Apple Slides Most Since 2025 After Supply Shortages Hurt Outlook

0:00So like 100 % of investors think that protection is important, but only about 70 % of advisors are like talking to their clients about that. Where do you think the disconnect is happening? There's this huge differences that exist in terms of what advisors think they're talking about their clients, what clients are actually hearing. Healthcare doesn't always work great. If you've ever waited on a refill or couldn't schedule an appointment, you get it. That's the kind of stuff Optum is changing. They're using data and technology to integrate patient care, pharmacy, and everything else. So healthcare is connected, not complicated.

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1:11Let's create smarter business. IBM. Bloomberg Audio Studios. Podcasts. Radio. News. You're listening to the Bloomberg Intelligence Podcast. Catch us live weekdays at 10 a.m. Eastern on Apple CarPlay and Android Auto with the Bloomberg Business App. Listen on demand wherever you get your podcasts or watch us live on YouTube. Going back to the markets, the Dow not doing anything, the S &P not doing anything. But within the Dow, the best performer is Amazon, up almost 15 percent. The worst performer is Apple, down about 9.3 % following yesterday's quarterly results and the outlook. Gene Munster is the authority on Apple.

1:56He is managing partner at Deepwater Asset Management. And of course, years before that, he was a sell-side analyst on Apple, one of the most well-known. Gene, good to speak with you. Partially, I'm guessing that Apple's decline today, outsized decline, has a lot to do with the fact that it was an outperformer in the lead-up to these results. What did we really learn from Apple that can be attributed to decisions it made versus things that are beyond its control, like really high memory chip prices? Well, this is less about the high memory prices and more just some more numbers about where the guidance is going.

2:29So just to take a step back, they guided the 12 or the shoes at 12 percent revenue growth through September. They guided to nine to 11. Now, when you find this subtraction key with a company, a stock that's been up 22 % over the past month versus the NASDAQ up 1%, when analysts go to that subtraction key, that is negative for the stock. There's just no explanation that can get investors comfortable. And I think that's kind of where the conversation ended. But I want to go through that a little bit and answer your question about, like, what's the substance of what's going on? Is this about memory costs?

3:01The answer is a little bit about memory costs. Maybe if you think about the 10 % decline, probably 1 % or 2 % is about just higher memory costs. It's going to have a 50 bps negative impact on their margins in the September quarter. The bigger picture is on revenue. And effectively what happened, this is a pretty unique dynamic, but it makes a ton of sense, is that the iPhone has been on fire. It was up 22 % in the June quarter. If you look at over the past year, it's been up 22%. That compares to over the past five years, it's up 3 % on average. So we've got this huge surge in iPhone demand and separately the Mac up almost 30%.

3:37Typically it's up a few percent. And what that means is that they have essentially been pulling through inventory. Remember how tight inventory is? In part because of these pricing deals that they have to try to keep costs low. They're limited to the amount of capacity that they've had. So they pulled inventory essentially from September into the June quarter. And that means they just simply don't have as much. and the way that I'm going to back test this and it'd be pretty easy for your listeners to do this is just look at what the lead times on the products are. Right now they're running a few weeks.

4:06Now that typically would be same day on many of their products. That's an indication that they are in fact constrained. And so effectively what happened is they stole demand from the September quarter and pulled it into the June quarter. There's still a ton of demand out there, stole supply, excuse me, and pulled it into the June quarter. There's still ample demand and I I think at the end of the day, just to put it in the most basic terms, Street was at 12 percent revenue growth for September. If they would have kind of had currency constant and supply constant, I bet they would have got it to better than 15 percent growth for the September quarter.

4:40So, Gene, you were busy this week, as a lot of tech investors were with all the earnings. But I got to ask you about this story. Wall Street Journal story about Tesla spinning out its China business to maybe pave the way for a SpaceX merger. does that does that seem reasonable to you yeah i would say it's uh reasonable uh and it is going to increase the probability that i have put on this happening in the next few years from 90 to probably 92 percent about a week ago i had it at 80 percent and then the tesla earnings call they let a question in about the two companies coming together which surprised me elon started to answer the question and then legal took over and said really we can't say much and then elon grabbed the mic back and started to kind of pontificate about the benefits of these two companies being together that took me from 80 to 90 now i'm at 92 and the answer is it just makes a ton of sense like this china piece i think is um grossly underappreciated about the tensions tech from the technology companies geopolitically as i've been meeting with many companies that have ties and these leading private companies that have ties to China it's pretty clear that they want as much separation as possible and so my view is that we're probably a couple years away Elon's always been has always structured the China business to be easily separated from the US business for a lot of reasons and one of them is his master plan just don't it's very simple he's gonna just keep rolling up his businesses into a master company and so to answer your question Paul, is I think that this makes a ton of sense.

6:14And even though they're saying it's not going on, I think it very much is in the cards. Sounds like it'd be good for Elon Musk from the way he operates and runs his company. Would it be good for investors? That's the key question. And I think the answer is that the simple answer is yes, from two levels. And an operational piece, which is most important, is that when you bring things together you reduce redundancies and there's you know this long-standing view and within tech companies that are highly innovative that smaller teams are more effective and so when you have smaller tighter teams and effectively you can do that i think that's one piece of bringing all these together i think their visions are very similar obviously around being ai first space ai with spacex physical ai terrestrial with with tesla all that makes sense the other reason why i think investors would be rewarded is that the dynamic around Tesla and SpaceX to a lesser extent right now is really about unless investor confidence around the long term, retail investor confidence.

7:16And I think that that unwavering confidence would only increase if they brought some of these together. And that has really explained how Tesla can still be a$1.2 trillion company despite having many of its targets pushed back for years. And so I think you put these two together, it would undoubtedly be the biggest company. I think you put them together, I think the path to a$10 trillion company is well laid at that point. Stay with us. More from Bloomberg Intelligence coming up after this. Over$100 trillion estimated to be transferred to generations in the next 25 years. It's both a risk and an opportunity because we see that only about 18, 19 % of high net worth investors plan on sticking with their advisor post-transfer.

8:00This has to be a tough statistic for some to hear. People who work so hard trying to grow their net assets, they want to protect that life work and they want to make sure that it is able to transfer in a seamless way.

8:26putting on a hedge. On public, you can now create AI agents that handle all these tasks on your behalf. Just describe what you want to do in plain English. Like, if the VIX hits 25, buy a put option on the S &P 500. Or, if my cash balance goes above$20 ,000, move the excess into my direct index. You approve of the workflow and your agent handles the rest. Monitoring the market, watching for your conditions and executing your strategies exactly as defined. An investing platform driven by your intent, not just your clicks. You can also get full read and write access to your account via the public API.

9:04Go to public.com slash market and fund your account in five minutes or less. That's public.com slash market. Paid for by Public Investing. Brokered services by Open to the Public Investing, Inc., member FINRA and SIPC. Advisory services by Public Advisors, LLC, SEC Registered Advisor. Complete disclosures available at public.com slash disclosures. Get the news you need in just 15 minutes. Start your day with Bloomberg Daybreak, the podcast with a global view on the stories that matter. I'm Nathan Hager. And I'm Karen Moscow. Join us each morning for curated stories on current events, politics, business, and foreign relations.

9:42Plus one conversation on the day's biggest developments, all in just 15 minutes. Subscribe to Bloomberg Daybreak for a precise, thoughtful take on the stories that matter. Listen to Bloomberg Daybreak each morning on Apple, Spotify, or anywhere you listen. You're listening to the Bloomberg Intelligence Podcast. Catch us live weekdays at 10 a.m. Eastern on Apple CarPlay and Android Auto with the Bloomberg Business App. Listen on demand wherever you get your podcasts or watch us live on YouTube. Earnings coming out of the energy patch here. ExxonMobil, Chevron, some of the big boys reported here.

10:19Let's get in touch with an expert on this stuff. Vincent Piazza. He's the senior research analyst. He covers all the oil and gas companies for Bloomberg Intelligence. No idea where he is. It could be Philly, Princeton, Wilmington. You never know where this guy is. Vince, what's going on in your world of big oil? And good morning from Wilmington, Delaware. But it's always sunny in Philadelphia. if you remember. There you go. Yeah. So look, if you think about coming into the quarter, Exxon and Chevron, significant optimism coming into the quarter, just considering where we are on WTI and Brent. But, you know, Chevron posted a much, much cleaner quarter operationally, significant free cash flow buybacks and dividends were up.

11:10The debt side, you know, Chevron bought back roughly$8 billion of debt. So look, strong quarter operationally for Chevron, a little more optimism coming into the quarter for Exxon. It's down roughly 2%, a little softer on the downstream side. But Paul, combined$32 billion of free cash flow in the quarter for both companies. You're getting that back in dividends. You're getting that back in buybacks as well. But for Exxon, Paul, a little bit more of an impact from Hormuz in 3Q. So some thorny issues that they have to deal with. But for Chevron, much, much cleaner quarter. So does this windfall help them do anything that they wouldn't be able to do otherwise?

12:01You talked about how Chevron is going to reduce debt and increase share buybacks, but operationally, can it think bigger than that? Yeah. So if you think about Venezuela for Chevron, Chevron's output in Venezuela will likely grow through 2028. Again, put the geopolitics aside, definitely an operational ambition for them, but one that will see production grow from roughly 280 ,000 barrels to 400 ,000. Not a big mover right now, but think about over the next couple of years what could happen there with a more sanguine political backdrop in the country. Hey, Vince, what are your companies saying about the Strait of Hormuz?

12:45I'm kind of of the opinion that this thing's never going to be really open again because it just takes the threat of an attack to kind of shut things down. What are your companies saying? Well, I can tell you what they've met and consider that most of my coverage universe is U.S. and domestic. But what we see the industry doing is recasting those capital flows, rejiggering, reordering seaborne maritime logistics to dilute the impact of the region. And what does that mean? Well, it means extending transit times by up to two, three weeks and moving barrels away from geopolitical and conflict zones.

13:30What does that mean in general, though? it means a higher floor price, and it also means a logistics environment that provides for greater redundancy, whether it's floating storage, whether it's more land storage as well. But it does suggest that over time, we do see that part of the world being diluted so that you get away from those conflict zones. It means more capital coming to North America, whether it's capital invested in the U.S. or Canada to get those molecules out in the export market. It means more dollars heading down to South America, too, whether it's Venezuela, whether it's Argentina, and even Brazil as well.

14:16So you could see over the next several years greater capital flowing to the Western Hemisphere, more barrels in floating storage, more barrels in land storage to dilute the impact of subsequent geopolitical events. Stay with us. More from Bloomberg Intelligence coming up after this. Support for the show comes from public.com. If you're actively involved in your portfolio, you probably catch yourself repeating the same actions. Buying the dip, manually sweeping idle cash, putting on a hedge. On public, you can now create AI agents that handle all these tasks on your behalf. Just describe what you want to do in plain English.

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16:18You're listening to the Bloomberg Intelligence Podcast. Catch us live weekdays at 10 a.m. Eastern on Apple CarPlay and Android Auto with the Bloomberg Business app. Listen on demand wherever you get your podcasts or watch us live on YouTube. Let's get right to it. FIFA has plans to privatize some of its commercial business. I think I've got that right. OK, that's the global FIFA. UEFA, they're the European dudes. They're not happy with it. And look at this. Just across the tape. I think this is AP. senior FIFA official resigns over Infantino's World Cup sell-off plan. Second says it deceived staff.

16:56Wow. Randall Wames joins us here, U.S. Sports. This is a big story, Randall. This is global soccer. We just finished with the World Cup. People have a great appreciation for football, maybe now than they had before the World Cup. What's going on here? Listen, FIFA is trying to make as much money as they possibly can. And, you know, for me personally, I thought the World Cup was going to come to a close. I would be able to take a deep breath. But obviously, we're witnessing a global fight right now. We have FIFA, who is over the World Cup, which is the biggest, largest tournament and the most famous tournament.

17:25It's the one the players love the most. It's the one that the teams are participating. They have a deep desire to win it. But now they're saying, you know, we can raise up to$4.2 billion from Joshua Kushner's drive capital. And, of course, he is the son-in-law of President Trump, who FIFA cater to. Brother of the son-in-law. Brother of the son-in-law. Thank you for correcting me that. who, you know, FIFA catered to President Trump all while he was here. And you have UEFA, who's over many of the countries who were participants, France, England, Spain. So many who are just like, hold on, enough is enough.

17:58Enough is enough. So UEFA is now talking about boycotting the World Cup. That's not for another four years. So is this kind of an empty threat? Because there's a lot of time between now and the next World Cup. I don't think it's an empty threat. I think that they're very, very serious about this because CONCACAF, who is over in North America, Central America and the Caribbean, is also in. And we have yet to see what South America has to say as well. And so if everyone raises their hand and says, we're done with this, then of course, these are membership organizations. These aren't the members themselves.

18:26But of course, to be a part of UEFA, you have to be a member. And I think FIFA as well. So if England, France, Mexico, the U.S., all of these organizations are saying, no, who is going to be participating in this World Cup? And it's not just the 2031. It's next year's Women's World Cup. That, of course, is top of mind as well. one of the uh surprising aspects to me is jp morgan is advising um fifa here i'm surprised jp morgan would get within a million miles of this well it's not a lot of money and the the potential political fallout is ugly yep it's true that's true however jp morgan tried to do the super league years ago that that fell apart as well and then outside of that the upside is tremendous.

19:13You know, FIFA's talking about expanding the World Cup to 64 teams. I believe there was a report from The Times of London that just dropped a couple hours or maybe minutes ago that said that they're trying to do this by August. And the vote for this$4.2 billion would be in September. So who stands to profit between now and then if you expand it before this investment goes? And of course, the investors immediately make a ton of money. Your colleague, Giles Turner in London wrote a really interesting newsletter where he said FIFA's mistake was to value its spinoff at$20 billion. What it should have done is value it at five times that amount and make it so that the members, each country, would get even more of a payout so that it'd be uneconomical for them to say no.

19:56We were talking about this before we went live. And if you are France, if you are England, if you are Spain, if you're Portugal, if you're Croatia,$20 million is nice. But a good portion of these soccer federations can make that money in their sleep. And$100 million goes a long way. You might be able to build a training facility. You might be able to hire coaches that can better develop talent, all of those things. Whereas$20 million, I'm not so sure. It's harder to say soccer's not for sale if you get$100 million. Exactly. And of course, you have to remember that some of the issues that exist in global football outside of Europe are often the money distribution.

20:32So after you send this check, Who's going to be distributing the money? Is that person going to be like, oh, we got$20 million. I'm going to take five of it. Oh, no one's looking. I'm going to take another two and a half. And now you have 12 and a half left to distribute amongst the players, amongst other officials, and everyone else like that. There's no governance over that. It would just be a blank check to these federations, and then they would have to deal with it. So it's on life support, I would say. Is UEFA and the other critics of the FIFA's plan, are they critical of the fact that they're selling a piece of FIFA in general?

21:05Or is it to whom they are selling? I think it's both. OK. I think it's both. Number one is that if you were going to sell a part of this, then you would want to consult them to begin with. You would want to consult UEFA. You would want to consult CONCACAF. Hey, we're thinking about doing this. Then you could get some preliminary thoughts on it. And everyone was shocked a week ago or earlier this week when they dropped this and said, you know what, we're going to be raising this money. But your reporting has shown that these discussions have been going on for a while. It's not like it was last week.

21:34Exactly. So now that makes you think you go back all the way to December of last year, President Trump gets a peace prize. And then we have these different wars that go on. But also, how long has FIFA been considering this, knowing that this was going to be the most successful World Cup of all time? And why did FIFA not have conversations with other private equity firms? That's right. Such as CVC, such as a six street. There's a bunch of them who might be interested in doing this, but those conversations probably did not happen. It's called running a process. Why did they not run a process? The process is here's a pitch book.

22:05We're going to sit down to 200. You cover yourself, right? And do it. And then you create competition. You drive up the value and all that kind of stuff. And you brought up J.P. Morgan really quickly. What about the other banks? I'm not saying there's anything wrong with J.P. Morgan, but I imagine that there are other banks who might globally who might want to be in this and they're not. This is the Bloomberg Intelligence Podcast, available on Apple, Spotify and anywhere else you get your podcasts. Listen live each weekday, 10 a.m. to noon Eastern on Bloomberg.com, the iHeartRadio app, TuneIn and the Bloomberg Business app.

22:38You can also watch us live every weekday on YouTube and always on the Bloomberg Terminal.

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23:19The Bloomberg This Weekend Podcast. News, politics, and the lighter side of Bloomberg. The cutthroat competition to get a gig on a cruise ship. They get to enjoy all the amenities, and a one-week contract can pay like thousands of dollars for them. I know this is a good gig. Like you're booked through six months and you could pay your bills for like a year and a half. And you may get norovirus. The Bloomberg This Weekend Podcast. Subscribe today on Apple, Spotify or wherever you listen.