Apple’s Woeful Week, Novo Nordisk Overtakes Tesla, and NYCB
Editor’s Note: It’s Friday! Cue the celebrations… and the obligatory meme.
But first, let’s get to it.
A Week of Woe for Apple
This has not been a good week for Apple (NSDQ: AAPL).
For one thing, the EU’s European Commission has slapped the Cupertino giant with a $2 billion antitrust fine.
This is the third-largest fine levied by the commission.
Interestingly enough, both the largest and second-largest fines were imposed on the same company: Alphabet’s (NSDQ: GOOGL) Google.
The EU fined Google 4.3 billion euros and 2.4 billion euros in 2018 and 2017, respectively. The fines were related to charges that Google unfairly promoted its own services on Android devices and gave its own e-commerce services an unfair edge on Google Search.
Take a look:
You will find more infographics at Statista
In its ruling against Apple, the competition watchdog said that “Apple bans music streaming app developers from fully informing iOS users about alternative and cheaper music subscription services available outside of the app and from providing any instructions about how to subscribe to such offers.” These practices are illegal, according to EU rules.
Adding to Apple’s woes, a new report shows that iPhone sales are plummeting in China — one of the company’s biggest markets.
According to a report from Counterpoint Research, the mobile phone market in China as a whole is falling, experiencing a 7% decline in the first six weeks of the year.
However, Apple felt the brunt of this, with iPhone sales plunging by a whopping 24%.
The researchers found that, thanks to a slowing Chinese economy and rising geopolitical tensions, consumers in China are choosing “local” brand such as Huawei.
“Primarily, [Apple] faced stiff competition at the high end from a resurgent Huawei while getting squeezed in the middle on aggressive pricing from the likes of Oppo, Vivo, and Xiamo,” Counterpoint Senior Analyst Mengmeng Zhang wrote in a statement.
In addition, Apple-loyal consumers have largely chosen not to upgrade their devices.
“Although the iPhone 15 is a great device, it has no significant upgrades from the previous version, so consumers feel fine holding on to the older-generation iPhones for now.”
Troubles in the Chinese economy — including rising unemployment among young adults, lackluster consumer spending, and a real estate market crisis — pose a threat to Apple’s bottom line. After all, China is the iPhone maker’s largest market after the U.S.
However, the U.S. government has imposed sanctions that restrict Chinese consumers’ access to certain American-grown chip technology. The concern is that the Chinese government — in particular the military — could “steal” the technology and use it against “us.”
As a result, according to Counterpoint, these sanctions are irritating Chinese consumers, who are switching over to devices made by Chinese companies. The report shows that sales of Huawei’s Mate 60 smartphone are eating into Apple’s sales.
In January, Huawei commanded a 17% share of the mobile phone market in China. Apple commanded only a 16% share.
Novo Nordisk Is Now More Useful Than Tesla
This week, shares of Novo Nordisk (NYSE: NVO) shot up yesterday after the company reported positive early trial results for a new obesity drug.
In fact, Novo Nordisk became the 12th most valuable publicly traded company by market capitalization — surpassing Tesla (NSDQ: TSLA).
It’s already the most valuable publicly listed company in Europe, having beat LVMH (OTCMKTS: LVMUY) to the title last year.
Novo told investors that the Phase I trial of an experimental amycretin pill showed that study participants shed 13.1% of their weight after 12 weeks of taking the medication.
Those are better results than what the company saw in trials of Wegovy, its blockbuster weight-loss treatment. Wegovy trials showed that participants lost just 6% after 12 weeks.
Novo started selling Wegovy in the U.S. back in June 2021. Since then, its stock has more than tripled in value. Year to date, shares of Novo Nordisk are up by roughly 35%.
Amycretin and Wegovy — as well as Eli Lily’s (NYSE: LLY) Zepbound — work by targeting hormones that regulate hunger and blood sugar levels. In fact, this group of drugs stems from diabetes treatments.
According to analysts at Goldman Sachs (NYSE: GS), the market for these drugs is expected to reach $100 billion by 2030.
“The chronic weight management market is undergoing an inflection,” the team of analysts wrote. They’ve predicted “solid growth ahead and a peak opportunity that, by our estimates, could ultimately yield some of the highest-grossing drugs of all time.”
The Goldman analysts further forecast that Novo Nordisk and Eli Lily will control about 80% of the weight-loss market by 2030. “A dominant leadership position can be maintained at this level,” they wrote.
Mnuchin Bails Out NYCB
This week, New York Community Bank (NYSE: NYCB) received a $1 billion-plus bailout. The capital injection came courtesy of a group of investors led by Liberty Strategic Capital, a D.C.-based private equity firm helmed by former Treasury Secretary Steven Mnuchin.
However, NYCB reported that, in the month before it received the bailout, it lost 7% of its deposits.
According to a presentation delivered by the bank, NYCB had $77.2 billion in deposits as of March 5. On February 5 — the day before Moody’s downgraded the bank’s credit rating to “junk” — it had $83 billion in deposits.
NYCB also announced that it would slash its quarterly dividend from 5 cents per share to 1 cent per share. That’s an 80% cut and marks the second time the bank has trimmed its dividend.
Before the bank, which focuses on real estate loans, reported the fourth-quarter loss that started this whole debacle, it paid a quarterly dividend of 17 cents.
Back in January, NYCB reported a surprise loss for the fourth quarter. And last week, the bank admitted that it suffered from “material weaknesses” in its internal operations. The company reported a $2.4 billion loss in earnings and replaced its CEO.
The warning certainly put investors on edge. After all, it was last March that Silicon Valley Bank and Signature Bank — two regional, mid-sized banks — collapsed.
Anyway, Mnuchin told CNBC yesterday that he’s been keeping an eye on NYCB, whose stock has lost roughly 65% year to date.
“The issue was really around perceived risks in the loans, and with putting billion dollars of capital into the balance sheet, it really strengthens the franchise and whatever issues there are in the loans we’ll be able to work through,” the Liberty Strategic Capital CEO said.
“I think there’s a great opportunity to turn this into a very attractive regional commercial bank.”
NYCB has a new CEO, Joseph Otting, who formerly served as the comptroller of the U.S. currency from 2017 to 2020.
According to Otting, he’s already working on a turnaround plan. Otting said that he wants the bank to loosen its tight focus on commercial real estate lending and instead function more like other regional banks.
“The right balance sheet for an organization is a third of it being in consumer-related businesses, a third in commercial banking-type relationships, and a third of it in real estate,” he said during a conference call.
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