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Portfolio Update - 20 May 2022

📢 Weekly Update 📢

Good evening everyone. I should have had provided an update last week but I am still digesting the high volatility of the market.

Since I am on the Etoro platform, I have never experienced anything like it for so long. Usually the decline of the market lasts up to 3 months.

In 2022, out of 5 months, we had 4 negative months. It is frustrating but it is also part of the game, the market cannot go only go in the direction we want.

It is only fair to ask ourselves if there is anything we can do to benefit from that situation. I could try to sell the market, which means selling high in the first place and then buying low, but I have never been successful at it and do not want to risk it. There is also the option of hedging, which means that we could have 2 positions in opposite directions, buying and selling at the same time. It involves selling and again, I know myself, I have never been good at it.

For time being, I have decided to sit back and ride the market. Not doing anything is really hard as it is very tempting to close positions, but I make the decision everyday to keep my current positions and not to close them as I strongly believe in each company we are holding.

For many months I have been keeping cash in our portfolio for this kind of situation. The cash is meant to be used for opening new positions at an attractive share price.

Additionally, due to the high volatility of some share price, the risk profile of the portfolio went up from 4 to 6.

If you have any question regarding the portfolio, please ask in the comment section below.

21 Apr | Kering

Group revenue: €4,956 million

Group revenue rose sharply in the first quarter of 2022, up 27% y/y

Revenue from directly operated stores were up 23% on a comparable basis year-on-year and up 32% relative to the same period in 2019.

Sales growth was supported by very strong momentum in Western Europe, North America, and Japan. In Asia-Pacific, sales were affected by new lockdowns in certain major Chinese cities.

Online sales continued to grow during the quarter and accounted for 15% of total direct sales.

Kering’s Houses posted an extremely strong first quarter, up 25% both as reported and on a comparable basis, with scope and foreign exchange impacts canceling each other out. Each House delivered double-digit growth. Sales from directly operated stores rose 45% on a comparable basis.

26 Apr | Alphabet A

  • Earnings per share (EPS): $24.62 per share, vs. $25.91 expected

  • Revenue: $68.01 billion, vs. $68.11 billion expected

  • YouTube advertising revenue: $6.87 billion vs. $7.51 billion expected

  • Google Cloud revenue: $5.82 billion vs. $5.76 billion expected

  • Traffic acquisition costs (TAC): $11.99 billion vs. $11.69 billion expected

Google's revenue came in at $68.01 billion, growth of 23% from the same period last year. That's a slowdown from 34% growth in the first quarter of 2021, when the economy was reopening from the pandemic.

The company reported $54.66 billion in advertising revenue for the quarter — up from $44.68 billion the year prior.

YouTube ad revenue for the quarter fell short of analyst expectations. The video site was a particular beneficiary of the pandemic, when users were primarily at home on their devices. The miss also comes as TikTok captures a growing share of the social media video market.

Traffic Acquisition Costs (TAC), the metric used to show how much the company pays other websites to acquire traffic, came in higher than Wall Street expected at $11.99 billion.

Google's cloud business was a standout in the quarter, growing 44% and beating estimates as more big enterprises shift their workloads away from their own data centres. However, the cloud division is still losing money, reporting an operating loss of $931 million, compared to $974 million a year earlier.

During the quarter, Google halted much of its Russian operations due to the invasion of Ukraine. Revenue growth in the European region, which also includes the Middle East and Africa, slowed to 19% in the first quarter from 33% a year earlier.

26 Apr | Microsoft

  • Earnings: $2.22 per share, adjusted, vs. $2.19 as expected by analysts

  • Revenue: $49.36 billion, vs. $49.05 billion as expected by analysts

Microsoft's revenue increased by 18% year over year in the quarter, which ended on March 31, compared with 20% in the previous quarter, according to a statement. Microsoft turned in the smallest revenue beat since 2018, exceeding the consensus by less than 1%.

Amy Hood, Microsoft's finance chief called for fiscal fourth-quarter revenue of $52.4 billion to $53.2 billion on a conference call with analysts. Hood's revenue guidance for each of the company's three business segments surpassed the expectations of analysts. But the middle of the range for total revenue, at $52.8 billion, is just below the $52.95 billion consensus among analysts.

The company's Intelligent Cloud segment, which contains Microsoft's Azure public cloud for application hosting, along with SQL Server, Windows Server and enterprise services, generated $19.05 billion in revenue. That's up 26% and above the $18.90 billion consensus among analysts.

Microsoft's Productivity and Business Processes segment, containing Office productivity software, LinkedIn and Dynamics, posted $15.79 billion in revenue in the quarter, up about 17% and slightly more than the analyst consensus estimate of $15.75 billion. Microsoft raised the prices of certain Office 365 productivity software subscriptions during the quarter.

The More Personal Computing Segment, which includes Windows, Xbox, search advertising and Surface, kicked in $14.52 billion in revenue, up 11% and higher than the $14.27 billion analyst consensus.

Microsoft announced a plan during the quarter to acquire video-game publisher Activision Blizzard for $68.7 billion, the largest transaction in Microsoft's 47-year history.

27 Apr | Boeing

Boeing reported a loss of $2.75 a share from $14 billion in sales.

Wall Street was looking for a loss of about 15 cents a share on sales of $15.9 billion. A year ago, in the first quarter of 2021, Boeing reported a per-share loss of $1.53 on sales of $15.2 billion.

“It just got worse,” wrote Vertical Research Partners analyst Rob Stallard in a Wednesday report after the earnings. Defense and space sales were below his forecast and there is still no earnings guidance for investors to reference.

Investors have to go back to the first quarter of 2018 to find a first quarter unaffected by the pandemic or the 737 MAX, when the jet was grounded worldwide between March 2019 and November 2020 after two crashes. Back then, Boeing earned about $3.64 a share from $23.4 billion in sales.

It’s yet another tough quarter for the company. Boeing delivered 95 commercial jets in the first quarter of 2022, up from 77 jets delivered a year ago. Back in the first quarter of 2018, Boeing delivered 218 commercial jets.

Over the past 12 quarters, stretching back to just after the second MAX crash, Boeing has lost about $24 billion, and burned through about $34 billion in cash flow.

“While the first quarter of 2022 brought new challenges for our world, industry, and business, I am proud of our team and the steady progress we’re making toward our key commitments,” said CEO Dave Calhoun in the company’s news release. “We increased 737 MAX production and deliveries, and made important progress on the 787 by submitting our certification plan to the FAA.”

The MAX jet was grounded worldwide from March 2019 through November 2020 following two deadly crashes inside of five months. Boeing has been delivering its backlog of MAX jets built during the grounding as well as ramping production back up. Boeing is also not delivering 787 jets now after the some production quality issues discovered by the FAA.

Over the 12-quarter span, Boeing has missed analysts’ estimates nine times.

I am seriously thinking of removing this company from our portfolio if no action from the management is being done.

27 Apr | Meta Platforms

  • Earnings per share: $2.72 vs $2.56 expected

  • Revenue: $27.91 billion vs $28.2 billion expected

  • Daily Active Users (DAUs): 1.96 billion vs 1.95 billion expected

  • Monthly Active Users (MAUs): 2.94 billion vs 2.97 billion expected

  • Average Revenue per User (ARPU): $9.54 vs. $9.50 expected

In addition to the earnings figure, Facebook also exceeded expectations for average revenue per user. But almost every other key metric was a miss, including monthly active users.

Revenue rose 7% in the quarter, marking the first time in Facebook's 10-year history as a public company that growth has landed in the single digits. Analysts were expecting 7.8% growth.

For the second quarter, Facebook forecast revenue of $28 billion to $30 billion, trailing the $30.6 billion estimate of analysts. The company said in the release that the guidance takes into account continued trends from the first quarter, including soft revenue growth that "coincided with the war in Ukraine."

Facebook changed its name to Meta in October, reflecting CEO Mark Zuckerberg's effort to push the company towards a future of working, playing and studying in a virtual world.

Facebook's family of apps, including the core app, Instagram and WhatsApp, accounted for 97.5% of revenue in the quarter. The remaining $695 million came from Reality Labs, the part of the company that's attempting to build products for the metaverse.

Facebook lowered its total expenses guidance for 2022 to somewhere between $87 billion and $92 billion, below its earlier estimate of $90 billion to $95 billion. It expects most of that expense growth to be driven by its family of apps segment, followed by Reality Labs.

Chief Operating Officer Sheryl Sandberg told analysts on Wednesday's earnings call that they've so far "been able to close a good part of the underreporting gap and share that with advertisers," but it will take more time to make up for the rest.

Sandberg said that though finalized text of the DMA has not been made public, it was generally in line with expectations. She said she expects the regulatory environment to continue to be a "real challenge" for the whole industry.

28 Apr | Amazon

  • Earnings: $7.38 per share, adjusted, vs. $8.36 expected

  • Revenue: $116.44 billion vs. $116.3 billion expected

Here's how other key Amazon segments did during the quarter:

  • Amazon Web Services: $ 18.44 billion vs. $18.27 billion expected

  • Advertising: $7.88 billion vs. $8.17 billion expected

Amazon recorded a $7.6 billion loss on its Rivian investment after shares in the electric vehicle company lost more than half their value in the quarter. That resulted in a total net loss of $3.8 billion.

Revenue at Amazon increased 7% during the first quarter, compared with 44% expansion in the year-ago period. It marks the slowest rate for any quarter since the dot-com bust in 2001 and the second straight period of single-digit growth.

"The pandemic and subsequent war in Ukraine have brought unusual growth and challenges," Amazon CEO Andy Jassy said in a statement. He added that the company is "squarely focused" on offsetting costs in its fulfilment network now that staffing and warehousing capacity are at normal levels.

Amazon has been navigating a host of economic challenges, including rising inflation, higher fuel and labour costs, global supply chain snarls, and the ongoing pandemic. To offset some of those costs, Amazon earlier this month introduced a 5% surcharge for some of its U.S. sellers, the first such fee in its history. And last quarter, Amazon hiked the price of its U.S. Prime membership for the first time in four years to $139 from $119.

Amazon's cloud-computing unit continues to hum along, as the company fends off competition from Microsoft and Google. Sales at Amazon Web Services increased 36.5% from a year earlier to $18.44 billion, above the $18.27 billion projected by Wall Street.

AWS generated 57% growth in operating income to $6.5 billion, while total operating income for Amazon fell to $3.7 billion from $8.9 billion a year ago.

Amazon also confirmed Thursday that this year's Prime Day will take place in July. Last year, Amazon held Prime Day in June. By moving the two-day discount event to the third quarter, it could potentially hurt year-over-year comparisons for revenue in the second quarter while boosting third-quarter results.

28 Apr | Apple

Apple’s revenue grew nearly 9% year over year in the quarter ended in March showing strong growth and bucking investor worries about a deteriorating macroeconomic environment affecting demand for high-end smartphones and computers.

But Apple shares fell nearly 4% in extended trading after Apple CFO Luca Maestri warned of several challenges in the current quarter, including supply constraints related to Covid-19 that could hurt sales by between $4 billion and $8 billion. The tech giant also warned that demand in China was being sapped by Covid-related lockdowns.

Apple CEO Tim Cook added the company was “not immune” to supply chain challenges.

Here’s how Apple did versus analysts consensus estimates:

  • EPS: $1.52 vs. $1.43 estimated

  • Revenue: $97.28 billion vs. $93.89 billion estimated, up 8.59% year over year

  • iPhone revenue: $50.57 billion vs. $47.88 billion estimated, up 5.5% year over year

  • Services revenue: $19.82 billion vs. $19.72 billion estimated, up 17.28% year over year

  • Other Products revenue: $8.81 billion vs. $9.05 billion estimated, up 12.37% year over year

  • Mac revenue: $10.44 billion vs. $9.25 billion estimated, up 14.73% year over year

  • iPad revenue: $7.65 billion vs. $7.14 billion estimated, down 1.92% year over year

  • Gross margin: 43.7% vs. 43.1% estimated

In addition, Apple said that its board of directors authorized $90 billion in share buybacks, maintaining its pace as the public company that spends the most buying its own shares. It spent $88.3 billion on buybacks in 2021, according to S&P Dow Jones Indices.

Apple increased its dividend by 5% to 23 cents per share.

The smartphone business grew over 5% during the quarter, yielding more evidence that the current iPhone 13 model is selling well.

Cook said that the iPhone business had a successful quarter with sales to so-called switchers, or people who previously had an Android phone but decided to buy an iPhone.

The earnings beat also suggests that Apple’s premium smartphone business may be insulated from concerns about deteriorating consumer confidence. The increase in sales also came despite a difficult year-over-year iPhone comparison, since the new iPhones were launched earlier in 2021.

Elsewhere, Mac computers continued to grow strongly after Apple transitioned its lineup to use its own M1 chips instead of Intel processors. Sales were up nearly 15% year over year to $10.44 billion.

However, Apple’s iPad business continues to go sideways, with sales down 2.1% from a year ago, despite updated models with Apple’s M1 chip. Cook said the iPad business had “very significant supply constraints” during the quarter.

Apple’s profitable services business, which includes subscriptions, licensing fees, and extended warranties, continues to grow strongly with over 17% growth. However, over the past two years the business had made a habit of beating Wall Street expectations by between 3% and over 8%, and this quarter, it only exceeded analysts estimates by 0.51%.

Cook said that Apple’s financial performance was “better than we anticipated.” The fastest-growing region was the Americas, which saw sales rise 20% during the quarter to $50.57 billion. Greater China, which includes Hong Kong and Taiwan, grew at a slower 3.47% rate to $18.34 billion. Cook said Covid-related China lockdowns didn’t affect Apple during the quarter, however.

05 May | Airbus Group

Airbus said that its profit in the first three months of 2022 more than tripled to 1.22 billion euros ($1.28 billion), helped by an increase in aircraft deliveries as airlines recover from the worst of the pandemic.

Airbus said it plans to speed up production of its A320 family of planes that compete with Boeing 737s to 75 per month by 2025. To hit that rate, Toulouse, France-based Airbus will build a second final assembly line at its plant in Mobile, Alabama, CEO Guillaume Faury told reporters.

The ramp-up in A320 production builds on a current Airbus goal to build 65 A320s a month by the middle of 2023. The company hopes to take advantage of strong demand for short- and medium-range planes. Boeing is also trying to churn out more 737 Max jets but is producing only about 30 a month.

While it is forging ahead with ambitious production plans, Airbus suffered a setback in building a new plane, the A321 XLR. Airbus now expects the plane to begin carrying passengers in early 2024, not late 2023. Airbus has encountered more difficulty than it anticipated in meeting certification requirements set by Europe’s aviation regulator.

The market for “narrowbody” planes like the A320 and 737 families is much stronger than demand for bigger, two-aisle “widebody” planes that are mostly for long-haul international flights — a segment of the travel market that has been slower to recover.

Airbus said that Russia’s invasion of Ukraine and the resulting ban on Russian imports has increased the company’s exposure to supply-chain disruptions. Before the sanctions, the company used titanium from Russia in aircraft parts.

In the first quarter, Airbus delivered 142 airline planes, up from 125 a year ago. Revenue rose 15% from a year earlier, to 12 billion euros ($12.645 billion).

The company stood by its targets of delivering 720 airliners this year and producing 5.5 billion euros ($5.8 billion) in adjusted profit before taxes, even with rising risks due to the “complex geopolitical and economic environment,” Faury said.

05 May | Block

Block, Inc which changed its name from Square in December 2021, reported Q1 FY 2022 earnings that missed analyst expectations on multiple fronts. Adjusted earnings per share (EPS)came in at $0.18, one cent behind analyst predictions for the quarter.

Revenue also missed analyst estimates. Quarterly revenue was $4.0 billion, down about 22% YOY and behind the predicted $4.2 billion analysts had called for. Square said that revenue declines were largely driven by a decrease in Bitcoin revenue. Excluding Bitcoin, total net revenue for the quarter increased by 44% YOY.23

Block's gross payment volume (GPV) was $43.5 billion, also short of analyst expectations.

Consensus estimates had predicted $44.6 billion in gross payment volume for the quarter.

GPV is a key metric that tracks the total dollar amount, net of refunds, of all card payments processed by sellers using the company's payments ecosystem. It includes peer-to-peer payments as well as transactions with merchants that use Block's mobile payments app.

Block charges transaction fees on these gross payments, and those fees constitute a major source of revenue. The transaction fees are generally calculated on a percentage of the total transaction amount processed.

GPV also provides an indication of how many users the company has on its platform. If Block can attract more users to its main payments ecosystem, then it will be able to direct more traffic to its other businesses. This helps fuel more revenue because Block takes a cut of the transactions. In addition, Block's GPV has been fuelled by acquisitions that provide business services to different clients, and this additional business helps spur people to use their other services beyond the company's well-known Cash App brand.

Block did not provide financial guidance for upcoming quarters in its shareholder letter.

📅 Earnings Reports during in the following update 📅

11 May | Walt Disney

18 May | Tencent

25 May | NVIDIA

Thank you

Have a nice weekend! 👍🏻👍🏻


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