Tag: Business

MSFT capex saw 41% increase in CY2023 and 79% increase in the first quarter of 2024. And MSFT expects material sequential increase in capex, which could mean 50-60% increase yoy.

Alphabet capex saw 2% increase in 2023 and 91% increase in the first quarter of 2024. The company expects similar amounts in the following quarters, which points to 50% yoy increase in 2024 capex.

Meta capex saw 12% decline in 2023 and 5% decline in 2024q1, but the company upgrades capex guidance for 2024 to be $35-40bn, which indicates a 33% yoy increase at midpoint.

Adding the 3 above would be $150bn combined capex already, up from ~$100bn in 2023 for those three.

What did US homebuilders do in 2008? Residential property market was really bad.

D.R. Horton revenue dropped by 41% yoy in 2008; loss of $2.6bn (more than 2x of 2006 net income) was incurred. Book value was only $2.8bn at 2008 YE.

But D.R. Horton maintained positive cash flows, scaling back expansion and selling inventories.

D.R. Horton started to pay down some debt in 2007 and did so in 2008 as well. It continued to do so until 2011. In 2012, it started to take on more debt.

Similarly for Lennar – revenue dropped 55% yoy in 2008 and incurred loss of $1.1bn. Book value was $2.6bn at 2008 YE.

It maintained positive operating cash flow, reducing supply (deliveries dropped 68% from 2006), pausing expansion and selling inventories.

It didn’t take new debts, but focusing on paying back.

 

 

Many brands exited the market, but total vehicles registered bounced back a bit to 1.1mn in 2023, up 58% yoy. Local brand LADA had over 30% market share in 2023.

AEB – AMC reports for 2023

Back in 2020, there were 1.6mn vehicles sold. And 1.76mn for 2019. So still 1/3 lower than 2019 level.

1/ the $1.8bn lawsuit became the catalyst to lower commission revenues for each home transaction.

Some real estate agents may exit the industry as the pie is smaller; and spending on Zillow per transaction will likely decrease.

Therefore, Zillow’s revenue from home sales shall decrease under the current model.

2/ competition from CoStar is very real while Zillow is not growing

CoStar combined traffic from 23q4 earnings presentation

Home.com (owned by CoStar) had 149 million unique visitors in Feb 2024, with 567% yoy growth.

Zillow’s 2023q4 reported average monthly unique users was 194 million, down 2% year over year. Visits during Q4 were 2.2 billion, up 1% year over year.

Zillow’s DAU trend from Investor Deck February 2024 – not looking amazing.

Their business models are different. CoStar is more SaaS like. And Zillow is more e-commerce.

(above from ChatGPT 4)

3/ of course the current interest environment is not helping.

While it’s not new and Fed may cut this year, marginal benefits of lowering from 6.5% to 6% won’t move the needle.

 

At the end of 2022, Abbott Laboratories announced the gradual exit of mainland China’s infant formula market throughout 2023.

Abbott had ~3% market share.

How other international brands were doing in 2023?

Nestle’s Greater China business overall saw 4.2% organic growth in 2023, citing positive growth in Infant Nutrition.

Danone (Aptamil brand) saw market share gain in 2023, with 8.3% yoy like-for-like growth in specialized nutrition in China, North Asia & Oceania.

A2 grew 10.4% yoy in 23H2 (FY24H1) for its China label products, and 16% yoy in 23H1 (FY23H2).

 

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For the quarter ended Feb 2024, Nike brand sales in China grew 4.5% yoy (overall company sales grew 6% yoy) and Nike brand EBIT in China grew 2.8% yoy.

Not that impressive – as last year’s result should still be impacted by surging covid cases after reopen.

Meanwhile, Nike said it’s growing share, which I believe is true (holding some ground), but also indicates that the overall market is not strong (<6% growth).

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Looking at channels, it’s wholesale that’s driving the growth. “Wholesale grew 12%” & “retail sales with our partners grew double digits in Q3 versus the prior year” & “seeing incredibly strong weekly sell-through on these franchises (wholesale partners)” from earnings call.

Another important observation – “physical retail channel in China is stronger than digital.”

Nike will be on Douyin. Not yet on Douyin. However, how should Nike balance gross margin? Live-streaming e-commerce is famous for heavy discounts.

I didn’t live that era so really appreciate the story.

Some key takeaway so far:

• in early 2000s: “The market consensus was that China’s banking system was technically insolvent and badly in need of wholesale reforms. The main issue was nonperforming loans (NPLs).”
• It’s easy to hide NPLs by offering bigger loans; the best practice of “forward looking” was not used in early 2000s
• Gov will insist on a “good-looking” multiple
• There was an jokingly bet for a tennis match between Zhou and Summers – “the winner would get to set the exchange rate between the dollar and the Chinese yuan”
• Much more ups and downs than I imagined
• “Fortress Besieged” is a really good metaphor..