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- BABBEL | January 16th, 2024
BABBEL | January 16th, 2024
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TOGETHER WITH
Today’s report is brought to you by Babbel, the world’s first language-learning app and also the best-selling. Its intuitive lessons have led to over 10 million subscriptions being sold, centering on learning a language through real-life conversations.
[ good morning ]
Here’s everything you need to know today
After a 701-day drought, we’ve got a solid dusting of snow here on Wall Street. Today is all about breaking out of old narratives like this as 2024 really gets going.
Earnings season is back in full swing as banking’s B-squad put out decent enough results, but not enough to stave off a selling spree initiated by treasury yields topping 4% (again). Get ready for swings like this for the next few weeks until we get a clearer path forward from the Fed at the tail-end of January.
There’s enough big moves happening in this market to keep us distracted from all this volatility though. New battle lines are being drawn in the AI wars every day as Microsoft puts in the work to hold on to their new title as the world’s most valuable company.
We’re also surprised to see how competitive fast food is going to be moving forward as that whole industry stabilizes.
So, let’s examine the most impactful headlines moving forward and try to get a solid sense of the 2024 landscape as it really starts to take shape.
Markets at a Glance
*Market data based on standard trading hours and calculated close to close
[ artificial intelligence ]
Microsoft Is The World’s Most Valuable Company (again)
A new Vodafone deal has secured 2024 as Microsoft’s year to lose
BREAKING NEWS
After slightly usurping Apple as the world’s most valuable company on Friday, Microsoft cemented their position with a new $1.5 billion deal with Vodafone today. Let’s break down their ascendance.
WHAT HAPPENED
Microsoft and Vodafone have agreed to a partnership where Vodafone will invest $1.5 billion into developing their own AI system using architecture provided by OpenAI and Microsoft Azure. This also includes a massive transition to using Azure as Vodafone’s primary server provider. Microsoft will in turn invest in Vodafone’s Internet of Things business when that splits off later in Q2 this year.
ENTERPRISE AI PLAYBOOK
This deal reveals a lot as it shows how Microsoft will work to stay dominant in the AI space this year. Microsoft’s business has relied more and more on stronger use cases for their Azure cloud service. By bundling like this, Microsoft is deepening their revenue base and making their whole product suite indispensable.
WHY IT MATTERS
For most enterprises, AI services will rely so heavily on the cloud that bundling like this is a critical strategic move on Microsoft’s part. This shows a new, critical battleground as AI becomes the catalyst to resurrect cloud budgets in 2024. Azure is making a run at Amazon’s dominance in the cloud space. All this news helped pump Microsoft stock 5% in the last week.
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Sectors at a Glance
| Sector | Day | Month | Year |
|---|---|---|---|
| Communications | 0.49% | 3.96% | 41.34% |
| Consumer Disc. | -1.20% | -3.06% | 24.16% |
| Consumer Stap. | 0.32% | 2.52% | -2.75% |
| Energy | 1.13% | -2.71% | -8.30% |
| Financials | -0.19% | 0.67% | 4.36% |
| Health Care | -0.25% | 4.82% | 3.80% |
| Industrials | -0.01% | -0.51% | 9.48% |
| Materials | 0.10% | -2.08% | -0.57% |
| Real Estate | 0.76% | -0.48% | -0.10% |
| Technology | 0.32% | 0.52% | 47.53% |
| Utilities | 0.57% | -0.36% | -11.29% |
*Market data based on standard trading hours and calculated close to close
[ fast casual ]
Burger King Owner Falls on $1 Billion Franchise Buyback
Restaurant Brands is taking a very expensive route to revitalizing Burger King
BREAKING NEWS
After announcing a $400 million plan to revamp the Burger King brand last year, Restaurant Brands is doubling down by buying out one of its largest franchise owners. The stock is falling. Here’s why:
WHAT HAPPENED
Restaurant Brands is buying Carrols Restaurant Group for nearly $1 billion in an all-cash deal. Carrols owns 1,000 Burger King restaurants—which is integral to this deal. Restaurant Brands is looking to remodel 600 of the Carrols-owned locations as part of their BK reset. Restaurant Brands is taking this financial risk to streamline the remodeling process.
FALLING FAST
Frankly, the boldness here is refreshing. Burger King has been on the decline for the better part of a decade. The brand recently lost their long-held #2 spot to Wendy’s and is still losing market share. Restaurant Brands is essentially betting the farm on this remodel, but at least the company is trying to stay competitive.
WHY IT MATTERS
We’re seeing a lot of strength emerge in the fast-casual space as food inflation stabilizes. With costs more under control, brands like McDonald’s and Burger King can focus on growth again. Restaurant Brands needs to make a move like this to stay relevant—but it’s going to come with a lot more risk down the line. For a lot of investors, that’s just too much risk to stomach. Restaurant Brands stock dropped 2% in early trading as a result.
[ big tech ]
Apple Falls on Discount News
The iPhone empire simply can’t beat declining demand
BREAKING NEWS
Apple stock steepened their decline today on new reports that the company has been forced to offer iPhone discounts in China. Let’s break it down:
WHAT HAPPENED
Apple is dropping iPhone prices by around $70 dollars in China as part of a Lunar New Year promotion. Why is that news?
Apple has offered discounts like this before—specifically last year, but investors are dumping the stock as Apple has already had margin concerns for the better part of this year. Meanwhile, pressure from the Chinese market and declining demand in general are causing investors to dump Apple whenever there’s even a hint of bad news.
BROKEN WATCH
Meanwhile, new reports claim that Apple is dropping blood oximeter sensors from certain Apple Watch models in order to circumvent an import ban placed by the U.S. government. The market sees this as Apple capitulating even though the whole patent argument is far from over. All of this is adding to today’s sell pressure.
WHY IT MATTERS
With critical downgrades from Wall Street traders and a litany of bad news to start the year, Apple’s stock is experiencing a ‘death by a thousand cuts’ moment. None of the news items surrounding Apple right now are overly negative in their own right, but they are starting to compound and add more and more sell pressure to the stock. Apple declined over 2% in early trading and has fallen over 6% since December.
Extra Moby Snacks
Goldman Sachs ‘won’ this morning’s slate of earnings in finance with a massive earnings beat driven by more profitable products. Their stock surged over 1%.
Shell declined nearly 2% in early trading after the oil empire finally sold their Nigerian operations for $1.3 billion.
TOGETHER WITH
Today’s report is brought to you by Babbel, the world’s first language-learning app and also the best-selling. Its intuitive lessons, have led to over 10 million subscriptions being sold, centering on learning a language through real-life conversations.