Thursday, Apr 21st 2022

Three Things (4/21)

Commentary

“I'm not emotional about investments. Investing is something where you have to be purely rational and not let emotion affect your decision making” —Bill Ackman

The below content and projections are the opinion of the authors. Any conclusions or takeaways are their own. This should not be considered as investment advice. Investing involves the risk of loss and returns are not guaranteed.

1) Netflix shares fall by most since 2004 after company talks up ads amid questions about future growth

  • CEO Reed Hastings said Tuesday the company is “quite open” to selling ads on lower-priced plans.
  • Netflix lost 200,000 subscribers in the first quarter and expects to lose 2 million more in the current quarter.
  • Shares of the company fell 35.1% during Wednesday’s trading session, the most since October 2004.

Titan’s Takeaway: Netflix’s newfound interest in selling ads marks a turning point in how the company positions itself in a crowded streaming market. And while Netflix’s stock price has been volatile throughout its history, shares falling 65% since late November suggests investors have serious questions about this new strategy.

2) Spotify shutters Greenroom creator fund amid shifts in streaming audio strategy

  • Spotify announced a creator fund for Greenroom, its live audio app, in June 2021, but shuttered the program this week.
  • Podcast industry publication Podnews reports there is no evidence the company paid out any of the announced funding.
  • Spotify recently rebranded its Greenroom app as Spotify Live.

Titan’s Takeaway: Spotify’s target market may be all of audio, but not every part of this market is at the same stage of a streaming transition. And when it comes to live audio, the streaming business doesn’t ask consumers to form a new habit, but break two old ones: listening anytime and listening anywhere.

3) Just Eat weighs sale up Grubhub one year after acquisition as delivery landscape shifts post-pandemic

  • Just Eat acquired Grubhub for $7.3 billion in June 2021.
  • The company said Wednesday it is seeing higher than normal churn this year as pandemic-related growth cools.
  • In its North America business, Just Eat order volumes fell 5% in the first quarter.

Titan’s Takeaway: For several quarters, we’ve seen pandemic-related growth peter out across industries. But like Netflix’s struggle with subscriber growth, Just Eat’s exploration to undo a deal it just completed shows the speed of these changes appear to have caught some management teams by surprise.

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