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

Feb 3, 2023 | Peel #392

Market Snapshot

Happy Friday, Apes.

Another day, another couple hundred bps added to the portfolio. Not bad for a Thursday, but we'll see if this has any chance to continue today and close the week out on a high note, as the biggest of big tech earnings have so far disappointed in after-hours trading. Despite that, the US Dollar Index pivoted, storming higher once again as bond yields continued to sell off.

Let's get into it.

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Banana Bits

  • 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

Macro Monkey Says

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 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.

What's Ripe

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.

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What's Rotten

Canada Goose ($GOOS) ↓ 23.69% ↓

  • Canadian Geese like to fly in v-shaped patterns. However, the bird's namesake jacket-maker apparently prefers to crash into the ground.
  • Following the company's utterly atrocious earnings report, traders sent this thing straight to the gulag. Sales and earnings both missed, but it didn't stop there, as the company's guidance going into 2023 was more depressing than 13 Reasons Why.
  • And all the blame was pointed squarely at one party: China, or more specifically, Xi Jinping. Turns out the sudden release of lockdown measures from 0 to 100 ruined the firm's quarter as infections limited both consumer foot traffic and employee headcount in one of the firm's most crucial regions. I mean, c'mon, is this pandemic thing ever gonna end??

Eli Lilly & Co. ($LLY) ↓ 3.46% ↓

  • Easily the best part of 2022 for Eli Lilly was when some messiah "hacked" the pharma firm's Twitter account to ironically Tweet about what scumbags they were. 2023 isn't off to a much better start.
  • Shares plunged nearly 3.5% (a certified f*ckload for a blue chip pharma stock) on, you guessed it, interesting earnings results, to say the very least.
  • EPS absolutely destroyed expectations, registering $2.09/sh vs. $1.78 guesstimated. Eli's obesity drug, Mounjaro, failed to live up to the hype it created in 2022 thus far. Don't ask me where they come up with the names for these drugs, all I know is the firm was supposed to move weight by removing weight, and you can be damn sure that neither one of those happened.

Data Peel



Thought Banana

ChatGPT Check-In

100 million is a whole lot of people. As such, it generally takes those few lucky tech platforms many months or even years to reach those kinds of numbers. ChatGPT is officially different.

  • TikTok, the app that dominates everything from your nighttime routine to the jokes you make with your friends, took a solid 9 months to rack up 100mn unique visitors.
  • For Instagram, that achievement took 2 years.

Meanwhile in 2023, that little chatbot is laughing in their faces hysterically.

In just about 60 days or roughly two months, ChatGPT officially hit that 100mn unique visitors milestone. Almost any statement I make to try to express how ridiculous that is would fall short, so let's not even try.

Now that the platform has reached such astounding success, the company behind the bot is deciding that, yes, actually, they would like to make some $ off of this thing. OpenAI has officially announced plans to soon implement a $20/month subscription for prioritized access, faster responses, and early releases of new features on the platform. If you're like me, that didn't sound like a whole lot when you read that last sentence. But hey, 100mn users is 100mn users.

Already, visitors to the new-age search engine have noticed common outages and other sufferings when trying to find the answers to life's most important questions like "what should I cook for dinner tonight" or "give me a pickup line to use on Tinder." I know it's a struggle, and OpenAI does too, so the "company" that was originally supposed to be some kind of non-profit research engine (I think?) has decided to scratch that capitalist itch.

We know one party who's certainly pumped about this: Microsoft. Microsoft has pumped at least $11bn, and likely much more, into the AI "startup" in recent years, hoping to integrate the chatbot's capabilities into its humiliating search engine Bing in order to finally be able to stand up to big, bad Google. Nothing has happened yet on that front, but dammit, we're excited.

So, to sum it up: a $20 monthly subscription, at least $11bn from the 2nd-biggest tech company in the world, and 100mn unique visitors to its service. Can you even possibly imagine a better product launch?

Elon could start giving away Teslas for free, and it wouldn't even come close to possibly thinking about being near those numbers. To borrow a word from 2020, this is unprecedented.

Stay tuned, apes, stay tuned.

The big question: Would anyone actually pay $20/month to talk to a damn robot? Can ChatGPT and OpenAI continue this kind of insane growth? When does this thing become the Terminator?

Banana Brain Teaser

Yesterday You are given 12 balls, 11 of them identical, and one of them a little bit heavier. If you can only use a scale 3 times, how can you determine which ball is the heavier one?

There are several methods to tackle this question, one of which is described below:

1. Weigh 4 random balls against 4 other ones.

  • If both groups weigh the same, the heavier ball must be in the group of 4 balls.
  • If one group weighs more than the other, the heavier ball must be in the group that weighs more.

2. You've now narrowed it down to a 4-ball group. Weigh 2 random balls from that group against the other 2.

  • One group must weigh more than the other, and the heavier group has the heavier ball.

3. You've now narrowed it down to a 2-ball group. Weigh the last 2 against each other.

  • The heavier ball is the one you are trying to find.

Today - It's 100 bananas off the WSO's Real Estate Modeling Course for the first 3 respondents. LFG!

4 investment bankers need to cross a bridge at night to get to a meeting. They have only one flashlight and 17 minutes to get there. The bridge must be crossed with the flashlight and can only support two bankers at a time. The Analyst can cross in 1 minute, the Associate can cross in 2 minutes, the VP can cross in 5 minutes, and the MD takes 10 minutes to cross. How can they all make it to the meeting in time?

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

Wise investor says

"The market does not beat them. They beat themselves, because though they have brains they cannot sit tight." - Jesse Livermore

Happy Investing, Patrick & The Daily Peel Team


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