In this briefing:
- ASML. Safe Harbor In A Semi Storm.
- Spotify: Playbook for Online Platforms to Turn Profitable – Implications for Meituan Dianping
1. ASML. Safe Harbor In A Semi Storm.
Dutch lithography bellwether ASML is unique among its WFE peers in forecasting 2019 as yet another growth year for the company, making it eight such years in a row. While the likes of Applied Materials and Lam Research anticipate YoY revenue declines in the mid-to-high teens, ASML is sheltered from the worst excesses of the downturn by virtue of its technological moat, namely its EUV lithography tools. Customers like Taiwan Semiconductor Manufacturing Company, Samsung Electronics and Intel are critically depending on ASML to deliver thirty of those tools in 2019 in order to ramp their latest process nodes.
On the latest earnings call, ASML underscored its confidence in the company’s prospects by proposing a 50% increase in dividends to €2.10 per share. Currently trading at a 17% discount to its 52-week high, ASML is a safe harbor in the current semiconductor storm.
2. Spotify: Playbook for Online Platforms to Turn Profitable – Implications for Meituan Dianping
- Our analysis of how Spotify Technology Sa (SPOT US) turned profitable in 4Q18 reveals three key ingredients: critical mass in sales, GM progression, and core business diversification.
- With sales reaching critical mass, this would allow fixed costs to be spread out in such a way that opex/unit is lower than GP/unit.
- Progression in GM and core business diversification strategy are worth monitoring.
- Implication: Meituan Dianping’s (3690 HK) core business is ahead of iQIYI Inc (IQ US) in terms of profitability inflection point timeline.
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