Spotify Stock Skyrockets 153% YTD: Here's How You Should Play It

Zacks

Spotify Technology S.A. SPOT stock has experienced a 153% upsurge this year, surpassing the industry’s 64% rally and the 26% rise of the Zacks S&P 500 composite.

Year-to-Date Price Performance

In the most recent trading session, the stock closed at $475.24, nearing its 52-week high of $489.69. SPOT is trading above its 50-day moving average, reflecting bullish investor sentiment.

SPOT Stock Trades Above 50-Day Average

With SPOT shares maintaining strong momentum, many investors are likely questioning whether the stock still holds investment potential. Let us delve deeper into the details.

SPOT Leverages Growth & Pricing Power

Spotify's performance metrics have been bolstered by sustained price hikes, a loyal consumer base and significant cost reductions. The ability to raise prices while retaining and expanding its subscriber base is particularly noteworthy. The third quarter of 2024 was the third consecutive quarter wherein premium subscriber growth outpaced ad-supported MAU growth sequentially, highlighting the effectiveness of Spotify’s pricing strategy.

The company's premium subscriber revenues, which account for approximately 88% of total revenues, play a crucial role in its financial performance. Ad-supported revenues contribute the remaining 12%. The recent price hikes, alongside those by competitors, such as Alphabet's GOOGL YouTube Premium, Apple’s AAPL Music/TV and Amazon’s AMZN Music Unlimited, underscore the industry's trend toward higher pricing.

Spotify is expanding its content portfolio, aiming for a larger portion of revenues from its podcasts and audiobooks. By boosting revenues from these high-margin content initiatives, the company could enhance its profitability, even if record labels take a tougher stance in negotiations. The profitability of podcasts is also on the rise as SPOT shifts its strategy from using content investments primarily for subscriber growth to focusing on monetization.

SPOT’s Sharp YTD Surge Inflates Valuations

Spotify's strong 2024 performance and market share gains have fueled a sharp stock surge, elevating its valuation significantly. Currently, SPOT trades at a forward 12-month P/E ratio of 55.21X, exceeding the industry’s average of 40.07X. Its enterprise value/EBITDA ratio of 85.9X is considerably higher than the industry’s 52.87X, underscoring the premium investors are paying. While optimism about growth has driven these valuations, sustaining such high multiples may prove challenging, increasing the risk of a correction if growth fails to meet expectations.

Estimates Move Down

Four estimates for the fourth quarter of 2024 have moved downward over the past 60 days versus two upward revisions. Over the same period, the Zacks Consensus Estimate for fourth-quarter 2024 earnings has decreased 2.9% to $2.01. Seven estimates for 2024 moved south over the past 60 days versus one northward revision. Over the same period, the consensus estimate for 2024 earnings has decreased 4.7% to $6.02.

Spotify: Hold Amid Valuation Concerns

SPOT's robust stock surge reflects its effective pricing strategies, subscriber growth and profitability improvements from high-margin initiatives like podcasts and audiobooks. The company’s ability to raise prices while expanding its subscriber base underscores strong operational execution.

However, the stock’s valuation is steep and significantly above industry averages, signaling limited upside potential in the near term. Downward revisions in earnings estimates for the fourth quarter and 2024 indicate challenges in meeting elevated growth expectations.

Given these factors, a hold strategy seems prudent, allowing investors to benefit from long-term growth while remaining cautious about short-term valuation risks.

SPOT currently has a Zacks Rank #3 (Hold).You can see the complete list of today’s Zacks #1 Rank (Strong Buy) stocks here.

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Apple Products Dominate Early Black Friday Trending Searches

Benzinga

Several Apple Inc products are among the most searched-for items on Black Friday for the 2024 holiday shopping season.

What Happened: Apple could be one of the big winners in the 2024 Black Friday shopping season, which could set records.

The technology giant is dominating searches at several of the largest retailers according to early Black Friday data, as reported by Similarweb.

Similarweb data shows trending searches across Amazon.com Inc , Best Buy Co Inc , Target Corp , and Walmart Inc consistently feature several Apple products among the top 10 most-searched items, alongside other electronics and children's toys.

Here are the overall Apple rankings across the four retailers:

2. Airpods
3. iPad
7. Apple Watch

Across searches at Target, Airpods ranked fourth, with the Apple Watch and iPad ranking sixth and seventh.

Why It's Important: The strong search traffic could signal interest from buyers of these products either as gifts for the holiday or for themselves.

Apple continues to see strong demand for its products as one of the top global brands that are well-known for their products.

The Christmas shopping season is shorter than in past years, with only 27 days from the day before Thanksgiving until Christmas Day.

Black Friday trends and data could signal how retailers and other companies will fare this short holiday season, with Apple looking to be one of the early winners.

AAPL Price Action: Apple stock is up 0.4% to $235.89 on Friday versus a 52-week trading range of $164.08 to $237.49. Apple stock is up 27.1% year-to-date in 2024.

Read Next:

Apple Q4 Results ‘Better-Than-Feared’: Analysts Highlight iPhone 16 Demand, Apple Intelligence Opportunity After ‘Rock Solid Quarter’

Image created using artificial intelligence via Midjourney.

Risk Warnings and Disclaimers

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This beauty stock is likely to deliver earnings beat: Citi

Investing.com

Investing.com -- Citi analysts are optimistic about Ulta Beauty (NASDAQ:ULTA) Inc. heading into its Q3 earnings report on December 5, saying in a note Friday that they expect the company to exceed consensus EPS estimates.

Citi forecasts earnings of $4.69 per share, compared to the consensus estimate of $4.49.

The bank said the expected outperformance is attributed to stronger-than-anticipated comparable sales and slightly better gross margins.

"ULTA is facing headwinds from weakening category trends/increased competition (Sephora in KSS, AMZN, ULTA in TGT) that are making it difficult to drive traffic this year," said Citi.

"However, given our view that trends have not gotten any worse (or better) in 3Q vs 2Q, we anticipate mgmt will narrow their F24 EPS guidance range, taking the worst case scenario off the table, and implying 4Q EPS guidance in-line w/cons."

The current guidance range of $22.60–$23.50 is expected to shift to $22.90–$23.50, implying Q4 earnings in the range of $6.44–$7.04, in line with the consensus of $6.80.

"We view a stabilization of comp trends as a modest positive, as it signals more confidence in achieving their F25 targets," Citi added.

The analysts raised their price target on Ulta to $390 from $345, reflecting higher estimates for fiscal 2024 and 2025. They project FY24 and FY25 EPS at $23.18 and $22.68, respectively, up from prior estimates of $22.95 and $20.75.

The bank also highlights Ulta's trading multiple of 18x FY25 earnings as offering balanced risk/reward, especially with sentiment skewing negative among investors.

"We believe some investors are more willing to own ULTA here given mgmt has already provided preliminary F25 guidance and current trends do not seem to be deteriorating any further," Citi noted.

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PDD Holdings Plunges 5.1% Since Q3 Earnings: Time to Sell the Stock?

Zacks

PDD Holdings PDD has witnessed a decline of 5.1% since its third-quarter earnings release on Nov. 21, signaling growing investor concerns about the company's future prospects. While the Chinese e-commerce giant reported 44% year-over-year revenue growth to RMB99.4 billion ($14.16 billion), the sequential growth momentum has notably decelerated, raising red flags about the company's ability to maintain its historic growth trajectory.

Share Price Movement

Intensifying Competition and Market Challenges

The company faces intensified competition and headwinds due to the ongoing external challenges in the e-commerce sector, which paints a concerning picture. The company is struggling to maintain its market position amid aggressive competition from rivals. Its global business is still in the exploration stage, and therefore, it continues to reel under competitive pressure from behemoths like Amazon AMZN, eBay EBAY and Alibaba BABA. This competitive pressure could further erode PDD's market share and profit margins in the coming quarters.

Mounting Operating Expenses Threaten Profitability

Despite reporting a 61% increase in net income to RMB25 billion ($3.56 billion), there are worrying signs in PDD's cost structure. Operating expenses rose 39% to RMB35.4 billion, with sales and marketing expenses jumping 40% to RMB30.5 billion. More concerning is the 138% spike in general and administrative expenses to RMB1.81 billion, indicating potentially declining operational efficiency.

RMB10 Billion Fee Reduction Program: Short-Term Pain

The company's ambitious RMB10 billion fee reduction program, aimed at supporting merchants, could significantly impact profitability. Management has already warned that profitability "may gradually trend lower over the long run" as they continue investing in merchant support and ecosystem development. This strategic shift could pressure margins and earnings growth in upcoming quarters.

For 2024, the Zacks Consensus Estimate for revenues is pegged at $55.07 billion, indicating growth of 58.96% from the year-ago period. The consensus mark for earnings is pinned at $11.39 per share, suggesting 73.63% growth from 2023. The figure has been revised 5.2% downward over the past 30 days.

Cash Flow Concerns Emerge

A notable red flag is the decline in operating cash flow, which fell to RMB27.5 billion from RMB32.5 billion in the same quarter last year. This 15.4% decrease, despite revenue growth, suggests potential issues with working capital management and could limit future strategic investments.

Investment Thesis: Consider Selling

While PDD Holdings maintains a strong market position and healthy cash reserves of RMB308.5 billion, several factors suggest investors should consider reducing their positions. The company's aggressive fee reduction strategy and increased merchant support programs will likely pressure margins in coming quarters. Growing competition in China's e-commerce space could force additional spending on marketing and promotions. The significant increase in operating expenses, particularly in administrative costs, raises concerns about operational efficiency. Declining operating cash flow despite revenue growth indicates potential underlying business challenges.

Despite PDD Holdings trading at what appears to be an attractive forward P/E of 7.49X, significantly below the industry average of 15.66X, this discount might be more of a warning sign than a buying opportunity. The market's lower valuation multiple likely reflects serious concerns about the company's future prospects and underlying business challenges.

PDD’s P/E F12M Ratio Depicts Discounted Valuation

Looking Ahead

PDD's shift toward "high-quality development" through merchant support and ecosystem investments, while strategically sound for the long term, creates near-term uncertainty. The company's increased focus on Western China expansion and agricultural initiatives, though promising, requires substantial investment and may take years to yield meaningful returns.

For investors, the prudent approach would be to wait for better clarity on the impact of the company's strategic initiatives and fee reduction programs. The stock's sharp decline post-earnings suggests market participants are already pricing in slower growth and margin pressure. Those holding positions might consider taking profits, while potential investors should wait for a more attractive entry point when the company demonstrates better cost control and sustained growth metrics.

The combination of intensifying competition, rising expenses and management's explicit warning about lower profitability makes PDD Holdings a risky investment at current levels. Investors would be wise to monitor the situation from the sidelines until there's evidence that the company's strategic investments are yielding tangible returns without significantly compromising profitability.

PDD currently has a Zacks Rank #5 (Strong Sell).

You can see the complete list of today’s Zacks #1 Rank (Strong Buy) stocks here.

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5 Hot ETF Deals for Black Friday Shopping

Zacks

The holiday season kicked off on Thanksgiving Day, and now it’s time for Black Friday — one of the busiest shopping days of the year. Retailers are splurging on early sales and special discounts and expect a record-breaking worldwide shopping frenzy this year.

The attractive offers are likely to boost retail sales and lead to a surge in stock prices in the days to follow. While an individual stock is a great option to tap the Black Friday deals in the investment world, a basket approach through ETFs is diversified and more cost-effective at lower risk. Investors should stock up ETFs like SPDR S&P Retail ETF XRT, VanEck Vectors Retail ETF RTH, Amplify Online Retail ETF IBUY and ProShares Online Retail ETF ONLN this weekend.

According to the National Retail Federation (“NRF”), a record 183.4 million Americans are expected to shop either in-store or online during the Thanksgiving weekend (spanning five days from Thanksgiving Day through Cyber Monday), surpassing last year’s record of 182 million.

Black Friday continues to be the most popular day to shop, with 72% (131.7 million) planning to shop. About 65% of Black Friday customers anticipate making in-store purchases on that day. Cyber Monday is the second most popular day, likely to attract 39% (72.3 million) of those planning to shop over the weekend (read: 5 ETFs to Binge on This Thanksgiving Week).

Adobe expects Cyber Week (the five days including Thanksgiving, Black Friday and Cyber Monday) to drive $40.6 billion in online spending, up 7% year over year, and represent 16.9% of the overall holiday season. Sales on Black Friday alone are expected to grow 9.9% to $10.8 billion, according to Adobe Analytics.

Retailers on a Roll

The Black Friday sales bonanza is in full swing as a number of retailers had already perked up their deals several weeks before. They are offering a range of exciting deals across various product categories. We have highlighted some of the best deals.

Amazon AMZN kicked off the Black Friday event on Nov. 21. It is set to continue through Nov. 29. Some deals include up to 55% on select Amazon devices, including Amazon Fire Smart TVs, major markdowns on Amazon’s own devices, such as Echo speakers, Fire TVs, and Kindle e-readers, and discounts of 30-60% on clothing, shoes and accessories from top brands. The e-commerce giant is also offering a 10% discount on gaming gift cards that can be used with both PlayStation and Xbox games. Some of the hot deals include The Batman in 4K UHD for $10, AirPods Pro for $153.99 and Meta Quest 3 featuring $75 of free Amazon credit for $299.

Additionally, Amazon also unveiled its Cyber Monday event, which begins Nov. 29 and will run through Dec. 2, with discounts of up to 55% off select mattresses from Zinus and up to 50% on select toys, including products from Play-Doh, Hasbro Gaming and Nerf.

Apple AAPL kicked off its four-day Black Friday shopping event on Nov. 29, which will run through Dec. 2. During the event, customers can get an Apple gift card with the purchase of an eligible product. Brand-new iPads at record low prices are among the top 15 Apple Black Friday deals. These include $149 off on 256GB 9th generation iPad, $60 off on AirPods Pro, $300 off on MacBook Air and $100 off on the most recently released iPad Air.

Walmart WMT, the world's largest retailer, kicked off the “Black Friday Deals” online on Nov. 25 and in-store on Nov. 29. This is the second of two “Black Friday Deals” sales events that Walmart has released in November, with the first going live on Nov. 11. Some top deals include 42% off a Sony PlayStation VR2 Horizon Call of the Mountain Bundle, 40% off a 100-inch Hisense TV and 42% off a Dyson V11 Cordless Vacuum Cleaner (read: Walmart Beats on Q3 Earnings, Hikes Views: ETFs to Gain).

Target TGT kicked off its Black Friday deals eight days earlier. It is offering Black Friday discounts (online and in stores) of up to 50% off on thousands of items such as tech, apparel, video games, board games, small appliances, and more. Some examples of these deals include $75 off PlayStation 5 Consoles, 40% off sweatshirts, sweatpants, fleece, and denim and 35% off TVs and soundbars, wearable tech and massage guns.

Target also announced that it will offer special three-day-only deals starting on Thanksgiving and running through Nov. 30, with twice as many deals as last year. Then, on Dec. 1 and Dec. 2, it will drop exclusive Cyber Monday deals online and on the Target app.

Best Buy BBY launched Black Friday Sale on Nov. 21, offering attractive deals on everything from electronic gadgets to electric vehicles. The nation’s largest consumer electronics chain has released doorbuster deals every Friday since Nov. 8 and plans to continue the weekly promotion through Dec. 20.

Home improvement stores like The Home Depot HD and Lowe's LOW are offering up to 40% off on tools and appliances, while Macy's M is running a “Parade of Deals” with 40%-60% off on several fashionable items and home goods. Nordstrom JWN is offering up to 70% off on popular products.

ETFs to Shop

Below, we have highlighted the ETFs in detail.

SPDR S&P Retail ETF (XRT)

SPDR S&P Retail ETF tracks the S&P Retail Select Industry Index, which provides exposure across large, mid and small-cap stocks. It holds well-diversified 78 stocks in its basket, with none making up for more than 2.3% share. SPDR S&P Retail ETF is well spread across various industries with a double-digit allocation each in automotive retail, specialty stores, apparel retail, and broadline retail.

SPDR S&P Retail ETF is the largest and most popular in the retail space, with AUM of $583.2 million and an average trading volume of 4 million shares. It charges 35 bps in annual fees and has a Zacks ETF Rank #2 (Buy) with a Medium risk outlook (read: Retail ETF (XRT) Hits New 52-Week High).

VanEck Vectors Retail ETF (RTH)

VanEck Vectors Retail ETF provides exposure to the 26 largest retail firms by tracking the MVIS US Listed Retail 25 Index, which measures the performance of the companies involved in retail distribution, wholesalers, online, direct mail and TV retailers, multi-line retailers, specialty retailers and food and other staples retailers. VanEck Vectors Retail ETF is highly concentrated on the top firm with double-digit exposure, while the other firms hold no more than 8.6% share.

VanEck Vectors Retail ETF has amassed $246.6 million in its asset base and charges 35 bps in annual fees. It trades in a lower volume of 3,000 shares a day on average. VanEck Vectors Retail ETF has a Zacks ETF Rank #3 (Hold) with a Medium risk outlook.

Amplify Online Retail ETF (IBUY)

Amplify Online Retail ETF offers global exposure to companies with significant revenues from the online retail business, traditional online retail, online travel, online marketplace and omni-channel retail by tracking the EQM Online Retail Index. IBUY holds 78 stocks in its basket, with none accounting for more than 3.3% of assets. Amplify Online Retail ETF has the largest allocation in online retail at 40% and online marketplace at 37%.

Amplify Online Retail ETF has attracted $187.2 million in its asset base and charges 65 bps in annual fees. IBUY trades in an average daily volume of 15,000 shares.

ProShares Online Retail ETF (ONLN)

ProShares Online Retail ETF offers exposure to companies that principally sell online or through other non-store channels and then zeroes in on the companies reshaping the retail space. It tracks the ProShares Online Retail Index, holding 19 stocks in its basket. ONLN is highly concentrated on the top two firms, while the other firms hold no more than 6.5% of the assets.

ProShares Online Retail ETF has accumulated $94.3 million in its asset base and charges 58 bps in annual fees. ONLN trades in an average daily volume of 10,000 shares.

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5 Things to Know Before the Stock Market Opens

Investopedia

News of the day for Nov. 29, 2024

U.S. stock futures are rising before Friday’s shortened trading session; Target (TGT), Kohl's (KSS), and JCPenney (JCP) are just a few of the retailers trying to draw shoppers on Black Friday; Canada's antitrust regulator is suing Alphabet's Google (GOOGL) over alleged anti-competitive conduct in online advertising; Australia passes the world's first ban on social media use by children under 16; and Disney's (DIS) Moana 2 heads toward a Thanksgiving weekend box office record. Here's what investors need to know today.

1. US Stock Futures Edge Higher on Shortened Trading Day

U.S. stock futures are edging higher after being closed Thursday for Thanksgiving. Trading will wrap up early Friday, with the stock market closing at 1 p.m. ET and the bond market at 2 p.m. On Wednesday, the S&P 500 and Nasdaq declined 0.4% and 0.6%, respectively, while the Dow Jones Industrial Average closed 0.3% lower after surpassing 45,000 points for the first time in early trading. Futures for all three major indexes are up about 0.2%-0.3%, while the yield on 10-year Treasurys is down slightly at 4.224%.

2. Taylor Swift Merch, Snow Globes Among Retailers' Black Friday Draws

Retailers are trying to get people in the door on Black Friday with exclusive deals and giveaways. Target (TGT) is launching sales of a book about Taylor Swift's "Eras" tour in brick-and-mortar stores, along with vinyl and CD versions of her last album, before offering them online a day later. Kohl's (KSS) is holding a sweepstakes with prizes including a Florida vacation. JCPenney (JCP) is handing out snow globes. Retailers prefer in-store purchases to those online because they tend to have higher margins and lower return rates, industry experts said, although consumer spending this holiday season may only raise 3% from last year, according to Bain & Co., as inflation weighs on people’s wallets.

3. Canada Sues Google for Alleged Anti-Competitive Online-Ad Conduct

Canada's antitrust regulator is suing Alphabet's Google (GOOGL) over alleged anti-competitive conduct in its online-advertising business, in the latest regulatory challenge to the tech giant's dominance. Canada's Competition Bureau said in a notice it filed Thursday with the Competition Tribunal, where the case will be argued, that Google "locks market participants into using its own ad tech tools," and is pushing for the company to sell two of its ad tech tools. The U.S. Department of Justice (DOJ) said last week that Google should sell off its Chrome browser, following an August court ruling that it holds an illegal monopoly in search.

4. Australia Passes Social Media Ban for Kids Under 16

Australia has passed the world's first ban on social media use by children under 16 years old, in a strict law that could potentially hurt platforms like ByteDance's TikTok, Snapchat parent Snap (SNAP), and Meta Platforms (META), owner of Facebook and Instragram. Social media platforms will have to take the responsibility of ensuring children don't have accounts, with those guilty of "systemic breaches" facing fines of up to $49.5 million Australian dollars ($32.2 million), the government said. Parents and their kids won't face fines. The ban will take at least 12 months to come into effect.

5. Disney's 'Moana 2' Heads Toward Thanksgiving Weekend Box Office Record

Disney's (DIS) is heading toward a Thanksgiving weekend box office record. The movie made $57.5 million by Wednesday, including Tuesday's preview showings, and appears headed toward grossing a record $175+ million for the five-day stretch through Sunday, Deadline reported. Moana 2, Universal Pictures' Wicked, and Paramount Pictures' Gladiator II helped all titles generate $92.2 million Wednesday, the second-highest-grossing moviegoing day of the year, the publication said.

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