Sparks: iPhones & Black Friday

Revolut Australia Trading

 · 12/05/2022  · 12/05/2022

Apple’s enemies

Welcome to Sparks, your weekly breakdown of some of the most interesting market news.

Here’s what sparked our interest:

  • Apple faces obstacles in the run up to Christmas
  • Consumers breaking spending records on Black Friday
  • Meta hit with yet another fine in Europe

What’s Cook-ing? 🍎

Continued unrest in Zhengzhou, China could spell bad news for Apple Inc. (NASDAQ: AAPL). Tensions over current COVID-19 lockdowns and intolerable working conditions have been rising for weeks in the key industrial hub, known as the ‘iPhone City’. After lockdowns led to food shortages in October 2022, thousands of staff fled the facility, operated by Foxconn Technology Group. Some of these workers were later replaced by new staff but clashes between workers and security personnel broke out in late November 2022 over unpaid wages and fears of spreading infection.

The Foxconn facility produces the vast majority of iPhone 14 Pro and Pro Max devices, which have been Apple’s most in-demand products this year. Earlier this year, Apple lowered its overall production target from 90 million units to about 87 million units. However, growing disruptions over the past two weeks have led Apple and Foxconn to increase their shortfall estimates. Foxconn is working to sustain the staff levels it needs at this crucial time of year and has offered a bonus of as much as $1,800 per month in December and January for full-time workers who’d joined at the start of November 2022 or earlier.

China hasn’t been Apple’s only cause for concern this week: Elon Musk has taken aim at CEO Tim Cook, complaining that Apple has mostly stopped advertising on Twitter as well as alleging the company has threatened to withhold the social media app from its App Store. Musk’s allegations have reignited criticisms of Apple’s App Store policies. The platform, which is a gateway for billions of users to download Twitter, Facebook (NASDAQ: META), Snapchat (NYSE: SNAP) and a whole range of other apps, has faced increasing backlash from developers and regulators. Politico reported in August 2022 that the US Justice Department was "drafting a prospective antitrust complaint against Apple" that would concentrate on the App Store; and the European Commission is currently looking into Apple on antitrust grounds as a result of complaints from Spotify (NYSE: SPOT).

The numbers

  • Approximately 200,000 - The number of workers employed in Foxconn’s Zhengzhou plant (also known as the ‘iPhone City’).
  • 6 million - The production shortfall of iPhone Pro units expected to be reached following the turmoil at the Zhengzhou plant
  • $48 million - Apple’s ad spend on Twitter during the first quarter of 2022, making it the top advertiser on the platform for that period

Cyber splurge 💻

Decades-high inflation did not stop consumers in the US from cashing in on Black Friday deals this year. Despite expectations for muted online spending this holiday season, this year, Black Friday broke $9 billion in online sales for the first time ever. Cyber Monday continued this trend, raking in $11.3 billion in sales according to figures from Adobe Analytics, the data and insights arm of software company Adobe Inc. (NASDAQ: ADBE). This was 5.8% more than consumers spent on the same day last year, setting a record both for the day and the year so far. Adobe said it was higher demand, not just inflated prices, that pushed spending to new highs.

These figures could be a positive sign for retailers in the upcoming weeks. Shops like Target (NYSE: TGT), Macy's (NYSE: M) and Nordstrom (NYSE: JWM) all reported a slowdown in sales in late October 2022 and early November 2022, while early Christmas estimates have been modest. Demand has remained strong despite the economic slowdown which may be explained in part by consumers' adoption of flexible payment plans which might have resulted in overspending. According to CNBC, on Black Friday through Cyber Monday, buy now, pay later (BNPL) payments jumped 85% compared with the week before, while BNPL revenue rose 88% for the same period – perhaps a worrying signal for the future state of some consumer finances.

However, the holiday shopping season did not bring cheer for all. Some workers at Amazon (NASDAQ: AMZN) sites in Germany and France staged a walk out on Black Friday, as part of a global move to call for better pay on one of the busiest shopping days of the year. In Germany, there were demonstrations at nine out of Amazon's 20 warehouses in the country, while France's SUD and CGT unions called for strike action in the country's eight warehouses.

The numbers

  • $9.12 billion - Black Friday 2022 sales, a record number up 2.3% from a year earlier
  • 221% - The amount online sales surged on this year’s Black Friday, compared to an average day in October 2022
  • $35.27 billion - The amount US shoppers spent online during Cyber Week, the period from Thanksgiving through Cyber Monday

In other news

Some other sparks that have been flying this week:

  • Sweeten the deal - In order to avoid formal objections to its $69 billion offer for "Call of Duty" creator Activision Blizzard (NASDAQ: ATVI), Microsoft (NASDAQ: MSFT) is likely to provide remedies to EU antitrust regulators in the upcoming weeks. Rival Sony (NYSE: SONY) has criticised the deal and even called for a regulatory veto since Microsoft announced it in January 2022. Since then, the Xbox maker has run into regulatory obstacles in the United States, the European Union and Britain. A Microsoft spokesman said, "Sony, as the industry leader, says it is worried about Call of Duty, but we've said we are committed to making the same game available on the same day on both Xbox and PlayStation. We want people to have more access to games, not less".
  • Meta leaks - Tech giant Meta (NASDAQ: META) was fined roughly $275 million on 28 November 2022 for a data leak found last year that resulted in the online publication of more than 500 million Facebook users' personal information. This is the latest in a series of fines for Meta levied by Ireland's Data Protection Commission: the same agency fined Meta $400 million in September 2022 for mishandling children's data and the company was also fined roughly $235 million in October 2021 for infractions involving its messaging service WhatsApp. This week’s ruling brings the total amount handed out by the body since last year to more than $900 million.
  • Face the heat - Executives from US grocers Kroger (NYSE: KR) and Albertsons (NYSE: ACI) were made to face questions at a congressional hearing in Washington this week over the companies’ proposed merger. Kroger, the second-largest grocer by market share in the United States, announced plans in October 2022 to acquire Albertsons in a deal valued at $24.6 billion. Together, Kroger and Albertsons would edge closer to Walmart, which holds the top spot. With the price of groceries rising, the companies faced questions about how the deal could affect competitiveness and the prices that consumers pay at the store.

    Top movers

Selected stocks are the three best and three worst performing stocks for the last seven days prior to the creation of this newsletter based on the stocks available to trade via the Revolut app in the UK.

Gainers

XPEV - Chinese electric carmaker XPeng (NYSE: XPEV) has gained more than 47% between 23 November 2022 and 30 November 2022. The company posted a wider-than-expected loss and revenue that fell short of expectations in its Q3 2022 earnings on 30 November 2022.

COUP - Shares in Coupa Software (NASDAQ: COUP) have gained roughly 7% between 23 November 2022 and 30 November 2022. The company, which helps companies track and manage the purchasing of goods and services, has made significant gains in recent weeks following speculation of an acquisition by private equity firm, Vista Equity Partners.

MANU - Shares in English Premier League side Manchester United (NYSE: MANU) have gained around 18% between 23 November 2022 and 30 November 2022. The stock price has continued to rise following reports last week the club’s owners are considering a sale.

Losers

TMPO - Shares in Tempo Automation (NASDAQ: TMPO) have fallen by around 64% between 23 November 2022 and 30 November 2022. On 23 November 2022, the software-accelerated electronics manufacturer announced that it completed its business combination with ACE Convergence Acquisition Corp.

CINC - Shares in CinCor Pharma Inc. (NASDAQ: CINC) have slid almost 54% between 23 November 2022 and 30 November 2022. The stock tumbled on Monday after the company's experimental drug to treat high blood pressure, Baxdrostat, failed in a mid-stage study.

ENFN - Shares in Enfusion Inc. (NYSE: ENFN) have fallen by almost 25% between 23 November 2022 and 30 November 2022. The company, a provider of cloud-based investment management software and services, announced the resignation of its Chief Financial Officer, Stephen Dorton on 28 November 2022.

Next week

Earnings reports are expected from Costco Wholesale Corp. (NASDAQ: COST), Broadcom (NASDAQ: AVGO) and AutoZone Inc. (NYSE: AZO).

That’s all for this week!

Thanks,

Team Revolut

Your capital is at risk if you invest.

Past performance and forecasts are not a reliable indicator of future performance.

This newsletter does not constitute investment advice or a personal recommendation. You should not make any investment decisions without first conducting your own research and considering your own financial situation.