Tuesday May.04, 2021

⚔️ Apple's Epic battle

_Suited up for the Battle Royale [Drazen/E+ via GettyImages]_

Hey Snackers,

May the Fourth be with you on this fine Star Wars Day. If you really want to go full fourth, here's a recipe for adorable Baby Yoda cookies. Yourself, treat.

The Dow jumped yesterday as investors moved away from tech and into "cyclicals." These are stocks in industries that tend to do well when the economy is growing (and vice versa). Think: travel, construction, and retail.

Suited

The Epic trial that could change Apple's iPhone app control as we know it

Battle Royale... But instead of crossbows, these warriors have briefcases and JDs. Yesterday was Day #1 of the landmark trial over Apple's App Store dominance. The lawsuit was brought by Fortnite-maker Epic Games, and could seriously damage Apple's app-power. It all started in August last year, when...

Shot #1: Epic added its own in-app payment system to bypass the "App Tax" — the ~30% cut of in-app purchases, downloads, and subs that Apple and Google take across apps in their stores.
Shot #2: Apple and Google said "not today," expelling Fortnite from their stores for rule-breaking.
Shot #3: Epic filed lawsuits against both tech giants, and launched a loud PR campaign (see: Nineteen-Eighty Fortnite). A date for the Google trial hasn't been set yet.

Bring these lawyers some Advil... Yesterday, Epic argued that Apple has an iPhone app monopoly, and purposely locks customers into its ecosystem. Apple argued that it gets to set the rules for its own App Store, which it says are needed to ensure quality and security. Epic disagrees.

Facepalm: A key part of the debate revolves around the market that Apple allegedly dominates. Epic says it's iPhone app distribution.... Apple says it's game distribution.
Google's Android controls ~85% of the operating system market — but it allows software downloads outside of Google's app store. With iOS, you can mostly only download via App Store.
If Epic wins, Apple could be forced to give up control of app distribution, allowing customers to freely install software on iPhones.

This could be Apple's make-or-break moment... The App Store created an explosion of opportunity (and $$$) for developers... but at a cost. That could change if Apple loses this suit — especially since it's facing other (related) antitrust scrutiny: last month, it got grilled by the Senate over its smartphone ecosystem power, and last week the EU charged it with allegedly abusing its control over music app distribution. CNBC estimates that Apple made $64B last year from the App Store (~30% of its annual revenue). Changes on the app side could cost it big.

Glowy

Estée Lauder's makeup sales prove corona habits die hard, even as outings return

Mentioned in every Vogue skincare video... La Mer's marketing team never sleeps. Estée Lauder is the beauty giant that owns brands like Bobbi Brown, La Mer, Clinique, MAC, Too Faced, and Jo Malone. Its first quarter earnings reveal a glow up from 2020.

Sales jumped 16% and were up in every region. But the stock plunged 8% yesterday because... they were slightly lower than expected.
"Travel retail" is recovering, especially in China. Think: splurging on Estée fragrances at the airport Duty Free.

Forgot how to do winged liner... (never really knew how). Skincare was the star of Estée's quarter, outperforming while makeup disappointed. Skincare sales soared 31%, perfume sales jumped 30%, and even hair care grew. Meanwhile, makeup dropped 11% — the only category that declined. Rival L'Oreal also reported "lacklustre" makeup sales last quarter.

Makeup sales fell across nearly all Estée brands, especially hitting foundation and lip products (no Zoom gloss necessary).
Skincare sales were more than 2X makeup sales. In 2018, skincare and makeup sales were about equal.
"Hero products" like Advanced Night Repair Synchronized Multi-Recovery Complex (whoa) and Crème de la Mer drove the most demand. Now, Estee is doubling down on skincare investments with The Ordinary.

Old habits die hard... so do some Covid habits. For a year, we’ve been sitting at home fresh-faced. "Big Nights Out" turned into "Big Nights In," complete with self-care rituals. Eye serum became the new eye shadow, and clean became the new cakey. Even with rebounding travel and "revenge spending," makeup is still lagging. That shows some Covid habits are sticking, even through reopenings. Amazon just had its best first quarter ever because ecomm is still growing, and Crocs posted record Q1 sales because comfort is (still) cool.

What else we’re Snackin’

Vax: The next gen of Covid vaccines being developed could be pills or nasal sprays (#science).
CEO: Berkshire Hathaway has chosen vice chairman Greg Abel to serve as CEO after Warren Buffett.
Booksie: Chegg's sales soared 51% last quarter, as you schooled-from-home with its digital study materials and tutors.
Juice: Ford and BMW are leading a $130M funding round in EV battery startup Solid Power, because they want green juice.
Antsy: Fidelity slashed its Ant Group valuation after Chinese regulators cracked down on the fintech giant.

Tuesday

Earnings expected from Pfizer, CVS, Hyatt, Zillow, DuPont, T-Mobile, and Under Armour

Authors of this Snacks own shares of: Apple

ID: 1632696

Latest Stories

Alphabet’s record Q1

Search and Cloud continue to deliver, as Alphabet announces its first-ever dividend

William Coulman, David Crowther18m

America’s birth rate keeps dropping

Births in the US, like almost everywhere else, are on the decline

Millie Giles, David Crowther24m

Nestlé, the world’s largest food company, is struggling

William Coulman, David Crowther30m

Jack Raines

Slow Funding

33m

Kim K's private equity struggles

Why is Kim Kardashian's SKKY Partners is struggling to fundraise?

Tom Jones & David Crowther

Tangential remarks

Nicolai Tangen, the CEO who holds the purse strings of Norway’s $1.6 trillion sovereign wealth fund, thinks that his fellow Europeans don’t quite stack up to US employees when it comes to pure hustle, telling the Financial Times in a recent interview that there is a difference in “the general level of ambition” and that “the Americans just work harder”.

Tangen has clearly been putting his money — or more specifically Norway’s — where his mouth is: the sprawling Norwegian oil fund, now one of the largest investors on the planet, has been pumping more capital into its US holdings in the past decade, while decreasing its investment into European entities.

The troublesome news for our European readers? Tangen might be onto something. According to data from the OECD, American workers are putting in almost 60 hours a year more than the weighted average for OECD nations… a benchmark that workers from countries in the European Union are already ~180 hours shy of.

Europeans ‘less hard-working’ than Americans | FT

$2T is the new $1T

Alphabet’s phenomenal earnings yesterday was enough to push the search giant’s market cap beyond $2 trillion, joining the likes of NVIDIA, Apple, and Microsoft.

Air taxi Blade is actually an organ transport business in disguise

How the helicopter fleet quietly became America's biggest airborne ambulance.

Jack Raines3h

NBA TV rights are finally up for grabs — with cable and streaming giants battling for the top spot

Nia Warfield

Read

Southwest nurses its wounds as airlines continue to feel the Boeing sting

Max Knoblauch

Read

Friday, Apr 26th

What’s happening

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?

20h

HOP TO IT

Joshua Topolsky

We get results!

22h

This earnings season is fully operational

Balancing Act

23h

Acrobatic Accounting

So, you want to join the circus?

Megan DeMatteo

Rani Molla

24h

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?