A is for ambition: Apple and Amazon bet big on the future

LiveWire2024-11-12

The recent Apple and Amazon results showed one key thing; these tech giants are laying down markers for how they see the next stage of tech evolution unfolding and staking out positions to profit from...

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}\n.meta {color:#5e5c6d;font-size:13px;margin:0 0 .5em; }\na{text-decoration:none; color:#2a4b87;}\n.meta .head { display: inline-block; overflow: hidden}\n.head .h-thumb { width: 30px; height: 30px; margin: 0; padding: 0; border-radius: 50%; float: left;}\n.head .h-content { margin: 0; padding: 0 0 0 9px; float: left;}\n.head .h-name {font-size: 13px; color: #eee; margin: 0;}\n.head .h-time {font-size: 11px; color: #7E829C; margin: 0;line-height: 11px;}\n.small {font-size: 12.5px; display: inline-block; transform: scale(0.9); -webkit-transform: scale(0.9); transform-origin: left; -webkit-transform-origin: left;}\n.smaller {font-size: 12.5px; display: inline-block; transform: scale(0.8); -webkit-transform: scale(0.8); transform-origin: left; -webkit-transform-origin: left;}\n.bt-text {font-size: 12px;margin: 1.5em 0 0 0}\n.bt-text p {margin: 0}\n</style>\n</head>\n<body>\n<div class=\"wrapper\">\n<header>\n<h2 class=\"title\">\nA is for ambition: Apple and Amazon bet big on the future\n</h2>\n\n<h4 class=\"meta\">\n\n\n2024-11-12 07:34 GMT+8&nbsp;&nbsp;&nbsp;<a href=https://www.livewiremarkets.com/wires/a-is-for-ambition-apple-and-amazon-bet-big-on-the-future><strong>LiveWire</strong></a>\n\n\n</h4>\n\n</header>\n<article>\n<div>\n<p>The recent Apple and Amazon results showed one key thing; these tech giants are laying down markers for how they see the next stage of tech evolution unfolding and staking out positions to profit from...</p>\n\n<a href=\"https://www.livewiremarkets.com/wires/a-is-for-ambition-apple-and-amazon-bet-big-on-the-future\">Source Link</a>\n\n</div>\n\n\n</article>\n</div>\n</body>\n</html>\n","isBrief":false,"type":0,"news_type":1,"symbol":"BK4571","symbol_name":"数字音乐概念","start_time":0,"source_url":"https://www.livewiremarkets.com/wires/a-is-for-ambition-apple-and-amazon-bet-big-on-the-future","article_id":"2482550798","we_media_id":null,"thumbnails":[],"rights":{"source":"livewire_stock","url":"https://www.livewiremarkets.com/wires/a-is-for-ambition-apple-and-amazon-bet-big-on-the-future","rn_cache_url":null,"directOrigin":true},"url":"https://stock-news.laohu8.com/highlight/detail?id=2482550798","pubTimestamp":1731368044,"columns":[],"sourceInfo":{"source_id":"livewire_stock","name":"Livewire Markets"},"weMediaInfo":null,"summary":"The recent Apple and Amazon results showed one key thing; these tech giants are laying down markers for how they see the next stage of tech evolution unfolding and staking out positions to profit from it. Looming large in this evolution is Ai [Apple Intelligence], with Apple looking to leverage capabilities across what is an enormous ecosystem of 2.2 billion active devices while Amazon is focusing on pushing Ai applications across their cloud and consumer business. The recentresults also provided key insights into shorter-term business performance.While the gains from the release of “Apple Intelligence” will be significant, they will take time. This was evidenced by the fact that despite this recent result coming in ahead of expectations, it was coupled with a guide for the coming quarter that was mildly below what the market was looking for .","collect":0,"end_time":0,"defaultTopTitle":"livewiremarkets.com","property":[],"viewcount":null,"language":"en","relate_stocks":{"BK4571":"数字音乐概念","LU0077335932.USD":"FIDELITY AMERICAN GROWTH \"A\" INC","BK4534":"瑞士信贷持仓","IE00B7KXQ091.USD":"Janus Henderson Balanced A Inc USD","BK4507":"流媒体概念","BK4576":"AR","IE00BLSP4452.SGD":"Legg Mason ClearBridge - Tactical Dividend Income A Mdis SGD-H Plus","BK4533":"AQR资本管理(全球第二大对冲基金)","XALG.AU":"Alphinity Global Equity Fund","IE0004086264.USD":"BNY MELLON GLOBAL OPPORTUNITIES \"A\" (USD) ACC","BK4566":"资本集团","BK4587":"ChatGPT概念","IE00B3S45H60.SGD":"Neuberger Berman US Multicap Opportunities A Acc SGD-H","GOOG":"谷歌","IE0004445239.USD":"JANUS HENDERSON US FORTY \"A2\" (USD) ACC","AAPL":"苹果","GOOGL":"谷歌A","LU0456855351.SGD":"JPMorgan Funds - Global Equity A (acc) SGD","IE00B19Z9505.USD":"美盛-美国大盘成长股A Acc","LU0072462426.USD":"贝莱德全球配置 A2","WRD":"文远知行","IE00BN8TJ469.HKD":"FTGF CLEARBRIDGE TACTICAL DIVIDEND INCOME \"A\" (HKD) INC","LU0719512351.SGD":"JPMorgan Funds - US Technology A (acc) SGD","IE00B1XK9C88.USD":"PINEBRIDGE US LARGE CAP RESEARCH ENHANCED \"A\" (USD) ACC","BK4503":"景林资产持仓","IE00BBT3K403.USD":"LEGG MASON CLEARBRIDGE TACTICAL DIVIDEND INCOME \"A(USD) ACC","BK4574":"无人驾驶","LU0158827781.USD":" ALLIANZ GLOBAL SUSTAINABILITY \"AT\" (USD) ACC","HK0000306701.USD":"TAIKANG KAITAI CHINA NEW OPPORTUNITIES FUND \"A\" (USD) INC","BK4551":"寇图资本持仓","IE00BMPRXN33.USD":"NEUBERGER BERMAN 5G CONNECTIVITY \"A\" (USD) ACC","LU0130518102.USD":"HARRIS ASSOCIATES GLOBAL EQUITY \"R\" INC","IE00B775H168.HKD":"JANUS HENDERSON BALANCED \"A5M\" (HKD) INC","BK4596":"哈里斯概念","IE00BZ1G4Q59.USD":"LEGG MASON CLEARBRIDGE US EQUITY SUSTAINABILITY LEADER \"A\"(USD) INC (A)","LU0203202063.USD":"AB SICAV I - ALL MARKET INCOME PORTFOLIO \"A2X\" (USD) ACC","IE00BK4W5L77.USD":"HSBC GLOBAL FUNDS ICAV US EQUITY INDEX \"HC\" (USD) ACC","IE0009G5SDU7.USD":"PIMCO BALANCED INCOME AND GROWTH \"M\" (USD) INC","LU0466842654.USD":"HSBC ISLAMIC GLOBAL EQUITY INDEX \"A\" (USD) ACC","AMZN":"亚马逊","LU0203201768.USD":"AB SICAV I - ALL MARKET INCOME PORTFOLIO \"AX\" (USD) INC","IE0003U64NQ7.SGD":"PIMCO BALANCED INCOME AND GROWTH \"M\" (SGDHDG) ACC","LU0225283273.USD":"SCHRODER ISF GLOBAL EQUITY ALPHA \"A\" (USD) ACC","IE00B1BXHZ80.USD":"Legg Mason ClearBridge - US Appreciation A Acc USD","IE00BKVL7J92.USD":"Legg Mason ClearBridge - US Equity Sustainability Leaders A Acc USD","LU0061475181.USD":"THREADNEEDLE (LUX) AMERICAN \"AU\" (USD) ACC","BK4554":"元宇宙及AR概念","BK4592":"伊斯兰概念","IE00B3SWFQ91.USD":"PIMCO BALANCED INCOME AND GROWTH \"E\" (USD) INC","LU0154236417.USD":"BGF US FLEXIBLE EQUITY \"A2\" ACC"},"translate_title":"A代表野心：苹果和亚马逊在未来上下了大赌注","themeId":null,"isJumpTheme":false,"ttsUrl":null,"symbols_score_info":{"AMZN":1,"XALG.AU":1,"WRD":1,"AAPL":1,"GOOGL":0.8,"GOOG":0.7},"content_text":"The recent Apple and Amazon results showed one key thing; these tech giants are laying down markers for how they see the next stage of tech evolution unfolding and staking out positions to profit from it. Looming large in this evolution is Ai [Apple Intelligence], with Apple looking to leverage capabilities across what is an enormous ecosystem of 2.2 billion active devices while Amazon is focusing on pushing Ai applications across their cloud and consumer business. The recent results also provided key insights into shorter-term business performance.\n\n\n\n\n\n\n\n\n\n\n\n\nApple (NASDAQ: AAPL)\n\n\nEPS: $1.40 vs. $1.35 estimated \n\nRevenue: $85.78 billion vs. $84.53 billion estimated\n\nGross margin: 46.3% vs. 46.1% estimated \n\nGuidance: OPEX of between $14.2 billion and $14.4 billion in the current quarter, Gross margins of between 45.5% and 46.5%.\n\nEstimates were provided by LSEG and compiled by CNBC.\nThe key takeaway\nWhile the gains from the release of “Apple Intelligence” will be significant, they will take time. This was evidenced by the fact that despite this recent result coming in ahead of expectations, it was coupled with a guide for the coming quarter that was mildly below what the market was looking for (Apple guided to revenue growth of low-to-mid single digits vs a market that was expecting +7%).\nThis makes sense as “Apple Intelligence” has only just rolled out in the US in recent weeks, and will not become available in the UK, Australia, Canada and New Zealand until December 2024. Other geographies will follow throughout 2025. Most importantly, it is also December 2024 before we see a meaningful expansion of the AI features including the long-awaited ChatGPT integration. As such, the powerful iPhone upgrade cycle that we expect to come with “Apple Intelligence” is likely to be a slow burn, with momentum building through 2025 and into 2026.\nWhat impressed and what disappointed\nThe ability of Apple to turn a benign demand environment into double-digit EPS growth is impressive. Product growth has been tepid but the higher growth services business, margin expansion and a buy-back continue to drive EPS growth above 10%.\nWhile we appreciate that Apple Intelligence will take time, the pace of the roll-out driving the weaker-than-expected outlook for 4Q (which is their biggest quarter of the year) was mildly disappointing. However, Apple tends to focus on quality rather than speed, so we do think that their ability to monetise Ai across an installed base of 2.2 billion active devices is a compelling, multi-year opportunity.\nThe next phase for Apple is all about an iPhone replacement cycle coupled with an expansion of associated Services revenue. The chart below shows what happened the last time a compelling technology shift occurred, with 5G driving a compression in this replacement cycle. Since the most recent trough in FY21, replacement cycles have shifted out by more than 12 months. A compression of this replacement cycle back towards four years will drive circa 10% EPS upgrades.\n\n\n\n\n\n\n\n\n\nSource: Morgan Stanley\nRisks\nThere are a few key risks facing Apple in the coming years. Key among these are:\n\nWhat if “Apple Intelligence” is a flop? This would undercut the investment thesis of a compelling technology shift driving customers to upgrade their phones, as well as reduce the ability of Apple to further monetise Ai capabilities through their Services business\nWhat about if Apple loses search payments from Google? The current DOJ case against Google has the potential to eliminate the $20-$25 billion of high-margin revenue that Google pays Apple to be the default search engine through Safari. While Apple will find a structure to replace at least some of this revenue, it is a potential drag in the short term\nWill the phone lose primacy as the key device state? Over the longer term, there is a risk that a different form factor supplants the phone as the dominant device. Meta is pushing down the glasses route and seems to be well ahead currently, but Apple also appears to be on the “visual” path, with the “Vision Pro” potentially just the first step towards a glasses device for Apple.\n\nBuy Hold Sell\nBUY: Apple’s ability to monetise its enormous consumer ecosystem is almost unrivalled. They will find a structure through which to monetise Ai, both through device sales and more importantly through an expansion of Ai-related services offerings. There is no company better placed to be the window into Ai for the average consumer.\n\nAmazon (NASDAQ: AMZN)\n\n\nEarnings: $1.43 vs $1.14 per share expected by LSEG\n\nRevenue: $158.88 billion vs $157.2 billion expected by LSEG\n\nAmazon Web Services: $27.4 billion vs. $27.5 billion expected, according to StreetAccount\n\nAdvertising: $14.3 billion vs. $14.3 billion expected, according to StreetAccount\n\nEstimates were provided by LSEG and compiled by CNBC.\nThe key takeaway\n\n\nMargins, margins, margins. Given the scale of the Amazon business, a mild shift in margin outcomes can drive enormous gains in operating income and EPS. Amazon spooked the market during their 2Q24 results which showed margins for their core retail business to be weaker than expected, which was blamed on everything from product mix (more lower priced “everyday essentials” in baskets) to building extra satellites for their broadband business. \nHowever, come the 3Q24 result last week, all was forgotten as Amazon blew those margin expectations (that they ironically had guided to themselves) out of the water. So the question becomes, will this margin expansion continue?\nWhat impressed and disappointed\nThe margin outcome in the core retail business was impressive, particularly in the International segment. Despite pressures from the mix and what appears to be heightened competition from legacy retailers (eg Walmart) and Chinese players (Temu, Shein), Amazon generated solid topline growth and exceptional margins. The Amazon cloud business AWS also showed a continuing re-acceleration driven in part by Ai. While it may seem unusual to have any source of disappointment in an exceptionally strong result, the variability of the margin outcomes compared to what management expected could indicate a lack of visibility. While a “miss vs expectations” is very happily received when it is an upside surprise, it does raise some concerns that perhaps next time the “surprise” could be the other way. Given the scale of the retail business, a shift in margin expectations has a material impact on earnings. A circa 100bps improvement in retail margins versus current expectations for CY25 would drive a 7% beat in Amazon's operating income.\n\n\n\n\n\n\n\n\n\n\nSource: Alphinity Investment Management\nThe other key chart is around cloud growth. A combination of the “law of large numbers” plus optimisations had driven compression in cloud growth rates across Amazon (AWS), Microsoft (Azure) and Google (GCP). However, the advent of Ai has driven a re-acceleration in cloud growth, which is impressive given the base of business is significantly larger.\n\n\n\n\n\n\n\n\n\nSource: Alphinity Investment Management\nRisks\nFor Amazon, risks are on a couple of key fronts:\n\neCommerce competition: Amazon used to be almost the only game in town when it came to eComm. However, COVID saw a number of retailers reshape and improve their eComm offerings (facing an existential threat to your survival will do that). Now traditional retailers such as Walmart (who can combine grocery with general merchandise) are making some inroads, while platforms like Shopify can offer alternate paths to market. This is coupled with an increase in competitive intensity from Chinese platforms Temu and Shein.\nCloud growth: while AWS has been performing well in recent quarters, they had initially slipped behind Azure in terms of Ai functionality. Given the sheer scale of the capex required to build out data centre capacity, continued success in cloud is critical to generate returns on this investment.\n\nBuy Hold SellHOLD: While this earnings outcome for 3Q24 was extraordinary with revenue +1%, operating income +18%, and EPS +24% ahead of market expectations, the margin variability coupled with some consumer stress creates some potential visibility issues. Top-line growth is landing in line with market expectations so margins need to continue to do the heavy lifting for Amazon to continue to exceed market expectations in the future. \nHistorically, Amazon has been happy to plough expenses back into the business just as this profitability begins to emerge which accentuates this risk. However, Amazon's position is a powerful one, and the Amazon Prime offer is compelling, so if Amazon can demonstrate consistency of profitability improvement, the stock would shift to a BUY.\n\n\n\nETF\nAlphinity Global Equity Fund (Managed Fund) (XALG)\nGlobal Shares\n\n\nView\n\n\n\n\n\n\nManaged Fund\nAlphinity Global Equity Fund\nGlobal Shares\n\n\nView\n\n\n\n\n\n \n\n\nNever miss an update\n\n    Enjoy this wire? 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