Hey Snackers,
A 99-year-old British WWII vet set a goal to raise $1.2K for the National Health Service by his 100th birthday (April 30) — he's now raised over $6M by walking daily laps of his garden.
Stocks dipped on weak bank earnings and some concerning econ data: Retail sales plummeted a record 8.7% last month (clothing/accessories alone fell over 50%), while NY's manufacturing activity plunged to an all-time low.
Welcome (back) iPhone SE — but did Apple just cannibalize itself?
Don't judge an iPhone by its cover... Remember iPhone SE? It's that little rectangle which you could actually operate one-handedly without spraining a finger. Apple released it in 2016, then stopped selling it in 2018. Now, it's shockingly resurrecting iPhone SE for 2020, starting at the (relatively) lower price of $399.
- Looks: Pretty much the same as the iPhone 8 — a 4.7-inch screen with a frame around it and a home button with Touch ID. The real change lies on the inside...
- Specs: Better camera equipped with 4K video and portrait mode. Also boasts a more powerful processor with the new A13 Bionic chip (sounds legit). Apple says it put "the brains" of iPhone 11 Pro in the body of SE.
What interested us most was the timing of this launch... Given the COVID-19 crisis, this might not seem like the best time to ship a new product. Apple thinks it's a great time:
- With the economy in shambles, it makes sense to introduce a lower-cost phone. The new SE is $200 cheaper than the next "cheapest" iPhone (and many Android models). A low-cost, high-performance phone could thrive right now.
- With most Apple stores closed, people can't try before they buy. Buying iPhones online becomes more attractive with a lower price and newer product — Apple's trying to drive excitement for online orders with this launch (people get hyped on pre-orders).
Is Apple cannibalizing itself?... Cannibalization occurs when a new product is so irresistible it steals sales from your other (often higher-priced) products. Tesla's Model 3 stole sales from its Model S. But Apple probably did a lot of research on this risk and decided that:
- More Upgrades: iPhone users might be more likely to upgrade from their old phones after the launch of SE, with that volume covering lost sales from pricier models.
- More Market Share: With this lower-priced option, Apple might convert some Androiders — Google's Android still controls 70% of the world's cell phones.
- But if fancy new iPhone users change to the lower-priced SE instead, that's a problem for Apple.
Airlines finally get their $25B bailout — now you (kind of) own 10 airlines
The "B" word has been thrown around a lot... But now airlines are finally getting their Big B: a $25B bailout from the US government. 10 airlines — including Delta, United, and JetBlue — will share the $25B to pay their hundreds of thousands of employees. Here's what this bailout looks like:
- 70% grants (aka, free money): The airlines won't have to repay this. By taking the money, airlines are agreeing not to layoff workers until at least September, which means the gov doesn't have to spend taxpayer money on unemployment checks for them — instead it gets to continue collecting income tax on those paychecks.
- 30% loans: 30% of the package will have to be repaid over 10 years. Airlines wanted only grants (duh) and the gov wanted loans, so this is a compromise.
- The Treasury also gets stock in the airlines, so Americans collectively (kind of) own around 1% of those companies.
Many (or all) airlines would likely go bankrupt... Without this bailout, that is. That's why it was a key part of the $2.2T stimulus package. With near-zero travel demand and high fixed expenses, airlines are quickly burning through the small cash cushions they have:
- 96% of the cash generated from airlines' profits over the last decade was returned back to shareholders through dividends and stock-boosting buybacks — now airlines won't be allowed to do buybacks until September 2021.
- In February, Delta generously dished out $1.6B (or 33% of its 2019 profit) in bonuses to employees. But now, passenger volume for airlines in the US is down 95% from a year ago — airlines are expected to lose $314B this year in global sales.
It's not necessarily bailout or bust... Even when airlines go bankrupt (no bailout), they can bounce back — 66 American airlines have gone bankrupt since 2000, including United Airlines in 2002 and Delta in 2005. But bankruptcy is a big hit to investors, since the stocks usually go to zero. If airline employees lost their jobs, the government would have to pay unemployment benefits — so it's shelling out $$$ either way.
What else we’re Snackin’
- Chatty: Epic Games-owned video chat app Houseparty added an impressive 50M new users over the month — that's 70X larger than its typical monthly gain in some markets.
- Legit: A Pentagon watchdog says Microsoft's $10B JEDI Contract cloud win over Amazon seems legit, months after Amazon sued saying the decision was biased.
- Check: This new IRS website lets you check the status and expected delivery date of your stimulus check — the IRS has already begun sending $1.2K checks to Americans.
- Sad: Best Buy furloughs 51K employees after a virus-driven surge in home and appliance sales ends — meanwhile, JCPenney might file for bankruptcy.
- L'Owned: Goldman Sachs' profit plummets 46% as it preps for losses from defaulted loans — but its trading biz snags a 28% bump thanks to a rollercoaster stock market.
Thursday
- Weekly jobless claims
- Earnings expected from Honeywell, BlackRock, Blackstone, and BNY Mellon
Disclosure: Authors of this Snacks own shares of Apple, Blackstone, and Delta
ID: 1153854