Thursday 07/02/19

  1. In ENTERTAINMENT-RELATED NEWS, Spotify buys into podcasting and game makers suffer from Fortnite success
  2. In AUTOMOTIVE NEWS, GM relies on trucks to mitigate China and Tesla cuts the Model 3 price again
  3. In INDIVIDUAL COMPANY NEWS, Chipotle gets spicy, Ocado faces questions while Barratt and Redrow shine
  4. In OTHER NEWS, I bring you a useful kitchen hack. Rock and roll, baby! For more details, read on…



So Spotify invests in podcasts and game makers get dented by Fortnite’s success…

Spotify buys podcast firms Gimlet and Anchor (The Guardian, Mark Sweney) highlights the music streamer’s purchase of two podcast firms for an undisclosed price with a view to spending up to $500m on additional acquisitions aimed at broadening its offering. Gimlet is the company behind a number of popular podcasts including Homecoming, which was adapted into an Amazon TV series, and Anchor is a platform that helps podcasters publish and monetise podcasts. News of the acquisitions came as the company revealed its first ever quarterly profit, although it said that it expected to fall into loss this year. Total monthly users were up by 29% year-on-year (now 207 million), paying subscribers by 36% (now 96 million) and total revenues by 30%. Spotify said that it would not be raising subscription prices as a result of the acquisitions. * SO WHAT? * It’s good to see that Spotify is investing in content other than music – and podcasts are a natural extension to the offering as founder and chief exec of Spotify Daniel Ek said in a blog post that “We believe that it is a safe assumption that, over time, more than 20% of all Spotify listening will be non-music content. This means the potential to grow much faster with more original programming”. You could argue that arch-rival Apple is already WAY ahead of Spotify in terms of podcast power, but at least Ek is doing something positive. Interestingly, it seems that podcast users spend much longer on Spotify as

they listen to podcasts AND music and by having compelling proprietary content, Spotify will continue to attract in a new audience.

Game makers’ shares hit in battle royale with ‘Fortnite’ (Financial Times, Matthew Rocco) shows how the likes of Electronic Arts and Take-Two Interactive are suffering from the success of online game makers as the traditional games developers announced downbeat sales forecasts sending their share prices down by 13% and 10% respectively in early trading. Activision Blizzard and Ubisoft also saw their share prices falling by 9%. Take-Two chief exec Strauss Zelnick batted off suggestions that there was anything to be worried about from the popularity of online gaming by treating the games like any other, but EA launched its own “battle royale” game (called Apex Legends) on Monday to compete with Fortnite and the like. * SO WHAT? * I guess that the threat of online gaming has been around for years, but as people use their phones more and more for entertainment due to better graphics, better and larger screens and just improved “playability”, I think that it is a threat that the traditional developers will have to take increasingly seriously. People have their phones with them pretty much all the time and with increasing numbers of people playing games both individually and with real/virtual friends, this is a trend that is likely to continue IMHO. I know I keep going on about them, but I really do think that when handset makers come out with bendy phones (Samsung look like the first “proper” mobile phone company that will get such a phone to market this year) we could see a huge uplift in online gaming as I would have thought that playability will be transformed with the sudden effective doubling in screen size.



GM wants to push more trucks and Tesla announces a price cut…

In GM leans on US truck buyers to counter weakness in China (Wall Street Journal, Mike Colias) we see that General Motors announced an 8% fall in operating profit in the latest quarter due to weakness in China (where profits fell by 40%) and forex pressures in LatAm but, rather like Ford, the company said that its North American business did really well.  It announced a record fourth quarter operating profit of $3.04bn that was mainly down to truck buyers spending more on upgraded versions of the company’s biggest models – the Chevrolet Silverado and GMC Sierra. * SO WHAT? * Like I said, Ford also had a similar experience with light trucks/SUVs doing pretty well domestically whilst the international business continued to suffer (GM now concentrates on the US and China having exited Europe and other loss-making regions in the last few years). This is great for now, but domestic strength isn’t going to last forever so it needs to spread the love to make

sure its international business is positioned well for any kind of uptick – either that, or use it as an opportunity to downsize in anticipation of a shift in the traditional vehicle ownership model.

Tesla cuts the Model 3 price again (Wall Street Journal, Robert Wall) highlights a $1,100 price cut off the price of its entry model to $42,900 – the second price cut this year so far – as Elon Musk tries to get prices down to his desired level of $35,000. The Model 3 is facing an effective price rise in the US this year as the government starts to phase out a $7,500 tax credit for buying electric vehicles. * SO WHAT? * Tricky times for Musk as subsidies have been a major driver of customer demand. Cutting sticker prices will go some way towards mitigating the tax credit reduction, but it will put extra pressure on the company just as he just announced a 7% cut in his full-time workforce whilst maintaining ambitions to produce 7,000 cars a week by year-end. He says that when his Shanghai plant comes online the weekly output of Model 3 cars will be 10,000 units. As everyone has learned by now, Tesla’s targets tend to be more of a wish than a reality – but it needs this increase in production yesterday in order to get profitable.



Chipotle spices up its profits, Ocado faces fire issues and UK housebuilders benefit from first-timers…

Chipotle profit rises as higher prices, restaurant investments drive growth (Wall Street Journal, Maria Armental) shows a real turnaround at the previously troubled restaurant as it announced a 4% comparable sales increase in 2018, with improvements in the pipeline. It has managed to achieve this via improving its food-handling practices, investment in restaurants and changes in the menu. The share price rose by 9.9% in after hours trading – it has risen by an impressive 22% so far this year. * SO WHAT? * Talk about a phoenix rising from the flames following a tricky few years of food safety scares! It sounds like there are more positives to come as it plans to roll out its loyalty programme nationally and invest in some dedicated drive-through lanes at certain restaurants for picking up orders using a mobile device. It sounds like things are back on track for the company after a rough time.

Ocado faces questions on robot facility after blaze (Daily

Telegraph, Ashley Armstrong) shows that the recent blaze at Ocado’s automated warehouse in Andover is raising questions over the company’s much-touted technology as investigations continue to examine the cause of the fire. The warehouse fulfills 10% of Ocado orders and the damage is more extensive than had originally been thought so sales growth is likely to be affected in the near-term. * SO WHAT? * I suspect that investors will be holding their breath to see what caused the fire. If it is a one-off, then Ocado will be off to the races again, but if it ISN’T – and there’s a problem with the tech – it could become a real headache for them considering that the company has licensed its tech to retailers including Sobeys in Canada, ICA in Sweden and Kroger in the US. Everyone will be watching developments closely as Ocado’s tech has been key to its recent successes.

Housebuilders buoyed by sales to first-time buyers (Daily Telegraph, Jack Torrance) highlights strong performances from Barratt Developments and Redrow as they continued to benefit from first-time buyer demand and the government’s Help To Buy scheme. Secondhand sales of homes have lagged the sale of new homes over the last year and Barratt’s chief exec David Thomas pointed out that although the sector is feeling pretty muted at the moment, their fortunes have been boosted by the undersupply of homes, government support for builders and cheap mortgages.



And finally, in other news…

I thought I’d leave you today with a useful life hack in Mums praise ‘amazing’ £1.60 oven cleaning hack to get rid of nasty grease (The Mirror, Robyn Darbyshire Watson’s Daily – here to make you life better ????

Some of today’s market, commodity & currency moves (as at 0828hrs green is up, red is down). THIS IS INTENDED AS A ROUGH GUIDE ONLY!

FTSE 100 *Dow Jones *S&P 500 *Nasdaq *DAX *CAC-40 *Nikkei **Shanghai **
7,173 (-0.06%)25,390 (-0.08%)2,732 (-0.22%)7,37511,325 (-0.38%)5,079 (-0.08%)20,751 (-0.59%)
Oil (WTI) p/bOil (Brent) p/bGold Per t/oz£/$€/$$/¥£/€$/₿

(markets with an * are at yesterday’s close, ** are at today’s close)