Speaker 1: Apple and Amazon delivered earnings after the close of regular trading.
Speaker 1: Apple shares this morning they're down one percent and Amazon
Speaker 1: Amazon shares right now six percent higher in pre market trading.
Speaker 1: Let's break it down for you now with Gene Monster,
Speaker 1: managing partner at Deepwater Asset Management. Gene, good morning, Thanks
Speaker 1: for being with us this morning. Thank you hey for Apple.
Speaker 1: What are the immediate pressure points that investors are looking at?
Speaker 2: You nailed that.
Speaker 3: The first is that the guidance for the December quarter
Speaker 3: was a little bit muted. They basically guide it to
Speaker 3: around five to six percent year every year growth. The
Speaker 3: street was at six percent. And I think what it
Speaker 3: speaks to is this acceleration around Apple intelligence still is
Speaker 3: not impacting the business. We're not seen it in the
Speaker 3: December quarter. I'm a believer that these tools, adding AI
Speaker 3: to twenty percent of the world's population is going to
Speaker 3: have a meaningful impact on iPhone growth, but we're just
Speaker 3: not seeing it in the Sember guidance. And part of
Speaker 3: the reason is that, of course these features really don't
Speaker 3: have the substance that they will have fast forwarding to
Speaker 3: the March quarter. They're pretty subtle. The improvements in your
Speaker 3: phone right now with AI, but they will improve. There's
Speaker 3: going to be another update in December, and then a
Speaker 3: couple other significant ones in the months of February and March,
Speaker 3: and so I think the big picture here, John, is
Speaker 3: that for optimistic investors in Apple, they kind of this
Speaker 3: lift off of growth isn't going to happen in the
Speaker 3: December quarter. But still the setup is positive that we're
Speaker 3: going to see that acceleration into next year. And I
Speaker 3: just want to put one final point on this. What
Speaker 3: is acceleration and growth? Is that the streets at five
Speaker 3: percent iPhone growth for this year.
Speaker 2: For fiscal twenty five, which just kicked off, I think
Speaker 2: it's going to be closer to ten percent.
Speaker 1: Well, what are the what are the features? And are
Speaker 1: they to resonate with customers if I'm upgrading? Do I
Speaker 1: have to have this?
Speaker 2: I think today the answers know.
Speaker 3: I think that most people who have done the beta
Speaker 3: present Company included find the features nice but not like
Speaker 3: must have. But I think they will be must have
Speaker 3: within the next six months. And just to kind of
Speaker 3: frame in a couple of them. They have the built
Speaker 3: in writing tools that many of you use for with GPT,
Speaker 3: but that's within text messages and email. They have a
Speaker 3: photo editing app that uses artificial intelligence. They also have
Speaker 3: this is available today. They have the ability to essentially
Speaker 3: read your email and notify which ones that are most important.
Speaker 3: And I've found that feature particularly helpful, especially with spam
Speaker 3: and trying to sift through all that. But as we
Speaker 3: fast forward into next year, essentially you get into what
Speaker 3: is referred to is a gentic ai, which is the
Speaker 3: ability for third party developers to build smart apps that
Speaker 3: run on your phone.
Speaker 2: So I think one example could be an app.
Speaker 3: That helps to figure out if you have a dispute
Speaker 3: with your cable company, for example, and would be able
Speaker 3: to reach out to the cable company actually get any
Speaker 3: work that's done on a phone or a computer can
Speaker 3: automate that. And that's when things really start getting exciting
Speaker 3: and these features become must have.
Speaker 2: Is when a gentic ai kicks in.
Speaker 1: It sounds like you're saying the rollout is a little
Speaker 1: too slow for your taste.
Speaker 3: Well, it's slow. I would say that it's what they
Speaker 3: had projected. But from my perspective, I can't wait. I
Speaker 3: can't wait for these features. I mean, this is something
Speaker 3: that I think is going to have a profound impact
Speaker 3: on how we use our devices, and so it's slow,
Speaker 3: It's as expected, and I think this is going to
Speaker 3: be a case where Apple investors just need to be patient.
Speaker 3: I think this acceleration ultimately is going to be coming
Speaker 3: real quick.
Speaker 1: Just finally on Apple, you believe in a super cycle
Speaker 1: for Apple? Is that still on track?
Speaker 2: It is. I mentioned that kind of ten percent growth.
Speaker 3: I think the streets at five percent of the next year,
Speaker 3: but in twenty twenty six, so investors will be quickly
Speaker 3: thinking about this. I think that they can grow at
Speaker 3: fifteen to twenty percent in the streets at seven, So
Speaker 3: I think you really get to a year and a
Speaker 3: half two years of elevated growth, which I believe is
Speaker 3: going to be positive for shares.
Speaker 1: What is standing out for Amazon this morning? For you?
Speaker 3: It was a there's two factors that drove they're driving
Speaker 3: the stock higher. The first is the operating income guidance
Speaker 3: for the December quarter. Typically they guide down versus the street.
Speaker 3: They did something rare here as they actually guided up
Speaker 3: slightly versus the street for December, and so the profitability
Speaker 3: piece is getting better for Amazon. So that was kind
Speaker 3: of the first leg up the stack was up around
Speaker 3: three percent on that news, and then it kind of
Speaker 3: moved another three percent Hired following a comment on the
Speaker 3: earnings call where they said that AWS they were constrained. Essentially,
Speaker 3: they could have done had more growth if they had
Speaker 3: better capacity. It was up nineteen percent and they basically
Speaker 3: said that the growth is going to continue to accelerate
Speaker 3: and they're going to be able to do that more profitably.
Speaker 3: And so I think those were the two factors that
Speaker 3: drove Amazon shares higher.
Speaker 1: The cost cutting there, that's I guess, an effort to reallocate.
Speaker 1: It's not just standard cost cutting. They're reallocating resources.
Speaker 2: Right they are.
Speaker 3: They've been pulling away from things like Alexa more recently
Speaker 3: and some of a lot of these devices, these different
Speaker 3: hardware devices that probably many of your listeners have never
Speaker 3: even knew that Amazon was doing. But they've canceled those
Speaker 3: projects and are kind of reallocating them, of course to
Speaker 3: things related to anything AI.
Speaker 2: AWS is a big factor.
Speaker 3: There also more automation tools that improve a profitability, and
Speaker 3: last is better tools for consumers to understand or get
Speaker 3: better shopping tools. So this rufous feature that they rolled
Speaker 3: out a few months ago, they're continuing to invest.
Speaker 1: In that twenty seconds impressions of Microsoft at failed six percent.
Speaker 3: Surprised at that. I think bottom line is that Microsoft,
Speaker 3: I think needs to inspire investors that they can have
Speaker 3: some measurable acceleration and revenue growth, not just keeping it
Speaker 3: flat at fourteen percent. They failed to do that, and
Speaker 3: I think that that's what's up for them for the
Speaker 3: next three months is to convince investors.
Speaker 1: Gene always a pleasure. Thanks very much for doing this
Speaker 1: this morning. Gene Monster, managing partner at Deepwater Asset Management,