🤖 Big Tech earnings wrap

Friday, February 2, 2024 by Snacks
High rises feelin’ low (VCG/Getty Images)

High rises feelin’ low (VCG/Getty Images)

High rises feelin’ low (VCG/Getty Images)

High rises feelin’ low (VCG/Getty Images)

Yesterday’s Market Moves
Dow Jones
38,520 (+0.97%)
S&P 500
4,906 (+1.25%)
Nasdaq
15,362 (+1.30%)
Bitcoin
$42,918 (+0.87%)

Hey Snackers,

Pennsylvania’s Punxsutawney Phil gets all the attention, but groundhogs have been predicting the weather in dozens of states. So happy Groundhog Day — and best wishes for an early spring to the millions who recently faced subzero temps.

Stocks picked up steam again yesterday ahead of megacap tech earnings. After the bell, Meta, Amazon, and Apple served up strong #s. And the January jobs report is due today.

🧠 Quiz Murray: If you’re having déjà vu, it’s not just Groundhog Day. Our Snacks Seven Quiz is back again. Try the first Q:

SNACKWRAP

1. Big Tech Earnings Wrap: Apple, Amazon, Meta, Google, Microsoft

📱Feed full of ads… Marketing teams are workin’ overtime. Meta shares spiked 14% yesterday after the Instagram parent tripled its profit and introduced its first dividend. All of Meta's social apps saw a boost in ad impressions and price per ad as it incorporated more AI into its algos for better #targeting. Revenue grew 25%. Ad rival Alphabet notched record quarterly sales and profit, but its stock fell after Google Search and YouTube ad sales weren’t as spicy as expected. Up next week: Snap and Pinterest.

☁️ AI in the sky… AI investments are powering a cloud boom. Microsoft notched record sales for the fifth straight quarter, as AI mania attracted thousands of new Azure customers last year. Its cloud biz, the world’s third largest, grew 20%. Now it’s focused on “infusing AI across every layer” of its tech stack. Google’s cloud revenue grew 25% as it enters its “Gemini era” (its new AI model). Amazon’s AWS (the largest cloud provider) saw 13% revenue growth, meeting expectations.

👾 Logged in… Gaming, hardware, and ecomm were also standouts. Gaming’s now Microsoft’s third-biggest biz after its Activision acquisition helped boost gaming revenue by 49% (shoutout CoD). But PC and other device sales are expected to stay in the “low double digits.” Apple reported its first quarterly revenue growth in a year. But the stock fell after the iDevice maker announced a 13% decline in China (and hinted at weak iPhone sales ahead). Amazon had expectation-beating 14% revenue growth after a record-breaking holiday-shopping szn.

Lookin’ forward → Big tech is soaring again as the AI revolution supercharges results. Meanwhile, tech’s “year of efficiency” (coined by Meta) has boosted profits, and the cost cuts are still going — tech layoffs this year have topped 30K. But more regulatory hurdles could be coming: last week the FTC ordered five tech biggies (including Microsoft, OpenAI, and Google) to give more deets on their AI + cloud partnerships.

FORECLOSURE

2. Real-estate behemoth Evergrande is ordered to liquidate as China’s economic crisis deepens

Not forevergrande… A Hong Kong court ordered Evergrande to liquidate, two years after the company defaulted on its $300B debt. Evergrande was once the world’s most valuable real-estate company and China’s top developer. But attempts to restructure the debt-drowned giant have failed. Now Evergrande’s fate rests on whether mainland China recognizes the Hong Kong court’s authority (a big if). Liquidation would be a headache because Evergrande’s property development includes 1.3K+ projects in hundreds of cities.

  • Scope: Evergrande’s assets reach beyond real estate and China. It owns an EV biz, and its lenders have included HSBC, BlackRock, and UBS.

  • Zoom out: China is the second-largest economy, and real estate makes up as much as 30% of its GDP. But the sector’s crumbling, exacerbating the country’s financial woes. FYI: property accounts for 70% of China’s household wealth.

Flyin’ more than one red flag… Experts say China’s real-estate crisis has yet to hit bottom. Home sales and prices are down as developers start fewer projects and folks avoid mortgages. Meantime, foreign investors are ditching assets in China and Hong Kong as geopolitical tensions rise (think: Chinese spy balloons in American airspace, US curbs on China’s chip industry). China’s GDP and retail sales missed growth expectations last quarter — a slowdown that’s rippled through global markets.

  • Policy soup: In the past two weeks, China’s gov’t has tried to shore up its economy and markets by merging hundreds of rural banks, slashing reserve requirements, and limiting short-selling.

THE TAKEAWAY

It’s hard to turn an economy off and back on again… Over three years, China’s strict zero-Covid lockdowns confined citizens indoors for months at a time. And when the country lifted restrictions in late 2022, the economy failed to bounce back as cautious consumers kept their purse strings tight. China may need gov’t stimulus to get its gears turning again: it rolled out new property-relief measures (like loans) that could soften the impact of Evergrande’s fall.

SUPER

3. The Crypto Catch-Up…

🤔 Sus… Over half of new tokens listed on ethereum decentralized exchanges (DEX) may be part of pump-and-dump schemes, Chainalysis said. Still, those sketchy tokens make up only about 1% of DEX volume, which suggests investors aren’t biting.

📜 Policy… The US gov’t said it’d start tracking crypto miners’ energy use more closely. The US has seen a bitcoin-mining boom following China’s 2021 mining crackdown and the decline in energy costs in states like Texas.

💰 Spendy… Coinbase donated $24.5M to a pro-crypto political-action committee ahead of this year’s election season. The super PAC’s goal: big spending in support of pro-crypto candidates who’ll try to help make industry-friendly regulation a reality.

What else we’re Snackin’

  • Lulule-men: Legging legend Lululemon is launching a men’s-footwear line after success with its foray into men’s apparel (think: stretchy khakis). As growth slows, Lulu wants a foot in the sneaker door.

  • CastAway: Amer, the sports-gear co that owns Wilson rackets and balls, debuted on the NYSE. The initial public offering valued Amer at $6.3B, a discount from expectations, as the IPO market struggles to get the ball rolling.

  • Pelodone: Peloton shares spun down 25% after the biz said it expected sales to decline (again) this quarter. The pandemic darling has struggled to find a profitable path, scrapping its much-hyped push into colleges.

  • BudLight: 5K AB InBev workers say they’ll strike unless they get a new contract (their current one expires this month). A work stoppage could shut Bud breweries, complicating its recovery from a conservative-led boycott.

  • Pharma: Merck saw 21% sales growth for its cancer drug Keytruda, helping the pharma titan beat quarterly estimates. Rivals like Johnson & Johnson and Pfizer have invested big in cancer treatments.

Snack Fact of the Day

Starbucks was named after a “Moby-Dick” character

Friday

  • Groundhog Day

  • Earnings expected from Chevron, Cigna, and ExxonMobil 

Authors of this Snacks own bitcoin and ethereum and shares of: Alphabet, Amazon, Apple, Exxon, Microsoft, Snap, and Starbucks

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