🎙️ Earn Baby, Earn

Last week, we heard from the Fed. Earlier this week, stocks dipped after a historic U.S. credit rating downgrade.

Today, we heard more insights about the economy when the world's rulers, Apple and Amazon, reported earnings after the bell 🛎️

The ‘Zon crushed earnings, sending its stock up over 7% in after-hours trading. Apple beat expectations, too — more on the two of them tomorrow.

💭 Today’s newsletter is heavy on the rest of this week’s corporate earnings. Let’s dive in.

— Matthew, Shawn & Weronika

Here’s the rundown:

Today, we'll discuss the three biggest stories in markets:

• Rounding up this week’s corporate earnings

• Amid backlash, Adidas’ Yeezy sneakers remain popular

• Buffett loads up on treasuries despite the U.S.’s credit downgrade

All this, and more, in just 5 minutes to read.

CHART OF THE DAY

IN THE NEWS

 📆 Big Earnings Week Roundup (WSJ)

It’s a big week for corporate earnings, with a handful of high-profile companies sharing insights about their business from this past quarter.

Uber: As shown in the Chart of the Day, Uber reported its first-ever operating profit, and it only took nine years and $31.5 billion of previous losses to do it.

• Although revenue grew 14% year-over-year, that was the slowest growth for the ride-hailing company in more than two years.

Doordash: Uber’s peer and the largest U.S. food-delivery app, DoorDash, also reported good-ish results to investors. Customers spent more on deliveries for food and household essentials, even though many have returned to eating out.

• Year-over-year revenues grew 33%. Still, the company is unprofitable, but its net loss narrowed by almost $100 million from the previous quarter.
  

• The company’s CFO commented, “(DoorDash) is becoming more of a utility and habit than you think,” after order frequency — the number of times people order from DoorDash in a month — reached a new all-time high.

Robinhood: The stock broker your friend who started trading options during the pandemic uses, Robinhood, turned a surprise profit. But investors sent its stock down over 7% on news that the company’s explosive user growth is a thing of the past (apparently, YOLOing into Gamestop isn’t as cool anymore).

• Monthly active users declined by about a million throughout the quarter to 10.8 million. That’s half of the 2021 peak when the company was the epicenter of a meme-stock trading bonanza.

Anheuser-Busch InBev: As beer drinkers abandoned Bud Light in protest, the world’s larger brewer — accounting for about one in every four beers sold worldwide — said its U.S. sales plunged last quarter. Still, that wasn’t enough to stop the company’s growth, as revenue rose 7.2% from the previous year.

• The stock has mostly recovered from its Bud Light-boycott-induced selloff. And an almost 10% increase in beer sales volumes in China helped offset a 14.1% decline in North America.
  

• Revenue was up in 85% of the markets the company sells in.

Moderna: Covid vaccines are still a big business — the company raised its Covid-19 vaccine sales outlook for the year by over $1 billion. Its shares jumped 4% on the news. However, earlier this week, Moderna’s stock was down almost 40% for the year.

• After reporting a loss of $3.62 per share, investors hope a new cancer vaccine, developed jointly with Merck, can be its next big business line.

Warner Bros. Discovery: In May, the media giant combined HBO Max and Discovery into “Max.” Now, Warner Bros. wants to add news and live sports to Max for U.S. subscribers. No specifics yet, but it does have sports rights for the NBA, NHL, and MLB.

• The company, which also owns TBS, TNT, CNN, HGTV, the Food Network, and its signature movies & TV studio, is focused on paying down debts, which it did to the tune of $1.6 billion last quarter.
  

• The company reported a loss of $1.24 billion, which is progress from its $4.42 billion loss a year earlier.

MORE HEADLINES

⬆️ The Bank of England has raised interest rates for the 14th straight time

🏥 The Healthcare staffing crisis is bad and getting worse

🥓 California law threatens to increase bacon prices

🤖 Chinese tech giant Alibaba reveals its own rival to ChatGPT

👟 Adidas Reports $437 Million in Yeezy Sales (Fortune)

In more earnings news: Adidas’ decision to sell Yeezy’s again has paid dividends. Adidas reported that the shoes generated $437 million in revenue and $164 million in operating profit.

• Amid controversy over the rapper Ye’s (Kanye West) discontinued collaboration, Yeezy shoes retain robust customer demand. Many shoe junkies swear by them for their comfort and feel.

Big drama: The German company stopped selling Yeezy shoes in October last year after ending its nine-year (and very lucrative) partnership due to his antisemitic remarks.

• Adidas ended its partnership with Ye, leaving around $1.31 billion worth of sneakers in limbo. Then Adidas decided to sell them all.

In numbers: Sales of surplus Yeezy shoes helped Adidas reduce its predicted loss for the year to $490 million, down from the $765 million loss previously expected.

• As part of image-repairing PR efforts, the company set aside around $120 million to organizations fighting discrimination and hate, standing by its decision to cut ties with Ye.

Why it matters:

Yeezy Come, Yeezy Go: The company’s first-year CEO, Bjørn Gulden, set himself an ambitious goal “to be the best sports brand in the world once again” and repair its tarnished brand image.

• Added Gulden: “Six months ago, people said we should burn, destroy the product, and now we have found ways of selling it; we can use part of that revenue to actually do something good in society.”

Zoom out: Yeezy was only part of Adidas’ problems. For years, the retailer has fallen further behind its major competitor, Nike.

One of the issues? Adidas's strategy might be too Eurocentric.

• Adidas boasts a lengthy list of influential soccer players, but basketball is more popular than soccer in the U.S. Nike dominates in that department.
  

• Nike made nearly three times more than Adidas last year in North America. Adidas’ weaker U.S. sports presence results in a roughly $12 billion gap between its North American sales and Nike's.

Another challenge: Marketing. Despite its partnerships with luxury brands like Gucci, Prada, and international stars like Beyonce, Adidas’ growth has stagnated.

A MESSAGE FROM THE TEAM

Our team is growing. Will you be the next to join?

We’re looking to add another podcast host — past podcasting experience not required.

💸 Buffett Loads Up On Treasuries (Bloomberg)

What credit downgrade? Warren Buffett’s Berkshire Hathaway doesn’t mind.

In a statement to CNBC on Wednesday night, Buffett said: “Berkshire bought $10 billion in U.S. Treasuries last Monday. We bought $10 billion in Treasuries this Monday. And the only question for next Monday is whether we will buy $10 billion in 3-month or 6-month” T-bills.

• The Oracle of Omaha added: “There are some things people shouldn’t worry about. This is one.”

Translation: By this, Buffett referenced the Fitch U.S. credit downgrade earlier this week from AAA to AA+ (we covered it here). Fitch, a credit ratings firm, cited “expected fiscal deterioration over the next three years,” growing debt, and an erosion of governance. The downgrade sparked a selloff in U.S. stocks, and the Nasdaq had its worst day since February.

• Many high-profile investors and financial leaders criticized the move, including JPMorgan’s Jamie Dimon, who said it was “ridiculous.”

This week, Treasuries maturing in a decade or longer are poised for their worst week this year. But Buffett is after shorter-term Treasuries (aka T-bills), which have seen strong demand as Federal Reserve interest-rate increases have pushed yields to the highest levels in over ten years.

• Refresher: T-bills don’t usually earn as much as other securities but offer higher returns than traditional savings accounts.

Buffett acknowledges that some of Fitch’s raised concerns are valid. He doesn’t agree with all federal government policies but still strongly believes in U.S. Treasuries and the dollar. Buffett likely made the comments partly to ease concerns about the credit downgrade. The downgrade shouldn’t change anything about how Buffett invests.

• “The dollar is the reserve currency of the world,” Buffett said, “and everybody knows it.”

Why it matters:

Rewind: Even during the Global Financial Crisis, Berkshire remained invested in U.S. Treasuries, ultimately helping Buffett bail out U.S. banks and rescue the economy to the extent he did.

Bill Ackman, on the other hand? Different story. He’s shorting (betting against) Treasury bonds. The famed investor said he’s short 30-year Treasuries “in size,” as a hedge against the impact of higher long-term rates on the stock market.

• Higher long-term interest rates over the next three decades would reduce the future value of companies’ earnings today, making stocks fundamentally less valuable.
  

• By “hedging,” he’s aiming to profit off a rise in long-term interest rates, as reflected by 30-year Treasuries, by shorting the prices for those bonds, potentially offsetting losses on his stock investments due to higher long-term rates.
  

See you next time!

That's it for today on We Study Markets!

Enjoy reading this newsletter? Forward it to a friend.

Was this newsletter forwarded to you? Sign up here.

Advertise with us.

Follow us on Twitter.

Keep an eye on your inbox for our newsletters on weekdays around 6pm EST and on weekends. If you have any feedback for us, simply respond to this email.

You can also leave your comments/suggestions/feedback anonymously here.

How would you rate today's newsletter?

⭐️⭐️⭐️⭐️⭐️
⭐️⭐️⭐️
⭐️