News of the Week (October 2 - 6)

Disney; Meta; Uber; SoFi; Amazon; Airbnb; PayPal; Nanox; Key Market News; Macro; Portfolio

1. Disney (DIS) -- Discounts, Pricing Power & India

a) Discounts

Disney is offering special children’s discounts for 1-day tickets. They’ll go on sale for $50 starting later in the month for January through March 10^th. Tickets usually cost $110-$150. Considering all of the negative sentiment surrounding Disney’s stock, some assume that an abnormal lack of demand is driving this decision. But this isn’t anything new.

Disney has a history of running first quarter promotions like this one. Furthermore, Parks and Experiences head Josh D’Amaro has explicitly told us in recent interviews that Disney is not raising promotional intensity. Conversely, per D’Amaro, Disney has gotten more selective with discounting thanks to better data collection and analytics at its parks since 2020.

b) Pricing Power

Discovery+ is hiking its pricing and Netflix plans to do the same once the actor strikes end. Talks with actors just resumed this week (as expected) following the writer strike resolutions.

Why does this news matter for Disney? Streaming is becoming less promotional and moving away from price-based competition. The arms race for subscribers has morphed into a margin race for Disney and its counterparts. All of these hikes make Disney look less expensive on a relative basis and should support its own pricing power IF (big if) its content warrants loyalty. Especially with Disney’s pivot from general entertainment to nurturing its core franchises, it should find real price elasticity of demand. It successfully hiked pricing in 2022 and by another whopping 30% this year. The 2022 hike was met with very minimal churn while we haven’t yet heard how the 2023 move was received.

Streaming must become profitable and the leverage there must continue for the narrative on Disney to turn. Its dying linear business needs to be replaced with another stable cash cow. While streaming cannot fully supplant linear overnight, signs of that happening will be cheered by investors. Its streaming EBIT profit trend is encouraging, bolstered by  several cost-cutting moves.

Disney+ could be creating another meaningful pricing power driver internationally. The company is reportedly planning to launch some of its live sports rights on that service outside of the USA. This is all part of its slow journey to create a more unified streaming app experience. It will never remove the ESPN brand (unless it sells it to Apple or Amazon), but it will infuse that brand into Disney+ like it has done with Hulu already. Sports drives eyeballs, loyalty and again, pricing power. This also feeds into Disney’s aim to extract as much value as it can from its asset base. . If there’s a cohort of international Disney+ subscribers that doesn’t have ESPN or ESPN+ (like there surely is), then why not make this move to fortify Disney+?

c) India

A few weeks ago, I talked about Disney exploring a sale of its Indian linear (Disney Star) and streaming (Hotstar+) assets to Reliance. This week, Bloomberg reported preliminary talks with 2 billionaires: Gautam Adani and Kalanithi Maran. Both are massive business moguls in the nation with Adani owning New Delhi TV and Maran owning the popular Sun TV Network. Disney is also talking with private equity firms for a cost-sharing partner like Reliance and Paramount do in that nation. That would likely resemble a potential ESPN partnership with Apple or Amazon to share content and distribution costs.

The Indian TV and streaming business is a complicated one. Reliance and Paramount are fierce  cricket rights competition, and they also offer those secured rights for free to juice ad revenue. Star lost some of its India Premier League (IPL) cricket rights to that duo, but still has the Cricket World Cup. For Disney, the market was wonderful for propping up its subscriber numbers when that’s what investors wanted throughout 2020-2021. Conversely, the revenue per subscriber there is minuscule and the EBIT contribution is negative. So? In a world where interest rates aren’t at 0% anymore and investors now care about profits over flashy subscriber additions, selling this business makes all the sense in the world. It will be a sizable cash infusion without any profit hit. The revenue hit would also be very small. Make it happen.

Liquidating this business and ABC/domestic linear assets to Byron Allen is something I strongly support. This could easily free up well over $10 billion in fresh cash while allowing Disney to redirect forgone expenses to other uses. Disney’s differentiation comes from its core intellectual property. Activating those brands on the big screen and in its parks is how it drives unparalleled fandom, loyalty and lifetime value. Neither its India business nor ABC’s general entertainment niche support this core differentiator. It’s time for Disney to focus exclusively on the things that do support it. It’s clear Iger is doing just that.

2. Meta Platforms (META) -- AI, Subscriptions & Chips

a) Generative AI

One of the best parts of Meta’s advertising stack is how easy it is to get started as a buyer. We do a bit of Facebook and Instagram marketing for Stock Market Nerd; it takes minutes to design a campaign with no coding necessary. That wonderful simplicity just got a powerful capability upgrade.

Meta is infusing all of its Gen AI model prowess (through EMU2 and others) to make campaign design easier. With a single click, advertisers can generate different backgrounds, texts and designs while easily fitting images to ad copies. Of the beta testing businesses that Meta surveyed, more than 50% expect this to save them a full 5 hours per week in creative design work. This essentially makes split testing and campaign perfection a fully serviced and automated process… and this is only step one.

The potential of what Meta can do with generative AI for its core ads business is exciting. Design is one example, but there are two other, arguably more notable perks. First, chatbots and other discovery tools emanating from GenAI will juice engagement and access to data to sharpen algorithms. Secondly, GenAI will enhance campaign measurement and reporting tools. Meta can pull from its models to aggregate and organize all previous campaign history. Using this data, the models can literally tell advertisers exactly what works best and take the guesswork out of creation. Not only will this make impressions more valuable, but it will make Meta a more user-friendly ad partner for buyers too. Simply put, generative AI will make all of Meta’s existing products better while allowing it to automate more processes internally (i.e. lower support costs).

b) Paid Subscriptions

Meta is toying with offering a $10.49/month ad-free subscription for app users in the EU on web (30% more for mobile due to app store take rates). Through the Digital Services Act (DSA), regulatory bodies such as Ireland's Data Protection Commission have consistently fined Meta for personalized ads. More broadly, there’s a threat looming on personalized ads being more heavily restricted.

The EU is nearly ¼ of Meta’s business with personalized ads driving virtually all of that revenue. This is how the EU can continue to contribute to overall results if regulatory threats become real. In an ideal world, Meta would not have to do this and could continue to rely on advertising to keep its products free and accessible. Still, this would be an effective plug to the gap regulation could create. It could also make Meta’s business there less cyclical as monthly subscriptions are less prone to macro volatility vs. advertising demand.

c) Chips

Meta seems to be pulling back on internal semiconductor development. It fired Reality Labs employees within its Silicon Unit on Wednesday. I guess it’s happy with the quality of Qualcomm’s Snapdragon chips.

3. Uber (UBER) -- Partners and Products

a) JetBlue

Uber for Business was named as JetBlue’s exclusive rideshare partner. Uber for Business is the firm’s set of enterprise-facing tools to help large clients handle stakeholder travel and meal programs. The product frees clients to do so without needing to maintain a costly, full-time network. Outsourcing transportation to Uber for Business consistently saves enterprises 10%+ on costs and is trusted by giants like Coke and Samsung. It’s no wonder why the roster of brands using this is explosively growing and why 90%+ of these customers recommend it to others. For this specific piece of news, Jetblue will use Uber to offer travel vouchers to fliers enduring certain delays or cancellations. This will start in the USA and expand globally into 2024.

b) Another Tool

Uber stands out in its unmatched driver supply, consumer demand and product breadth. It uses supply scale to offer best-in-class service and pricing. It uses demand scale (and its verb) to fuel word-of-mouth growth and hefty profits despite low margins. It uses product breadth to foster lower customer acquisition cost, higher retention and better lifetime value. That is the recipe for success that motivated me to make this a core position. It’s running a baby Amazon playbook… but actually doing so successfully (unlike countless others).

Uber is leveraging all three of these strengths yet again with a new package return tool. Starting this week, Uber App users can schedule up to 5 packages to be picked up by a driver and sent to a local post office or FedEx/UPS store. It launched Uber Connect 3 years ago to send items to other consumers and this takes that a step further. The service costs $5 for non-UberOne members and $3 for members.

Uber is using its driver scale to make these returns more local and cost effective. It’s using leading demand to give drivers enough volume here to make it worthwhile. It’s deepening its product breadth to enhance the health and value of its consumer base. Another tool… another small differentiator.

4. SoFi (SOFI) -- Galileo & Liquidity

a) Galileo

SoFi’s Galileo added buy now, pay later functionality for smaller businesses. SoFi’s aim is to be a consumer’s one-stop banking shop. This, however, does point to its willingness to tailor some products and offerings for business banking clients. To start, this will be for Galileo’s enterprise customers. It’s easy to see, however, SoFi using tools like this and its existing personal lending product to expand into business banking over time. Businesses are much easier to underwrite than individuals and SoFi has already demonstrated a talent for the latter. For now, the focus will remain fully on consumer banking.

b) Liquidity

The new SoFi investor concern going around social media is its finite access to capital. Investors fear that as its capital ratios become more constrained, growth will slow as it originates less credit. CFO Chris LaPointe gives us his quarterly “we have excess liquidity” on every call which I expect to be the case later this month. Still, while that’s nice to hear, concrete data supporting that idea is better. So let’s dig in.

The Ratios:

Starting with capital ratios. SoFi’s metrics (for the bank and the overall company) are in great shape. Its bank’s Common Equity Tier-1 (CET1) ratio sits at a robust 15.8% vs. a 7% minimum. Its total risk-based capital ratio is similarly strong at 16.1% vs. 10.5% required and its Tier 1 leverage ratio is 16.1% vs. 4% required. Cushions vs. required minimums have grown in recent quarters for the bank and remain robust for the overall company.

Access to Markets:

If SoFi was becoming capital constrained, which it isn’t, access to capital markets is another outlet it could explore. Both the whole loan and asset-backed securitization markets have reopened for this company. It’s often compared to Upstart and Pagaya here in terms of that access being a risk, but that isn’t fair. SoFi’s borrowers are much more affluent and of higher quality. The company has also religiously stuck to strict borrower parameters which is why loss ratios and delinquencies remain below 2019 levels. That isn’t the case for most other fintechs.

Some point to its accounting methods as covering up these losses, but that’s an argument that I’ve addressed previously and vehemently disagree with. “At Cost” (AC) accounting requires MORE FREQUENT markings and income statement cost recognition vs. current expected credit loss (CECL) accounting. Furthermore, SoFi uses a 3rd party auditor to make these markings. Finally, the assumptions embedded in markings include overly pessimistic GDP and employment forecasts which haven’t come close to fruition. Its markings are overly conservative if anything, but I digress.

Appetite for higher quality credit is less volatile across macro cycles and that’s why SoFi symbolically sold a bit of credit to those markets last quarter at improving spreads. It wanted to show investors that it could. It also comfortably had the liquidity to hold all of the credit for more overall value (via net interest income) which is why it chose to do so.

With capital ratios as comfortably above minimums as they are today, this will continue. If SoFi were to eventually bump up against those minimums, it has proven an ability to access buyers in quite chaotic times to offload lower return loans. That’s important and unique.

Liquidity Growth Bottleneck:

The clearest sign of excess liquidity can be found in SoFi’s warehouse capacity usage trend. The company continues to use less than 50% of its current capacity which is slowly falling. Warehouse credit is more expensive than its own equity and deposits (which it can use to fund because its leverage ratios are in such good shape). If SoFi were struggling at all with liquidity, this flexibility wouldn’t exist and the trend in usage wouldn’t be lower. It has the luxury of choosing lower cost funding supply as a byproduct of its strong ratios, rapid deposit growth and comfortable liquidity position.

Simply put, liquidity is in great shape. As long as SoFi’s market share gains and rapid member growth continue, lending growth will continue. If rates start to fall, the personal lending growth will slow while home and student lending accelerate… & vice versa. That’s the beauty of being a one-stop shop. Furthermore, financial services growth remains rapid while unit economics for the segment briskly improve; the tech segment is also poised for growth to bottom and re-accelerate. Growth is not going to suddenly grind to a halt like some bears seem to think. Management, which has a fantastic track record of under-promise, over-deliver, sees 20%-30% demand compounding for years and years to come.

Conclusion:

This fear is being driven by noisy price action and nothing more. If the stock goes meaninglessly higher for a week or two, the risk discussion will magically vanish. I added this week for the first time since May 2023 and at prices nearly 35% higher than my last purchases.

5. Amazon (AMZN) -- The World on a String… Sitting on a Rainbow

For decades, Amazon has been the low-cost e-tailer to drive market share for its marketplace, Prime Subscription and logistics businesses. It has forgone near-term profits and kept investor eyes on the potential future profit prize. That future is now the present as investor tastes shift and Amazon follows suit. Every week, we hear about a price hike, a new initiative to minimize deadweight loss, fulfillment process perfection or high margin products being introduced.

This month, analysts are drooling over the potential for ad introductions for Prime Video. Amazon will introduce ads to Prime Video TV and films in 2024. For those wanting an ad-free experience, it will cost them $2.99 per month on top of their existing subscription.

Considering how valuable ad-supported streaming subscribers have proven to be for Hulu and now Netflix, this could be quite material to overall results. Let’s use Pluto TV (a free streaming service) as our gauge of potential value. Pluto generates about $30 per user annually in advertising revenue. That would mean $4.2 billion in incremental, high margin revenue just from this change. That’s peanuts given the firm’s massive revenue base. But the profit contribution will not be peanuts. If we pessimistically assume a 60% incremental EBIT margin for this revenue, that would add 11% to Amazon’s 2023 earnings per share. Considering content costs have already been incurred and Amazon is simply enjoying more value from those costs, I don’t see the margin estimate as aggressive at all. For subscribers not wanting ads, they’ll pay $36 annually for that perk. Heads Amazon wins… tails Amazon also wins.

That’s exciting, but it’s not the overarching point I’m trying to make here. My point is that Amazon has not a few, but dozens of these easy opportunities to grasp whenever it feels the need. It is perhaps more in control of its bottom line than any other firm. That control paired with its focus on getting leaner and more efficient should lead to explosive profit upside vs. sell side consensus. That is what I expect to play out and that is why I’ve so quickly made this a core holding.

Regional fulfillment overhaul… 3rd party selling initiatives… Buy with Prime and other white label offerings to juice value from existing capacity… new healthcare subscriptions… the flex fulfillment worker program… shuttering struggling projects… CodeWhisperer… successful vertical integration of chips… Prime pricing power… advertising. It has the world on a string. The rainbow will be rapid EBIT growth and free cash flow generation.

6. Airbnb (ABNB) -- Chesky Interviews & Trimming

I sold a third of my Airbnb stake this past week. The position is up 30% since I started it nearly a year ago. The reasoning was based on several items that I wanted to address here.

Chesky Interview:

Brian Chesky

Chesky interviewed with Bloomberg this past week. In the chat, he mentioned a few things that I candidly did not love as a shareholder.

The main theme of the interview was the company “needing to get the house in order.” He compared Airbnb to a house that “never built a proper foundation” and instead grew like crazy without ensuring proper systems were in place. Listing fraud among other key customer service issues needed to be addressed this year. Per Chesky, they have mainly been resolved with a bit more work needed to be done.

The company running before it could walk meant 2023 was a year in which virtually no innovation and new product debuts took place. You better believe the same is not true for its competition. Those development areas ground to a halt while it put bandages on the pain points its product was creating. Chesky said the company is “ready to turn the corner.” We’ll see if that corner turning was effective as we enter 2024. Regardless, the discussion hinted at more execution risk which was a surprise.

It’s unacceptable for an $80 billion company not to have proper service processes in place. What was sold to shareholders as final tweaks to perfect the app were really stitches to mend open wounds.

NYC Domino?

NYC regulation in isolation is not material to Airbnb. BUT... New York City could prove to be a trend and not an isolated incident. What would be material is if the thousands of cities without regulation in place decide to use NYC as the blueprint for implementing their own laws. Florence, Italy just fully banned new short-term rentals in its historic center for example. Its mayor cited a doubling of Airbnb listings since 2016 as the reason for rents rising 42% over the time frame.

Maybe he’s wrong about the source, but that doesn’t change his opinion or the opinions of other lawmakers around the globe. The company is now pivoting in NYC to its experiences segment to recover some lost revenue from new legislation.  Airbnb has had zero material success with experiences to date so this clearly comes with more execution risk. I don’t think it’s responsible to assume this can fill the void. It probably can’t. Again, that doesn’t matter if NYC is a one-off event. I’m just not confident that it will be.

There’s more societal motive to regulate Airbnb due to affordable housing concerns than for other marketplaces like Uber where the debate is driver benefits. Housing shortages and lack of affordability could drive more Airbnb regulation. Again using Uber as the comparison, we already have a good sense of what regulation in geographies like the EU will look like. We don't have any sense here because regulation to this point has been at the city level. Could that change as housing becomes a more pressing issue? I don't know. More risk.

What's Next?

At this point I see just one obvious growth vector for this company in longer term rentals. When looking at other platforms like Uber, I can’t count on two hands the number of new tools it’s offering to consumers with significant momentum. It has several new businesses that easily eclipsed $1 billion in annual volume. I can’t say the same for Airbnb. What's next for this company slowing to mid-teens revenue growth? That's highly uncertain.

It says it’s renewing its push into experiences… but that renewing is taking place because the first stab at this just did not go well. It also says it may push into rental cars and more vacation activities like dining. What do all of these things have in common? They’re fiercely competitive and far less greenfield than the short-term rental category Airbnb essentially created and dominates. I think success in all of these new vectors comes with lower probability than its bread and butter. That’s always the case for new endeavors, but more so for Airbnb.

End of the Travel Boom:

Airbnb and the industry have enjoyed the unleashing of pent-up pandemic travel demand. That has propped up growth rates for the company and has now come to an end. This will mean tough comps for at least the next year. Macro amplifies that headwind by diminishing discretionary spend as the post-pandemic skew to services normalizes back to goods. I don’t see a growth re-acceleration for this business next year like I do for most other “growth stock” holdings.

Selling:

Several insiders and executives have been aggressively selling off shares in the open market. Some insider selling is not concerning. There are many, many reasons to sell. STILL... Coordinated, frequent, large-scale insider selling is more concerning.

Premium:

The firm fetches a large premium vs. its direct competitors and that premium may no longer be warranted considering converging growth and added execution risk.

Supply:

Poor macro & soaring cost of capital push more individual hosts to list homes. It also leads to fewer investment properties on the platform. That headwind is larger than the individual host tailwind. This could make supply growth harder to come by for the next several quarters. Supply growth is absolutely vital for controlling Airbnb listing prices in its push to be cheaper than hotels once more.

So why didn't I just sell it all?

I’m still a shareholder. I still believe in this company and will root for its success. I strongly hope this decision to trim will turn out to be a bad one but I do not operate with a crystal ball so good portfolio management dictates taking some profits off the table. I still think Chesky is a star and I still see the verb-fueled virality as unmatched in the space. None of its short-term rental competition comes remotely close to its network effect. It prints cash, it operates in a large market still with untapped potential and it dominates within younger generations. The short-term rental prize can still be a compelling one if regulators keep playing ball.

I’m just less certain of what the future for this sector entails. I’m also disappointed in the platform patch work that Airbnb has needed to make and how that patch work was sold to investors. If regulation & the fixes Airbnb is making to the platform became more certain, I'd likely start to add back some of these shares. For now, the execution risk is higher than since I started the position and the motivation for regulation has merely grown with housing supply issues.

I’m not looking to add back to my stake at lower levels at this time. I'm in wait and see mode, but still think the investment case is compelling enough to keep it as a 3% position. 4.5% felt too big as risk/reward has deteriorated a bit.

7. PayPal (PYPL) -- Takes a Village, Lawsuit & Data

a) Takes a Village

A decade ago, card networks were going to be the death of PayPal. Customers were going to be able to use credit online and that would mean no reason to use PayPal, right? Not so fast. A trillion dollars a year in payment processing later, the company’s vast consumer and merchant adoption paired with slick checkout flows led to it partnering with the major networks. They’ve all coexisted and all found a way to succeed together.

As I’ve said in the past, I see that exact same trend playing out today with Apple and Apple Pay. PayPal investors like myself are rightfully nervous about that newer entrant in North America. It integrates perfectly into the phones that we live on and features an easy-to-use checkout flow as well. Just like card networks allowed you to sidestep the opening of yet another account, Apple Pay does too. Apple doesn’t come close to PayPal in terms of merchant adoption, but it’s slowly closing that gap (with a long, long way to go).

Apple seemingly has all of the tools it needs to dominate in this space. The ecosystem, the technology and the back-end partner in Goldman Sachs. So it can just take over the payments space on its own, right? Wrong.

As part of a previously announced partnership, PayPal and Venmo card products have been directly integrated into the Apple Pay wallet. Ubiquitous merchant adoption, unparalleled payments brand trust and massive consumer scale are clear strengths that PayPal brings to the table. Even Apple saw the value in tapping into these strengths.

PayPal still dominates in branded checkout and still boasts leading market shares for countless large merchants. At the end of the day, consumer choice and flexibility are the easiest ways to drive higher conversion rates and adoption. Consumers choose PayPal more than any other online payments wallet. Now Apple is choosing PayPal.

This needed to happen for PayPal to remain a relevant part of mobile e-commerce. Apple’s smartphone domination in North America gives it control over who has access to its highly convenient tap to pay feature. It is the mobile, near field communication (NFC) chip gatekeeper in these highly important markets.

PayPal customers using cards on Apple Pay will get the same rewards they always do through the PayPal/Venmo app. Cards can also be used online or in store. The integration includes a seamless way to place cards into the Apple Wallet right from PayPal’s app. Again… This absolutely, positively, 101% needed to happen for PayPal. It happened.

b) Lawsuit

A group of consumers filed a class action lawsuit against PayPal this week. The lawsuit claims that the firm’s practices with merchants using PayPal/Venmo for checkout are anti-competitive. Specifically, it says PayPal prevents merchants from promoting other, cheaper checkout options. It also prevents them from explicitly telling consumers if there are cheaper options to use. As a result, consumers pay slightly more for purchases in aggregate.

PayPal will likely argue that its best-in-class brand trust and fraud protection programs are what earn it the premium it charges. And furthermore, PayPal’s massive consumer scale is what earns it bargaining power to demand more favorable placement. This could result in nothing, a fine, or even a branded checkout policy change in the worst case. It’s hard to say where this goes and it could take years to play out.

c) Data

PayPal’s CTO Sri Shivananda gave an interesting interview with CIO.com this week. In it, he spoke on a key theme that I frequently cover when discussing PayPal: data scale. The only way to allow consumers to speed through checkout without manual card entry is by knowing who that consumer actually is. It requires transaction or account history with that consumer and an ability to store the information in a scalable fashion within something called a card vault. PayPal’s vault is bigger than all others in the Western Hemisphere. This means it allows more consumers to enjoy convenient checkout processes more frequently which naturally builds retention and lifetime value.

The help from large, relevant datasets continues. Knowing customers better than your competition means you can authorize payments more frequently and even offer more favorable credit terms on merchant and consumer transactions. That’s why PayPal’s Buy Now, Pay Later (BNPL) product boasts auth-rates above 90% while industry benchmarks are closer to 73%. With checkout being commoditized, fewer clicks via auto-populated data paired with more frequent authorization is how players stand out. Standing out requires having access to more data. PayPal’s long history and $1.3 trillion in annual transaction volumes meet those prerequisites and then some.

Your weekly reminder that I am staying the course here. Let new CEO Alex Chriss work.

d) More PayPal News

Venmo users can now send and receive gift cards through the app. This should be an eventual boost to Venmo’s commerce volumes as checkout with Venmo ramps on Amazon, Starbucks and CVS among others. This type of transaction volume comes with vastly better margins than peer-to-peer payments.

8. Nano-X Imaging (NNOX) -- Partnership

Nanox entered into an interesting partnership this week as it gears up for its October 17th investor day. The agreement involves Varex Imaging (VREX) which is a U.S.-based X-ray component designer and manufacturer.

Varex will produce X-ray tubes for Nanox’s cold cathode Nanox.Arc 3D imaging system. Interestingly, Varex will be paid as part of a revenue share agreement for the pay-per-scan model Nanox intends to implement upon commercial deployment. There is a minimum revenue threshold that Nanox must clear, but this still serves as a sign of confidence in the legitimacy of Arc’s use cases. Varex agreed to work with Nanox after a months-long review of the company and technology.

It’s tempting to see this as an all clear for Nanox and it’s tempting to add to my tiny, tiny stake. It’s just not time to do so yet. I am steadfast in my belief that this company deserves no more than 0.2% of my capital until commercial deployment begins. Until then, this is all press releases and partnerships with no real financial success. The teleradiology and AI services are nice, but they’re not material to this investment case. Arc revenue must start flowing in and briskly ramping. For now, I wait.

9. Key Market Headlines

Tesla:

Tesla’s production numbers missed expectations by a bit over 4% but came in right at the whisper number. Deliveries missed by a similar margin and also slightly missed the whisper number. Also this week, Tesla cut pricing for some of its popular models. The glass half full view is that it’s taking advantage of its best-in-class margin profile. It’s using that large edge to juice market share during a time when all other EV makers are deeply in cash burn mode. The pessimistic view is that this is a needed maneuver to juice demand. Reality is likely somewhere in between.

Apple:

Apple has tweaked its app store rules to more tightly restrict non-Chinese apps from being purchased in that country. This comes after its government banned iPhones for government workers. This is why virtually all mega cap tech players are pushing so aggressively into India, Vietnam etc.

Google:

Google revealed its new smartphones and Pixel Watch this week. It also debuted “Assistant with Bard” which sounds very similar to what Meta is doing with Meta AI: Automated customer service for businesses and assistance for consumers.

10. Macro Data

Output Data:

• Manufacturing Purchasing Managers Index (PMI) for September was 49.8 vs. 48.9 expected and 47.9 last month.

• Institute of Supply Management (ISM) Manufacturing PMI for September was 49.0 vs. 47.7 expected and 47.6 last month.

• S&P Global Composite PMI for September was 50.2 vs. 50.1 expected and 50.2 last month.

• Services PMI for September was 50.1 vs. 50.2 expected and 50.5 last month.

• ISM Non-Manufacturing PMI for September was 53.6 vs. 53.6 expected and 54.5 last month.

• Factory Orders M/M rose 1.2% in August vs. 0.2% expected and -2.1% last month.

Inflation/Prices Data:

• ISM Manufacturing Prices for September was 43.8 vs. 48.6 expected and 48.4 last month.

• Average Hourly Earnings M/M in September rose 0.2% vs. 0.3% expected and 0.2% last month.

Employment Data:

• JOLTs Job Openings for August were 9.61 million vs. 8.8 million expected and 8.92 million last month.

• ADP Nonfarm Employment Change for September was 89,000 vs. 153,000 expected and 180,000 last month.

• Initial Jobless Claims were 207,000 vs. 210,000 expected and 205,000 last month.

• Non-farm payroll for September was 336,000 vs. 170,000 expected and 227,000 last month.

• Private non-farm payroll for September was 263,000 vs. 160,000 expected and 177,000 last month.

• Unemployment rate for September rose from 3.7% to 3.8%.

• Labor Force Participation for September remains at 62.8%.

11. My Portfolio

Transaction during the week with context can be found here.