Apple’s Court Of A-Peels, The Dell With It & Ford’s F-It-150
Friday Four Play: The “Too Late For Love” Edition
Somewhere in the distance, I hear the opening bell ring. Apple (Nasdaq: AAPL) news settles on the Street as investors start to sing.
And the developer ‘cross the street, she shuts out the night. There’s a thousand customers waiting … and she shuts out the light.
But it’s too late … too late … too late for love!
Sorry, got carried away with that one. But still, a little Def Leppard never hurt anyone.
So, Apple announced today that it’s making broad changes to App Store rules in an attempt to settle a class-action lawsuit. The suit, filed by U.S. app developers, alleges that Apple uses its market position to engage in anticompetitive behavior.
“What behavior?” you ask?
Well, on top of the 15% to 30% App Store “tax” that it charges every developer, Apple also forbids companies from letting customers know about cheaper payment and subscription options outside of the App Store.
Apple says it does this to provide safety and security to App Store users. I think that’s a smokescreen that Apple uses to pump up its services revenue … and it’s not just me thinking that, as you can tell from the lawsuit.
Not surprisingly, Apple’s App Store changes directly address the developers’ lawsuit. The company said it could allow developers to advertise other payment methods for services offered through their apps. But not within the apps themselves.
Nope. Developers could be allowed to email users on how to get around Apple’s payment systems. Because that’s how all the hip app users today get their info … not from in-app notifications, but email. Riiight.
Apple will also pay $100 million to developers as part of the settlement, which, of course, needs to be approved by a judge.
Steve Berman, a lawyer for the developers, called the settlement “hard-won” and said it would benefit U.S. iOS developers. But Meghan DiMuzio of the Coalition for App Fairness called Apple’s offer a “sham settlement.”
I have to say that scoring the privilege of emailing your own customers about your own apps doesn’t really feel like a “hard-won” victory. It sounds like “let them eat cake.” Apple’s proposal could also give Epic Games’ lawsuit against the company (for similar reasons) a considerable boost.
That said, the news doesn’t appear to have impacted investor sentiment on Apple — the stock initially rose on the news. I’m inclined to think that the lack of investor reaction means Apple’s offer heavily favors Apple … and not developers. Go figure.
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And now for something completely different! Here’s your Friday Four Play:
No. 1: What The Dell?
Even when you do everything right, someone else can come along and screw it all up for you. That’s what Dell Technologies (NYSE: DELL) investors face today.
For its part, Dell reported stellar second-quarter financials and guided above average for the year. Earnings beat Wall Street’s expectations by a full $0.21 per share. Revenue surged 15% to $26.1 billion as both retail and corporate customers rushed for new equipment.
Even guidance was solid. Dell forecast earnings of between $3.69 and $3.75 per share for the year — up 50% from 2020.
That’s a double beat and raise for those keeping track at home. So, why is DELL stock down roughly 5% today?
Well … that blame falls squarely on Dell competitor HP Inc. (NYSE: HPQ).
HP put in a solid quarter of its own but warned about supply shortages: “We could have grown more if it wasn’t for the shortages of components,” said HP CEO Enrique Lores. HP’s third-quarter guidance also missed Wall Street’s expectations.
Surprisingly, HP stock is only down about 2.5% … which seems entirely unfair. Apparently, Wall Street thinks that HP is better equipped to handle supply issues than Dell … even though Dell said it was doing fine with minor supply constraints, and HP went full-on temper tantrum.
I’m calling this a potential investing opportunity for DELL — if you’re looking for a way to get in on the work-from-home/return-to-office technology boom, that is.
No. 2: Trampled Under Ford
Much like supply chain hiccups (and HP) trampled Dell’s dreams today, so too was Ford’s (NYSE: F) Friday ruined by that dang chip shortage … again.
By this point, I think Ford’s tired of warning us about the chip kerfuffle.
Ford’s Kansas City Assembly Plant was closed this past week and will stay closed next week due to the lack of available parts. The Dearborn facility will face time cuts as well.
Both of these plants make the F-150, which is Ford’s most profitable cash cow … and its last resort when it comes to production cuts.
It’s not just stateside manufacturing, either — Ford’s also halting production at its Oakville Assembly Plant in Canada, which makes the Ford Edge and Lincoln Navigator.
This all sounds … vaguely familiar. Why must you give me déjà vu, Mr. Great Stuff?
Because we’ve seen this before with Ford. And it was an absolute car-tastrophe.
Remember, Ford announced back in March that it would idle its Dearborn, MI, plant because of the supply chain hullabaloo. And back then, I noted:
So, what does it tell you that Ford is cutting back on F-150 production companywide?
The U.S. automaker tried “rolling shutdowns” at its various plants throughout the year, and Ford still lost about 50% of its planned production last quarter. Now it’s bad enough for Ford to consider hurting production for its most profitable vehicles, which leads me to believe Ford’s about to go from bad to worse … and then worse again.
If you’re in the mood for non-Apple rumors, there was talk back in 2019 of a new Ford Bronco model — a pickup with more offroad-friendly pizazz. Ford never officially confirmed that it was making the model … but apparently, Ford fans (Fordies?) are so starved for truck models, the internet already went wild over Schrödinger’s Bronco.
But new rumors have emerged that the old rumors are now cancelled. In other words … no Bronco pickup for you. Looks like Ford’s reserving all its resources (read: chips) to keep cranking out any and every F-150 it can, lest that precious bottom line is tarnished even further.
No. 3: The Secret Semiconductor Sauce
Joseph, if this next story is another stupid chip shortage, my iPad’s going out the window.
Oh, but how about this? When is a chip shortage not a chip shortage? That’s to say … what if you were the one controlling the world’s supply of chips? Interested yet?
We’re moving right on up the supply chain … from the consumer tech cronies and automakers up to semiconductor big wigs like Taiwan Semiconductor Manufacturing (NYSE: TSM) that are the literal foundries for the world’s semiconductors.
TSM has been stuck between insane demand for its chips … and not being able to make enough of said chips. In a sense, this is the best spot to be in when you’re the chipmaker’s chipmaker. You control the spice … the flow of that chipmaking sand.
Now, TSM plans to raise prices to curtail demand for all but its most serious customers. In this case, you can bet tech giants like Dell and HP will get their chips before those back-of-the-line automakers (sorry, Ford).
Prices for Taiwan Semi’s most advanced chips will go up 10%, while its less-advanced chips that usually go to automakers will be marked up 20%. (Sorry again, Ford…) But as we’ve seen this earnings season, where there are semiconductor fears … there’s probably some inflationary fearmongering as well.
The Wall Street Journal is freaking out about “muh chip prices!” but to me, I don’t think TSM’s price hike will affect much at all. The company renegotiates prices this time of the year all the time. So, Taiwan Semi’s chips were due for a price increase anyway … regardless of the chip shortage snafu.
On the other hand, TSM stock isn’t jumping or falling off a cliff. Apparently, Wall Street doesn’t think the pricing moves will add or detract from the company’s bottom line. In fact, with how little of a reaction this news got, I’m thinking The Wall Street Journal’s looking to rile up some inflation ballyhoo.
For instance, Apple’s one of TSM’s biggest customers. And if Apple’s cost basis goes up, you bet that price hike will kindly and oh-so-innovatively be passed on to you, the customer.
But you tell me: If Apple’s iPhone prices were expensive due to inflation … how would anyone know?
No. 4: I Want To Ride My Bicycle
I want to ride my bike … and preferably without any data hacks or fatalities — thank you very much.
While the company warned investors back in May that Tread+ recalls would total $165 million in lost revenue, sales backpedaled even further in its latest fiscal quarter.
Peloton reported a net loss of $313.2 million, or $1.05 per share — far worse than Wall Street’s estimated drop of $0.45 per share.
Part of this slowdown is due to Peloton recalling those medieval torture devices — I mean treadmills. The company also faces increased competition from other at-home fitness companies like Tonal and Hydrow, whose machines offer more full-body workouts.
And let’s not forget all those crazies who still like to exercise outside. Apparently, warm weather following a year of lockdowns really dampens enthusiasm for further indoor activities. I’ll take air conditioning any day of the week … but hey, you do you.
To lure exercise enthusiasts back inside, Peloton announced a surprise 20% price cut to its signature stationary bike following yesterday’s earnings announcement. Of course, Wall Street didn’t like that one bit, taking it as a sign of waning customer demand in the face of cheaper competition — as it should.
But wait … there’s more!
More? How much worse can it get? Wait, don’t tell me…
Yup, you’re right. This morning, Peloton announced that the U.S. Department of Justice and the Department of Homeland Security subpoenaed the company in regard to its Tread+ recalls.
Evidently, it’s not good business practice to (initially) deny product safety concerns when said products have, in fact, injured multiple people. Oopsie-daisy.
Unsurprisingly, PTON shares tumbled nearly 8% following the announcement … but methinks this won’t be the last of the company’s plight. If the deadly recalls and Peloton’s lack of competitive edge were somehow compelling to you … steer clear of Peloton stock for now.
Ladies & Gentlemen, The Weekend!
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