Finimize - 🐚 Shell outdid BP

What’s going on here?

Apple’s sales and profit surpassed Wall Street’s expectations, but the tech icon’s hardware business left a lot to be desired.

What does this mean?

Apple might’ve delivered better-than-expected sales and profit – but dig a little deeper, and there’s more to the story. Apple’s profitable service business led by example, making 16% more revenue in the third quarter than the same time last year, thanks to hardy App Store spending, revamped iCloud plans, and a steady flow of AppleTV+ subscriptions. That helped pull up profit margins, sure, but then hardware soured the story. Double-digit declines were already predicted for Mac sales because of tough competition, but reported sales for the quarter still managed to disappoint, falling over a third from the same time last year.

Why should I care?

For markets: China’s trying out minimalism.

Apple’s been banking on the iPhone 15 to give the hardware department a lift. And while the firm’s initial comments seemed to suggest that the newest model was doing better than the iPhone 14 did at the same time last year, that’s only based on the first week of sales. The following weeks and months might not be as kind: competition’s tough in China, with local competitors like Huawei doing their best to win budget-conscious shoppers’ hard-earned cash. So if Apple wants to really invigorate its hardware business, the recent release of new M3 chips will have to be something really special.

The bigger picture: Thanks, banks.

The Federal Reserve’s recent decision to pause interest rate hikes is a welcome relief for stocks, especially tech ones. Higher interest rates dent the present value of their future cash flows, which is what investors use to value stocks. Plus, lower interest rates relative to other major economies will weaken the dollar, which makes US products and services cheaper for foreign customers. That’s a win for tech companies that make a lot of their money internationally – we’re looking at you, Apple.

What’s going on here?

Shell reported third-quarter results that lived up to expectations, so now the British oil goliath can enjoy a moment of zen.

What does this mean?

Shell’s results came hot on the heels of BP’s from earlier this week, with both hulking oil giants reporting third-quarter profit that was higher than the quarter before, but lower than the same time last year. No surprise: oil prices are cheaper than they were back then. But Shell must have done something right, because while BP’s profit was down 60%, Shell’s only slipped by about a third. That may or may not have something to do with the titans' long-term plans. BP is openly striving toward net-zero targets, but Shell’s keeping its cards close to its chest. Investors seem trusting: Shell’s shares are up 17% this year, way ahead of BP’s step up.

Why should I care?

For markets: Best friends forever – or at least, for now.

Big Oil’s keeping investors busy these days, not least because the energy transition is poised to shake up the industry’s long-term winners and losers. But for the moment, the fortunes of oil firms are closely tied to the oil price. Problem is, that future price tag is notoriously hard to predict.

The bigger picture: Clear as mud.

You’d think oil’s price would be pushing toward all-time highs right now. War in Europe has been suppressing the amount of oil available, and now the threat of conflict escalating in the Middle East has investors speculating on even more supply problems. Plus, OPEC – the group of oil-producing nations – has been keeping a tight grip on barrels lately too. But in reality, the black gold’s price is roughly the same as it was before war broke out in Ukraine. That means one of two things: either that’s a gleaming buying opportunity, or a hidden factor is holding prices down.