Closing Bell - Closing Bell Overtime: Apple Earnings From Every Angle; Venture Capital Scorecard With Francisco Partners Co-Founder 11/2/23

Episode Date: November 2, 2023

Another market rally as averages on pace for their best weekly performance of the year. Hightower’s Stephanie Link and Wells Fargo’s Scott Wren break down the market action. Apple’s Q4 numbers closely watched by the market; we cover every angle with Evercore analyst Amit Daryanani, Big Technology Founder Alex Kantrowitz, and shareholder George Seay of Annandale Capital. Plus, Steve Kovach speaks with CEO Tim Cook. Francisco Partners is one of the top VC firms by deal volume; Co-Founder Dipanjan Deb on what he likes right now. Other earnings from Dropbox, Paramount, Carvana, Expedia, Booking Holdings, Block, Coinbase, Live Nation, Skyworks and DraftKings.

Big, big rally as investors digest the Fed. VIX below 16 for the first time since September. That's a scorecard on Wall Street, but winners stay late. Welcome to Closing Bell Overtime. I'm John Fort with Morgan Brennan. It is the day Apple Watchers have been waiting for. We are just minutes away from one of the most important moments of earnings season. And a key read from the granddaddy of all bellwether stocks.

We will have live analyst reaction and commentary from shareholders and industry experts. And if that isn't enough, we'll also get results this hour from a wide range of other companies. There's something for every investor today, including Dropbox, Paramount, Carvana, Expedia, Coinbase, and many more, but also Apple. While we wait for those earnings to come out, let's bring in our market panel. Joining us now, Scott Wren from Wells Fargo Investment Institute and Stephanie Link from Hightower Advisors. Stephanie, do you buy it?

Like, literally, this rally post-Fed, right ahead of the jobs report and all these earnings this afternoon. Should investors believe that this is solid? Yeah, I do. I actually think we are set up for a rally into the end of the year. We've already had a couple of days, nice days. And I think the laggards are going to likely lead us, which we saw today, right? All the tax loss selling companies and stocks that got kind of washed in in that whole theme. They really

exploded today for sure. But the reason I'm positive really is because the data today was really the sweet spot for the Fed and for what we want. We want inflation to come down. We had unit labor costs come down. We had productivity the best in three years. And we also know PCE has also been coming down. So inflation is doing its job in terms of coming down, still have progress to go, but it's good. And then growth. We're not growing 4.9 percent like we just grew in the third quarter. We're going to slow, but I think we're going to be able to do 2 percent. And that is good for earnings. And by the way, earnings have been better than expected. Seasonally, this is a good setup time, right? And I think that there are a lot of people that are off foot right now, right? A lot of

negativity out there. Sentiment is really pretty crummy. So I'm a buyer, and I've been buying the last couple of weeks. Scott, we've got the T-Rex of the mega caps, Apple, reporting tonight. But it was the Russell 2000 that was up 2.5% today. Is that encouraging? Well, and normally it would be if you thought we were early in the cycle or halfway through a recession or a slowdown, something like that. And I'd love for Stephanie to be right. But when we look at it,

we're not convinced that the Federal Reserve is finished hiking rates. We think earnings estimates, whether it's the fourth quarter for all of next year, are way too high. Credit conditions are tight. Yield curves are inverted. I think right now the market's going to struggle to really probably get much above 4,400 if we bounce here. But certainly between now and the end of the year, we think it's going to be a little bit rougher. We have a year-end target out there of 4,100. So we're looking for recovery and a better market into year-end next year. But I think over the next couple of months, we're going to have a tough time. Well, we did have this quick move from 40 to below 4,200 back up above 4,300 just today.

I mean, 43.18 is where the S&P finished the day. 1.9 percent gains. We're up almost 5 percent on the week now, just thanks to the last two days. Scott, I mean, rate reprieve, peak Fed possibilities here. You got dampened volatility, you got favorable seasonality, and you got the reopening of corporate buyback windows. Just a couple of things that are being pointed to for this rally right now. What would it take for you personally to have more confidence in it? Well, I think we have to have some more confidence that the economy is not going to slip into a recession which we do. Now has timing that recession been

pretty difficult? It has been but from our perspective in these opening months of 2024 you're likely to slip into some sort of a recession that's going to take a little bit of time we're calling it moderate. So I think unless our economic outlook changes you know these last couple of days they're great I'm typically a glasses half full kind of guy so I want to be positive but I think these last few days this has been a lot of short covering not only in stocks but in the bond market as well I think we're in for some pretty volatile days and of course initially this week people wanted to get squared up for or in the position they wanted to be for the FOMC.

Now, today, they've got to try to get positioned up for how they want to go into this number tomorrow. And I will say that if it's anything like the last couple of Fridays, traders, which we know is the bulk of the day-to-day volume in the market, you know, they're not going to want to go home with meaningful long positions because God only knows what's going to happen in the Middle East over the weekend. So you have all these dynamics going on that's going to carry us through this week. All right. And geopolitics, too, on Friday afternoons. OK, we got our earnings parade has started. Paramount Global. Those results are out. Julia Borson has the numbers. Julia. That's right, Morgan. Paramount beating on the top and bottom line with adjusted earnings of 30 cents per share. That's ahead of expectations of 10 cents per share. You see the stock spiking about eight and a half percent on this news. Revenues of 7.13 billion,

also a hair ahead of the 7.1 billion analysts estimated. Now, there were some signs of weakness here. TV media revenues were a bit light. Ad revenue decreased 14 percent, which they said reflects continuing softness in the global ad market and lower political advertising. And licensing and related revenue did fall 12 percent due to the Hollywood strikes. But here's the key piece here, and this is what's driving the stock so much higher. The direct-to-consumer business narrowed its losses much faster than expected. The direct-to-consumer operating loss of $238 million was much less than the loss of $434 million that was the consensus estimate. Now, here is a key quote from the report. Quote, in Q3, we successfully grew direct-to-consumer revenue and Paramount Plus subscribers while narrowing our direct-to-consumer losses over 30%. They say now we expect DTC losses in 2023 to be lower than in 2022, meaning streaming investment peaked ahead of plan. They say looking

ahead, we remain on the path to achieving significant total company earnings growth in 2024. So just to add some key numbers here, direct-to-consumer revenue gained 38% in the quarter, direct-to-consumer advertising up 8%. So the stock up now 9%, John, on that success and moving past these peak losses in the streaming division. Yeah, moving higher, Julia. Thanks. Let's travel over now to Courtney Reagan. Expedia and Booking Holdings earnings are out. They're moving in different directions, Court. Yeah. OK, John. So let's start with Expedia reporting earnings per share of five dollars and forty one cents adjusted. That's better than the expected four dollars and ninety three cents that analysts were expecting. Revenues of three point nine three billion, also stronger than the three point eight six billion that analysts were expecting. They're also announcing a $5 billion buyback. Discussion about resilience in travel demand

in the executive comments, also noting that lodging gross bookings grew 8% compared to 2022, a record level for any third quarter. Shares of Expedia are higher by about 6%. And then moving to booking holdings, they are reporting earnings per share of $72.32 adjusted. That is much better than the street had expected at $67.61 on stronger than expected revenues as well. Room nights booked up 15% year over year for booking holdings. And again, the CEO was talking about being encouraged by the resilience of leisure travel demand, focusing on executing against the key strategic priorities, helping position the business for the long run. Shares, though, booking holdings in a reaction down about five percent. Back over to you.

Don't know why that is, Stephanie. I don't know if you have a take in between here real quick on the different moves in the travel stocks, booking expectations, anything like that. We'll just have to read more into it. We've got to read into it. We've got to look at margins. But I think it sounds pretty good. Maybe expectations are a little higher for bookings versus Expedia. Expedia has had a little bit more problems over the last couple of quarters. But you know what?

Services is on fire. Yes. And that's a big part of our economy. And by the way, earnings are coming in just much better than expected. And in my mind, stocks follow profits.

If they're going up, the market's going higher. And you think it's going higher. We remember that Skyworks Solutions earnings are out meantime. Christina Partsenevelis has those numbers. Christina.

Yeah, Skyworks presented a mixed report, $2.20 adjusted. That was a beat for EPS on revenues of $1.22 billion. So that's roughly in line. Keep in mind, Skyworks is a key component supplier for Apple. And what is happening is their Q1 guidance is falling a little short. Q1 EPS came in weak. The revenue guidance was extremely light. And so that's the reason why you're seeing the stock down about 5%. So again, Skyworks beat on the top line. EPS revenues in line, but guidance fell short. Okay. And of course, we are awaiting those Apple results, which should be a little bit later this hour. Christina, thank you. Dropbox earnings are out. Deirdre Bosa has those numbers.

Hi, Dee. Hey, Morgan. Dropbox shares are up 4% in the after hours after a beat on the top and bottom lines. EPS coming in at 56 cents adjusted versus 49 expected. Revenue also beating $633 million versus $629 million. That is single digit 7% year over year growth. A few more metrics, I'll give you paid users. Slight beat here as well as ARPU beat by about a dollar. That's average revenue per users. Again, shares holding on to gains of about 4% in the after hours. Okay. Deirdre Bosa, thank you. Live Nation earnings are out. Julia Borsten has those numbers

too. Julia. Morgan, this is Live Nation's strongest quarter ever. The company already reporting a record year in terms of revenues just from the first three quarters. Stock is pretty much flat, but just to go through the numbers here, earnings per share beat coming in at $1.78 versus the $1.27 estimated. Revenues coming in at $8.15 billion versus the $6.99 billion estimated, and a record number of tickets sold $140 million in the first three quarters of the year. That's already surpassing last year's total of 121 million. Now, the concert revenue beat estimates, as did ticketing revenue. So just going through both of those there, this is really an across-the-board beat. Now, a key thing here about Live Nation is they don't give technical guidance, but they do talk about bookings because they don't actually report revenue until the event happens.

Obviously, people buy tickets months in advance. They say they have a strong concert calendar and that event related deferred revenue is up 39 percent to 2.6 billion versus the year ago quarter. They say that reflects continued momentum going into 2024. Just want to point out this is the second straight massive beat for Live Nation. And there will certainly be a lot to talk about when I sit down with Live Nation CEO Michael Rapinoe. That's in the 2 p.m. Eastern hour tomorrow. It's an exclusive interview. You don't want to miss it.

John. All right. I'll take it. Julia, thank you. We're looking forward to that. I'm surprised no specific commentary about Taylor Swift or Beyonce since we've gotten it from so many other companies. A lot to go through there with all those earnings. Stephanie, I mean, it's like pick your poison here between Dropbox, Live Nation, Paramount. The fact that it looks like their losses have peaked

a year earlier than planned. Yeah. I wouldn't touch Paramount. I just think, I think that whole business is very, it's, they're struggling. It's so competitive. There's so much money that has to be invested. And at the same time, they have to cost cut. And so to balance all that, I think that's kind of a challenge. It's down a lot.

Expectations really low. Happy for Jim Labenthal, my friend who owns it. I'm glad that he's going to see some profits tonight. But I do think overall, the earnings picture, big picture, is better than expected. And that's really very important. And that is because the economy continues to do better than we think, even if it's going to slow. The Atlanta Fed tracker came out yesterday. We're looking at 1.2 percent for the fourth quarter in GDP, well below the 4.9 that we saw in the third quarter. But I think it's just too early. I think you're going to see about 2%. And that's going to be

good. And what is really important throughout earnings is margins have actually held up remarkably well. Everybody talks about how margins are going to just totally roll over, and they haven't. They've actually been expanding. And that's a function of pricing power. That's a function of restructuring and being lean and mean and also seeing operating leverage because, again, because the top line is coming in. So I'm pretty encouraged. Scott, part of this guidance on the consumer side has been this confidence. We heard it from DoorDash last night. We seem to be hearing it from Live Nation here on deferred revenue. People are buying tickets to see these concerts. They're not going to recognize the revenue until they happen. Does that at all change, move the needle for you on optimism and what's coming? Well, you know, John, it's funny because I think I have concert tickets

for three different shows here coming up. I have them in my pocket right now. But I think, you know, services have been on fire. People still want to get out. But for us, you know, services have been on fire. People still want to get out. But for us, you know, the cost of borrowing spend, consumers are getting tapped out. You know, this infrastructure deficit spending has pushed the economy more ahead for longer than what we initially thought. But for us, that extra cash is running out. Unemployment rates likely to go up. The Fed could very well have more hikes left in them. And for us, we think consumer spending certainly has been good. We expect it to deteriorate here over the next four to six months, let's call it.

Yeah, to your point, it really depends on where you're focused in the products that you're selling to consumers. Block earnings are out. Leslie Picker has those numbers. Hi, Leslie. Hey, Morgan. Yeah, revenue coming in at $5.62 billion, beating estimates. And the bottom line adjusted $0.55 per share on undiluted basis here. But Block processed $60.08 billion in gross payment volume in the third quarter, which was about a billion dollars below consensus. I spoke with Block CFO Amrita Ahuja, who said that the high-profile outage of Square and Cash app in September contributed to about 100 basis point dent in growth of GPP. So excluding that outage, growth would have been 12%. Ahuja also said that moderation stems from same-store sales growth moderation,

which she believes is in line with broader macro trends, just the overall slowdown in consumers. Transaction-based revenue and subscription and services-based revenue each coming in a little bit light relative to estimates. Block, though, one of the reasons why you see that stock price up so high after market is it's been touting its Rule of 40 goal. And today, it gave some targets around that. Rule of 40 is the targeting of gross profit growth plus adjusted operating margins totaling 40 percent or above. So in today's shareholder letter, Jack Dorsey said that Block will reach rule of 40 in 2026 with an initial composition of at least mid-teens growth, gross profit growth and mid 20 percent adjusted operating income margin. The company is also authorizing the repurchase of a billion dollars in shares to offset a portion of the dilution from share-based compensation. Block

is also creating a cap on the number of people at the company at 12,000. That's what they feel is appropriate at this time. And then that will change when the growth of the business has meaningfully outpaced the growth of the company. Now, current level of employment is about 13,000, so they'll have to get down to 12,000. Shares are currently up pretty significantly. I believe it's up 9% after having dropped 32% this year. So a big boost on third quarter earnings for Block, guys. Yeah, we're seeing about 13.5% so far in this after hours. My eyesight's really bad here. Just to clarify that, and I'll bet you Jack Dorsey is happy to be talking about Rule of 40 at Block

instead of also having to think about Twitter. Meantime, Carvana earnings are also out. Phil LeBeau has those numbers. Phil? John, Carvana and the shares moving higher as the company reported a profit of $3.60 a share. We're not giving you the comparable estimate from the analysts because it's so far off when the estimates were at and the analysts expecting a loss. So we're trying to figure out exactly what the difference is there. But a couple of factors.

First of all, revenue in line with expectations at $2.77 billion. The company also in the third quarter selling just under 81,000 vehicles. And they also say that the macro and economic environment is uncertain. We've heard this from other auto dealers and the gross profit per unit per vehicle sold. Really nice pop here. Up $2,452 per vehicle sold to almost $6,000 gross profit per vehicle. Again, shares of Carvana up a little over 4% on the third quarter earnings of $3.60 a share. Guy, I'll send it back to you. Phil, thank you.

Stephanie, Block is heading a lot higher after hours. At the same time, though, they are announcing this cap on the number of employees. Looks like they might have to cut 1,000. Microsoft also making cuts in its LinkedIn unit and elsewhere. We've got these companies that are doing pretty well, but also really needing to control the bottom line. What should investors take away from that? Well, I think they're being prudent, right? And these aren't massive layoffs, but I think that they are trying to keep their infrastructure lean, as lean as they can. They're growing certain parts of their business.

We know Microsoft is focusing all about AI, right? So they're probably growing and expanding in that part of the company. So I think it's prudent, and I think it's going to help the margin story overall. But I'm not alarmed. These are small layoffs for now. We'll have to keep an eye on it, of course. But I think the results speak for themselves, guys and gal. All right. Stephanie, Scott Wren, thank you. I know we're going to hear more from you,

Stephanie, in just a little bit. Yeah. All right, Sean. Well, we are awaiting Apple earnings that are due just minutes from now. Technology remains a key area of focus for private equity, accounting for nearly one third of PE activity by value over the last 12 months, according to Ernst & Young, up from 26 percent the year before. Our next guest is the CEO of private equity firm Francisco Partners, which he co-founded more than 20 years ago. The tech focused firm has more than 40 billion dollars in assets under management, has been ranked as one of the top performing PE firms, according to HEC Paris and Dow Jones. Let's bring in Francisco Partners CEO DJ Deb. DJ, it's great to have you on the show. Welcome. Morgan, thank you for having me on. It's hard to go right before Apple, but I'll try to do my best. Well, we're glad to have you. And certainly on a day where in the public markets we've seen a major rally over the last couple of

days. I mean, the Nasdaq's had such sizable gains in the last two days. It's now on pace for its best week of the year. How does it speak to what we're seeing, whether it is public markets or private markets, valuations and how investors are approaching assets right now? Yeah, Morgan, we spend very little time thinking about the day-to-day movements in stock prices. I know that's what your show and most of the other shows are on. We focus more on the long term. I would say going stepping back in time in 2021 at our advisory board meeting in March in front of all our investors, I made a little joke to start with.

As I said, more people had raised the SPAC than had COVID. And to us, that represented the absolute top of the markets. And we made three strategic decisions at that point, to sell every company we could, to only invest in companies that we thought could withstand duration, and then to pull our fundraising in earlier, which we did in 2022.

Of course, we got some things wrong. We ended up in retrospect, probably overpaying for some assets and not hedging enough for our debt. But coming into the end of 2022, we actually started getting constructive on valuations. We've made eight investments this year. Valuations today are back to 2013 levels. There is this big, giant divide between the haves and have-nots.

But if you look at the public tech markets today, we're back to 2013 level in valuations. Almost 75% of the market trades at less than five times revenue. 55% of the market trades at less than five times revenue. 55 percent of the market trades at less than three times revenue. So even though I think we may be headed into a recession, if you have duration on your side, we actually are relatively constructive on long term what it means for the technology landscape. OK. I mean, you just touched on it, but you did complete fundraising. You raised $17 billion in two funds last year. You have more than $23 billion to deploy based off of that. Just given your comments right now on valuations, where do you see the greatest opportunities? And I ask that knowing that there are 10 specific tech subsectors that you tend to operate in. You know, we're actually seeing

opportunities across the board. I'd say the one big wild card is the geopolitical situation in the Middle East. I would say a month ago, I was probably more constructive than I am today. Just I'm not sure what's going to happen in the Middle East and the contagion effects. But again, if you take a couple year view, we think there's interesting opportunities across all 10 of those sectors. Specifically, a lot of our activity was in doing division carve-outs. So, for instance, we bought a division out of Raytheon called Forcepoint. We bought two divisions out of IBM, the old Watson Health business. We've renamed it Meritiv.

We bought the Weather Channel or the Weather Company from IBM as well. We bought a division out of SAP. We bought a division out of CBS. Those continue to be interesting opportunities. We're also seeing some opportunities in the going privates we've recently announced the acquisition of new relic and earlier this year announced acquisition of sumo those are in different sectors some are in healthcare some are in security some are in infrastructure software and one is consumer internet so across the board we're seeing opportunities i would say however we're

modeling that businesses will get worse before they get better. And you need to get to the other side to make reasonable returns. What are the signals that you're looking for, DJ, that we're heading in that direction? It seemed like about 12 months ago there was a bit of a spike in going privates. There's a little M&A going on, particularly with AI type names acquiring. It seems to me we're still a ways away from the IPO window staying open for more than a hot minute. Or am I wrong? No, you're absolutely right. I don't think the IPO market's really open. We had the three or four IPOs a month and a half ago, but it seems like it's closed again. We're not

optimistic that the IPO market's gonna open anytime soon. I would say, I think the going privates will start accelerating. A lot of public boards and board members focus on 52-week numbers, and as those 52-week numbers roll off, people get more constructive on getting things done.

The other hindrance this year, in terms of why deals didn't get done as much, is interest rates were rising. Obviously, rising interest rates is not good for private equity in general, both in terms of terminal multiples and the cost of debt. But what's even worse is when there's a great rate of change on interest rates. Even if interest rates stay high, if they're roughly flat and the Fed has indeed stopped raising rates, people will get more constructive on this is the new normal and start pursuing transactions. So I'm actually, I think there will be more deals in 2024 than there were in 2023. You also mentioned, DJ, that you think some of these businesses are going to get worse before they get better. Why? Yeah, you know,

it's interesting. You've had all this stimulus. All of you, I was just listening to your program right before I came on. Everyone's talking about people beating earnings. Things are better. What's happened is things are better, but the second derivative is still negative, which is that versus two years ago, companies aren't growing as fast, but they're growing faster than people expected. Earnings have been better because many of these companies, frankly, overhired. But we really haven't seen things turn over. We told all our portfolio company CEOs earlier this year, expect a recession, which still hasn't happened. We're sort of assuming the worst and hoping for better. But if you do the inverse,

you get into big, big problems. And so, you know, our strategy, we call it complexity arbitrage, which is you buy confusion, hopefully at a discount, and you sell clarity, hopefully at a premium. What does that mean? It means buying companies with good technology and good customer is you buy confusion hopefully at a discount and you sell clarity hopefully at a premium what does that mean it means buying companies with good technology and good customer base that can get optimized so we're trying to optimize these operations and if indeed we go into a recession then uh there's that gives you opportunity to help clean up some of these other businesses dj deb of francisco partners great to have you on the show. Thanks for joining us. Thank you so much for having me. We have more earnings. DraftKings. Those results are out. Bertha Coombs has the numbers. Bertha.

That's right. Right now, DraftKings posting a smaller than expected loss of 61 cents a share on 790 million dollars in revenues. The street had been looking for a loss of 69 cents on 706, let's call it 707 million. As far as the average monthly unique paying customers, 2.3 million, up 40%. That also beat expectations. And the average revenue was $114, a little bit ahead of the street. You know, they are showing pressure to show progress toward profitability after Caesars surprised to the upside and BetMGM showed profitability. And for the fourth quarter, the company is now guiding its cash flow, its earnings before interest, taxation, depreciation, EBITDA of positive $200 million. That is above what analysts were looking for. They are also raising their full year guidance and establishing guidance for revenues for 2024 of $4.5 billion to $4.8 billion. As you can see there, the stock moving higher.

All right. Yeah. Bertha Coombs, thank you for keeping an eye on all of that. Betting on profitability at the sportsbooks. Yes. And the wait is almost over for Apple earnings. That stock has popped this week,

heading into the print, up nearly 6%. So what's going to happen here? Are results going to send shares higher, lead to a pullback? We will find out pretty soon

after this break. We'll be right back. Apple earnings due out any second. Morgan, this is still an iPhone story. China could play a big role in which way this quarter tilts. And then the holiday quarter is the current quarter. So the guidance big. Yeah.

And, of course, we're going to get that guidance or at least maybe if not official guidance, because they've pulled that since 2020. But you tend to get some commentary from CFO Luca Maestri. Yes. In the conference call. So we'll be watching for that. The China piece is particularly interesting to me, given the fact that Huawei released its own high end phone.

There's already we've seen it with other companies, some softness in China with the consumer there. And then to your point, services. Hold on. Let's get to Steve Kovac with the numbers. Okay. Hey there, John. Yeah, we got a beat on the top and bottom lines for Apple EPS coming in at $1.46 versus the $1.39 Street was looking for. Revenues, just a slight beat here, $89.5 billion versus the $89.28 billion expected. That's down about a percent from the year ago quarter, which was expected, marking, of course, that fourth quarter in a row of declining sales for Apple. And then let's just talk about iPhone revenues for a minute. Right in line with expectation and a record quarter, Apple is saying for the September quarter for iPhone, $43.81 billion. That's exactly in line with estimates, as I said. And services revenue,

also super important, of course. That is a beat and another record for them, $22.31 billion versus the $21.35 billion expected. I will have more for you shortly, John. All right, Steve Kovach, thank you. Now let's dig into these numbers, what we know so far, with Evercore ISI Senior Managing Director Amit Dharianani. He's got a $210 price. And big technology founder Alex Kantrowitz joins us as well.

Amit, first to you, slight beat on revenue. Really, the bottom line is what's shining here. Is that good enough? You know what? This may depend on what they say about the December quarter guide and what iPhone demand does in December, right? But so far, what I'd say, this looks pretty good, right? Services, it looks like there's a pretty healthy acceleration they're seeing

to mid-teens revenue growth. I would also point out that some of the FX head, when we think about 200 basis points, could be because of FX for them. So perhaps the beat is a lot better on a constant currency basis that they will flush out on the call. But so far, so good.

iPhone demand into December, the expectations are going to be key to watch for. Alex, are there any softer areas outside of the product numbers that you think are particularly important here? Trying to look through the geographies, for example. Well, look, I think that the fact that they beat on services is huge for them. Now, of course, we're looking at talk about softness, four straight quarters of revenue decline.

It's not even growth decline. That's decline. And you need something to make up for that. So you look at services, right, which is basically if your stock is going to be up 41 percent on the year and you're going to have force rate quarters of revenue decline, you need something to make up for it. It looks like they're coming in very nicely on services. And of course, you know, like like your my counterpart said up here, I'm going to wait for the guidance and the call to really, you know, put my finger down on what we can expect regionally. OK, well, let's get back to Steve Kovach for more on Apple results. Steve. Yeah, I talked to Tim Cook, Morgan, about these results.

And we went over just some of the demand and some of these issues that guests were just talking about here. So let me let's just dive into what he told me about the iPhone business, which, of course, came in $43.81 billion. That's up 3% from the year-ago quarter. Here's what Tim Cook told me about the iPhone 15 launch, which we got about eight days or nine days of sales for this quarter. He's telling me, quote, we launched the new iPhone 15 family during the quarter. It's the best product lineup we've ever had for the iPhone, and we're excited to get those into the hands of customers as quickly as possible. It's still early, and the iPhone 15 Pro and 15 Pro Max are still constrained. That's key, guys, and we're working hard to get those out there as quickly as possible. Also followed up with Tim on that and Mr. Cook on

that and asked him a little bit about the mix of iPhones and things he's seeing there. Wouldn't really talk too much about that or competition about Huawei, just reiterating a strong quarter, strong demand for the iPhone 15, and that those constraints they're seeing right now for those pro phones, which are more important, more expensive, also telling me those constraints are due to just high demand for the products that they just can't fulfill yet. So that's kind of a good problem to have for Apple. And then I do want to dive into the Mac business as well. Talk to Cook a little bit about that. It's down 34%, guys, to $7.61 billion. That's due to some wonky comps after some production problems throughout the year they had

in China last year. Here's what he told me about that business, though. Some optimism about the holiday quarter for Mac telling me, quote, I think the Mac is going to have a significantly better quarter in Q1 in the December quarter. We've got the M3s. Those are the new chips he launched. We've got the new products. We don't have the compare phenomenon on a year-over-year basis. So I think it'll be significantly better. So guys, a little bit more

optimism for the holiday quarter, at least for the MAC side, but like the guests were saying just now, wait for the call to get some revenue guidance for that holiday quarter to see if they can return to top-line growth. Okay. Steve Kovac, great reporting. Thanks for bringing it to us. Thanks. We're going to go back to the panel. Amit and Alex, shares are down 1.5% right now. Amit, I'll start with you. I mean, a lot to digest there in terms of that Cook commentary, but starting with the iPhone 15 launch and the fact that they do seem to be, according to Cook, experiencing strong demand that they can't keep pace with on the supply side. Your read. Yeah. Listen, end of September, you would almost expect there's enough Apple fanboys to drive demand higher. So not a shock that they're making that statement.

I'll tell you, one of the things that actually stands out is on a flourished revenue trajectory, China demand was slightly weaker. It was down, I think, two and a half, three percent year over year. That might be something we're digging into with them over time is demand trend. While they're good in iPhones broadly, are they holding up in China? Or what you folks were talking about is the Huawei issue starting to pop up a bit more over there. So that's the one thing I would say that stands out is China looks slightly weaker on a year basis versus the headline numbers are. Yeah, I was looking at the same thing. North America, well, America's geographically actually got stronger year over year. China weaker. Europe was just about in line. Also, Alex, when I look at how the different segments lined up, Kovac mentioned the Mac business. That

missed. iPad beat. Wearables were about in line. Services was strong. Is that a proxy for loyalty? I tend to think of it that way. And, you know, iPhone itself was just about in line as well. Yeah, services is definitely a proxy for loyalty. It's a proxy for how active people are within the products and frankly, how much more money they're willing to give Apple and making after making these big ticket purchases. You know, you have these big flagship purchases that people are making, but making less frequently, something like the iPhone and something like the MacBook, right? They now have a billion people who are using services and they need to make as much money as they can from them to make up from the shortfalls that they're going to see from people upgrading much less frequently. That's a good thing. The

products are better, but they have to see that revenue somewhere else. And you see this big, I mean, huge miss on MacBook and on Mac. And you have to make up for that somewhere. They did OK. I mean, they beat tremendously on services, but apparently that's not enough for investors. So we're going to have to see how this plays out. Ahmed, I want to get your thoughts on that, too. I mean, active installed base of devices has reached a new all time high across all products, according to this press release and geographic segments, a new all-time high in terms of services revenue as well. We know the margins are better there. Is this a situation where as they continue to build that focus on that, it's going to change that margin picture

over the longer term? We've been talking about it for so long now, but iPhone always still tends to dominate the headlines. Yeah, I mean, you know, if you think about it for so long now, but iPhone always still tends to dominate the headlines. Yeah, I mean, you know, if you think about it, the install base is there because of the iPhone success. Right. And so I do think that's the core of the Apple install base. It's crucial for that to keep doing well. And I think so far by all metrics are doing perfectly fine there. You know, I do think the monetization of the install base is from the right long term narrative to have on this company. It all seems to be in the right direction there. But I do think you want to make sure the health of the install base is probably the right long-term narrative to have on this company. It all seems to be going in the right direction there. But I do think you want to make sure the health of the install base is intact. And the one way you gauge that is how quick are the replacement cycles, how quick are the refurbish cycles. And again, September data seems like it's

relatively decent across most years other than China. We'll have to see if that holds up in December as well for them. All right. Alex, thank you. Great to have you. Thanks so much. Shares down slightly right now in reaction. Up next, much more on Apple earnings, including what two shareholders make of the print and what they want to hear from management on that upcoming earnings call. And don't forget, you can catch us on the go by following the Closing Bell Overtime podcast on your favorite podcast app. We'll be right back.

Welcome back to Overtime. Apple shares slightly lower right now in overtime after reporting earnings. Joining us now is CNBC contributor and Hightower chief investment strategist Stephanie Link. She's back. And Annandale Capital founder George C. Both are shareholders in the company. Stephanie, I'll start with you. There was a lot. There's a lot to like and there's stuff to take issue with in this report, but there is a lot to choose from. Right. So the quarter was kind of in line

at the headline, right, in terms of a little bit better on earnings, revenues as expected down 1%. You highlighted iPhones kind of in line, although I think that there were some expectations that they could do a 5% to 7% growth number. Looks like it was a 3% number. So not terrible, but I think expectations were a little bit higher. Services obviously is going to be the bright spot for sure. The whisper number was 13%, so we got 15%. Clearly positive. I don't know what's going on with Mac. We'll have to dig into that. That's problematic.

China does not surprise me at all because that's one of the things that we've all been worried about. Huawei competition. Right. And then also the geopolitical issues. So we have to get more color commentary there. This really is going to come down to guidance for the December quarter. And it's going to be because there are some expectations out there that you're going to see them or hear them say they can get to a 3% to 4% top line number for total revenues from minus one this past quarter. If they do that, I think the market can rally. If they don't, same old, same old. You have a stock that's trading at 29 times for what are you getting right and when i compare in your world john like amazon and alphabet and meta they're putting up double digit

growth with operating margin expansion so you can see why the stock is kind of languishing a little bit i don't think this is terrible by any means but i couldn't poke some holes for sure george you're a longtime shareholder in apple your thoughts on this quarter and just I'll dig into the Mac piece of it specifically because it was a large miss. But we did just get those comments from Steve Kovac, from Tim Cook as well. That M3 chip Mac event earlier this week. It sounds like there's a potential for that division to charge up or reaccelerate in the current quarter? Well, Morgan, Mr. Sandman, take me away. This was a real yawner of a quarter. It's not very interesting at all. And we talked about Max, but Max are kind of around the air for this company at this point. And if you're going to

continue to pay a 50 to 70 percent premium multiple on this company versus the market, it's all about services. Services is the growth driver and the margin driver and where the future of the company is in terms of getting a premium multiple. So that's the number to keep a close eye on going forward. And it grew very nicely this quarter. So I was really happy to see that. But this is a yawner. It's not going to move the stock significantly either direction unless their guidance is really, really disturbing to the street and to shareholders. And we'll see. George has got a point, Stephanie.

At the same time, Apple just hiked the subscription price for Apple TV+, I believe, to near $10 from somewhere around $5. So maybe they're feeling like that's going to help in the near term on the revenue side since the customer is so loyal. Vision Pro, in an economy that's slowing, they weren't going to sell that many of those anyway, so that's not going to move the top line needle. Does it come down to how many iPhones can they build? We heard from Steve Kovach, Tim Cook told him they're supply constrained on the high end. And markets outside the U.S., does China sort of turn around for them after this flirtation with Huawei?

See, so I actually think the consumer in China is stronger than expected. We saw Starbucks as a perfect example today, not Estee Lauder. That's a company-specific issue. We saw better results from the Chinese consumer in gaming, Las Vegas Sands. We see the better consumer in Nike in China. So I think the consumer actually is going to come around. We do have competition from Huawei. That's what I mentioned. However, I still think people want to own the iPhone, and I think that's going to recover as the Chinese consumer recovers. So I feel a little bit more bullish on that.

On the other hand, if they're increasing their subscription pricing, they obviously think they can. And that's going to help margins. If they can sell more pros, that's going to help margins. Services clearly is the margin driver. So that's why they're able to put up 44% to 45% gross margins, though, right? So that's a big part of the story. I just think you do need the iPhone numbers to accelerate. And that's why it's going to matter what they talk about in terms of the December quarter guidance, because that's what's going to drive the revenue numbers.

So, George, with these numbers threatening to put you to sleep from Apple, do you wake up and buy some more here? Do you sell some and buy some one of these smaller cap stocks? The Russell that's, you that's trying to rally lately today after being so down this year? Yeah, this is a hold forever stock. And you just trim or add on the margins depending on valuation. And we sold about 30 percent of our position in 2021. And then we bought back about half that much in 2022. And I'm completely sitting on my hands right now. There's just not enough here to get excited about.

But if it takes a big dive at some point in the next six to nine months, we'll add some more. So, but you've got to have compelling price at this point because this is such a Leviathan company. It's so big and it's so well reflective of the U.S. market and the global market as well. So you can choose to be picky in terms of when you buy and when you sell.

And it's up so much this year. I don't think you want to chase it with the kind of numbers they're putting out there. I think the suppliers are kind of interesting. I added to Broadcom today. If it's down on the Skyworks news and sympathy, I'd buy more of that. It's much more diversified, but you still get the Apple exposure, about 30%. And we know they just locked up the new contract with them. We don't know what the terms are, but it is what it is. Apple drives a hard bargain.

They sure do. Stephanie, George, thanks to you both. Thank you all. Well, we've still got a lot more on all the after-hours action coming up, including the numbers that are sending Coinbase lower in overtime. We'll be right back. Coinbase's initial move is down about four and a half percent, and it was worse. Leslie Picker, what do the numbers look like?

Yeah, it's recovered a little bit down about four and a half percent right now. And this is on a beat, a double beat, top line beating estimates with total revenue of six hundred and seventy four point one million. On the bottom line, Coinbase lost one cent per share better than the 54 cents per share loss that the street was expecting. But here's what the street is really focusing on here. Crypto asset volatility, that is a key driver of revenue that continued to decline in Q3 and reached its lowest level that Coinbase has measured since 2016. So this macro backdrop that they're experiencing contributed to global spot market trading volumes declining 24% sequentially quarter over quarter in Q3. And then Coinbase noting in its outlook that it expects Q4 subscription and services revenue to be approximately flat with Q3. And for Q3 transaction expenses as a percentage of net revenue to be in

the mid-teens. So a little bit on that flat guidance, a little bit on just overall volumes and volatility, guys. All right. Leslie Picker, thank you. Shares down 4.5% right now. Still ahead, much more on all the big after-hours earnings movers as Apple's call gets set to kick off at the top of the hour in about 8.5 minutes. Stay with us. Welcome back. Virgin Galactic soaring today after Sir Richard Branson's spaceflight company completed its fifth revenue-generating commercial flight today and its sixth spaceflight in as many months.

Galactic 5 was a research flight, meaning the VSS Unity spaceship was converted into a suborbital space lab and the company could command higher ticket prices for the researchers on board than the sum that it usually commands from so-called private astronauts. One of the six crew members today, Kelly Girardi, is a payload specialist and a bioastronautics researcher for the International Institute for Astronautical Sciences. She's also a mission operations lead for Palantir Technologies. Now, she flew with

three payloads on this mission, including two evaluating healthcare technology and microgravity. To be able to access a suborbital spaceflight platform like Virgin Galactics is unprecedented. You know, you have the International Space Station to conduct research, but it's bottlenecked, both being cost prohibitive and, you know, also a long pipeline of research waiting to fly. And then you have parabolic research or zero G flights here on Earth. But they're very accessible. But the amount of time that you get during each parabola is quite limited. So there's a market there, a research market for Virgin Galactic to target. Girardi, who's also an author and STEM focused social influencer, telling me the barrier hasn't been aptitude.

It has been that access. As for Virgin Galactic, this was the last spaceflight of 2023. The company will now conduct planned annual vehicle inspections. Flights are expected to start back up on this monthly cadence again in January. You can see right there, shares finishing the day up 14% on this spaceflight. But keep in mind, Virgin Galactic is a small cap, valuation of just over $600 million. For more of my conversation with Kelly Girardi, check out the newest episode of Manifest Space, available wherever you get your podcasts. For sure. And up next, all the after hours earnings movers that need to be on your radar as we count down to several big earnings calls. We'll be right back.

Welcome back. Let's run through some after hours movers. There have been so many paramount surging after a big bottom line beat of 12 percent right now. Block is booming after beating on both lines and announcing a billion dollar buyback. You can see those shares 19 percent gain and Redfin moving higher after a smaller than expected loss and a beat on revenues. Speaking of Redfin, we'll speak exclusively tomorrow with Redfin CEO Glenn Kelman about earnings and about the broker commission ruling in Missouri that this week has sent his stock lower. And DoorDash, a big winner, up 15% today after better than expected quarterly results thanks to a 24% increase in orders. Cue the QR code real quick. That leads into the latest installment of my On the Other Hand newsletter. This week's debate, are DoorDash's

results a sign it'll grow or is it going to hit a wall? Sign up using that code or type in cnbc.com slash O-T-O-H. And Morgan, that's it. That's it. Apple call, jobs report tomorrow. That does it for overtime. Fast Money starts now.