Wednesday's Headlines: Spotify Finally Launches Audiobooks

Wednesday's Headlines: Spotify Finally Launches Audiobooks

Here were the biggest movers in the MyWallSt shortlist yesterday:

Moving Up ⬆️

Cognex (CGNX) +6.4% Group (TCOM) +3.8%

StoneCo (STNE) +3.2%

Wynn Resorts (WYNN) +2.9%

Huazhu Hotels Group (HTHT) +1.6%

Moving Down ⬇️

Ford Motor Company (F) -12.3%

Farfetch (FTCH) -8.7%

Lovesac (LOVE) -7.9%

Etsy (ETSY) -7.0%

DraftKings (DKNG) -6.4%

Here are the stories that you need to know ahead of market-open today, Wednesday the 21st of September.

Spotify Adds Audiobooks in Latest Bid to Satisfy Your Listening Needs 📖

On Tuesday, Spotify (SPOT) announced the launch of its long-awaited audiobooks initiative. More than 300,000 famous titles will come to the world’s most popular streaming platform, including popular works such as Delia Owens' ‘Where the Crawdads Sing’, Michelle Obama's ‘Becoming,’ and Colleen Hoover's ‘It Ends With Us’.

The launch is just the latest attempt by Spotify to create more audio content outside of the music industry. Longtime investors will know that the biggest thorn in Spotify’s side is music royalties, making it almost impossible for the platform to generate a profit. Despite its premium subscription service and the ad-supported tier, Spotify’s margins are razor thin. But when it comes to audiobooks and exclusive podcasts, Spotify may get a bit more breathing room.

According to Spotify’s Vice President, Nir Zicherman:

"Audiobooks are next to come into the picture because we see a substantial untapped market: while audiobooks represent just a 6-7% share of the wider book market, the category is growing by 20% year-over-year."

For context, the audiobook market brought in $1.67 billion last year.

Initially, Spotify will sell audiobooks individually, not on a subscription basis. According to management, this model was favored during testing and benefits the more casual listener. Prices are expected to be competitive with other offerings, which is good because the audiobook market is hotly contested with the likes of Amazon’s Audible.

Time will tell if this offering is enough to regain Wall Street’s love. Spotify’s stock has fallen significantly over the last year and is now trading below its 2018 direct listing price.

Stitch Fix Shares Tumble on Revenue Decline 🪡

Shares of Stitch Fix (SFIX) are down 10% in pre-market trading today after the company announced a revenue decline in its fourth-quarter earnings report. The e-commerce brand saw revenue fall 16% year-over-year and active clients fall.

The company, which specializes in online personal shopping and styling, brought in revenue of $482 million for the quarter. Even though analysts had expected to see revenue decline from a year ago, that was still well below forecasts. The company also swung to a loss of $0.89 per share, compared to $0.19 a share profit for the same period last year. This too was below analyst estimates.

The company had 3.8 million active clients for the quarter, down 9% year-over-year. However, spend-per-client did increase 8% to $546.

Stitch Fix, like many e-commerce companies, saw strong demand during the COVID-19 pandemic, with shares rising to over $96 in early 2021. However, since then, founder Katrina Lake stepped down as CEO in a shock announcement, and was replaced by Bain & Company partner, Elizabeth Spaulding.

Spaulding has blamed the downturn in demand on macroeconomic factors and announced the axing of 330 jobs in June in order to return the company to profitability.

Shares of the company are set to open at $4.25 — over 90% below the company's 52-week highs.

Cognex Boosts Its Revenue Outlook 💰

Cognex (CGNX) shares spiked in trading yesterday after the company upped its revenue guidance for the current quarter.

Ahead of Cognex’s so-called ‘Analyst Day’ on September 20th — where management will give institutional investors and analysts an updated view on its estimated market size and its sustainability efforts — the company has said that it now expects to pull in revenue of between $195 - $205 million for the third-quarter. This is an increase of almost 15% on previous forecasts at the top end.

In the press release, the optimistic forecast was attributed to a better-than-expected recovery from a fire at one of Cognex’s main manufacturers. Earlier this year, a serious fire at a manufacturing partner’s facility in Indonesia destroyed an estimated $45 million worth of inventory. This had an immediate knock-on effect for Cognex, with CEO Robert Willett estimating at the time that the incident would hit sales for the company in September by as much as $80 million.

However, in yesterday’s release, Willett said:

“We are pleased that our hard work to procure new components has enabled us to fulfill customer demand faster than we expected. We have taken the unusual step of updating our guidance on this one occasion as we recover from the fire and because we intend to cite the updated revenue guidance during Analyst Day.”

Cognex manufactures machine vision systems that are used in automated manufacturing. With major customers like Ikea, Unilever, and Ford all using its products, the company is a vital component of manufacturing systems across most major industries.

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