Serving apples

Market scorecard

US markets bumbled sideways in quiet trade yesterday, then ended lower. The S&P 500 fell for the third day in a row, but those losses only add up to 1.9%, so there's no need to panic. Energy shares led with a 1% gain, while utilities and real estate sectors dropped 2.3% and 1.4%, respectively.

In more exciting company news, Amazon (NASDAQ:AMZN) gained 8.7% after-hours thanks to a resounding earnings beat, with pleasing signs in both its e-commerce and cloud hosting businesses. Apple (NASDAQ:AAPL)'s results were more muted, and the stock price went 2% lower in late trade. Michael goes into more detail on those numbers below.

Yesterday's scoresheet - the JSE All-share closed up 0.35%, the S&P 500 fell 0.25%, and the Nasdaq was just 0.10% lower.

Michael's musings

Last night Apple reported 'meh' results, with both revenue and profits slightly higher than forecast, but forward guidance lighter than the market wanted. For the quarter, Apple reported revenue of $81.8 billion, down 1% from a year earlier. At their scale, it's hard to move the needle up or down.

Apple's annual revenue is just under $400 billion, more than South Africa's GDP! Of those sales, around 25% goes to shareholders as profit.

Sales of iPhones, Macs and iPads were down, but wearables and services saw good growth. The exciting news was that Apple now has over 1 billion paying subscribers for Apple services.

The company noted good demand in emerging markets, with the new store in Mumbai, India exceeding their expectations. There's good potential to sell more devices and services in poorer countries, while developed markets are closer to being saturated.

In years past, Apple's revenue consisted mostly of iPhone sales, with everything else rather irrelevant. The services business is now huge too, helping the company to have a more diversified business. For perspective, in this quarter just passed, iPhone sales were $39 billion and services sales were $21 billion.

Over the last nine months, Apple generated $88 billion in free cash flow, another mind-numbing number. $56 billion of that was used on share buybacks and $11 billion was paid out in dividends. Apple might not be seeing rapid growth like some other technology companies, but it is a stable cash-generating machine. We are happy shareholders.

One thing, from Paul

Friday life advice time! A Twitter user called @fed_speak came up with this gem in October 2020.

"The purpose of life is to experience things for which you will later experience nostalgia".

That's excellent. In other words, try for more moments that will be memorable, in years to come. The best way to do that is to share special meals, trips or activities with loved ones. Of course, those require some forward planning.

Byron's beats

Tesla (NASDAQ:TSLA) has decided to licence their self-driving software for installation on other cars. Tesla Full Self Driving (FSD) is their beta assistance system that can automate some driving tasks. Unfortunately, it is not completely autonomous just yet.

Tesla is taking this step because it opens the door to relationships with hundreds of millions of new customers. It will also allow them to gather a lot more driving data, which is needed to help crack remaining obstacles to truly driverless vehicles.

There are presently about 400 000 Tesla vehicles with FSD on the roads. They have accumulated around 300 million miles of FSD driving data. I'm very excited about the prospect of Tesla being the first to create a completely safe and competent autonomous car. This is another step in the right direction.

Bright's banter

On Tuesday, Prosus (JO:PRXJn) announced plans to sell parts of its fintech company PayU to UK-based Rapyd for a cool $610 million. The deal excludes PayU's operations in India, as well as its units in Turkey and Indonesia. It does include PayU's Global Payments Organisation, which operates in over 30 countries and makes up about a third of PayU's overall revenue. That unit has seen payment volumes grow like crazy, up over 300% in the past five years alone.

PayU is a major player in the digital payments world, serving over 450,000 merchants and millions of consumers across 50 markets. The honchos at Prosus are pushing it to double down in areas where it has a substantial market share, and offload the rest. PayU is the leading payments service provider in India and is rapidly expanding its credit offering.

Prosus CEO Bob van Dijk is under pressure to unlock value in the portfolio at a scale comparable to the epic bet on Tencent (HK:0700). The payments and fintech segment is most promising, and showed revenue growth of 52% in the last financial year. It's encouraging to see that all bets are on the table.

Signing off

Asian markets are slightly higher across the board this morning. The People's Bank of China has been making a lot of noise about stepping up monetary support, and mentioned it again this morning in a press briefing after meeting with hotshots from the property industry.

US equity futures are trading higher, but can they hold on to these gains as the day wears on? The monthly US non-farm payrolls data is due this afternoon, which will be a good indicator of whether the US jobs market is still firing on all cylinders or cooling off.

The Rand has had a rough week, and is trading at around R18.69 to the Dollar.

Here in Joburg the days are getting longer and the weather warmer. Enjoy the weekend.

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