Daily Brief: It’ll Take More Than A Bag Of Rice To Fix Apple And Amazon’s Earnings Tumble

Daily Brief: It’ll Take More Than A Bag Of Rice To Fix Apple And Amazon’s Earnings Tumble

over 2 years ago3 mins

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Amazon and Apple both reported worse-than-expected results late on Thursday, and it’s going to take more than a bag of rice to fix this.

What does this mean?

Amazon finally has something to grumble about: revenue from the company’s ecommerce segment climbed by a weaker-than-expected 12% last quarter versus the same time last year. It has reservations about the next few months too: it’s not expecting labor shortages to go away, even as it offers tasty incentives to poach workers off smaller outfits. Investors, then, initially sent its stock down 5%.

Apple had slightly better luck: revenue from its high-margin services segment – Apple TV, Music, and the like – grew by more than expected. But the company said it reckons the chip shortage has cost it as much as $6 billion, and iPhone sales – which represent the biggest source of revenue for the company – came in below expectations. Investors noticed: they sent its shares down 5%.

Revenue
Source: The Wall Street Journal

Why should I care?

Zooming in: Apple doth protest too much.

If you followed Facebook and Snapchat’s earnings updates, you’ll know that Apple’s new privacy settings have made it harder for advertisers to target would-be shoppers. And while Apple keeps waxing lyrical about how the move was in iOS users’ interests, that virtuousness looks a little threadbare considering that advertisers now have to pay Apple directly if they want to get noticed. Hardly a coincidence, then, that the segment has more than tripled its market share in the six months since the changes were introduced…

The bigger picture: A very wary Christmas.

Amazon’s disappointing ecommerce update reflects a bigger problem: US consumer spending is dropping off, which is partly why data on Thursday showed the country’s economy grew just 2% last quarter versus the same time the year before. That’s the slowest growth since the beginning of the recovery. Better get your priorities straight this Christmas, then: it’ll definitely be the gift – not the thought – that counts.

US GDP

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Shell Missed Expectations, And Investors Have Renewables On Their Minds

Shell image

Shell’s quarterly results missed expectations on Thursday, so the oil giant will do whatever it has to do to prove its green credentials and win investors back over.

What does this mean?

You’d think that Shell would be raking it in as energy prices soar, but Hurricane Ida had other plans: the storm dented the energy giant’s oil and gas production in the Gulf of Mexico in late August, and sent its profit down by a higher-than-expected 25% last quarter versus the one before.

Shell profit

So you can bet Shell’s doing everything it can to keep investors on side. And since they’re increasingly pushing the company to turn away from fossil fuels, that’s as good a place as any to start: it just sold its business in the Permian Basin – the biggest oil production site in America – for almost $10 billion, and on Thursday announced it’d be cutting its 2016 emissions level in half by 2030.

Why should I care?

The bigger picture: Oil and water don’t mix.

Shell’s been using the profit it makes from its oil and gas business to fund its renewable energy segment, but legendary activist investor Dan Loeb reckons the two opposing businesses are actually dragging down the overall value of the company. And he’s putting his money where his mouth is: Loeb’s firm, Third Point, has reportedly taken a $750 million stake in Shell, and he’s using this newfound sway to urge Shell to split its business in half.

Zooming out: Ford’s not doing Shell any favors.

Shell makes a big chunk of its revenue from fuel for vehicles, but it can’t count on that income forever as electric vehicles (EV) gain in popularity. And that’s only going to keep accelerating if Ford’s anything to go by: the carmaker announced this week that it’ll be spending $7 billion on four new plants that are forecast to produce 1 million EVs. It’s all part of a bid to make 40% of all the cars it sells electric by 2030.

Ford stock
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