I hope you had a wonderful week!

Earnings season is in full swing and with the Super Bowl tonight I’ll keep this update short and sweet.

In Case You Missed It

Here’s some of the content I put out this week. Enjoy!

• Spotify’s Emerging Dominance: Spotify’s earnings showed the company pulling away from competitors like Apple Music in audio.

• Bob Iger Isn’t Playing Around: Disney’s earnings report was solid and the stock jumped 11.5% but it was Iger’s comments about cable that caught my eye.

• Hot Stocks, Bubbles, and FOMO: Some of the most successful investors in the world are already calling AI and NVIDIA a bubble. Buyer Beware!

• Sell This Terrible Stock Now: Snap’s earnings go from bad to worse.

Early Earnings Takeaways

Earnings season is far from over, but a lot of the biggest companies on the market have reported. Next up is the next tier of companies, including Airbnb, MGM Resorts, Zillow, and Crocs.

My early takeaways from the quarter go something like this:

Big Tech Cost Cuts Rule the Day

Meta Platforms, Spotify, and even Alphabet are seeing better margins and earnings because of cost cuts made over the past year. Venture too far down the tech stack and you’ll see companies getting squeezed from cuts across the industry.

For example, Lumen Technologies revenue was down 7.4% in the quarter. Enterprise IT company ePlus saw revenue drop 18.4%.

The big are getting bigger and the small are only growing where there’s a real strategic advantage (see Cloudflare).

Consumers are…OK

Earnings are just now coming out from consumer goods and retail companies and results are fine.

For example, Pepsi’s revenue was down 0.5% in the quarter but organic revenue growth was 4.5%.

Chipotle continued to grow nicely with same-store sales up 8.4%, helped by price increases in 2023.

On the earnings front, results are more predictable because inflation is falling to more normal levels. I think we’ll see margins stabilize at companies that couldn’t immediately pass on higher costs over the past two years.

There’s still talk of consumers “trading down” but we will see how big an impact that is when we get more retail numbers.

The Banks Are All Right

No surprise, big banks are doing fine.

Regional banks are more mixed, but I think we’ve avoided a crisis that could have swept over the industry in the wake of Silicon Valley Bank’s collapse.

Each day we move further away from the zero interest rate environment the lower the risks get for a run on regional banks that could turn paper losses into very real losses.

Detroit Is Fine, EVs…Not So Much

GM, Ford, and Tesla have reported results and the market is starting to realize ICE vehicles may be around a lot longer than previously expected.

GM and Ford not only reported strong revenue and cash flow for the end of 2023, they expect results to be solid in 2024. Tesla is seeing margins decline and competitors like Lucid, Rivian, and Canoo are expecting more losses ahead.

My contrarian take is simply that a transition to EVs will take a lot longer than expected. That’s why I own shares of GM at a P/E multiple of 4!

Disclaimer: Asymmetric Investing provides analysis and research but DOES NOT provide individual financial advice. Travis Hoium may have a position in some of the stocks mentioned. All content is for informational purposes only. Asymmetric Investing is not a registered investment, legal, or tax advisor or a broker/dealer. Trading any asset involves risk and could result in significant capital losses. Please, do your own research before acquiring stocks.