🎧Dominating the Audio Streaming Industry

Plus, second quarter GDP figures came in as a big surprise.

July 25, 2024

Pencils down, it’s time for lunch. Here’s what you missed this morning:

  • 🟩 | Market Snapshot: The Nasdaq Composite and S&P 500 rose this morning, partially recovering from their worst sell-off since 2022.

  • 🎉 | In focus: Surprise! The US economy grew at a 2.8% annualized pace in the second quarter, blowing the 2.1% forecast out of the water.

  • 🎒 | Noteworthy: A mixed bag of news… The personal consumption expenditures price index rose 2.6% for the second quarter, a significant decline from Q1’s 3.4% increase. However, the report also showed that the personal savings rate continues to decline, dropping by 3.5% for the quarter.

  • 🎧 | The Midday Trade: Dominating the Audio Streaming Industry. Scroll down for more.

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STREET STATS

MORNING MOVERS

NOW: ServiceNow’s stock is headed for its best day in more than a year after surpassing Wall Street expectations for Q2 earnings (Investing.com)

HAS: Shares of toy maker Hasbro surged higher after reporting a beat on Q2 earnings and revenue thanks to its digital gaming segment (CNBC)

AAL: American Airlines saw its stock rise despite slashing its earnings outlook for the year as it grapples with an industry-wide supply glut (WSJ)

HON: Shares of industrial conglomerate Honeywell tumbled after it trimmed its full-year earnings guidance (Barron’s)

ALGN: Align Technology reported better than expected Q2 EPS, but revenue came up short and caused shares to fall (Investing.com)

TOP CALLS

Goosehead Insurance: Piper Sandler Maintains Overweight on Goosehead Insurance, Raises Price Target to $72 (Trade It)

Raymond James: JP Morgan Maintains Overweight on Raymond James Finl, Lowers Price Target to $135 (Trade It)

Coca-Cola: Truist Securities Maintains Buy on Coca-Cola, Raises Price Target to $70 (Trade It)

Universal Health: Cantor Fitzgerald Reiterates Underweight on Universal Health Servs, Maintains $162 Price Target (Trade It)

Tenet Healthcare: Truist Securities Reiterates Buy on Tenet Healthcare, Raises Price Target to $170 (Trade It)

Bumble: Goldman Sachs Maintains Buy on Bumble, Raises Price Target to $18 (Trade It)

THE MIDDAY TRADE

Earnings Boost

Spotify’s (SPOT) earnings were solid, and Goldman Sachs (GS) analyst Eric Sheridan is bullish on the stock. The analyst upgraded his rating to buy from neutral and raised his price target to $425. Shares jumped nearly 12% following its earnings report, its biggest single day gain since January 2023.

According to Sheridan, Spotify has solidified itself at the top of the audio distribution industry and is the clear-cut global audio platform leader.

Strong Fundamentals

Aside from its industry dominance, Sheridan likes the stock for its strong operating margins and free cash flow capabilities. Operating margins are improving following its restructuring last year, and he believes margins could surpass the company’s medium-term projections. Q2 gross profit margins were up to 29.2%.

Additionally, Sheridan expects the company to increase user engagement and pricing power.

Are Projections Still Too Conservative?

Despite his price target increase, Sheridan believes his projections could still prove to be too conservative. He believes its strengthening advertising revenue margin, added revenue thanks to price hikes, and efficient operations could drive the stock even higher.

On top of all that, Spotify is seemingly in a good position to begin returning capital to shareholders in the form of stock buybacks. He believes it may repurchase around 25% of its current market cap through 2029.

Spotify seems to have a lot of momentum right now, and if that holds, it could be a solid investment.

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SURVEY THE STREET

Amazon isn’t just an e-commerce company; it’s a leading AI giant.

Its generative AI service contributes multiple billions in annual revenue to Amazon’s cloud business, helping Amazon Web Services (AWS) hit a $100 billion annual run rate.

And it doesn’t look like growth in Amazon’s generative AI sector is slowing down any time soon. Today, GE HealthCare announced that it is working with AWS to build generative AI models for medical use cases.

Are you bullish or bearish on Amazon as an AI company?

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Plus, Yesterday’s Poll + Results:

🟨🟨🟨🟨⬜️⬜️ Bullish 🐂 

🟩🟩🟩🟩🟩🟩 Bearish 🐻 

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