Inflation firm in the US, in DOGE we trust, Spotify to hit record, Suncor pops
The problem with having a 7-year old is that it is getting harder to shield them from the painful things in life. Not just famine and injustice, but also the fact Taylor Swift is coming to town and we don’t have tickets. This is a particularly acute problem in our house because one of her friends says she has an extra ticket! And she is going to bring her! In two days! Except none of this is true. Spare a thought for me as I try to break down the chasm in society between those with Taylor Swift tickets and those without.
In DOGE we trust: The TSX was one of the only markets on the planet to finish in the green yesterday and it was entirely because of one stock: Shopify. In fact, most stocks were down on the TSX but Shopify’s 20% rally overpowered that. Futures popped higher and bonds rallied after a read of inflation in the US. CPI showed core inflation remains firm for a third straight month and headline inflation reaccelerated for the first time since March. So why the celebration? I guess fears it could have been worse. December’s odds of a rate cut were at just 59% before the print and could wane further, especially since higher tariffs impose by Trump are expected to be inflationary. While we are on the subject, Trump announced Elon Musk and Vivek Ramaswamy will head up a new something called Department of Government Efficiency aimed at cutting spending and slashing regulation. DOGE for short. Life imitating memes. I said “something” because it is unclear how this agency will operate since if you work for the government, you can’t also be the CEO of Tesla, X and SpaceX. But I’m sure that in addition to doing a complete financial audit of the government they can also find a way around those pesky conflict of interest laws.
Play that funky music: Spotify is poised to open at a record high this morning. Quarterly results showed the streaming service is growing its subscriber base while also improving its profitability. Spotify now boasts 640 million subscribers, which is higher than expected. Spotify’s forecasts suggest they can keep it going and says next quarter they will have 665 million subs. Margins and free cash flow were at record highs and shows that recent job cuts are helping to boost the bottom line. How is Spotify doing this? Ad growth is still tepid, notes Evercore’s Mark Mahaney. But they are making it up with paid promotions by artists and labels. In addition, he says, the company is being more judicious with large podcast content commitments. Shares of Spotify are up 122% so far this year. Mahaney says he still sees upside.
Under pressure: Shares of Instacart owner Maplebear are down 7% in the pre-market even though sales and profit grew more than expected. The rub is that the outlook for profit isn’t as high as investors were hoping. Citi says the outlook is likely conservative and remains a buyer. With the stock doubling so far this year perhaps an easy profit-taking candidate. Groupon is tumbling more than 20% right now after cutting its profit forecast for the year. In an era of rising costs and people hunting for deals, they don’t seem to be hunting for them at Groupon. Sales dropped nearly 10%, which was worse than feared. The number of active customers dropped nearly 9% to 15.5 million. Spirit Airlines is getting crushed down 70% right now. The airline (ticker is SAVE) looks unlikely to find a buyer to save it from bankruptcy. The WSJ and others are reporting that talks with Frontier Airlines broke down.
Sun comes out: Suncor will trade higher this morning after a “stellar” set of quarterly results. “Suncor reported blockbuster 3Q24 financial results, highlighted by a massive production and cash flow beat,” wrote Chris MacCulloch at Desjardins. The company also hit its net debt target of $8 billion and is now expected to return 100% of its free-cash flow to investors. It is starting with a 5% dividend increase. Suncor has been an outperformer this year. It is up nearly 30% in 2024 while the TSX oil producers are up just 12%. TD points out that with the dividend hike, this now means Suncor has the second-highest dividend yield among peers. “This translates into a pro-forma…second-highest-among-peers yield of 4.3% vs. CNQ (4.5%), CVE (3.3%), and IMO (2.4%),” wrote Menno Hulshof of TD in a note to clients.
White knight: I’ll watch shares of Couche-Tard after the owner of 7-Eleven said it received a rival takeover offer from the founder’s son. Couche-Tard has been in hot pursuit of the Japanese convenience store chain with very little progress. At the same time that the founder’s son has tabled a non-binding offer, the Financial Times is reporting that 7-Eleven has started to engage in preliminary talks with Couche-Tard. So the dance is on. Shares of Couche-Tard have underperformed this year, basically flat for the year as investors worry about how it will finance the purchase of 7-Eleven if they are successful.
