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Futures Slide After Trump Opens A “Most Unwelcome Can Of Worms” With TikTok, WeChat Executive Order

Futures Slide After Trump Opens A "Most Unwelcome Can Of Worms" With TikTok, WeChat Executive Order

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Futures Slide After Trump Opens A "Most Unwelcome Can Of Worms" With TikTok, WeChat Executive Order Tyler Durden Fri, 08/07/2020 - 07:19

World stocks ended a four day rally overnight that pushed the MSCI World index to green for the year, after U.S. President Trump cranked up simmering tensions with China after late on Thursday has signed orders to ban Americans from transactions involving China’s ByteDance (TikTok’s parent) and WeChat (owned by Tencent), taking effect in 45 days. Furthermore, Trump’s Working Group on Financial Markets recommended that Chinese companies currently listed on US exchanges should be delisted if they do not become compliant with US accounting standards.

Tencent Holdings slumped 5% in Hong Kong after plunging as much as the 10% limit earlier.

Trump's decision to take aim at WeChat, the world’s most-used messaging app, has the potential to upend the international businesses of companies from Apple Inc. to Walmart Inc.

“The executive orders leveled on TikTok and the scrutiny over WeChat has opened up a most unwelcome can of worms," said Stephen Innes, chief global markets strategist at AxiCorp. This could “be more of a signal than anything else, especially front-running the China trade talks” expected later this month, he said.

S&P futures pared some of their Thursday gains after the ES continued to print new post-COVID highs in late US trade on Thursday; the Emini hit a high of just shy of 3350, ahead of its ATH just beneath 3400.

MSCI’s index of world stocks fell 0.2% on Friday after up four consecutive days of gains. It was less than 3% away from a late February peak, and had just turned green on the year on Thursday.  European stocks opened lower, with major indexes down between 0.2% to 0.4% in early trading, although they largely brushed off Asia’s tech-led slump. The Eurostoxx 600 is little changed as gains in telecoms and media are offset by weaker autos and oil & gas names. FTSE MIB and IBEX underperform.

Chinese stocks led losers in Asia and the yuan slumped after Trump issued the executive orders, noting that his admin was stepping up efforts to purge “untrusted” Chinese apps from U.S. digital networks and called TikTok and WeChat “significant threats.” “The U.S. pressure on China’s tech sector appears likely to continue in the presidential elections, injecting volatility in the sector and opening the door to escalatory retaliation,” UBS strategists said.

In addition to the TikTok crackdown, Trump confirmed he has signed proclamation re-imposing aluminium tariffs on Canada, to which Canada has said it would retaliate. However, as NewsSquawk notes, the measures appear more symbolic/political for now than part of a broader economic concern.

Meanwhile, concerns remain that lawmakers won’t be able to resolve differences over a new U.S. relief package. The White House and congressional Democrats are up against a self-imposed Friday deadline to strike a deal. Markets will also be closely watching details from the monthly U.S. jobs report today (full preview here), which is expected to show a steep slowdown in hiring during July.

In rates, there is a modest bull-flattening bias in Treasuries, 2s unch. At 11.5bps, 10s -2bps at 52bps and 30s -3bps at 117bps; the strength was made in futures overnight amid the escalating Sino-US tensions.

In FX, the dollar strengthened, while gold retreated for the first time in six days. The subdued risk tone has seen the Dollar Index reclaim the 93 handle after the late risk rally on Thursday kept it away, seeing cyclical currencies and EMFX on the defensive. Turkey’s lira slumped to a record low against the dollar even after the central bank spent billions to to prop it up, although a late burst pushed the battered currency to unchanged.

Sterling fell after a post-BOE advance on Thursday, as traders take stock of officials distancing themselves from negative rates and an optimistic view of the U.K’s economic recovery. The Australian currency weakened after dovish remarks from the Reserve Bank and the escalation of the U.S.-China row weighed on the currency. The New Zealand dollar followed suit, seeing the biggest losses in the G-10. The Norwegian krone follow oil and gold prices lower, although a mid-week spike in the commodities helped make the currency see the biggest weekly gains among its peers against the greenback.

In commodities, crude futures have been moving slightly lower through Europe, although by no means significant, with oil demand more sheltered from the US-China tech battle. Gold and silver have faded some of their record gains, with silver dropping modestly after rising just shy of $30 late on Thursday.

Economic data include the monthly employment report for July. Dish and Brookfield Renewable Partners are due to report earnings.

Market Snapshot

  • S&P 500 futures down 0.5% to 3,327.50
  • STOXX Europe 600 down 0.1% to 362.08
  • MXAP down 0.6% to 168.82
  • MXAPJ down 0.9% to 563.20
  • Nikkei down 0.4% to 22,329.94
  • Topix down 0.2% to 1,546.74
  • Hang Seng Index down 1.6% to 24,531.62
  • Shanghai Composite down 1% to 3,354.04
  • Sensex down 0.05% to 38,007.48
  • Australia S&P/ASX 200 down 0.6% to 6,004.84
  • Kospi up 0.4% to 2,351.67
  • German 10Y yield fell 0.6 bps to -0.537%
  • Euro down 0.4% to $1.1829
  • Brent Futures down 0.4% to $44.89/bbl
  • Italian 10Y yield fell 4.1 bps to 0.806%
  • Spanish 10Y yield fell 0.3 bps to 0.276%
  • Brent futures down 0.8% to $44.74/bbl
  • Gold spot down 0.1% to $2,060.74
  • U.S. Dollar Index up 0.3% to 93.10

Top Overnight News from Bloomberg

  • President Donald Trump signed a pair of executive orders prohibiting U.S. residents from doing business with the Chinese- owned TikTok and WeChat apps beginning 45 days from now, citing the national security risk of leaving Americans’ personal data exposed
  • The Trump administration’s move to ban U.S. residents from doing business with Tencent Holdings Ltd.’s WeChat app erased $30 billion from the Internet giant’s market value and sent the yuan to its biggest slump in two weeks
  • Hopes for a speedy economic rebound in large parts of Europe are holding ground as manufacturing starts to recover from pandemic lows. Industrial output in Germany rose at a faster-than-expected pace of 8.9% in June, and factory demand is also increasing. With France and Spain experiencing similar trends, signs are mounting that Europe’s initial bounce-back from the worst recession in living memory may be faster than anticipated
  • OPEC’s second biggest producer Iraq made its strongest commitment yet to implement deep cuts in crude production after the country’s oil minister and his Saudi counterpart held a phone call Thursday. The country failed to meet its production-cut target in May and June

Asian equity markets failed to sustain the positive handover from Wall St where all major indices notched gains as tech resumed its outperformance and Apple continued to print fresh record highs to edge closer towards the USD 2tln market cap status, while sentiment stateside was also underpinned by lower jobless claims data and with COVID-sensitive sectors such as airlines, hotels and casinos supported in late trade after the US State Department lifted advisory against all international travel and returned to its previous system of country specific levels of travel advice. Nonetheless, the momentum faded in Asia with the region cautious heading into the latest Chinese trade data which later proved to be mostly better than expected and with US-China tensions stoked after US President Trump signed executive orders to ban transactions with TikTok’s parent ByteDance, as well as Tencent-owned WeChat in 45 days. ASX 200 (-0.6%) and Nikkei 225 (-0.4%) were both negative in which Australia’s mining names gave back some of their recent gains and as Japan digested earnings, with sentiment also dampened by concerns of a weaker consumer as although Household Spending in June rose by its fastest pace since data was made available in 2000, the actual decline in household spending for the April-June quarter of 9.8% Y/Y was the steepest contraction on record. Hang Seng (-1.8%) and Shanghai Comp. (-0.9%) conformed to the downbeat tone due to the US recent actions against TikTok and WeChat which saw Tencent shares slump over 7%, while US President’s Working Group on Financial Markets earlier recommended Chinese companies currently listed on US exchanges to be compliant with US accounting standards or be delisted. Finally, 10yr JGBs were relatively flat with minimal gains seen amid the risk averse tone and the BoJ present in the market for JPY 940bln of JGBs focused on 1yr-3yr and 5yr-10yr maturities.

Top Asian News

  • Japan Looks to Scrap New Libor-Tied Lending Six Months Early
  • China Official Reserves Rise to Highest Since July 2016

European stocks are modestly softer [Euro Stoxx 50 -0.3%] as the downbeat APAC performance seeps into the region after China lodged stern opposition to the US’ executive order on China’s TikTok and WeChat, alongside the State’s drone sale to Taiwan. Broader sectors are mixed with underperformance seen in the energy sector amid losses in the complex, whilst Telecoms remain firm as Deutsche Telekom (+2.8%) holds onto gains amid stellar numbers from T-Mobile (+5.5% pre-mkt) of which Deutsche Telekom owns 43.5%. The sectoral breakdown adds little meat to the bones and provides no clear risk bias, whilst the Travel & Leisure sector remain pressured amid fears of further additions to quarantine lists prompting travel cancellations. In terms of individual movers: BP (-2.6%) trades lower as sources stated that it is poised to sell a large chunk of its oil and gas assets even if crude prices rise; oil giants usually hold assets in the longer-term even if prices fall – with a view of bringing marginal production online contingent on improving market conditions. Rolls-Royce (-3.4%) is hit on the back of source reports that activist investor ValueAct has reportedly sold its entire 10.9% stake in the group since 2017. Finally, Hikma Pharmaceuticals (+9%) extended on gains after raising its FY20 generic revenue guidance alongside its operating margin, whilst the CEO later stated that the group entered a manufacturing deal for Gilead’s remdesivir treatment, potentially providing added impetus.

Top European News

  • Standard Life Loses Top Spot Among U.K. Asset Managers
  • SAS Makes Last-Ditch Bid to Secure Backing for Rescue Plan
  • TP ICAP Says July Trading Activity ‘Materially Lower’ Than 2019

In FX, the Dollar continues to benefit from corrective and positional trade rather than any real fundamental shift in sentiment or direction, as consolidation and short covering persists pre-NFP and the showdown talks in Washington to resolve differences on the next relief bill. It’s debatable whether the monthly BLS report or fiscal deadline will be Friday’s headline-grabbing event, but for now the Buck has clawed back more lost ground against G10 peers and the index is holding between 93.227-92.759 parameters, above Thursday’s 92.495 new 2020 low.

  • NZD/EUR/CHF/CAD - The major victims of the Greenback’s ongoing recuperation, if not quite revival, as the Kiwi backs off from a test of resistance/offers into 0.6700 and the Euro fades into 1.1900 where 1.5 bn option expiries reside. Note also, the single currency has found ventures above the round number unsustainable and is now south of almost equally large expiry interest at 1.1850 (1.2 bn), with bids said to be underpinning around 1.1820-10 and a key Fib in close proximity (1.1823). Meanwhile, the Franc remains sub-0.9100 and straddling 1.0800 vs the Euro as SNB reserves data reveal a decline, and the Loonie has reversed further towards 1.3400 from recent 1.3250+ multi-month highs following the reintroduction of US tariffs on Canadian aluminium and impending like-for-like countermeasures. More immediately, the 2 NA nations go head-to-head on the jobs front with July data due simultaneously ahead of Canada’s Ivey PMIs.
  • AUD/GBP - Also down vs their US counterpart, but clinging to or near big figure/psychological levels at 0.7200 and 1.3100 respectively, as the Aussie draws some underlying support from encouraging or arguably upbeat Chinese trade data and the Pound retains an element of post-BoE strength even though MPC member Ramsden leaves the door open for more stimulus in November should the need arise. For the record, no major reaction down under to the RBA’s SOMP or comments from Deputy Governor Ellis largely underlining latest policy meeting assessments and guidance.
  • JPY - Still no big make or break for the Yen that is pivoting 105.50 after a late fixed related recoil yesterday and Japanese reserves showing a rise conducive with, but not conclusive, a degree of official intervention, albeit this time around 100 pips above the low 104.00 area.
  • EM - Simply no respite for the Lira that has crashed to fresh all time depths against the Dollar and Euro for that matter, even though the CBRT has started withdrawing liquidity provisions and instructing banks to use the overnight lending facility at 9.75% ahead of a 50% reduction in primary dealer OMO limits as from Monday. Usd/Try paring back a tad from 7.3650 or so.      

In commodities, WTI and Brent front month futures drift lower in a correlated move with the equity markets as news-flow for the complex remains scarce ahead of the US jobs report. An earlier Saudi-Iraq statement did the rounds but provided no fresh substance – with the two nations reaffirming their commitment to the OPEC+ pact. WTI Sept resides around USD 41.50/bbl having had briefly dipped below the figure, whilst Brent Oct lost its 45/bbl-status after oscillating on either side of the figure in early hours. Elsewhere, spot gold is relatively uneventful and remains contained around the USD 2060/oz mark, as has been the case throughout the European morning, whilst spot silver sees more pronounced losses as price consolidate from yesterday’s outperformance.  In terms of base metals, Dalian iron ore prices retreated overnight following yesterday’s warning from the Dalian exchange around investing rationally amid the recent rally, whilst Shanghai copper saw losses as US-Sino tensions continue to ratchet.

US Event Calendar

  • 8:30am: Change in Nonfarm Payrolls, est. 1.48m, prior 4.8m
    • Change in Private Payrolls, est. 1.18m, prior 4.77m
    • Average Hourly Earnings MoM, est. -0.5%, prior -1.2%
    • Average Hourly Earnings YoY, est. 4.2%, prior 5.0%
    • Average Weekly Hours All Employees, est. 34.4, prior 34.5
    • Unemployment Rate, est. 10.55%, prior 11.1%
    • Labor Force Participation Rate, est. 61.8%, prior 61.5%
    • Underemployment Rate, prior 18.0%
  • 10am: Wholesale Inventories MoM, est. -2.0%, prior -2.0%; Wholesale Trade Sales MoM, prior 5.4%
  • 3pm: Consumer Credit, est. $10.0b, prior $18.3b deficit

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Growing Number Of Doctors Say They Won’t Get COVID-19 Booster Shots

Growing Number Of Doctors Say They Won’t Get COVID-19 Booster Shots

Authored by Zachary Stieber via The Epoch Times (emphasis ours),

A…

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Growing Number Of Doctors Say They Won’t Get COVID-19 Booster Shots

Authored by Zachary Stieber via The Epoch Times (emphasis ours),

A growing number of doctors say that they will not get COVID-19 vaccine boosters, citing a lack of clinical trial evidence.

I have taken my last COVID vaccine without RCT level evidence it will reduce my risk of severe disease,” Dr. Todd Lee, an infectious disease expert at McGill University, wrote on Twitter.

A vial of the Pfizer-BioNTech COVID-19 vaccine is seen in a file photograph. (Justin Sullivan/Getty Images)

Lee was pointing to the lack of randomized clinical trial (RCT) results for the updated boosters, which were cleared in the United States and Canada in the fall of 2022 primarily based on data from experiments with mice.

Lee, who has received three vaccine doses, noted that he was infected with the Omicron virus variant—the vaccines provide little protection against infection—and described himself as a healthy male in his 40s.

Dr. Vinay Prasad, a professor of epidemiology and biostatics at the University of California, San Francisco, also said he wouldn’t take any additional shots until clinical trial data become available.

“I took at least 1 dose against my will. It was unethical and scientifically bankrupt,” he said.

Allison Krug, an epidemiologist who co-authored a study that found teenage boys were more likely to suffer heart inflammation after COVID-19 vaccination than COVID-19 infection, recounted explaining to her doctor why she was refusing a booster and said her doctor agreed with her position.

She called on people to “join the movement to demand appropriate evidence,” pointing to a blog post from Prasad.

“Pay close attention to note this isn’t anti-vaccine sentiment. This is ‘provide [hard] evidence of benefit to justify ongoing use’ which is very different. It is only fair for a 30 billion dollar a year product given to hundreds of millions,” Lee said.

Dr. Mark Silverberg, who founded the Toronto Immune and Digestive Health Institute; Kevin Bass, a medical student; and Dr. Tracy Høeg, an epidemiologist at the University of California, San Francisco, joined Lee and Prasad in stating their opposition to more boosters, at least for now.

Høeg said she did not need clinical trials to know she’s not getting any boosters after receiving a two-dose primary series, adding that she took the second dose “against my will.”

I also had an adverse reaction to dose 1 moderna and, if I could do it again, I would not have had any covid vaccines,” she said on Twitter. “I was glad my parents in their 70s could get covid vaccinated but have yet to see non-confounded data to advise them about the bivalent booster. I would have liked to see an RCT for the bivalent for people their age and for adults with health conditions that put them at risk.”

The U.S. Food and Drug Administration (FDA) granted emergency use authorization to updated boosters, or bivalent shots, from Pfizer and Moderna in August 2022 despite there being no human data.

Observational data suggests the boosters provide little protection against infection and solid shielding against severe illness, at least initially.

Five months after the authorization was granted, no clinical trial data has been made available for the bivalents, which target the Wuhan strain as well as the BA.4 and BA.5 subvariants of Omicron. Moderna presented efficacy estimates for a different bivalent, which has never been used in the United States, during a recent meeting. The company estimated the booster increased protection against infection by just 10 percent.

The FDA is preparing to order all Pfizer and Moderna COVID-19 vaccines be replaced with the bivalents. The U.S. Centers for Disease Control and Prevention, which issues recommendations on vaccines, continues advising virtually all Americans to get a primary series and multiple boosters.

Professor Calls for Halt to Messenger RNA Vaccines

A professor, meanwhile, became the latest to call for a halt to the Pfizer and Moderna vaccines, which are both based on messenger RNA technology.

At this point in time, all COVID mRNA vaccination program[s] should stop immediately,” Retsef Levi, a professor of operations management at the Massachusetts Institute of Technology, said in a video statement. “They should stop because they completely failed to fulfill any of their advertised promise[s] regarding efficacy. And more importantly, they should stop because of the mounting and indisputable evidence that they cause unprecedented level of harm, including the death of young people and children.”

Levi was referring to post-vaccination heart inflammation, or myocarditis. The condition is one of the few that authorities have acknowledged is caused by the messenger RNA vaccines.

Read more here...

Tyler Durden Thu, 02/02/2023 - 19:10

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Apple Pares Much Of Drop During Earnings Call

Apple Pares Much Of Drop During Earnings Call

Update 6:00pm:  Apple has staged a remarkable reversal after hours, and erased almost the entire…

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Apple Pares Much Of Drop During Earnings Call

Update 6:00pm:  Apple has staged a remarkable reversal after hours, and erased almost the entire loss after the company said that it expects a 5% impact from FX rates in Q2, and also expects iPhone revenue growth to accelerate in Q2. CEO Tim Cook was also asked whether the move to higher ASPs for the iPhone is sustainable in light of the sharp decline in sales, and whether this will continue in a worsening economy. Cook said the 14 Pro and 14 Pro Max did extremely well until the supply-chain constraints. He says this is definitely a “strong Pro cycle” and credits the new features in the device. He says he’s happy that Apple is now shipping to the demand.

Tim Cook also said that AI is critical to Apple and mentions features like crash-and-fall detection and the use of AI in features like EKG on the Apple Watch. He says AI will effect everything the company does, including all products and services.

Apple is quite bullish on India and other emerging markets, with CEO Tim Cook saying the company will soon open its first retail stores in India. He also said Apple saw marked improvement in China in December (versus November) after another round of Covid re-openings.

As Bloomberg notes, the company also stuck to a line that revenue and sales of individual product categories would have been higher if not for supply-chain constraints and issues stemming from the macroeconomic environment.

* * *

With both Amazon and Google sliding after reporting disappointing earnings and mixed guidance, it was all up to the world's biggest company, AAPL, to provide some hail mary for the tech earnings season which for better or worse is concentrated in a one hour stretch this afternoon. Alas, it was not meant to be and after missing on the top and bottom line, AAPL has joined the parade of selling and tumbled after hours due to numbers which the market was clearly not impressed with.

  • EPS $1.88 vs. $2.10 y/y, missing estimate $1.94
  • Gross margin $50.33 billion, -7.2% y/y, missing estimate $52.03 billion
  • Revenue $117.15 billion, -5.5% y/y, missing estimate $121.14 billion
    • Products revenue $96.39 billion, -7.7% y/y, missing estimate $98.98 billion
    • IPhone revenue $65.78 billion, -8.2% y/y, missing estimate $68.3 billion
    • Mac revenue $7.74 billion, -29% y/y, missing estimate $9.72 billion
    • IPad revenue $9.40 billion, +30% y/y, beating estimate $7.78 billion
    • Wearables, home and accessories $13.48 billion, -8.3% y/y, missing estimate $15.32 billion
    • Service revenue $20.77 billion, +6.4% y/y, beating estimate $20.47 billion
    • Greater China rev. $23.91 billion, -7.3% y/y, beating estimate $21.8 billion
  • Cash and cash equivalents $20.54 billion, -45% y/y, estimate $29.91 billion

And here is AAPL's diluted EPS in context: needless to say, could have been better.

Commenting on the quarter, Tim Cook said that “during the December quarter, we achieved a major milestone and are excited to report that we now have more than 2 billion active devices as part of our growing installed base.”

CFO Luca Maester chimed in: “our record September quarter results continue to demonstrate our ability to execute effectively in spite of a challenging and volatile macroeconomic backdrop. We continued to invest in our long-term growth plans, generated over $24 billion in operating cash flow, and returned over $29 billion to our shareholders during the quarter. The strength of our ecosystem, unmatched customer loyalty, and record sales spurred our active installed base of devices to a new all-time high. This quarter capped another record-breaking year for Apple, with revenue growing over $28 billion and operating cash flow up $18 billion versus last year.”

Going back to the results, Apple missed consensus revenue in most product categories, with the exception of iPads, to wit:

  • IPhone revenue $65.78 billion, missing estimate $68.3 billion
  • Mac revenue $7.74 billion, missing estimate $9.72 billion
  • Wearables, home and accessories $13.48 billion, missing estimate $15.32 billion
  • IPad revenue $9.40 billion, beating estimate $7.78 billion

Of note: Apple recorded its first decline in iPhone revenue since the third quarter of 2020; yet in context, the 8% drop was still less than the 20% decrease reported by Samsung. Other major smartphone providers that have yet to report are expecting to see double-digit losses. Ironically, Apple may have fared comparatively well on smartphone revenue.

The silver lining: service revenue $20.77 billion, +6.4% y/y, beating estimates of $20.47 billion...

... and rose 6.5% Y/Y, an improvement from last quarter's 5.0%

One other place where investors were pleasantly surprised was China sales, which at $23.91 billion, beat the estimate of $21.8 billion by more than $2 billion.

None of that changes the fact that AAPL's sales by region were uniformly negative across the board.

And another potential problem: AAPL's gross cash continues to slide, dropping to $165 billion, the lowest since June 2014...

... while cash net of debt rebounded modestly from $49 billion to $54 billion, just above a 12 year low with the company having spent hundreds of billions on stock buybacks. Let's hope that Apple doesn't actually need to use that cash.

Commenting on the results, Bloomberg writes that the results show that Apple hasn’t been able to dodge the tech slowdown afflicting many of its competitors. Demand for smartphones and computers has slumped in the past year, and Covid-19 restrictions in China added to Apple’s woes during the holiday sales period. Timing was another issue: The company didn’t launch new Macs and HomePods until recent weeks, missing the end of the first quarter.

In response to these disappointing earnings, the stock predictably slumped as much as 4% before recouping some losses, although even with the drop it is back to where it was... yesterday.

Tyler Durden Thu, 02/02/2023 - 18:05

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Apple Slides After Missing On Top And Bottom-Line, First iPhone Revenue Drop Since 2020

Apple Slides After Missing On Top And Bottom-Line, First iPhone Revenue Drop Since 2020

With both Amazon and Google sliding after reporting…

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Apple Slides After Missing On Top And Bottom-Line, First iPhone Revenue Drop Since 2020

With both Amazon and Google sliding after reporting disappointing earnings and mixed guidance, it was all up to the world's biggest company, AAPL, to provide some hail mary for the tech earnings season which for better or worse is concentrated in a one hour stretch this afternoon. Alas, it was not meant to be and after missing on the top and bottom line, AAPL has joined the parade of selling and tumbled after hours due to numbers which the market was clearly not impressed with.

  • EPS $1.88 vs. $2.10 y/y, missing estimate $1.94
  • Gross margin $50.33 billion, -7.2% y/y, missing estimate $52.03 billion
  • Revenue $117.15 billion, -5.5% y/y, missing estimate $121.14 billion
    • Products revenue $96.39 billion, -7.7% y/y, missing estimate $98.98 billion
    • IPhone revenue $65.78 billion, -8.2% y/y, missing estimate $68.3 billion
    • Mac revenue $7.74 billion, -29% y/y, missing estimate $9.72 billion
    • IPad revenue $9.40 billion, +30% y/y, beating estimate $7.78 billion
    • Wearables, home and accessories $13.48 billion, -8.3% y/y, missing estimate $15.32 billion
    • Service revenue $20.77 billion, +6.4% y/y, beating estimate $20.47 billion
    • Greater China rev. $23.91 billion, -7.3% y/y, beating estimate $21.8 billion
  • Cash and cash equivalents $20.54 billion, -45% y/y, estimate $29.91 billion

And here is AAPL's diluted EPS in context: needless to say, could have been better.

Commenting on the quarter, Tim Cook said that “during the December quarter, we achieved a major milestone and are excited to report that we now have more than 2 billion active devices as part of our growing installed base.”

CFO Luca Maester chimed in: “our record September quarter results continue to demonstrate our ability to execute effectively in spite of a challenging and volatile macroeconomic backdrop. We continued to invest in our long-term growth plans, generated over $24 billion in operating cash flow, and returned over $29 billion to our shareholders during the quarter. The strength of our ecosystem, unmatched customer loyalty, and record sales spurred our active installed base of devices to a new all-time high. This quarter capped another record-breaking year for Apple, with revenue growing over $28 billion and operating cash flow up $18 billion versus last year.”

Going back to the results, Apple missed consensus revenue in most product categories, with the exception of iPads, to wit:

  • IPhone revenue $65.78 billion, missing estimate $68.3 billion
  • Mac revenue $7.74 billion, missing estimate $9.72 billion
  • Wearables, home and accessories $13.48 billion, missing estimate $15.32 billion
  • IPad revenue $9.40 billion, beating estimate $7.78 billion

Of note: Apple recorded its first decline in iPhone revenue since the third quarter of 2020; yet in context, the 8% drop was still less than the 20% decrease reported by Samsung. Other major smartphone providers that have yet to report are expecting to see double-digit losses. Ironically, Apple may have fared comparatively well on smartphone revenue.

The silver lining: service revenue $20.77 billion, +6.4% y/y, beating estimates of $20.47 billion...

... and rose 6.5% Y/Y, an improvement from last quarter's 5.0%

One other place where investors were pleasantly surprised was China sales, which at $23.91 billion, beat the estimate of $21.8 billion by more than $2 billion.

None of that changes the fact that AAPL's sales by region were uniformly negative across the board.

Commenting on the results, Goldman writes that the results show that Apple hasn’t been able to dodge the tech slowdown afflicting many of its competitors. Demand for smartphones and computers has slumped in the past year, and Covid-19 restrictions in China added to Apple’s woes during the holiday sales period. Timing was another issue: The company didn’t launch new Macs and HomePods until recent weeks, missing the end of the first quarter.

In response to these disappointing earnings, the stock predictably slumped as much as 4% before recouping some losses, although even with the drop it is back to where it was... yesterday.

Tyler Durden Thu, 02/02/2023 - 17:01

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