🤳 AT&T’s 5G-fueled boom
Hey Snackers,
British people were tracking whether a head of lettuce would outlast the leadership of Liz Truss, who resigned yesterday as UK prime minister after just 45 days. Her tenure featured a market-roiling tax-cut proposal that was scrapped after severe backlash, a plunging pound, 10% inflation, and the death of Queen Elizabeth (unrelated to Truss).
The British pound rallied after Truss’ resignation announcement. In the US, stocks closed down after the Philadelphia Fed chief said officials would likely raise rates “well above” 4%.
AT&T shares had their best day since 2020 as Americans splurge on 5G and phone plans
Off the hook… AT&T shares had their biggest jump in two years after the wireless giant reported surprisingly good numbers. Last quarter the telecom titan added 708K wireless subscribers (100K+ more than Wall Street expected) and had its highest wireless revenue growth in over a decade.
- Heading out: AT&T raised its full-year forecast as pricier phone plans and the return of international travel (see: $10/day pass) help with sales.
- Hanging up: AT&T is saddled with $134B in debt (after taking a $93B hit on its WarnerMedia spinoff this year) and cut its cash-flow outlook as late payments pile up in its enterprise biz.
5G energy… 5G can power everything from crisper gaming and video chatting to VR and self-driving cars, and has helped boost sales of Apple’s new iPhones. That’s why investors are curious to see how telecoms are making strides with the hot tech:
- AT&T said it would invest $48B in fiber-optic internet and 5G wireless services through 2023. Fiber can run 20X as fast as traditional broadband.
- Verizon plans to spend $10B upgrading its 5G services, and T-Mobile expects to cover 200M of its users with speed-boosting C-band 5G by the end of the year.
People hate skimping on their phones… even if it means cutting back on other expenses. AT&T is the first major wireless carrier to release earnings this quarter (Verizon and T-Mobile are next up). Its results suggest the wider industry could be insulated from inflation-strained budgets. With people spending more time on their phones than on their laptops, demand for 5G is surging.
Hermès sales soar as wealthy shoppers up their splurges while others cut back
In the (Birkin) bag… Inflation is near a 40-year high and the global economy is on the downturn, but deep-pocketed shoppers are still snapping up $10K purses. Yesterday, luxury retailer Hermès said its quarterly sales rose 24% from last year, while Gucci owner Kering reported a 23% jump. As many industries brace for dwindling demand, luxe retailers see few signs of a slowdown:
- Opportunity in opulence: Analysts expect luxury sales to rise 5% this year as shoppers splurge on Cartier watches, Dior scarves, and “supremium” whips like Ferraris.
- Fashionably great: Last week LVMH (which owns Louis Vuitton, Dior, Sephora, and Moët Hennessy) posted a bigger-than-expected 22% sales bump.
A tale of bags and bag-nots… Business is booming for pricey products: luxury retailers can often raise prices without losing sales because wealthier shoppers are less sensitive to price increases. Hermès has already hiked prices 4% this year (twice as much as in previous years) and plans to jack up prices up to 10% in January. Chanel hiked the price of its classic purse three times last year — for a $3K total increase.
The threshold’s higher for high rollers… Gucci belts aren’t made for tightening: Hermès expects business to keep booming because its customers aren’t worried about gas prices. Brands that cater to big spenders, like Ferrari, have recently boosted their profit forecasts as the superrich throw down for pricier products. Meanwhile, regular retailers like Walmart and Target have lowered their profit forecasts as everyday consumers continue to cut back.
The Crypto Catch-Up…
- 🤔 Sus… A hacker who reportedly squeezed $47M out of DeFi platform Mango said he was playing by the rules. This so-called financial hacking (think: using a crypto platform's own code to trade against it) is on the rise.
- 📜 Policy… Speaking of which, FTX's Sam Bankman-Fried is sick of big $$ payouts to crypto hackers (aka "hack to return") and proposed a "5-5 standard." Basically: DeFi platforms should offer hackers 5% or $5M (whichever is smaller).
- 🪙 Coins… Proof-of-stake blockchain Aptos launched on Monday and was greeted with a major selloff. Its token plunged 40% on reports of low transaction speeds (4/second) and of devs and investors getting 49% of token supply.
What else we’re Snackin’
- Busst: With PM Liz Truss on her way out, the UK will’ve had three PMs in one year. The Conservative Party's expected to announce a new leader next week, and former PM Boris Johnson is on the table.
- CircleJ: Weed + gas = green. Next year customers will be able to buy pot at 10 Florida Circle K gas stations. Green Thumb Industries will lease space to sell bud (medical marijuana card required).
- Antizon: A $1B UK class-action lawsuit accuses Amazon of hiding better-value deals via its "featured offer" (picture: favorable search-result placement). The antitrust suit says millions of people overpaid.
- Stanker: 35 natural-gas tankers are chilling off Europe’s coast. There's nowhere to unload (storage capacity's maxed as countries stockpile), and if fuel prices jump, waiting now = more $$ later.
- Electruck: Startup TeraWatt said it's building a charging network for heavy- and medium-duty electric trucks along I-10 from Long Beach, CA, to El Paso, TX. The stations will be 150 miles apart.
Friday
- Earnings expected from Verizon and American Express
Authors of this Snacks own: shares of Apple, AT&T, Amazon, and Walmart
ID: 2526991