Tag: iab-sales

Housing slump likely to continue but some see hopeful signs ahead | CNN Business

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A version of this story first appeared in CNN Business’ Before the Bell newsletter. Not a subscriber? You can sign up right here.

New York
CNN
—

Mortgage rates have ticked down recently, but are still up dramatically from a year ago thanks to the surge in long-term bond yields as the Federal Reserve hiked interest rates.

While that’s already had a negative impact on the housing market, we’ll get more details this week about how much worse the damage has become.

A long list of housing data is on tap. On Tuesday the US Census Bureau will report housing starts and building permits figures for November, followed by Friday’s release of new home sales data for the same month. In between that will be the November existing home sales numbers from the National Association of Realtors on Wednesday, as well as weekly data on mortgage rates and applications on Thursday.

For the past few months, existing and new home sales have been steadily declining because of the spike in rates and the fact that home prices remain stubbornly high for first-time buyers. Housing starts and building permits have been choppier on a month-to-month basis, but those figures are both down from a year ago.

Still, there are some promising signs that the worst could soon be over. Shares of Lennar

(LEN), one of the largest homebuilders in the US, rallied after reporting earnings last week. Revenue topped forecasts and the company’s guidance for the number of homes it expected to deliver next year was a little higher than analysts’ estimates as well.

Lennar investors “may be looking ahead to 2023, perhaps crossing the valley from recession to potential recovery,” according to CFRA Research analyst Kenneth Leon.

Others in the industry are cautiously optimistic as well.

According to data from Amherst Group, an investment firm that buys single-family homes to rent out, it’s important to put the recent slide in prices in context.

Amherst said home prices are still up about 40% from pre-pandemic levels. So even a further drop of about 15% would merely bring them to mid-2021 levels. In other words, this isn’t like the mid-2000s real estate bubble bursting.

It’s also worth noting that the job market is still strong and wages are growing. What’s more, many consumers still have decent levels of excess savings thanks to pandemic era government stimulus.

That all amounts to a few good reasons why the housing market could avoid a severe and prolonged slump.

“The U.S. housing market is still supported by a tight labor market, the lock-in effect of low fixed mortgage rates for existing homeowners, tight mortgage underwriting, low leverage in the mortgage sector, and low housing supply,” said Brandywine fixed-income analyst Tracy Chen in a report this month.

“We believe we can avoid a severe housing downturn like the one in the Global Financial Crisis,” Chen added.

Others point out that even though housing sales may remain weak due to high home prices and still elevated mortgage rates, the good news is that most existing homeowners are still paying their monthly mortgage on time.

Again, that’s a stark contrast from 2008 when many people with subprime loans or borrowers with poor credit histories were unable to keep up with their mortgage payments.

“Housing is not bringing down the economy. Yes, the housing market has been impacted. But mortgage delinquencies are still low,” said Gene Goldman, chief investment officer at Cetera Investment Management.

There aren’t a ton of companies reporting their latest earnings this week. But the few that are could give more clues about the financial health of consumers and the state of corporate spending.

Cereal giant General Mills

(GIS) will release earnings on Tuesday. Analysts are expecting a slight increase in both sales and profit. Consumers may be growing increasingly wary about inflation and the broader economy, but they’re still eating their Wheaties. Shares of General Mills

(GIS) have soared nearly 30% this year.

Analysts are less optimistic about the outlooks for sneaker king and Dow component Nike

(NKE), used car retailer CarMax

(KMX) and memory chip maker Micron

(MU), whose semiconductors are used in devices ranging from cell phones and computers to cars.

Earnings are expected to decline for these three companies. They won’t be the only leaders of Corporate America to report weak results.

According to data from FactSet, fourth-quarter earnings for S&P 500 companies are expected to decline 2.8% from a year ago. Analysts have been busy cutting their forecasts too. John Butters, senior earnings analyst at FactSet, noted in a report that fourth-quarter profits were expected to rise 3.7% as recently as September 30.

Investors are also going to be paying very close attention to what companies say in their earnings reports about their outlooks for 2023. Analysts currently are anticipating earnings growth of 5.3% for 2023. That could be too optimistic… especially if companies start cutting their own forecasts due to worries about the broader economy.

“Odds of a recession are pretty high,” said Vincent Reinhart, chief economist and macro strategist at Dreyfus & Mellon. “That will have a knock-on effect for corporate earnings. Higher rates and weaker earnings suggest more pain for stocks.”

Monday: Germany Ifo business climate index

Tuesday: US housing starts and building permits; China sets loan prime rate; Bank of Japan interest rate decision; earnings from General Mills, Nike, FedEx

(FDX) and Blackberry

(BB)

Wednesday: US existing home sales; Germany consumer confidence; earnings from Rite Aid

(RAD), Carnival

(CCL), Cintas

(CTAS), Toro

(TTC) and Micron

Thursday: US weekly jobless claims; US Q3 GDP (third estimate); earnings from CarMax

(KMX) and Paychex

Friday: US personal income and spending; US PCE inflation; US new home sales; US durable goods orders; US U. of Michigan consumer sentiment; Japan inflation; UK markets close early

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December 18, 2022
The Grinch comes for retailers | CNN Business

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A version of this story first appeared in CNN Business’ Before the Bell newsletter. Not a subscriber? You can sign up right here. You can listen to an audio version of the newsletter by clicking the same link.

New York
CNN
—

Weaker-than-expected retail sales in November pummeled market sentiment on Thursday and raised the odds that the Federal Reserve’s inflation-fighting interest rate hikes would push the economy into recession.

What’s happening: US retail sales, which measure the total amount of money that stores make from selling goods to customers, fell 0.6% in November, the weakest performance in nearly a year. The drop concerned economists who had expected monthly sales to shrink by just 0.1%. It’s also a sharp reversal from October’s sales increase of 1.3%.

That’s a bad sign for the economy. Just last month Bank of America CEO Brian Moynihan told CNN that the continued strength of the US consumer is nearly single-handedly staving off recession. Consumer spending is a major driver of the economy, and the last two months of the year can account for about 20% of total retail sales — even more for some retailers, according to National Retail Federation data.

Market mania: The weak report means that spending faltered just as the holiday season started, a critical time for retailers to ramp up profits and get rid of excess inventory. Investors weren’t too happy about that.

Shares of Costco

(COST) closed Thursday 4.1% lower, Target

(CBDY) fell by 3.2%, Macy’s

(M) dropped 3.5% and Abercrombie & Fitch

(ANF) was down 6.2%.

The entire sector took a blow — the VanEck Retail ETF, with Amazon

(AMZN), Home Depot

(HD) and Walmart

(WMT)as its top three holdings, fell by 2.2%. The SPDR S&P Retail ETF, which follows all S&P retail stocks, was down 2.9%.

Weak sales are likely to continue, say analysts, and if they do, then retailers’ bottom lines and fourth-quarter earnings will suffer.

“The headwinds of the past year are catching up to consumers and forcing them to be more conservative in their holiday shopping this winter,” warned Morgan Stanley economist Ellen Zentner in a note.

The Fed factor: November’s report could indicate that consumers are feeling the double-punch of sky-high inflation and painful interest rate hikes from the central bank. This retail sales data adds to recessionary concerns, as it suggests that consumers may be becoming more cautious with their spending.

“Households are increasingly relying on their savings to sustain their spending, and many families are resorting to credit to offset the burden of high prices. These trends are unsustainable, and the current credit splurge is a true risk, especially for families at the lower end of the income spectrum,” said Gregory Daco and Lydia Boussour, economists at EY Parthenon.

While American bank accounts are still fairly robust, they’re beginning to dwindle. In the third quarter of 2022, credit card balances jumped 15% year over year. That’s the largest annual jump since the New York Fed began keeping track of the data in 2004.

“Against this backdrop, we expect consumers will rein in their spending further in coming months,” said Daco and Boussour. “Real consumer spending should see modest growth in the final quarter of the year, but we expect it will barely grow in 2023.”

Bottom line: If Bank of America’s Moynihan was right, the US economy is in trouble.

US mortgage rates came in lower once again this week, marking the fifth consecutive drop in a row.

The 30-year fixed-rate mortgage averaged 6.31% in the week ending December 15, down from 6.33% the week before, according to Freddie Mac. A year ago, the 30-year fixed rate was 3.12%, reports my colleague Anna Bahney.

That’s a sharp reversal from the upward trend in rates we’ve seen for most of 2022. Those increases were spurred by the Federal Reserve’s unprecedented campaign of harsh interest rate hikes to tame soaring inflation. But mortgage rates have tumbled in the last several weeks, following data that showed inflation may have finally reached its peak.

The Fed announced on Wednesday that it will continue to raise interest rates — albeit by a smaller amount than it has been.

“Mortgage rates continued their downward trajectory this week, as softer inflation data and a modest shift in the Federal Reserve’s monetary policy reverberated through the economy,” said Sam Khater, Freddie Mac’s chief economist.

“The good news for the housing market is that recent declines in rates have led to a stabilization in purchase demand,” he added. “The bad news is that demand remains very weak in the face of affordability hurdles that are still quite high.”

American regulators have been granted unprecedented access to the full audits of Chinese companies like Alibaba

(BABA) and JD.com

(JD) after threatening to kick the tech giants off US stock exchanges if they did not receive the data.

The announcement marks a major breakthrough in a yearslong standoff over how Chinese companies listed on Wall Street should be regulated. It will come as a huge relief for these firms and investors who have invested billions of dollars in them, reports my colleague Laura He.

“For the first time in history, we are able to perform full and thorough inspections and investigations to root out potential problems and hold firms accountable to fix them,” Erica Williams, chair of the Public Company Accounting Oversight Board, said in a statement Thursday, adding that such access was “historic and unprecedented.”

More than 100 Chinese companies had been identified by the US securities regulator as facing delisting in 2024 if they did not hand over the audits of their financial statements.

On Friday, China’s securities regulator said it’s looking forward to working with US officials to continue promoting future audit supervision of companies listed in the United States.

There are more than 260 Chinese companies listed on US stock exchanges, with a combined market capitalization of more than $770 billion, according to recent calculations posted by the US-China Economic and Security Review Commission.

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December 16, 2022
The Fed will raise rates again. But it’s playing with fire | CNN Business

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A version of this story first appeared in CNN Business’ Before the Bell newsletter. Not a subscriber? You can sign up right here.

New York
CNN
—

The Federal Reserve is all but guaranteed to announce Wednesday that it will once again raise interest rates. But investors are hopeful it will be a smaller increase than the last four hikes.

Traders are betting on just a half-point increase. Federal funds futures on the Chicago Mercantile Exchange show an 80% probability of a half-point hike.

The Fed bumped up rates by three-quarters of a percentage point in the past four meetings (June, July, September and November). That followed two smaller rate hikes earlier this year. The central bank’s key short-term interest rate, which sat at zero at the beginning of the year, is now at a range of 3.75% to 4%.

The hope is that inflation pressures are finally starting to abate enough that the Fed can pivot — Fed-speak for a series of smaller rate hikes -— to avoid crashing the economy into a recession.

But it may not be that simple. The government reported Friday that a key measure of wholesale prices, the Producer Price Index, rose 7.4% over the past 12 months through November. That was a bit higher than the expected rate of 7.2% but a marked slowdown from the 8% increase through October.

The more widely watched Consumer Price Index data for November comes out Tuesday, just a day before the Fed announcement. CPI rose 7.7% year-over-year through October.

As long as inflation remains a problem, the Fed is going to have to tread cautiously.

“Inflation has probably peaked but it may not come down as quickly as people want it to,” said Kathy Jones, chief fixed income strategist for the Schwab Center for Financial Research.

Jones still thinks the Fed will raise rates by only half a point this week and may look to hike them just a quarter point in early 2023. But she conceded that the Fed is now sort of “making it up as they go along.”

The other problem: The Fed’s rate hikes this year have had limited impact on the economy so far. Yes, mortgage rates have spiked and that has severely hurt demand for housing, but the job market remains strong. Wages are growing, and consumers are still spending. That can’t last indefinitely.

“The cumulative impact of higher rates are just beginning. Hence, the Fed has to step down its pace a bit,” Jones said.

So investors are going to need to pay attention not to just what the Fed says in its policy statement about rates and what Powell talks about in his press conference. The Fed also will release its latest projections for gross domestic product growth, the job market and consumer prices Wednesday.

In September, the Fed’s consensus forecasts called for GDP growth of 1.2% in 2023, an unemployment rate of 4.4% and an increase in personal consumption expenditures, the Fed’s preferred measure or inflation, of 2.8%. It seems likely that the Fed will cut its GDP target and raise its expectations for the jobless rate and consumer prices.

The likelihood of an economic downturn is increasing, and the Fed’s projections may reflect that. But the Fed is not expected to start cutting interest rates until 2024 at the earliest, so it may be too late for the central bank to prevent a recession.

“A pivot or pause is not a cure-all for this market,” said Keith Lerner, co-chief investment officer at Truist Advisory Services. “Rate cuts may be too late. Recession risks are still relatively high.”

The US economy isn’t in a recession yet. But are American shoppers tapped out? We’ll get a better sense of that Thursday after the government reports retail sales figures for November.

Economists are actually forecasting a small dip of 0.1% in retail sales from October. But it’s important to put that number in context. Retail sales surged 1.3% from September and 8.3% over the past 12 months.

So it’s possible consumers were simply getting a head start on holiday shopping. Inflation has an effect on the numbers too, since retail sales have been impacted (positively) by the fact that people have to spend more money for stuff.

One market strategist also pointed out that as long as price increases continue to slow, consumers will feel more confident as well.

“Everybody has been talking about inflation this year. Going forward, it will be more about disinflation in 2023 or 2024,” said Arnaud Cosserat, CEO of Comgest Global Investors.

What does that mean for investors? Cosserat said people should be looking for quality consumer companies that still have pricing power and can maintain their profit margins. Two stocks that his firm owns that he said fit that bill: Luxury goods maker Hermes

(HESAF) and cosmetics giant L’Oreal

(LRLCF).

Monday: UK monthly GDP; earnings from Oracle

(ORCL)

Tuesday: US Consumer Price Index; Germany economic sentiment

Wednesday: Fed meeting; EU industrial production; UK inflation; earnings from Lennar

(LEN) and Trip.com

(TCOM)

Thursday: US retail sales; US weekly jobless claims; ECB and Bank of England rate decisions; earnings from Jabil

(JBL)

Friday: Eurozone PMI; UK retail sales; earnings from Accenture

(ACN), Darden Restaurants

(DRI) and Winnebago

(WGO)

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December 11, 2022
Salesforce Co-CEO Bret Taylor steps down, leaving Marc Benioff alone at the top | CNN Business

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New York
CNN Business
—

Enterprise tech giant Salesforce said Wednesday that its co-CEO and Vice Chair Bret Taylor will step down from his roles. Salesforce co-founder Marc Benioff, who had been co-CEO alongside Taylor, will continue running the company and serving as board chair, the company said in a news release.

Taylor had worked at Salesforce

(CRM) for six years, most recently as president and COO before being elevated to co-CEO last November. He will officially exit his position on January 31, 2023. Benioff, in a statement, called Taylor’s decision to step down “bittersweet.”

“After a lot of reflection, I’ve decided to return to my entrepreneurial roots,” Taylor said in a statement. “Salesforce has never been more relevant to customers, and with its best-in-class management team and the company executing on all cylinders, now is the right time for me to step away.”

Prior to Salesforce, Taylor founded and led collaboration platform Quip, which Salesforce acquired for $750 million in 2016. Taylor also worked as chief technology officer at Facebook during the company’s IPO.

Taylor’s move comes at a rocky time for Salesforce, whose shares have fallen around 40% since the start of this year amid the economic downturn. The announcement coincided with Salesforce’s third quarter earnings report, in which the company said it expected fourth quarter revenue at the low-end of analysts’ expectations.

Salesforce’s stock fell more than 6% in after-hours trading following the earnings and leadership change announcements.

Taylor also had a busy year outside Salesforce. As the former chair of Twitter’s board of directors, he was in charge of leading the company through Elon Musk’s tumultuous takeover deal and litigation. Musk officially closed his $44-billion deal to buy the company last month and quickly dissolved the board of directors.

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December 1, 2022
Nikola to pause truck production after posting bigger quarterly loss | CNN Business

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CNN
—

Nikola Corp on Tuesday reported a bigger quarterly loss and said it would pause production to streamline the assembly line at its Coolidge, Arizona factory amid sluggish demand for its battery-powered trucks.

Investors have focused at cash reserves at Nikola and other EV makers amid fears that slowing sales could push the companies to pursue more share sales to raise funds.

“At the end of May, we plan to pause truck production as we convert the line to accommodate both hydrogen fuel cell and battery electric trucks on the same line and will resume production in July with the first saleable hydrogen fuel cell trucks,” Nikola said.

Earlier in the day, Fisker Inc cut its full-year production target as the electric-vehicle startup seeks to keep a leash on expenses and reported a smaller first-quarter loss.

Nikola’s net loss widened to $169.09 million in the quarter, from $152.94 million a year earlier.

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April 12, 2021
Lyft stock plunges nearly 15% on weaker than expected revenue forecast | CNN Business

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CNN
—

Lyft may have a bumpy road ahead to recovery.

The ride-hailing company reported revenue of $1 billion for the quarter ending in March, marking a 14% year-over-year increase and beating Wall Street estimate’s. But the company forecast weaker-than-expected revenue for the current quarter, which was enough to jitter investors.

Shares of Lyft plunged nearly 15% in after-hours trading Thursday following the earnings results.

The latest earnings report comes on the heels of Lyft shaking up its the C-suite and announcing plans to cut 26% of its employees as it fights for market share and profitability.

David Risher, who previously worked at Amazon and Microsoft, recently took over as CEO of Lyft and the company’s two co-founders stepped down from their management positions at the company. Risher has been a member of the Lyft board since 2021.

On a conference call with analysts on Thursday to discuss the results, Risher said Lyft is currently at “an inflection point” as people return to pre-pandemic social habits.

“I am very aware of our current levels of growth and profitability are not acceptable,” Risher said on the call, his first as CEO. “I am committed to growing Lyft into a large, durable, profitable business, that our riders, drivers and shareholders love, and I look forward to keeping you informed on our progress.”

Compared to its chief rival Uber, Lyft has so far struggled to bounce back from the pandemic’s hit to its business. While Uber diversified its business beyond ride-hailing by delivering meals and grocery items during the health crises, Lyft never did. Uber also was able to attract drivers back to the platform better than Lyft as pandemic restrictions eased in the U.S.

Earlier this week, Uber said in its quarterly earnings report that revenue was up 29%, as demand for its rideshare and delivery services held firm despite lingering recession fears.

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April 12, 2021
How Uber left Lyft in the dust | CNN Business

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CNN
—

For years, Lyft positioned itself as the “nice guy” in the ride-hailing industry. It let rival Uber do most of the dirty work fighting regulators and the taxi industry to create a path for a new crop of companies to offer rides to customers through an app.

In the process, Lyft cultivated a feel-good brand – but Uber dominated the market. For a brief moment in 2017, however, it looked like the balance of power might shift, as Uber was rocked by a seemingly endless series of PR crises that culminated with its founder and CEO Travis Kalanick stepping down.

Six years later, however, Lyft’s position is arguably more precarious than it has ever been. Uber now has 74% of the US rideshare market, up from 62% in 2020, according to market research firm YipitData, while Lyft’s market share slipped to 26% from 38% during that same period. Meanwhile, Lyft stock has plunged nearly 90% since it went public in 2019.

In a nod to those challenges, Lyft announced Monday that its two cofounders, Logan Green and John Zimmer, would step back from their management roles and the company would bring in Amazon veteran and Lyft board member David Risher to take the helm of Lyft as CEO.

In its announcement, Lyft framed the leadership change as a straightforward succession plan. “All founders eventually find the right moment to step back and the right leaders to take their company forward,” Green said in a statement. “As a member of the board, he knows both the challenges and opportunities ahead.”

For Lyft, the current challenges are immense. While Uber diversified its business beyond ride-hailing by delivering meals and grocery items, Lyft never did. That arguably hurt the company earlier in the pandemic when fewer customers were traveling but more were ordering items online. Late last year, Lyft said it was cutting 13% of its staff, or 700 employees, as part of a major effort to cut costs.

At the same time, Lyft now faces an Uber that is run by a seasoned executive, Expedia veteran Dara Khosrowshahi, who immediately got to work straightening up the company’s business and image. Under Khosrowshahi, Uber doubled down on growing its meal delivery business, while working to cut costs elsewhere, including by selling off more experimental efforts like its self-driving car unit.

In its most recent earnings report last month, Uber said that it had its “strongest quarter ever,” reporting a 49% year-over-year increase in revenue. Lyft’s latest earnings report, meanwhile, was unusually disappointing for Wall Street.

One tech analyst, Dan Ives of Wedbush Securities, said Lyft’s conference call to discuss the results “was a Top 3 worst call we have ever heard” as its “management is trying to play darts blindfolded.” He slammed the earnings outlook offered on the call as a “debacle for the ages.”

With Risher as the new CEO, Lyft is clearly hoping for a turnaround. Risher was the 37th employee of Amazon – a company that has long been the model for the on-demand industry – and he went on to become the e-commerce giant’s first head of product and head of US retail. In its statement announcing Risher as the new CEO, Lyft pointed to his legacy at Amazon: “In tribute to Mr. Risher’s contributions, Jeff Bezos added a permanent thank-you to the Amazon website, where it can still be seen  today.”

Tom White, a senior research analyst at D.A. Davidson, wrote in a note this week that the new CEO “could signal an increased willingness to broaden the strategic aperture at  LYFT a bit as it relates to areas like product strategy (delivery), partnerships, or other novel ways to create value.”

Nicholas Cauley, an analyst at research firm Third Bridge, wrote that Lyft “still has many levers it can pull to regain market share.” He added: “There are still improvements to be made and a leadership change is a positive catalyst for turning the ship around.”

But in an interview with CNN’s Julia Chatterley on Wednesday, Risher seemed to dash hopes that Lyft would borrow from Uber’s playbook and branch into other delivery categories.

Risher told CNN he wants to make sure Lyft focuses on providing a great ride-hailing service and “not get distracted by delivering pizzas or packages or all sorts of other things that other companies are doing.”

“I don’t really want to get in the same car that, you know, just delivered the tuna sandwich,” he added. “And if you talk to drivers, they say, ‘Gosh, I don’t make as much in food delivery and it’s more frustrating. I get tickets when I’m double parked in front of the restaurant and so forth.’ So, you know, I think that, that Uber has its challenges too. I really do.”

Risher also said “it’s not our focus” to pursue a sale of the company.

While the market initially seemed to welcome Risher’s appointment, the slight uptick in Lyft stock after the news came out was quickly wiped out a day later once Risher started talking about his plans for the company.

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April 12, 2021
Apple got rich in China. Other Asian markets offer the next ‘golden opportunity’ | CNN Business

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Hong Kong
CNN
—

Apple launched an online store in Vietnam this week, in another nod to the growing importance of emerging markets for the iPhone maker.

The opening on Thursday, which followed the high-profile launch of its first physical shops in India, means consumers in the fast-growing Southeast Asian economy will be able to buy any Apple product directly for the first time.

Markets like Vietnam, India and Indonesia are becoming more important for Apple as its growth in developed markets, including China, slows down, prompting the company to focus on places where it’s traditionally been less active.

For decades, China was central to Apple’s extraordinary ascent to become the most valuable company on Earth, serving as a backbone for both its production and consumption. While the country remains key to Apple’s operations, the tech giant is now hedging its bets.

Apple

(AAPL) CEO Tim Cook has pointed to the company’s prospects in emerging economies, calling them bright spots in the company’s financial results. On an earnings call this month, Cook said he was “particularly pleased” with the performance in these markets during the first three months of the year.

Apple “achieved all-time records in Mexico, Indonesia, the Philippines, Saudi Arabia, Turkey and the UAE, as well as a number of March quarter records, including in Brazil, Malaysia and India,” he told analysts.

That came as the California-based giant also reported its second straight drop in overall quarterly revenue, prompting concerns about a broader slowdown in demand amid economic uncertainty.

“Clearly, growth has slowed globally and thus put more pressure [on Apple] to aggressively go after emerging markets,” said Daniel Ives, managing director of Wedbush Securities.

Ives predicts that “over the coming years, Indonesia, Malaysia and India will comprise a bigger piece of the pie for Apple, given its efforts in these countries.”

The start of online sales in a country usually precedes the launch of brick-and-mortar stores for Apple, he told CNN. This was true of India, for instance, which got its first physical outlets last month and a pledge from Cook to further invest in the country.

Thursday’s launch showed how Apple was “further cementing” its presence in emerging markets, according to Chiew Le Xuan, a research analyst who covers smartphones in Southeast Asia for Canalys.

He said the tech giant had been “actively increasing” its presence in the region in recent months, ramping up its distribution and network of authorized resellers, especially in Malaysia.

Apple has ample room to run in these markets.

Currently, the company only operates its own stores in more developed regional economies, such as Thailand and Singapore, according to Canalys.

Even Indonesia, a vast archipelago that is the world’s sixth-biggest smartphone market, doesn’t have a physical Apple store yet, said Chiew. Apple’s market share there is tiny, at just 1% in 2022, according to Canalys data.

“We’re putting efforts in a number of these markets and really see, particularly given our low share and the dynamics of the demographics … a great opportunity for us,” Cook said during Apple’s results call.

Apple joins a growing list of global businesses that have become bullish on Southeast Asia, where more investment is being poured into manufacturing.

The region’s consumer base also holds promise, with the number of middle-income and affluent households in economies such as Vietnam, Indonesia, and the Philippines projected to grow by around 5% annually through 2030, according to the Boston Consulting Group.

The consultancy has called this group of consumers “the next mega-market.”

The allure of Southeast Asia’s rising middle class “has changed the dynamic in these countries, which previously Apple stayed away from,” according to Ives.

“This is a golden opportunity for Apple,” he said.

For years, premium brands like Apple have have struggled to compete in emerging markets because of the price of their products, choosing instead to rely on local resellers.

iPhones, which cost between $470 and $1,100, are expensive for consumers in less developed Southeast Asian economies, where the bulk of smartphone shipments are priced under $200, according to Chiew.

He said Apple’s absence from places like Cambodia or Vietnam was typically more apparent around the launch of a new iPhone, as buyers from those countries often flew to Singapore or Malaysia to purchase devices and take them back for resale.

This could change in the coming years, particularly as Apple continues to increase its firepower in the region.

Ives predicted that Apple could “further expand its ecosystem and tentacles to emerging markets using its China playbook,” meaning it could try to hook customers through “various pricing strategies and building out from there.”

Once those users have converted to Apple’s operating system, iOS, they tend to stick around and become loyal customers, he added.

This has “been the core part of its success in China that now can be replicated in India, Indonesia, and Vietnam, among others,” said Ives.

But Apple may face hurdles in Southeast Asia, where several countries have placed stringent requirements on foreign businesses, according to Chiew.

For example, at least 35% of the components of electronic goods sold in Indonesia must made locally, a threshold Apple has had to meet by working with partners, he added. Similar rules prevented Apple from setting up shop in India for years until the relaxation of regulations in 2019.

And while consumers are becoming more affluent, the company’s price points are still considered high in many emerging markets, noted Ives. “Growth will be choppy we believe.”

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April 12, 2021
AI chip boom sends Nvidia’s stock surging after whopper of a quarter | CNN Business

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New York
CNN
—

The AI boom is here, and Nvidia is reaping all the benefits.

Shares of Nvidia

(NVDA) exploded 28% higher Thursday after reporting earnings and sales that surged well above Wall Street’s already lofty expectations. That was enough to make investors temporarily forget about America’s dangerous debt ceiling standoff, sending the broader stock market higher — even after credit rating agency Fitch warned late Wednesday that America could soon lose its sterling AAA debt rating.

Nvidia makes chips that power generative AI, a type of artificial intelligence that can create new content, such as text and images, in response to user prompts. That’s the kind of AI underlying ChatGPT, Google’s Bard, Dall-E and many of the other new AI technologies.

“The computer industry is going through two simultaneous transitions — accelerated computing and generative AI,” said Jensen Huang, Nvidia’s CEO, in a statement. “A trillion dollars of installed global data center infrastructure will transition from general purpose to accelerated computing as companies race to apply generative AI into every product, service and business process.”

Huang said Nvidia is increasing supply of its entire suite of data center products to meet “surging demand” for them.

Last quarter, Nvidia’s profit surged 26% to $2 billion, and sales rose 19% to $7.2 billion, each easily surpassing Wall Street analysts’ forecasts. Nvidia’s outlook for the current quarter was also significantly — about 50% — higher than analysts’ predictions.

Nvidia’s stock is up nearly 110% this year.

“There is not one better indicator around underlying AI demand going on … than the foundational Nvidia story,” said Dan Ives, analyst at Wedbush. “We view Nvidia at the core hearts and lungs of the AI revolution.”

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April 12, 2021
Samsung to cut chip production after posting lowest profit in 14 years | CNN Business

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Seoul
Reuters
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Samsung Electronics said on Friday it would make a “meaningful” cut to chip production after flagging a worse-than-expected 96% plunge in quarterly operating profit, as a sharp downturn in the global semiconductor market worsens.

Shares in the world’s largest memory chip and TV maker rose 3% in early trading, while rival SK Hynix shares surged 5% as investors welcomed plans to cut production to help preserve pricing power.

Samsung

(SSNLF) estimated its operating profit fell to 600 billion won ($455.5 million) in January-March, from 14.12 trillion won a year earlier, in a short preliminary earnings statement. It was the lowest profit for any quarter in 14 years.

“Memory demand dropped sharply … due to the macroeconomic situation and slowing customer purchasing sentiment, as many customers continue to adjust their inventories for financial purposes,” it said in the statement.

“We are lowering the production of memory chips by a meaningful level, especially that of products with supply secured,” it added, in a reference to those with sufficient inventories.

The production cut signal is unusually strong for Samsung, which previously said it would make small adjustments like pauses for refurbishing production lines but not a full-blown cut.

It did not disclose the size of the planned cut.

The first-quarter profit fell short of a 873 billion won Refinitiv SmartEstimate, weighted toward analysts who are more consistently accurate. Multiple estimates were revised down earlier this week.

It was the lowest since a 590 billion won profit in the first quarter of 2009, according to company data.

With consumer demand for tech devices sluggish due to rising inflation, semiconductor buyers including data center operators and smartphone and personal computer makers are refraining from new chip purchases and using up inventories.

Analysts estimated the chip division sustained quarterly losses of more than 4 trillion won ($3.03 billion) as memory chip prices fell and its inventory values were slashed.

This would be the chip business’ first quarterly loss since the first quarter of 2009, a major divergence for what is normally a cash cow that generates about half of Samsung’s profits in better years.

Revenue likely fell 19% from the same period a year earlier to 63 trillion won, Samsung said.

The company is due to release detailed earnings, including divisional breakdowns, later this month.

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April 12, 2021
Apple is now worth $3 trillion, boosted by the Nasdaq’s best start in 40 years | CNN Business

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New York
CNN
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Apple’s stock ended trading Friday valued at $3 trillion, the only company ever to reach that milestone. It has been riding a Big Tech stock wave that has given the Nasdaq its best first half gain in 40 years.

Shares of Apple rose more than 2% Friday at a record $193.97. With 15.7 billion shares outstanding, that stock price pushed Apple to its historic market value.

Apple has been here once before: On January 3, 2022, Apple hit the $3 trillion mark during intraday trading, but it failed to close there.

The company’s stock closed Thursday at a record high share price for the third-straight day, but it merely budged 0.2% higher. Apple easily surpassed the $190.73 level it needed to break $3 trillion at Friday’s market open.

The sky-high valuation for the tech giant comes on the heels of its risky launch of the Apple Vision Pro earlier this month and a stronger-than-expected quarterly earnings report in May – even though sales and profit slumped.

The Vision Pro, which will go on sale next year, impressed tech journalists who got an early preview of the augmented reality device. But it is entering a nascent market with little mainstream consumer adoption. Apple plans to charge a hefty $3,499 for its headset, which currently has limited apps and experiences, and requires users to stay tethered to a battery pack the size of an iPhone.

Apple’s

(AAPL) stock has skyrocketed 49% this year, boosted by a broader surge in Big Tech stocks as investors have jumped onto the AI bandwagon. Nvidia

(NVDA) leads the S&P 500 with a 190% jump this year, followed by Meta

(META) at 138%.

The Nasdaq grew by 31.7% in the first half of the year, notching its largest first half percentage gain since 1983.

This year’s stock market success for Apple comes in sharp contrast to 2022. At the start of 2023, Apple’s market cap fell below $2 trillion in trading for the first time since early 2021.

Wall Street ended the first half of 2023 on a positive note as the tech rally led markets to close higher for both the month and second quarter of the year.

The S&P 500 gained 6.5% in June, its best monthly performance since January. It also notched its third consecutive quarter of growth, up 8.3% in the second quarter. The S&P 500 is about 15.9% higher so far this year, its best half since 2019.

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April 12, 2021
Nvidia says US curbs on AI chip sales to China would cause ‘permanent loss of opportunities’ | CNN Business

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Hong Kong
CNN
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Nvidia warned Wednesday that if the United States imposes new restrictions on the export of AI chips to China, it would result in a “permanent loss of opportunities” for US industry.

The company’s chief financial officer, Colette Kress, said she didn’t anticipate any “immediate material impact” but tighter curbs would impact earnings in the future.

US officials plan to tighten export curbs announced in October to restrict the sale of some artificial-intelligence chips to China, according to multiple media reports, including the Wall Street Journal and Financial Times. Washington has ramped up efforts to cut China off from key technologies that can support its military.

The US Department of Commerce has not replied to a CNN request for comment.

The rules, as reported, could make it harder for companies like Nvidia

(NVDA) to sell advanced chips to China. Fueled by a boom in demand for its AI chips, the company briefly hit a market capitalization of $1 trillion in late May.

“We are aware of reports that the US Department of Commerce is considering further controls that may restrict exports of our A800 and H800 products to China,” Kress told an investment conference.

“Over the long-term, restrictions prohibiting the sale of our datacenter GPUs to China, if implemented, would result in a permanent loss of opportunities for US industry to compete and lead in one of the world’s largest markets and impact on our future business and financial results,” she said.

GPUs refer to graphics processing units, which are chips or electronic circuits capable of rendering graphics for display on electronic devices.

“Given the strength of demand for our products worldwide, we do not anticipate that such additional restrictions, if adopted, would have an immediate material impact on our financial results. We do not anticipate any immediate material impact on our financial results,” Kress added.

Last October, the Biden administration unveiled a sweeping set of export controls that ban Chinese companies from buying advanced chips and chip-making equipment without a license.

The new move is aimed in part at Nvidia’s A800 chip, which the US-based company created following the introduction of last year’s curbs in order to continue to sell to China, Bloomberg reported.

China is a key market for Nvidia. Revenues from mainland China and Hong Kong accounted for 22% of the company’s revenue last year, according to its financial statements.

On Wednesday, shares of Nvidia slumped as much as 3.2%, before recouping some of the losses. It ended down 1.8%. Chinese AI stocks suffered much heavier losses.

Inspur Electronic Information Industry fell by 10%, the maximum allowed, on Wednesday in Shenzhen. It dropped again by 5.3% on Thursday. Chengdu Information Technology of Chinese Academy of Sciences slid 12% on Wednesday. Baidu

(BIDU), which is developing a rival to ChatGPT, sank 4.4% on Thursday in Hong Kong.

“The US could ruin China’s AI party,” Jefferies analyst said in a research note. Local chipsets do not have Nvidia’s GPU ecosystem, thus every update may require reworking, resulting in lower efficiency and higher costs.

The Biden administration’s chip curbs would be “much more effective” in limiting China’s advances in military power driven by AI than rules restricting US investment in China’s tech sector, the analysts added.

China has strongly criticized US restrictions on tech exports, saying earlier this year that it “firmly opposes” such measures.

In May, Beijing banned Chinese operators of critical information infrastructure from buying products from Micron Technology

(MU), in apparent retaliation against sanctions imposed by Washington and its allies on the country’s chip sector.

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April 12, 2021
TSMC says skilled worker shortage delays start of Arizona chip production | CNN Business

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Shares of Taiwan Semiconductor Manufacturing Co slumped more than 3% Friday after the world’s largest contract chipmaker flagged a 10% drop in 2023 sales and said production due to start next year at its first plant in Arizona would be delayed.

On Thursday, TSMC

(TSM) reported a 23% fall in second-quarter net profit — its first year–on-year drop in quarterly profit since 2019 — as global economic woes take a toll on demand for chips used in everything from cars to cellphones.

“While the company’s declining revenue and profit were disappointing, its long-term growth prospects remain encouraging,” said Brady Wang, associate director at Counterpoint Research. “Despite facing macroeconomic headwinds, TSMC’s long-term outlook remains robust, supported by mega trends like 5G and high-performance computing.”

As TSMC steps up its global expansion, the company said production at its first plant in Arizona will be delayed until 2025 due to a shortage of specialist workers.

“While we are working to improve the situation, including sending experienced technicians from Taiwan to train the local skilled workers for a short period of time, we expect the production schedule of N4 process technology to be pushed out to 2025,” TSMC chairman Mark Liu said Thursday.

TSMC’s total investment in the US project amounts to $40 billion.

The company said its position as the largest manufacturer of artificial intelligence chips and high demand for AI have not offset broader end-market weakness as the global economy recovers more slowly than it had expected.

“The short-term frenzy about the AI demand definitely cannot extrapolate for the long term. Neither can we predict the near future — meaning next year — how the sudden demand will continue or flatten out,” Liu said.

Still, the company’s earnings of 181.8 billion Taiwan dollars ($5.85 billion) for the quarter ending in June beat forecasts.

“We see TSMC well-positioned for a strong growth outlook in 2024,” Goldman Sachs said in a research note. “We believe the US expansion delay is also well-expected by investors.”

Other analysts, too, were upbeat on TSMC, thanks in part to strong demand for AI, which currently accounts for around 6% of the company’s revenue.

“We expect a solid 2024-onward outlook on the back of its leading position in AI chip manufacturing,” Citi Research analysts said in a note.

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April 12, 2021
Google-parent stock drops on fears it could lose search market share to AI-powered rivals | CNN Business

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CNN
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Shares of Google-parent Alphabet fell more than 3% in early trading Monday after a report sparked concerns that its core search engine could lose market share to AI-powered rivals, including Microsoft’s Bing.

Last month, Google employees learned that Samsung was weighing making Bing the default search engine on its devices instead of Google’s search engine, prompting a “panic” inside the company, according to a report from the New York Times, citing internal messages and documents. (CNN has not reviewed the material.)

In an effort to address the heightened competition, Google is said to be developing a new AI-powered search engine called Project “Magi,” according to the Times. The company, which reportedly has about 160 people working on the project, aims to change the way results appear in Google Search and will include an AI chat tool available to answer questions. The project is expected to be unveiled to the public next month, according to the report.

In a statement sent to CNN, Google spokesperson Lara Levin said the company has been using AI for years to “improve the quality of our results” and “offer entirely new ways to search,” including with a feature rolled out last year that lets users search by combining images and words.

“We’ve done so in a responsible and helpful way that maintains the high bar we set for delivering quality information,” Levin said. “Not every brainstorm deck or product idea leads to a launch, but as we’ve said before, we’re excited about bringing new AI-powered features to Search, and will share more details soon.”

Samsung did not immediately respond to a request for comment.

Google’s search engine has dominated the market for two decades. But the viral success of ChatGPT, which can generate compelling written responses to user prompts, appeared to put Google on defense for the first time in years.

In March, Google began opening up access to Bard, its new AI chatbot tool that directly competes with ChatGPT and promises to help users outline and write essay drafts, plan a friend’s baby shower, and get lunch ideas based on what’s in the fridge.

At an event in February, a Google executive also said the company will bring “the magic of generative AI” directly into its core search product and use artificial intelligence to pave the way for the “next frontier of our information products.”

Microsoft, meanwhile, has invested in and partnered with OpenAI, the company behind ChatGPT, to deploy similar technology in Bing and other productivity tools. Other tech companies, including Meta, Baidu and IBM, as well as a slew of startups, are racing to develop and deploy AI-powered tools.

But tech companies face risks in embracing this technology, which is known to make mistakes and “hallucinate” responses. That’s particularly true when it comes to search engines, a product that many use to find accurate and reliable information.

Google was called out after a demo of Bard provided an inaccurate response to a question about a telescope. Shares of Google’s parent company Alphabet fell 7.7% that day, wiping $100 billion off its market value.

Microsoft’s Bing AI demo was also called out for several errors, including an apparent failure to differentiate between the types of vacuums and even made up information about certain products.

In an interview with 60 Minutes that aired on Sunday, Google and Alphabet CEO Sundar Pichai stressed the need for companies to “be responsible in each step along the way” as they build and release AI tools.

For Google, he said, that means allowing time for “user feedback” and making sure the company “can develop more robust safety layers before we build, before we deploy more capable models.”

He also expressed his belief that these AI tools will ultimately have broad impacts on businesses, professions and society.

“This is going to impact every product across every company and so that’s, that’s why I think it’s a very, very profound technology,” he said. “And so, we are just in early days.”

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April 12, 2021
Uber’s post-pandemic growth is slowing | CNN Business

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New York
CNN
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Uber has reported that its revenue ticked up 14% last quarter, marking a slower pace of growth than recent quarters when sales surged as riders returned to pre-pandemic habits.

The company on Tuesday reported revenue of $9.2 billion for the quarter ending in June, a 14% increase from the same period last year, just missing Wall Street’s estimates. The number of trips customers took were up 22% in the quarter.

The company reported its first-ever unadjusted operating profit of $326 million. It also posted record quarterly free cash flow of $1.1 billion.

“For most of our history, ‘profitable’ wasn’t the first thing that came up when you ask someone about Uber,” CEO Dara Khosrowshahi said on a call with analysts Tuesday morning. “But we knew they were wrong about Uber, as did many of our investors who backed us over the years.”

Uber also said gross bookings (the amount paid by customers) surged 16% year over year to $33.6 billion. Trips during the quarter grew 22% to 2.3 billion, or approximately 25 million trips per day on average.

On the call, the chief executive touted “a new all-time high of $15.1 billion in total earnings for drivers and couriers on the platform” that was seen last quarter.

Uber also announced Tuesday that Chief Financial Officer Nelson Chai will leave the company next January, and a search for his replacement is underway.

“Nelson has been a huge part of Uber’s transformation over the past five years,” Khosrowshahi said on the analysts’ call. “I know that I speak for the entire company that we’re grateful for everything he’s done to establish such a strong foundation for a path forward.”

Shares for Uber climbed by some 4% in pre-market trading Tuesday morning as the company offered rosy guidance. Uber stock has roughly doubled since the start of the year.

In a note Tuesday morning, William Blair analyst Ralph Schackart touted how the strong results this past quarter were “driven by continued execution, robust engagement, and record audience levels using the platform.”

“Uber continues to drive incremental profitability, demonstrating its ability to efficiently run the broader business and drive positive results,” Schackart added.

Uber has so far navigated its pandemic recovery far better than its chief rival, Lyft. Lyft is set to report quarterly earnings next week on Tuesday.

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April 12, 2021
Meta stock jumps after company reports first revenue growth in nearly a year | CNN Business

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New York
CNN
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Facebook-parent Meta on Wednesday reported that it grew sales by 3% during the first three months of the year, reversing a trend of three consecutive quarters of revenue declines and far exceeding Wall Street analysts’ expectations.

Meta shares jumped as much as 12% in after-hours trading following the report, continuing the company’s strong trajectory since Zuckerberg announced that 2023 would be a “year of efficiency.”

Another bright spot: user growth was relatively strong compared to recent quarters. The number of monthly active people on Meta’s family of apps grew 5% from the prior year to more than 3.8 billion and Facebook daily active users increased 4% to more than 2 billion.

“We had a good quarter and our community continues to grow,” Zuckerberg said in a statement Wednesday. “We’re also becoming more efficient so we can build better products faster and put ourselves in a stronger position to deliver our long term vision.”

But Meta has a long hill to climb.

The company also reported that profits declined by nearly a quarter compared to the same period in the prior year to $5.7 billion. Price per advertisement — an indicator of the health of the company’s core digital ad business — also decreased by 17% from the year prior.

Meta has been in the midst of a massive restructuring, as it attempts to recover from a perfect storm of heightened competition, lingering recession fears resulting in fewer ad dollars and a multibillion dollar effort to build a future version of the internet it calls the metaverse. Meta said in November it would eliminate 11,000 jobs, the single largest round of cuts in its history. And in March, Zuckerberg announced Meta would lay off another 10,000 employees. All told, the cuts will shrink Meta’s workforce by a quarter.

Meta took a hit of more than $1 billion related to the restructuring in the March quarter, and said it will realize additional charges of around $500 million related to 2023 layoffs by the end of the year.

Zuckerberg said on a call with analysts Wednesday that when Meta started its “efficiency work” late last year, “our business wasn’t performing as well as I wanted, but now we’re increasingly doing this work from a position of strength.”

The company said it expects revenue to grow again in the current quarter compared to the prior year. And it slightly lowered its expectations for full-year expenses, potentially buoying investor optimism.

“The year of efficiency is off to a stronger than expected start for Meta,” Insider Intelligence principal analyst Debra Aho Williamson said in a statement. But she added that the company “can’t afford to sit still in this environment.”

Like other tech companies, Meta has recently read investor cues and taken to playing up its focus on artificial intelligence rather than the metaverse. The shift comes as Meta contends with the popularity of AI tools from tech firms like Microsoft and OpenAI.

In his statement with the results Wednesday, Zuckerberg said: “Our AI work is driving good results across our apps and business.” He added in the call that the company’s AI work includes efforts to build AI chat experiences in WhatsApp and Messenger, as well as visual creation tools for posts on Facebook and Instagram and advertisements.

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April 12, 2021