Apple Wants to Disrupt Finance. How It’s Getting Help From Banking Turmoil.

The timing of the tech giant’s latest push into financial services, whether intended or not, probably has something to do with that.

Not only is the yield strong when compared with other banks, but it also comes at a time when confidence in the regional banks is wavering. Americans are on the lookout for other places to put their cash—somewhere they can trust.

Apple, hoping to use its strong brand and iPhone user base, couldn’t have picked a better moment.

In contrast, under-pressure regional banks are finding the task of inspiring confidence and faith much harder.

PacWest Bancorp’s update Thursday seemingly had enough in it to calm market fears, with deposits increasing since March 31 and insured deposits totaling 75%, up from 71% at the end of the first quarter. Yet the stock plunged 50%. It wasn’t the only one, as Western Alliance also had a tough day. The stocks showed signs of a rebound early Friday but volatility is likely to continue as investors remain on edge.

Apple wants to play the role of disrupter again, but the turmoil sweeping through the banking sector means change is happening anyway. Regardless, it looks to be in the right place at the right time.

—Callum Keown

*** Join Mansion Global’s managing editor Beckie Strum today at noon when she talks to Danielle Hale, the chief economist at Realtor.com, and Janet Horlacher, principal, Janet MdAfee, about the outlook for luxury real estate markets around the world. Sign up here.

Try your hand at the Barron’s crossword puzzle and sudoku games, now running daily along with a weekly digital jigsaw based on the week’s cover story. To see all puzzles, click here.

***

iPhones Drive Earnings, Again

Apple posted quarterly results that were better than analysts expected. Most of its revenue beat was driven by stronger-than-expected sales in the tech giant’s iPhone unit, which generated revenue of $51.3 billion in the quarter, ahead of the $48.7 billion in iPhone sales Wall Street expected.

• For the fiscal second quarter, Apple reported earnings of $1.52 a share on revenue of $94.8 billion. Analysts polled by FactSet expected earnings of $1.43 a share on sales of $92.9 billion.

• Services revenue of $20.9 billion was a touch below estimates of about $21 billion. Revenue from the company’s Mac computers of $7.2 billion was below estimates at $7.8 billion. Revenue from iPads of $6.7 billion was in line with expectations.

• CEO Tim Cook said in the earnings release: “We are pleased to report an all-time record in services and a March quarter record for iPhone despite the challenging macroeconomic environment, and to have our installed base of active devices reach an all-time high.”

What’s Next: During the company’s earnings call, Chief Financial Officer Luca Maestri said the company expects its revenue growth in the June quarter to be similar to its March performance, during which revenue fell 3%.

—Connor Smith

***

Berkshire Hathaway’s Annual Buffett-Palooza Kicks Off

This weekend, 30,000
Berkshire Hathaway
investors will congregate in Omaha, Neb., for the conglomerate’s annual meeting. The three days are packed with special shopping deals, meals, and, of course, Saturday’s question-and-answer session run by CEO Warren Buffett and his vice chairman Charlie Munger.

• Berkshire’s after-tax operating earnings from an array of businesses including the Burlington Northern Santa Fe railroad, a property-and-casualty insurance business, and one of the U.S.’s largest electric utilities, are expected to rise more than 10% this year to $35 billion.

• Berkshire investors may be happy to see it back in the deal game. After buying insurer Alleghany for $11.6 billion, it spent $8 billion to raise its stake in the parent of Pilot Flying J truck stops. It owns $27 billion of
  Chevron
  stock, and a 23.6% stake in
  Occidental Petroleum.

• Shareholder shopping day kicks off today in the exhibit hall of the CHI Health Center in Omaha. The Q&A session begins Saturday in the center at 9:15 a.m. local time and is scheduled to last about six hours with a break for lunch. There’s a $5 BBQ meal offered from 5:30 p.m. to 8 p.m. Saturday evening.

• Buffett turns 93 in August, and his likely successor, Greg Abel, 60, vice chairman and head of non-insurance operations, is taking a more assertive role in improving operations at subsidiaries, something Buffett preferred not to do. “It has already improved dramatically, the management of Berkshire,” Buffett recently told CNBC.

What’s Next: Berkshire is sitting on more than $125 billion of cash that could fund what Buffett calls an “elephant size” acquisition. Until then, that cash, kept in short-term Treasury bills, can earn 5% while banks are sitting on more than $600 billion of bond losses.

—Andrew Bary and Janet H. Cho

***

Anheuser-Busch Isn’t the Only Company Fighting the Culture Wars

Anheuser-Busch InBev
said it was too early to know the effect of the backlash against its Bud Light brand, which started after transgender influencer Dylan Mulvaney promoted the beer. The opposition to the use of Mulvaney has also illustrated the growing political attacks against progressive policies at companies such as
BlackRock
and Walt Disney.

• Despite calls to boycott consumer brands and companies accused of corporate “wokeism,” and some Republican-led states passing laws penalizing companies, there is scant evidence that firms are retreating from environmental, social, and governance, or ESG, initiatives. Some, such as
  Disney,
  are fighting back.

• Amid huge economic incentives to support ESG goals, companies that speak out risk losing investments or sales, notably in more conservative regions. South Pole, a climate consulting firm, calls private companies’ reluctance to publicly discuss their global-climate emissions targets “greenhushing.”

• And despite attempts to demonize ESG, many companies are still pledging to meet ambitious targets in areas such as carbon emissions and workforce diversity.

• Anheuser-Busch InBev’s first-quarter earnings beat didn’t include the period when the Bud Light controversy erupted, but the company maintains its full-year earnings outlook. CEO Michel Doukeris said April’s sales drop represented 1% of global volumes.

What’s Next: Doukeris said it’s too early to know the full-year impact of the boycotts, but AB InBev’s shares are up 9.8% so far this year, and up 15.5% over the past 12 months. Analysts expect Anheuser-Busch’s full-year EPS to come in at $3.23, on $62.2 billion revenue.

—Daren Fonda and Janet H. Cho

***

DraftKings Raises Outlook as Mobile Sports Gambling Picks Up

DraftKings
shares jumped nearly 10% in after-hours trading after it raised its outlook for the full year and beat expectations for revenue in the first quarter. Monthly unique payers are up 39% from the same time one year ago.

• Revenue of $770 million in the quarter was up from $417 million one year ago. A loss per share of 87 cents was slightly narrower than expectations. Monthly unique payers increased to 2.8 million.

• The company said the rise in monthly unique payers reflects success in retaining players and drawing new ones across its sports book and igaming platforms, and the expansion of both platforms into new jurisdictions.

• The company also has a streaming video platform under way, free to users but supported by advertising, Bloomberg News reported. It is competing with
  Flutter Entertainment’s
  FanDuel for bets in the more than 30 U.S. states that have legalized sports betting, the report said.

• DraftKings raised its full-year revenue guidance to between $3.14 billion and $3.24 billion, from the guidance for the year it gave in February. The updated guidance represents year-over-year growth of 40% to 44%.

What’s Next: DK Horse, its stand-alone horse-racing platform, was live in at least 15 states and could be available as other states approve it in advance of Saturday’s Kentucky Derby. States where it is already available include Kentucky, home to the
Churchill Downs
racetrack that hosts the race.

—Liz Moyer

***

Carvana Eyes Positive Quarter, While Lyft Notes Market Share Gains

Carvana
shares jumped 22% in after-hours trading after the online used car seller reported a narrower quarterly loss and said it should achieve positive adjusted profit in the current quarter after overcoming a sharp post-pandemic slowdown in sales.

• The company lost $1.51 a share, which was better than expected, and revenue fell 25% to $2.61 billion, about in line Wall Street estimates. The positive earnings before interest, taxes, depreciation and amortization this quarter comes after a difficult environment, it said.

• Carvana continued to cut down on inventory, but not too much as to reduce choice for consumers, and reduce advertising spending. But rising interest rates are a challenge to sales volumes, the company said.

• Ride-hailing app
  Lyft
  beat expectations for the first quarter, but its forecast weighed on the shares in after-hours trading, initially dropping 12% before recovering to just under 2% lower. It sees second-quarter revenue of $1 billion to $1.02 billion, below the expected $1.08 billion.

• CEO David Risher told MarketWatch that third-party data show the company gaining market share against its rival
  Uber Technologies,
  rising to 30% in April from 27% in February. Uber’s share fell to 70% from 73%, according to YipitData.

What’s Next: Risher, who took over as Lyft’s CEO three weeks ago after the co-founders were pushed out of daily management, said he would share more about new products in the future, and expressed optimism about increased ridership as more companies call their employees back to the office.

—Liz Moyer and MarketWatch

***

Do you remember this week’s news? Take our quiz below to test your knowledge. Tell us how you did in an email to thebarronsdaily@barrons.com.

1. Which bank bought most of First Republic Bank’s assets after regulators seized the San Francisco-based bank in the second largest U.S. bank failure?

a. JPMorgan Chase

b. Citigroup

c. Wells Fargo

d. Bank of America

2. Which short seller caused Icahn Enterprises shares to tank this week after the firm raised concerns about the Carl Icahn-controlled company’s valuation, saying its assets are being held at inflated prices?

a. Citadel Advisors

b. Kynikos Associates

c. Hindenburg Research

d. Pershing Square Capital Management

3. Which company’s vaccine for respiratory syncytial virus, or RSV, in people 60 and older was the first to be approved by the U.S. Food and Drug Administration?

a. Pfizer

b. GSK

c. AstraZeneca

d. Johnson & Johnson

4. The Federal Open Market Committee raised its key interest rate by a quarter percentage point marking its 10th consecutive hike and bringing the effective rate to 5.0%-5.25%. What did the FOMC indicate for next month’s meeting?

a. It anticipates that some additional policy firming may be appropriate

b. It would weigh a variety of factors in assessing whether it should raise rates again

c. A and B

d. B but not A

5. Which department store chain is closing two stores in San Francisco as it faces rising operating costs, concerns about crime, and foot traffic remaining well below pre pandemic levels?

a. Macy’s

b. Dillard’s

c. Nordstrom

d. Kohl’s

Answers: 1(a); 2(c); 3(b); 4(d); 5 (c)

—Barron’s Staff

***

—Newsletter edited by Liz Moyer, Patrick O’Donnell, Rupert Steiner