🎁 Amazon delivers a double profit

Friday, July 31, 2020 by Robinhood Snacks |
_Apple loves its profit Pomeranians_

Apple loves its profit Pomeranians

Yesterday’s Market Moves
Dow Jones
26,314 (-0.85%)
S&P 500
3,246 (-0.38%)
Nasdaq
10,588 (+0.43%)
Bitcoin
$11,158 (-1.43%)
10-Yr US Treasury
0.538%

Hey Snackers,

Coca-Cola is going hard. It's entering the alcohol biz for the 1st time since 1983, when it sold its rando wine company. Coke is leveraging its trendy Topo Chico sparkling water brand to launch... hard seltzer (details on our pod). Because we definitely needed more of that.

While the S&P 500 and Dow ticked down, the Nasdaq got a little bump in anticipation of Big Tech earnings. Meanwhile, the US economy officially had its worst quarter ever: GDP — the total value of all goods and services produced — took a 33% nosedive for the April to June quarter.

Deliver

The Empire strikes back... A day after Jeff Bezos got grilled by Congress, his ginormous baby Amazon reported expectation-smashing quarterly earnings. The Zon delivered big numbers:

  • +100%: Amazon's quarterly profit doubled to $5.6B from last year. Even more impressive when you consider it spent $4B on COVID-related costs.
  • +40%: Amazon's sales soared to a casual total of $89B. $50B came from products and $39B came from services (like AWS cloud computing and 3rd party seller plans).
  • 175K: How many jobs Amazon created since March. That's almost double Delta's total number of employees.

It's surprising, but it's not... Amazon's expenses were up a massive $4B, which should have eaten into profits. But it still managed to double its profit because: almost every single one of Amazon's business lines directly benefited from the corona-conomy. Lockdowns and germ-avoidance hugely favored the Zon's businesses.

  • Ecommerce: Amazon's 3rd party sales jumped 52% as sellers flocked online, and Amazon-owned sales popped 48%.
  • Cloud: Amazon's AWS cloud brought in $11B on WFH cloud computing needs.
  • Grocery: Amazon revved up grocery delivery capacity by 160% and tripled pickup locations on soaring demand.
  • Streaming: Prime Video launched its Watch Parties social feature, after 1st time viewers nearly 2X'd in the previous quarter.
THE TAKEAWAY

Amazon’s earnings just reinforce Congress’ argument... Wednesday, Jeff Bezos tried to convince Congress that Amazon faces real competition — in other words, that it's not a competitor-crushing monopoly. But its massive earnings suggest many Americans view it as a necessary platform, especially mid-pandemic. Many sellers see Amazon as their only option, since it controls ~40% of the US retail ecommerce market and reaches 82% of US households.

Wear

What 3 months can buy you... A Lyft — the company, not the ride. Apple took home over $11B in profit last quarter, enough to buy Lyft and still have $2B left over for lunch. Despite having its stores closed and its operations slowed during the pandemic, the trillion-dollar fruit managed to post its best fiscal 3rd quarter (2nd calendar quarter) ever:

  • +11%: Total sales jumped to $60B, the most Apple has ever made from April through June.
  • $13B: Services sales (like the App Store, Apple Pay, and Apple Music) were up 15%.
  • $6.4B: Sales of Wearables like AirPods and Apple Watches were up 17%.

Now slice up the Apple... Apple also announced it's going to do a 4-for-1 stock split at the end of August. Investors who own 1 Apple share will suddenly find themselves with 4 (example: if you own 1 share trading at $400, you'd soon have 4 $100 shares).

  • Companies split their stock to lower its price so that more people can afford to invest — but the company's overall value doesn't change.
  • This is Apple's 5th stock split to date. Its last one was in 2014, when it did a 7-to-1 split. It did 2-1 splits in 2005, 2000, and 1987. Apple splits so much, it should be called Banana.
  • Apple's stock price would be way higher if those splits had never happened. Splits are less relevant today though now that fractional shares are more widely available to invest in.
THE TAKEAWAY

The bigger the profit puppy, the slower it grows... iPhone is a fully grown St. Bernard. It's undoubtedly Apple's main profit puppy, making up almost half of its sales. But iPhone sales grew less than 2%, even with the introduction of the cheaper $399 SE. Meanwhile, Pomeranian pups grew in the double-digits: iPad sales were up 31% and Mac sales jumped 21%. The WFH shift was like gourmet dog food for those smaller profit puppies' growth spurts.

What else we’re Snackin’

  • Adpocalypse: Google has its first sales decline ever after advertisers tightened their wallets — it still beat earnings expectations though.
  • Instaworthy: Facebook reports 11% sales growth, its slowest since 2012 — but it still crushed corona-conomy expectations (BTW: FB now has 1.8B daily users).
  • Sealed: UPS thrives on a 65% jump in home shipments (handling packages for Amazon helps).
  • Request: Venmo-owner PayPal has its best quarterly earnings ever — sales soared 25% as people flocked to digital payments.
  • Nom: Taco Bell parent Yum Brands saw sales fall 15% (it blamed its other child, KFC) — but business is picking up on reopenings.
  • Afford: Ford beat earnings expectations despite its factories having shut — it only lost $1.9B (compared to $5B expected).

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Friday

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

ID: 1288897