Monday May.03, 2021

📲 Big Tech's big blowout

_Apple checks the earnings iMessage [Flashpop/DigitalVision via GettyImages]_

Hey Snackers,

The Declaration of Independence is going public via IPO. Call it an Initial Patriot Offering.

Stocks fell for the week, but ended April with the biggest monthly gain since November. Investors were pumped that the Fed decided to keep interest rates near zero, for now. A streak of killer tech earnings also helped...

AAPI Heritage Month: In May, we're celebrating Asian-Americans and Pacific Islanders. Stay tuned for special coverage.

Whoa

Big Tech giants drop back-to-back records (thanks to your 2021 spending)

Feeling like Jordan '96,'97... The "Big Tech 5" demolished earnings with jaw-dropping records. Despite the vax rollout and reopenings, some online pandemic habits seem to have only ramped up from January to March...

Amazon had its best first quarter ever, as the ecomm boom continued. Sales surged 44% from 2020 to a wild $109B, and profit more than 3X'd. Fun fact: ads were one of the 'Zons fastest-growing categories. Oh, and Bezos called Prime Video and AWS "our kids" (#nostalgic).
Apple's sales soared 54% to a Q1 record, and profit more than doubled to a shocking $24B. All product categories saw double-digit sales growth, but iPhone brought home the real iBacon (thanks, 5G upgrades).
Google also smashed sales expectations, and profit more than doubled to $18B. YouTube was the star, with sales jumping 49% to $6B (more than Snap, LinkedIn and Pinterest... combined).
Facebook's sales soared 48% to $26B (nearly all from ads). Profit ~2X'd, thanks to a surge in ad prices. FB users, including Insta and WhatsApp, jumped 15% to 3.5B — aka: nearly half Earth's population.
Microsoft posted its strongest revenue growth since 2018 (partly thanks to higher PC sales).

BTW... The "Big Tech Five" makes up ~22% of the S&P 500's value, which reflects the total stock market. After a year of stocks thriving while the economy suffered, the economy seems to be starting to catch up. And consumer spending is playing a big role.

Big Tech's records reflect economic confidence... Consumer spending is rebounding thanks to stimulus(es), vaccines, and business reopenings. Retail sales surged 10% in March, the largest jump in a year. That benefited Amazon, but it also boosted ad giants, who rely on your spending to sell ads. Spending fueled 6.4% GDP growth last quarter, the second-fastest pace since 2003. Meanwhile, the techy Nasdaq index is up 62% over the past year. But a few clouds could rain on Big Tech's parade. Like: increasing antitrust scrutiny (the Apple-Epic "App Store monopoly" trial starts today) and inflation concerns.

Events

Coming up this week...

Checking in (all at once)... It's hotel week, with Hilton, Hyatt, Booking, Expedia, Tripadvisor, Starwood, and Wynn Resorts all dropping earnings (now breathe). A pandemic isn't the best time to sip mojitos poolside, but we have seen "revenge spending." Flight and restaurant sales surged in March, and TSA numbers are notching pandemic highs. But global Covid cases are still soaring, and earnings are expected to be lower than a year ago.

Coming in mRN-ASAP... Moderna and Pfizer earnings. Unlike J&J, the two mRNA vaccine makers didn't pledge to pass up vax profits (which could be big). Pfizer projects $15B in Covid vax sales for 2021, and Moderna forecasts $18B+. Vax sales will likely make a bigger difference for Moderna than for pharma giant Pfizer. Moderna has never made a profit, and the Covid vax is its first product. Pfizer stock is up 5% since January last year. Moderna is up 850%.

Zoom Out

Stories we're watching...

Biden's big spending proposal... Another one. Last week, President Biden unveiled a $1.8T social spending plan that could transform the role of US government. It includes free pre-K and community college, federal paid family leave, and extended tax credits. It also brings Biden's total proposed spending tally to $6T, and would be paid for by tax hikes on the wealthy. We'll see how it fares in Congress, where Dems have a razor-thin majority.

The "DPF Effect"... We're seeing the "demand pulled forward" effect hit some coronaconomy thrivers. DPF: when user growth that should've happen last quarter actually happened in 2020. Pinterest stock plunged 11% last week on slowing user growth — the moodboard-boom already happened. Netflix also blamed DPF for its big subscriber miss last quarter. We’ll see if DPF hits other coronaconomy thrivers like Peloton, which reports this week.

ICYMI

Highlights from last week...

Energy: Exxon is facing the “Blockbuster Alarm” on oil — change and go green, or go extinct.
Ads: Apple is rolling out big iOS privacy changes that could hurt competitors like Facebook and Google, while bolstering its own ad biz.
Fashion: Crocs shares soared 19% for the week after it reported record first-quarter sales because functional = the new fashionable.

What else we’re Snackin’

Hustle: Why everyone wants to work in the gig economy now.
Release: 10 ways to let go of anger (without ignoring it).
Yolo: After a year of hunching over MacBooks, Millennials embrace the "YOLO Economy."
Swipe: Four reasons to use credit cards... as if they were debit cards.

This Week

Monday: Earnings expected from Estée Lauder, Chegg, and The Mosaic Company
Tuesday: Earnings expected from Pfizer, CVS, Hyatt, Zillow, DuPont, T-Mobile, and Under Armour
Wednesday: Earnings expected from Etsy, Paypal, GM, Twilio, Hilton, Hyatt, Wynn Resorts, Booking, Fox, Scotts Miracle-Gro, and Zynga . Jessica Alba's Honest Co expected to IPO
Thursday: Weekly jobless claims. Earnings expected from Moderna, Peloton, Beyond Meat, Expedia, Volkswagen, Live Nation, and AMC
Friday: Earnings expected from Tripadvisor and IAC. Monthly Employment Report drops

Authors of this Snacks own shares of: Amazon, Apple, Google, Microsoft, and Moderna

ID: 1630662

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

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Acrobatic Accounting

So, you want to join the circus?

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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

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Gonna have to rename the company... again

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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.