Additional Thoughts on Apple’s MLS Season Pass, Playing Devil’s Advocate With Warner Bros. Discovery (Daily Update)
In today’s update, Neil examines a few follow-ups to yesterday’s discussion. We begin with how success for Apple and its MLS Season Pass streaming service will be measured. The discussion then turns to Warner Bros. Discovery and the ongoing rumors that David Zaslav is ultimately trying to sell the company. Neil puts his devil’s advocate hat on to examine the argument for Warner Bros. Discovery M&A.
Hello everyone. There are a few follow-ups to yesterday’s discussion that are worth pursuing in today’s update. Let’s jump right in.
Additional Thoughts on Apple’s MLS Season Pass
What will success look like for Apple with MLS Season Pass, its upcoming paid streaming service for U.S. soccer?
Soccer in the U.S. is not the NBA or NFL. It’s certainly not English Premier League either. Those aren’t controversial statements. Based on viewership data, U.S. soccer has 500,000 to 600,000 regular fans. When considering other countries, we can add a little bit more to the total. The NFL sees multiple times (i.e. 10+) that number with the NBA and English Premier League at more like a few times over that range on a per game basis.
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Apple Unveils MLS Season Pass, Warner Bros. Discovery 3Q22 Earnings, David Zaslav’s Big Bet (Daily Update)
We kick things off by going over new details regarding Apple’s upcoming streaming service for Major League Soccer (MLS). Neil compares Apple’s subscription pricing to his estimates and what it suggests about Apple’s subscriber goals. The discussion then turns to Warner Bros. Discovery 3Q22 earnings and the bet Neil sees CEO David Zaslav making in the video content space.
Hello everyone. Happy Wednesday.
Today’s update will have a content streaming focus. We will begin with Apple providing details on its upcoming Major League Soccer (MLS) streaming service.
Let’s jump right in.
Apple Unveils MLS Season Pass
Back in June, Apple made waves by announcing a 10-year streaming rights deal with Major League Soccer (U.S.) Apple was attracted to the idea of having all matches available in one location. It’s a novel idea in an industry that is used to disjointed distribution and things like blackouts.
Earlier today, Apple provided via press release many of the missing details about the standalone streaming service which will be called MLS Season Pass.
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Amazon Looking to Scale Back Devices Division, Bloomberg BusinessWeek’s Profile on Apple Retail, Apple Retail and Upselling (Daily Update)
We kick things off with Neil’s reaction to news of Amazon looking at a major cost review that includes scaling back its devices division. The discussion then turns to Bloomberg Businessweek’s big profile on Apple Store employee unionization. We go over what the article was missing and then examine the most troubling allegation found in the piece.
Hello everyone. Let's jump right into today's update.
Amazon Looking to Scale Back Devices Division
In an article published on November 10th, here are Dana Mattioli, Sebastian Herrera, and Jessica Toonkel for the WSJ:
“Amazon. com Inc. Chief Executive Andy Jassy is leading a cost-cutting review of the tech giant and paring back on businesses at the company that haven’t been profitable, according to people familiar with the matter.
As part of the monthslong cost-cutting review, Amazon’s leadership is closely evaluating its Alexa business, according to some of the people. The business has more than 10,000 employees and is a major recipient of investment capital, some of the people said. Internal documents viewed by The Wall Street Journal show that in some recent years Amazon’s devices unit, which includes Alexa, had an operating loss of more than $5 billion a year.”
Many people will read this article and conclude that Big Tech must see something on the economic horizon that other companies aren’t seeing yet. After years of heavy investment and betting big on devices and technology including Alexa, it took fears of a recession for Amazon to approach things differently.
My suspicion is that there is more to the story.
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Apple Adjusts TV+ Strategy, Apple’s Twist to Licensed Video Content, Zuckerberg Pulls the Plug on Meta Smartwatches (Daily Update)
In today's update, we examine a subtle yet intriguing strategy adjustment to Apple TV+. The discussion then turns to Mark Zuckerberg pulling the plug on Meta’s smartwatch plans. We look at why the news came to Neil as a surprise.
Hello everyone. Welcome to a new week.
We will jump into today’s update with Apple TV+.
Apple Adjusts TV+ Strategy
Over the past few weeks, we have seen Apple unveil a subtle yet intriguing strategy adjustment to Apple TV+. For the first time, Apple has made licensed video content available next to its original video content within Apple TV+ for paying subscribers.
The company’s approach to licensed content deserves closer examination.
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Roku 3Q22 Earnings, Peloton 1Q23 Earnings (Daily Update)
Hello everyone. In today's update, we will focus on earnings from two of the smaller companies playing in the tech arena (Roku and Peloton). While Roku is an Apple competitor, Peloton remains a good source for assessing how consumers are thinking about different forms of connected fitness.
Let's jump right in.
Roku 3Q22 Earnings
Roku reported earnings back on November 2nd.
With macro issues taking a big toll on Roku's advertising business, the company's user growth and engagement appear to be rare bright spots. We say “appear” as it’s difficult to get comfortable regarding how streaming companies define and measure engagement. According to Roku, an active account is anyone who has streamed something in the past 30 days. It's easy to see how that definition offers quite a bit of wiggle room for volatility.
As shown below, Roku has seen a small rebound in new user growth (on a TTM basis).
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Ranking Big Tech’s 3Q22 Performance, Zuckerberg Announces Major Round of Layoffs, Disney 4Q22 Earnings (Daily Update)
In today’s update, we go over Neil’s rankings for how Big Tech performed in 3Q22. We discuss Apple, Alphabet, Amazon, Microsoft, and Meta. The discussion then turns to Zuckerberg’s drastic move to reduce Meta’s workforce by 13%. We conclude with a closer look at Disney’s earnings. Disney management is making one strategic mistake with Disney+.
Hello everyone. Let's jump right into today's update.
Ranking Big Tech’s 3Q22 Performance
CY3Q22 was a mixed bag for Big Tech (Apple, Microsoft, Amazon, Alphabet, Meta). Macro issues are not being felt evenly. At the same time, competition is impacting some companies more than others. It’s telling that maybe the biggest surprise to come out of 3Q22 earnings season came in November, after everyone reported,
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Amazon 3Q22 Earnings, The Shift in Selling Amazon Prime, Microsoft 1Q23 Earnings (Daily Update)
In today’s update, we wrap up our earnings reviews for the four tech giants (and Meta) by circling back to cover Amazon’s and Microsoft's CY3Q22 earnings. To recap, these are the dates when we covered earnings from the others:
The five companies represent 21% of the S&P 500 index. The discussion includes Neil’s thoughts on the most interesting takeaways from the reports.
Amazon 3Q22 Earnings
Amazon reported 3Q22 results back on October 27th, one day prior to Apple’s earnings.
Overall, the quarter was more negative than what the company reported three months earlier.
Amazon has stood out among Big Tech for facing the most direct impact from macro issues.
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Apple Warns on iPhone Supply, The “iPhone City” COVID Timeline, Revisiting iPhone 14 and 14 Pro Sales (Daily Update)
We begin with Apple issuing an iPhone supply warning due to COVID lockdowns and restrictions at the largest iPhone production facility in China. After going over Neil’s thoughts on the news, we take a closer look at the timeline of events to obtain a better handle of the situation and what Apple may have known and when. The discussion concludes with a look at how the lockdown may impact 1Q23 iPhone sales.
Hello everyone. Welcome to a new week. Let’s jump right in.
Apple Warns on iPhone Supply
In a press release issued yesterday, here's Apple:
“COVID-19 restrictions have temporarily impacted the primary iPhone 14 Pro and iPhone 14 Pro Max assembly facility located in Zhengzhou, China. The facility is currently operating at significantly reduced capacity. As we have done throughout the COVID-19 pandemic, we are prioritizing the health and safety of the workers in our supply chain.
We continue to see strong demand for iPhone 14 Pro and iPhone 14 Pro Max models. However, we now expect lower iPhone 14 Pro and iPhone 14 Pro Max shipments than we previously anticipated and customers will experience longer wait times to receive their new products.
We are working closely with our supplier to return to normal production levels while ensuring the health and safety of every worker.”
Zhengzhou is responsible for an estimated 50% of Apple’s iPhone production. While Foxconn’s smaller facilities in China, including Shenzhen, battled COVID outbreaks and lockdowns earlier this year, Zhengzhou had managed to escape major lockdowns and interruptions until now.
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Apple 2022 10-K Takeaways (Daily Update)
Today's Above Avalon daily update includes Neil’s key takeaways from Apple's annual 10-K filing for 2022. The update covers 19 Apple financial topics.
Hello everyone.
We conclude our Apple 4Q22 earnings review with Apple’s 10-K filing for FY2022. Published at the end of the fiscal year (Apple's fiscal year ends in September), 10-K filings include a more in-depth examination into Apple’s financials and business versus the 10-Q filings published at the end of 1Q, 2Q, and 3Q.
Apple 2022 10-K Takeaways
Share Buyback. Here is quarterly data from the past three years for Apple's share buyback via open market transactions:
4Q19: $17.9B. Average repurchase price per share: $52.20.
1Q20: $10.0B. Average repurchase price per share: $62.55.
2Q20: $18.5B. Average repurchase price per share: $71.67.
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Meta 3Q22 Earnings, Meta’s Fragile Bridge, The Big (Meta) Picture (Daily Update)
In today's update, we will go over Meta’s CY3Q22 results which ended being just as much about industry developments as it did Meta’s performance. In particular, we go over Neil’s thoughts on two problems found with Mark Zuckerberg’s plan on funding future bets and the ultimate bet Zuckerberg is making here.
Happy Wednesday.
Late last week, Apple released its 2022 10-K (58 pages). The tentative plan is to go through the key takeaways from the financial filing tomorrow.
In today's update, we will go over Meta’s CY3Q22 results which ended being just as much about industry developments as it did Meta’s performance.
Let’s jump right in.
Meta 3Q22 Earnings
Last Wednesday, Meta reported 3Q22 earnings.
Here is an earnings recap table comparing Meta's numbers to those of Apple and Alphabet:
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Reading Between the Lines of Apple’s 4Q22 Earnings Q&A With Analysts (Daily Update)
Instead of just recapping the question and answer exchanges that occurred on Apple’s 4Q22 earnings call, we will go over Neil’s thoughts / response to each exchange. This will allow Neil to go beyond what was talked about on the call.
Hello everyone.
Last Friday, we went over the big picture and numbers from Apple’s 3Q22 earnings release. Yesterday, we examined Mac and iPad sales. In today’s update, we will focus on Apple’s earnings Q&A session with analysts.
After recapping each question and answer exchange that occurred on the call between Apple and sell-side analysts, we will go over my thoughts / response to the exchange. Let’s go beyond what was talked about on the call.
Reading Between the Lines of Apple’s 4Q22 Earnings Q&A With Analysts
NOTE: The following earnings call questions (“Q”) and answers (“Cook” or “Luca”) have been cut, summarized, paraphrased, and rearranged for clarity. To read the full question and answer exchanges, The Motley Fool offers a written transcript here.
iPhone
Q: How does iPhone 14 and 14 Pro demand look?
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Inside Apple’s Record Mac Quarter, What’s Going On With iPad Sales?, Charting Apple’s Ecosystem Growth (Daily Update)
In today's update, we will continue our Apple 4Q22 earnings review with a few granular takeaways. In particular, we look beyond the Mac and iPad numbers. Tomorrow, our focus will be geared toward everything that was discussed on management's earnings call.
Inside Apple’s Record Mac Quarter
Apple reported $11.5B of Mac revenue in 4Q22. It was a quarterly record that exceeded my estimate by a significant $1.5B. Prior to 4Q22, the previous Mac revenue record was $10.9B (in 1Q22).
Diving deeper into 4Q22 Mac results, things become more complicated. We may be seeing something equivalent to a near-term plateau, or growth air pocket, for Mac sales.
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My Initial Reaction to Apple Earnings, Apple 4Q22: By the Numbers, Breaking Down Apple’s Guidance (Daily Update)
Today’s update will be dedicated to going over Apple’s 4Q22 results and management commentary. The idea is to keep things broad today and look at the big picture, in addition to the financial results. The discussion will continue next week as we move beyond the numbers to look at the granular takeaways.
My Initial Reaction to Apple Earnings
Apple went into this earnings season possessing the most formidable ecosystem of devices and services in the world. Despite facing major FX headwinds, Apple’s ecosystem remained on track in 4Q22. The company reported all-around solid 4Q22 results. The few areas of weakness (iPad and Services came in below my expectations) were offset by iPhone, Mac, and Apple Watch sales strength.
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Alphabet 3Q22 Earnings, Three Google Yellow Flags, What Apple May Say About FY1Q23 (Daily Update)
We begin today’s update with Neil’s thoughts on Alphabet’s 3Q22 earnings. The discussion then turns to three yellow flags found in Google’s numbers. We conclude with a few of Neil’s closing remarks heading into Apple’s earnings release. The update includes access to Neil’s updated Apple earnings model.
Hello everyone.
As a reminder, there won’t be a daily update published tomorrow due to Apple earnings. Instead, the update will be pushed to Friday. In today's update, we will conclude our Apple earnings preview discussion.
CY3Q22 earnings season is in full swing. Tesla reported results a few days ago. Alphabet, Microsoft, and Spotify reported earnings yesterday. Meta reported results today.
The game plan is to go through these earnings reports with an eye out for trends and developments that will either have a direct impact on Apple or cause Apple competitors to change / modify strategies. We will kick things off with Alphabet earnings.
Alphabet 3Q22 Earnings
Heading into Alphabet’s earnings release, consensus was already aware of various headwinds impacting digital advertising trends. Macro issues were clearly hitting advertising revenue growth. In addition, temporary behavioral change caused by the pandemic was still producing an overhang on year-over-year revenue growth metrics. The unknown was found with how competition, namely TikTok and Apple, were impacting business trends.
In a nutshell, Alphabet’s 3Q22 numbers were alarming. Revenue growth has imploded.
The following exhibit contains the primary financial metrics for Alphabet’s 3Q22.
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Previewing Apple’s 4Q22 Earnings, My Apple 4Q22 Estimates, Apple Raises Apple Music and Apple TV+ Pricing (Daily Update)
Happy Tuesday.
We will go over my updated Apple earnings model tomorrow. It's not quite ready for publication. As a reminder, with Apple reporting earnings on Thursday, here is the daily update schedule for the rest of the week:
Wednesday: Regular update
Thursday: No update
Friday: Special Friday update dedicated to reviewing Apple earnings
Previewing Apple’s 4Q22 Earnings
My expectation is for Apple to report OK results on Thursday. While FX, inflation, and ongoing supply chain issues will negatively impact numbers, Apple should be able to comfortably exceed the all-time FY4Q revenue record ($83B is the current record).
FY4Q presents a few challenges for Apple financial modeling and earnings analysis as results reflect demand and supply trends 1) leading up to the critical September product launches and 2) a portion of the product launches themselves. For Apple, those two periods can end up representing distinct demand environments.
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Apple’s Head of Industrial Design to Leave Company, Revisiting Apple Design Turnover, Apple Industrial Design Succession (Daily Update)
Hello everyone.
This is shaping up to be a busy week. Apple reports FY4Q22 earnings (results from July to September) on Thursday. As with previous quarters, Apple’s earnings release timing will result in Thursday’s daily update being pushed to Friday.
Here is how the daily updates schedule looks:
Monday: Regular update
Tuesday: Apple earnings preview
Wednesday: Regular update
Thursday: No update
Friday: Apple earnings review
Let’s jump into today’s update.
Apple’s Head of Industrial Design to Leave Company
Over at the WSJ, here’s Sarah Needleman:
“Apple Inc.’s head of industrial design is leaving the company, marking another significant loss in the department responsible for the iconic look and feel of its iPhones, Macs and other popular consumer products.
Evans Hankey took over leadership of the group three years ago, filling a void created after longtime chief design officer Jony Ive departed to start his own design firm in 2019.
An Apple spokesman said the company is well equipped to continue onward without Ms. Hankey, who will temporarily stick around as it works through the change in leadership.
‘The senior design team has strong leaders with decades of experience,’ the spokesman said. Bloomberg earlier reported the news of Ms. Hankey’s departure.”
In a sign of how few people are familiar with Apple design and its leaders, a number of inaccuracies have been circulating online about this news.
A few publications, including the WSJ, claimed Evans Hankey was departing Apple after just three years. That is false. Hankey has been part of Apple’s industrial design group for nearly two decades.
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The Rationale for the New 10.9-inch iPad, The Case for iPad SE, The Hoopla Surrounding Magic Keyboard Folio (Daily Update)
Hello everyone.
In today’s update, we will go over a few things that have been on my mind regarding the new iPad.
The Rationale for the New 10.9-inch iPad
On Tuesday, Apple announced an all-new $449 10.9-inch iPad (10th gen).
One question that has been gaining steam: Why didn’t Apple position the new iPad as a true iPad (9th gen) successor at $329? Apple’s decision to sell a $449 iPad, along with the $329 iPad (9th gen) has led some to say the iPad line is becoming complicated and confusing again.
Others want to know why the iPad (10th gen) received an all-new keyboard accessory while the updated iPad Pro models didn’t. We will address the keyboard question shortly.
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Netflix 3Q22 Earnings, Netflix Wants a New Narrative, Netflix's ARPU Mission (Daily Update)
Hello everyone.
We are going to talk more about the iPad line tomorrow. There are a growing number of questions as to what Apple announced (and didn’t announce) yesterday regarding the iPad. We will go over where I think Apple may take the iPad line from here.
Today’s update will be dedicated to Netflix earnings. As the company with the most paid subs in video land, at least until Disney provides its updated subscriber total, Netflix results can provide insights as to how the paid video industry is evolving.
Let’s jump right in.
Netflix 3Q22 Earnings
Netflix successfully played Wall Street's expectations game. The 3Q22 paid subscriber guidance that management gave three months ago was very weak. Management was essentially calling for no subscriber growth on a global basis (+1.0M) despite having a strong quarter from a video content perspective.
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Thoughts on Apple’s New and Updated Products (Apple TV, iPad, iPad Pro) - Daily Update
Hello everyone.
In this special edition of the daily update, we will discuss Apple’s various product announcements from earlier today.
Thoughts on Apple’s New and Updated Products (Apple TV, iPad, iPad Pro)
Heading into October, signs were pointing to Apple having a few more product announcements ready to go for 2022. The question was whether Apple would host another event at the end of October or unveil new products via press release. The latter strategy was used by Apple during the early months of the pandemic.
We now have an answer.
Earlier today, Apple unveiled via three press releases the following:
Apple TV 4K (3rd gen) - smaller form factor (volume), new chip, revised pricing
iPad (10th gen) - all-new design aimed at students
Updated iPad Pro models - new M2 chip and a new Apple Pencil hover feature
We will discuss each product in detail.
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4Q22 iPhone Installed Base, iPhone Installed Base Growth Trajectory (Daily Update)
Hello everyone. Welcome to a new week. Let's jump right in.
4Q22 iPhone Installed Base
Last week, we went over my estimates for the Apple Watch installed base as of the end of September. Today, we will discuss the iPhone installed base. It’s been a year since we examined the issue.
Before we go any further, it is important to go over definitions. Unlike the Apple Watch installed base, Apple has provided an iPhone installed base figure from time to time. Apple defines the iPhone installed base as the number of iPhones in the wild. My definition is slightly different - the number of people using an iPhone. This includes both consumers who bought a new iPhone from Apple or a third-party retailer as well people using pre-owned or hand-me-down iPhones. If you use an iPhone, regardless of where it came from, you are part of the iPhone installed base.
Apple’s installed base definition will lead to a slightly higher iPhone total versus my definition. For today’s discussion, the difference won't change any observations or outcomes. There aren't many people using more than one iPhone.
The methodology used to derive my iPhone installed base estimate is similar to the one used for the Apple Watch installed base. Accordingly, we won’t spend time going over the steps. The iPhone business is broken into user cohorts/buckets distinguished by the year (2007 to 2022) they purchased their first new iPhone from Apple or a third-party retailer.
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The daily updates have become widely read and influential in the world of Apple and technology. They are unmatched in the marketplace in terms of comprehensive analysis and research on all things Apple. Members reside in 60 countries and hold a diverse range of backgrounds and occupations. They include Silicon Valley executives and investors, the largest Apple shareholders, and the leading Apple journalists in the business.
More information about Above Avalon membership, including the full list of benefits and privileges, is available here.