🍎 Apple earnings and smokeless cigs
![_Apple pulling the Android users to its side [Jacobs Stock Photography/Digital Vision via GettyImages]_](https://cdn.robinhood.com/static_content/mwphzyq69oso/en-US/assets/files/7DCVSyG851dC2B58lSiASW_1_GettyImages-136801648.jpg)
Hey Snackers,
A life-changing revelation is sweeping social media: the ridges on the edge of Ritz crackers are made for cheese-cutting. Our take: this "revelation" was made for TikTok.
Stocks snapped their five-day win streak ahead of Fed Chairman Jerome Powell's announcement today. As usual, investors are worried that the central bank will scale back its economy-boosting policies.
Apple has its best third quarter ever (feat. iPhone "switchers"), as Big Tech flips the growth narrative
Can't stop, won't stop... Big Tech companies are giving off manatee meme vibes. Lockdowns may be behind us, but Big Tech's growth streak is hotter than ever. Despite reopenings, some online pandemic habits seem to have intensified. Here we go again with the quarterly records:
- Microsoft posted its most profitable quarter ever, with cloud services leading the way to record sales.
- Google had its fastest quarterly sales growth in more than 14 years, as Google Cloud revenue soared 54%.
- Apple posted its best third quarter in its 45-year history (#MidlifeThriving).
Cancel the Cabo trip... Apple prefers the Silicon Valley marathon. In January, Apple had its biggest quarter ever. Then again in April, Apple reported record second quarter sales as the 5G iPhone 12 fueled an upgrade cycle. The third quarter (aka: this latest one) is kind of like Apple's "Spring Break" — usually, it's the slowest of the year. These intense numbers just killed that vacay narrative:
- +36%: Total sales growth from 2019. Sales for every product category jumped by double-digit percentage points. Services (think: App Store, Apple Music) got a 33% boost.
- +50%: iPhone was the fastest-growing product, making up nearly half of Apple's $81.4B in quarterly sales. That was thanks to upgraders and "switchers" — aka: Androiders who switch to the Fruit. That's a great bragging point for CEO Tim Cook, since Android is still the most-used smartphone OS in the world — by far.
Big Tech has flipped the growth curve... Companies' growth tends to slow as they get larger and older. The smaller something is, the more it has room to grow (think: toddler vs. NBA player). For companies, it's often easier to double sales from $5M to $10M than from $50B to $100B. But after massive growth in 2020, tech giants are somehow still growing faster in 2021.
Philip Morris might stop selling cigarettes to go “smoke-free": what that really means
Double-take on the headline... Philip Morris International is the smoke giant behind 130+ cigarette brands, including Marlboro, Parliament, and your great aunt's Chesterfield's. This week, PMI said it plans to stop selling cigarettes in the UK within the next 10 years. In fact, CEO Jacek Olczak said he wants to allow the company to leave smoking behind altogether. Huh?
Blowing smoke?... If you think the headline is surprising, just look up PMI's website: it says "Delivering a Smoke-Free Future" all over. What it's really selling when it says smoke-free: heated tobacco products and vapes. Smoking kills more than 8M people per year, but PMI is pushing these products as "less harmful" alternatives for smokers. While cigarettes still make up the bulk of PMI's biz, "smoke-free" products accounted for 28% of its sales last quarter:
- IQOS: These heated tobacco units are a rare sight in the US, but they're more popular in Europe and Asia. You stick a cigarette into a device, but instead of burning it, IQOS heats the tobacco at a lower temp which releases lower levels of harmful chemicals.
- Vapes: Juul-style. Last year, PMI launched an e-cig version of the IQOS in select markets. These work by heating nicotine-laden vape juices instead of cigarettes.
To roll it up... While cigarette use has been declining, PMI's sales actually grew 6% last quarter. That was thanks to IQOS, which now has an estimated 19M+ users. Regardless of the "smoke-free" narrative, heated tobacco units still require PMI’s pseudo-cigarettes, called “Heets” sticks, which boosts PMI's sales.
"Smoke-free" saved Big Tobacco... for now. Global tobacco use has been falling for decades, with 60M fewer users since 2000. Smokers are trading tobacco-filled paper for liquid-filled metal and other puffable tech. That's why smoke giant Altria (PMI's former parent company), bought a big stake in Juul — and why PMI has been doubling down on its IQOS biz. But while "smoke-free" products may not be as harmful as OG cigs, non-smokers and teens are getting hooked, too. That's already posed major regulatory troubles for Big Tobacco.
What else we’re Snackin’
- Ship: UPS stock fell 7% after it said quarterly package deliveries fell as more shoppers emptied their e-carts and ventured to physical stores.
- UMart: Walmart will pay for full college tuition and book costs at some schools for its US workers, in a move to attract talent during the labor shortage.
- Re-Mask: The CDC reversed its mask guidance, saying that even fully-vaxxed people should mask up in riskier indoor areas like schools.
- Rebound: GE posted expectation-beating sales growth thanks to a rebound in orders of jet engines, power, and hospital equipment.
- Labor: The Biden admin is advancing regulatory changes aimed at increasing workers’ pay, continuing its push to tilt the balance of power from employers to employees.
- Newsflix: NBC plans to hire 200+ employees for its streaming and digital news teams, joining CNN in a race to gear up for the stream-y future of news.
Wednesday
- Jerome Powell press conference
- Earnings expected from Facebook, PayPal, Shopify, Spotify, Pfizer, McDonald’s, and Boeing
Authors of this Snacks own shares of: Apple, Google, Uber, Walmart, and Microsoft
ID: 1739523