Examining Consumer Habits Through Amazon and Apple Earnings

Next week’s earnings deluge will once again highlight consumer habits as Amazon.com Inc., Shopify Inc., and PayPal Holdings Inc. are anticipated to discuss online spending trends. Additionally, Apple Inc. might provide insights on the outlook for iPhone sales.

It follows a busy week that showed the US economy and consumer spending growing faster than expected, while corporate earnings offered few surprises. Intel Corp. rallied after the chipmaker said its long-awaited comeback may be just around the corner; McDonald’s Corp. and Mastercard Inc. also beat estimates. So far, U.S. companies have registered their biggest profits in nearly two years, with companies that sell non-essential goods and services delivering more surprises than others, according to data tracked by Bloomberg Intelligence.

In the semiconductor sector, Qualcomm Inc., Western Digital Corp. and Advanced Micro Devices Inc. are expected to report lower sales amid uncertainty. Results from drug giants Pfizer Ltd. and Merck & Co. are being watched for developments in oncology and human papillomavirus vaccines as Covid-19 gains fade and sales of older drugs slow.

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Monday: Western Digital ( WDC US ) may have bottomed out in demand for flash and hard disk drives in the fourth quarter of the year, paving the way for a slow recovery, Bloomberg Intelligence said. Still, a fifth consecutive quarter of declining sales is likely, with a 44 percent year-over-year drop forecast. Investors are interested in an update on the Kioxia Holdings merger, but expect those questions to fade away, BI said.

Tuesday: Pfizer’s ( PFE US ) Covid vaccine spread is the biggest reason for a forecast 51% drop in quarterly sales. According to BI’s John Murphy, sales of newer treatments, including the company’s respiratory syncytial virus vaccine, are unlikely to start before the second half of the year, and the chances of updating to full-year guidance are slim at this stage. There are also questions about its proposed $43 billion purchase of cancer treatment company Seagen.

• Merck ( MRK US ) may have room to improve guidance even as sales of lead drug Keytruda slow as HPV vaccine Gardasil grows, BI said.
• Electronic Arts ( EA US ) could reappear on the M&A radar as Microsoft’s bid for Activision Blizzard clears regulatory hurdles, according to BI, which touted companies including Amazon, Apple and Comcast as potential suitors. Analysts at Wedbush said that in addition to continued contract speculation for the foreseeable future, EA could offer a punch, driven by the strength of Star Wars Jedi: Survivor and live services.
• Advanced Micro Devices ( AMD US ) second-quarter sales likely fell 18.8% from a year ago, accelerating from a 9.1% decline in the previous three months, the consensus shows. At the same time, the company will benefit from the recent increase in demand for generative AI products, BI said.

Wednesday: Qualcomm’s ( QCOM US ) sales are expected to decline for the third consecutive quarter, as consensus calls for a 22 percent year-over-year decline. Apple, Samsung, and Xiaomi – Qualcomm’s three biggest customers, which account for around 50% of revenue – are also seeing weaker sales. On the plus side, the car segment can provide relief with a forecast of 28 percent growth. The results are after an hour.

• Shopify ( SHOP CN ) may have gained market share in the U.S. in the second quarter after increased engagement with its online offering, Citi said. That leaves the company with room to upgrade its guidance of 25 percent revenue growth for the period, although clarity on the demand outlook for the rest of the year is key, the broker said. Shopify reports after launch.
• PayPal’s ( PYPL US ) post-IPO report may show a 25% rise in revenue after a 19% decline in the same period a year ago as e-commerce spending grew in the quarter. The total number of payments is expected to grow again by around 9% during the quarter. Jefferies noted an acceleration in online spending from last year.

Thursday: Apple ( AAPL US ) asked its suppliers to keep iPhone shipments flat for the year as it struggles as demand for electronics wanes. This may not stop it from raising the prices of its Pro models. BI said the company is likely to order more shipments after it launches the iPhone 15. Apple’s reliance on Chinese manufacturing is also a major concern as relations between Beijing and Washington tighten.

• Amazon’s ( AMZN US ) strength in streaming and advertising could be offset by a slowdown in consumer and business spending, BI said. In the second half of the year, online sales should return to growth and accelerate as shopping trends normalize, while the company likely enjoyed “strong sales” from Prime Day. Amazon’s move into pharmacies and grocery stores is also closely monitored.
• Gilead ( GILD US ), like Pfizer, is also expanding into oncology, although the failure of the trial has eliminated a near-term source of new revenue, BI said. Prospects for cancer drugs Trodelvy and Yescarta are expected to be the focus of its second-quarter results.
• Warner Bros Discovery’s ( WBD US ) second-quarter revenue is seen falling 3.4%, reversing growth of at least 200% over the previous four quarters. The quiet quarter is due to the weak performance of The Flash, lower advertising revenue and the introduction of the Max streaming platform in May, BI said. The heavy marketing spend on Barbie is also draining, a cost likely well spent since the film had the biggest opening of the year. Mattel also renewed its licensing partnership with Warner Bros. ahead of 14 more films.
• BI said second-quarter top-line growth for Airbnb ( ABNB US ) is forecast to slow to 15 percent. Ebitda growth may also follow revenue as a result of intensifying competition and higher consumption of generative AI tools.