Daily Archives: July 29, 2022

In its earnings report, Ally Bank, a big auto loan maker, provided data on past-due auto loans in the second quarter for borrowers at a range of income levels. Past-due loans were either at or close to prepandemic levels for borrowers with lower incomes.

Ally declined to provide the same data for earlier quarters, making it impossible to know how quickly past-due loans might have risen. On its earnings call, Jenn LaClair, Allys chief financial officer, said, We have continued to invest in talent and technology to enhance our servicing and collection capabilities and remain confident in our ability to effectively manage credit in a variety of environments.

Some analysts think the pullback in spending could spread to wealthier households.

Youre going to see it go up the income scale as the year unfolds with people sitting there, saying, Ill go without rather than spend this much on that or Ill trade down to something more affordable, said Mr. ORourke, the JonesTrading strategist. He added that he was waiting for earnings from Macys and Nordstrom, which are scheduled to report in August, to see if that was happening.

The concern is that the heavy summer spending that has recently bolstered the earnings of the hospitality industries and the airlines is not sustainable. Theres a faction of the market thats quite convinced that when we get to the fall and the bills from the summer spending come home to roost, the consumer will be in a much trickier spot, Mr. Barnhurst of PGIM said.

An exchange this earnings season reveals how chief executives and companies can keep the economy going, even when they fear that a downturn may be at hand.

Jamie Dimon, the chief executive of JPMorgan Chase, warned in May that storm clouds were gathering over the economy. On JPMorgans second-quarter earnings call, Mike Mayo, an analyst at Wells Fargo, asked Mr. Dimon why the bank had committed to investing such large sums this year if things could turn dire.

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If the Economy Is Shaky, Why Are Company Profits Still Strong? - The New York Times

One day after a government report showed that the U.S. economy had shrunk for a second consecutive quarter -- an indicator the country may indeed be in a recession -- the Nasdaq Compositeis up 228 points, or about 1.9% in mid-afternoon trading on Friday. Those gains put the index up by about 10.6% for the month. If the market holds onto that rise, July will go in the books as the best month for the tech-heavy index since late 2020.

Leading Friday's move higher were tech giants Amazon(AMZN 10.36%), up 12%, andApple(AAPL 3.28%), up 3.7% after their quarterly reports -- delivered before the market opened -- beat expectations. A host of smaller tech companies' shares are up as well, including Five9 (FIVN 9.90%), which also rose 12% after reporting its own earnings.

Most of the clean energy stocks in the Nasdaq are also racing higher. The group includes SolarEdge Technologies(SEDG 5.55%) andSunrun (RUN 5.72%), with shares up around 6% as of this writing. Those gains came after Thursday's news that the U.S. Senate is moving forward with a spending bill that would provide significant funding and incentives to the renewable energy industry.

While Amazon reported a GAAP loss for the second quarter in part due to rising costs in its e-commerce business, its shares surged due to its generally positive results and forward guidance. Revenue was up 10% (adjusted for foreign currency changes), and a significant portion of its losses were tied to the drop in value of electric vehicle maker Rivian, in which Amazon owns a large stake. Investors are rewarding Amazon because of what's working well for it -- namely, advertising and its Amazon Web Services (AWS) cloud infrastructure unit. Ad sales were up 10%, while AWS revenue was up 33% and operating income rose by 36%. The company guided for revenue growth in the 13% to 17% range in the third quarter.

Apple also shook off investor concerns, beating expectations with modest revenue growth and reporting iPhone sales that outpaced the rest of the smartphone market, which seems to be cooling off. This is especially important for Apple. Not only is the iPhone its most important and profitable product, but it's also central to how most people access the tech giant's services ecosystem. Apple's services segment grew revenues by 12%; a significant portion of those $19.6 billion in quarterly revenues came from iPhone users.

Five9 investors have had a tough go of it, especially since its failed merger withZoom Video Communications last year. But the earnings report it delivered Thursday is helping reverse that downbeat sentiment. The company reported 32% revenue growth to a record $189.4 million. In particular, its enterprise business looks great, with 41% growth in subscription revenue. Its gross margins on a GAAP and adjusted basis fell modestly to 53% and 61%, respectively, but those results were in line with expectations. Based on the accelerating momentum of its business, management raised guidance for the year for both sales and operating results.

Like many other high-growth cloud and software-as-a-service companies, Five9 is still operating at a loss, and it generated negative operating cash flow in the quarter (though it has been operating-cash-positive in prior periods). Investors will want to keep monitoring its growth, and should also look for improved cash flow metrics. That's particularly true in today's interest rate environment, where capital access is growing more limited and borrowing is becoming more expensive.

Many of the Nasdaq's clean energy stocks also moved higher Friday on Thursday's news that congressional Democrats appear to have crafted a compromise bill that can win passage in the Senate and would provide $369 billion to support technologies to combat climate change. Much of that funding would go toward various incentives that favor clean energy tech companies. These include SolarEdge, which makes power management electronics used in residential and commercial solar power systems, and Sunrun, one of the largest installers of solar power systems in the U.S.

While government incentives will always be helpful to these companies, they're not thesis-changing or thesis-building. SolarEdge and Sunrun, for example, have grown to become significant players in their respective segments by focusing on providing high-quality products and services at competitive prices. While federal incentives can sweeten the pot, their competitors will have access to the same programs. At the end of the day, it will be the clean energy industry scaling up and global competition increasing that do the most to keep reducing the costs of wind and solar power and energy storage -- not federal subsidies or tax incentives.

John Mackey, CEO of Whole Foods Market, an Amazon subsidiary, is a member of The Motley Fool's board of directors. Jason Hall has positions in Zoom Video Communications. The Motley Fool has positions in and recommends Amazon, Apple, Five9, and Zoom Video Communications. The Motley Fool recommends SolarEdge Technologies and recommends the following options: long March 2023 $120 calls on Apple and short March 2023 $130 calls on Apple. The Motley Fool has a disclosure policy.

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What Recession? 5 Stocks Leading the Nasdaq to Its Best Month Since 2020 - The Motley Fool

Both companies reported that in addition to other segments of their businesses, their cloud and advertising services were a large part of the reason for their better than expected (or feared) results.

Much of the world has been forced to adjust their behavior over the last few years, with many spending more time online during the pandemic, whether it was working from home or shifting their buying habits, so showing growth in these areas would seem to make logical sense.

The CEO of Alphabet and Google, Sundar Pichai, commented on this in his statement, saying, The investments weve made over the years in AI and computing are helping to make our services particularly valuable for consumers, and highly effective for businesses of all sizes. As we sharpen our focus, well continue to invest responsibly in deep computer science for the long-term.

Microsoft executive vice president and chief financial officer, Amy Hood, similarly commented, In a dynamic environment we saw strong demand, took a share, and increased customer commitment to our cloud platform.

Microsoft revenue totaled $51.9 billion and increased 12% over the same period last year. Their operating income increased by 8% to $20.5 billion. A net income of $16.7 billion saw a 2% increase, and the diluted earnings per share were $2.23, up 3%. The company showed its best ever sales for the cloud service, Azure, which were up 28%.

The company this month was also selected by Netflix to partner in their newest ad-supported, cheaper subscription service, a potentially significant new source of revenue.

Alphabets figures show its lowest growth rate since the 2020 April-June quarter, but they are still in an enviable position compared to most other non-tech companies in the current landscape. Its revenue totaled $69.69 billion and increased 13% compared to the same period last year. Their operating income increased to $19.45 billion, up from $19.36 billion. A net income of $16 billion saw a small drop from last years $18.52 billion, and the diluted earnings per share were $1.21, down from $1.36.

Google Cloud fell short of target earnings by around $1 million at $6.3 billion, and ads through YouTube came in under budget, with $7.3 billion as opposed to $7.5 billion in estimates.

So far, these two firms have avoided the pitfalls that other large businesses across the world have been experiencing. Supermarket giant Targets shocking first-quarter earnings are one such example, as is Walmarts predicted decline in profits for its upcoming report due in August. Many point to the ongoing issues with inflation, household costs increasing, and supply chain issues as having a huge impact on such retailers.

Online rivals in the social media world, Twitter and Snap have also just seen negative fourth-quarter earnings, with some analysts pointing to the fact that ad content can be more expensive through these types of social media as opposed to search engines, as it requires more than just text.

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Tech Giants Hover Above the Storm - FX Empire

The market is trading higher in the early going here on Wednesday due mainly to positive responses to earnings from Alphabet (GOOGL) and Microsoft (MSFT) . Neither company had blowout reports, but market participants were relieved that there was not a major surprise, especially after the ugly news from Walmart (WMT) on Tuesday.

In addition to mild positive responses to Alphabet and Microsoft, there were good reports from Chipotle Mexican Grill (CMG) and Texas Instruments (TXN) , but the market doesn't look quite ready to start chasing the news at this point.

The big event will be the Fed interest rate announcement at 2 p.m. ET, followed by a press conference with Fed Chairman Jerome Powell. It is widely expected that the Fed will raise rates by three-quarters of a percentage point for the second month in a row, but what will be key is the policy statement and any hints about the pace of future hikes.

The Fed has been far more concerned about taming inflation than it has been worried about creating a recession, but now that there is some clear economic slowing in places the issue is whether there will be any hints about a gradual pivot to a less hawkish posture.

Investors are not very optimistic about a market-friendly Fed at this point, but those low expectations mean that even a subtle hint about some shift in policy will likely create a positive market response.

As the Fed news is digested, there will be a slew of earnings reports as well. Companies such as Meta Platforms (META) and Ford Motor (F) report tonight, and Apple (AAPL) is on deck for Thursday.

Overall the news flow out there is not very positive, but expectations are low and that is helping to create a positive reaction. If we had this sort of news in a different market environment there would be substantial selling pressure, but this market has discounted quite a bit of bad news already so mediocre news is all it takes to create a positive response.

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The Power of Low Expectations Is on Display in Reaction to Tech Giants' Results - RealMoney

Things are tough all over in the technology-media-telecom sector -- not only have big streaming companies like Netflix and Roku experiencing suddenly stalled growth and chilly investor relations, a retreat back to the comforts of linear distribution looks like a nonstarter.

Three of the five largest traditional bundlers of pay TV channels in America delivered second-quarter earnings reports this week, and each revealed marked increases in the number of customers ditching linear video service.

Verizon lost 86,000 Fios TV customers in Q2 vs. 62,000 in the same period of last year.

Comcast lost 512,000 pay TV customers in the second quarter, up from 399,000 in Q2 2021.

Charter Communications bled out another 240,000 Spectrum TV customers from April - June, up from just 63,000 in the same period last year. Two years ago, amid a flurry of broadcast connectivity signups from suddenly quarantined and desperate new customers, Charter added 94,000 video subscribers in Q2.

Dish Network, which lost 132,000 linear satellite TV customers in the second quarter of last year, will report metrics for Dish satellite and Sling TV in a few weeks.

And soon, Disney will also offer insight on Hulu+ Live TV. Beyond that, we have pretty much all the publicly effacing cord-cutting picture we're likely to get, and it ain't pretty.

Where are these pay TV refugees going to get their TV fix?

Roku, which had a miserable Q2 report Thursday amid what appears to be slowing advanced advertising sales, did say that its active user growth perked up in the second quarter, increasing to 1.8 million users vs. 1.2 million in Q1.

Beyond that, the video business is becoming a shrouded realm, full of spinoffs and Joint ventures that are harder to get metrics on.

Comcast, for example, noted Thursday that its app-based video JV with Charter will come off the books in the third quarter. The cable giant will stop revealing customer and financial data on services like the ad-supported Xumo, and it won't be compelled to talk about how many out-of-footprint customers are getting into platforms like XClass TV.

Essentially, Comcast's entire portfolio of app-based, beyond-footprint video experiences is going behind a wall, so we won't be able to necessarily trade a clean line between customers, say, ditching the traditional Xfinity X1 Full Monty and adopting X1-like app-based viewing via an XClass smart TV.

Indeed, there are more dark places to hide in the video business than not these days. That starts with the vast market capitalizations of the tech giants, who rarely drill down on the quarterly usage metrics of their video apps and CTV device platforms.

While revealing a net loss of nearly $2 billion in the second quarter on Thursday, Amazon didn't come close to drilling down on how many folks use Amazon Prime Video worldwide, or its connected TV platform, Amazon Fire TV.

Likewise, Apple hasn't once revealed a subscriber -- or even active user -- metric for Apple TV Plus. How many active users does the Apple TV 4K CTV ecosystem have? Outside of research company estimates, we have no clue.

Meanwhile, before it revealed decelerating Q2 ad sales for its YouTube platform, meanwhile, Google/Alphabet said its virtual MVPD, YouTube TV, had reached 5 million users. But we have no idea when that benchmark was actually reached or how fast the streaming service -- now the fifth largest pay TV platform -- is growing ... or not growing. Alphabet rarely drills down on it for its investors.

Back in the realm of linear, AT&T still owns the third largest linear pay TV brand in America, DirecTV, which encompasses satellite TV, DirecTV-branded vMVPD service and the legacy U-verse TV platform. These services collectively shedded around 473,00 customers in the second quarter of 2021. But again, since AT&T spun DirecTV off last year in a JV with private equity, we no longer have a visual.

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Cord-Cutting Quickens in Q2 for Comcast, Charter and Verizon, But Where Are All of Those Customers Going? - Next TV

Earlier this week, it was reported that Apple, Amazon, Microsoft and Alphabet have bought gold from an Italian refiner accused of sourcing it illegally from the Amazon. The refiner allegedly procured stocks of the precious metal from so-called wildcat miners accused of illegal deforestation and polluting the Amazon River with mercury.

The news reveals that, despite recent efforts, the worlds largest companies are still struggling to clean up their supply chains. Data from human rights advocacy group KnowTheChain reveals that the tech giants due diligence on human rights abuses in their supply chains is also moving at a glacial pace, with campaigners calling for faster action on forced labour.

The incident in the Amazon is not the first time the worlds biggest technology companies have been accused of negligence in monitoring their supply chains. In 2019, human rights lawyers launched a landmark legal case against Apple, Google, Dell, Microsoft and Tesla on behalf of 14 parents and children from the Democratic Republic of Congo alleging that these companies were complicit in the deaths of children working in cobalt mines in their supply chain.

The federal court in Washington dismissed the class action lawsuit last year on the grounds that this long chain of contingencies, in all its rippling glory, creates mere speculation, not a traceable harm.

But data from KnowTheChains ICT Index, which tracks the human rights due diligence efforts of the worlds 48 largest tech companies, leaves open the possibility that similar scandals are likely to arise in the future, largely due to the slow rate of progress in the sector.

The index scores companies out of 100 for their adherence to the UNs Guiding Principles on Business and Human Rights. The ICT sector as a whole scores 30 out of 100, with just 10 companies scoring above 50. Almost three-quarters of the companies analysed score below 50.

IT giant HPE ranked first in the Index with a score of 70, followed closely by Apple, Intel, Samsung and HP.According to the report, these companies have repaid workers who were forced to stump up illegal recruitment fees and provided specific details of how they support responsible hiring practices in their global supply chains.

Each of the five companies scored more than 80 for publicly disclosing their policies in training first and lower-tier suppliers to manage labour conditions in their supply chains.

HPE also stands out in its leadership in conducting extensive human rights due diligence processes. For example, the company has previously mapped out recruitment practices across its supply chains and has partnered with other large companies in the ICT industry to develop supplier guidance on repaying worker-paid recruitment fees.

According to researchers from KnowTheChain, it is also the only US-based company that does not limit supplier requirements regarding the right to freedom of association and collective bargaining in compliance with local law, effectively allowing its workers in its supply chains to unionise.

At the other end of the spectrum, companies with low scores include Hikvision, the world's largest video surveillance manufacturer, and Taiwan's Largan Precision which produces lenses for Apple. Both have committed to tackling forced labour in their production lines, but there is no evidence of any concrete steps to do so, according to KnowTheChain.

Smartphone giant Xiaomi is the only company to score zero on the Index. The Chinese manufacturer has a 14% share of the European smartphone market, third behind Apple and Samsung, according to figures from Statcounter.

Assessing the human rights impact of the technology supply chain is hampered by a grave lack of transparency. Fewer than a third of companies analysed in the index disclose who their first-tier suppliers are, while just six companies provide detailed information. Fewer than half (47%) have even disclosed the countries from which they source raw materials that are at risk of involving forced labour, such as tin, tungsten and gold.

The most valuable companies are not the most transparent, the Index also reveals. E-commerce giant Amazon and chip maker Broadcom, for example, both have a greater market capitalisation than HPE, KnowTheChain observes, but both score lower.

The supposed complexity of global supply chains is given as a reason why tech companies can't be more transparent about their human rights impact. But this doesn't need to be the case, says Rosie Monaghan, a researcher from the Business and Human Rights Centre.

It appears that these tech companies share a lot of the same suppliers and therefore, there is an opportunity for the industry to work collaboratively in addressing the issue, she says. While it does get more complex further down the supply chain, there are a lot of shared suppliers in at least the first and second tiers, so this creates strong opportunities for collaboration.

An easy step would be for technology providers to make their supplier lists across different tiers publicly available. Its a really good way for companies to begin with identifying and understanding where their risks are, Monaghan argues. Its also a great way to show accountability and if your stakeholders also have access to these supplier lists, it obviously makes it much easier to identify where labour abuses might be taking place.

Voluntary reporting practices are not having the desired impact on labour practices, the Business and Human Rights Centre has argued, and need to be bolstered with regulation. Due diligence as companies have been carrying out so far isnt really working, and if it was we would be seeing better progress which is not the case, says Monaghan. A shift in approach is needed from a box-ticking exercise to a much more comprehensive, ongoing and iterative approach.

This may soon be the case. Earlier this year, the European Parliament voted in favour of a ban on products that were produced using forced labour. On current evidence, many IT suppliers would struggle to comply.

Monaghan argues that ICT suppliers that engage with their community of stakeholders on human rights issues now will be well-placed should a ban come into force. One of the really significant gaps weve seen in the ICT sector is the lack of engagement with civil society organisations and other rights holders like the workers themselves during the due diligence process, she says.

Companies should ensure that all these stakeholders are engaged throughout their due diligence processes to make sure that those are really effective, and I think that would really help them prepare for incoming legislation.

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The tech supply chain is making slow progress on forced labour - Tech Monitor

Australia is home to the largest number of technology start-ups in the Asia Pacific, after India and China according to a joint KPMG and HSBC report.

The joint study Emerging Giants in Asia Pacific 2022 revealed that venture finance investments hit US$5.3 billion in the country last year, nearly 2.8 times that of 2020.

According to Amada Price, head of High Growth Ventures at KPMG Australia, The pandemic sparked growth in digital start-ups which hasnt stopped.

When Covid hit, companies realised almost immediately they had to digitalise to be able to cope. But a lot of the infrastructure put in place was temporary, that process is now going to continue as people figure out whats really needed and put it in place.

The list of emerging giants in Australia includes fintechs, advanced manufacturing, digital health, cryptocurrency and cloudtech, and is led by Finder, a platform that enables users to compare financial products.

KPMG and HSBC also named Pentana Solutions, Omniscient, Eucalyptus, Easy Crypto, Alpha Fintech, GBST Holdings, Harrison.ai, Secure Code Warrior and Avocado Guild as Australian emerging giants, after analysing over 6000 companies with valuations of up to US$500 million.

Australian start-ups are adopting a more global mindset. No start-up plans only for the local market anymore, said Price.

Other companies in the region which were flagged as ones to watch include Chinas BioMind, Hong Kongs Catheon Gaming, Indias BrightChamps, Indonesias Waresix, Japans Cygames, Malaysias Boost Holdings, Singapores Spenmo, South Koreas Tridge, Taiwans Maicoin, Thailands Eatigo, and Vietnams Propzy.

According to Kee Joo Wong, CEO at HSBC Singapore, From Singapores position as a global and regional financial centre, weve observed increased interest in venture capital participation in Series A and B rounds of innovative firms in either B2B software of financial services sectors across Europe and Asia.

The report highlights ESG opportunities as a centric to business and investment strategies in the Asia Pacific, and China is highlighted as a leader in this space, as it prioritises green development, energy transition, and ESG in manufacturing, construction and mobility.

Daniel Chan, head of technology, media and telecommunications at KPMG China noted, More and more investment is going to ESG mainly fast-growing technology companies doing things such as R&D into environmentally friendly plastics, new materials and other products.

According to the report, For Asia Pacific jurisdictions to meet their climate goals, they will require a host of new technologies and processes supported by massive amounts of funding.

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KPMG and HSBC reveal APAC's emerging tech giants - Digital Nation

Earlier today the Irish government stated that it will be appointing two additional commissioners to Ireland's Data Protection Commission, the lead regulator in Europe that keeps an eye on US tech giants Alphabet Inc's Google, Apple, Metas Facebook, Microsoft and Twitter.

Minister for Justice Helen McEntee said the appointments will support existing commissioner Helen Dixon and improve the commission's ability to handle an increased workload and increasingly complex investigative requirements.

Ireland regulates a number of large U.S. internet giants because their European Union headquarters are in the country, but its DPC has been criticized for long, plodding investigations into big tech multinationals. Pressure has been building for a pan-European approach to data and privacy protection.

Last month, the head of the European Data Protection Supervisor (EDPS), Wojciech Wiewiorowski, called for a pan-European data protection enforcement model to ensure consistent high-level protection of fundamental rights to data protection and privacy across the European Union. For more, read the full report from Reuters.

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Ireland is set to Appoint New Commissioners to their Data Protection Commission to Monitor Big US Tech Companies like Apple, Google+ - Patently Apple

The European Commission is dressing up its latest attempt to end encryption under the guise of protection against child sexual abuse material.

The European Commission has proposed legislation that would essentially spell the end of personal privacy online and end-to-end encryption.

While dressed as a method to combat the proliferation of child sexual abuse material online, the proposal would hand tech giants like Meta and Apple access to users images and messages, opening the door for far wider reaching surveillance system.

Under the proposal, the Commission has outlined the requirement for private companies to scour their servers for abusive material and report them to relevant authorities. Not only would this leave massive room for error due to the magnitude of data that companies would have to sieve through, but also for wider abuses of privacy with access to all forms of communication.

Allowing any authority access to private communications should be deemed unacceptable but handing that ability to notoriously untrustworthy Big Tech companies is like letting the fox guard the henhouse.

Yet as preposterous as such an idea sounds, it can come as no surprise when looking at just how much influence Big Tech wields inside European institutions. Lobbying is legalised bribery and when it comes to this particular tactic, no sector does it quite like the tech giants.

Europes once proudly strong safeguards on data protection have been gradually eroded precisely by these companies, who have lobbied relentlessly to intrude further and further into the publics digital space.

This has resulted in a shift of power that now sees these tech giants sway the laws and regulations into their favour, prising power from EU states.

Apple, which will play a prominent role in assisting the EU in this latest proposal, being one of the two global mobile operating systems, has increased its lobbying expenditure by 900 percent in less than a decade. From 700,000 euros spent in 2013 on lobbying EU institutions, that figure reached 7 million in 2021. And from having zero lobbyists with European Parliament accreditation working on the companys causes in 2013, it now employs eight on a full-time basis.

It is no mere coincidence that this proposal eerily resembles the very plan that Apple sought to implement less than a year ago, before it was struck down due to privacy concerns.

Now it is back, rebranded, and with the support of the European Commission.

The desire from certain sections of European institutions to bring an end to encryption is nothing new. The blocs most powerful and influential states, France and Germany, jointly pushed for this under the guise of terrorism prevention in 2016, while an internal draft document from the Council of the European Union outlined plans to do the same on the back of the 2020 Vienna terrorist attack.

Before, it was due to counter-terrorism efforts, today it is to prevent child abuse, tomorrow it will be to combat Russian disinformation or COVID-19 sceptics. But no matter how it is dressed, it will always be to strip citizens of their right to digital privacy, as has long been the objective.

Like many of the Commissions proposals, what sounds like a well-intended plan on the surface is yet another ruse to further intrude on individual privacy.

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EU Commission plans to end encryption and make Big Tech the gatekeeper - Andreas Vou - DiEM25