📦 Amazon Couldn't Deliver

Good afternoon! Hop on the Nostalgia Express—train travel in America is making a stylish comeback. Fed up with airport headaches, travelers are trading in their wings for wheels, choosing the scenic, stress-free, and eco-friendly ride. Amtrak's ridership has jumped 18% since last year, and the Miami-to-Orlando route has seen its revenue triple. As planes fall out of favor, maybe someone should clue in Kim Kardashian—especially after she jetted across the Atlantic just for a slice of cheesecake.

MARKETS

• Markets took a nosedive after economic data came in worse than anticipated, revealing that initial jobless claims surged to their highest level in nearly a year. The Rusell 2000, which had recently been gaining traction, took the hardest hit suffering its worst day since February. The Dow Jones took the lead lower with its biggest decline of 2024. Meanwhile, the Nasdaq and S&P 500 were battered by a wave of tech stock selling.

• Arm Holdings ($ARM) plunged 15.72% after disappointing guidance and announcing it will no longer report chip volumes.

STOCKS
Winners & Losers

What’s up 📈

• Shake Shack ($SHAK) soared 16.89% after reporting a strong revenue increase, defying the trend of cost-conscious consumers.

• C.H. Robinson Worldwide ($CHRW) surged 14.78% as its robust cost-cutting measures led to surprisingly strong earnings last quarter.

• Carvana ($CVNA) jumped 10.07% following a positive earnings surprise and upbeat forward guidance.

• Rolls-Royce ($RYCEY) powered up 7.01% to a new all-time high after reinstating its dividend and raising its profit forecast for the year.

• Eli Lilly ($LLY) climbed 3.50% on news that its GLP-1 weight loss drug also reduces the risk of heart failure in patients with obesity.

What’s down 📉

• Moderna ($MRNA) cratered 21.01% after cutting its full-year revenue forecast due to weaker sales in Europe and a challenging US market.

• MGM Resorts International ($MGM) tumbled 12.24% despite delivering stellar second-quarter earnings.

• Qualcomm ($QCOM) slid 9.37%, even after beating analyst expectations, as investors decided to lock in profits.

• Teladoc Health ($TDOC) sank 8.91% following dismal earnings and a write-down related to its 2020 acquisition of Livongo.

• Wayfair ($W) declined 6.97% as customers reined in spending on home goods after a lackluster earnings report.

• Roblox ($RBLX) fell 6.45%, with shareholder concerns growing over the CFO’s departure and weaker-than-expected bookings.

• Crocs ($CROX) dropped 2.65% despite beating expectations, as worries about a potential slowdown next quarter loomed large.

EARNINGS
Amazon Couldn't Deliver — Cloud Gains, Retail Pains

Amazon’s second-quarter earnings report has landed, and it's clear that even the mighty e-commerce giant isn’t immune to cautious consumer spending. The company flagged that shoppers are increasingly bargain-hunting and downgrading to lower-priced items, which led to a revenue miss and a less-than-stellar forecast for Q3. The stock? It took a nosedive, dropping 6.85% in after-hours trading. Ouch.

Retail Reality Check

Let’s talk about the elephant in the room: Amazon’s ($AMZN) revenue came in at $148 billion, which, while impressive, was just a smidge below Wall Street’s expectations of $148.8 billion. This shortfall is largely thanks to consumers tightening their purse strings, leading to lower average selling prices (ASP) across the board. And the third quarter isn't looking much rosier, with Amazon's guidance falling short of what analysts had hoped for.

Brian Olsavsky, Amazon’s CFO, mentioned that the revenue miss was driven by shoppers opting for cheaper products, a trend that's been increasingly noticeable. It seems consumers are playing it safe, holding onto their wallets a bit tighter as economic uncertainties loom.

Silver Linings in the Cloud

But it’s not all doom and gloom. AWS, Amazon’s cloud computing cash cow, continues to shine. The segment saw a 19% jump in sales, raking in $26.3 billion and outpacing expectations. With the surge in demand for AI-driven tech, AWS is poised to keep growing, but the heavy investments required to keep up with this demand could squeeze margins.

Meanwhile, Amazon's advertising business, another profit powerhouse, grew by 20% to hit $12.8 billion—though it fell just shy of the $13 billion analysts had penciled in. It’s clear that the ad business is still a strong performer, even if it didn’t quite meet the high bar that had been set.

By the Numbers

• Net Sales: $147.98 billion (+10% YoY), missed the estimate of $148.78 billion.

• EPS: $1.26, beating the forecasted $1.04.

• Operating Income: $14.67 billion, outpacing expectations of $13.59 billion.

• AWS Sales: $26.28 billion (+19% YoY), topping the $25.98 billion estimate.

• Advertising Revenue: $12.8 billion (+20% YoY), slightly below the $13 billion forecast.

• Q3 Guidance: Revenue expected between $154 billion and $158.5 billion, compared to the analyst consensus of $158.43 billion.

The Road Ahead

So what’s next for Amazon? CEO Andy Jassy is betting big on AI, with plans to ramp up investments in this area. The company is also reportedly developing a discount digital storefront to take on the likes of Temu and Shein, aiming to capture the growing market of budget-conscious shoppers.

However, Amazon’s guidance for Q3 suggests the road ahead might be bumpy, especially with consumers remaining cautious and the looming competition in the discount space. Investors will need to keep a close eye on how these strategic moves play out in the coming months.

For now, it’s clear that while Amazon is still a force to be reckoned with, even it isn't immune to the changing tides of consumer behavior.

NEWS
Market Movements

• Microsoft ($MSFT) says OpenAI is now a competitor in AI and search

• Boeing ($BA) taps a new CEO to correct its course

• Walt Disney ($DIS) to cut jobs in television unit

• Delta ($DAL) CEO Ed Bastian said last month’s IT outage will cost the company $500 million in revenue and compensation for canceled flights and hotel stays

• The Federal Reserve again held interest rates between 5.25% to 5.5%, the same as it’s been for the last year, but suggested a cut could be near. All eyes will be on the Fed’s Sept. 18 meeting

• StubHub is sued over “drip pricing” as regulators crack down on sneaky fees. According to the lawsuit, the company sold 5M tickets to DC customers since 2015 that carried $118M in hidden fees

• Fertility and period-tracking app Flo Health raised $200M at a $1B+ valuation. Investments into women’s-health startups have hit $5B over the past three years, up 60% from the previous three years

• Spring Health, a “personalized mental health” startup that uses AI to pair patients with providers, has paired itself with all the money, raising $100M at a $3.3B valuation

• Taco Bell plans to launch AI at hundreds of US drive-thrus this year. Parent company Yum Brands ($YUM) said its two-year test of the tech improved accuracy, speed, and profits

• The sports streaming platform planned by ESPN, Fox, and Warner Bros. Discovery ($WBD) — called Venu Sports will be available for $42.99 per month with its planned launch in the fall

• OpenAI opened ChatGPT’s advanced Voice Mode to selected users: Plus users will gain access this fall. The launch was delayed after Scarlett Johansson accused OpenAI of using her voice without permission

EARNINGS
Apple’s Q3: iPads Power Up, While iPhones Hit Snooze

Apple ($AAPL) just rolled out its fiscal third-quarter earnings report, and while the tech giant managed to top Wall Street estimates, it wasn’t all smooth sailing. The company’s revenue jumped 5% to $85.78 billion, surpassing the expected $84.53 billion, but China sales took a hit. Despite the mixed bag, Apple’s stock held steady in after-hours trading, up 13% year-to-date.

iPads Shine, iPhones Stumble

Apple’s ($AAPL) bread and butter, the iPhone, which still accounts for nearly half of the company’s sales, saw a slight revenue decline year-over-year to $39.3 billion. While this was better than the $38.81 billion analysts expected, it's still a 1% drop, marking a slowdown in what’s usually Apple’s star performer.

But where iPhones stumbled, iPads soared. Revenue from iPads surged nearly 24% year-over-year to $7.16 billion, fueled by the launch of a new lineup that had customers upgrading in droves. Even Mac sales got a modest boost, coming in at $7.01 billion, slightly above estimates.

The real hero of the quarter, however, was Apple’s Services division. From iCloud to Apple TV+, this segment raked in $24.21 billion, beating forecasts and continuing its streak as the company’s fastest-growing category. Tim Cook highlighted that Apple now boasts 1 billion paid subscriptions, underscoring the strength of its ecosystem.

By the Numbers

• Revenue: $85.78 billion (+5% YoY), beating the $84.53 billion estimate.

• EPS: $1.40, topping the forecasted $1.35.

• iPhone Revenue: $39.30 billion, just above the $38.81 billion estimate.

• iPad Revenue: $7.16 billion, crushing the $6.61 billion estimate.

• Mac Revenue: $7.01 billion, slightly better than the $7.02 billion estimate.

• Services Revenue: $24.21 billion, ahead of the $24.01 billion forecast.

• Wearables, Home, and Accessories Revenue: $8.10 billion, surpassing the $7.79 billion estimate.

• Greater China Revenue: $14.72 billion, missing the $15.26 billion estimate.

AI on the Horizon

Apple’s AI-driven Apple Intelligence, introduced in June at the Worldwide Developers Conference, was another hot topic. Tim Cook emphasized that while it’s too early to gauge its impact on iPhone sales, the tech is expected to be a game-changer, integrated across everyday apps. The catch? It’s only compatible with the latest iPhones, setting the stage for what could be a massive upgrade cycle.

China Concerns and the Road Ahead

While Apple’s overall numbers were solid, Greater China remains a challenge. Revenue in the region slipped to $14.72 billion, below expectations, as local competitors like Huawei continue to nibble away at Apple’s market share. But Cook is optimistic, pointing to record upgrades and improving sales trends.

Looking ahead, Apple expects continued revenue growth in the next quarter, with a focus on bolstering its AI capabilities. As Cook & Co. gear up for the iPhone 16 launch in September, all eyes will be on whether Apple Intelligence can deliver the next big wave of upgrades—and if the company can regain its footing in China.

AEROSPACE
Boeing's New Pilot: Can Kelly Ortberg Turn the Jet Around?

Boeing ($BA) is handing over the cockpit keys to a new captain, and not a moment too soon. After months of searching, the beleaguered aircraft maker has named Kelly Ortberg as its new CEO. Ortberg, an industry veteran with an engineering background, has the Herculean task of navigating Boeing through one of the most turbulent corporate turnarounds in recent history.

Despite the news of Ortberg's arrival giving Boeing’s stock a little lift, the company revealed a Q2 loss of $1.44 billion—yes, that’s billion with a "B"—more than triple the $149 million loss from a year ago. That brings Boeing’s total losses since 2020 to nearly $25 billion.

A Bumpy Ride Ahead

Boeing’s troubles are far from over. The company is dealing with everything from manufacturing mishaps to heightened regulatory scrutiny (thanks to the infamous “doorgate” incident) and a supply chain that’s as tangled as a set of earphones. Here’s the lowdown:

• Sales Dive: Last quarter saw a 15% drop in overall sales and a 32% nosedive in commercial aircraft deliveries. Not exactly the high-flying numbers investors were hoping for.

• Burn Rate: Boeing’s operations are burning through roughly $1 billion per month, and that’s expected to continue at least through this quarter. Maybe they should start selling in-flight snacks.

• Project Woes: The company is hemorrhaging money on fixed-price contracts and is behind schedule on a defense project for Air Force One—because apparently, building a plane fit for a president isn’t easy.

Kelly’s Game Plan

Ortberg, who previously led aerospace supplier Rockwell Collins, is expected to bring a much-needed fresh perspective to Boeing. His mission: ramp up production of the 737 Max from ~25 jets per month to 38 by year’s end, all while keeping the company afloat. Boeing even waived its mandatory retirement age to bring in Ortberg, banking on his 64 years of wisdom to steer the company back on course.

But let’s be clear: Ortberg has his work cut out for him. With a potential September strike looming, a defense business that’s limping along, and a commercial division struggling to regain the trust of regulators and the public, Boeing’s turnaround isn’t going to be a smooth flight.

Calendar
On The Horizon

The Federal Reserve and Jerome Powell signaled a shift in priorities yesterday, emphasizing that their dual mandate—aiming for 2% inflation and maintaining high employment—may be evolving. While inflation has eased significantly this year, the Fed is now increasingly concerned about recent labor market indicators showing signs of cooling. If employment declines faster than the Fed is comfortable with, it could accelerate their decision to cut interest rates sooner rather than later, aiming to stimulate the economy and support job growth.

This means that tomorrow's Labor Department jobs report will be crucial in shaping the Fed's next steps. All eyes will be on the numbers to gauge what direction monetary policy might take next.

Before Market Open:

• Exxon Mobil ($XOM) has lagged behind the broader market this year, but don’t be deceived—the oil and gas giant has plenty of strength left. With robust dividends, an attractive valuation, and the recent acquisition of Pioneer Natural Resources, Exxon could be poised for a boost after its earnings announcement. Consensus estimates are $2.01 EPS on $90.99 billion in revenue.

• Chevron ($CVX), like Exxon, remains a powerhouse in the energy sector, steadily moving forward. Investors will be keen to hear updates on the planned acquisition of Hess and the status of oil production in the Permian Basin, a key asset for the company. Consensus estimates are $2.93 EPS on $50.79 billion in revenue.

After Market Close:

• AMC Entertainment Holdings ($AMC) might be a favorite among meme stock enthusiasts, but beneath the surface, the picture isn’t as rosy. The company is grappling with high debt, falling revenue, and ongoing unprofitability, which has led analysts to universally avoid recommending the stock. However, in the unpredictable world of meme stocks, all it takes is a few viral posts on Reddit for AMC to surge. Consensus estimates are -$0.47 EPS on $1.04 billion in revenue.