🍎 Apple posts an iRecord profit

Wednesday, January 29, 2020 by Robinhood Snacks | Disclosures
_Apple reviewing its quarterly AirPod sales_

Apple reviewing its quarterly AirPod sales

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Hey Snackers,

Tweet-alert from the San Miguel Sheriff's Office: "Large boulder the size of a small boulder is completely blocking east-bound lane..." Big hump day mood.

Markets recovered some of their losses from Monday (the worst day for US stocks since October) as corporate earnings-palooza outweighed coronavirus worries.

Record
1. Apple has its most profitable quarter ever thanks to iPhone and Airpods

It's an iRecord plus... Apple just posted its biggest ever quarterly profit, and its first quarterly profit increase in over a year. And iPhone sales rose for the first time in a year, but a star has been born with AirPods. The branches of the Apple tree are growing:

  • Wearables: Sales up 37%, thanks to AirPods Pro and Apple Watch
  • Services: Up 17%, thanks to Apple TV+ and the Apple Card
  • iPhones: Up 8%, iPhone sales (which made up 61% of Apple's revenue) jumped again thanks to fancy new features (like the 3-eyed camera) and cheaper prices for Chinese consumers
  • iPad and Mac: Sales of the only rotting apples fell by 11% and 4%

An Apple a year... Apple shares have more than doubled over the past 365 days. That's right — over the course of 1 year, Apple has added over $725B to its value (that's more than Facebook's entire value). Apple's installed base of hardware devices — iPhones, MacBooks, iPads, etc — grew by 100M over the year to a total of over 1.5B. Plus, Apple is now worth $1.4T, #2 globally to Saudi Arabia’s oil co.

THE TAKEAWAY

It's all about the self-serving ecosystem... Last year, Apple failed to report a record quarterly profit for the first time since the iPhone's 2007 debut. Now, with iPhone sales up again and wearables and services thriving, it's back in record-profit mode. And the success is circular. Apple's diverse products and services tie back to and benefit its core product: the iPhone (which could be 5G capable next year, likely driving another wave of upgrades).

Rollout

Keeping Huawei away... might be harder than the US initially thought. The UK gov just gave Chinese tech giant Huawei the greenlight to build part of its next-gen 5G network, defying warnings from the Trump admin. And 5G is the critical wireless tech infrastructure for the next wave of the internet.

  • The US is worried that Huawei will act as a Chinese gov spy on American/Euro communications (sounds familiar). The US & UK govs share sensitive intelligence info with each other on the reg, so if China can tap the UK's calls, it kinda taps into the US.
  • Doesn't help much that Huawei itself couldn't really explain who owns it in the course of a 90-minute speech. Huawei denies it would let China's government use its network for spying... but defying orders from the Chinese government doesn't really happen.
  • Yesterday, the UK decided Huawei would build "noncritical" parts of its 5G network — it concluded that the security risks were manageable, and not using Huawei would cost a ton of money (bad news for the other 2 5G providers, Ericsson and Nokia).

There's a lot going on... for the UK right now. Brexit is (finally) happening on Jan 31, so the UK is looking to keep its trade relations strong. The US is a key component of that, but so is not antagonizing China.

THE TAKEAWAY

Kind of a big deal... The UK's decision is a big blow to American efforts to curb the reach of Huawei and China. It could also influence Germany and other US allies, who have to walk the line between two economic powerhouses. But the US and the UK have a long-running "special relationship" (#cousins). This decision is a thorn in its side.

Scoot

Remember that low-tech, Razor scooter you loved as a 9-year-old?... Big-kid electric scooters are taking over now. Bird is the Santa-Monica based scooter pioneer that just scooped up Berlin-based competitor Circ, which scoots across 40 cities in 14 European countries (and the UAE). Here's the scoop:

  • Money: Bird hit a $2.5B valuation in October by littering cities with e-scooters you unlock via phone. It also just raised $75M as an extension to its latest funding round.
  • Shopping: Circ isn't Bird's first acquisition — it bought California rival Scoot in early 2019.
  • Losses: Bird lost almost $100M during the 1st quarter of 2019 — Blame scooter lifespans, vandalism, and (shocker) cold winter months.

An unprofitable ride... Major scooter operators like Bird, Lime, Uber, and Lyft all laid off employees recently — Circ fired 10% of its team before selling itself to Bird. Even though Bird's surged to a $3B valuation in less than 3 years of life, here's 1 key reason it's so unprofitable: Bird scooters in some cities only last for 23 days on average before they have to be replaced, according to Oversharing.

THE TAKEAWAY

Just like delivery apps... We've talked about consolidation in the mafia-style food delivery wars. The heat is also turning up in the scooter market, where rivals like Spin, Jump, and Skip compete over sidewalk real estate. Food delivery and scooter startups similarly face little loyalty from app-comparing "promiscuous" customers, and low (to no) profits. So scooters are now merging to cut their growing costs to compete.

What else we’re Snackin’
  • Shut: Starbucks temporarily closes over half its China stores as concern over the spread of coronavirus keeps growing
  • Game-cation: Gaming pioneer Atari is opening 8 video game-themed hotels across the US (think VR, AR, and arcade games)
  • Settled: European plane giant Airbus is fined $4B after settlement of a corruption/bribery probe
  • Breakup: Match Group (owner of Tinder) is about to separate from its parent company IAC — but it also just ended its relationship with its CEO
Snacks Daily Podcast
  • Casper is our “ex-unicorn of the day” (lost the horn) — its valuation has fallen below $1B as it preps to IPO. Casper loses money like a tech company, but isn’t growing like one.
  • MGM Studios owns Bond, James Bond. Now it's in preliminary talks with Apple, Netflix, and other big media to sell itself — consolidation in the entertainment space continues...

The Snacks Daily Podcast = 15 minutes of entertainment-packed, digestible financial news

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Disclosure: Authors of this Snacks own shares of Apple, Uber, and Tesla

ID: 1073240