🧱 Big tech hits a wall

Thursday, April 28, 2022 by Robinhood Snacks |
All eyes on Big Tech (Justin Tallis/AFP via Getty Images)

All eyes on Big Tech (Justin Tallis/AFP via Getty Images)

All eyes on Big Tech (Justin Tallis/AFP via Getty Images)

All eyes on Big Tech (Justin Tallis/AFP via Getty Images)

Yesterday’s Market Moves
Dow Jones
33,302 (+0.19%)
S&P 500
4,184 (+0.21%)
Nasdaq
12,488 (-0.01%)
Bitcoin
$39,239 (+2.95%)

Hey Snackers,

A window into the wild housing market: after five cash offers, a Virginia home sold above asking price in less than a week — despite the stranger living rent-free in the basement. “Selling Sunset” would never.

In the markets, volatility has become the new normal: stocks ticked up after a choppy trading sesh, a day after the techy Nasdaq had its largest daily drop since 2020. Big Tech earnings are in full swing (so far — not encouraging). Apple and Amazon report today.

Fangs

1. Meta’s sales grew at the slowest pace since its IPO, as Big Techies hit a wall

Oh, Zuck... Even legless metaverse avatars can't distract from this reality: Meta posted its slowest quarterly revenue growth since going public as Facebook in 2012. In the previous quarter, Meta reported a $1B profit hit and its first-ever dip in daily users (cue: TikTok smirk). The latest: users actually ticked up last quarter, but financials… weren’t great.

  • Top line: Sales growth majorly slowed to 7%, from 20% in the previous quarter. Meta has blamed Apple’s iOS privacy update for sagging ad sales (ads = nearly all its revenue).
  • Bottom line: Profit fell for the second quarter in a row, down to $7.5B, from $9.5B a year earlier. Meta has spent $10B on its meta-ambitions, and it's eating into earnings.
  • Wall Street's line: “Could’ve been worse.” Meta stock popped 16% after it reported, as investors were surprised by better-than-expected profit.
  • Plot line: As of yesterday’s close, Meta stock had lost nearly half its value this year. Compare that to the Nasdaq, which has lost one-fifth (also… not great).

FAANG may be losing its teeth... Meta isn't the only Big Techie with slacking growth. Last week Netflix tanked on news that it lost 200K subscribers last quarter — and expects to lose millions more. On Monday, Google reported slowing sales growth and profits. Investors also ghosted Snap, which disappointed on earnings as ads faced pressure.

THE TAKEAWAY

Revenue diversity is winning... Between Covid, inflation, and war, the economic situation is too fragile to rely on one $$ stream (think: Meta with ads). Even Netflix has cracked the door open to ads, after years of renouncing them. Microsoft crushed earnings thanks to strong demand not only for its software but also for its cloud and cybersecurity services (yep, it has a $15B cyber biz). And even though Google ads slowed, growth in cloud, hardware, and services saved the day.

Plastic

Splurging on a new Tulum fit… or three. Credit-card companies are racking up profits as you go on a pre-summer swipe spree. Last quarter, Visa’s sales jumped 25%, from a 2% decline a year ago. Now it expects to top pre-pandemic levels this year. FYI: Visa makes up over half of the US payments market.

  • Jett(spend)ing: Visa's cross-border volume — aka the number of transactions outside the US — made up nearly half of revenue as international biz and leisure travel picked up.
  • Visa’s CEO says pent-up demand for summer bookings is “very high” and cross-border travel spend, including Europe, is already above 2019 levels.

Dusting off the passport… As most pandemic-era restrictions have now been lifted, consumers are making up for lost time when it comes to travel. More than 80% of Americans will take at least one trip with family and friends this year, and at least half plan to spend more than before the pandemic. For tourists visiting the US, Visa execs say there’s “plenty of recovery” to come.

  • Big balances: Last quarter, rival Amex saw a 121% rebound in entertainment and travel spend, while Capital One got more swipes in its “heavy spender” category.
  • Swipe-off: Mastercard, which has a similar biz to Visa, is also expected to score a travel-related sales surge when it reports earnings today.
THE TAKEAWAY

Consumer spending is in a U-turn… People aren’t spending less — they’re spending differently. Think: moving dollars from DoorDash and Netflix and into restaurants and delayed vacays. But it’s TBD how long the spree can last: concerns are rising that the global economy might be in for a significant slowdown that could hit consumers just as they’re venturing back into their pre-Covid routines.

What else we’re Snackin’

  • Yikes: Last month Deutsche Bank was the first big bank to forecast a mild US recession. Now the bank’s warning clients to expect a “major” recession as the Fed gets aggressive in tackling inflation.
  • Playful: Thanks, Barbie: Mattel reported a surprise profit, buoyed by sales of classics like Hot Wheels, which were in short supply during the holidays. Shares rose 14%, partly on rumors its shopping for a buyout.
  • Bumpy: Boeing posted higher losses than expected because of Ukraine-related costs and ongoing manufacturing delays, and said its newest jet wouldn’t be ready until 2025. The dismal earnings sent shares down nearly 9%.
  • Worth: Texas is morphing into a full-fledged crypto hub: Fort Worth is on track to be the first US city to mine bitcoin itself. The gov’t will set up mining rigs in city hall as part of a pilot program.
  • Refurb: A not-so-quick fix: Apple opened its online store selling iPhone self-repair kits to customers, after years of pressure from critics who say buyers should have a “right to repair” their devices.

Snack Fact of the Day

Thomas Jefferson and John Adams died on the same (symbolic) day: July 4, 1826

Thursday

  • GDP data from the first quarter
  • NFL draft
  • Weekly jobless claims
  • Earnings expected from Apple, Amazon, Mastercard, Merck, Comcast, Intel, McDonald’s, Caterpillar, Altria, and Hershey

Authors of this Snacks own: bitcoin and shares of Google, Snap, Microsoft, Apple, Netflix, and Amazon

ID: 2174696