Sector Breakdown: Mobile Payments, Tech Regulation, EV's, And Venezuelan Oil

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Includes: AAPL, CVX, DRIV, FB, GOOGL, IPAY, JPM, TSLA
by: REX Shares, LLC
Summary

China is seeing rapid adoption rates of mobile payments.

American sentiment regarding tech companies is on the decline.

Growth in China's electric vehicle market is slowing down following a reduction in EV subsidies that were meant to encourage product innovation.

Mobile Payments

J.P. Morgan (JPM) decided to shut down its Chase Pay app in early 2020. Launched in 2015, Chase Pay has had a slow rate of adoption with less than 1% of online merchants accepting the product according to a PYMNTS report.

During the Q3 earnings call, Apple's (AAPL) Tim Cook reported that Apple Pay is completing 1 billion transactions per month, nearly double the amount from a year ago. Much of this growth can be attributed to China.

The Breakdown: According to Bain, 10% of U.S. consumers used mobile payments last year, whereas China’s adoption rate is 80%. While WeChat Pay and Alipay have a huge lead in China's mobile payment landscape, Apple Pay has quietly gained 17% market share.

Big Tech Regulation

Facebook (FB) quietly won a court order against a pioneering German data-protection ban. Issued by Germany’s Federal Cartel Office, the ban would have prevented Facebook from combining data on users across Facebook, Instagram, and WhatsApp without user consent.

As Silicon Valley buzzes about the looming antitrust probe of Google (GOOGL), the company is also facing an antitrust investigation from the EU regarding Google for Jobs. Since 2010, the EU has launched three different investigations against the tech company for violating competition laws. The EU has levied $9.3 billion in antitrust fines against the tech behemoth.

The Breakdown: 50% of Americans believe that tech companies have a positive impact on the U.S., falling from 71% four years ago according to research from Pew (see below figure).

American Tech Company Sentiment

Source: Pew Research Survey of U.S. adults conducted July 10-15, 2019.

Electric Vehicles

Historically, China's market for electric vehicles (EV's) had major automakers scrambling to ramp up production quotas. Today, the Chinese EV market continues to decline as sales fell 12.1% between June and July. Tesla (TSLA) Model 3 demand dropped in July with 1,800 units sold. This was down from 6,500 units in June which was the largest amount sold by a foreign automaker.

The Breakdown: In late June, subsidies on EV's with ranges below 250 kilometers were completely cut in an effort by the Chinese government to spur further product innovation.

China EV Sales

Source: EV Volumes, number of fully EV models sold.

Trouble in Venezuela

In January 2019, the U.S. government issued sanctions against Chevron (CVX) affiliate, Petroleos de Venezuela. Chevron is a large player in South America's Caribbean Coast ($2.7 billion carrying value). In recent months, Chevron won a reprieve allowing for continued Venezuelan operations through October.

The Breakdown: Chevron saw a decrease in net production of synthetic oil from last year, driven by its Venezuelan affiliate.

CVX 10-Q

Source: Chevron Corporation 10-Q Filing (Q2 2019), All values shown in MBOEPD - thousands of barrels of oil-equivalent per day.

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