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THE HEADLINES

 

SOUR APPLE

Apple inexplicably deciding in November that it will no longer share iPhone quarterly unit sales reporting is starting to make a whole lot more sense …

The company revised its Q4 revenue forecast (ending December) downward, in an unprecedented move that sent panic through markets after hours. You see, the Street had been anticipating quarterly revenue of between $89B and $93B … but Apple is expecting to come in closer to $84B.

Despite being halted in after-hours trading briefly the stock still went all “hold my beer,” falling almost 8%.

But why?

According to the man who undoubtedly has Steve Jobs rolling in his grave (read: Tim Cook), Apple swung and missed in China. Cook didn’t mince words when he blamed the ongoing trade war and cited shrinking demand in China due to a slowing economy and increased competition from the likes of Huawei.

Of course, there was plenty of blame to go around. Jobs Jr. also pointed fingers at decreased carrier subsidies and fewer phone upgrades, especially in emerging markets. You mean there isn’t a huge demand for $1k phones in rural India?

I’ve got good news and I’ve got bad news

The good news is that the MacBook maker’s service business revenue jumped 27% and its smartwatch and AirPod sales grew at a rate of 50%. The bad news is that all of that isn’t enough to offset the loss of iPhone sales in China.

 

PRESCRIPTION DRUG ABUSE

Prescription drug makers appear to be subscribing to the “Office Space” playbook (you know, “fractions of a penny“). At the stroke of midnight on December 31st, Rx companies didn’t turn into pumpkins, but they did hike prices by an average of 6.3%.

The biggest offender? Allergan, who increased the price of 51 products, including a 9.5% increase on 27 drugs and a 4.9% hike on 24 of its meds. For the armchair economists at home, this is well above the rate of inflation.

Who else?

Hikma Pharma came out swinging in 2019. The generic Rx manufacturer increased the price of morphine by 10% and the cost ketamine by 20%. But, if you’ve ever seen anyone on ketamine, it seems like it might be worth it.

Pfizer, of course, jumped the gun, balking at President Trump’s calls for price controls by returning to standard price hiking practices in November. The Silent P is making noise with price increases on nearly 10% of its portfolio.

That’s just plain wrong

Guys, before you go getting your panties in a bunch about drug costs, keep in mind that Allegran and others are “self-policing” and have even signed a “social contract” with patients that it will keep increases under … 10%. Wait, what?

Society and the government have applied a healthy amount of pressure on drug companies with President Trump going as far as to suggest pricing in prescription TV spots.

 

AND THEY’RE OFF

Tesla shares fell more than 8% on Wednesday as the automaker missed the mark on Model 3 deliveries, and said that it would be cutting prices on all vehicles. Almost makes you miss 2018.

The brain-child of Elon Musk cut prices of the preferred EV of affluent tree-huggers by $2,000 in an effort to combat the phase-out of tax incentives. Tesla triggered the tax credit cut back in July when it became the first US automaker to sell 200k electric vehicles.

To combat the tax credit loss, Tesla is cutting prices, which could end up costing the company around $180M in revenue every quarter.

OK, so what does that mean for me?

Prior to this year, Tesla purchasers were getting a $7,500 kickback from the government for buying the electric vehicles. Now that Telsa had hit the 200k mark, that incentive drops to $3,750 until July, when it becomes $1,875, and then is ultimately phased out in 2020.

Tell me more about this “miss”

With a loose cannon at the helm, it’s no wonder that markets were skittish about Tesla missing Model 3 delivery expectations (63,150 vs. 64,900) by a razor-thin margin. For what it’s worth, the carmaker delivered less than 2k in Q4 of 2017.

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IN OTHER NEWS

• The name is Bond … Jame- … nope, that’s it. Just Bond. Mary Meeker’s venture capital fund will be called Bond and plans to raise $1.25B. She will become the first woman to raise a $1B+ fund. Meeker, a legend of Silicon Valley is the author of the renowned internet trends report.

 

• Brace yourself … changes are coming. The Roku channel will soon let customers subscribe to Showtime, Epix, Starz, and other premium TV networks. The big draw? Customers would be billed through Roku instead of settling up individually. Customers wouldn’t be the only ones to benefit. This would likely be a major cash cow for Roku via ad revenue.

 

• Investors stocked up on Treasurys yesterday, causing the 10-year yield to fall to a one year low (2.677%). Slumping equity futures drove t-note prices up and yield down.

 

• New Year, new Wells Fargo? Fat chance! Monsanto, which doesn’t exactly have a glowing reputation itself, is suing Wells Fargo and Citizens Asset Finance for trying to place leases for company-owned planes in default. Monsanto claims that the banks are trying to cover their asses because the asset’s values are significantly lower than what was originally expected.

 

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