$ABNB and $SPOT

There is a trend in the big companies right now focusing on cost cutting and efficiency. Lets take a look at Spotify and Uber. Below is the LTM free cash flow from Spotify.

And below is Spotify stock price. It bottomed around 75$ at the end of 2022.

And free cash flow for Uber and stock price.

So axiomatically, the share price increased as the free cash flow did. Now, without going to detail if these companies are worth investing in, I think the important lesson here is that these companies were not focusing on free cash flow, just like Snapchat and Airbnb, but that is about to change.

Ever since the monetary and fiscal policy tightening, companies like mentioned do not anymore get free loans. They have had to focus on cutting costs and focusing on the core operations. And for some reason, the executives of these companies did not realize that if the stock does great, so will their compensation (or were their compensation already enough?).

Have you ever thought how internet companies like snapchat, airbnb, spotify are not making profit (in past tense). How is it possible that snapchat, who has to host a few servers and collect money from advertisers is not able to make money. This has always baffled me and I could not figure out what the fuck they spend their capex on.

Well, I have a feeling that time is over now. I’m looking into Airbnb and Snapchat currently, and it does already seem like they are focusing on cutting costs and starting to focus on what matters to shareholders. The way these non-physical companies can generate revenue and straight up return cash to shareholders is going to be insane, if they focus on it. Companies like Airbnb, Snapchat and Spotify do not need to invest much into their futures. Only thing they will have is expenses under SG&A or straight up Advertising Expenses.

Before diving into the stocks (Airbnb Q results are in less than a week), I need to dig up on their last quarter reports to see if there is any wording about cutting costs and free cash flow. $ABNB 135$ currently and $SNAP around 10$.

And btw, probably the best thing is that these companies do not need to spend a dime on AI.