TMTB Morning Wrap
Good morning - QQQs +20bps and main story is out of China as China stocks are moving higher after China's Central bank lowered interest rates and the government added stimulus designed to bolster the stock market. China's Central bank will cut banks' reserve requirement ratio (RRR) by 50 basis points in the near future, freeing up about 1 trillion yuan ($142.21B) for new lending. Depending on the market liquidity situation later this year, the RRR May be further lowered by 0.25-0.5 percentage points, Pan said.
China names all up on the news. Does $ flow out of certain TMT sectors into China/commodities today? Does $ flow into China exposed semis? We’ll see - will be an interesting nday.
Oil +2%; BTC +40bps; China +5%; Yields up 2-4bps across the curve. Let’s get to it…
AMZN: Various news items out this morning, some positive, some negative….
Positive:
Hearing M-sci upticked slightly on AWS calling out H100/H200 added capacity (don’t have details yet on the #s) and said NA and saying int’l sales tracking slightly above street as Aug and Sept improved following a weak July
Cowen also positive after AMZN accelerate seller conf and takes his 24 GMV CAGR to 10% through 2029 after “hearing of several initiatives to drive higher unit vol incl new genAI listing tools (faster listing as 40% of key info done, video creation), Prime badge on seller’s 3P site/outside of AMZN and further regionalizing US fulfillment w/ new warehouse and disty nodes which drives faster delivery speed/higher conversion.”
Bernstein also positive on the Prime Video Ads opportunity saying it could be key to the bull case. They note that while product search ads continue to make up the bulk of ad revenues, Prime Video ad dollar contribution is weighted to back half of 2024particularly 4Q, as dollar commits from the Upfronts and they expect $1-$1.5B in incremental EBIT uplift (3-5% upside) in 2H 24.
Negative:
A couple 3p data points negative on retail. Hearing Yip 3p weekly retail data downticked - latest week under 7% y/y and q tracking 70bps below street
BAML also out with their internet tracking saying Q3TD sales through 9/16 are only up 4%, a decel vs 7% in Q2. This compares to AMZN’s total sales guide for 1 pt decel at the midpt and street projecting NV rev growth to only slow 1 pt to 8% y/y.
3p Roundup:
CVNA: Hearing Yip saying slight decel from 31% to 30% in latest week. Hearing other boutique (AA) 3p data showing more steep decel to 20% in latest week, which would be slowest growth in several months. Usually they track each other closely, so not sure what to make of difference….
UBER/LYFT: Hearing uptick in latest weekly Yip data
ETSY: Hearing another downtick in latest weekly Yip data.
CRM: Salesforce upgraded to Overweight from Neutral at Piper Sandler
TheFly:
Piper Sandler analyst Brent Bracelin upgraded Salesforce to Overweight from Neutral with a price target of $325, up from $268. The firm sees a favorable risk/reward profile for the shares given the potential for Salesforce's free cash flow per share to double to $20 by 2028 from $9.65 in 2023, even if its sales growth "remains at subdued levels" of 8%-9%. Relative to large-cap software peers, Salesforce also has the lowest valuation multiple, the analyst tells investors in a research note. Piper says discussions last week with the leadership team, partners, and customers give it confidence that the company's new pricing and packaging could broaden multi-cloud adoption while the promise of Agentforce could help stabilize demand and drive a recovery entering 2026.
PINS: Oppenheimer initiates at Buy and $45 PT
Oppenheimer says PIns is the fastest growing digital ad platform excluding META. 3p integrations with AMZN/GOOGL are driving improvements to auction density and pricing. Oppenhimer sees upside to DAUs and engagement after conducting a proprietary consumer survey. Per their channel checks, even though ARPU is 50c above SNAP, PINS is more attractive to advertisers on a ROI basis, mostly bc SNAP focused on larger brand advertisers and struggles with direct response. Opp also notes they PINS penetration is only 3% and a TikTok ban could be a tailwind
TSM: MS positive on TSM and raises PT to NT$1,280
MS says they see faster capacity expansion at TSMC in both the front-end (2nm/3nm) and advanced packaging (CoWoS) to meet very strong AI semi demand. MS notes “TSMC originally planned to expand CoWoS capacity to 80kwpm in 2026, but that now looks set to take place by end-2025. TSMC's AP8 fab (newly bought from Innolux) should offer sufficient space.” They now model TSMC's CoWoS capacity at 80k by 2025 and incremental allocation to Nvidia.
UBER (strong buy) /DASH (outperform) /LYFT (Hold) /CART (Hold): Raymond James initiates the group.
On UBER, RAJA's “Robo-ride” thesis reflects its view that Uber scales as Waymo (~5M ride run-rate) relies on Uber 3P demand to maximize Waymo utilization (est. ~4 hours per day currently) while it is more cautious that Tesla FSD advances/Cybertaxi launch will provide the break-through performance gains needed to quickly achieve L4+ autonomy (I.E., >50k MPD and 99.9999% crash safety rate) and subsequent state/city permit/licensing processes. RAJA's Strong Buy rating is informed by its view that the Uber AV narrative will swing from perceived risk (est. ~2% of bookings in Top U.S. 25 markets assuming Waymo 1P at 20% market share) to tailwind. RJ Uber/Waymo scenario analysis sees a +1-2% revenue tailwind as most likely (Waymo demand 50/50 1P/3P demand with lower case being 1P incremental/3P substitutive and higher case being 1P/3P incremental), considering Uber 3P demand could improve utilization across various parts of the utilization sine curve (E.G., peak, commute, off, event)
On DASH, RAJA's Outperform rating is informed by a bottoms-up multi- segment (U.S. restaurants, new vertical/international, ads) margin build that suggests room for upside as it models ~3.5% EBITDA margin (GOV) in 2026 vs Street closer to 3% benchmarking off discounted incrementals achieved in the U.S. restaurant segment. They expect a “faster-than- anticipated realization of profitability in high-growth international and new vertical (C- store, grocery-light) segments.”
CART: Instacart price target raised to $45 from $41 at BofA / MS lowers estimates
TheFly:
BofA raised the firm's price target on Instacart (CART) to $45 from $41 and keeps a Neutral rating on the shares. Given Bloomberg Second Measure credit and debit card data indicating potential for the company to meet/beat revenue expectations in Q3, and the benefit of rate cuts for consumer spend and sector valuations, the firm is raising its price target for Instacart. However, the firm adds that it continues to prefer faster growing gig economy companies including Uber (UBER) and DoorDash (DASH).
MS also out lowering their F24/25 GTV by -2% and EBITDA by -1%/-8% on slower ad ramp. They note CART’s efforts to diversify towards smaller advertisers is taking time to drive a step-change in auction density and ad growth, the analyst tells investors.
SNAP: Snap Integrates Google’s Generative AI Model Into Chatbot
Snap Inc. will start using Google’s generative artificial intelligence model to help power Snapchat’s AI chatbot, part of a broader plan to boost engagement and increase user time spent on the messaging app.
Snap has been investing in new AI features as it competes with larger peers, such as Meta Platforms Inc., which also has its own AI chatbot. Alphabet Inc.’s Google, meanwhile, has been seeking new corporate clients for its Gemini AI model as a way to boost business. The two companies announced the new partnership Tuesday
SNOW: Snowflake announces proposed private placement of $2.0B of convertible senior notes
SIRI: Sirius XM resumed with an Underweight at Morgan Stanley
Morgan Stanley resumed coverage of Sirius XM with an Underweight rating and $23 price target. The firm sees continued risk to subscriber growth expectations. The company's net additions have remained negative despite recovered auto sales, led by gross add and conversion pressure, the analyst tells investors in a research note. Morgan Stanley believes Sirius XM's product investment will help but says it will take time.
BIDU: HSBC downgrades to Hold
HSBC downgrades Baidu from Buy to Hold and cut TP to USD100 (from USD116) after factoring in new beta estimates and currency estimates, and slower long-term growth in its SOTP model stemming from more intense competition from other traffic platforms and weaker ad outlook.
Other News:
AAPL: MS saying “India sales could set a new milestone amid the current lead time debate” in their morning spec note but I can’t find the full research note
AI POWER USE: Constellation CEO Says US Should Copy China to Meet AI Power Use – Bloomberg
AI: Anthropic Has Floated $40 Billion Valuation in Funding Talks- The Information
US / SEMIS: House Approves Permit Exemption for Chips, Sending Bill to Biden – Bloomberg
META: Meta will announce this week that it has secured deals w/certain celebrities to use their voices in its AI-based digital assistant – Reuters
TIKTOK: TikTok to Shut Down its Music Streaming Business in November – Bloomberg
AAPL: Highly Anticipated Siri Experience With Apple Intelligence To Arrive Sooner Than Expected On iPhone With iOS 18.3 Update - Wccftech
GOOGL: Google’s Gemini AI might soon appear in your corporate Workspace - The Verge
NVIDIA’s H20 AI Accelerators Might Face The Next “US Ban”, Team Green Stops Taking New Orders In China - Wccftech
