Apple’s Earnings Can Boost the Stock Market. Here’s What It Needs to Deliver.

A solid beat doesn’t seem to be enough these days, particularly for tech stocks after their impressive 2023 rally. Apple’s 48% gains, taking it to a market cap above $3 trillion, mean the bar is especially high.

That being said, Wall Street expects the tech giant’s revenue to fall 1.4% year over year. If, as expected, iPhone and iPad sales fall in the company’s fiscal third quarter, it could be time for Apple’s services business to shine.

Meta and Alphabet’s stronger-than-expected digital advertising performance, suggests an upside surprise could be on the table in its services unit. There’s also scope for an unexpected AI announcement.

Apple’s push into financial services, in particular, seems to be going well. Apple said its high-yield savings account, in partnership with Goldman Sachs, has reached $10 billion in deposits since its April launch.

A beat strong enough to boost the stock would be a triumph in diversification for Apple, even more so after Qualcomm’s earnings suggested the smartphone slump is here to stay.

As a bellwether for consumer demand and the S&P 500’s largest stock, the broader market could really do with a stellar set of earnings, and upbeat outlook from Apple.

—Callum Keown

*** Join Barron’s senior managing editor Lauren R. Rublin and healthcare industry reporter Josh Nathan-Kazis today at noon when they discuss the outlook for healthcare stocks, and the latest news on Covid-19 treatments and vaccines. Sign up here.

Try your hand at this morning’s Barron’s crossword puzzle and sudoku games. For all games, including a digital jigsaw based on the week’s cover story, click here.

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AB InBev’s Earnings Beat Despite Bud Light Boycott Hit

Anheuser Busch InBev on Thursday reported second-quarter earnings that beat expectations, despite taking a significant hit to its U.S. sales as some drinkers boycotted its Bud Light beer brand.

• AB InBev reported underlying earnings of 72 cents a share for the quarter to the end of June, on revenue of $15.12 billion. Analysts had expected 68 cents a share on revenue of $15.38 billion.
• Revenue in the U.S. declined by 10.5% as AB InBev’s flagship American brand Bud Light is facing a conservative boycott over its marketing partnership with transgender influencer Dylan Mulvaney.
• AB InBev reiterated that it expects its 2023 earnings before interest, taxes, depreciation, and amortization to grow in line with its medium-term outlook of between 4% to 8% and revenue to grow ahead of Ebitda.

What’s Next: AB InBev will be hoping that with time it can recoup sales in the U.S. In its results it mentioned a survey of 170,000 American consumers over the quarter that showed most people are favorable toward the Bud Light brand. However, it could still be a long time before Bud Light reclaims the title of best-selling U.S. beer that it lost to Modelo Especial in the past few months.

—Adam Clark

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American Talking to Airbus, Boeing About Ordering More Jets

American Airlines

confirmed discussions with Airbus and Boeing about its future plans for narrow-body jets, becoming the latest carrier looking to expand its fleet as air travel rebounds. American has said it expects to spend about $3.5 billion annually on aircraft through the end of the decade.

• “We continually evaluate our fleet and our future aircraft requirements,” spokesperson Rob Himler told Barron’s in an email, adding that the carrier is talking to Boeing and Airbus about its “narrow-body aircraft needs for the latter half of this decade and beyond.”
• American was talking with the plane makers about ordering at least 100 jets and maybe 200 to replace some of its oldest aircraft, Bloomberg reported, adding the estimated value of the order was around $6 billion.

  Boeing

  declined to comment, and

  Airbus

  could not be reached.

• In recent months, India’s IndiGo has ordered 500 Airbus A320 airliners; Europe’s Ryanair Holdings has ordered up to 300 Boeing 737 MAX jets, and

  United Airlines

  has ordered 200 Boeing 737 MAX and 70 Airbus A321neo jets.

• Hungarian budget airline

  Wizz Air Holdings

  ordered 75 more of Airbus’ largest single-aisle aircraft, for a total of 434. The carrier will have a total of 565 A320 aircraft, Airbus said. CEO Jozsef Varadi said the addition would help Wizz offer affordable, sustainable travel options.

What’s Next: While American raised its third-quarter profit guidance along with other carriers, it said total revenue per available seat mile, a proxy for pricing power, is expected to be down 4.5% to 6.5%, an indication ticket prices may be cooling.

—Janet H. Cho

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Amazon Extends Grocery Delivery to Non-Prime Shoppers

Amazon
’s
Fresh grocery business has begun offering grocery delivery for non-Prime shoppers in 12 U.S. metro areas, including Boston, Dallas-Fort Worth, Denver, Portland, and San Francisco, with a plan to go national by year end. It could expand Amazon’s grocery sales as it revamps the business amid tough competition.

• Delivery fees for non-Prime members range from $7.95 to $13.95, but there is free pickup in select metro areas. Prime members get free deliveries on orders larger than $150 and pay $3.95 to $9.95 for delivery of orders below that. Prime subscriptions cost $139 a year.
• Amazon.com aims to merge its e-commerce grocery platforms including Whole Foods and Amazon Fresh into a single cart and expand its share of the U.S. grocery market, currently trailing

  Walmart
  ,

  Kroger
  ,

  Costco
  ,
  and

  Albertsons
  ,
  according to UBS. It bought Whole Foods in 2017.

• UBS estimates the U.S. grocery market to be about $1.5 trillion. Amazon is overhauling its Fresh store locations, highlighting in a blog post two remodeled Chicago-area locations that feature

  Krispy Kreme

  coffee and doughnut stands and carry 1,500 more items than before.

• Amazon has been cutting jobs and closing some Amazon Fresh and cashierless Go stores to trim costs, but has expanded inventory at others. Amazon operates about 500 Whole Foods stores, 44 Fresh grocery stores, and more than 20 Go stores.

What’s Next: Amazon is reporting earnings after the closing bell tonight. Earnings are expected to swing back to a profit of 35 cents a share, and sales are expected to rise 8% from last year’s second quarter, to $131 billion.

—Janet H. Cho

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Zillow Beats on Revenue. It’s Planning a Housing Super App.

Zillow

reported higher revenue and a smaller-than-expected second-quarter loss amid the housing market’s ongoing recovery. It expects third-quarter revenue of between $458 million and $486 million, which is below consensus and a slowdown from the second quarter and last year’s third quarter.

• The real estate platform reported revenue of $506 million and an adjusted profit of 39 cents. The company said higher mortgage rates are having a pronounced effect on sales volumes during a normally busy summer sales season. It expects it will take time for conditions to normalize.
• CEO Rich Barton and CFO Jeremy Hofmann said Zillow wants to become “the housing super app,” a central hub for real estate-related services. Zillow expects the strategy to double its share of customer transactions to 6% from 3% by the end of 2025.
• Zillow is repositioning after exiting its flipping business buying and selling homes, a model referred to as iBuying. Zillow announced in November 2021 that the program was ending, and reported the segment as a discontinued operation in November 2022.
• Revenue from rentals increased 28% to $91 million, from last year. Zillow benefited from lower rental demand and greater supply as new listings hit the market, driving landlords to the company to advertise, a shareholder letter said.

What’s Next: Zillow will provide

Redfin

with thousands of listings of newly built homes not available on a multiple listing service, starting in the fourth quarter. Redfin, which reports earnings later today, estimates that a third of all single-family homes for sale this year were new construction.

—Shaina Mishkin and Janet H. Cho

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Robinhood Market Records Its First Profitable Quarter

Robinhood Markets

notched its first profitable quarter, beating expectations and marking a “significant milestone,” in the words of CEO Vlad Tenev. An experiment in 24-hour trading on the app is off to a strong start, with interest surging during earnings, the company said.

• Robinhood didn’t release data on 24-hour trading. App users can now trade 52 stocks 24 hours a day, five days a week. That said, monthly active users were down by one million from the first quarter, to 10.8 million. Transaction revenue fell 7% from the first quarter.
• Earnings of 3 cents a share on $486 million in revenue both beat expectations. Helping boost profit: founders didn’t take some stock compensation, which lowered operating expenses. Its customer total rose by 70,000 to 23.2 million.
• Robinhood’s new retirement offering has attracted over 325,000 customers. The company matches 1% of customer deposits in their retirement accounts, and is now offering a 3% match for its paying gold members.
• In a bid to diversify, Robinhood bought the fintech start-up X1, which offers a no-fee credit card, allowing Robinhood to offer customers access to credit.

  Affirm

  CEO Max Levchin was an investor in X1.

What’s Next: Robinhood said it is on track to introduce brokerage services in the U.K. by the end of the year. It is also in discussions to buy most or all of the remaining 55 million shares bought by Sam Bankman-Fried in 2022.

—Liz Moyer and Avi Salzman

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A reader recently asked whether she was handling her Roth conversions the right way. It’s certainly not the first time someone has wondered the same thing. Even the pros constantly debate the rules!

For one thing, the government keeps changing the parameters. One big switch: You used to be able to change your mind about Roth conversions in a calendar year, and now you can’t anymore.

Another big confusion is that there are two different five-year rules. The first says your Roth account must be open for five years or else you will be taxed on any growth you withdraw. The second is that each year’s Roth conversion has its own five-year clock, mostly to avoid a 10% early withdrawal penalty, that could impact you if you’re younger than 59½ or haven’t met the first five-year rule.

The IRS provides only limited guidance on how you’re supposed to functionally manage the ins and outs of Roth IRAs and conversions.

Read more here.

—Beth Pinsker

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—Newsletter edited by Liz Moyer, Patrick O’Donnell, Rupert Steiner