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All right, let's get back to some of these tech earnings coming in here. Palanteer Uber. Yes, I arbitrage between Uber and Lyft and people who don't do that. I don't understand those people because I get huge discounts twenty thirty percent.
Wait, so you whenever you need to go somewhere, you're going to check both apps and then figure out which one.
It takes an incremental like eight seconds, and it saves me real money. And Matt Miller and I had this fight on the air. He doesn't do it. He's brand loyalty.
I'm like, you're leaving money.
No, No, there's no loyalty to this. This is all about how much it costs. Yeah, I don't know, it's just a commodity. How about the money?
Exactly right?
Man Deeps saying somehow he's built a career on doing this stuff and Deep seeing these are senior tech analysts Bloomberg Intelligence.
Mandy, let's start with pat Palenteer. What you call on that and what do you make of the stock action today?
What I'd love to just get your thought on the company, the stock and what do you think of the action today?
The solo, I mean, Palenteer still is the most expensive enterprise software business. So at a five hundred billion dollar valuation, you have to ask yourself, you know, is this the best software company that I can own or is there something else out there in the world of AI, which, to my mind, open Ai and Entropic are also recurring revenue software businesses. Yes, open ai is much bigger in their ambitions with regards to a consumer business and an
enterprise API business. But these companies Open Ai and Tropic are growing triple digits and open Ai, for example, is at a thirteen billion plus revenue run rate. So when I compare an open Ei and Tropic to Palenteer Talenteer, you're at four billion dollars rund rate, growing at a very healthy fifty percent, trading at one hundred times cv DO sales. That is where I think the valuation is what gives me a stop.
Here, Okay, I was raised by gentlemen where you did pe ratio, and then I got converted to EV to ibata, and then you people in technology got me focusing on multiples of revenue.
Where it comes to software companies not other businesses. Yes, exactly.
And then I said, all right, I can kind of get used to five, six, seven, eight times revenue.
Now you're telling me what one hundred times?
Yeah, that's that's It's like peg ratio and eyeballs back in the day. So mandeep when it comes to Pounder on what it does though there's no other company like it, right, that's the issue. It counts big governments as its customers and then now increasingly big companies. And as much as you can compare a Pounder as a stock to other AI plays, the actual responsibilities has the business that it conducts is irreplaceable, irreplicable.
They clearly have a very strong mode in terms of you know, creating an ontology. That's what they call basically making sense of data that an enterprise may have. And think about you know, any enterprise, they'll have ten twenty systems, a lot of data replication, and Talenteer can give you like a master data where they can help you get rid of all their interundancies and give you data that
really matters for your AI. And so think about an organization that has a billion dollar IT budget spending billions of dollars on AI. Why would you not spend fifty million dollars on Talenteers, especially if you are a government or bank or a manufacturing company and not a tech company. That's why Palenteer's customer base is not your sophisticated tech companies like Google, a Meta or you know, any of the tech players, because they do their own thing, but
it's your bank. Not that they're not sophisticated, but they need more help with organizing their data and Talenteer gives you an out of the box solution. And in this age of AI men, things are really kind of getting bigger and bigger in terms of spend. The last thing you want to save on is spending on data because if your overall project fields since you didn't have good data, then it's bad ROI. And that's where Talenteer is really benefiting and making a case Guys, you're spending so much
on infrastructure, why are you not spending on data? And I think that's a good pitch.
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Looking at young brands today, that's a stock in the news. Uh sucks up five point six percent today, It's up about ten percent year to date. Launching a strategic review focusing on their Pizza Hut brand. There, let's break it down a little bit with Michael Halen. He's a senior restaurant analyst for Bloomberg Intelligence. Michael, when I was in college in Richmond, Virginia, Pizza Hut was the bomb. That's
all we had down there for pizza. What's going on with the Pizza Hut and what's Yum's thinking about?
Yeah?
Uh, you know, I miss I missed Pizza Hut from back in the day.
You know, I feel like the quality.
Has slipped since then. Man, I lost those breadsticks especially Uh. You know, UH International has been okay, but US has been a big time drag on UFC. On a on young brand's results. So yeah, so I think this was kind of a long time coming. It's really been a drag on the top and bottom line growth. You know, Taco Bell is an absolute monster, is putting up unit growth as well as same store sales growth quarter after
quarter after quarter. KFC has had some well documented same store sales issues in the US, but that seems to be turning. They had a solid little quarter here with flat same store sales versus six straight quarters of decline, so that business seems to be accelerating a little bit. And KFC unit growth overseas is phenomenal, absolutely phenomenal.
They crush it overseas.
Yeah, so Pizza Hut has been this drag on this business for quite some time. I think the street is really excited about a potential divestiture here.
Any potential buyers out there that you can identify, No.
We don't have.
We don't think any of the companies in the public market are going to be an acquirer of Pizza Hut. Yeah, you know, this thing is, like I said, has struggled mightily. I mean, we can see pete private equity. I think private equity would be a good fit right, because it's going to take you know, management set on the call. It might take some of their markets two three years to get them back to like their rightful position as market leader in those countries they which they see as
their rightful, you know position. I think Dominos would have something to say about that. But you know, it's gonna take a few years to turn around some of these markets, and private equity obviously looking out a five to seven year time horizon would be a good fit.
All right, Mike, Let's step back the restaurant space in general, getting through you know, earning season here. What are you learning about kind of the consumer out there from the restaurant perspective.
Yeah, today we heard from Wingstop and another fast casual chain that's struggling also partly been a victim of its own success.
Right.
It's absolutely crushed it over the last six years and is lapping very very strong results from last year. But they talked some more about lowing come consumers and Hispanic consumer weakness and it broadening here in the third quarter. The stock is up pretty significantly, though. We think there's some couple of things going on. Number one, is stock sold off big time off that Chipotle's poor third quarter print. And secondly, there's some optimism here, I think around the
smart kitchens. So what's a smart kitchen they're so they're rolling out some kitchen technology that's boosting operations. It's speeding up service times. You know, they're they're putting out consistent ten minute service times, which is fifty percent better than they were doing prior. Accuracy is better, Food's getting to customers hotter and fresher, and people are going to have
a better experience. And so stores that have had this technology right now, it's in about two thirds of the US stores, It's going to be in all three thousand by the end of the year. But stores that have this equipment and have had it the longest are outperforming on same source sales by five hundred basis points.
So we think that's that's why the stock is up so much.
People are now a little bit more confident in a positive twenty twenty six despite the decelerating trends here in the third quarter.
Boy, big Big Pop today stocks up thirteen percent today, down fourteen percent year to date, but a good move today. I don't think there's wingstops in Jersey, Are there Mike, I haven't seen one.
Yeah, there's there's some, but there's there's not you know, there's not a whole bunch. You know, Texas, it's strong in Texas.
They're talking about the Southwest being strong.
But now, man, we need some more new Jersey wing stuff franchisees.
The product's pretty good, absolutely. So what's going on on the laborfront for restaurants? I'm thinking quick service restaurants. You know, with the southern border shut off, that was one of the industries that said we may have some labor problems associated with that.
You heard from your companies about that.
Yeah, you know, our companies just talk about the fact that they use Everify and there and they do everything by the book, which you know, I think is predominantly the case. The impact that you know you're seeing a is with more of the independent restaurants.
OK.
But then be also kind of causes labor costs to go higher here for the public chains, right, and they're seeing another four to five you know, wage rate inflation this year. That's been pretty common year in and year out since the pandemic.
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YouTube, Ranganath and she covers all the media names, including Spotify, and she explained it to me very clearly early on in.
Coverage of this company.
I think of Spotify as kind of the Netflix for music, and it's like, okay, now I get it.
Keitha, thanks so much for joining us here. What did you make of the Spotify numbers?
I actually like the Spotify numbers, Paul. I mean, you know, the big numbers that we always look for are, of course, the user metrics. We want to see them kind of do well on both monthly active users, which are basically the free listeners, as well as the premium subscribers, which is basically, you know, everyone paying about twelve dollars a month for a Spotify subscription, and both those numbers came in well ahead of guidance. The other number that we
look for in Spotify results is gross margin. This has been you know, a constant point of debate, but Spotify has done really well in terms of expanding their gross margin. They again delivered numbers ahead of guidance both for you know, third quarter as well as ahead of forecast for the fourth quarter in terms of guidance. So fundamentals seem to be really strong. I think the one concern, Paul, that has really kind of emerged with Spotify over the past
few months is pricing power. You know, are they going to keep you know, being able to increase prices? And this is something that has dominated the conversation for not just Spotify, but of course for any streaming company. We've seen Netflix, as you just pointed out, demonstrate really good pricing power. I think Spotify has very good pricing power as well, but people are really waiting for the next big US price hike to really gain more confidence in the story.
Keith, what's the competitive landscape for Spotify out there? Because as we think about the video business, it's Netflix and then a kind of a big drop down to Disney and then a bigger drop to kind of everybody else fighting it out.
What's the landscape for in the audio business.
It's actually very similar, Paul. In fact, you know, Spotify just leads by a wide, wide margin. So if you just look at both the global audio streaming market in terms of subscribers, they have about a thirty three percent share globally. They have close to almost forty percent share in the US market, so way ahead of their competitors. So obviously gives them a lot of I think, you know, again we come back to pricing power. Gives them definitely a lot of pricing power in the market.
So what's the on the cost structure for them? What are the real levers for them? It seems like you know, the I know at Netflix and they got to write big, big checks to you know, either license content or you know, create their own content.
What's it like on the Spotify side.
Yeah, you bring up an excellent point, Paul, And this has kind of again been one of the pain points for Spotify because again, this is a music streaming service. They don't own any of you know, the music music itself. That's all kind of controlled by the labels, and as you well know, content is king.
So this is really where.
Spotify has a lot of trouble because for every dollar that they earned, about seventy cents goes back to the music label, so they have very little leverage. They've been trying to kind of change that whole dynamic, that whole EQUI come up with more of their content. So a big investment area for them has been you know, podcast has been audiobooks where they kind of get better you know, profit dynamics.
It has worked well.
But actually one of the things that we're kind of looking for next year is we're going to see a step up in all of the royalty costs. And that's again something that the street and investors are a little bit nervous about because we need to see how you know, Spotify kind of manages their whole margin expansion story as those royalty costs go up, So the amount that they're paying all of the music labels, the warners, and the universals of the world is going to go up slightly.
But we still think that they're in good shape. They've been adding a ton of new features to all of their tiers. They're probably going to debut some new tiers again. All of that bills to that whole pricing, power and monetization story.
And how is Apple as a competitor here, Because anytime I see a company that's even remotely in competition Apple, I get nervous.
So Apple, you know, if you're just kind of looking at it. In terms of share, they are way below Spotify, both globally as well as in the US market, so not much of a competitor from from a share standpoint.
In fact, they've even priced their products slightly lower. Some of the you know, some of the noise around Spotify and Apple has been you know, in terms of the iOS and whether you know, Spotify can kind of get better terms, and they managed to do that as well, So some of the changes on the iOS system have actually helped Spotify in terms of getting a better market share and getting better economics. Actually, so Apple Music not too much of a worry for Spotify.
All right, let's switch gears to some of the big cat media names you cover. I need to get an update, Githa on Paramount, Warner Brothers, Discovery, Comcast, any movement forward there or have to wait to the Allen Company conference next summer to.
Get something done.
Yeah, we really don't know. We haven't heard anything. So just a few days back, I think it was just for last week and we heard that Netflix was kind of poking around. So Warner Brothers Discovery at this point has opened up their books to any of the interested parties. There were news reports and Netflix is looking at some
of the financials of Warner Brothers Discovery. Again, this doesn't necessarily mean that a bit is coming, but of course anybody who you know has a chance, I'm sure, wants to take a look at the Warner Brothers Discovery, especially the studio and the streaming asset. So right now we know Comcast is interested, we know Netflix is definitely interested,
and of course Paramount Skydance is interested. But again Paramoun skid as interested for the whole company, so streaming studio plus the TV networks.
So this is.
Again you know, I don't know it's how it's going to play out, but hopefully we should get to hear from you know, somebody pretty soon. Warner Brothers Discovery is reporting a little later this week.
Boy. Yeah, you think about it, Gith.
I mean, you've got a company whose board and whose CEO seems to be open to a deal. You would think that something get happened quickly, but it's not.
How is it? Price has been a sticking point, Paul, So we know that. Yeah, so we know that you know, a paramount has come in with about twenty four dollars a share. It looks like David's also was looking for something north of thirty dollars, so again it's you know, it's all going to come down to those negotiations.
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