TMT & Consumer Independent Equity Research Analyst, Obex Capital Research

Aaron Gabin

TMT & Consumer Independent Equity Research Analyst

TMT & Consumer Independent Equity Research

Obex Capital Research

“Obex” is Latin for Barriers to Entry. Obex Capital Management’s investment philosophy is driven by an intense focus on which business model’s Barriers to Entry are able to withstand the ever increasing competitive disruption in the TMT and Consumer Sectors.

Equity Bottom-Up

<ul>
<li>Warner Music hired YouTube's Chief Business Officer Robert Kyncl as its new CEO, an impressive executive well positioned to expand music monetization to newer frontiers.</li>
<li>The stock has roundtripped its $25 June 2020 IPO price after doubling.</li>
<li>There is a compelling "comping the comp" catalyst path for 2023, as streaming revenues reaccelerate, and Kyncl renegotiates static licensing deals with Peloton, Tiktok, etc.</li>
</ul>


Warner Music hired YouTube's Chief Business Officer Robert Kyncl as its new CEO, an impressive executive well positioned to expand music monetization to newer frontiers.
The stock has roundtripped its $25 June 2020 IPO price after doubling.
There is a compelling "comping the comp" catalyst path for 2023, as streaming revenues reaccelerate, and Kyncl renegotiates static licensing deals with Peloton, Tiktok, etc.


Long Idea: Warner Music’s New CEO Could Prove a Catalyst

Pan-Asia Index Rebalances/ Events/ Delta One, Periscope Analytics

Brian Freitas

Pan-Asia Index Rebalances/ Events/ Delta One

Periscope Analytics

Periscope Analytics focuses on event-driven trades across Asia Pacific and provides comprehensive, timely and systematic coverage of index changes to major Asia Pacific indices in a structured manner.

The analysis includes forecasted inclusions and exclusions to all major Asian indices that have significant amount of tracking assets, including estimates of passive buy/sell flow on the stocks. The service also provides commentary and impact of market consultations, ground rule changes, and other events (IPOs, spin-offs, M&A) that could lead to index changes and passive flow.

Periscope Analytics works with multi-strategy hedge funds, proprietary trading firms, stat arb trading groups and long-only investors that invest and trade in the Asia Pacific region with the data being used to trade index rebalances, avoid pre-positioning and passive flow, and to time entry into and exit from stocks.

Event-Driven Trades Across Asia Pacific

Event-Driven

<ul>
<li>
<a href="https://www.smartkarma.com/entities/tencent-holdings-ltd" target="_blank" data-smartkarma-citation="entities:26:1" rel="noopener">Tencent (700 HK)</a>'s reported sale of its <a href="https://www.smartkarma.com/entities/meituan-dianping" target="_blank" data-smartkarma-citation="entities:26970:1" rel="noopener">Meituan (3690 HK)</a> stake led to a selloff on Meituan and on other companies that Tencent has invested in.</li>
<li>There are 10 listed companies where <a href="https://www.smartkarma.com/entities/tencent-holdings-ltd" target="_blank" data-smartkarma-citation="entities:26:1" rel="noopener">Tencent (700 HK)</a>'s holding is over US$1bn. Some stakes are more likely to be sold than others. </li>
<li>A complete stake sale will benefit some companies more than others since they are part of a wider array of indices and that will bring in passive flow.</li>
</ul>



Tencent (700 HK)'s reported sale of its Meituan (3690 HK) stake led to a selloff on Meituan and on other companies that Tencent has invested in.
There are 10 listed companies where Tencent (700 HK)'s holding is over US$1bn. Some stakes are more likely to be sold than others. 
A complete stake sale will benefit some companies more than others since they are part of a wider array of indices and that will bring in passive flow.


Tencent's Potential Sale of Meituan Stake - Read Across to Other Stocks & Index Implications

<ul>
<li>Spotify's earnings were not as impressive as they seemed. Revenue beats driven by huge FX tailwinds, while MAU beats are coming from low ARPU regions.</li>
<li>ServiceNow's earnings were not as weak as seemed. Uberbullish CEO Bill McDermott had already guided to elongated sales cycles, but we think reiterated margin targets and 130% NRR matter more. </li>
<li>Inverse results...Spotify jumped without any evidence of progress towards an unbelievable LT operating model, while ServiceNow fell without evidence that its (superb) LT model is in question.</li>
</ul>


Spotify's earnings were not as impressive as they seemed. Revenue beats driven by huge FX tailwinds, while MAU beats are coming from low ARPU regions.
ServiceNow's earnings were not as weak as seemed. Uberbullish CEO Bill McDermott had already guided to elongated sales cycles, but we think reiterated margin targets and 130% NRR matter more. 
Inverse results...Spotify jumped without any evidence of progress towards an unbelievable LT operating model, while ServiceNow fell without evidence that its (superb) LT model is in question.


TMT Earnings Quick Hits: Spotify and ServiceNow

<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>


TikTok's business model advantage: short form video creates greater signal for algorithmic addiction is forcing rivals to react (where possible).
META is best positioned to copy TikTok, and is trading at a valuation approximating cable networks during cord cutting.
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.


<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>


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.
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).
To hit these targets requires believing in fanciful TAM forecasts, market share, and margins.


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

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)

Long Idea: Warner Music’s New CEO Could Prove a Catalyst

Warner Music's hiring of YouTube Chief Business Officer Robert Kyncl is an intriguing hire well positioned to increase Warner's monetization in...

Aaron Gabin

Tencent's Potential Sale of Meituan Stake - Read Across to Other Stocks & Index Implications

A Reuters report that Tencent intended to sell its stake in Meituan led to a selloff across Tencent's investee companies. The impact of passive...

Brian Freitas

TMT Earnings Quick Hits: Spotify and ServiceNow

A tale of two cities...Spotify jumped without any evidence of progress towards an unbelievable LT operating model, while ServiceNow fell without...

Aaron Gabin

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

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

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