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Nvidia Earnings Are a Big Deal. But There’s Something More Important.

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Nvidia’s headquarters in Santa Clara, Calif.

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Nvidia

stock has been on a tear recently, and to say the chip maker’s earnings after the market closes Wednesday will be closely watched is an understatement.

The stock has climbed 38% in the past month, is 130% up year-to-date and sits around all-time highs. Analysts have been raising their price targets left, right, and center this month, not only due to upside expectations for sales and earnings amid demand from data centers, artificial intelligence, and gaming.

The real driver has been the metaverse—a virtual environment seen as the future of the internet. Facebook’s name change to


Meta Platforms

and its huge investment in the concept has catapulted it into the minds of investors. Nvidia wants to be at the heart of the metaverse, unveiling platforms, software, and tools earlier this month to help make it a reality.


Morgan Stanley

analysts think the metaverse could be a $57 billion opportunity for luxury-goods makers, just by selling their products to be worn by avatars in the new virtual world.

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Imagine then what it might mean for a company pushing to be at the forefront of building the whole thing. Of course, the metaverse is in its very early stages and Nvidia will also face competition from the likes of


Advanced Micro Devices
.

Leaving the future to one side for now, the company’s earnings may need to be something special to significantly move the stock higher, given its recent performance and high expectations.

Callum Keown

*** Join Barron’s senior managing editor Lauren R. Rublin today at 2 p.m. as she talks to Cathie Wood, founder, CEO, and chief investment officer of ARK Invest, about the technologies reshaping our world and the best investment opportunities. Sign up here.

***

Consumers Are Planning to Splurge Over the Holidays

Consumers are planning to spend an average of $1,243 on holiday-related purchases this season, including gifts for themselves, according to a survey by MassMutual. The Census Bureau said October retail sales rose 1.7% from the prior month.

In the survey, 73% people said they’re feeling optimistic about their finances, though the sampling was done before last week’s Bureau of Labor Statistics report, which showed consumer prices rising 6.2% from last year, the fastest pace in 31 years.

MassMutual found that 42% percent plan to spend at least $500 more than last year. Twenty-nine percent will shop in stores this year when they hadn’t last year, and 26% will shop exclusively in-person to avoid potential delivery delays.


Walmart

beat expectations for the third quarter and raised its full-year adjusted profit forecast after it hired 200,000 workers last quarter.


Home Depot

also beat expectations on demand for home-improvement supplies.

Retail seasonal hiring fell 9% in October compared with a year earlier, according to outplacement firm Challenger Gray & Christmas.


Amazon

aims to hire 125,000 this holiday season, and


Target

and


UPS

each plan to hire 100,000.

What’s Next: Among those who use credit cards to pay for their holiday spending, 59% expect to carry that debt for at least six months, MassMutual’s survey said. This is even though more than one-third of those surveyed were able to save $1,000 in the past three months.

Janet H. Cho

***

Apple on Pace to Set iPhone Sales Record


Apple

could break its iPhone sales record this year, according to Wedbush Securities, which estimates it to be on pace to sell 40 million of the devices between Black Friday and Christmas and more than 80 million this quarter.

Analyst Dan Ives said delivery times for the iPhone 13 Pro are getting longer, an indication that demand is outstripping supply by about 15% heading into next week.

That is despite the lingering global shortage of semiconductors, a critical component in iPhones. Apple said the chip shortage and Covid-19-related factory closures in Vietnam and Malaysia hurt last quarter’s potential revenue by $6 billion.


Qualcomm

said Tuesday chip sales to Apple should fall in the coming years as the iPhone maker pivots to its own chips, but Qualcomm also forecast growth in chips for autonomous-driving cars and other connected devices.

Starting next year, iPhone users who are in a car accident could hear their phones dial 911 automatically, as part of a “crash detection” safety feature Apple is considering adding to its iPhones and Apple Watches, The Wall Street Journal reported.

What’s Next:


Foxconn Technology
,
the biggest manufacturer of Apple iPhones, expects global supply-chain backups to last until the second half of 2022. Supplies of power management chips used in battery-operated devices such as smartphones will likely remain tight, Foxconn chairman Young Liu said.

Jack Denton and Janet H. Cho

***

Pfizer Seeks FDA Authorization for Covid-19 Pill


Pfizer

asked the Food and Drug Administration to authorize its antiviral pills for treating Covid-19 patients who are at high risk of severe illness. The pill and another by pharma rival


Merck

are seen as potential game-changers in the race to end the pandemic.

Pfizer’s pill, called Paxlovid, reduced the risk of hospitalization or death by 89% among high-risk patients who took it within three days of their diagnosis or symptoms in late-stage trials.

The company has already started making the pill, and FDA authorization could make it available immediately. Pfizer estimates it could make up to 180,000 courses of treatment this year and 50 million next year.

Pfizer also will allow generic drugmakers to manufacture Paxlovid through the Medicines Patent Pool, a United Nations-backed nonprofit, for distribution to 95 low- and middle-income countries, similar to Merck’s deal in October. Pfizer won’t receive royalties on those sales.

Merck’s antiviral pill with Ridgeback Biotherapeutics has been authorized in the U.K. and is being reviewed by the FDA for authorization in the U.S. The pill cut the risk of hospitalization or death by 50% in high-risk people with mild Covid.

What’s Next: Pfizer said it also plans to seek authorization for Paxlovid in other countries, including the U.K., Australia and New Zealand. The Biden administration is working on a contract for 10 million courses of treatment.

Josh Nathan-Kazis and Janet H. Cho

***

Germany Set for Covid ‘Lockdown for the Unvaccinated’

German federal and regional authorities are considering the reintroduction of severe restrictions for the unvaccinated population, as the number of infections and deaths due to Covid-19 has reached a level unseen since last spring.

The number of new infections reported Tuesday, at 32,048, was up 47% compared with a month ago, while the number of deaths increased by 265, the steepest jump since May.

Lawmakers are preparing legislation to require tests or proof of vaccination to go to work or use public transportation. “That is in reality a lockdown for the unvaccinated that is on the way,” a social-democrat leader in Parliament said Tuesday.

Decision at the national level is, however, hindered by the fact that political parties are still negotiating the terms of a future coalition government. But several German regions, notably the capital Berlin, have already banned access for unvaccinated people to places such as cinemas, hairdressers, restaurants, and gyms.

Germany has the lowest vaccination uptake in Europe, along with the U.K., with only 67% of the population now fully vaccinated—behind Spain, Italy, and France.

What’s Next: Angela Merkel and her putative successor as chancellor, Olaf Scholz, are due to hold a press conference on the matter later this week. And the premiers of Germany’s 16 states are meeting Thursday to discuss stricter restrictions.

—Pierre Briançon

***

Peloton Is Raising Money After All, Seeking $1 Billion


Peloton

plans to sell $1 billion in new shares, raising money that could be used for general matters such as acquisitions or to expand facilities in an apparent about-face. The connected fitness equipment maker’s finance chief said in early November there weren’t plans to raise money.

The stock jumped 15% on the announcement even though new stock sales usually erode the value of shares held by existing shareholders. The stock is still down 64% this year.

During the pandemic, when people were forced to exercise at home, Peloton spent hundreds of millions of dollars to increase production to keep up with soaring demand for its bikes. Revenue more than doubled last year compared with 2019, overcoming product shortages and delays.

Earlier in November, Peloton said fewer people were joining its online workouts, warning that annual revenue could be 20% lower than it previously forecast. Its cash, cash equivalent, and marketable securities were $924 million at the end of September, down 42% from June.

Analysts asked CFO Jill Woodworth on Nov. 4 if Peloton needed more cash. She said, “Cutting to the chase, we don’t see the need for any additional capital raise based on our current outlook,” adding that Peloton could delay capital investments and cut costs, The Wall Street Journal reported.

What’s Next: Peloton plans to sell 23.9 million shares at $46 each in an offering it expects to close Thursday.

Liz Moyer

***

Dear Quentin,

I married my girl from high school in 1972. We graduated and she went to medical school. She graduated and has worked as a doctor since 1978. I worked in computers.

We went from having less than $4,000 to $8.5 million. We are old and our pleasure is planting (my wife) and travel (for me) as Minnesota is cold. We also spend our time working on the farm. We had two birth children, and adopted seven children.

With our estate, my wife and I split things equally. She wants $500,000 to go to our church. I do not have a problem with that, even though we have supported it and have paid a faithful tithe for our 49 years together.

Our two eldest children work in a hospital and our third eldest got a religious degree and did missionary work overseas for 12 years, and now is sort of a paraprofessional. Two other children are living in properties that I bought for them.

I would like to give my eldest son double what I give the other kids, but I would like to exclude three of my children from my will for three different reasons: gambling, leaving home at 16, and trying to shake me down for money (long story).

My wife wants me to change my mind with one of my children who declined to pursue an education, and has been holding down a job, if not a very well-paid job. Must the assets be divided equally? What is your take on this?

—Father of Nine in Minnesota

Read The Moneyist’s response here.

Quentin Fottrell

***

—Newsletter edited by Liz Moyer, Camilla Imperiali, Steve Goldstein, Callum Keown

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