Wednesday Apr.28, 2021

📲 Apple's surprising ad play

_When reality doesn't match the moodboard [Kmatta via GettyImages]_

Hey Snackers,

A concerning headline: "Creation of first human-monkey embryos sparks concerns." Humonkey isn't bothered.

Microsoft and Google reported strong earnings yesterday after the market closed. Facebook and Apple are up today. About that...

Juicy

Apple's "sneaky" ad biz: how privacy changes could give it an edge over Google and FB

Quiet but deadly?... It's easy to overlook Apple's ad biz, when Google and Facebook take the spotlight. Apple doesn't have a search engine or social network to fill with protein powder ads — but it does sell ads in its App Store, and displays ads in the News and Stocks apps. App Store ads are expected to bring in $2B this year (a fraction of Apple's $275B annual sales). For reference: Google made $46B in ad revenue last quarter alone. Buuut...

Apple is making big privacy changes that could hurt competitors, while bolstering its own ads. Apple’s latest iOS update lets users decide whether to let apps track them for ads.
According to #PFWTM: Advertisers targeting iPhone users will get more detailed and timely data if they buy Apple’s ad space, than if they buy via third parties (like FB).
Apple's own ad biz won't be affected by the changes, since ads on its platforms can only target large groups, not individuals.

MiPhone, MiRule... These changes could hurt companies' precious ad-targeting, while giving Apple’s ad biz an edge. Apple has been getting heat for allegedly favoring itself on its platforms. Think: favoring its own apps on the App Store, and taking large cuts of purchases from non-Apple apps. Just last week, Apple and Google got grilled in a Senate hearing over their dominance of smartphone ecosystems. Still...

The ad changes could be hard to challenge: Apple says it's not favoring itself, but is motivated by user privacy concerns.

Ads could be Apple’s competition-slayer... Not because it has a massive ad biz, but because it can influence the fortunes of its competitors' main money-driver: ads make up ~80% of Google's sales, and 98% of Facebook's. Apple doesn’t have to become an ad giant to reduce ad giants’ power. The privacy changes are already poised to hurt its competitors. Meanwhile, Apple reportedly plans to expand its own ad offerings. JPMorgan estimates its ad revenue could grow to $11B/year by 2025.

Mood

Pinterest gets "DPF'd" — it dropped impressive earnings, but the stock plunged

Sounds like a #pinner... Pinterest's earnings yesterday were a textbook lesson in "everything is relative." Quarterly sales were up a sweet 78% from a year earlier, with international revenue nearly 3X'ing — and its net loss shrank 85%. So far, so great. Monthly active users hit 478M (double Snap's), up 30% from 2020. Sounds awesome. The reaction: shares plunged 11% after earnings...

Always in a mood(board)... Despite the awesome numbers, investors were bummed and fixated on one thing: slowing user growth. That 30% user boost sounds great – but it was Pinterest's slowest growth in a year, and it missed expectations. Last year, people flocked to Pinterest to create inspo boards for postponed weddings and Tuscan-style dream kitchens. Now...

Pinterest warned that user growth is slowing in the US, its most valuable market by far (Americans spend a lot, so advertisers pay more for US ads).
Pinterest said engagement is falling as the US economy reopens. People are eager to spend more time off-screen (white sand beach IRL).

Blame the "DPF Effect"... "Demand Pulled Forward." Thanks to the pandemic boom, user growth that Pinterest should've experienced last quarter actually happened in 2020. Netflix also blamed the “Covid-19 pull-forward” effect for its big subscriber miss last quarter: it added less than 4M subs, compared to nearly 16M in the first quarter of 2020 (aka: peak lockdown). We can expect the DPF Effect to hit other coronaconomy thrivers, too.

What else we’re Snackin’

Windows: Microsoft posted its best quarterly sales growth since 2018, partly thanks to PC sales from the WFH/school-from-home life.
Yougle: Google's sales soared an expectation-smashing 34% last quarter... largely thanks to pandemic YouTube-binging.
Venti: Starbucks' US sales bounced back to pre-pandemic levels, but investors are worried about international growth.
Revenge: Consumers' confidence in the US economy jumped for the fourth-straight month, approaching pre-pandemic levels.
Taxing: The Biden admin wants to make (much) stricter IRS enforcement a centerpiece of its spending plan. Aaaand: taxes are due May 17.

Wednesday

Earnings expected from Apple, Facebook, Spotify, Shopify, and Boeing
US Interest Rate Decision

Authors of this Snacks own shares of: Apple, Microsoft, Snap, Starbucks, and Google

ID: 1624800

Latest Stories

Pop Quiz!

Sales of what are up 136% since 2019?

Don't be a sucka

$70B

Alphabet shares are soaring in the after-market session, with a initial jump of more than 10% implying a gain of upwards of about $200B in market value when the stock opens tomorrow morning.

Google’s parent company crushed earnings expectations, initiated a cash dividend for the first time, and authorized a fresh $70B in share repurchases for good measure. The market likes it very much.

What’s up doc?

HOP TO IT

Joshua Topolsky

We get results!

This earnings season is fully operational

Balancing Act

Acrobatic Accounting

So, you want to join the circus?

Megan DeMatteo

No, Apple hasn’t cut its Vision Pro production estimates in half

Quite a few news outlets are reporting that Apple thinks it’s only going to sell 400,000 to 450,000 Vision Pros in 2024, compared a “market consensus” of 700,000 to 800,000. They’re all citing a note from Apple analyst Ming-Chi Kuo.

Obviously there’s no question that Apple’s $3,500 face computer will have a limited audience and could be a huge flop, but this also doesn’t seem like accurate news.

The issue is that 1) this 400,000 number isn’t new. Back in July of 2023, the Financial Times reported that Apple planned to make fewer than 400,000 units in 2024, reducing its initial projections of 1M units, citing two people close to Apple and, the Chinese contract manufacturer assembling the device. 2) It's unclear who was estimating 700,000-800,000 Vision Pros in the first place, but it appears that it was Ming-Chi Kuo himself?

Apple reportedly cuts Vision Pro production due to low demand

Seriously, relax

11h

Economy keeps on humming along

Meta exhaustingly tries to merge the metaverse and AI

Gonna have to rename the company... again

Rani Molla13h

Chris Black

Black’s Gold

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Can you justify a $335 trashcan? Yes.

Here’s how.

18h

Biden signs a bill that could ban TikTok — but the #ForYou fight is far from over

Jamie Wilde

Read

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Nia Warfield

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Matt Phillips

4/24/24

Chipotle continues to go on a tear, hitting a sales record

Hey it might not be the kind of AI stock investors are all hot and bothered over, but don’t sleep on the burrito business.

Chipotle posted much better-than-expected results on Wednesday, with sales rising 14% to a record $2.70B in the first quarter, which is like a billion additions of guac.

Profits jumped 23% to $359M.

Chipotle has quietly cruised higher over the last year. It’s up 63%, compared to the 24.5% gain for the S&P 500 over the 12 months through Wednesday’s close. Not bad for a rice-and-beans based business model.

Rani Molla

4/24/24

Facebook had great earnings, the market hates it

Facebook reported impressive earnings. Record first-quarter revenue thanks to AI! Profit up 117% compared to a year earlier! But at the same time, its capital expenditures are going up and it’s expecting second quarter revenue potentially lower than analyst estimates. So in other words, the future doesn’t look as bright as the present.

All in all the stock is down more than 10%. (Basically the opposite of what happened with Tesla yesterday).

Net net

4/24/24

Earnings can’t stop, won’t stop

Rani Molla

4/24/24

Why Tesla investors are holding on to hope for a cheap car

Despite terrible earnings numbers last night — declining vehicle sales, disappointing revenue and profit, enormous spending — Tesla stock is up more than 10% as of midday. That’s a welcome move for the car company, that’s been among the worst performers this year in the S&P 500.

Why the about face?

While Reuters reported earlier this month that Tesla is no longer making its long-awaited $25,000 mass-market car — news sent the stock, already suffering from headwinds across the EV industry, down even further— Tesla reported during its earnings that it’s going to make cheaper cars than it currently has.

Before the second half of next year, Tesla said it will release “more affordable models” that “will utilize aspects of the next generation platform as well as aspects of our current platforms, and will be able to be produced on the same manufacturing lines as our current vehicle line-up.”

So rather than release the $25,000 Model 2, Tesla is incorporating some of that technology into its existing models. UBS called it the Franken-3Y2.