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Happy birthday to YouTube

Published 2024/04/24, 10:41
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Market scorecard

US markets rallied strongly yesterday, fuelled by economic data which revived hopes for US interest rate cuts. Business activity in the US expanded at its slowest pace this year, signalling a pullback in demand. So, slightly bad news is actually good news! The S&P 500 and Nasdaq had the best back-to-back rally in two months, with chipmaker Nvidia (NASDAQ:NVDA) (+3.7%) leading the surge in the tech sector.

In company-specific developments, Tesla (NASDAQ:TSLA) shot up 13.4% after-hours as the EV giant said it's accelerating the development of new cars, including affordable models; management remained optimistic despite missing sales targets. Elsewhere, Visa (NYSE:V) is up 2.2% in pre-market trade as its results sailed past Wall Street expectations thanks to happy people that are travelling and dining out. Lastly, Spotify (NYSE:SPOT) jumped 11.4% because they signed up lots of premium subscribers (+14%) and delivered all-time high profits.

At the end of the day, the JSE All-share was up 0.26%, the S&P 500 powered up by 1.20%, and the Nasdaq flew 1.59% higher. Now we're talking!

One thing, from Paul

Technology analyst Kevin Kelly says "Asking "what-if?" about your past is a waste of time; asking "what-if?" about your future is tremendously productive."

This is also true of investing in the stock market. It's pointless to ask yourself why you didn't sell some stock when it was high, if it's now lower (like Tesla). It's also silly to beat yourself up for missing out on something that is now much higher (like Nvidia).

In the same vein, you really shouldn't look back at a stock that's been high, then went lower, and then roared back to the old highs (like Netflix or Meta) and wonder why you didn't jump in and out at each of the turning points. Harry Hindsight is the world's best trader. Too bad he's a fictional character!

It's much more productive to ask yourself what the price of a share will do if they rack up a lot more sales (of electric cars, AI chips, streaming subs or online ads in the examples above). Keep asking "what-if" something big happens in the next 5 years. Then make the call, to own a company's shares or not.

Byron's beats

Yesterday, in 2005, the first ever YouTube video was uploaded. It is called "Me at the zoo" and has over 317 million views. Don't go watch it, there is nothing special about it other than being a historical milestone. The video hosting site founded by former PayPal (NASDAQ:PYPL) employees was snapped up very quickly by Google (NASDAQ:GOOGL) just 20 months later for $1.65 billion.

Fast forward to 2024 and YouTube has 2.49 billion monthly active users, 100 million of whom are paying subscribers. These users spend on average 48.7 minutes a day on the site, watching 1 billion hours of videos a day. The more recently created product called YouTube Shorts which competes with Instagram stories already has 70 billion views per day.

Last year YouTube crossed $30 billion in ad revenue. Advertisers are finding the platform very effective. It makes perfect sense, if I am watching 'travel to Italy' content, then show me adverts for hotels in Italy. Happy 19th birthday YouTube, we are very happy shareholders.

Michael's musings

While writing my recent Musings article about the Netflix (NASDAQ:NFLX) numbers, I was thinking about how the streaming landscape has evolved in only a few years. Not so long ago, streaming meant watching re-runs of popular shows from the 1990s and the odd Netflix special like 'House of Cards' or 'Orange is the New Black'. Now there is more choice than you need.

According to this NYT article, Americans' new TV habit: Subscribe. Watch. Cancel. Repeat, viewers have shifted their consumption habits with the maturing of the industry. Consumers are tired of having a monthly subscription to services that they don't regularly use. Over the last two years, 25% of subscribers have cancelled at least three services. Of those who cancel, a third will reactivate one of the cancelled services within six months of cancelling.

The US market is unique however as it has more choices than many other parts of the world. The average person in the US was signed up for four streaming services a month at a total average cost of $61, up from $48 a month last year. Out of all the US streaming services available, Netflix had the lowest churn rate - a very important metric for us as shareholders. Being an early leader in the industry and spending $18 billion a year on content has given Netflix some moat against the competition.

Bright's banter

TikTok seems to be gearing up to launch a new photo and text-sharing app, similar to Instagram. Some users have reported notifications about sharing photos on a platform called TikTok Notes, with an option to opt-out. A website for TikTok Notes is live but not functional yet.

TikTok confirmed it's working on a "dedicated space" for photos and text but hasn't finalised the app design or release date. Reports suggest TikTok has been encouraging brands to use its photo carousel feature, which receives more engagement than video posts on average.

Experts note that TikTok's move towards photo sharing doesn't diminish the importance of video content but aims to engage users who are uncomfortable with video. TikTok is also exploring text posts similar to Twitter and Meta's Threads, and experimenting with longer videos akin to YouTube.

Signing off

Asian markets are higher in line with New York last night. The MSCI Asia-Pacific index gained the most in a month as benchmarks recorded gains in India, Hong Kong, Japan, mainland China and South Korea.

Locally, Capitec (JO:CPIJ) posted solid profit growth, with annual headline earnings per share up by 16% to R10.6 billion from R9.2 billion. Their Return On Equity (ROE) hit 26% thanks to customer growth, which is damned impressive.

US equity futures are higher this morning thanks to a few solid earnings reports. The Rand is loitering at R19.09 to the US Dollar.

Today, our focus will be on Meta (NASDAQ:META) who report numbers after the market close tonight. Other companies updating include Thermo Fisher Scientific (NYSE:TMO), IBM (NYSE:IBM), ServiceNow (NYSE:NOW), and Boeing (NYSE:BA).

Have a good Wednesday, it is the middle of earnings season and we love it!

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