DIS), Occidental Petroleum Corporation (OXY)
- Wednesday, November 8th: TC Energy Corporation (TRP), Rivian Automotive (RIVN), Roblox (RBLX)
- Thursday, November 9th: Astrazeneca (AZN), US Foods (USFD), Ralph Lauren (RL)
At IJ, we know that many other publishers are creating great personal finance content. So each week we like to call out a few recent stories from our colleagues that we felt were interesting, eye-opening, challenging, inspiring…or just funny.
Here are our picks for this week:
- The Oil and Gas Paradox Threatening Biden’s Party at the Polls (Politico)
- For Some, Amazon Music’s Big Prime Expansion Comes With Big Frustration (The Verge)
- ‘Game of Thrones’ NFTs Are Coming (Variety)
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