🍎 Apple’s still sellin’

Isaac Newton would be stumped… This Apple just doesn’t seem to fall. Yesterday the world’s most valuable company said sales jumped more than expected last quarter — to $97B — despite ongoing supply issues, the war in Ukraine, and booming inflation. All told, it was Apple’s third-best quarter of all time. The details:

• Booming sales: Sales of iPhones, Macs, and other hardware like AirPods all rose more than expected. Sales grew fastest in the services division (think: App Store, iCloud).
• Soaring buybacks: Apple’s board authorized $90B in stock buybacks, even more than last year. Analysts typically see buybacks as a sign of confidence.

The post-pandemic slump… still hasn’t hit Apple. Apple’s stock is still up more than double since the pandemic began, while fellow stay-at-home surgers Meta, Zoom, Peloton, and Netflix have fallen to pre-pandemic levels. But some analysts worried that China’s latest lockdowns would finally put a damper on Apple’s results:

• The cause for concern: China is critical to Apple’s business: an estimated 20% of iProducts are sold in China and 85% are built there.
• Saved by a flexible supply chain: Apple’s recent sales didn’t fall. Part of the reason: the Fruit shifted production resources between products to prevent shortages (basically: making more iPhones than iPads when they ran low).

THE TAKEAWAY

Apple isn’t just a company… it’s an iConomy. Apple’s worth nearly $3T (or about 2% of the world’s GDP), making it an indicator for the entire global economy. The combo of steady iDemand and Apple’s flexible supply chain offers investors hope that consumers may keep spending despite soaring prices and other economic headwinds.

Carvana’s car-vending machine… is running out of quarters as the lure of cash-burning used-car companies wears off. Yesterday, private-equity giant Apollo reportedly agreed to buy $1.6B of Carvana’s corporate debt (think: investors lend Carvana $$ through bonds, and then get paid with interest). Apollo’s coming to the rescue after Carvana struggled to raise money for an acquisition amid slowing demand for its refurbished cars sold online.

• Last quarter: Carvana posted its first sales decline since going public in 2017 — and it’s expected to lose $800M this year.
• Slashing tires: In response to supply backlogs and labor shortages, Carvana hiked its car prices and trimmed back on inventory for online shoppers.

Your 2018 Honda Civic… is worth more than you think. Used-car sales hit record highs during the pandemic as supply shortages made new wheels hard to come by. Some models were even selling for 20% more than their new editions. Carvana made it easy for shoppers to buy online and have their cars delivered, without hassling with a dealership. But as car shopping has become more like house hunting (see: low inventory, high prices), it’s hurting demand — and not just for Carvana:

• Rival Vroom has lost 90% of its post-IPO gains, while used-car OG CarMax says shaky consumer confidence is keeping buyers away.

THE TAKEAWAY

The pandemic thriver model is broken… and private equity wants to be the glue to fix it. From Airbnb to Carnival, PE firms have thrown lifelines to numerous companies needing quick cash to combat pandemic-fueled losses. In turn, firms like Apollo guarantee dividends for investors and a big payout down the road. It’s worked before: Apollo's fund jumped 10% after Hertz paid back part of a $1.5B loan less than a year after getting it.

What else we’re Snackin’

• Boxed: In its latest earnings results, Amazon posted its slowest sales growth in over two decades. The e-commerce legend notched a $7.6B loss from its stake in EV-maker Rivian and warned of slower sales ahead.
• Shots: We’re gonna need more lollipops: after successful trials, Moderna asked for emergency FDA approval for its Covid vax for little kids. If approved, it’d be the first vax available to the pre-K crowd.
• Rx: Teladoc is the latest stay-at-home stock to get crushed: shares lost nearly half their value after the telemedicine company badly missed earnings, blaming a slowdown in sales and increase in competition.
• Dough: Ben & Jerry’s parent, Unilever, said it saw a softening in consumer demand last quarter after raising prices by 8%, which suggests that Unilever may have found the limit of price hikes that consumers will accept.
• Bird: Twitter missed its sales expectations for the quarter but reported an uptick in daily users, to 229M. It could be one of the last earnings reports for Twitter before its sale to Elon is finalized.

Snack Fact of the Day

Friday

• Earnings expected from: ExxonMobil, Chevron, AbbVie, AstraZeneca, Bristol Myers Squibb

Authors of this Snacks own shares of Apple, Netflix, Twitter, Exxon, Vroom, and Moderna

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