Amazon stock tumbles as profit, revenue outlook disappoints

 Amazon's (AMZN) stock fell in afternoon trading Friday after the retail and cloud giant offered a current quarter forecast on Thursday that fell short of expectations on both the top and bottom lines.

The disappointing returns were amplified by a weak July jobs report, which sent the tech world and the broader market deep into the red.

For the third quarter, Amazon guided sales to a range of $154 billion-$158.5 billion compared to analyst forecasts for $158.43 billion, according to Bloomberg data. Its operating income in the third quarter is set to fall within a range of $11.5 billion-$15 billion. Wall Street had expected operating income to come in closer to $15.2 billion.

The report wrapped a wave of Big Tech results that have flashed warnings that investors have limited patience for massive AI spending. Any weakness in the core business has heightened the scrutiny on Wall Street.

Even as Amazon brought home earnings per share (EPS) of $1.26, beating estimates of $1.04 and nearly doubling profits from the same period last year, investors focused instead on the report's weaknesses.

Amazon generated revenue of $148 billion, a touch below the $148.8 billion that analysts expected, but even the slight miss failed to impress.

The company's booming advertising segment, which has routinely grown by double-digit percentages, continued to show strength, but that segment too came in just below expectations, registering $12.8 billion in revenue versus the $13 billion expected.

A bright spot of the report came from its cloud business, Amazon Web Services. AWS raked in $26.3 billion in revenue compared to the $26 billion expected and well above the $22.1 billion during the same time last year.

Amazon CFO Brian Olsavsky told reporters on a call after earnings that AWS is poised to generate more than $105 billion annually.

Like several of its peers, Amazon is investing heavily in infrastructure to support the rapid deployment of new AI technologies and cloud services.

Olsavsky said the company has spent just over $30 billion in the first half of the year on capital expenditures, owing to the growing need for AWS services, including demand for generative AI tools. Amazon expects those investments to increase for the second half of the year, he said.

On the ecommerce front, the everything store has drawn increasing competition from the likes of Temu and Shein, companies that specialize in low-cost goods that rely on a direct-from-factory supply chain. Amazon is reported to be developing a discount digital storefront of its own to directly compete for fashion and lifestyle spending.

https://finance.yahoo.com/news/amazon-stock-tumbles-8-as-profit-revenue-outlook-disappoints-165216566.html

Vertex Scraps Two Phase I AATD Candidates Following Disappointing Data

Poor efficacy data for two early-stage candidates for the rare disease alpha-1 antitrypsin deficiency have convinced Vertex Pharmaceuticals to terminate their development.

Vertex Pharmaceuticals released its second-quarter financial report on Thursday, revealing that it has discontinued the development of two early-stage investigational therapies after underwhelming Phase I data.

The two assets—VX-634 and VX-668—were small molecule drug candidates being assessed for alpha-1 antitrypsin deficiency (AATD), a rare genetic disorder that affects the liver or the lungs and manifests as persistent jaundice, elevated liver enzymes, severe itching and easy bleeding. There are currently no approved treatments for AATD.

VX-634 and VX-668 were proposed as correctors of the misfolded Z-AAT protein, which in AATD accumulates in liver cells, leading to progressive organ dysfunction and fibrosis. Through this mechanism of action, the two candidates were thought to increase the secretion of functional AAT into the bloodstream, potentially addressing the effects of AATD on the lungs and liver.

However, Phase I data for VX-634 and VX-668 returned disappointing results showing that the candidates “would not deliver transformative efficacy for people with AATD,” according to Vertex. Despite trimming its pipeline, the company is “using the learnings” from VX-634 and VX-668 to inform the development of more effective therapies for AATD.

While its AATD portfolio continues to struggle, Vertex on Thursday touted the promising performance of its gene therapy Casgevy (exagamglogene autotemcel), indicated for sickle cell disease and transfusion-dependent beta-thalassemia. As of mid-July, Vertex has activated more than 35 authorized treatment centers globally and has harvested cells from around 20 patients up for treatment since Casgevy’s first approval in December 2023.

William Blair analyst Myles Minter in a note to investors said that Casgevy’s revenues will be recognized once the gene therapy has been infused into the patients, which could start in the third quarter of 2024, “followed by a greater influx of revenue in late 2024 and early 2025.” The investment firm expects Casgevy to make around $81.4 million this year.

As Vertex awaits Casgevy sales, its business continued to be anchored by its cystic fibrosis (CF) franchise, which in Q2 generated $2.65 billion in revenue, up from nearly $2.5 billion during the same period in 2023. Vertex’s CF earnings were generally in line with the consensus estimate of $2.66 billion, and a bit lower than William Blair’s forecast of $2.68 billion, according to Minter.

The biotech’s CF business will likely receive a boost early next year with the FDA’s potential approval of its Vanza triple combo regimen. In February 2024, Vertex announced that Vanza triple aced its pivotal Phase III program—consisting of three late-stage studies—demonstrating the investigational treatment was at least non-inferior to the currently approved CF therapy Trikafta (elexacaftor/tezacaftor/ivacaftor and ivacaftor).

In July 2024, the FDA accepted Vertex’s New Drug Application for Vanza triple in CF, with a target action date of Jan. 5, 2025.

Looking ahead to the rest of 2024, Vertex raised its total product revenue guidance to a range of $10.65 billion to $10.85 billion, up from a previous projection of $10.55 billion to $10.75 billion.

https://www.biospace.com/business/vertex-scraps-two-phase-i-aatd-candidates-following-disappointing-data

Vir Lays Off 25% of Staff, Cuts Most Virus Work, Pivots to Cancer in Sanofi Deal

 

As part of a major reorganization, Vir Biotechnology has discontinued the bulk of its virology work and pivoted to cancer in an exclusive licensing deal with Sanofi.

Vir Biotechnology announced a strategic overhaul on Thursday that includes a major shift in its research and development priorities as well as sweeping structural changes.

As part of its second-quarter business results, Vir revealed that it will no longer be continuing its work in COVID-19 and influenza, while pulling the plug on its T-cell-based viral vector platform. Instead, the biotech will restrict its virology business to its hepatitis B and D programs, allowing it to focus only on the “highest near-term value opportunities.”

Vir on Thursday also entered into a worldwide licensing deal with Sanofi, which marks its pivot toward cancer. Under the agreement, the biotech will pay Sanofi an undisclosed upfront amount, as well as promise future development, regulatory and commercial net sales-based milestones. Sanofi will also be entitled to tiered royalties on net worldwide sales of any product that reaches the market.

In return, Vir’s investment will grant it exclusive licenses to three investigational T-cell engagers. The first, dubbed SAR446309, is a dual-masked HER2xCD3 molecule that is currently in Phase I development for metastatic, treatment-resistant HER2-positive tumors, such as breast and colorectal cancers. The second asset is SAR446329 is a dual-masked PSMAxCD3 candidate in early-stage assessments for metastatic castration-resistant prostate cancer.

The third asset SAR446368 is also a dual-masked T-cell engager targeting the EGFR and CD3 antigens. The asset is set to enter a Phase I study in the first quarter of 2025 for various EGFR-positive cancers.

Sanofi acquired the three molecules when it bought Amunix Pharmaceuticals in December 2021 for $1 billion upfront. However, the pharma ultimately decided to divest Amunix—along with its assets and 100 employees—in April 2024, as part of its own restructuring effort.

Under Vir’s strategic overhaul, the biotech will lay off 25% of its workforce, eliminating approximately 140 roles across its operations. Meanwhile, it will be bringing on some “key employees with extensive scientific and development expertise” in T-cell engagers from Sanofi, as part of its agreement.

Vir now expects to close out the year with around 435 employees, which is some 200 employees fewer from its peak headcount in mid-2023.

As a result of its realignment initiative, Vir expects to book around $50 million in annual workforce cost savings starting in 2025, and another $50 million in savings related to the phasing out of specific programs. Restructuring initiatives will cost Vir around $11 million to $13 million, primarily due to severance payments.

In the second quarter of 2024, Vir recorded $3.1 million in revenue, down from its $3.8 million revenue during the same period the prior year. As of June 30, 2024, Vir had $1.43 billion in cash, cash equivalents and investments.

https://www.biospace.com/business/vir-lays-off-25-of-staff-abandons-most-virus-work-and-pivots-to-cancer-in-sanofi-deal

Investors dump Intel's bonds as spreads blow out after restructuring news

 Spreads on some of Intel's longer-dated bonds were as much as 20 basis points wider on Friday

Bonds issued by troubled chip maker Intel Corp. were getting crushed on Friday as the stock cratered toward a 50-year low, with spreads widening by 15 to 20 basis points as the selling gained momentum.

Adding to the gloom, S&P Global Ratings placed its A-minus rating on Intel to CreditWatch Negative, meaning it could downgrade the credit in the near-term.

The move "reflects our view that the company will likely miss the free cash flow and, possibly, leverage targets we view as consistent with the current rating," the rating agency said in a statement.

Intel (INTC) shocked investors late Thursday with an earnings report that brought a miss on adjusted profit and downbeat guidance. The company said it would cut $10 billion in costs and reduce headcount by 15%, while suspending its dividend, which costs it about $2.2 billion a year.

"Simply put, we must align our cost structure with our new operating model and fundamentally change the way we operate," Chief Executive Pat Gelsinger told investors. "Our revenues have not grown as expected-and we've yet to fully benefit from powerful trends, like AI."

S&P said the cost-cutting measures, "could alleviate some near-term cash-flow-generation challenges." But it's unclear whether it will be enough to maintain the company's business competitiveness and enable healthy growth.

Moody's has an A3 rating on the credit, after a February downgrade from A2.

The following charts from data solutions provider BondCliQ Media Solutions shows the sharp movement in spreads overnight-the red arrow separates that trend from the flatter performance earlier in the week.

The bonds have seen net selling on Friday with a small set of buyers emerging after 10.00 a.m. Eastern.

Intel has more than $52 billion worth of bonds, according to FactSet data, with $3.75 billion due to mature in 2025.

The stock, meanwhile, is now down 57% in the year to date, while the S&P 500 SPX has gained 12%.

https://www.morningstar.com/news/marketwatch/20240802333/investors-dump-intels-bonds-as-spreads-blow-out-after-restructuring-news

Financial Strain On American Households Hits Retailers Hard

 by Michael Wilkerson via The Epoch Times,

If anyone still believes that the U.S. economy is doing just fine, they should take a closer look at what is happening to the retailers that depend upon the faithful American consumer to “shop, shop, shop” to keep the economy afloat. American consumers are rapidly running out of firepower, and now, so too are the retailers that depend on them

American consumers, increasingly overextended on credit card debt, and having depleted their pandemic-accumulated savings, have started to close their wallets to all but essential, non-discretionary purchases such as food and fuel. The portion of surveyed Americans who state a positive intent to purchase big ticket items such as a home, an automobile, or a major appliance has fallen substantially since May. The bigger the ticket, the steeper the drop off. For example, the percentage of respondents stating intent to purchase a home has fallen to the lowest level in the post-lockdowns era.

This is in part a consequence of inflation and the rising interest rates used to combat it. With the cost of food, energy, and shelter all up well over 20 percent from three years ago, and real wages lagging behind, Americans are having to make difficult tradeoffs. With mortgages some 4 percent higher, yet housing stock more expensive than ever, new home purchases are out of the question for many. But the pain extends further. Almost every discretionary spending category is flat or in decline as consumers feel the pinch of lost purchasing power. Nowhere is this more evident than in the performance of the U.S. retail chains.

Impact on Major Retailers

For the big box retailers, the writing has been on the wall for a while. For home improvement retailers such as Home Depot and Lowe’s, companywide same-store comparable sales, which compares the sales of a store open for at least a year against the previous period, have been in decline for six quarters. The same trends can be seen in the consumer electronics space, where Best Buy has posted negative same-store sales, sometimes in the double digits, for 10 consecutive quarters. Venerable Target, a traditional favorite of middle-class consumers, has also posted negative comps for a year now.

The discount stores are faring only slightly better. Dollar General, a pillar of support for low-income families, is treading water with flat sales, while Walmart has seen its comparable store sales fall from nearly 9 percent two years ago to less than 4 percent in its most recent quarter. Costco is following the same trend. For nearly all of the retailers, even those managing to grow revenue, profit margins are compressing as they are forced to discount more heavily to attract the otherwise beleaguered shopper.

For the second tier of retailers, especially those in the home products space, the pressure is too much. Furniture chain Conn’s has filed for bankruptcy and is liquidating its more than 70 stores after 134 years in operation. Big Lots, the off-price home goods retailer, is closing 150 stores and trying to raise rescue capital to avoid bankruptcy itself.

Conn’s and Big Lots aren’t alone. Over the past year, business bankruptcy filings are up 40.3 percent, and have now reached a number not seen since the second quarter of 2020, at the peak of lockdowns. American households are following along, with total bankruptcy filings up 16.2 percent in the past year, including 132,710 new filings in the second quarter of 2024 alone.

The global iconic brands are not immune to the consumer downturn. Starbucks just announced a decline in comp store sales, number of orders, revenue, and operating profit. Starbucks’s shares are down 25 percent over the past 12 months, and activist shareholders are pushing hard for change. The newly ensconced CEO, charged with a major restructuring of the business, quipped, “We are focused on what we can control in a consumer environment that can be best described as complex.” Complex it is.

Not even value mainstay McDonald’s is safe in this environment. The fast-food retailer and consumer bellwether just announced second-quarter earnings. The company reported that comparable store sales declined 1 percent, as did revenue, which marked the first revenue decline since lockdowns. McDonald’s CEO commented that consumers are “dropping out of the market, eating at home and finding other ways to economize, cutting down on trips.” He noted that, regarding their newly launched $5 value meal, “it’s just not enough to offset the pressure that we’re seeing on that low-income consumer.”

There is perhaps a silver lining in all of this. The advanced estimate for second-quarter GDP recently came in at 2.8 percent (compared with an anemic 1.4 percent for the first quarter), indicating that the economy may be picking up some steam. The national GDP number masks the fact that there are faster-growing regions in the country, such as in the South and Mountain West, where economies are relatively thriving, and where job opportunities are more plentiful than in the Northeast, West Coast, and Midwest. Americans’ mobility and willingness to migrate have always been a positive factor toward moving the country out of recession.

In the meantime, both households and businesses are being forced to reconsider what are their most important priorities and to allocate scarce capital accordingly. Inefficient firms, which benefited for too long from zero interest rates, will either fix their business models or fail. There may be more pain to come in the short term, but the American economy has always proven resilient, and continues to have the natural, human, and technological resources needed to start growing again

https://www.zerohedge.com/personal-finance/financial-strain-american-households-hits-retailers-hard

How Authentic Is Kamala Harris' Online Support? Influencers Have Doubts

 Via American Greatness,

The overnight transformation of Vice President Kamala Harris from an abrasive, word salad dispensing political opportunist into a hip, approachable political savior has been extraordinary, to put it mildly

But a number of Gen-Z online content creators are calling into question whether any of it is authentic and some are saying it’s part of an astroturfed effort to make Harris more appealing to younger voters.

Comedian Steve McGrew shared an email that appears to offer him money, in exchange for posting positive videos about Harris.

A recent Harris campaign rally in Atlanta drew large numbers of enthusiastic participants but the purported groundswell of support for the presumptive Democratic nominee didn’t necessarily reflect reality.

Many of the attendees were paid to attend or came to hear Megan Thee Stallion perform and began streaming out of the venue halfway through Harris’ speech.

Other content creators told the Daily Caller that recent lighthearted Harris videos poking fun at coconut tree anecdote are simply another way for Democrats to create the appearance of support for their candidate through manipulation of social media.

The videos are intended to convey an attitude of organic support for Harris having made a transition, As Van Jones put it, “She’s gone from cringe to cool.”

Chrissy Clark is a Gen-Z conservative commentator who says the Democratic National Committee (DNC) is using an “influencer dark network” to push online trends that are intended to build up Harris’ image and make her seem cool and approachable.

According to the Daily Caller, the DNC has paid hundreds of thousands of dollars to a media company representing young TikTok influencers and it’s expected that Harris will capitalize on those relationships as her campaign swings into gear.

But getting these younger voters to share memes and laugh at Harris won’t necessarily translate into getting them to vote for her.

Gen-Z has likely noticed that the same people telling them that Kamala is a great candidate this month, are the same ones who were telling them Biden was fit for the job last month.

https://www.zerohedge.com/political/how-authentic-kamala-harris-online-support-influencers-have-doubts

Kelly’s past surveillance balloon venture presents political target

 Sen. Mark Kelly’s (D-Ariz.) venture into space tourism and defense contracting before he became a senator could become a political target should he join Vice President Harris on the Democratic ticket. 

The company, World View Enterprises, which he co-founded in 2012, received millions in investment funding from one of China’s largest tech companies, Tencent, which is linked to the governing Chinese Communist Party (CCP).

Kelly was hammered over the ties during his first Senate race in 2020, and those attacks have started to bubble up again as vice presidential speculation grows, with articles about his China ties in Fox News and other conservative outlets. 

The attacks in Kelly’s 2020 race against Republican Martha McSally did not stop him from flipping the seat long held by former Sen. John McCain (R), and then being reelected in 2022.

However, Kelly’s consideration now as a vice-presidential candidate could thrust him onto the national stage in a political environment that has become increasingly hostile to China and any signs of ties to its government. 

Daniel Scarpinato, a Republican political strategist in Arizona, said Kelly’s former company could complicate the campaign for Democrats. Even though foreign policy and national security are not the top concern for voters, ties to China “could be something that resonates” in a close election. 

“Their entire playbook is to win the Rust Belt, to win states where workers have seen their jobs shift to China,” he said of the Harris campaign. “If you end up having on the ticket someone who has ties to China or to that issue, I mean, that could be a real sledgehammer that Republicans could use across Michigan, Wisconsin, Pennsylvania.”

A spokesperson for Kelly’s office declined to comment on this story. The senator stopped his involvement in the Tucson-based World View in 2019 ahead of his Senate run. 

“I’ve known China as an adversary my entire adult life,” Kelly said in 2020, calling McSally’s attacks “lies.”

World View was initially founded as a space tourism company but has pivoted to become a defense contractor that provides the Pentagon, government agencies and private businesses with aerial surveillance balloons and other remote sensing technology. 

Its primary product, an unmanned surveillance balloon called Stratollite, attracted renewed interest in February 2023, after China flew a spy balloon over the mainland U.S. and an American fighter jet shot it out of the sky over the Atlantic Ocean.

World View received venture capital funding from Tencent, a major technology company that owns the popular WeChat, around 2013 and again in 2016, according to public reports.  

It’s not clear how much Tencent invested, but public reporting in 2016 indicated Tencent was part of a group of investors that injected $15 million at the time.  

Although he is no longer part of the company, financial disclosure reports filed by Kelly in 2021 indicate he has between $100,000 and $250,000 of stock in World View through a blind trust. 

In a statement, World View said Kelly has no “access, interest or control in the company since he left” and that Tencent also “has zero access, zero input and zero control over our company.” 

“The current leadership believe it was a mistake for the company to accept Chinese investment when it did, even if that investment was only in support of our early vision of a space tourism offering, not for development of any defense capabilities,” the company said, explaining new leadership in 2019 moved to protect the business from future Chinese investment. 

“Since then, we have worked closely with our defense customers and partners that frequently examine our company to validate our work remains free of foreign interference,” it added. 

In the mid-2010s, Chinese companies were investing heavily in U.S. businesses, especially related to media and tourism.  

That stopped in 2018, when the U.S. began restricting new investments, including with a law that empowered the Committee on Foreign Investment in the United States to more easily block Chinese investors.

Derek Scissors, a senior fellow at the American Enterprise Institute who focuses on China’s economy, said Tencent clearly has no influence over World View, and its “peak influence” in 2016 was “easily outweighed” by larger U.S. investors. 

Scissors added that Tencent’s investment, which he said was some $3 million, is a “drop in the bucket” compared to the tens of billions of Chinese funding in the mid-2010s.

“If World View is fully disclosing, other startups who don’t disclose or who are funded by Chinese affiliates are a much bigger problem,” he said in an email. 

Republicans have repeatedly raised Kelly’s connection to Tencent and the CCP.  

Nikki Haley ripped Kelly over the ties while stumping for McSally ahead of the 2020 election. 

“China is absolutely our No. 1 national security threat, whether you ask a Republican or a Democrat,” Haley said.

“We can’t have a senator holding hands with our biggest national security threat,” she added. “He should be completely disqualified from running in this race altogether.”

Alex Vogel, CEO of the political consulting firm Vogel Group, said China is the “seminal” national security issue today. 

“The temperature and the politics around Chinese national security issues have fundamentally changed” since Kelly’s last election, he said. “This is a much broader issue … [and] the fact that this connects to, of all things, high altitude balloons, given the China spy balloon situation, further ratchets that up.” 

World View said in its statement that its “stratospheric ballooning intellectual property has always remained in our control and has never been used for or contributed to China’s spy balloon program.” 

Kelly is seen as a top prospect in Harris’s vice presidential selection process, with an announcement expected in the coming days. Other Democratic candidates in the mix are Kentucky Gov. Andy Beshear and Pennsylvania Gov. Josh Shapiro.

Kelly has avoided speculating on whether he will be selected but remained open to the possibility. 

“I think that’s going to be something that the vice president is going to have to figure out,” Kelly told MSNBC’s “Morning Joe” on Wednesday. “I think she’s got a lot of great choices out there. My focus is not on this, and this is not about me.”

Kelly, who sits on the Senate Armed Services Committee, would bring significant foreign policy and defense experience to the ticket. Kelly is also a former Navy fighter pilot who retired at the rank of captain, and is a former astronaut.

He also could help Harris with the border, as a rare Democrat who has found a successful moderate stance in a battleground border state.

But China, while less of a campaign issue than the border, remains a bipartisan issue that both Democrats and Republicans want to be seen as strong on.

Barrett Marson, who helps consult campaigns throughout Arizona through a public relations firm, said Kelly and Harris may put up a strong defense against the Chinese investment, but would need to expend political capital on the issue. 

“Just putting them on the defensive on that issue is significant,” he said. “When you’re explaining, you’re losing.” 

And other critics say the Chinese funding of World View undercuts Kelly’s image as an American hero and decorated military veteran and astronaut. 

“Sen. Kelly has kind of this reputation of, because he’s an astronaut, he’s kind of seen as a hero,” said John Feehery, a longtime GOP political strategist. “But this kind of goes directly at that reputation. … It’ll be an attack point for the Republicans.”

https://thehill.com/homenews/campaign/4807475-mark-kelly-china-attacks-vice-presidential-campaign/