[ good morning ]

Here’s everything you need to know today

I guess rates don’t matter when the winners keep winning. The market surged yesterday despite Jerome Powell dropping the hammer on the promise of interest rates getting lowered by March. It looks like enough businesses are finding ways to perform despite higher costs and higher rates.

More importantly, 3 of the top 10 biggest stocks in the world posted incredibly strong earnings yesterday and painted a very rosy picture for 2024 (at least for the most part). Meta can’t help but drive more efficiency, Amazon can only drive higher margins and Apple can only post revenue gains even when their revenue in China is falling off a cliff.

Basically, if you’re invested in the Magnificent 7 (besides Tesla)—you’re going to do just fine while the Russell 2000 struggles to find any signs of life. Slowly but surely, the mid-tier players will find a way forward in this tough environment—but the big dogs are thriving no matter what.

However, the rest of the market is getting hammered as a hotter-than-expected jobs report caused U.S. Treasury yields to pop on added inflation fears. With that sell-off not even denting the Mag 7 winners from yesterday—we’re really starting to see the economy bifurcate as the winners at scale continue winning despite how oppressive the macro environment is.

So, let’s explore how the top tier of this economy is staying dominant and how the battle lines will evolve in 2024.

Markets at a Glance

*Market data based on standard trading hours and calculated close to close

[ social media ]

Meta Stuns Market With First Dividend

And another insane quarter of surging revenue and crushed costs.

BREAKING NEWS
Somehow, the Zuck keeps getting away with it. Meta stock is up double-digits in early trading thanks to an astonishing beat in every possible capacity in earnings.

WHAT HAPPENED
Meta demolished expectations at a time when investors were expecting a pullback in revenue overall. Meta generated an astonishing $5.33 EPS from $40.1 billion in revenue.

The scale of this beat is honestly hard to communicate. This time last year, Meta got a little positive buzz for generating a $1.76 EPS from $32 billion in revenue. Meta’s pivot to an efficiency model has yielded a truly astonishing turnaround—to the point that Meta can afford stock buybacks and a $0.50 quarterly dividend now.

COMPLETE TURNAROUND
You can look at this turnaround from a lot of different angles—but let’s focus on two of the biggest outliers that signal what’s to come:

1. Meta has more users than ever, and those users are more valuable than ever. The Meta family of apps has pushed to 3.19 billion daily active users—a mild slowdown from the last two quarters. However, Monthly active users are knocking on the door of 4 billion and Meta has finally boosted engagement enough that 80% of their Monthly active users are also daily active users. All Meta has to do is capture your attention once and they have an 80% chance of turning you into someone who engages daily.
   More importantly—Meta’s algorithm advancements have pushed their revenue per user up 17% in the last year to $10.10.

2. Reality Labs just crossed $1 billion in revenue. Meta’s embarrassing push into the metaverse is suddenly generating real money. Is Zuck actually going to pull off this move to VR? Of course, despite the huge jump in revenue—Reality Labs also saw their operating loss surge to $4.6 billion in Q4. That means Meta lost over $16 billion in 2023 building the metaverse. Meta is so staggeringly huge that they burned through the equivalent of the entire GDP of Moldova just to try and make the Metaverse a thing.

WHY IT MATTERS
These results are honestly staggering. Meta’s efficiency gains here are incredible—and the wildest part is it looks like Meta still has room for improvement. Engagement on Facebook and Instagram is skyrocketing a year after a lot of analysts predicted TikTok would steamroll Zuck’s family of apps. Meta attributes these gains to AI advancements within their algorithm—and results like these are going to drive many more companies into developing their own AI efficiencies this year. Meta stock surged 16% in early trading, comfortably securing their spot back in the $1 trillion valuation club.

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Sectors at a Glance

*Market data based on standard trading hours and calculated close to close

[ technology ]

Amazon Erupts As Profits Return

After a year of getting crushed by costs—Free Cash Flow and Net Income are back with a vengeance

BREAKING NEWS
Amazon has finally gotten their costs under control and posted a huge jump in profits. The stock is up big as their news just gets better and better.

WHAT HAPPENED
Amazon netted a huge $1.00 EPS from $170 billion in revenue as their operations have become far more efficient in the last year. Profit numbers beat The Street’s expectations by 25%. Meanwhile, advertising revenue at Amazon jumped to $14.7 billion—making ads a significant top-line driver for the stock. The main news here is how Amazon has crushed costs for their e-commerce business. North American net income jumped to over $6 billion after Amazon operated at a $200 million loss this time last year. International income is finally within striking distance of profitability.

MEET RUFUS
On top of these efficiency gains—Amazon is introducing their first consumer-level AI tool. Amazon is rolling out a beta of their Rufus chatbot to select users, with a bigger release scheduled for later in the year. Rufus is being billed as a ‘shopping assistant’ that can help users make decisions and navigate the shopping experience over time.

WHY IT MATTERS
It was easy enough for Meta to get their costs under control as a software play—but Amazon moves physical products through the real world. So, this surge in efficiency is gigantic for the firm as they rely more on automation and stronger algorithms to better deliver goods at lower costs. With AWS profits jumping as well—Amazon is in a strong position to stay on top in 2024. Amazon stock jumped 7% in early trading.

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[ technology ]

Apple Falls as China Woes Compound

Apple’s iPhone sales are billions of dollars short of expectations

BREAKING NEWS
Apple managed to beat profitability and revenue expectations in their earnings report—but a sharp decline in revenue from China is pushing their stock lower. Let’s break down the fallout here:

WHAT HAPPENED
Apple made $2.18 per share from $119 billion in revenue in Q4 2023. Both of those numbers beat expectations—but there are troubling trends underneath those beats that are driving the stock lower.

DECLINING FAST
First up—revenue in China declined 13% YoY as competitors are finally making real gains against Apple. This was offset by a huge revenue jump coming out of Europe and Japan—but American growth is starting to slow as well.

Meanwhile, iPhone sales managed to drive a respectable bump in revenue while Mac sales stayed relatively flat and iPad and Wearables revenue posted sharp declines. All of that was offset by services revenue shooting higher.

WHY IT MATTERS
Apple’s story is in the middle of a huge shift. While Apple is becoming more of a services play and that’s netting solid profitability growth—investors are afraid that Chinese declines will only accelerate while gains in other regions are slow to keep up. Apple can easily turn things around here, but it might take some time. Apple shares declined 3% in early trading.

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