TOP STORY
📉 Pinterest down 20% and Snap down 35% in Rough Week for Social Media Stocks

Pinterest fell 20% after earnings on Thursday, mirroring Snap’s dramatic 35% drop on Tuesday.

Both social media giants fell short of targets, potentially signaling rocky waters for the broader social media/digital advertising space, but with other digital advertising giants Google and Meta faring very well this year (up 35% and 8% YTD respectively), it’s worth taking a look at Snap and Pinterest to see what’s going on and whether this spells trouble for the broader market.

😪 Snap: Struggling to Keep Pace

• ❌ Revenue: $1.36 billion vs. $1.38 billion expected

• ❌ Earnings per share:  -$0.15 vs. -$0.06 expected

Despite a 10% year-over-year increase in daily active users to 414M, Snap’s shocking 150% higher-than-expected loss per share was hard to look past. The drop completely erased Snap’s gains since November.

🇵🇸 Blaming the Middle East?

Interestingly, in the company’s letter to shareholders, Snap highlighted the Middle East conflict as a key headwind.

More likely, analysts are concerned about the pace of Snap’s ad business, which was hit hard by Apple’s changes to ad targeting on mobile devices.

According to Wells Fargo analyst Kawrelshi, Snap has also made slower progress on direct-response advertising (which is aimed at inspiring purchases rather than simply promoting a brand).

🔪 Laying off 10% of Workforce

To address earnings concerns, Snap announced plans to lay off 10% of its staff along with a reorg to reduce hierarchy and promote in-person collaboration, likely following a similar ‘Year of Efficiency’ model that has worked well for Meta and Amazon.

💍 Some Silver Linings

A few smaller silver linings showed up in the earnings including:

• A 175% increase in time spent on Snapchat’s TikTok-esque Spotlight feature

• A 20% increase in the number of small and medium-sized advertisers

• Snapchat+ grew to a $249M ARR with 7M paying subscribers

But the main reason for optimism among analysts was also the main reason for recent gains in Meta and Alphabet: artificial intelligence. Some analysts, like Raymond James’ John Back, believe AI will improve Snap’s ad business and maintained an Outperform rating on the stock.

Time will tell whether this will be enough to turn this story around.

🤝 Pinterest: Saved by the Strategic Partnership

• ❌ Revenue: $981 million vs. $991 million expected

• ✅ Earnings per share: $0.53 vs. $0.51 expected

Although Pinterest initially fell by ~20% after earnings, it ended the week down only 7.7% - still a big drop, but small in comparison to Snap.

The dip was softened by an exciting partnership announcement with Google.

🤝 Google Strategic Partnership

Despite the miss on revenue, many analysts remain optimistic due to Pinterest’s recent partnership with Google, allowing Pinterest ads to be shown via Google’s Ad Manager.

This builds on the strategic partnership Pinterest previously unveiled with Amazon which redirects users to Amazon’s website to complete a purchase, aligning with Pinterest’s goal to make every pin shippable.

Both partnerships are set to play a critical role in international markets, which currently only account for 20% of revenue despite making up 80% of users.

🔭 Optimism Ahead

Pinterest's revenue forecast for the upcoming quarter is set between $690 million and $705 million, slightly below analyst expectations. The company has emphasized "disciplined expense management," with operating expenses coming in under projections at $785 million for the quarter.

CEO Bill Ready remains optimistic about Pinterest's trajectory, highlighting the platform's effective execution and its appeal to advertisers and users alike, particularly among the Gen Z demographic, which represents its largest and fastest-growing user base.

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BIG TECH
📈 Nvidia Market Cap Soars, Challenging Amazon’s Spot as 4th Most Valuable Company

Nvidia’s impressive rally this year - adding nearly Tesla’s entire market capitalization in the last 2 months alone - has put it on track to soon pass Amazon as the fourth most valuable company in the U.S., with a market cap nearing $1.78 trillion, <2% under Amazon’s cap of $1.81T.

This highlights the intense demand for Nvidia's AI computing chips, driving the stock up by more than 40% already in 2024 after already gaining ~70% in 2023.

📊 Performance and Expectations

Despite concerns over its quick ascent, Nvidia's stock has continued to rise, with a now 34x price-to-earnings ratio.

Many question how sustainable Nvidia's mediocre rise will be, but analysts remain optimistic, with 34/38 analysts rating it a buy according to TipRanks.

🤖 Nvidia's strategic position in AI has not only fuelled its current success but also solidified its growth outlook. The company's technical superiority in processing chips is deemed essential for the ongoing AI revolution, with revenue expected to climb by 120% over its 2024 fiscal year and another 60% the following year.

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MEDIA
🏰 Disney Rises ~12% and Announces Investment into Epic Games

Disney posted strong Q1 results this week, with adjusted earnings of $1.22 per share, comfortably beating the $0.99 consensus among analysts. Despite a slight revenue miss at $23.5 billion against the expected $23.8 billion, Disney’s stock rose nearly 12% this week.

Here are some of the drivers at play:

• 💸 Disney announced a 50% increase in its cash dividend to $0.45 per share (currently 0.69% yield), payable in July to shareholders of record as of July.

• ✅ Disney’s new $3 billion share repurchase initiative for fiscal 2024 was approved, underscoring confidence in Disney's financial health and growth trajectory.

• ✂️ CEO Bob Iger's cost-cutting measures are on track to meet or exceed a $7.5 billion annual savings target in 2024, with ongoing efforts to identify further efficiency opportunities.

• 🎮️ Disney plans to invest $1.5 billion in Epic Games, aiming to integrate Disney's storytelling into the Fortnite universe, marking a significant move into gaming for Disney.

• 📺️ Disney+ solidified its position as a premier streaming platform with exclusive offerings like "Taylor Swift: The Eras Tour (Taylor's Version)" and an animated "Moana" sequel.

• 📽️ Streaming losses narrowed significantly, with Disney+ core subscriber numbers reflecting strategic price adjustments. The upcoming quarter anticipates an addition of 5.5 to 6 million core Disney+ users, bolstered by partnerships with Charter Cable for complimentary subscriptions.

• ⚾️ The ESPN+ streaming service is set for a fall 2025 launch, alongside collaborations with Warner Bros. Discovery and Fox for a new sports streaming platform, highlighting Disney's aggressive push into digital sports broadcasting.

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