Generate's Investment Specialist Greg Smith was on ZB with Mike Hosking this morning, talking about the positive takeaways from the latest print on NZ consumer confidence. He also covers two cracking results from the super-cap tech sector. Cloud and advertising revenues are booming at Amazon, while Apple, has seen “red hot” demand for the new iPhone17.
Listen here or read the transcript below:
From Generate, Greg Smith, morning to you.
Good morning Mike.
We're trying, but the numbers on the consumer side of the equation don't seem to back it up.
Yeah, that's right. So, this is the ANZ Roy Morgan Consumer Conference survey. So, it was titled, “Stalled.” That gives you a bit of a clue. So, confidence fell slightly from 94.6 to 92.4 in October. So, I gave it last month's gains. The big thing to look at is it, is it a good time to buy a major household item? So, the proportion of households that think it is has fell into – (negative)14, and it hasn't been positive in four years.
Future conditions, it's looking a bit better, not so much in the year and now. So we're a bit more optimistic about the future. Perceptions of current financial situations that eased a bit. That's not too far off the 2025 average, but a net 9% expect to be bit off this time next year. Perceptions around the outlook of the next 12 months, it lifted a little bit still – (negative) 22 percent. And then if you look at the inflation side, Mike, so that's lifted to 5.1%. So that might not seem, but curious because CPI that's running at 3%, but I suppose people may be looking at food price inflation. So that's 4.6%. House prices, they lifted a little bit, 3.1%. But yeah, I think overall you'd have to say we're in a cautious mood. And I suppose, you know, the headlines appear to be reinforcing that sentiment.
But suppose if you scratch the surface hard enough, Mike, we need to do that. Consumer arrears have been declining, some retailers saying they're doing OK. So, you know, maybe lower interest rates are starting to feed through, you know, hopefully provide a fill-up into that, I suppose, that key shopping period. So, let's see. But I mean, might make another decent rate cut before then as well.
I think we will. Ah pretty good news at Amazon?
It is all good in the jungle, Mike.
So, Amazon came with a cracker result. Shares are up nearly 10% on Friday. Profits and sales ahead of expectations. Two drivers here- The cloud business, that's what rents out computer power to other companies. That's going pretty well. And the advertising arm is booming. So, it's helping in the global rush in AI. So, if you look at Amazon Web Services, that's the cloud; these sales are up 20% to $33 billion, operating income $11.4 billion. That's around about 2/3 of their total operating profit. They know that's a, it's a fraction of sales. So, it's quite interesting.
There's been a bit of concern about how well given Google and Microsoft are doing, that Amazon might be falling behind. It hasn't been in many of these big AI deals either, but it is doing just fine. And they say the demand for AI is so strong, they're going to spend around about $125 billion building data centers in technology to keep up this year. Revenue they had seen are doing even better, up 24%, $17.7 billion. Amazon is now one of the biggest ad companies on earth. Total sales 70% higher, $180 billion. Amazon.com that's doing pretty well as well. And for the current court, Amazon see sales of $213 billion.
Not all smooth sailing, they are killing around 14,000 corporate jobs, but a bit of a drop in the bucket when you look at the fact they've got 1.6 million employees. So, the $2.6 trillion company looks to be doing pretty well there, Mike.
What about Apple, and the 17 works.
Yeah, the 17 does work. It's flying off the shelves. So, Tim Cook said, “the demand for the new iPhone is red hot and it has been off the charts”. The shares went off, the shares actually slightly lower on Friday. But to be fair, they are up 30% over the past six months. So, the iPhone's going well, about $102 billion in sales. It's a gain of 8% Net income that nearly doubled to $27.5 billion. iPhone revenue up 6 percent, $49 billion. So yeah, that's going pretty well, actually said they could have sold more, but they had a few supply constraints. And it's also worth highlighting as well that the new phone didn't go on sale till September 19. So, you've only got a week or so of sales in the current quarter.
Other things are doing well as well, Mike, services business - it's subscriptions, iCloud, Apple Music sales- they're up to 15 percent, $25 billion, and Mac are also called the humble laptop, Mike. It's back in style, sales up 13%, so the cheaper MacBook Air that's helping. But overall, Tim Cook said stores are buzzing again. Traffic's up on last year. He's confident December is going to be their best ever. And just on tariffs, he said they're deciding that billion-plus cost, but they can do that. Margins still good, but they reckon sales for the final quarter $137 billion. So, like you could say, a fun fact is that it’s more than the entire GDP of many countries, including us (NZ). So, he also sees big leap coming in AI, big developments in Siri, and also partnerships like it's deal of ChatGPT inside Apple Intelligence. So yeah, overall Apple is crunchy.
It's unreal numbers. Give us some numbers.
Yes, so record highs for the three main US indices. So, the Dow is up 0.1% (47562), the S&P 500 is up 0.3% (6840), and the NASDAQ is up 0.6% (23724), the 5100 dis own 0.4% and Nikkie is up 2.1% (52411)- that is also a record. A 6200 flat (8881), NZX 50 - we're 0.7% higher (13548). Gold down 21 dollars (4003) an ounce. Oil up $0.41 60 spot 98, and the currencies we were 0.3% lower against the US 57.2. Also lower against Aussie 87.5 when it's gone. Won't be talking about 86 before long. British Pound 43.5 down 0.4%. Japanese yen 88.2 down 4.4%.
Lots going on this week, Mike, building permits, dairy auction, RBNZ’s influential stability report. Unemployment here is expected to lift to 5.3%. I've got results from Westpac. Melbourne Cup - a day that will be stopping the nation but not the RBA. They're deciding on rates. The Bank of England also deciding. Not much data, probably with the shutdown in the US but there will be lots of results. Palantir, AMD, Uber, Toyota, McDonald's, AstraZeneca, ConocoPhillips, and Airbnb.
It's good stuff. Catch up soon. Greg Smith out of Generate Wealth and KiwiSaver specialists.