Thursday's Headlines: Spotify Makes Another Acquisition
Here were the biggest movers in the MyWallSt shortlist yesterday:
Moving Up ⬆️
Trip.com Group (TCOM) +5.4%
Nordstrom (JWN) +3.5%
Nike (NKE) +2.8%
Atlassian (TEAM) +2.6%
Autodesk (ADSK) +2.3%
Moving Down ⬇️
2U (TWOU) -7.3%
Redfin (RDFN) -5.6%
Zillow (Z) -4.9%
Trupanion (TRUP) -4.8%
Roku Inc. (ROKU) -4.3%
Here are the stories that you need to know ahead of market-open today, Thursday the 6th of October.
Spotify Makes Another Acquisition 🎶
Fast becoming one of the most acquisitive companies on our shortlist, Spotify (SPOT) announced yesterday that it has snapped up yet another company as part of its efforts to conquer the world of audio.
Its latest catch — Kinzen — is a Dublin-based firm that helps to identify and moderate harmful content on the internet. Founded in 2017 by former journalists, the company has worked in partnership with Spotify since 2020 to help the company target misinformation and hate speech on its platform. Kinzen uses a combination of machine learning and human expertise to analyze potentially harmful content in multiple languages and countries.
The terms of the deal were not disclosed, but it’s clear that Spotify is keen to learn lessons from some of its tech compatriots and try to solve the issue of content moderation before it gets too big to handle.
Though the company does not face the same issues with user-generated content as social media sites like Twitter (TWTR) and Facebook (META), it has come under fire in the past for the material that is hosted on its platform, including a backlash against ‘The Joe Rogan Experience’ — with whom the company has an exclusive distribution deal worth more than $200 million — over misinformation relating to the COVID-19 pandemic.
In the press release announcing the acquisition, Spotify’s Global Head of Public Affairs Dustee Jenkins said: “This investment expands Spotify’s approach to platform safety, and underscores how seriously we take our commitment to creating a safe and enjoyable experience for creators and users.”
Spotify shares dropped marginally in trading yesterday off the back of the news.
Costco Sales Rise 10% in September 📈
Costco (COST) continues to be one of the few bright spots on the retail landscape as the company reported a 10% increase in sales for September.
The wholesaler brought in $21.46 billion in sales for the five weeks ending October 2nd, up from $19.50 billion for the same period last year. Company-wide, same-store sales rose 8.5%. The biggest increase came in the United States, with sales up 11.2%, while sales in Canada were up 5.2%. International sales, its smallest segment, were down 1.9%.
Costco, which operates 839 warehouses worldwide, has been grabbing market share as consumers look for value amidst inflationary pressures not seen for over 40 years. Rivals Walmart and Target have both been struggling with inventory levels and have had to resort to deep discounting. Earlier this year, Walmart’s management issued a profit warning after seeing a sharp shift in spending habits, with consumers walking past discretionary items in favor of essentials.
Costco runs a membership model that allows consumers to purchase essential food items in bulk for steep discounts. They also stock a much smaller selection of items and have a hugely popular private-label brand that accounts for around 25% of sales.
Costco stock is currently down 15% year-to-date.
Chewy Soars on Expected Sales Figures 🐶
The online pet retailer Chewy soared yesterday after research firm YipitData suggested it will exceed sales estimates for Q3. Those analysts’ estimates for the quarter are coming in at $2.46 billion, which would represent an 11% growth rate from the year previous. Shares of Chewy were up 11% yesterday on the news.
Down almost 40% on the year, even after yesterday’s jump, and almost 70% from all-time highs set in early 2021, the excitement around the stock has waned in recent times as growth has decelerated post-pandemic. That being said, one in five families in the U.S. adopted a pet during the pandemic, and 91% of households consider pets part of the family. These two stats bode well for Chewy, as spending on pets will be viewed as non-discretionary in times of an economic downturn.
Chewy is the one-stop shop for all pet needs online. Originally selling only pet food, the company has expanded to cover such things as prescriptions, toys, treatments, supplements, and anything else your pet may need. It has described itself as the “preeminent online destination for pet parents”. One of the key aspects of the business is its auto-ship program that automatically sends the same order to customers every month. This accounts for 73% of total order volume. It is made possible thanks to its seven fulfillment centers across the U.S., allowing the company to ship to 80% of the U.S. population overnight and almost 100% in two days.