1 00:00:05,790 --> 00:00:08,610 Sean Aylmer: Welcome to the Fear & Greed Business Interview. I'm Sean Aylmer. 2 00:00:08,700 --> 00:00:11,069 Sean Aylmer: Earning season in the US is drawing to a close, 3 00:00:11,070 --> 00:00:12,719 Sean Aylmer: which means it's a great time to see who the 4 00:00:12,719 --> 00:00:16,169 Sean Aylmer: winners and losers on Wall Street are. We're talking about 5 00:00:16,170 --> 00:00:18,389 Sean Aylmer: some of the biggest companies in the world, but of 6 00:00:18,389 --> 00:00:21,090 Sean Aylmer: course we've been focusing so much on the Magnificent Seven 7 00:00:21,090 --> 00:00:23,730 Sean Aylmer: tech stocks recently we probably need to look a bit 8 00:00:23,730 --> 00:00:27,120 Sean Aylmer: beyond that. Remember, this is general information only. You should 9 00:00:27,179 --> 00:00:31,139 Sean Aylmer: certainly seek professional advice before making investment decisions. Josh Gilbert 10 00:00:31,170 --> 00:00:35,159 Sean Aylmer: is a market analyst at social investment network eToro and 11 00:00:35,159 --> 00:00:37,890 Sean Aylmer: a regular guest here on the podcast. Josh, welcome back 12 00:00:37,890 --> 00:00:38,580 Sean Aylmer: to Fear & Greed. 13 00:00:38,940 --> 00:00:39,930 Josh Gilbert: Thanks for having me back, Sean. 14 00:00:40,800 --> 00:00:44,670 Sean Aylmer: Okay, overall impression of the March quarter earning season in 15 00:00:44,670 --> 00:00:45,300 Sean Aylmer: the US? 16 00:00:46,019 --> 00:00:48,540 Josh Gilbert: Yeah, so in our eyes it's been a good earning 17 00:00:48,540 --> 00:00:51,598 Josh Gilbert: season so far. We've obviously still got a couple of 18 00:00:51,598 --> 00:00:55,019 Josh Gilbert: big names left to report, but we aren't getting ahead 19 00:00:55,020 --> 00:00:57,390 Josh Gilbert: of ourselves just yet. We are seeing growth at just 20 00:00:57,390 --> 00:01:00,840 Josh Gilbert: over 5.5%, which is slightly less than what we saw 21 00:01:00,870 --> 00:01:04,650 Josh Gilbert: last quarter, but it's better than what many had expected 22 00:01:05,160 --> 00:01:08,190 Josh Gilbert: heading in. We also do have every sector on the S& 23 00:01:08,190 --> 00:01:11,819 Josh Gilbert: P 500 ahead of analyst forecasts as well, which is 24 00:01:11,819 --> 00:01:14,610 Josh Gilbert: a positive. And we're also seeing those analysts lift their 25 00:01:14,610 --> 00:01:17,790 Josh Gilbert: estimates for the second quarter as well. So a lot 26 00:01:17,790 --> 00:01:21,928 Josh Gilbert: of positives to take away and it's really, for us, 27 00:01:21,929 --> 00:01:24,750 Josh Gilbert: been good enough, we think, to rejuvenate the rally that 28 00:01:24,750 --> 00:01:30,780 Josh Gilbert: we've seen in the S&P 500 and broad tech stocks. And our 29 00:01:30,780 --> 00:01:33,090 Josh Gilbert: view is that we are going to see earnings continue 30 00:01:33,090 --> 00:01:36,000 Josh Gilbert: to move into double- digits and we may even get 31 00:01:36,000 --> 00:01:39,240 Josh Gilbert: there by the next quarter. And for us, that will 32 00:01:39,240 --> 00:01:43,020 Josh Gilbert: remain a fundamental pillar of this bull market and will 33 00:01:43,020 --> 00:01:45,509 Josh Gilbert: continue to drive markets higher. 34 00:01:46,109 --> 00:01:48,360 Sean Aylmer: It's a pretty good effort given how high interest rates 35 00:01:48,389 --> 00:01:51,270 Sean Aylmer: have run and how quickly they got to these levels. 36 00:01:51,960 --> 00:01:55,710 Josh Gilbert: Absolutely, yeah. I think one of the big standouts for 37 00:01:55,710 --> 00:01:58,380 Josh Gilbert: us over the last year and I think for many 38 00:01:58,380 --> 00:02:03,119 Josh Gilbert: has been the resilience of the global economy. Obviously, the 39 00:02:03,120 --> 00:02:06,150 Josh Gilbert: US economy is probably that sort of standout. That's obviously 40 00:02:06,150 --> 00:02:09,000 Josh Gilbert: really been a big help. We're still seeing GDP growth in 41 00:02:09,300 --> 00:02:11,339 Josh Gilbert: a lot of countries in a lot of major economies 42 00:02:11,340 --> 00:02:14,460 Josh Gilbert: across the world, and that really helped. And obviously, the 43 00:02:14,460 --> 00:02:17,820 Josh Gilbert: emergence of AI as well is really helping a lot 44 00:02:17,820 --> 00:02:20,309 Josh Gilbert: of businesses and really, you mentioned it at the top 45 00:02:20,309 --> 00:02:22,529 Josh Gilbert: of the episode, but it's tech. Tech is doing the 46 00:02:22,529 --> 00:02:26,130 Josh Gilbert: heavy lifting and the Magnificent Seven, as you say, are doing what 47 00:02:26,130 --> 00:02:29,190 Josh Gilbert: they do best. They're sort of growing earnings at the 48 00:02:29,190 --> 00:02:34,559 Josh Gilbert: fastest pace. Saw 36% earnings growth in the quarter as well. And 49 00:02:34,559 --> 00:02:36,960 Josh Gilbert: we still obviously have Nvidia to come as well. 50 00:02:37,919 --> 00:02:40,230 Sean Aylmer: So we have to wait for Nvidia. Apple, though, what 51 00:02:40,230 --> 00:02:43,560 Sean Aylmer: about it? Because it really hasn't done so well this 52 00:02:43,560 --> 00:02:46,049 Sean Aylmer: year. It's been one of the laggards of the Magnificent 53 00:02:46,050 --> 00:02:48,510 Sean Aylmer: Seven, but things have picked up a bit for Apple. 54 00:02:49,440 --> 00:02:52,169 Josh Gilbert: Yeah, I think there was plenty of trepidation for Apple heading 55 00:02:52,169 --> 00:02:54,720 Josh Gilbert: into the result. There was question marks overgrowth, as you 56 00:02:54,929 --> 00:02:58,169 Josh Gilbert: said, and I think the big question was if they 57 00:02:58,169 --> 00:03:02,100 Josh Gilbert: could still deliver the growth that investors have become accustomed 58 00:03:02,100 --> 00:03:05,430 Josh Gilbert: to over the years. But I think Tim Cook really 59 00:03:05,430 --> 00:03:09,450 Josh Gilbert: navigated it perfectly. All of those question marks over growth 60 00:03:09,809 --> 00:03:12,240 Josh Gilbert: and then he essentially just shows how much of a 61 00:03:12,240 --> 00:03:15,419 Josh Gilbert: financial powerhouse Apple is. They announced the biggest buyback in 62 00:03:15,419 --> 00:03:19,798 Josh Gilbert: history, 110 billion US dollars. If that's not a statement, 63 00:03:20,250 --> 00:03:22,889 Josh Gilbert: I'm not sure what it is. But sales in China 64 00:03:22,889 --> 00:03:27,090 Josh Gilbert: were also better than feared, helping things look slightly better. 65 00:03:27,599 --> 00:03:30,000 Josh Gilbert: And I think really what we saw from Apple was 66 00:03:30,059 --> 00:03:33,299 Josh Gilbert: just a bit of a resilience really after a tough 67 00:03:33,299 --> 00:03:36,359 Josh Gilbert: period. And I think it would be naive to think 68 00:03:36,359 --> 00:03:41,070 Josh Gilbert: that Apple aren't building the foundations, laying the groundwork in 69 00:03:41,070 --> 00:03:44,130 Josh Gilbert: the background for continued growth. And I think it's going 70 00:03:44,130 --> 00:03:46,739 Josh Gilbert: to be a couple of tricky quarters for Apple, but 71 00:03:46,740 --> 00:03:49,469 Josh Gilbert: I think if they lay out their plans for AI, 72 00:03:49,500 --> 00:03:52,320 Josh Gilbert: we've got the new iPhone 16 probably coming very soon, 73 00:03:52,590 --> 00:03:54,960 Josh Gilbert: I think we're probably going to see a shinier Apple 74 00:03:55,170 --> 00:03:56,490 Josh Gilbert: come the end of 2024. 75 00:03:56,730 --> 00:03:59,550 Sean Aylmer: I like the idea of a shinier Apple. Microsoft, world's 76 00:03:59,550 --> 00:04:01,980 Sean Aylmer: biggest company or Wall Street's biggest company, what do you 77 00:04:01,980 --> 00:04:02,940 Sean Aylmer: make of their results? 78 00:04:03,480 --> 00:04:06,988 Josh Gilbert: Yeah, again, solid beats across the top and bottom line. 79 00:04:07,349 --> 00:04:10,440 Josh Gilbert: Cloud growth is that key. That's the key across all 80 00:04:10,440 --> 00:04:13,080 Josh Gilbert: of those sort of big businesses that think Amazon, think 81 00:04:13,080 --> 00:04:16,500 Josh Gilbert: Alphabet, those are the three key players really when it comes 82 00:04:16,500 --> 00:04:21,089 Josh Gilbert: to cloud growth. AI is obviously front and center. They 83 00:04:21,089 --> 00:04:23,129 Josh Gilbert: even say they can't even keep up with demand right 84 00:04:23,130 --> 00:04:25,738 Josh Gilbert: now, and they're spending more to try and keep up with 85 00:04:25,740 --> 00:04:32,160 Josh Gilbert: that demand. They invested early into ChatGPT, OpenAI, and it's clearly 86 00:04:32,160 --> 00:04:34,560 Josh Gilbert: paying off and they're going to continue to be one 87 00:04:34,560 --> 00:04:36,599 Josh Gilbert: of the main benefactors from this AI boom. 88 00:04:37,140 --> 00:04:39,810 Sean Aylmer: And Amazon and Alphabet fit into that category as well? 89 00:04:40,080 --> 00:04:42,000 Josh Gilbert: Absolutely, yeah. I think if we look at Amazon, it 90 00:04:42,000 --> 00:04:43,859 Josh Gilbert: was probably one of the standout names for me, I 91 00:04:43,860 --> 00:04:48,089 Josh Gilbert: think. Stronger sales in that sort of cloud growth, cloud 92 00:04:48,089 --> 00:04:51,300 Josh Gilbert: unit to start the year, the fastest growth that we've 93 00:04:51,300 --> 00:04:54,330 Josh Gilbert: seen in over 12 months from that unit as well. 94 00:04:54,540 --> 00:04:58,409 Josh Gilbert: Operating income jumped by about 200%. And I think in 95 00:04:58,410 --> 00:05:02,610 Josh Gilbert: terms of AWS, which is Amazon's Web Services, which is really 96 00:05:02,610 --> 00:05:05,520 Josh Gilbert: a fundamental part of their business, when we think about 97 00:05:05,520 --> 00:05:07,980 Josh Gilbert: Amazon e- commerce is what drives the revenue. When we 98 00:05:07,980 --> 00:05:11,310 Josh Gilbert: think about Amazon as a general consumer, we think about their 99 00:05:11,310 --> 00:05:14,910 Josh Gilbert: online store. That's what drives revenue. But if we look 100 00:05:14,910 --> 00:05:19,080 Josh Gilbert: at AWS, that's the crown jewel. It generates 10% of 101 00:05:19,080 --> 00:05:23,339 Josh Gilbert: revenue, but it contributes over 60% of overall operating profits. 102 00:05:23,369 --> 00:05:23,639 Sean Aylmer: Wow. 103 00:05:23,699 --> 00:05:27,360 Josh Gilbert: So, huge numbers from a small part of the business, 104 00:05:27,360 --> 00:05:30,779 Josh Gilbert: but really has a huge, huge impact. So I think 105 00:05:30,990 --> 00:05:33,118 Josh Gilbert: maybe the downside from that report was that we didn't 106 00:05:33,120 --> 00:05:36,238 Josh Gilbert: see a dividend, which Alphabet did deliver, given that these 107 00:05:36,240 --> 00:05:39,899 Josh Gilbert: businesses have huge cash piles, but instead they sort of 108 00:05:39,900 --> 00:05:42,629 Josh Gilbert: said that they were going to refocus on reinvesting back 109 00:05:42,629 --> 00:05:45,120 Josh Gilbert: into the business. And I think when you are talking 110 00:05:45,120 --> 00:05:48,930 Josh Gilbert: about reinvesting in AI, I think anything around that is well- 111 00:05:48,930 --> 00:05:51,720 Josh Gilbert: placed at the moment and Wall Street is applauding that. 112 00:05:52,320 --> 00:05:54,030 Sean Aylmer: Stay with me, Josh, we'll be back in a minute. 113 00:06:00,959 --> 00:06:03,630 Sean Aylmer: I am speaking to Josh Gilbert, market analyst at social 114 00:06:03,630 --> 00:06:08,370 Sean Aylmer: investment network eToro. The Magnificent Seven laggard, without a doubt, 115 00:06:08,370 --> 00:06:11,729 Sean Aylmer: is Tesla. What did they say this quarter? 116 00:06:12,450 --> 00:06:13,948 Josh Gilbert: Yeah, look, this was the name that I think most 117 00:06:13,950 --> 00:06:17,459 Josh Gilbert: investors were sort of watching heading into earnings season. It's 118 00:06:17,459 --> 00:06:20,789 Josh Gilbert: a stock loved by retail investors. It's the most owned 119 00:06:20,790 --> 00:06:24,450 Josh Gilbert: stock globally at eToro by retail investors, so we know 120 00:06:24,450 --> 00:06:27,900 Josh Gilbert: it's loved. But for earnings, it was the worst performing 121 00:06:27,900 --> 00:06:31,289 Josh Gilbert: stock on the S& P 500, which is no easy 122 00:06:31,290 --> 00:06:34,948 Josh Gilbert: task. And for a name like Tesla is unexpected. And 123 00:06:34,949 --> 00:06:37,260 Josh Gilbert: I actually said before earnings that if the stock was 124 00:06:37,260 --> 00:06:39,930 Josh Gilbert: going to move high, that we needed Musk to deliver 125 00:06:39,930 --> 00:06:43,290 Josh Gilbert: some magic. And that's exactly what he did. He sort 126 00:06:43,290 --> 00:06:46,078 Josh Gilbert: of gave us some magic. The result was worse than 127 00:06:46,080 --> 00:06:49,380 Josh Gilbert: expected. We had a bigger miss on earnings, but Musk 128 00:06:49,380 --> 00:06:53,309 Josh Gilbert: stepped up. He laid out the foundation for Tesla's future 129 00:06:53,309 --> 00:06:57,870 Josh Gilbert: growth strategy, and that importantly included a lower cost vehicle 130 00:06:57,900 --> 00:07:00,988 Josh Gilbert: that's set to be released in 2025, and that was 131 00:07:00,990 --> 00:07:03,630 Josh Gilbert: what Wall Street has sort of longed for. And I 132 00:07:03,630 --> 00:07:05,730 Josh Gilbert: think what's really important here is that Tesla is going 133 00:07:05,730 --> 00:07:10,830 Josh Gilbert: through a challenging period through delivery growth, margin compression, obviously 134 00:07:10,830 --> 00:07:13,560 Josh Gilbert: higher rates are really hurting the EV space, we're seeing 135 00:07:13,560 --> 00:07:17,730 Josh Gilbert: demand fall, but I think Musk is taking the reins 136 00:07:17,730 --> 00:07:21,840 Josh Gilbert: slightly here. He's really pulling things back in. And let's 137 00:07:21,840 --> 00:07:24,780 Josh Gilbert: not forget, I think when we think about EVs and businesses, 138 00:07:24,780 --> 00:07:28,049 Josh Gilbert: we often think startups, but Tesla isn't a startup anymore. 139 00:07:28,049 --> 00:07:32,280 Josh Gilbert: They've got the financial power, unlike other EV names to navigate 140 00:07:32,280 --> 00:07:34,470 Josh Gilbert: this period. And I think what Musk is doing really 141 00:07:34,470 --> 00:07:37,890 Josh Gilbert: well, maybe compared to some of the other businesses, I 142 00:07:37,890 --> 00:07:40,320 Josh Gilbert: think he's really trying to take competition out, and I 143 00:07:40,320 --> 00:07:41,879 Josh Gilbert: think he's really trying to cut off their legs. And 144 00:07:41,880 --> 00:07:45,480 Josh Gilbert: if we think about some of their competitors, your Rivians, 145 00:07:45,929 --> 00:07:49,260 Josh Gilbert: other names, these businesses are losing huge amounts of money 146 00:07:49,260 --> 00:07:51,810 Josh Gilbert: on every vehicle they sell. So it's going to be 147 00:07:51,810 --> 00:07:54,270 Josh Gilbert: a really difficult time for them, but Tesla have the 148 00:07:54,270 --> 00:07:59,099 Josh Gilbert: financial power to cut costs, to continue delivering vehicles and 149 00:07:59,099 --> 00:08:01,559 Josh Gilbert: actually navigate this period, even if it is going to 150 00:08:01,559 --> 00:08:02,280 Josh Gilbert: be a challenging one. 151 00:08:03,059 --> 00:08:05,100 Sean Aylmer: I want to get away from the tech stocks. I 152 00:08:05,100 --> 00:08:06,989 Sean Aylmer: know a couple of companies that you have looked at, 153 00:08:07,200 --> 00:08:11,130 Sean Aylmer: which I think are really interesting are the cruise liners, Caribbean 154 00:08:11,430 --> 00:08:12,540 Sean Aylmer: or in Carnival? 155 00:08:13,080 --> 00:08:15,570 Josh Gilbert: Yeah, absolutely. So for me, the travel sector has probably 156 00:08:15,570 --> 00:08:18,090 Josh Gilbert: been one of the surprises for me. We've got a 157 00:08:18,090 --> 00:08:21,509 Josh Gilbert: really busy summer coming up and we've had some mixed 158 00:08:21,509 --> 00:08:24,270 Josh Gilbert: results. And as you said there, I think the biggest surprise 159 00:08:24,270 --> 00:08:26,970 Josh Gilbert: and the standout was the cruise liners, and it maybe 160 00:08:27,150 --> 00:08:29,550 Josh Gilbert: over the last couple of years, they're businesses that we've 161 00:08:29,550 --> 00:08:32,550 Josh Gilbert: probably forgotten about, and I think that comes from the 162 00:08:32,550 --> 00:08:36,719 Josh Gilbert: fact that they were decimated in COVID. And yeah, particularly 163 00:08:36,719 --> 00:08:40,740 Josh Gilbert: Royal Caribbean and Carnival, they've come back with a vengeance 164 00:08:40,740 --> 00:08:42,870 Josh Gilbert: and they really have. If we look at Royal Caribbean 165 00:08:42,900 --> 00:08:47,488 Josh Gilbert: specifically, 360 million in net income. A year ago, that 166 00:08:47,490 --> 00:08:51,809 Josh Gilbert: was a $ 48 million loss, so a huge, huge turnaround, and 167 00:08:51,809 --> 00:08:55,380 Josh Gilbert: they upgraded their earnings guidance for the full year saying 168 00:08:55,380 --> 00:08:58,980 Josh Gilbert: demand was high, customers are spending more on extras. So 169 00:08:58,980 --> 00:09:02,070 Josh Gilbert: when they're getting on board, they're upgrading their packages, they're 170 00:09:02,070 --> 00:09:06,150 Josh Gilbert: spending more money. And Royal Caribbean were hitting records across 171 00:09:06,150 --> 00:09:09,179 Josh Gilbert: the boards. They were seeing over a hundred percent capacity 172 00:09:09,420 --> 00:09:11,400 Josh Gilbert: on their ships, which means that we're seeing more than 173 00:09:11,400 --> 00:09:15,960 Josh Gilbert: one person in each cabin and just basically record bookings, 174 00:09:16,170 --> 00:09:18,960 Josh Gilbert: which is really surprising. Then on the flip side of 175 00:09:18,960 --> 00:09:23,700 Josh Gilbert: that, you've got Airbnb who beat expectations last week, but 176 00:09:23,700 --> 00:09:27,449 Josh Gilbert: then they got punished for weaker guidance. That also follows 177 00:09:27,450 --> 00:09:31,530 Josh Gilbert: suits from the likes of Booking. com and Expedia as 178 00:09:31,530 --> 00:09:36,179 Josh Gilbert: well, who earlier in earning season also said that guidance 179 00:09:36,510 --> 00:09:38,910 Josh Gilbert: is looking a little bit shaky. They're not sure if 180 00:09:38,910 --> 00:09:41,098 Josh Gilbert: demand is going to hold up, even though it started 181 00:09:41,100 --> 00:09:44,069 Josh Gilbert: pretty well. And as I say, that surprised me given 182 00:09:44,070 --> 00:09:46,800 Josh Gilbert: what we've seen, one, from this cruise liners, but also 183 00:09:46,800 --> 00:09:49,499 Josh Gilbert: ahead of a busy summer. We've got the Olympics, we've 184 00:09:49,500 --> 00:09:52,978 Josh Gilbert: got Euro 2024 in Europe, so there's a very busy 185 00:09:52,980 --> 00:09:55,199 Josh Gilbert: summer coming up. So a real mix I think there 186 00:09:55,200 --> 00:09:58,260 Josh Gilbert: between those travel names, but also I think it just 187 00:09:58,260 --> 00:10:02,460 Josh Gilbert: goes to show that we are still seeing consumers spend, but it's 188 00:10:02,460 --> 00:10:05,880 Josh Gilbert: just where that spending is coming through. Maybe we're seeing 189 00:10:05,880 --> 00:10:10,199 Josh Gilbert: cruise liners do well because maybe the older generation, the 190 00:10:10,199 --> 00:10:14,550 Josh Gilbert: retired generation have more capital to spend. Higher interest rates 191 00:10:14,550 --> 00:10:17,880 Josh Gilbert: may have obviously been more rewarding for them and they 192 00:10:17,880 --> 00:10:21,360 Josh Gilbert: can spend on cruising. Whereas maybe people just looking for 193 00:10:21,360 --> 00:10:25,529 Josh Gilbert: a normal holiday through Airbnb, Booking and Expedia don't have 194 00:10:25,530 --> 00:10:28,348 Josh Gilbert: the same expendable cash. So, real two ends of the 195 00:10:28,350 --> 00:10:30,029 Josh Gilbert: scale there, and that was a big surprise for me. 196 00:10:30,450 --> 00:10:32,130 Sean Aylmer: Josh, thank you for talking to Fear & Greed. 197 00:10:32,400 --> 00:10:33,150 Josh Gilbert: Thanks so much, Sean. 198 00:10:33,570 --> 00:10:36,390 Sean Aylmer: That is Josh Gilbert, market analyst at social investment network 199 00:10:36,420 --> 00:10:39,689 Sean Aylmer: eToro. This is the Fear & Greed Business Interview. Remember, this 200 00:10:39,690 --> 00:10:42,599 Sean Aylmer: is general information only and you should always seek professional 201 00:10:42,599 --> 00:10:46,020 Sean Aylmer: advice before making investment decisions. Join us every morning for 202 00:10:46,020 --> 00:10:48,419 Sean Aylmer: the full episode of Fear & Greed, daily business news for 203 00:10:48,450 --> 00:10:51,570 Sean Aylmer: people who make their own decisions. I'm Sean Aylmer. Enjoy 204 00:10:51,570 --> 00:10:51,930 Sean Aylmer: your day.