Wyatt Research Week in Review: June 7-13

Apple (NASDAQ: AAPL) took another step forward in its quest for world domination this week with the unveiling of a subscription-based streaming music service to compete with industry leader Spotify.
Apple Music, which will be available on Apple devices June 30, will cost $9.99 a month and will give subscribers on-demand access to the approximately 37 million songs in the iTunes music library. That compares to about 30 million songs available with Spotify’s $9.99 per month streaming service.
Apple will also launch a streaming radio station called Beats 1. Featuring live DJs, it will broadcast 24 hours a day and will be available in more than 100 countries.
While the launch of the Apple Watch in April was a proactive attempt to fundamentally change the manner in which people access mobile data, Apple Music is a decidedly reactive move.
According to Nielsen SoundScan, sales of digital albums fell 9% in 2014, while individual digital song sales fell 12%. Those sales figures should only continue to decline.
Apple is thus seemingly willing to cannibalize the already depleted sales of its iTunes digital music store to play catch-up with Spotify, which has a seven-year head start and 20 million subscribers.
It’s one of the clearest signs yet that digital music purchases will eventually join compact discs as an antiquated form of music consumption that future generations will puzzle over, like eight-tracks and cassette tapes.
For further details and analysis of the Apple Music launch, I invite you to check out my colleague Jay Taylor’s article. Jay also provided a recap of the other notable announcements from the 2015 Apple Worldwide Developers Conference, which can be found here.
And if you have some free time this weekend, please check out some of my other favorite Wyatt Investment Research articles from the week:
The Real Reason Behind the Rash of Semiconductor Consolidation – In two separate record deals recently, Intel (NASDAQ: INTC) agreed to purchase Altera Corp. (NASDAQ: ALTR) for $17 billion in cash, and Avago Technologies (NASDAQ: AVGO) agreed to buy Broadcom Corp. (NASDAQ: BRCM) for $37 billion in cash and stock. But the industry-wide semiconductor consolidation is about more than just cost synergies. It’s a significant change for the hardware industry as a whole.
Is McDonald’s the Next Wendy’s? – Wendy’s (NYSE: WEN) earnings growth over the last few years has been due in large part to its aggressive remodeling and refranchising measures. McDonald’s (NYSE: MCD) turnaround plan includes a strategy to streamline its menu and refranchise up to 3,500 stores. Can Mickey D’s right the ship by taking a page from the Wendy’s playbook?
Here Comes the Netflix Stock Split – At Netflix’s (NASDAQ: NFLX) annual shareholder meeting Tuesday, shareholders voted to approve a share authorization to increase the number of Netflix shares outstanding – a necessary step for a stock split. The lower price tag that results from a stock split often makes an otherwise “expensive” stock seem more palatable to investors. Will it work for Netflix?
Should You Be Worried About a Crash in Bond Prices? – The jobs report released June 5 by the U.S. Labor Department revealed an unexpected surge in U.S. job gains in May. As a result, investors are getting nervous, with some heading for the exits and dumping bonds on a bet that the Federal Reserve will raise the federal funds rate in September. Should investors be concerned about bond prices?
Warren Buffett’s $13 Billion Bet – Warren Buffett is famously tech-averse. Speaking on behalf of his holding company, Berkshire Hathaway (NYSE: BRK-B), Buffett stated, “Technology is just something we don’t understand, so we don’t invest in it.” So why does Berkshire own close to $13 billion of this tech stock?
US Auto Sales Are Booming, But How Long Will It Last? – In May, U.S. auto sales hit 17.79 million units at a seasonally-adjusted, annualized rate. This represents the highest rate since summer 2005. But key catalysts such as low gas prices, easy financing and pent-up demand won’t last forever.
The Best Pure-Play Concrete Stock – Concrete isn’t the sexiest industry out there, but consider for a moment that on a ton-for-ton basis, concrete is the most widely used building material on the planet. Twice as much concrete is used as steel, wood, plastics and aluminum combined. Growth stock expert Tyler Laundon’s favorite concrete stock has a market cap of just $560 million and trades at a modest current-year price-earnings ratio of 13, based on estimated earnings of $2.90 per share.
The Secret to Superior Long-Term Wealth Creation – What’s a company’s most valuable asset? For many corporations, it isn’t its physical property or patents. Instead, it’s something far more difficult to measure.
Twitter CEO Out: What’s Next? – News broke Thursday that Twitter (NYSE: TWTR) CEO Dick Costolo will step down effective July 1. Returning to the CEO role on an interim basis is co-founder and former chief executive Jack Dorsey. According to Business Insider’s Jay Yarow, “It sounds as if Dorsey is interested in being CEO of Twitter full time.” With 300 million users, Twitter certainly isn’t small. But when you compare it to WhatsApp’s 800 million users and Facebook’s (NASDAQ: FB) 1.4 billion users, Twitter seems much less significant. Could Dorsey be the man for the job to grow Twitter to its full potential?
If You Could Only Buy 1 Stock – What if you could only buy one stock? The question sounds crazy, but that’s exactly what Chief Investment Strategist Ian Wyatt’s grandfather did in the 1980s when he decided to invest in the stock market for the first time. Which stock would you buy?
Have a great weekend!