🎙️ Sports Biz

Yes, indeed, Elon Musk channeled Warren Buffett and the idea of Mr. Market.

Tesla’s CEO recently brought some perspective after the stock ran up ~25% in a week.  

“The stock market is wild,” he said, “sort of a roller coaster. Warren Buffett has a lot of good sayings. One of his sayings, I believe, is [that] having a publicly traded company is like having someone stand outside your house and yell house prices all day — and it’s still the same house!

“You’re like, ‘Why is this person yelling house prices at me all day long?!?’ That’s what it’s like being in a publicly traded company. They just yell stock prices at you all day long. And it’s like, ‘Actually, it’s still pretty much the same company as yesterday.’”

— Matthew & Shawn

Here’s today’s rundown:

Today, we'll discuss the biggest stories in markets:

• Delving into earnings from Apple, Amazon, Meta

• The investing index for sports leagues

This, and more, in just 5 minutes to read.

Chart of the Day

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In The News

🤔 Delving Into Earnings: Apple, Amazon, Meta

Here’s what you need to know after Apple, Amazon and Meta reported earnings this week.

Apple

Apple’s sales hit a quarterly record mainly because its iPhone business rebounded and total sales were $94.9 billion, beating the $94.5 billion analysts expected. 

Apple’s iPhone business — around half of overall sales — reported sales of $46.2 billion.

•  “There’s an underappreciated demand,” one fund manager and Apple shareholder told The Wall Street Journal. “It’s super encouraging to see this growth in advance of the AI features fully launching.”

Cautious guide: Apple services revenue was almost $25 billion, up almost 12% from a year earlier but just under expectations. Apple’s relatively cautious forward guidance is a main reason the stock fell ~2% after earnings. It also has lingering concerns about the competitive China smartphone market ahead of the most key sales period of the year (Q4). 

• Apple’s iPad business experienced the most growth of any of its hardware units, with an 8% rise in sales to $6.95 billion.

Apple, with a market capitalization of about $3.38 trillion, has risen 20% year-to-date and 248% over the past five years. 

Amazon

Get this: Incredibly, Amazon's AWS revenue over the last 12 months ($103 billion) was higher than the revenue of 468 companies in the S&P 500. 

Amazon stock popped Friday after a third-quarter earnings beat. Then CEO Andy Jassy pledged that the company’s enormous investment in AI will one day pay off. Jassy noted Amazon’s cloud computing business, Amazon Web Services, continues to excel.

• “I think we’ve proven over time that we can drive enough operating income and free cash flow to make this a very successful return on invested capital business,” Jassy said. “We expect the same thing will happen here with generative AI.”

Capex boom: Amazon spent $22.6 billion on capital expenses — property and equipment — during the quarter, up 81% year-over-year. Jassy said Amazon plans to spend $75 billion on capex this year and even more next year. 

Amazon stock, up ~32% this year, closed near an all-time high on Friday. It has risen ~121% in the past five years. 

Once-in-a-lifetime: Jassy also said AI presents “a really unusually large, maybe once-in-a-lifetime type of opportunity, and I think our customers, the business and our shareholders will feel good about this long term that we’re aggressively pursuing it.”

• The stock also rose because of Jassy’s optimistic comments around how Amazon will profit from investments in AI. Jassy said Amazon’s AI business will become a “multi-billion-dollar revenue run rate” business within AWS that “continues to grow at a triple-digit year-over-year percentage.”
  

• “It’s growing more than three times faster at this stage of its evolution as AWS itself grew, and we felt like AWS grew pretty quickly,” he added.

Meta

Meta’s Mark Zuckerberg said he’ll continue to increase AI investments while continuing to pour money into infrastructure and other projects like the metaverse and AI-powered glasses. 

• “We’re seeing AI have a positive impact on nearly all aspects of our work, from our core businesses to new services and computing platforms,” he said.“There are lots of opportunities to use new AI advances to accelerate our core business.”

Reality sets in: Meta’s costs around “Reality Labs” — its AI division — might hit $100 billion this year, so Meta is pulling from its core, enormously profitable ad business to fund the endeavor. Revenue for this quarter will be around $46 billion. 

• In other words, Zuckerberg keeps trying to invest profits from the ad business into what he hopes his company becomes: an AI innovator. “Our AI investments continue to require serious infrastructure and I expect to continue investing significantly there,” Zuckerberg said.

Meta, with a market capitalization of $1.44 trillion, is up about 64% this year and 193% over the past five years.

Read more

More Headlines

💭 Aswath Damodaran on the “fallen angels” Starbucks, Intel, and Boeing

🤖 OpenAI launches ChatGPT search, taking Google head-on

💙 Which countries donate most frequently to charities?

😬 Coinbase drops 15% after earnings miss for worst day in two years

📈 A record share of Americans say the stock market boom will continue

😬 Super Micro’s $50 billion stock collapse underscores risk of AI hype — and chasing rallies

☕ Seven ways that Starbucks CEO Brian Niccol plans to change the coffee chain

⚾ Morgan Stanley to Launch Index Tied to Sports Leagues

Soon, investors will be able to plow money in indexes tied to their favorite sports leagues. 

Morgan Stanley will launch a portfolio for investors tied to prominent sports leagues, such as the NFL, NBA, and MLB. The portfolio will target higher-net-worth sports fans with a minimum investment of $250,000. 

As sports teams valuations have soared in the past two decades, more investors will be able to join the growing asset class. 

• Morgan Stanley’s wealth management division announced the launch on Thursday, calling it the “Parametric Custom Core Sports League Strategy.” Investors can invest in a curated index of companies with sponsorship, media, and advertisement ties to sports leagues.
  

• Sports leagues and teams are an exclusive club with (mostly) billionaires leading the way. But now, the realm will be much more accessible for those with at least $250,000. 

A big opportunity: The idea apparently came to Morgan Stanley — whose stock just reached an all-time high — after clients asked the bank to create a portfolio of companies that support a specific sport. 

• “We saw that there was a bigger opportunity to do something here,” the managing director and head of Morgan Stanley’s Global Sports and Entertainment Division told CNBC. “This one person represents many, and multiples of many that are looking to invest in sports as a fan looking to get engaged.”

What else to know: Holdings will be selected from large-cap U.S. equities. There will be between 250 and 400 securities. Morgan Stanley said the portfolio will have risk characteristics similar to those of the S&P 500. 

• Morgan Stanley has $516 billion of assets under management (AUM) and will use Nielsen Sports as its data source to track activity, spending and visibility of companies with exposure to pro sports leagues.

The offering involves 13 of the biggest sports leagues, from the NFL and NBA to the US Open and Formula 1. It also includes men's and women's Division I college basketball.

Why it matters:

People love their sports. And the owners of high-profile franchises like, say, the New York Yankees, have seen their wealth soar as the team’s valuation keeps climbing higher. Sports clubs worldwide are getting richer amid more competition over broadcast rights and revenue from sports betting, among other factors. 

Recession proof? Billionaires own sports teams for many reasons. Notably, they like sports teams because it helps them diversify their assets into something that’s relatively recession-proof. And sports most definitely thrive during bull markets.

Look no further than the NBA, which had record attendance and record sponsorship during the 2023-24 season, producing ~$13 billion in league-wide revenue.

Other big Wall Street firms, such as Goldman Sachs, Citi, and JPMorgan, are also rolling out offerings for their wealthy clients to invest in sports. Last year, for example, Goldman launched a unit of dealmakers to pitch investments in teams and stadiums to wealthy clients.

• “We see the demand from our clients that are asking about ways to invest in sports,” Morgan Stanley noted. “And it’s going to continue.”

Read more

Sponsored by Masterworks

Wall Street Loads Up On Surprising Asset Class

Bank of America. UBS. JP Morgan. They’re all building (or have already built) massive investments in one $2.1tn asset class—and it’s not what you think. It’s not private equity or real estate, but fine art. Why?

In partnership with Masterworks, data from Citi shows it’s a potent diversifier with low correlation, and certain segments have even outpaced traditional investments. Take blue-chip contemporary art, which has outpaced the S&P 500 by 64% (1995-2023).

Masterworks knows the power of art investing, with their platform giving 900k+ users the opportunity to invest in this asset class as part of their overall portfolio strategy. In fact, from their 23 exits so far, Masterworks investors have realized representative annualized net returns like +17.6%, +17.8%, and +21.5%* (among assets held for longer than one year).

With so many users, Masterworks offerings can sell out quickly.

Quick Poll

On Wednesday, we asked: Do you own AMD or Reddit stock? Why or why not?

— Most respondents own neither AMD nor Reddit. “Uncertain about future of AMD,” one wrote.

— An AMD shareholder said: “Held AMD for a while and very disappointed in the stock performance. I also own NVDA and recently started a position in LRCX. I feel that LRCX will outperform AMD through 2025.”

See you next time!

That's it for today on We Study Markets!

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_{The content is not intended to provide legal, tax, or investment advice. No money is being solicited or will be accepted until the offering statement for a particular offering has been qualified by the SEC. Offers may be revoked at any time. Contacting Masterworks involves no commitment or obligation.  “Net Annualized Return” refers to the annualized internal rate of return net of all fees and expenses, calculated from the offering closing date to the date the sale is consummated. IRR may not be indicative of Masterworks paintings not yet sold and past performance is not indicative of future results. For additional information regarding the calculation of IRR for a particular investment in an artwork that has been sold, a reconciliation will be filed as an exhibit to Form 1-U and will be available on the SEC’s website. Masterworks has realized illustrative annualized net returns of 17.6% (1067 days held), 17.8% (672 days held), and 21.5% (638 days held) on 13 works held longer than one year (not inclusive of works held less than one year and unsold works). Correlation data based on repeat-sales index of historical Post-War & Contemporary Art market prices and S&P 500 annualized return (includes dividends reinvested) from 1995 to 2024, developed by Masterworks. There are significant limitations to comparative asset class data. Indices are unmanaged and a Masterworks investor cannot invest directly in an index. See important Reg A disclosures at masterworks.com/cd.}

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