Broad Specifics | The Daily Peel | 2/3/23

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• The US labor market is about as whack as a Bhad Babie song right now; someone pls tell me what’s going on (no fr, I’m scared)
• Well, that’s one mystery solved. I guess we know where all that digital ad spending intended for Google and Meta went…
• Like passing an exam, you think you aced only to end up disappointing your friends and family with like a 40%, the Nasdaq and tech shares altogether *may* have gotten a little too excited earlier this week
• Send up a quick “Thoughts & Prayers” to the homies up in New England this weekend… they’re gonna need a whole lot more than that to stay warm

Broad Specifics

Welp, it was fun while it lasted.

January got us off to a hot start. For the first time in far too long, we could actually check our portfolios without subsequently needing a Safe Space to go cry in. For example, we recently spoke about how January was on track to be (and actually was) the best month ever for Ark’s risk-drunk flagship fund, $ARKK.

Yesterday, the vibe shifted. All day long, everyone was getting pumped for three things; earnings from 1) Amazon, 2) Alphabet, and 3) the biggest dawg of them all, Apple. The numbers are out, and it’s only been after-hours (AH) trading thus far, but it’s an early indication that the fun might be over.

Those three companies alone represent ~$4.95tn in aggregate market cap, and they just so happened to report earnings on the same day. However, not only do these firms basically control US financial markets, but their numbers give us a broadly specific glimpse into the US as well as parts of the global economy. With no further ado, let’s take a look.

Amazon: I was sitting in the office yesterday at 4:04 pm when I saw the CNBC headline “Amazon beats on revenue…” blah blah blah. Great, I thought, until the next headline appeared, along with a flashing red background and an exceedingly disoriented-looking pundit apparently gasping for breath when it said, “Amazon misses on AWS revenue expectations.” I’m pretty sure bombs went off in Seattle.

At the time of writing, shares were off over 4% AH. No one cared that the firm’s top line of $149.2bn beat guesstimates by nearly $5bn, nor did they care that EPS clocked right in line with expectations. All the attention was on the segments themselves.

In particular, cloud is what mattered to investors. AWS sales gained 20% on the year, well below the growth posted by Microsoft’s Azure and just mildly below street estimates.

The other important line item here from a macro perspective is, of course, the online store sales. This segment contracted 2% on the year, contributing heavily to the firm’s slowest annual revenue growth ever as a public company (just 9%). But still, sales at Amazon.com remained ~44% above the same line item in 2019, which, to be fair, is the year we really should be comparing it to.

Alphabet: Never one to let Amazon steal the show, Alphabet joined its fellow quasi-monopoly in reporting some disappointing earnings late yesterday. Its shares were off 3.75% AH at the time of writing, but it’s very much a similar story.

Google Cloud, the current bronze medal holder in the Cloud Olympics, also disappointed on revenue by slightly more than $100mn. Not much compared to the firm’s $76bn in total revenue, but it just so happens that that aggregate sales number managed to miss as well.

Alphabet sits right at the crosshairs of two of the shakiest markets when it comes to economic downturns, cloud and digital advertising. Advertising is widely known to be one of the first costs cut when a company enters tough times. Cloud is nice, but it’s mostly not essential for small/medium businesses. So, it’s no wonder why investors are down so bad right now.

YouTube was the real disappointment, however. Another victim of the volatile digital ad space, sales came up hella short despite the expectation that Shorts would finally stand up to Tiktok’s dominance. Spoiler: it did not.

Apple: Meanwhile, Tim Apple and the team managed to miss on both the top and bottom lines. EPS and revenues came up short at the US’s largest company, but it kinda only got worse the closer you looked.

See, Apple sells a little-known product called the “iPhone,” and sales absolutely sucked for this thing over the quarter. Largely due to production delays at its China-reliant factories, the lack of iPhone slingin’ was entirely a supply issue. I’d say that bodes well, as it shows resilient demand for the luxury product, but the key to Apple’s success since the passing of Steve (RIP) has been stellar supply chain management. Timmy boy might’ve dropped the ball on this one.

Almost every line item came up short, except (weirdly) iPad sales. Despite this lone bright spot, guidance from the CFO indicates double-digit declines in this and Mac segments. The firm still isn’t providing numerical guidance, but they did say they expect a “similar declining trend” in Q1’23.

This is a wild one because Apple simply doesn’t miss, but they did this time. Pairing the big dawg’s results with Google and Amazon spells out one thing: demand is slowing down from both businesses and consumers.

We saw from the chipmakers that PC sales were weak AF in Q4, and along with Snapchat and Meta, it looks like digital ad spend from businesses is following a similar trajectory.

Well, JPow, you’ve officially killed demand. I hope you’re happy.

Coinbase Global ($COIN) ↑ 23.99% ↑

• God damn. Did anyone else notice that Coinbase is up nearly 150% in 2023 alone? I sure didn’t, but hey, at least Scum Bag-Fraud gave us at least one way to profit off crypto.
• Coinbase shares surged nearly a quarter of its market cap on Thursday as the firm caught yet another W in a scary, spooky lawsuit. Basically, a New York judge tossed some class action case out the window, clearing Coinbase as officially on the legal Nice List…for now.
• The suit itself was a walking contradiction, but given public sentiment around the digital asset space right now, this is the relief investors needed.

Snap Inc ($SNAP) ↑ 9.93% ↑

• Yesterday, we spent a solid 3-4 paragraphs dumping on Snapchat and how its quarterly figures were worse than the firm’s premium Snapchat+ offering. Obviously, shares stormed upward the day following.
• Snap shares floated nearly 10% higher after falling by roughly the same amount just a day prior, bringing the Santa Monica-based firm’s returns for the week to roughly +4.20%. Nicely done, team.
• In case you’re wondering, there was no additional news whatsoever. Dip buying and short-profit-taking were almost for sure the driver of yesterday’s gains, proving that if you simply sit around, do nothing, and wait long enough, good things are undoubtedly to come. I just wish I could use that strategy at work.