Latest news with #MoffettNathanson
Mint
2 days ago
- Business
- Mint
Apple's growing list of problems clouds AI reboot
It says something about Apple's current status that its trailing position in artificial intelligence isn't the company's biggest problem. It might seem to be next week, though. Investors are glum ahead of Apple's Worldwide Developers Conference that kicks off Monday. The stock has slid 20% since the first of the year, which is the worst run the shares have experienced ahead of the company's WWDC event since at least 2010. Apple's big tech peers now use their own annual developer events almost exclusively to tout their progress in AI. But Apple's conference this year is expected to mainly demonstrate how far behind the company is in what is considered a once-in-a-generation technological shift. The Apple Intelligence service introduced at last year's conference is still a work in progress, and the Siri digital assistant is still awaiting a promised AI makeover. That won't be coming next week, at least based on a rare admission Apple made three months ago that its planned Siri upgrade was taking longer than expected. 'Apple will be much more cautious about overpromising and will refrain from showing features that aren't yet ready for prime time," Craig Moffett of MoffettNathanson predicted in a report Thursday. But AI is only one of the significant problems Apple is facing now. Tariffs threaten the profit margins of the company's hardware business. And the president of the U.S. is openly pressuring Apple to effectively undo its two-decade-old business model of exclusively producing its devices overseas. Then there is services, which drive an outsize portion of Apple's bottom line. Legal challenges hang over the fees the company earns from app developers, as well as the payments it receives from Google to make the search engine the default option on Apple's devices. Those fees and payments together comprise a substantial part of Apple's services arm that generates annual gross profit margins of 74%—twice the margins the company's device business commands. 'We caution that Apple has material risks to its revenue growth, margins, and valuation multiple," Needham analyst Laura Martin wrote in a report on Wednesday, where she downgraded the stock to a 'hold" rating. Against the risk of tariffs, App Store fee reductions and the loss of Google payments, Apple's slow start in AI seems almost a minor worry. The company hasn't been marketing Apple Intelligence as a premium service that would cost users extra—a notable contrast to the approach of Microsoft and Alphabet's Google, which are charging money for most of the generative AI tools sold to their customers. But Apple needs to give customers more reasons to buy its devices, and upgrade them more frequently. Its flagship iPhone business has been in a rut, with revenue growth relatively flat over the past two years and expected to be flat again for the current fiscal year ending in September. The lack of new AI offerings is expected to weigh on the next cycle as well, with Wall Street expecting iPhone revenue growth of only 3% in fiscal 2026, according to FactSet estimates. 'We believe that, for this stock to work, it must have the catalyst of an iPhone replacement cycle, which we do not foresee in the next 12 months," Needham's Martin wrote in her report. Apple has a lot of very loyal customers—more than 2.35 billion active devices make up its installed base—who won't necessarily bail over a single piece of missing software. But the company that disrupted the smartphone market could be disrupted itself if generative AI creates a new class of devices that obviate the need for a touch screen slab in everyone's pocket. OpenAI just nabbed Jony Ive, the famed Apple designer who crafted the original versions of most of Apple's current product line, as part of an ambition to eventually ship 100 million 'AI companions." The first devices are expected to come out next year. The famously secretive Apple could very well spring some of its own surprises by then. But it will have to do so while juggling its global supply chain and deftly navigating the legal challenges to its App Store fees and Google payments. Apple isn't even officially a party to the Google case, which might limit its options to shape the outcome. Apple's slow start in AI is a problem, but compared to its other challenges, at least it is more under its control.
CNBC
22-05-2025
- Business
- CNBC
Consumer need isn't there for OpenAI hardware product, says Michael Nathanson
Michael Nathanson, MoffettNathanson founding partner and senior research analyst, joins 'Power Lunch' to discuss if physical hardware will be a part of AI, who are the winners in big tech, and much more.
CNA
15-05-2025
- Business
- CNA
CoreWeave shares slip after AI spending forecast exceeds revenue expectations
CoreWeave shares fell more than 6 per cent on Thursday after the Nvidia-backed artificial intelligence cloud firm forecast that its annual capital expenditure would be about four times higher than predicted revenue in 2025. The projection, made in CoreWeave's first earnings since going public in March, shows companies are continuing to plough billions of dollars into AI even as investor scrutiny has sharpened after the launch of DeepSeek's low-cost AI models. The company said it added a new hyperscaler and signed expansion agreements with its customers, including a recent $4 billion deal with a large AI enterprise. "Investors were alarmed by the level of capital intensity for CoreWeave." D.A. Davidson & Co analyst Gil Luria said. "Signing more hyperscalers as customers is not really good news. Hyperscalers are direct competitors to CoreWeave and are only temporarily using CoreWeave for overflow capacity. They will likely go away once they have built out enough of their own data centers." CoreWeave, which leases computing capacity to technology companies and hyperscalers such as Microsoft, reported a more than five-fold increase in its revenue to $981.6 million for the first three months of the year. The management was optimistic about the demand for its services on the post-earnings call, but brokerage MoffettNathanson said "the cost of preparing to meet this demand may spook investors" who are paying a high price for the stock. Big Tech firm Meta raised its annual capital expenditure forecast in April, while Alphabet reaffirmed it and a Microsoft executive also re-emphasized the company's AI spending plans. As of last close, CoreWeave's stock surged 69 per cent from the offer price in its March IPO. At least seven brokerages have raised their price targets on the stock to between $50 and $80.
Yahoo
13-05-2025
- Business
- Yahoo
10 Advertising & Media Stocks That Could Tank If Recession Hits
When recession strikes, the advertising and media sectors are the first ones to see a noticeable impact. Companies tend to reduce their advertising budgets when the going gets tough. As a result, media companies that rely heavily on advertising spending fail to hit their revenue targets. So, if investors want to look at red flags for recession, advertising and media stocks offer good insights. While media companies across the board feel the heat of reduced advertising budgets, some companies tend to fare better. These are mostly the ones that have diversified their income streams to reduce reliance on advertising. In this post, we look at stocks that are likely to struggle if ad spending goes down. To come up with our list of top 10 advertising and media stocks that could tank if recession hits, we only looked at stocks that had a market cap of at least $5 billion. A large movie theatre filled with people enjoying a film streaming on a smart TV. 10. Netflix, Inc. (NASDAQ:NFLX) Netflix, Inc. operates as an entertainment service provider. It provides TV series, games, documentaries, and feature films across different languages and genres in over 190 countries. Owing to its strong subscription-based business model, the stock is the least likely to be affected if ad spending goes down. The streaming giant was upgraded last month by Moffett Nathanson with an increased price target of $1,100. The upgrade was based on Netflix's potential to boost profits through better monetization and ad expansion. Moffett predicts continued advertising expansion and subscription growth to boost profit margins to 40% by 2030. Moffett Nathanson highlighted the company's growth potential by saying: We now forecast Netflix will generate over $6 billion in advertising revenue in 2027 and almost $10 billion by 2030 Similar sentiment was shown by Morgan Stanley as it maintained its Overweight rating for the entertainment firm last week. MS named the stock as its top pick in entertainment and media stocks. Analysts predict the company to show flexibility in a challenging global macroeconomic situation, replacing stocks like Disney. After reporting Q1 results three weeks ago, the management reaffirmed its 2025 guidance. The streaming firm plans to invest in growth strategies and return excess cash to shareholders in the form of share buybacks. It aims to generate free cash flow amounting to $8 billion in 2025. Despite the clouds hanging over ad spending, Co-CEO Greg Peters highlighted plans to double advertising revenue by utilizing their proprietary ad-tech platform to improve targeting capabilities and advertiser flexibility. 9. The Walt Disney Company (NYSE:DIS) The Walt Disney Company is a global entertainment company. The company operates in Sports, Experiences, and Entertainment segments. It distributes and produces television and film content under Disney, Fox, Freeform, National Geographic, ABC Television Network, FX, and Star brand television channels. The entertainment firm announced the launch of its new streaming service for ESPN. The streaming service will combine content from Disney's SVOD ESPN+, potentially user-generated content, and the ESPN linear television channel. The service costing around $25 - $30 per month could reach 30 million subscribers over the next few years, adding $7.5 billion in revenue. If the company's ESPN turnaround succeeds, it could add significant revenue, helping the company survive an ad spending slowdown. The firm's pricing strategies and strategic investments set it up for long-term growth, mainly in the Experiences segment. Theme park admissions, one of the most significant revenue sources so far, grew its revenue from $8.60 billion to $11.17 billion from 2020 to 2024. The company's domestic parks attendance significantly improved by more than 114%. In case of a recession, DIS still remains a risky stock. However, the earnings announced this week have forced analysts and investors to rethink their thesis on the stock. DIS jumped 10% after posting strong earnings, then doubled down with the announcement of a $30 billion theme park and an Abu Dhabi resort! The diversification could help Disney withstand any slowdown in ad spending. 8. Alphabet Inc. (NASDAQ:GOOG) Alphabet Inc. provides different platforms and products. The company operates through Google Cloud, Google Services, and Other Bets segments. It offers various products and services, including Google Drive, Search, ads, devices, YouTube, Google Maps, Android, and others. The company also offers internet and healthcare-related services. Nielsen presented a report recently, a monthly snapshot of total broadcast, streaming consumption via TV, and cable. According to the report, YouTube was the leading media distributor in the US for March, accounting for 12% of overall TV viewing. At the start of this month, GOOG entered into a new non-exclusive agreement with Samsung Electronics. This deal enables Samsung to use alternative search products with no exclusivity requirements. The company's stock has declined significantly, providing a potential buying opportunity. With the stock trading down 20% YTD, there is value. However, Apple has just announced an AI search offering. Google pays Apple approximately $20 billion per year to have its search engine as the default search engine in Apple devices. Once this relationship ends, Google will be dealt a big blow. The stock tanked 7.5% as this news came out, clearly reflecting investor concerns. 7. Meta Platforms, Inc. (NASDAQ:META) Meta Platforms, the firm that owns platforms like Facebook, WhatsApp, and Instagram, is a business that thrives on advertising revenue. A recession, which usually damages small and medium-sized businesses, will deal a big blow to the company's finances. On top of all that, META is facing more heat than usual on the regulatory front. The company was recently sued by a group of 67 top French media companies for illegal business practices, resulting in an unfair domination of the digital ads business. This comes after META was fined 200 million Euros for breaching the DMA, Europe's Digital Markets Act. META continues to protest, arguing the Commission's policies force META to offer an inferior product to European users. However, the continent has decided to value privacy over profits, and that's what the company has to deal with. For now, META continues to report strong earnings despite adverse market conditions. The bigger question is, once the economy starts to show weakness, will the earnings stay strong? 6. Snap Inc. (NYSE:SNAP) Snap Inc. is a technology company. It provides Snapchat which is a visual messaging application with different tabs including visual messaging, stories, spotlight, snap map, and camera. The company also offers Spectacles, Snapchat+, and advertising products. The technology firm has just introduced three new AI-driven video lenses. These lenses use the company's in-house video generative model. This move aims to keep the tech firm competitive against major rivals Instagram and TikTok with its AI tools. SNAP reported earnings last week, and Q1 revenue grew 14% YoY. The growth drivers were direct response advertising and small and medium-sized businesses: the two variables that will go down in the case of a recession. The company is not very well diversified and could take a serious hit if ad spending goes down. The stock has already lost half its value in a year and could go further down. 5. The Trade Desk, Inc. (NASDAQ:TTD) The Trade Desk, Inc. is a technology company. It provides a self-service cloud-based ad-buying platform that enables buyers to optimize, manage, plan, and measure data-driven online ad campaigns. The tech firm serves advertisers, advertising agencies, and other service providers for advertisers or agencies. For the first time in 8 years, the company missed revenue guidance in the most recent quarter. It also fell short of guidance on the profitability front, missing adjusted EBITDA estimates. Management highlighted that this miss was due to a series of minor execution missteps. However, the tech firm still ended the quarter with no debt and $1.9 billion of cash. Due to the guidance miss and tariff concerns, the stock has gone through major headwinds. The share price has experienced a significant decline, falling 52% so far this year. At the current price level, the stock presents a compelling buying opportunity as recession worries seem priced in. Wall Street analysts have shown their optimism through Buy ratings on the stock. Based on 39 analysts' ratings, the company has a higher target price of $150, highlighting that the share price could nearly triple from its current price levels in the case of a bull scenario. With such an attractive upside of 209% along with the current stock price dip, the opportunity is enticing. 4. Paramount Global (NASDAQ:PARA) Paramount Global is a streaming, entertainment, and media company. The company operates in Filmed Entertainment, TV Media, and Direct-to-Consumer segments. A recession is likely to hinder one of the best business turnarounds in recent media history. PARA found itself at a crucial juncture: wait for traditional media to die or transition quickly to a streaming service provider. With high debt, the company could not just muscle its way to a successful streaming platform. Against the odds, it slowly improved its Paramount+ and Pluto offerings and is expected to turn these into a profitable part of the business this fiscal year. In the last quarter of 2024, the company gained an additional 5.6 million subscribers for Paramount+. The watch time for Pluto TV also grew by 8%. The media firm is setting itself up to monetize this growing subscriber base, but if ad spending takes a turn for the worse, the turnaround will have to wait a little longer. 3. Fox Corporation (NASDAQ:FOX) Fox Corporation is an entertainment, sports, and news company. It operates in Television, The FOX Studio Lot, Credible, and Cable Network Programming segments. The company recently announced the acquisition of Red Seat Ventures, a media company. Red Seat Ventures supports digital content and podcasts for creators like Megyn Kelly, Bill O'Reilly, and Tucker Carlson. This deal is all about investing in the growing creator economy, as Cheesbrough highlighted: It is one of the fastest growing media categories worldwide by measure of reach and influence, and consumers are increasingly looking to get insights and entertainment directly from the voices and brands they trust. The firm announced the launch of a direct-to-consumer service by the end of 2025. This service is designed for individuals who have never abandoned traditional TV cables. Lachlan Murdoch clarified that the service will be priced reasonably and won't require extra rights costs. For 2025, Fox's Tubi is anticipated to exceed $1 billion in revenue, fueled by its targeted advertising capabilities and large ad-supported video library. While this segment drives the company's bullish thesis, a recession could spoil the company's plans. 2. Warner Bros. Discovery, Inc. (NASDAQ:WBD) Warner Bros. Discovery, Inc. is an entertainment and media company. The company operates in DTC, Studios, and Network segments. It also offers content through various distribution platforms, including authenticated GO applications, linear network, direct-to-consumer subscription products, and others. WBD has had a good year as a business, even if the stock has offered mixed returns. The company now has a 6.7% TV and streaming market share, one that is likely to grow moving forward. The problems that the company faces are slightly different, though. It has $9.64 billion worth of debt maturing over the next three years. The management has already cautioned investors to have muted expectations. If a recession hits, the deleveraging process could get even slower. The management has also hinted that it will take time to arrest the decline in advertising revenue, another factor that a recession will delay. WBD, therefore, is a stock that could take a bad hit from a recession. 1. Roku, Inc. (NASDAQ:ROKU) Roku, Inc. is a TV streaming platform operator. It operates in the Devices and Platform segments. The company's streaming platform enables users to access and find news, TV shows, sports, movies, and similar content. It offers streaming services distribution, digital advertising, sale of streaming players, audio products, and other products and services. Last month, the firm was upgraded by Bank of America (BofA) with a Buy rating and a price target of $100. The upgrade was based on the company's strong user base and its growth potential. Brent Navon, BofA Securities analyst, highlighted the company's profitability trajectory by saying: We believe Roku provides an attractive combination of top-line growth, margin expansion, and scaling free cash flow generation The company's streaming market share has been growing steadily, and with it, the advertising revenue as well. Like a handful of other streaming stocks, ROKU's bull thesis also relies on its advertising revenue, and once investors start seeing that slow down, the stock could fall even further. While we acknowledge the potential of ROKU as an investment, our conviction lies in the belief that some AI stocks hold greater promise for delivering higher returns, and doing so within a shorter time frame. There is an AI stock that went up since the beginning of 2025, while popular AI stocks lost around 25%. If you are looking for an AI stock that is more promising than ROKU but that trades at less than 5 times its earnings, check out our report about this cheapest AI stock. READ NEXT: and . Disclosure: None. Insider Monkey focuses on uncovering the best investment ideas of hedge funds and insiders. Please subscribe to our free daily e-newsletter to get the latest investment ideas from hedge funds' investor letters by entering your email address below. 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Bloomberg
08-05-2025
- Business
- Bloomberg
Apple Eyes Move to AI Search, Ending Era Defined by Google
Apple Inc. is 'actively looking at' revamping the Safari web browser on its devices to focus on AI-powered search engines, a seismic shift for the industry hastened by the potential end of a longtime partnership with Google. Eddy Cue, Apple's senior vice president of services, made the disclosure Wednesday during his testimony in the US Justice Department's lawsuit against Alphabet Inc. The heart of the dispute is the two companies' estimated $20 billion-a-year deal that makes Google the default offering for queries in Apple's browser. The case could force the tech giants to unwind the pact, upending how the iPhone and other devices have long operated. MoffettNathanson co-founder Michael Nathanson explains how this change could signal the beginning of the end for the dominance of Google's search engine, which has long been the industry standard for Internet-based queries. Michael speaks with Tom Keene and Paul Sweeney on Bloomberg. (Source: Bloomberg)
