Friday Four Play: The “Over The Hills And Far Away” Edition
Hey, Great Ones, you got the love I need.
Maybe, more than enough. Oh, Wall Street, Wall Street … Wall Street, walk a mile with me.
Oh, inflation’s got so much … so much … so much…
Just what are you on about, Mr. Great Stuff?
Well, since the Fed’s favorite inflation indicator is basically “over the hills and far away,” I figured some Zeppelin was in order.
That’s right, the Personal Consumption Expenditures Price Index (PCE) surged 6.8% in June, marking its biggest annual jump since January 1982.
The so-called “core” PCE Index — which removes food, energy and rents — rose 4.8% from 2021. Still, growth in the core Index is down from a 5.3% surge in February.
Maybe that’s why Federal Reserve Chairman Jerome Powell’s comments were a bit more dovish than Wall Street was expecting this week.
I don’t know about you, but a dovish Fed seems a bit premature, given that PCE real spending only rose 0.1% in June — well below inflation’s still rampant pace.
Oh, and speaking of consumers… Y’all are the most pessimistic bunch ever. The June Consumer Confidence Index hit another record low, dropping to 95.7 from May’s lowered reading of 98.4. This marks the third straight drop in consumer confidence and the second record low reading in a row.
So how do we make money in this clearly deteriorating situation?
Great Ones, many times I’ve invested, and many times been bitten. Many times I’ve gazed along the open road. But many investing dreams come true, and some have silver linings.
Take cryptocurrency and Bitcoin…
As many of you know, bitcoin is a word that only leaves you guessing. Guessing about a thing you really ought to know … you really ought to know.
Let’s say you bought bitcoin in 2015, and you turned $250 into about $20,000. Not too shabby … if you had the stomach to hold through multiple 80% plunges and two 50% declines in the last year alone.
But if you live for your dreams and a pocket full of gold, you’ve probably realized that the good ol’ buy-and-hold days of bitcoin are gone. Kaput. Joined the choir invisible.
That’s why my buddy Mike Carr recently perfected a trading system that could’ve quintupled your results.
That $250 in 2015? It’s $106,000 now.
Can you say “buy-and-hold looks like an absolute joke?” Sure you can.
And now for something completely different … it’s time for Friday Four Play!
No. 1: Stairway to Apple
There’s a company that’s sure all its iProducts are gold, and its stock’s on the stairway to heaven.
Aww… Spoil sport.
So anyway … it looks like I’ll have to quit bashing Apple for a while. The company freaking killed it with its Q2 report, laying down a double-beat quarter:
- Earnings per share: $1.20 versus $1.16 expected.
- Revenue: $83 billion versus $82.81 billion.
Not only did earnings and revenue top Wall Street’s targets, iPhone and iPad revenue were both exceptional … and gross margin came in at 43.26% versus estimates for 42.61%.
The only weak spots in Apple’s armor were a slight miss on services revenue — which still rose 12% year over year — and Mac revenue, which always seems to struggle.
If you were hoping for a double beat and raise, however, you’re going to be disappointed. Apple didn’t provide current-quarter guidance, but CEO Tim Cook said: “In terms of an outlook in the aggregate, we expect revenue to accelerate in the September quarter despite seeing some pockets of softness.”
Cook may not be the piper that will lead us to reason, but Apple has certainly figured out how to be a rock and not to roll, oh yeah.
AAPL stock rose roughly 3% on the day.
No. 2: Hey, Hey Amazon Too
Want to tell you about this stock I love, my, it looks so fine.
It’s the only one that I’ve been betting on, maybe someday it will be all mine.
In the evening when the sun is sinkin’ low, and everybody’s with the one they love…
I search online lookin’ for something to buy … searching for my Amazon fix.
Despite inflation and struggling consumers, Amazon is still killing it. Revenue jumped to $121.2 billion, with Amazon Web Services (AWS) sales soaring to $19.74 billion.
Investors were relieved to see strong revenue from AWS, especially after Microsoft’s Azure saw a bit of a slowdown in growth last quarter.
But it wasn’t all hanging out in bars where the people play guitars for Amazon. The company lost $2 billion on the quarter due to its investment in electric vehicle maker Rivian Automotive (Nasdaq: RIVN). So far this year, Amazon has lost more than $11 billion on its RIVN holdings.
Additionally, Amazon’s North American retail division also logged its third consecutive loss.
It’s odd to think that Amazon is subsidizing its online retail business with AWS and ad revenue, but it is what it is.
AMZN stock rallied more than 11% following the report, but I’m interested to see just how the economic recession in the U.S. affects this enthusiasm going forward.
No. 3: Aaah Aaaaaa Ah!
My personal favorite streaming company just reported a Q2 net loss of $112.3 million, or $0.82 per share. Revenue came in at $764.4 million.
Both figures missed Wall Street’s expectations.
And that’s not the worst of it:
In Q2, there was a significant slowdown in TV advertising spend due to the macro-economic environment, which pressured our platform revenue growth. Consumers began to moderate discretionary spend, and advertisers significantly curtailed spend in the ad scatter market. — CEO Anthony Wood
So in addition to supply chain issues — i.e., semiconductors — Roku is now facing a slowdown in ad spending. This is bad news bears for the company, as it makes most of its money now from ad revenue.
Roku said it expects Q3 revenue to rise only 3% to $700 million, whiffing the Street’s target for $898 million. Roku also pulled its full-year outlook, adding more fuel to the selling fire.
As a result, ROKU stock plummeted more than 25%.
Now, I get a slowdown in Twitter, Snap and Facebook ad spending … but Roku has the greatest streaming device market penetration in the world. It has tons of free content and is on its way to becoming the biggest online “broadcaster.”
Ad companies are going to figure this out when the U.S. recession hits full swing. They’re going to see a boom in ad-supported streaming as wallets get tighter. As such, I see this 25% plunge in ROKU as a potential buying opportunity — if you have the risk tolerance, that is.
No. 4: Intel, I’m Gonna Leave You
I said Intel (Nasdaq: INTC), you know I’m gonna leave you.
I’ll leave you when the summertime comes a-rollin’.
Of all the semiconductor companies on the market, Intel is about the last one I’d buy right now.
The company’s Q2 report shows that it still hasn’t solved any of its problems, and I’m not sure passage of the CHIPS for America Act is gonna help Intel at all.
I mean, just look at these pathetic numbers:
- Earnings per share: $0.29 versus $0.69 expected.
- Revenue: $15.3 billion versus $17.94 billion expected.
Even guidance came in light, with Intel’s Q3 revenue of between $15 billion and $16 billion well below the consensus estimate for $18.72 billion. And then Intel cut its full-year expectations as well.
I’ve rarely seen a company post a double miss and guide lower. That said, I have to congratulate Intel’s leadership for realizing that it wasn’t just all economic and supply chain issues:
This quarter’s results were below the standards we have set for the company and our shareholders. We must and will do better. The sudden and rapid decline in economic activity was the largest driver, but the shortfall also reflects our own execution issues. — Intel CEO Pat Gelsinger
You know your “own execution issues” are big when even the imminent passage of a $52 billion government semiconductor incentive package does absolutely nothing for your stock. Or who knows … maybe it did have an impact and INTC stock still fell more than 9%.
Either way, until Intel shows that it can get its $#!t together … I’m avoiding INTC stock like the plague.
What Is And What Should Never Be
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