🛍️ Apple’s Upgrade Cycle Arrives

MARKET UPDATE

Good Morning Investor! On Thursday, the broader indices collapsed on economic data which pointed towards a potential recession, while at the same time, the Bank of England announced its first rate cut in four years.

Initial jobless claims rose the most since August 2023. And the ISM manufacturing index, a barometer of factory activity in the US, came in at 46.8%, worse than expected and a signal of economic contraction.

Additionally, biopharmaceutical darling Moderna ($MRNA) experienced a market reaction more painful than a botched vaccine shot. Its share price plummeted 20% after slashing its forward guidance. The company blamed low sales in the EU (apparently, Europeans prefer their shots in glasses, not syringes) and a tough US vaccine market. Shares of Snapchat ($SNAP) also collapsed 20% in after hours trading after reporting abysmal earnings.

TODAY’S BIG HEADLINES

Apple’s Upgrade Cycle Arrives

Amazon’s Cloud Impresses, But Suffers Discount Crunch

Ferrari Catches Wall Street Off Guard

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SMARTPHONES & SOFTWARE

Apple’s Upgrade Cycle Arrives🥳

The Favorite Big Tech Child: Unlike its big tech sibling Amazon, who reported on the same evening, iPhone maker Apple ($AAPL) proved on Thursday that it's still the market’s little money-maker. The company's after-hours earnings report caused its share price to rise (albeit only by 2%).

The Device King is Back: The Cupertino colossus managed to surpass both revenue and earnings estimates, proving that its devices are still hotter than a MacBook left in direct sunlight. Here's a bite of the juicy report:

• Apple reported revenue of $85.78 billion, beating analyst estimates faster than Siri can misunderstand your request. That's a 5% year-over-year increase.

• Net income swelled to $21.44 billion, up 7.84% year-over-year. The resulting earnings per share (EPS) of $1.40 left analysts' expectations of $1.35 looking as outdated as last year's iPhone model.

• Apple's various segments all beat their revenue expectations, performing like a well-oiled machine (or should we say, a well-polished Apple?). The higher-margin services segment reported sales of $24.21 billion, beating the $24.01 billion expected, proving that Apple can squeeze more juice out of its customers than a determined bartender on mojito night, and fueling a gross margin beat of 46.3% vs the 46.1% expected.

The AI Upgrade Cycle: During the quarter, iPhone sales made up roughly 46% of the company's total sales, showing that Apple's core is still as firm as ever. However, despite the beat, total iPhone sales declined 1% year-over-year, suggesting that some customers are holding onto their devices longer than Apple would like. While Apple played coy and didn't provide any formal guidance (such a tease!), the tech world is buzzing about the anticipated launch of Apple Intelligence and iOS 18. It's expected to encourage an upgrade cycle so significant, it might make your current iPhone feel like it belongs in a museum.

ECOMMERCE & CLOUD COMPUTING

Amazon’s Cloud Impresses, But Suffers Discount Crunch🛍️

Prime Day for Pessimism: After a Thursday market selloff more brutal than a cage match between grizzly bears, Amazon ($AMZN) found a way to extend the pain into after-hours trading. Its stock dropped faster than a clumsy drone delivery, plummeting over 4% after serving up a disappointing earnings soufflé that failed to rise to expectations.

Polarising Businesses: Amazon reported a beat on profits but a slight miss on revenue, proving that even tech giants can't always satisfy everyone. Its e-commerce division faced more pressure than a deep-sea submarine, thanks to upstarts like Temu and Shein undercutting them with discounts deeper than Jeff Bezos' pockets. However, AWS managed to float above the fray like a well-programmed cloud. Here's the nitty-gritty:

• On a constant currency basis, net sales increased 10% to $148.0 billion, slightly below expectations of $148.56 billion. It seems even Amazon can't always deliver... on analyst predictions.

• Amazon's cloud division reported sales of $26.3 billion, marking a 19% increase year-over-year, and above estimates of $26 billion, proving that in the tech world, having your head in the clouds can be a good thing.

• Net income swelled to $13.5 billion, or $1.26 per share, beating analyst estimates of $1.03 per share like a Prime member pouncing on a Lightning Deal.

• Amazon's advertising revenue missed the mark, bringing in $12.8 billion vs $13 billion expected. Apparently, even with all that user data, Amazon still can't quite read our minds... yet. This is in contrast to the positive advertising results reported by the behemoths of the industry Google and Meta.

Disaster Fortune Cookie: The real showstopper of this earnings report was the guidance, which was about as comforting as a fortune cookie that reads "Outlook not so good." Amazon's revenue forecast for Q3 has a mid-point of $156.25 billion, trailing analyst estimates of $158.24 billion like a sloth in a marathon. The operating income forecast range is lower than the chances of finding a PS5 on Prime Day, falling between $11.5 billion and $15 billion, below estimates of $15.3 billion.

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LUXURY & AUTOMAKERS

Ferrari Catches Wall Street Off Guard🏎️

Ferrari's Horsepower Humbles Wall Street: While luxury titans like LVMH ($M), Richemont ($CFR), and Gucci-owner Kering ($KER) have been sputtering like a rusty Fiat, Italian stallion Ferrari ($RACE) has managed to leave Wall Street drooling like a teenager at a car show. But how did this prancing horse gallop past expectations, sending its shares soaring 5%?

Ferrari's Fiscal Finesse: Ferrari proved it's not just a pretty face with a thunderous engine, beating earnings estimates while only slightly missing on revenue. But the real throttle-opener was raising its full-year adjusted EBITDA forecast. Let's pop the hood on this report:

• Revenue purred in at €1.71 billion, a hair's breadth below the €1.76 billion analysts expected.

• Earnings per share (EPS) of €2.29 raced past analysts' estimates of €2.23. Ferrari's adjusted EBITDA revved up to €669 million, a 14% year-over-year boost that left the estimated €645.2 million eating dust.

• The company's EBIT margin expanded to 29.9%, above the estimated 29.3%, proving Ferrari knows how to squeeze every euro out of its operations like an Italian nonna with a tomato.

Ferrari Portfolio Mix: Ferrari's delivery numbers were tighter than an Italian tailor's inseam, missing the mark by a mere 2 units. Still, they managed to ship 3,484 speed demons, a 2.7% increase year-over-year. The Ferrari Purosangue (Italian for "thoroughbred,"), the Roma Spider, and the 296 GTS were the main horsepower behind this quarter's deliveries.

• Ferrari's stable of stallions consisted of eight internal combustion engine (ICE) models for the purists who like their cars loud and thirsty, and four hybrid models for those who want to save the planet... at 200 mph. These represented 52% and 48% of total shipments respectively.

Ferrari's Crystal Ball Gets a Polish: The increased guidance was the real showstopper, with Ferrari now expecting adjusted diluted EPS of at least €7.90, up from €7.50. It's like they found a few extra horses under the hood! Both revenue and adjusted EBITDA forecasts have been tuned up higher than expected by analysts, thanks to an enriched product mix and increased demand for personalizations. Apparently, Ferrari owners want their rides as unique as their egos.

MORE NEWS

Additional market-moving events🌎

Uber's EV Partnership: Uber ($UBER) has partnered with Chinese EV maker BYD ($BYDDF) to add 100,000 EVs to its fleet across the globe. The two companies say they will offer Uber drivers incentives to switch to electric cars, including discounts on maintenance, charging, financing and leasing. (BBC)

Ackman Axes IPO: Bill Ackman’s Pershing Square USA has withdrawn its IPO, citing investor uncertainty about participating in the IPO vs. aftermarket investments. (CNN)

Footballer Turned Owner: Oaktree Capital Management is selling its stake in French second division football club Stade Malherbe Caen to a firm founded by star player Kylian Mbappe. Mbappe’s Interconnected Ventures will hold a majority stake in the team through its investment firm Coalition Capital. (Bloomberg)

Record Olympic Revenue: NBCUniversal said advertising revenue for the Paris Olympics and Paralympics surpassed the record $1.25 billion sold for the Tokyo 2020 Games, thanks to companies such as Coca Cola returning. (Bloomberg)

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