Aaron Gabin

TMT & Consumer Independent Equity Research Analyst

Obex Capital Research

Equity Bottom-Up

<ul>
<li>Management promises belt tightening! Losing €659M at ~€12B in revenues? And still won't be profitable in 2023?  Why should investors believe this change?</li>
<li>Gross margin guidance misses...again. Two beats in the past 3 years on gross margins.</li>
<li>Podcasting growing 100% in 1Q22 exited 4Q22 growing 30%...and ad-related revenues still just 14% of the total. Why will this move the needle?</li>
</ul>

<ul>
<li>Spotify disclosed podcasting is a €200M business with -57% gross margins currently, but will go breakeven in 1-2 years, and become GM accretive in 3-5 years.</li>
<li>Spotify put forth outlandish LT targets: 1B MAUs (vs. 422M today), €100B in revenues (vs. $10B today), of which € 10B will be advertising revenue (vs. € 1.2B today).</li>
<li>To hit these targets requires believing in fanciful TAM forecasts, market share, and margins.</li>
</ul>

<ul>
<li>MAUs beat, margins miss, guidance weak. Where / when is the operating leverage?</li>
<li>Podcasting business took a restructuring charge this quarter, not bullish for the business meant to expand gross margins.</li>
<li>TikTok reportedly readying a new streaming music app... not good.</li>
</ul>

Sumeet Singh

Head of Research, IPOs & Placements

Aequitas Research

IPOs and Placements coverage across Asia Pacific

Event-Driven

<ul>
<li>Multiple new agencies have been reporting that <a href="https://www.smartkarma.com/entities/tencent-holdings-ltd" target="_blank" data-smartkarma-citation="entities:26:1" rel="noopener">Tencent (700 HK)</a> plans to trim its investment portfolio over the remainder of the year. </li>
<li>The reports have been coming in since the second half of the year and the company has been duly denying these rumors.</li>
<li>In this note, we look at Tencent’s shareholding in various companies to try and gauge which ones it could sell out of and how.</li>
</ul>

<ul>
<li>TikTok's business model advantage: short form video creates greater signal for algorithmic addiction is forcing rivals to react (where possible).</li>
<li>META is best positioned to copy TikTok, and is trading at a valuation approximating cable networks during cord cutting.</li>
<li>Netflix is worst positioned... as YouTube, Instagram, and Snap incorporate TikTok's short form video, more attention will be drawn away from the streaming services. Tough spot to be in.</li>
</ul>

Luxembourg

Spotify Technology S.A. provides music streaming services. The Company offers commercial free music and ad-supported services to subscribers. Spotify Technology serves clients worldwide.

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Spotify - SPOT US

Spotify 4Q22: Speed + Efficiency?

Promises of future margin expansion because Spotify laid off 6% of its (bloated) workforce and have done a reorg to stress efficiency? Structural...

Aaron Gabin

Spotify Analyst Day: We’re Going to Be Huge and Profitable in 10 Years

Spotify's Analyst Day came with new disclosures and an aggressive long-term model. For a company that chronically underwhelms the street on...

Aaron Gabin

Spotify 3Q22: Another TikTok Victim?

Spotify had another murky quarter as margins continue to undershoot despite management talking about more cost discipline in this "new" cost of...

Aaron Gabin

Tencent Investee Selldown - The US$120bn Global Overhang

There have been multiple reports that Tencent (700 HK) plans to trim its investment portfolio over the remainder of the year. We look at Tencent's...

Sumeet Singh

TMT Pre-2Q Earnings: The TikTok Impact

TikTok is wreaking havoc on the advertising and streaming ecosystems by stealing attention. META is best positioned to respond, NFLX is least well...

Aaron Gabin

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