Friday Morning Reads
- Rewired For The Future
- Lessons for a Disrupted World
- Drag on U.S. Economic Growth
- Gaining Smartphone Customers
- World’s Most Valuable Stock
- Power Over Media
- Wall Street Starts to Doubt Facebook
- Facebook Renames Itself Meta
- Could a New Name Help Facebook After All?
- Meta Shares Spike — But It’s a Canadian Materials Company, Not the Rebranded Facebook
- Amazon Slaps a $9.95 Fee
- The 37-Year-Olds Are Afraid
- A $532 Million NFT Sale Was a Sham
- How Cheesecake to Go Saved the Cheesecake Factory
Facebook (NASDAQ:FB) CEO Mark Zuckerberg used his keynote address at the Connect conference on Thursday to unveil the social media giant's new corporate identity: Meta. "Our mission remains the same," he declared. "We're still a company that designs technology around people, but now we have a new North Star. From now on, it's going to be Metaverse first." According to Zuckerberg, the Metaverse is an "embodied internet," or the "next chapter of the internet," where people can "interact in immersive, 3D and shared digital worlds."
Snapshot: The rebranding comes at a time when the social network is reeling from a massive internal document leak, as well as a ramping up of regulatory pressure and Congressional testimony. The move wouldn't just clear the company of bad vibrations, but follow in the footsteps of Google's (GOOG, GOOGL) parent company changing to Alphabet. Meta wants to be known for more than social media and a separate parent name could put Facebook under a larger umbrella, along with Instagram, WhatsApp, Oculus and more.
As part of the re-branding, Meta will begin trading under the ticker symbol MVRS on Dec. 1. Shares climbed as much as 4% following Zuckerberg's announcement, though they pared gains after the head of the firm's Metaverse division cautioned investors that massive investments in the burgeoning technology might take more than a decade to fully pay off. "The Metaverse vision for us is a 5-, 10-, 15-year journey," Vishal Shah told CNBC.
FAANG in flux: There have already been some contortions since Jim Cramer coined the FANG term in 2013 to refer to Facebook, Amazon (AMZN), Netflix (NFLX) and Google. It then moved to FAANG to accommodate Apple (AAPL), and Netflix later made room from Microsoft (MSFT) in some iterations, leading to FAAMG. While there was no appetite to change when Google became Alphabet - though Cramer did flag FAAAM for some time - Facebook's move does allow for some new possibilities (post ideas in the comments section).
More Big Tech
Investors didn't receive good news from Apple (AAPL) on Thursday, with shares falling 3.7% AH to $146.99. The iPhone maker can't meet demand for its products, especially as the holiday season approaches, due to supply chain problems around the world. Looking ahead, CEO Tim Cook was unable to give a timeline for the chip shortage to ease, saying "it is unclear how long it will last" and it depends on how the economy performs in 2022.
By the numbers: Earnings came in at $1.24 a share, meeting expectations, but the $83.4B revenue figure missed estimates by $1.6B (for the first time since 2018). Sales were impacted by $6B in "industry-wide silicon shortages," as well as "COVID-related manufacturing disruptions." The company generated $38.9B in iPhone revenue (+47% Y/Y), Services totaled $18.3B (+26% Y/Y), Mac sales reached $9.2B (+2% Y/Y), iPad notched $8.3B (+22% Y/Y) and "Wearables, Home and Accessories" brought in $8.8B (+11% Y/Y).
Quarterly results didn't look much better at Amazon (AMZN), which badly missed earnings and revenue forecasts for the third quarter. CEO Andy Jassy additionally said the retail giant expects to take on "several billion dollars" of extra costs in its consumer business in Q4 due to labor shortages, higher employee costs, global supply chain constraints and increased freight and shipping costs. "It'll be expensive for us in the short term, but it’s the right prioritization for our customers and partners," he declared, as AMZN shares slipped 4% AH to $3,446.
For the first time ever: Revenue from Amazon services, like AWS, advertising, third-party seller services and Prime subscriptions, surpassed the retail sales division ($54.9B vs. $49.9B during the quarter).
Supply chain problems were on full display yesterday as the U.S. economy grew at its slowest pace in more than a year. GDP expanded at an inflation-adjusted 2% annual rate in Q3, slowing from a 6.7% pace in the previous quarter and below the 2.7% consensus penciled in by economists. Meanwhile, the pace of core inflation, the Fed's preferred gauge, moderated somewhat, decelerating to 4.5%, from the 6.1% increase seen in the second quarter.
Bigger picture: Growth was hit by two main factors. The first was a resurgence in COVID infections (due to the highly contagious Delta variant) which led to additional labor shortages, factory shutdowns and supply bottlenecks. Catalysts like government stimulus, business reopenings and vaccination campaigns - which helped GDP grow at a robust rate in the first half of 2021 - also faded this past quarter.
Equities continued to march towards record highs despite the data, though futures edged down overnight following disappointing earnings from Apple (AAPL) and Amazon (AMZN). "We had a temporary set of impediments coming from a resurgence of the coronavirus that should ease as we move through the quarters ahead," noted Carl Tannenbaum, chief economist at Northern Trust. However, much of Corporate America is seeing things as a little more than "transitory," based on earnings calls heard over this past week.
From the transcript: "We don’t see the raw material or the inflation environment slowing down in any way," 3M (MMM) CFO Monish Patolawala said on Tuesday. "Next year we anticipate a more challenging inflation environment," added General Electric (GE) CFO Carolina Dybeck Happe. "On the cost side of the equation, we do not see any meaningful improvement until well into 2022," declared Sherwin-Williams (SHW) CEO John Morikis, while Kimberly-Clark (KMB) CFO Maria Henry announced, "I think the headwinds and the increased distribution costs will certainly be with us into 2022."
There's a lot on the table for the future of the energy market as world leaders meet this weekend in Glasgow, Scotland. The talks, known as COP26 (Conference of the Parties' 26th annual summit), will be eyed for clues to how a faster transition toward a zero-carbon economy will affect everything from investing sectors to individual stocks. Plans are expected to detail methods of cutting emissions, financing the steps away from fossil fuels and launching a tradable credit system that would offset polluting activities.
Quote: "For investors, current climate trends suggest making environmental considerations a part of their long- and short-term portfolio strategies," said Sarah Norman, senior investment strategist at Bank of America.
The total cost of the transition is around $150T, per BofA, while decarbonization efforts could boost global inflation by up to 3% annually (as central bank balance sheets rise by $500B per year). "It'll certainly be expensive, but we believe it can be done with technology, the economy, markets and ESG joining forces." BofA also estimates that a third of global equity inflows are currently headed to funds with a sustainability label.
Cost of inaction: Besides disastrous environmental consequences for the planet, Bank of America forecasts that over 3% of GDP would be lost every year by 2030, growing to $69T by 2100. Around 5% of global equity stock market value (approximately $2.3T) could also be wiped out by climate policy re-pricing, with a "potentially extreme hit to corporate earnings for certain sectors." Meanwhile, BofA says those looking to benefit from climate solutions should look to these names ahead of the COP26: NextEra Energy (NYSE:NEE), Enphase Energy (NASDAQ:ENPH), Generac (NYSE:GNRC), Lucid (NASDAQ:LCID) and Waste Connections (NYSE:WCN).
In Asia, Japan +0.3%. Hong Kong -0.7%. China +0.8%. India -1.1%.
In Europe, at midday, London -0.5%. Paris -0.7%. Frankfurt -1.2%.
Futures at 6:20, Dow -0.2%. S&P -0.5%. Nasdaq -0.9%. Crude +0.1% at $82.89. Gold -0.2% at $1798.50. Bitcoin flat at $60940.
Ten-year Treasury Yield +4 bps to 1.61%
Today's Economic Calendar
8:30 Personal Income and Outlays
8:30 Employment Cost Index
9:45 Chicago PMI
10:00 Consumer Sentiment
1:00 PM Baker-Hughes Rig Count
3:00 PM Farm Prices