Big Tech Crushes Earnings

Catch Up Quick

• Q2 GDP fell by 33%

• Economists say it could take years for the job market to fully recover

• Apple may not launch its newest iPhones this September after all

• U.S. renters owe nearly $21.5B in back rent

• Families sue Walmart & Safeway (+ others) over pandemic-related employee deaths

• Airlines have made up for plunging passenger revenue by flying cargo

• CDC warns of "‘significant public health consequences" if schools don’t reopen in the fall

• Apple ($AAPL) shares soar +10% upon huge earnings beat

My Friday Opinion

• Apple ($AAPL) announced a 4-for-1 stock split, meaning each share will essentially become 4 shares, but the aggregate market cap will not mechanically change due to this (i.e. if I held one AAPL share worth $400, after the split, I will own 4 shares each worth $100) — I think this is a smart move by Apple, aiming to capitalize on the surge in retail trading volume by making their shares more accessible to lower net worth investors / individuals by decreasing the price per share

Thought of the Day

• Speaking of public markets, IPOs have boomed during the pandemic for both real and shell companies (SPACs in particular)

• In other words, a flurry of corporate entities have recently elected to sell their shares to the public

• This is generally considered a positive sign with respect to economic and financial market health, as idle cash leads to higher demand for investments

• However, in this specific context, I opine this is a negative sign, supporting the notion that valuations are too high at the moment

• Companies like raising capital via equity (selling shares for cash) when stock prices are high, because they receive more money per share

• However, a general downside of issuing shares for the company is that it forgoes unrealized and realized capital gains on the shares that is sells, given this capability, along with the associated risk, is shifted to the new owner

• Recently, so many companies have gone public, it appears as if the consensus is to shift equity risk to the public in order to raise capital

• More companies would be holding onto their shares if try truly saw more upside ahead

The Bottom Lines

• At a high level, the stock market seems very intuitive, especially given how easy it has become to participate

• However, given it is a core mechanism for companies to fund themselves on the equity side of the book (contrary to debt), it lends insights into corporate outlooks, which sometimes differ greatly to that of the public

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