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Speaker 2: I'm looking at Amazon stocks down seven point two percent today.
Speaker 2: I don't know anytime I see Amazon trade down like that,
Speaker 2: I'm like, boy, if I had a portfolio manager, you
Speaker 2: got to be thinking about this is a good time.
Speaker 2: It's flat ear to date, so certainly underperforming the marketplace here.
Speaker 2: They put out some numbers last night a little bit
Speaker 2: disappointing on their guidance, and some questions about the cloud
Speaker 2: and kind of the growth rates there and all that
Speaker 2: kind of stuff.
Speaker 3: Put them boil.
Speaker 2: She follows the company, she follows the stock. She's a
Speaker 2: senior US e commerce and retail analysts for Bloomberg Intelligence.
Speaker 2: Put on, what did you take away from the quarter
Speaker 2: last night?
Speaker 4: Yeah, thanks, Paul, So I think you know. The quarter
Speaker 4: had two mixed streets. The first found the reach side
Speaker 4: things were actually pretty well. Sales grew double digits on
Speaker 4: the retail front, and that was higher than we expected
Speaker 4: shows that value is driving shoppers to amaz about Amazon
Speaker 4: dot COM's retail platform, and prices aren't going up, so
Speaker 4: shoppers are still buying, at least on Amazon dot Com.
Speaker 4: The second side of the story is Amazon's AWS business,
Speaker 4: and I think that's where you're seeing the sell off
Speaker 4: come from. They were disappointing, plain and simple. We saw
Speaker 4: Microsoft and Google. They both outperformed when they reported, and
Speaker 4: Amazon was just in line on the sales side, but
Speaker 4: operating margins were much weaker thirty two percent. That's off
Speaker 4: of thirty nine plus percent in the last quarter. The
Speaker 4: guidance was also weak on the margin side, and I
Speaker 4: think that's really what's causing the stops slide today morning.
Speaker 5: Anyone who was watching Sharer's postmarket yesterday after their results
Speaker 5: watched them fall, you know so much. During that earnings call,
Speaker 5: during Andy Jase's comments, what did he say that was
Speaker 5: so concerning to investors.
Speaker 4: I think it was basically that it's a slow and
Speaker 4: steady climb from here. It's not overnight, right. Amazon is
Speaker 4: not getting the benefit of like the chat GBT that
Speaker 4: my soft is seeing. They are investing in enterprise clients.
Speaker 4: The B to B side of the cloud business, and
Speaker 4: that has plenty of growth ahead. But that growth isn't
Speaker 4: going to come overnight. It's going to come year by year.
Speaker 4: We're still very, very optimistic that Amazon has a long
Speaker 4: runway for growth here, both on the cloud and the
Speaker 4: retail side, and also advertising, which grew nicely at over
Speaker 4: twenty two percent. So the results to us, you know,
Speaker 4: suggest a small slow down, but we think Amazon's earnings
Speaker 4: will e've and flow, but the path forward is still
Speaker 4: up in our mind.
Speaker 2: It's August first, so I guess I have to ask
Speaker 2: this question. I hate to do it because I'm personally saying, hey,
Speaker 2: we're only halfway through summer here, but the reality is
Speaker 2: back to school spending. What's Amazon saying here about back
Speaker 2: to school spending here?
Speaker 4: So they're saying much yet, but back to school is
Speaker 4: clearly the second largest holiday shopping season of the year.
Speaker 4: We think, given Amazon's outperformance here to date on the
Speaker 4: retail side, they will continue to draw in back to
Speaker 4: school spending at this time. Consumers want value. They think
Speaker 4: prices are going up. Prices are going up to some extent,
Speaker 4: but they haven't gone up that much, which is why
Speaker 4: retails holding up. When you're looking for school supplies. You're
Speaker 4: going to Amazon, You're going to Walmart, You're going to
Speaker 4: where you can find value.
Speaker 5: How much of this reaction in Amazon has to do
Speaker 5: with the facts that it was just bad timing for them,
Speaker 5: that they're facing much tougher comparisons after some of the
Speaker 5: other megacaps reported results.
Speaker 4: Comparisons are going to remain tough on the cloud side
Speaker 4: for years to come, because you will continue to see
Speaker 4: growth in the double digit range. I think more of
Speaker 4: it has to do with just Amazon's results were not bad.
Speaker 4: They were pretty good. It's just say weren't as good
Speaker 4: as Microsoft and Google. And that does go back to
Speaker 4: what I said earlier. They own to get the benefit
Speaker 4: of the C two C side of cloud growth that
Speaker 4: those two competitors get.
Speaker 3: So on the retail side.
Speaker 2: Here with teriffs, we now have a clear picture of
Speaker 2: kind of how the TERFF situation might shake out. I
Speaker 2: got to feel like Amazon, I mean, nobody's got more,
Speaker 2: you know, buying power than Amazon, so I can't somebody
Speaker 2: tries to raise the prices on me, I'd be like,
Speaker 2: don't take a walk.
Speaker 3: I mean, what are they saying?
Speaker 4: Yeah, I think you know, clearly prices are going to
Speaker 4: rise slightly. Is Amazon more shielded than the rest of retail?
Speaker 4: I think absolutely. As to your point, Paul, seven hundred
Speaker 4: plus billion dollars in global GMB, forty percent of the
Speaker 4: business or less than forty percent is first part which
Speaker 4: is which means that's the inventory that they own, and
Speaker 4: that's the inventory where they have pricing control over still
Speaker 4: sizable and therefore they do have that buying power advantage.
Speaker 4: And they also have o their offsets. Right, Amazon has
Speaker 4: more than just retail in its house. It's got a WS,
Speaker 4: it's got advertising, which you are very very high profit margins.
Speaker 4: So could they eat some of that cost absolutely? Will
Speaker 4: they pass them along, yes, but not on the basics
Speaker 4: right retail, one on one, you don't raise the price
Speaker 4: of milk. You raise the price of something else. So
Speaker 4: the items that you draw you to the platform, they're
Speaker 4: not going to raise the price of materially there or
Speaker 4: we don't expect them to. And on the third party side,
Speaker 4: that's on Amazon's problem. They have over two hundred million sellers.
Speaker 4: You can go between the seller. I'm sure that there
Speaker 4: will be intense competition as prices may rise there for
Speaker 4: shoppers to have choices.
Speaker 5: We have more clarity on tariffs than we did before.
Speaker 5: But there's this idea that tariff policy is still in
Speaker 5: a flux in the final framework could change. How much
Speaker 5: do you think that will impact Amazon's decision making from
Speaker 5: this point?
Speaker 4: I think for Amazon, you know, tariffs right now the
Speaker 4: way we look at them as they're changing. China is
Speaker 4: still on a ninety day pause, right, so we don't
Speaker 4: know where things will end up in China, and that's
Speaker 4: a very very important country to watch for. So I'd
Speaker 4: say we're very much in fox Vietnam, the tariffs have
Speaker 4: gone up from the ten percent post to twenty percent.
Speaker 4: They're also going up in other Asian countries India speculated
Speaker 4: or said to be around twenty five percent. These are
Speaker 4: countries where the last round of tariffs, companies had moved
Speaker 4: out of China into many of these countries. Right, so
Speaker 4: while the teriff freight is still better, right, twenty percent
Speaker 4: is still better than the thirty percent pause, and who
Speaker 4: knows what it'll be among their two months from now.
Speaker 3: All right, for the thanks so much, Punem, thanks so much,
Speaker 3: appreciate it.
Speaker 2: She covers all the retail for Bloomberg Intelligence, including Amazon.
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Speaker 2: Alexamanova from Bloomberg News on pulps when you were live
Speaker 2: here on our Bloomberg and Active Broker Studio streaming live
Speaker 2: on YouTube as well. All right, Applestock down one and
Speaker 2: a half percent today, down eighteen percent year to date.
Speaker 2: I thought their quarter last night was really good. The
Speaker 2: fastest quarterly revenue growth in more than three years. Revenue
Speaker 2: is of nine point six percent. People telling me this
Speaker 2: is a low, maybe mid single digit growth story. It
Speaker 2: looked pretty darn good to me. They said China was
Speaker 2: even pretty good. And for me, one of the biggest
Speaker 2: head wins for Apple story has always been how are
Speaker 2: you going to operate in China? So I thought it
Speaker 2: was a pretty solid, if not actually kind of really
Speaker 2: good quarter. Angelo Zeno he's the pro who'll give us
Speaker 2: the load down here. He's a senior vice president of
Speaker 2: Equitiani sid C fr A research Angela. What was your
Speaker 2: takeaway from the Apple print last night?
Speaker 6: Yeah, so thanks for having me, I think overall, to
Speaker 6: your point, the results were really good, better than I
Speaker 6: think we anticipated in anybody else out there. And again
Speaker 6: to your point, I mean, this was probably the I
Speaker 6: think the best growth rate we've seen since late calendar
Speaker 6: twenty twenty one.
Speaker 7: And again with China, the return to.
Speaker 6: Growth, the first quarterly growth rate that we saw in
Speaker 6: two years. All kind of positives here for Apple. And
Speaker 6: I think to me that the biggest takeaway or the
Speaker 6: biggest positive on the call was actually the services number.
Speaker 6: They grew thirteen percent year of a year. They actually
Speaker 6: didn't give guidance three months ago, you know, due to
Speaker 6: some fears whether it had been related to they got
Speaker 6: the Games case or what have you, and they actually
Speaker 6: provided guidance for the September quarter as far as services
Speaker 6: is concerned, also about thirteen percent are consistent with the
Speaker 6: June quarter. So the services, we think continues to be
Speaker 6: the key growth story and why we like it. But
Speaker 6: I will say this, as far as the guidance is concerned,
Speaker 6: and what they had to say forward looking in nature,
Speaker 6: they didn't really answer or kind of alleviate the concerns
Speaker 6: out there that some of the bears have, and you know,
Speaker 6: I'd say the biggest thing is really the fact that
Speaker 6: when they did provide guidance, it essentially assumes no changes
Speaker 6: to tariffs, and we.
Speaker 7: Think that's unlikely.
Speaker 6: We actually think there are going to be changes to tariffs,
Speaker 6: because you're going to get something from the two thirty
Speaker 6: two semi conductor investigation, likely in the next couple of weeks,
Speaker 6: and when you do see that, that is going to
Speaker 6: have an impact. We think on Apple, probably their decision
Speaker 6: on what they're going to do in terms of pricing
Speaker 6: in their margin strategy.
Speaker 5: Angelo is speaking of tariffs. How sustainable is that revenue
Speaker 5: growth number that we saw, How much of it is
Speaker 5: related to a tariff related pull in?
Speaker 7: I mean, for the June quarter, they said it was
Speaker 7: one out of their ten points.
Speaker 4: Right.
Speaker 6: Whether or not you want to believe that, you know,
Speaker 6: is up to you know, every individual out there. We
Speaker 6: expect We thought that, you know, when we originally saw
Speaker 6: the print, we would have, you know, bet on the
Speaker 6: fact that it probably would have been more than that. Again,
Speaker 6: for the September quarter, the guidance of you midt to
Speaker 6: high single digit growth where we were looking for about
Speaker 6: three percent growth. It just seems like the growth rates
Speaker 6: at least right now for the for these two quarters,
Speaker 6: you can call they obviously attributed to the fact that
Speaker 6: the iPhone sixteen cycle is just seeing maybe better upgrades
Speaker 6: than what we saw in prior cycles. But it's just
Speaker 6: hard to imagine that's all that's happening because you didn't
Speaker 6: necessarily see those type of growth rates right in the
Speaker 6: December quarter, in the March quarter when the cycle first started.
Speaker 7: So you know, it's.
Speaker 6: Probably a little bit more than what they're leading us
Speaker 6: out to believe. But you know, well, again, we'll get
Speaker 6: better clarity as we kind of go into the iPhone
Speaker 6: seventeen cycle and into December quarter.
Speaker 3: ANGELA.
Speaker 2: One of the headwinds for Apple, real or perceived, I'm
Speaker 2: not sure, is the belief that they don't really have
Speaker 2: a solid AI play AI angle to the story A.
Speaker 3: Do you believe it? Do you agree with that? And
Speaker 3: be what do you think they should be doing on
Speaker 3: that front?
Speaker 7: No, we believe it. You know, they don't have They're not.
Speaker 6: This is the problem right when you kind of look
Speaker 6: at some of these other stories across the tech space,
Speaker 6: there are much better stories as far as the as
Speaker 6: far as.
Speaker 7: Investing in AI.
Speaker 6: We know AI is going to be a huge disruptive
Speaker 6: trend here over the next decade and longer than that.
Speaker 6: But if you're not in this AI kind of ecosystem,
Speaker 6: and you know you're not playing a role in the
Speaker 6: whole AI space, you know you're missing out and investors
Speaker 6: are going to get frustrated with that.
Speaker 7: The biggest is with.
Speaker 6: Apple has been the fact that they haven't they haven't
Speaker 6: made good on their promise. You know, back in June
Speaker 6: of twenty twenty four at the Developers Conference when they
Speaker 6: essentially said by this year we were going to see
Speaker 6: you know AI or you know, Cirie integration across that
Speaker 6: app store, and we just haven't seen it yet.
Speaker 7: What we did like last night on the.
Speaker 6: Call was Tim Cook seemed like he was he remains
Speaker 6: committed that we are going to see at some point
Speaker 6: here over the next couple of quarters. We continue to
Speaker 6: say they've got to get this right. By the time
Speaker 6: we hit the Developers Conference in June of next year.
Speaker 6: That's the absolute latest that they can get this AI
Speaker 6: story right. We think they will get it right. They've
Speaker 6: got all the money in the world to kind of
Speaker 6: throw at it, and whether it be done internally via
Speaker 6: partnerships or some m and a strategy all which it
Speaker 6: seems like they were open to on the call last night.
Speaker 7: We think they'll get it right.
Speaker 5: Obviously a lot of investors want to hear what companies
Speaker 5: are doing on AI. But does Apple actually risk losing
Speaker 5: customers if they don't come up with an AI strategy
Speaker 5: or will they be okay with using each hot GPT
Speaker 5: app on their phones.
Speaker 7: That's a great question.
Speaker 6: You know, I don't know if they really risk losing
Speaker 6: you know, customers at this point in time. I do
Speaker 6: think it's going to have a huge impact on the
Speaker 6: upgrade cycle. If you see them get this AI story
Speaker 6: right and we see some really cool AI capabilities, integration
Speaker 6: across the app store, get these developers to really developing
Speaker 6: some you know, really great apps out there, you're going
Speaker 6: to see consumers really start to upgrade. And Apple's going
Speaker 6: to benefit from a monetization perspective on the hardware side,
Speaker 6: and we think they're also going to be able to
Speaker 6: charge some nice features from a services perspective as well.
Speaker 6: So that's how they can make money from an AI
Speaker 6: standpoint on both hardware and services. But maybe to your point,
Speaker 6: our consumers all of a sudden depart not necessarily.
Speaker 7: But listen, Samsung is a formidable threat out there.
Speaker 6: They've got you know, some decent people out there as well.
Speaker 6: You know, they've got some really good integration with with Alphabet.
Speaker 6: So you know, we'd rather see Apple get it right
Speaker 6: and that have to necessarily worry about that issue.
Speaker 3: Angel thirty seconds left.
Speaker 2: I kind of like the aqua higher kind of strategy
Speaker 2: that are seeing across the tech space where companies will
Speaker 2: buy a majority stake, not the whole thing so the
Speaker 2: regulators don't jump down their throat.
Speaker 3: Is that something Apple would considered, do you think?
Speaker 6: I mean, it doesn't seem like it's in their DNA
Speaker 6: right now. And when we kind of see you know,
Speaker 6: some of the moves that they've met as of late,
Speaker 6: they've actually been you know, they've actually been hurt by
Speaker 6: the Aqua higher strategy, right, just given some of the
Speaker 6: key departures that we've seen.
Speaker 7: But yeah, I mean, Apple's got.
Speaker 6: The They've got the ability to kind of benefit from
Speaker 6: that theme. My guess is again they're going to have
Speaker 6: to get this AI story right so they could use
Speaker 6: it towards their advantage.
Speaker 7: But I agree with you, I like the.
Speaker 6: Whole Aqua hier theme for the broader, you know, AI,
Speaker 6: space ecosystem and the tech sector.
Speaker 2: All right, angel I thank you so much. We appreciated that.
Speaker 2: Angel Is, you know, senior vice president equity analyst at
Speaker 2: CFRA Research. I mean, look, it's not like they don't
Speaker 2: have the money, folks, Apple Scott one hundred and thirty
Speaker 2: billion dollars of cash on the balance sheet.
Speaker 3: They can borrow whatever they want.
Speaker 2: They're gonna have free cash flow, you know, north of
Speaker 2: one hundred billion dollars over the next several years, one
Speaker 2: hundred and twenty billion dollars.
Speaker 3: So it's not like the of the cash to go
Speaker 3: all in on AI.
Speaker 2: The question is kind of what's their strategy, and that's
Speaker 2: still kind of up in the air for a lot
Speaker 2: of investors. I'm not sure we're gonna get much cloudy,
Speaker 2: but as angel is saying, that needs to come.
Speaker 1: You're listening to the Bloomberg Intelligence Podcast. Catch us live
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Speaker 3: All right, let's switch over to the energy biz.
Speaker 2: I'm just going to quote Wtech houd to oil because
Speaker 2: I watch Landman four season. I know all about the
Speaker 2: oil and gas businesses. Down at dollar eighty seven sixty
Speaker 2: seven dollars and thirty eight cents. Chevron, Exon it reported
Speaker 2: some numbers here today. Let's break it all down for
Speaker 2: the big oil companies. Vince piaz a senior equity and
Speaker 2: I'll see covers all the energy space for Bloomberg Intelligence.
Speaker 2: He has done that for decades on both the south
Speaker 2: side and.
Speaker 3: The buy side.
Speaker 2: Evince, what you what'd you see? What you learn from
Speaker 2: the Exons of the world, the Chevrons of the world.
Speaker 8: Hey, so today what we definitely picked up is, you know,
Speaker 8: the view that Exxon and Chevron are closely mirroring one another.
Speaker 8: So you know, Permian growth, Permian basin growth for both
Speaker 8: the Chevron and Exon was there. Chevron topped out at
Speaker 8: a million barrels a day h in the Permian. But
Speaker 8: you know, going forward that will likely sort of temper
Speaker 8: down a bit because of just you know, the indecision
Speaker 8: of around wt I and just the the energy environment
Speaker 8: in general. So we'll probably see some more free cat
Speaker 8: flow flowing out of their More importantly though, for Chevron,
Speaker 8: Paul the Hess deal closed. So now the hard part
Speaker 8: starts for Chevron to integrate this very large footprint after
Speaker 8: you know, almost two years of legal hassles with Exon.
Speaker 8: The good news here is that both parties are now
Speaker 8: partners in what is the most prolific offshore international asset
Speaker 8: that we've seen in decades. And so I think going forward,
Speaker 8: what you see here for both of these entities is
Speaker 8: the upstream side of the equation stinning more of a
Speaker 8: light on the upstream side because of not only developments
Speaker 8: that they've had offshore, but also here shorter cycle permium growth,
Speaker 8: which will likely provide tax flow going forward for both
Speaker 8: of these entities.
Speaker 5: Vince, one thing that stood out to me is, in
Speaker 5: addition to the off its surprise, Exon said it's keeping
Speaker 5: an eye out for more acquisitions after it's sixty billion
Speaker 5: dollars dollar takeover of Pioneer Natural Resources. What do you
Speaker 5: think that this activity will mean for the company.
Speaker 8: Well, look, they have been very proficient in picking up pieces,
Speaker 8: first the XTO several years ago, now Pioneer. This is
Speaker 8: not a play just for volume. It is strategic. The
Speaker 8: permium basin can still use some consolidation. There aren't very
Speaker 8: many pieces of size left. There are a lot of
Speaker 8: other smaller entities. So for Exon, in order to move
Speaker 8: that needle, it would need to make a a very
Speaker 8: sizable acquisition. They're still out there and they do have
Speaker 8: some scale. The issue here is this isn't just about volume.
Speaker 8: It's also about consolidating and expanding the resource play within
Speaker 8: the Permian and there is and there are a few
Speaker 8: of size in the region that would make sense. But
Speaker 8: we're not going to lead the witness and tell you
Speaker 8: what's coming up in the next couple of weeks for us.
Speaker 2: So, Vince, I think about that the Chevron deal, and
Speaker 2: I know you know from talking to you and reading
Speaker 2: your research. A big part of that attraction for Hess
Speaker 2: by being bought by Chevron was Hess had a stake
Speaker 2: in or a big property or find down a Gian
Speaker 2: to tell us about that, because that was.
Speaker 3: A sure real opportunity.
Speaker 8: Yeah, I think that is the crown jewel of this acquisition,
Speaker 8: and that's what the arbitration really was about. It was
Speaker 8: about Exxon's writer or first refusal to that particular asset.
Speaker 8: Of course, uh that decision went in favor of Chevron. No,
Speaker 8: Guyana is a very large asset the straybook block is
Speaker 8: a very large, prolific piece. There are more than a
Speaker 8: dozen developments that will be ongoing, and that asset base
Speaker 8: will provide decades of production growth that will facilitate the
Speaker 8: short run short cycle development, short cycle production here in
Speaker 8: the US in the permium basin for both Devron and Exon.
Speaker 8: So having two very large entities that understand these longer
Speaker 8: cycle large developments, I think is a positive. And it's
Speaker 8: also a positive that both have fairly deep pockets and
Speaker 8: good experience doing these types of things.
Speaker 2: Vince, thanks so much for joining us. Always appreciate getting
Speaker 2: a few minutes of your time, Vince Piazza. He is
Speaker 2: the go to voice Bloomberg Intelligence for all things energy,
Speaker 2: oil and gas for Bloomberg Intelligence and again on the
Speaker 2: Landman front. You got to watch it if you want
Speaker 2: to be an expert like I am now in oil
Speaker 2: and gas.
Speaker 5: I'm still learning a lot about oil and gas every
Speaker 5: day at I don't.
Speaker 3: Know, I just it's a tough life. That's one of
Speaker 3: my takeaways.
Speaker 2: I mean, that's hard to get that stuff out of
Speaker 2: the ground is not easy, and these companies make huge investments. Again,
Speaker 2: Chevron's excellon spending sixty billion dollars for Pioneers, Chevron buying hes.
Speaker 3: I mean, it is a tough business, but I'm a act.
Speaker 2: They are filming season two of land Man, so it
Speaker 2: is coming, so that is cool.
Speaker 3: I'm all fired up for that.
Speaker 4: There.
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