Daily Brief: Apple Posts Blowout Earnings, While Tesla Leaves Investors Baffled

Daily Brief: Apple Posts Blowout Earnings, While Tesla Leaves Investors Baffled

about 3 years ago3 mins

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Talk about a eureka moment: Apple announced much better-than-expected results late on Wednesday, raking in over $100 billion of quarterly revenue for the first time ever.

What does this mean?

Apple’s impressive update was mostly down to iPhone sales that surged past analysts’ expectations – even though the latest models launched a month later than planned. Turns out that it might actually have worked in Apple’s favor: the delay gave customers – especially Chinese customers, whose shopping patterns are getting back to normal – more time to save up for an upgrade.

Apple’s quarterly sales surpass $100 billion

Revenue from Apple’s more profitable “services” segment beat forecasts too, and the tech giant’s hoping that subscription income – from the likes of Apple Music, the App Store, and TV+ – will boost its profit margin. But investors might have to estimate the impact for themselves: Apple refused to make an earnings forecast yet again.

Why should I care?

For markets: There are always naysayers.

Investors are split: the bulls might argue Apple’s strong iPhone and services sales prove its strategy is working, while the bears might flag that demand for newer, more expensive iPhones is sinking – which explains why the company’s focus has recently shifted to cheaper models. And as for services, those same skeptics might point out that it’s a gambit Apple’s been playing for a decade without much to show for it…

Apple's iPhone business rakes in record sales

The bigger picture: Big Tech’s winning everywhere you look.

It’s not just Apple hitting the high notes: Facebook announced better-than-expected quarterly results late on Wednesday too, mainly because the company reported more monthly active users than expected. And given that users’ attention is being sold to advertisers at higher and higher prices, that’s the key figure investors use to gauge how the social media titan’s doing.

Facebook monthly active users

Keep reading for our next story...

Tesla Reported Mixed Earnings

Tesla image

Elon will do anything for a bit of attention: Tesla reported mixed fourth-quarter earnings late on Wednesday, and delivered an outlook that left investors baffled.

What does this mean?

Tesla had already revealed the number of vehicles it delivered in 2020 earlier this month, and things were looking promising: that figure was 35% higher than the year before. This update, then, was a chance for the company to tout a couple of other big wins: namely a fifth-straight quarterly profit and its first-ever full-year profit. Trouble was, its all-important forecast for future vehicle deliveries was oddly vague: Tesla didn’t promise a specific number of vehicle deliveries like normal, but instead just said it’d grow them by 50% a year for an unspecified number of years.

Tesla's quarterly net income/loss
Source: Tesla, FactSet, The Wall Street Journal

Why should I care?

The bigger picture: It’s a tipping point for EVs.

Global sales of EVs were up 43% in 2020 from the year before, even as the pandemic dragged overall car sales down by 20%. In fact, sales of EVs and hybrids went from 2.5% of all cars sold in 2019 to 4.2% last year. And this could be just the beginning: analysts reckon EVs will be cheaper than gas-guzzlers by 2023 – and that’s when sales should really take off.

EV sales growth

For you personally: There’s mileage in less obvious EV investments.

It’s hard to say which EV maker will ultimately come out on top: Tesla’s the current market leader, sure, but it’s facing stiff competition from incumbents like Volkswagen – not to mention contenders in the booming Chinese market. Of course, keep in mind that carmakers aren’t the only way to invest in the industry. EV batteries – the most expensive part of the vehicle – can make or break a carmaker’s bottom line. So if you can find a company that hits upon game-changing technology – or even if you invest in a commodity involved in the battery-making process – you might be onto a winner…

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