News and analysis

Bitcoin (BTC) experienced a 7.0% decline this week, dropping to $58,880. On Wednesday, it briefly fell to $56,537 before attempting to reclaim the $60,000 resistance level. However, failure to surpass this hurdle could lead to further downside, with a potential retreat to $50,000. Spot Bitcoin-ETFs have witnessed net outflows for the second consecutive week, signaling ongoing investor caution. Standard Chartered has highlighted additional downside risks, suggesting a possible correction to $50,000-52,000 per coin. Despite this, it maintains its target prices for BTC at $150,000 by the end of 2024.

Apple Co reported only a $0.03 improvement in its EPS (equity per share) vs average analyst estimate of $1.50 in Q1 2024. The iPhone maker shows nearly permanent profit numbers in the first quarters over the past three years, even though sales of its gadgets are reduced, so that Apple's total revenues degraded from $97.28 billion in Q1 2022 to $94.8 billion in Q1 2023, ending to $90.8 billion during the first three months of 2024. Therefore, Apple sales dropped, but less than feared, with profit lines dynamics indicating higher efficiency squeezed from collected money.

App Store contribution grew despite the shop of applications being put under pressure from new European regulatory rules to prevent monopolizing of the market and driving up prices. Sales in the services segments, like Apple Music and Apple TV, reached $23.87 billion vs analyst expectations of $23.27 billion. Consensus expected MacBook sales to go down once again, but they instead grew to $7.5 billion, thanks to the strength of the new MacBook Air, powered by the M3 chip. Yet, the iPad segment declined to $5.56 billion, below average expectations of $5.91 billion. In the wearables, like Apple Watches and AirPods, sales decreased to $7.91 billion, below expectations of $8.08 billion. Apple also authorized an additional $110 billion for its buyback program, a big sum to encourage the crowd.

Meanwhile, its CEO Tim Cook said the giant company sees a return to further sales growth already in the current quarter, so that growth by "low-single digits" in revenue could be expected before the end of June. He added Apple is focused on investing more into artificial intelligence (AI) features at the moment. Competitive environment became less friendly to Apple after Samsung Electronics, Huawei and other rivals introduced new devices especially aimed at hosting AI chatbots. "We continue to feel very bullish about our opportunity in generative AI and we're making significant investments. We're looking forward to sharing some very exciting things with our customers" at events later this year, Tim Cook announced. He added that iPhone sales experienced "growth in some markets, including China". Apple's decline in China was narrower than feared, with sales of $16.37 billion lying above consensus expectations of $15.6 billion, down 8.1% in the quarter. Amazingly, a cumulative effect from verbal statements and these figures was enough for Apple stock to bounce by nearly 7%, from its closing price of $173.18 during the regular session on May 2 to a $185 area in the first hour of extended trading. The stock came down by almost the same quantity of percentage points in the last three months when IPhone sales lowered by 10.5%. Thus, Apple share price just seemingly won back that loss following last night's quarterly release. Much better than nothing, yet it is too early to tell about breaking contradictory trends. The report contained some positive aspects and may initiate a new wave of re-testing the next $190 to $195 range due to inertia. Yet, further price increases and a more stable bullish trend for Apple are still not entirely supported by fundamentals.

Another favourite of mine, which I first bought in early autumn of 2023, has backed both the reputation and value of my asset portfolio today. Qualcomm (QCOM) is a smartphone wireless chip-making firm. It covers the entire range of popular devices, including Apple and Samsung, and its share price soared by nearly 8.5% immediately after the opening bell this Thursday, May 2. Qualcomm's sales to Chinese producers reportedly added 40% in the last two quarters, which the company also feels is a sure sign of recovery in that market. Its Q1 financial results were mostly in line with expert projections. Revenue numbers grew by 1.2% only YoY to reach $9.39 billion, with EPS at $2.44 per share, a 13.5% better compared to Q1 2023. Yet, Qualcomm CEOs see next quarter revenue and EPS at $9.2 billion and $2.25 per share, exceeding consensus estimates of $9.05 billion and $2.17 per share, according to LSEG data. Again, this was the second consecutive quarter of growing higher, while a typical upcycle for semiconductor stocks usually lasts more than eight quarters.

"AI is driving a lot of silicon content in those devices because of the expected computational capability to run those models... users want to buy a more capable phone that can run AI," chief executive at Qualcomm, Cristiano Amon, said during a conference call. Asian customers are shifting more to premium phones. A competitive headwind from Huawei, which recently launched its 5G smartphone using Huawei's own especially designed chip, produced by Huawei's subsidiary HiSilicon, may take its share. However, the whole market is growing, especially in the more capable devices' segments where Qualcomm gets most of its money. Qualcomm's thesis for the growing recovery in China does not directly extend to iPhones, with more signs of recovery among Android customers like Oppo and Vivo. Internet of things, as well as autonomous driving, computing powers in data centers, machine learning also needs 5G technologies, which are common for Qualcomm production.

Apple report is coming tonight, and some experts raised concerns for possibly lower sales, just because of rising competition from Huawei and other locals. That's why I did not buy Apple stock in recent months, but I was sure on a more balanced bet on Qualcomm. Its income is less dependent on a particular brand, but it becomes stronger from prolonged co-operation with Apple as well, as Apple is going to use Qualcomm-designed Snapdragon® 5G modem systems for Apple devices at least until 2026. We will see the condition of Apple stock very soon, having a chance to re-estimate Apple stock price prospects. As to Qualcomm, it is already winning its own game.

At least, I was obviously wrong with my assessment of Starbucks' stocks. The technical path of the coffee house's price went much worse than it could be expected a couple of months ago. Since it performed a fast route from a $90+ area to above $100 per share in early November, I felt as if the best moment to invest passed by. Yet, the stock was treading water near the same price range and even lower for quite a long time after that. Finally, quarterly numbers in after-hours trading on April 30 re-shaped the disposition to temporarily bearish, derailing previous attempts to recover and sending the stock below $75.

A 15.88% drop in one day happened amidst weaker sales and profit numbers during the last quarter, also marked by a decrease in customer visits. Same-store sales were down by 4% YoY globally, and were down by double digits on the Chinese market, citing dampening demand in North America and China, which was the worst thing one could imagine. Equity per share (EPS) amounted to $0.68 only vs consensus of $0.80 (a 15.2% of supposed money inflows was missing). Besides, gross marginality per sold unit was 25.6%, down from 26.2% a year ago, and free cash flow lessened to $629.9 million, down 64.8% from the previous quarter.

The bright side of the bigger picture for me is the growing number of new store locations to reach 38,951 before the end of the quarter, as much as 2,317 higher than 12 months ago. Of course, that was the reason for growing expenses, which did not return quickly, yet are promising to bring more money back even if the business marginality would remain relatively low for a while. I am sure that this globally renowned chain of coffee houses, with a nearly $100 billion of market caps, perfectly knows what it is doing when opening new stores in Asia. It should not be an instant coffee effect, but a far-reaching invigorating contribution to a long history of the company, which successfully taught millions of Americans of drinking proper coffee drinks as they were designed and created in Europe, instead of enjoying a poor excuse for a coffee in fast food points. Now, they are teaching this to their Chinese and broader Asian audience as well. A retreat by value-oriented customers and other forms of consumer weakness, when more families prefer eating at home, as well as unfavourable weather conditions in the US, come and go. Yet the coffee empire remains all penetrating amid competitive pressure.

Not too much time will pass and the current price of $75 per share of Starbucks would be perceived as a blessing, though the price may use this short-lived opportunity to test even lower levels. After all, the price briefly dropped below $70 in May 2022 and reached almost $50 in the covid year of 2020. Many of those who abandoned lost opportunities to buy Starbucks in between $50 and $70, being feared by a fleeting moment, would be biting their elbows later when the price surfaced to above $100 again. Taught by various kinds of experience, I began to add more to my buy positions in Starbucks here and now.