Happy Halloween War & Peaceniks - ready to BE SCARED‽
Third Quarter earnings started coming out last week, and some were truly spooky. Let’s look at the highlights (and lowlights) from Alphabet, Amazon, Apple, Comcast, Meta, Microsoft & Spotify (Note: all percentages are based on YoY 3Q growth, or lack thereof), and offer some prognostication on what these earnings mean for 2023.
3Q Earnings So Far:
Alphabet greatly disappointed with a drop in net income and anemic ad sales - continuing media’s collective slide into an Impression Recession which is being led by the nosedive in Social Media.
The difference between Alphabet and all the Social Media drain-circlers? Diversification. Yes, Google search and YouTube ads make up 82% of their revenues, BUT unlike Meta, Snap, Twitter and Pinterest, Alphabet has businesses OTHER than ads. They are the fastest growing CTV OS on the planet, AND their Cloud business grew 32% YoY.
Plus, unlike many over-leveraged media companies at the moment, Google’s parent is sitting on $116 billion in available cash. And with most media valuations in the crapper, 2023 looks to be a shopping year for Google. That said, 2023 could be a year where regulators finally take a pound of flesh from the company that controls 70% of the world’s smart phone OS; 94% of the planet’s search; and 67% of earth’s browser use.
Market Cap Since 3Q Earnings: -12%
The single unifying factor among long-time successful companies that falter: Failures in leadership succession. By every measure Andy Jassy has failed so far as the first-ever non-Bezos CEO of Amazon. He helped lead a major over-investment in e-commerce that has caused the company to lose $3 billion thus far in 2022. And his entire theory for solving seems to be: “blame the economy and stop hiring.”
Maybe Bezos knew this was all coming, so he left Jassy holding the smiley box, as he sailed off on his Superyacht (that can’t actually sail). Regardless, Jassy, who came from the AWS Cloud, has been only saved this year by AWS and Amazon’s fast-growing ad biz. Additionally, Amazon saw more Prime Membership sign-ups during their first live Thursday Night Football game than in any 3-hour period in history. TNF is also attracting big and young audiences, live, every week.
BUT… AWS growth is slowing, due in large part to steep competition from Alphabet, Apple and Microsoft; and despite platform-wide cost-cutting, expenses continue to balloon. Their cash-on-hand has plummeted 32% in the last twelve months.
That said, Amazon still boasts the fastest growing ad platform in media, and the best recurring revenue bundle in history. My sense is that Jassy is trying to isolate their bad mojo in 2022. The entirety of their $3b loss this year comes from the $7.8b writedown of their Rivian investment. In 2023, with MGM entirely ingested, their write-down done, and their over-extension in warehouses behind them; look for Amazon to make major moves in Gaming (looking at you EA) and more moves in Audio (joining Apple in the siege on Spotify).
Market Cap Since 3Q Earnings: -16%
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