Motley Fool Money: Amazon and Disney See Ad Dollars
Release Date: January 10, 2025
Hosts: Dylan Lewis, Ricky Mulvey, Mary Long
1. Introduction and Big Macro Outlook
Motley Fool Money kicks off the episode with Dylan Lewis navigating the macroeconomic landscape for 2025. The hosts, including senior analyst Jason Moser and Ron Gross, delve into the implications of the Federal Reserve's latest meeting minutes from December, shedding light on interest rate policies and inflation concerns.
Key Discussions:
- Federal Reserve's Stance: Ron Gross highlights the Fed's indication that interest rate cuts are unlikely before mid-2025 due to persistent inflation and uncertain impacts of recent trade and immigration policies.
- Job Market Resilience: A robust jobs report revealed 256,000 jobs created with unemployment ticking down to 4.1%, contrary to market expectations for a slowdown.
Notable Quotes:
- Ron Gross [01:07]: “It's a little dicey, Dylan. I think what the weak stock market has been telling us lately is that we still actually may have an inflation problem after all of the soft landing talk.”
- Jason Moser [03:21]: “This is about interest rates, it's about inflation. We’re in this sort of twilight zone regarding interest rates right now… it’s volatile time.”
2. Online Retail and Holiday Spending
The hosts transition to discussing Adobe's report on online holiday spending, which saw $241 billion in online sales between November 1 and December 31, marking an 8.7% increase from the previous year.
Key Highlights:
- Mobile Dominance: 54.5% of total spend came from mobile devices.
- Buy Now, Pay Later (BNPL): BNPL services grew to over $18 billion, up from $16.6 billion.
- Earnings Implications: Increased discounting could impact retail margins in the upcoming earnings season.
Notable Quotes:
- Jason Moser [04:35]: “We saw mobile gain share representing 54.5% of total spend coming from mobile devices.”
- Ron Gross [05:46]: “Let’s keep an eye on credit card debt and savings balances… Let’s see how consumers funded those expenditures.”
3. Delta Airlines' Strong Earnings
Delta Airlines presented a stellar earnings report, surprising the market with a 10% share increase despite a weak Friday.
Key Points:
- Revenue Growth: Up 5.7%, surpassing guidance.
- Cost Controls: Operating margins improved from 9% to 12%.
- Future Outlook: CEO Ed Bastian anticipates continued growth in corporate bookings and international markets.
Notable Quotes:
- Ron Gross [07:42]: “Revenue growth up 5.7%… That’s a nice beat there.”
- Ron Gross [09:48]: “So things look like they’re going pretty well for Delta, only trading nine times forward earnings. So not necessarily expensive.”
4. Advertising Landscape: Disney and Amazon
Disney's Ad-Supported Tiers
Disney reported that 157 million users globally have opted for their ad-supported tiers across Disney, Hulu, and ESPN, echoing a return to traditional ad-supported models.
Insights:
- Market Shift: Transitioning back to ad-reliant models to offer more affordable subscription options.
- Impact on Revenue: Average revenue per user decreased due to the popularity of cheaper, ad-supported plans.
- Strategic Moves: Acquisition of Fubo TV and cancellation of Venue Sports indicate a need for clearer streaming strategies.
Notable Quotes:
- Jason Moser [10:36]: “Advertising continues to rule today… they want to push more of those ad subscriptions because over the long haul they can be more lucrative.”
- Ron Gross [12:24]: “I think there’s a lot of things going on here… Disney looks interesting to me as a value investment.”
Amazon's New Retail Ad Services
Amazon announced its new retail ad service, allowing U.S. retailers to customize ad placements on their sites, mirroring Google's offerings for web publishers.
Key Points:
- Strategic Expansion: Enhancing Amazon's advertising capabilities to complement its retail and cloud businesses.
- Data Utilization: Leveraging ad data to improve recommendation systems and overall user experience.
- Market Position: Amazon's ad revenue has surged to over $14 billion, making it a formidable player alongside Alphabet and Meta.
Notable Quotes:
- Jason Moser [14:01]: “This is the Google-ification of Amazon… become a little bit more of what companies like Google historically have been.”
- Ron Gross [15:02]: “That third division now could start to creep up on maybe even the cloud business in a year or two.”
5. Meta’s Transition to Community Notes
Mark Zuckerberg announced that Facebook and Instagram will replace professional fact-checkers with crowdsourced community notes to manage content moderation.
Implications:
- User Experience: Aims to create a more transparent and community-driven approach to content verification.
- Advertiser Impact: Potential risks of backlash and uncertainty in content moderation could affect advertiser confidence.
- Financial Perspective: Ron Gross maintains a neutral stance, holding Meta shares while acknowledging potential risks.
Notable Quotes:
- Jason Moser [17:12]: “It points to actual source material with the facts. It’s a heck of a lot cheaper and then that it’s sourced from the community itself.”
- Ron Gross [18:11]: “There’s a lot of potential backlash that could come from this, which is a risk that I think investors have to keep in mind.”
6. Real Estate Outlook for 2025
Dave Meyer from BiggerPockets discusses the real estate market's transition from a recession to an expansion phase. Despite current challenges with affordability and high mortgage rates, signs point towards recovery in 2025.
Key Insights:
- Affordability Crisis: High home prices and mortgage rates have significantly reduced demand and supply in the market.
- Market Dynamics: Increased inventory and transaction volumes signal the end of the real estate recession.
- Investment Advice: Meyer recommends a long-term investment approach, emphasizing the benefits of cash flow, tax advantages, and property value appreciation.
Notable Quotes:
- Dave Meyer [21:01]: “Affordability in the housing market is just a measure of how easily the average American can afford the average priced home.”
- Dave Meyer [26:55]: “I don’t advise waiting because you might be waiting for a long time… real estate has historically been a very good hedge against inflation.”
7. Radar Stocks: Paylocity and Gannett
Jason Moser's Radar Stock: Paylocity (PCTY)
Jason highlights Paylocity, a cloud-based human capital management and payroll software provider. The company is leveraging AI to enhance its services, including schedule optimization and employee engagement.
Key Points:
- Financial Health: Cash flow positive with a growing net margin exceeding 15%.
- Market Position: Targets smaller businesses looking for cost-effective HR solutions.
- Future Prospects: Strong potential for growth through AI-driven innovations.
Notable Quotes:
- Jason Moser [35:27]: “Paylocity is a compelling business. I’m enjoying digging into it.”
- Ron Gross [36:55]: “The founder and director Steve Sarawitz still owns about 16% of the company. So clearly he sees good days ahead as well.”
Ron Gross's Radar Stock: Gannett (GCI)
Ron focuses on Gannett, a media company transitioning from traditional newspaper revenue to a content-driven model. Despite declining traditional ad revenues, Gannett is investing in diversified content areas like sports coverage and entertainment.
Key Insights:
- Strategic Shift: Moving towards high-margin content segments to compensate for declining newspaper revenues.
- Market Challenges: The internet's impact continues to challenge traditional media business models.
- Investment Perspective: Positioned as a value investment with potential for growth through new content strategies.
Notable Quotes:
- Ron Gross [37:32]: “Legacy newspaper business is a tough business in this environment… Gannett is shifting more into a content business.”
- Ron Gross [38:55]: “It could be a real value investment here from our friends over at Value Hunters.”
8. Conclusion and Closing Remarks
Dylan Lewis wraps up the episode by encouraging listeners to explore real estate resources on BiggerPockets and reminding them to consider the discussed radar stocks. The hosts emphasize the importance of strategic investment decisions amidst a volatile market landscape.
Final Thoughts:
- Long-Term Perspective: Whether in stocks or real estate, maintaining a long-term investment horizon is crucial.
- Market Adaptation: Companies like Disney, Amazon, and Gannett are adapting to changing market dynamics through strategic shifts.
- Investment Opportunities: Paylocity and Gannett present potential value investment opportunities amidst evolving economic conditions.
This detailed summary captures the essence of the January 10, 2025 episode of Motley Fool Money, providing insights into macroeconomic trends, advertising strategies of major corporations, real estate market outlook, and noteworthy investment opportunities.