Market Overview & Recent Earnings
July proved to be a slower month for active traders. However, Microsoft and Meta delivered “unbelievable” earnings reports, with Meta’s performance being particularly “jaw-dropping.” While Microsoft gave up most of its post-earnings gains, Meta managed to hold onto theirs. Amazon’s report set a high bar, and some analysts are even suggesting that Amazon is losing cloud market share to Microsoft’s Azure, especially given Azure’s impressive 39% growth against an expected 35%. This could make Amazon a “buy the dip” opportunity.
Spotify (SPOT)
Spotify stands as the undisputed leader in audio streaming. Despite its strong market position, the stock was priced for a stellar quarter, trading at 100 times trailing and 60 times forward earnings. The company reported a negative EPS of 42 cents (euros) against an expected 1.9 euros and missed revenue expectations at 4.19 billion euros versus 4.26 billion euros. Guidance was perceived as weak, partly due to a $133 million “social charge” related to share price appreciation. Management needs to focus on improving their advertising business and accelerating platform transformation, potentially leveraging AI.
- Bright Spots:
- Monthly active users grew by 18 million, exceeding guidance by 7 million.
- The conversion rate from free to paid users is showing positive trends.
- New subscribers totaled 8 million, surpassing the 5 million expectation.
- Financials:
- Market Cap: $133 billion
- P/E Ratio: 145 (trailing), 62 (forward)
- Price to Sales: 7
- Revenue: $4.1 billion, with year-over-year growth of 10% (down from 15% in previous quarters).
- Net Income: Negative $86 million loss.
- Free Cash Flow: $699 million, the best Q2 for free cash flow, improving from $533 million.
- Cash Position: 6.8 billion euros with no long-term debt. The stock’s post-report decline was considered fair given its valuation. Technically, Spotify remains in a firm uptrend, with the 150-day moving average acting as support. While multiples are high, the hosts believe monetization of the app will improve revenue and net income, especially considering only 3% of the world’s population currently subscribes to Spotify, with management aiming for 10-15%.
AMD (Advanced Micro Devices)
Hype is “super high” for AMD’s upcoming earnings report, with the stock more than doubling since April and potentially reaching its highest price before an earnings report. Resistance is noted at $186, with $220 as a potential target if broken. Despite a 64% stock decline over a 13-month period, revenue increased 37% quarterly during that time. AMD is not seen as a direct competitor to Nvidia in terms of revenue ($30 billion for AMD vs. $148 billion for Nvidia).
- Bull Case:
- AMD’s market cap of $291 billion compared to Nvidia’s $4 trillion suggests significant upside.
- Trailing one-year revenue growth has been increasing over the past four quarters.
- Capturing even 5% market share in the AI GPU space offers substantial growth potential.
- CEO Lisa Su is highly regarded, and the MI300 series is competitive and expected to gain approval for sales in China.
- Expected Move: 10%, implying a $17 swing from the current $176.
- Financials:
- Market Cap: $291 billion
- P/E Ratio: 131 (trailing), 46 (forward)
- Price to Sales: 10.50
- Year-over-year revenue growth has been decreasing, from 36% in Q1 to an expected 27% for the upcoming report.
- Revenue is expected at $7.4 billion.
- Net Income: $79 million in Q1.
- EPS: 49 cents in Q1, with analysts lowering expectations from 96 cents. The chart looks strong, trading above all rising moving averages, with buyers expected near $162 if the stock breaks its 5-day moving average. The guidance, especially concerning the MI300 in China, will be crucial. Analysts project solid revenue growth for 2026-2028. An anchor VWAP from all-time highs at $141 could act as support.
D-Wave (QBTS)
D-Wave, reporting on Thursday, August 7th, pre-market, focuses on “quantum annealing” using superconducting circuits for qubits. This technology specializes in optimization problems and could significantly enhance machine learning by expanding compute capabilities beyond classical binary computing. D-Wave is unique in its focus on quantum annealing, boasting 4,400 qubits, significantly more than competitors like IonQ (36) or Rigetti (84). A strong bullish case for quantum computing firms is potential acquisition by major tech companies.
- Expected Move: 17%, implying a $4 move for a $17 stock.
- Expected Loss: 6 cents per share.
- Revenue Expected: $2.52 million.
- Financials:
- Market Cap: $5.3 billion
- No P/E ratio (not yet profitable)
- Price to Sales: 178
- Revenue is up 500% year-over-year but is unstable, with a decrease from $15 million to $2.5 million quarterly.
- Shares are being diluted.
- Cash Position: $34 million with $30 million in debt.
- Negative Free Cash Flow: $19 million. Most analysts have a “strong buy” rating, with bullish targets at $30. Expected revenue growth is strong for 2026-2028, though the company is still projected to lose money. Technically, if bulls can recapture the 5-day moving average and consolidate above $17-$18, it could attract buyers. Despite D-Wave’s impressive qubit count, the hosts still prefer IonQ.