Market scorecard
US markets took a hit last night and bonds rallied on disappointing economic data. Unemployment claims hit an almost one-year high and US manufacturing contracted. With the next Federal Reserve meeting only in September, this bad news was taken as bad news. The S&P 500 and the tech-heavy Nasdaq saw their biggest declines since May 2022.
In company news, Amazon (NASDAQ:AMZN) slid 6.8% in late trade on a slight revenue miss and disappointing guidance for the third quarter. The good news was that AWS cloud sales exceeded all estimates. Elsewhere, Apple (NASDAQ:AAPL) rose 1% after-hours as it reported excellent hardware and services revenue.
In summary, the JSE All-share closed down 1.08%, the S&P 500 gave up 1.37%, and the Nasdaq was hammered by 2.30%. Oof.
Byron's beats
After a rough few weeks for the magnificent 7 stocks, Meta (NASDAQ:META) galloped to the rescue with some great-looking numbers on Wednesday night. Revenues came in at $39 billion, crushing expectations by $760 million. Earnings were up 73% from this time last year at $5.16 per share, well ahead of the expected $4.72. If you annualise those earnings, the stock trades on a price-to-earnings ratio of 22 which seems good value for such a solid business.
DAP (daily active people) amongst their family of apps for the quarter was 3.27 billion, 7% higher than last year. This resulted in ad impressions increasing 10% year-over-year, led by Europe where advertising revenue grew by an impressive 26%.
WhatsApp is finally starting to contribute. Paid messaging tools are estimated to have contributed around $400 million. That's still small, but growing 73% versus last year.
Of course AI is still a strong theme. I am excited about how that technology can improve their advertising effectiveness as well as timeline algorithms. That would be the immediate benefit but Zuck and the team have bigger plans.
Their open-source Llama product will allow anyone to build AI tools on the platform. Meta has invested huge amounts of money (mostly on Nvidia (NASDAQ:NVDA) chips) to build this system. They believe that having open-source AI will reduce the potential risks that come with AI.
How they will fully monetise free AI tools remains to be seen. I guess everyone is racing to become the next Apple app store of AI and it seems Meta is one of the front runners. I have a schoolmate who works at Meta and has been working on the Llama project. I am visiting him at the Meta head office in September. I am looking forward to getting some direct feedback.
This business has incredible foundations which allows it to stay ahead of the game. It is run by one of the best CEOs on the planet who took some time to mature but that is understandable. Meta is a must-own in all portfolios.
One thing, from Paul
Here's an important life skill we need to work on right now: discerning what is fake and what is real, and focusing on the latter.
Put your hand up if you've been spending more time recently on social media apps, watching visually arresting content. I'm guilty of it, for sure. Much of this stuff is generated to maximise engagement or outrage, and a lot of it is "slop" created by AI.
The picture below is an example of a trend that is popular on Facebook (NASDAQ:META) now. It features outlandish images of Jesus and flight attendants. It's garbage, but people love it. You can spend hours trawling through this kind of thing. Hours that could have been used for a more worthwhile endeavour, like exercising, or talking to your friends and family.
Aldous Huxley's book Brave New World, written in 1931, warns that "the truth will be drowned in a sea of irrelevance". He feared that humanity would be overwhelmed by a steady diet of entertaining content, reducing us to passivity and egoism. In other words, what we love will ruin us.
Bright's banter
L'Oreal (EPA:OREP) reported a mixed yet reassuring performance in the second quarter, driven by growth outside China. The French cosmetics giant saw a 5.3% year-on-year increase in sales, reaching EUR10.875 billion, above expectations.
The growth was primarily fuelled by skin products, though the dermatological beauty sub-segment fell short of expectations. L'Oreal's performance in emerging markets, Europe, and North America offset a 2.4% decline in the North Asia region, including China, where soft consumer spending impacted sales.
Operating profit for the first half of the year rose 8% to EUR4.60 billion, narrowly beating analyst predictions. The company remains optimistic about outperforming the market this year, highlighting improvements in travel retail in North Asia and stronger-than-expected growth in Europe.
L'Oreal's North American business also showed resilience with a 3.4% increase in organic sales, while Latin America grew by 12.3%. The company's net profits for the first half of 2024 increased by 8.8% to EUR3.65 billion, with total sales rising by 7.5% on a reported basis.
Management expressed confidence in L'Oreal's ability to continue outpacing the global beauty market despite ongoing economic and geopolitical tensions.
Signing off
Asian markets are tanking this morning. Equity benchmarks fell in Hong Kong, India, Japan, while mainland China, South Korea, and Taiwan led the drop with their biggest one-day reversal in four years.
In local company news, Mpact (JO:MPTJ) has entered into a deal to sell its Versapak business to Greenpath Recycling for R267.7 million. Elsewhere, MTN (JO:MTNJ) Ghana saw a rise in both mobile and data subscribers, while mobile money continued to outperform.
US equity futures are in the red pre-market. The Rand is trading at around R18.27 to the US Dollar.
It's been a topsy-turvy week. Happy Friday and take a rest.