Big Tech Fall Hard | The Daily Peel | 10/27/22

Oct 27, 2022 | Peel #325

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Market Snapshot

Meh Q3 results from Microsoft and Alphabet point to an ugly upcoming report from Meta, and all three weighed on the Nasdaq Wednesday.

Oil prices jumped on the back of U.S. crude exports hitting record highs and a weakening dollar.

Bond yields are retreating, with the 10-year yield losing nearly 30 basis points in the past week.

Banana Bits

Somehow this was allowed before, but the SEC just approved a new rule that will force executives to pay back bonuses if their financial statements are wrong
Troubles with supplying military equipment led Boeing to lose over $3 billion in Q3
The layoff train made its latest stop at Oracle after the cloud giant announced cost cuts
A triple whammy of flu, RSV, and C-19 could mean viruses galore this winter

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Macro Monkey Says

Big Tech Showing Cracks

The S&P 500 has a total market cap of about $30 trillion. Just four giants—Apple, Microsoft, Amazon, and Alphabet—make up nearly a fifth of that total.

Big Tech has had an epic run over the past decade, but cracks are starting to form.

Zuck is happily burning billions on his metaverse pipedream and has seen his stock cut in half as a result
Apple has fared the best out of the group this year, but iPhone demand is slowing, and anger is growing over its anticompetitive App Store policies
Despite Alphabet’s sales growth continuing to slow in Q3, the company shows no concern over costs and continues to swell its employee ranks
Antitrust suits around the world are threatening the lucrative walled gardens these companies have fiercely protected

Meme of the day

Source

What's Ripe

Wingstop ($WING)

Inflation is everywhere…except wings, which have seen prices drop 43% YoY
Reduced opex and a wildly successful new chicken sandwich line meant big profit gains in the quarter

Harley Davidson ($HOG)

HOG demand hasn’t been the issue for Harley as of late—it’s getting enough bikes into stores
Easing supply chain snags helped replenish inventories and notch a Q3 beat on the top and bottom line

What's Rotten

Spotify ($SPOT)

A week after its Netflix feature was released, $SPOT reported a loss of 1 euro/share in Q3 and barely met its revenue target
Price increases could be a necessary evil to protect margins amid a weakening ad spending market

Alphabet ($GOOGL)

Like its smaller Swedish cousin, Alphabet is being forced to reckon with slower online ad spending
Most concerning is the slowdown in YouTube and online search revenue, which have been cash machines in the past

Data Peel

Source

Thought Banana

One Swedish Boi vs. Trillions

Imagine hearing a few decades ago that a Swedish startup would hold twice the music market share as the maker of the iPod.

It’s been an improbable rise, and Spotify is on a mission to own the market for everything that hits your ears.

Spotify has a vice grip on the music streaming market, but lags behind Apple and Amazon in podcasts and audiobooks, respectively
Apple controls how most of Spotify’s users reach its service, and it’s exploited this benefit before (just ask Meta)
Daniel Ek and team are taking the fight to antitrust court, and judges could be the ones that ultimately determine a winner
Apple can lose plenty of money in music without pissing off investors. Spotify can’t.

The big question: Will an industry backlash against Apple exploiting its gatekeeper position force it to allow more competition in the App Store?

Banana Brain Teaser

Yesterday — Which word does not belong in the following list: Stop cop mop chop prop shop or crop?

“Or.”

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I know a word; six letters it contains. And yet if you take one away, twelve is what remains. What’s the word?

Shoot us your guesses at [email protected] with the subject line “Banana Brain Teaser” or simply click here to reply!

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