🎙 Show Off

Despite taking a breather, the bull run has marched on at a historical magnitude.

Since 1980, only four years have had more new all-time highs than 2024: 1995, 2014, 2017, 2021.

And so far, this market’s post-election rally has mirrored a similar pattern to the rallies that followed the presidential elections in 2016 and 2020.

— Matthew & Shawn

Here’s today’s rundown:

Today, we'll discuss the biggest stories in markets:

• Behind Spotify’s 600%-plus run

• The Starbucks comeback adds a new chapter

This, and more, in just 5 minutes to read.

Chart of the Day

A Message From Our Friends at DUNN Capital

50 Years of Market Mastery

What’s the value of 50 years of experience?

At DUNN Capital, it’s everything.

Founded in 1974 by physicist Bill Dunn, we’ve spent the last five decades navigating every major market shift - from the oil crises of the 1970s to the financial meltdown of 2008, to inflationary pressures in 2022. Throughout it all, their data-driven, disciplined approach has allowed them to succeed.

Now, as they celebrate their 50th anniversary, they’re sharing their journey with you in a brand-new eBook.

Here’s what you’ll get when you download it:

• A behind-the-scenes look at DUNN Capital’s 50-year evolution from bold experiment to a firm managing over $1.4 billion in assets

• Key lessons learned through some of the most volatile periods in financial history

• How their unwavering commitment to discipline and client alignment has kept them on top through every market shift

Accredited Investor? Confirm your status to download the eBook and gain exclusive access to a video detailing DUNN Capital’s remarkable journey from inception to industry leader.

In The News

🎵 Spotify Keeps Delivering Strong Earnings

Spotify’s financial turnaround continues to impress. While concert-goers face steep ticket prices sometimes reaching $500-$1,000, Spotify's monthly subscription fee of about $12 seems like a bargain. That perspective has helped fuel its stellar performance, pushing the stock from a 2022 low of about $70 to about $470 today. 

• The audio streaming and media service provider has surged about 150% this year, outperforming prominent AI-centric companies. 

Breaking records: The company's third-quarter results revealed record-breaking performance. Spotify posted its highest-ever gross margin of 31.1%, above its two-year average of 25%. Traditionally, the company has had to return over 70 cents of every revenue dollar to record labels.

• Subscriber growth also exceeded expectations. The platform added 6 million new premium subscribers and 9 million new users to its ad-supported tier.
  

• Spotify’s user base now stands at 665 million, up over 16% in the past 18 months, despite implementing two price increases that made their standard plan more expensive than competitors Apple and Amazon.

Improvements across the board: Cost management has played a key role in Spotify's financial health. Reducing the workforce also has helped: Spotify has cut employee numbers by about one-third from a peak of 10,000 in 2022.

Spotify also generated record free cash flow in the third quarter, which helped drive Wednesday’s ~10% rally. 

Why it matters:

Spotify lives in a brutally competitive market with two titans: Apple and Amazon. Plus, Alphabet’s YouTube is also in the mix. 

Spotify faces both opportunities and challenges. The company must continue expanding its user base while maximizing revenue from paying subscribers and ad-supported users. 

One advantage in their favor is their service's "sticky" nature — users who have invested time creating personalized playlists are often reluctant to switch platforms, even when presented with alternatives like pre-installed services on new devices.

Final thoughts: Industry watchers note potential challenges in managing relationships with major record labels. As highlighted by one analyst, Spotify's improved profitability might prompt music labels and artists to demand higher rates, though that risk is somewhat mitigated by the labels' dependence on streaming platforms for their primary revenue stream.

• Spotify's evolution from a growth-focused company to one delivering substantial profits continues to resonate with investors. That suggests confidence in the company's strategic direction and execution.

There’s a reason the stock is up over six-fold since 2022.

Learn more

More Headlines

📊 Annual inflation rate hit 2.6% in October, meeting expectations

💡 Nvidia’s Jensen Huang: 60 direct reports, no 1-on-1 meetings

📈 Bitcoin hits another record over $93,000 amid monster post-election rally

❗ Grubhub just sold for $650 million. Four years ago, it was worth $7.3 billion

😬 Hedge funds shorting Tesla lost more than $5 billion after Trump's win

📱 Apple's future products may never be as profitable as iPhones

☕ Revising The Starbucks Turnaround Attempt

New Starbucks CEO Brian Niccol is wasting no time making changes to address the coffee giant.

Earlier this year, he scouted cafes at all hours of the day, quizzing baristas about their favorite drinks to make or problems in how the stores operated. 

And, in about two months on the job, Niccol has already pushed to simplify Starbucks' operations and menu."Sometimes you just want a brewed cup of coffee really quick," he said. 

He’s prioritizing speed and accuracy in drink preparation, especially during the morning rush. He’s bringing back customer-friendly touches like Sharpies for handwritten cup labels, and he might reinstate physical newspapers for in-store customers at the world’s largest coffee chain, with a $112 billion market cap. He also plans to narrow down Starbucks’ tens of thousands of drink-customization options.

• Mobile orders account for more than 30% of U.S. transactions.
  

• Over 60% of U.S. sales come from cold beverages, many customized. 

Starbucks’ struggles have been well-documented. It has faced falling U.S. transactions for three consecutive quarters, and its most recent earnings report missed analyst estimates, prompting the company to scrap its financial forecasts.

"We're in a little bit of a ditch, but that's not to say that we're not capable of getting out of that ditch quickly, effectively, smartly," Niccol said.

Why it matters:

Starbucks shares are up about 5% this year and only 17% over the past five years, underperforming the S&P 500 by a wide margin. But Wall Street appears optimistic about Niccol, as shares have risen ~25% since his hiring was announced in August. 

The new CEO's restaurant experience, which includes a turnaround at Chipotle, was a key factor in his hiring. 

• "Niccol's restaurant experience, which included a turnaround at Chipotle Mexican Grill, will help to tackle its challenges," the Starbucks board said.

Back to power? At Chipotle, Niccol made decisive moves. He relocated the headquarters and overhauled the leadership team. He’s bringing a similar approach to Starbucks, stressing accountability and warning corporate employees about the company's stricter three-day in-office policy.

• Niccol is not afraid to scrap initiatives that aren't working, even ones championed by former CEO Howard Schultz. The company is discontinuing its Oleato line of olive oil-infused drinks, which reportedly sold poorly, and a recent energy drink launch. Again, for Niccol, it’s about simplifying and returning to what made Starbucks a powerhouse. 

What to watch: Schultz, who briefly returned as CEO earlier this year, has endorsed Niccol's efforts so far. His tenure will be closely watched as he tries to steer the coffee giant back to growth.

Read more

Quick Poll

On Monday, we asked: What is your favorite shoe brand?

— About one-third of investors say Nike is their favorite shoe brand. On Shoes got about 20% of the votes. Other answers included New Balance, Asics and Brooks — the latter owned by Berkshire Hathaway.

— Wrote one investor: “I use On running shoes for training, and I love them because they are durable and provide a solid response. However, for fast marathons, I still go the carbon Nikes.” Another said: “Asics, Hoka, Brooks are great for running, but Asics still the most comfortable and effective.”

See you next time!

That's it for today on We Study Markets!

Enjoy reading this newsletter? Forward it to a friend.

Was this newsletter forwarded to you? Sign up here.

Use the promo code STOCKS15 at checkout for 15% off our popular course “How To Get Started With Stocks.”

Advertise with us.

Follow us on Twitter.

Keep an eye on your inbox for our newsletters on weekdays around 6pm EST and on weekends. If you have any feedback for us, simply respond to this email.

You can also leave your comments/suggestions/feedback anonymously here.