Wed Earnings Watch: Spotify, PayPal, Shopify...

Equities 4 minutes to read

Kay Van-Petersen

Global Macro Strategist

Summary:  Erns Watch aims to highlight some of the key names that are in heavy rotation on investors' radars.


(These are solely the views & opinions of KVP, & do not constitute any trade or investment recommendations. By the time you synthesize this, things may have changed.)

Wed Earnings Watch: Spotify, PayPal, Shopify... 

 

Overview

Spotify: $267 Last, $50bn Mkt Cap, +79% YTD,  P/E 19x, 2Q Est. -$0.45 EPS, Rev $1.9bn

  • Swedish Tech sensation Spotify, is one of the few European household tech names that one hears discussed with the likes of the FANGs, Teslas, Shopify & other hot tech names. The company is based in Stockholm, Sweden where at least the keep the silicon valley tradition of not needs to report earnings as a tech company.

  • The 12m consensus price target is c. $250 no that far from the current $267 last price, with a range of with a range of $320 to $140. There are c. 50% buys in the name, vs. 23% sells with the balance being holds at 27%.

  • The name is up c. +80% YTD, with a +127% jump from the Mar lows of $117.64.

  • Whilst Spotify has never made a profit, its been widely touted as a pioneer in the music streaming business (lots of graveyards of start-ups that tried) & has recently been adding the fast growing podcast genre under its groovy wings.

  • Spotify (like TSLA, BYND, SHOP, TWTR) is often touted as a potential takeover target, given its modest mkt cap size vs. the goliaths on the scale of Amazon (AMZN), Apple (AAPL), Alphabet (GOOG) & Zuck’sbook (FB).

  • Just for context Apple is sitting on +$193bn of cool mula – which has also likely seen very little if any tax payments, but hey that’s for a different tangent. Maybe they should stop messing about with their Apple Music & bid for Spotify.

  • 1yr earning growth are expected to be +85% for 2021 (+6.3% for 2020 year). For 2Q earnings, -$0.45 EPS is expected vs. revenues of $1.9bn is expected.

  • Spotify’s 1st Quarter Report.

  • Spotify [SPOT] results should be out before the US Markets open today


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PayPal: $176 Last, $207bn Mkt Cap, +63% YTD,  P/E 42x, 2Q Est. +$0.87 EPS, Rev $5.0bn

  • KVP’s favorite story on PayPal (yes also has that Elon & Thiel DNA) is that they were bought by ecommerce “pioneer” Ebay for $1.5bn in 2002, as they had a better payments system than eBay’s inhouse system (at the very least, PayPal was growing super-fast because of, yep, transactions on eBay).
  • There is a lot of drama in relation to this period, from Elon being sidelined by Thiel & other executives of the PayPal Mafia, to intense competition overall in the payments space, to the dotcom nuclear winter that was unfolding in the background. To of course also the stunning success of Tesla & SpaceX – i.e. Elon (who granted may have never sold if he had not been sidelined) used the proceeds of the profits from his stake in PayPal to fund his companies.

  • Fast forward c. 18yrs later and PayPal (which ended up being spun out of eBay) now has a market cap of $207bn vs. eBay’s c. $40bn, with the former also being ludicrously more profitable. This is a great analogy on theta (time decay) & its effects on technological disruption, as well as also how being a pioneer & first mover is not enough.

  • PayPal’s 12m consensus price target is c. $180pretty much on the money to the $176 last price, with a range of with a range of $216 to $120.

  • There are c. 80% buys in the name, vs. 2% sells with the balance being holds at 18%. Granted payments as an investment theme & space, has a secular trend going for it that is going to last for decades.

  • The name is up c. +63% YTD, with a +107% jump from the Mar lows of $85.

  • 1yr earning growth are expected to be +24% for 2021 (+9.1% for 2020).

  • For 2Q earnings, is expected at +$0.87 EPS vs. Revenues of $5.0bn.

  • PayPal’s 1st Quarter Report

  • PayPal [PYPL] results should be out after the US Markets close today.

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Shopify: $985 Last, $117bn Mkt Cap, +148% YTD,  P/E 1,444x, 2Q Est. $0.035 EPS, Rev $512m

  • Tech upstart Shopify, is one of the few prominent tech e-commerce platforms that has continued to thrive despite the likes of the 600-ton Juggernaut, that is Amazon. The company is based in Ottawa, Canada unlike your usual Silicon Valley & Seattle tech names.
  • The 12m consensus price target is c. $880, with a range of $1250 to $244. There are c. 38% buys in the name, vs. 9% sells with the balance being holds 53% (i.e. we have to always factor that being WS, a lot of these “holds” are really sells – so likely one can say analysts are not exactly clambering on to wave the Shopify flag from a valuation basis at least).

  • Still momentum, is momentum - Its up over 200% from its $322 lows during the mar sell-off & c. +3380% since listing in 2015.

  • At c. $120bn mkt cap, the law of large numbers does not quite apply to Shopify to the same extent that it does to Amazon which is at $1.5trn mkt cap (almost +15x bigger).

  • 1yr earning growth are expected to be +25% (2021) before accelerating to plus triple digit percentage figures in 2022 & 2023.

  • For 2Q earnings, $0.035 EPS & revenue of $512m is expected – no doubt as with all companies this earnings season there will be a focus on C19 impacts.

  • And yes, that’s not a type… one-year fwd P/E on Shopify is 1,444x. And no, KVP is not in the business of shorting potential rocket ships – yes a few of them may blow up here & there, but you are more likely to spectacularly lose money overtime on the ones that don’t… and that not even talking about the most important PnL.

  • 3 Jun 2020 Macro Dragon: Mental PnL…

  • The cost of a mental pnl drawdowns are exponentially great than nominal PnL losses.

  • Shopify’s 1st Quarter Report.

  • Shopify [SHOP] results should be out after the US Markets Close today.
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Start-to-End = Gratitude + Integrity + Vision + Tenacity. Process > Outcome. Sizing > Idea.

This is the way

KVP

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