← CNBC's "Fast Money"
CNBC's "Fast Money"
Alphabet’s Reports… And Disney Gears Up To Do The Same 02/04/25
00:42:53
Shares of Alphabet on the move as the tech giant reports results. What it means for the broader tech space, and how our traders are handling the move. Plus Streaming in focus, as Netflix hits a new all-time high, and Fox prepares to launch its own service. So how will Disney stack up against the competition when numbers cross the wires tomorrow? What to expect, and how the media giant is faring in the streaming wars. Fast Money Disclaimer
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- [00:01]
Unknown Speaker 1
What counts most to you? Maybe it's spending more time with the ones you love, or maybe doing more.
- [00:08]
Deirdre Bosa
Of what you love to do.
- [00:10]
Unknown Speaker 1
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- [00:31]
Karen Finerman
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- [01:01]
Melissa Lee
Live in the NASDAQ markets in the heart of New York City's Times Square. This is fast money. Here's what's on tap tonight. A monster night of earnings from Alphabet and AMD to Burritos and Biotech. We've got all the numbers from companies reporting tonight and are bringing you the trades and a Merck meltdown. Shares of the pharma giant tumbling to more than two year lows after saying it's paused in sales of one of its key vaccines. What it means for revenues this year and whether the stock can bounce back. Plus, Estee Lauder shares in need of a makeover. Pepsi loses its fizz. We're getting ready for Disney earnings tomorrow morning. How the entertainment giant stacks up now in the streaming space. I'm Melissa Lee coming to you live from Studio B at the nasdaq. On the desk tonight, Tim Seymour, Karen Feineman, Dan Nathan and Savita Subramanian, head of US equities and quantitative strategies at bank of America securities. Welcome, Savita. We start off with Alphabet slide on its Q4 results. The tech giant losing nearly 200 billion in market cap after a miss on cloud revenue. The company also announcing $75 billion in CapEx this year. The call kicking off in just the last. CNBC's Deirdre Bose has been listening in. She's got the latest. Steve O.
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Deirdre Bosa
Hey, Melissa, I'm listening in. And the cfo, not Ash Nikazi, is speaking right now. We're getting to the juicy parts. I'll check back in with you. But the big picture here is that shares are down more than 7%. She just called out for an exchange rate impact that will affect Q1 revenue. So that may be why you're seeing them slide even lower. She's going to call it A Few More Things which I'll bring you. But it's really the cloud miss that investors have been focusing on. That comes about a week after Microsoft's cloud cloud myths suggesting perhaps that investors are going to have to wait longer for substantial AI monetization. Center Pichai, the CEO opened the call talking about Google's full stack approach to AI. That's infrastructures, models and product capex. This is a number that many investors are looking at very closely in a post deep sea world. It is intact. They're expecting to invest approximately $75 billion in capex in 2025. That is a major step up. That's 47% growth year over. Street had been expecting about 18%. So that is a big stack up. Basically telling us that they're going to continue to invest in AI even though Deep seek proved that you can do this a lot more efficiently. Doesn't really change the proposition for the big AI foundational model players like Google because the stakes are just risen for them. They have to keep spending. Sender also shouted out their quote, strong relationship with Nvidia right at the top, noting that just last week they were the first to announce a customer running on the Blackwell platform. Melissa, I have a feeling that there was more comments from the CFO right now. So I'm going to look at those and I'll bring you them if they're moving the stock.
- [03:42]
Melissa Lee
All right, Debo, thanks. Deirdre Bosa the Stock is down 8.6% as Deirdre was talking was sinking a little bit. So what do we make of the quarter, Karen, especially given the stock was up into the results.
- [03:53]
Savita Subramanian
Yeah, so the stock was up sharply into the results the last two weeks. But I mean there's some stuff not to like here and Google's a big position for me and you know, so this is not delightful but I think some puts and takes. I thought the, the advertising business was fine if you were afraid there. I don't think it was anything to really be afraid of. That, that capex which you talked about, that is a very big change when we still haven't fully gotten our arms around what is the promise of all of that spend. Right on the flip. So Google cloud was about $250 million light on the flip side. YouTube $250 million above. So I don't know those two things. Even though the same amount of money. They don't seem to have the same weight. The cloud is much more of a focus here. So the last three or four points down, I don't know what that was. I would say it's really important to listen to the call. What they have to say, I want to hear what, what are they, what are they thinking when they talk about that $75 billion spend? Why are they so feeling that they.
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Melissa Lee
Want to spend, they want to ramp at this point. Right.
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Karen Finerman
Well, and would we have been happy to hear 50 billion because that, that also would imply that there's been a lot of missteps in terms of capex and they're toning it down a little bit. So I don' mean, I, I understand why we're watching post deep sea Capex for, for everybody, but I think this was all about clout. I think this is weak. This is bread and butter. Because, you know, I think about ad tech, I think where they are in digital ad and I think they're dominant and I think they're going to continue to grow, take market share and improve margin. So I guess I'm less worried about that than I am the bread and butter. And it gets down to some commoditization and a very, very crowded cloud space. I do like the operating margin at 32%. I think overall margins for this company are getting better. That's good news. And I think everyone just hit it. I mean, the stock moved 40 points or about 35% from Thanksgiving into the print. It was priced to perfection even though it wasn't expensive. And Carol, point this out. I mean, what's interesting about Google and this might be a negative, is that in the run we've had with mega cap tech stocks, this stock is absolutely in line with its 10 year P E. In other words, it's not really a stock that you can say, well, it's gotten kind of expensive in this move and it deserves a higher multiple. It doesn't have a higher multiple. Why is that?
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Tim Seymour
Yeah, gross margins though, last year 69%, this year a little below 64%. So this is something. And it goes back to capex. It goes back to, you know, just kind of, you know, how they're operating and how they see their path forward. You know, when you say that that step up in capex from 59 billion to 75 billion, it almost seems somewhat defensive. And I think Tim's point is a great one. If they had come in from 59 down to 50, like might that show a level of confidence about they've already built. When you think about the hyperscalers in general, they are more interested in asking for forgiveness than permission on this front. And that might be one reason why this kind of story has flipped a little bit lately.
- [06:33]
Melissa Lee
The stock is approaching a 9% loss here in the after hour session. Let's go back to Debo who's got more from the conference call. Deirdre?
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Deirdre Bosa
Yeah, so this is where sort of the CFO left off. It's exactly what Dan Nathan is talking about. She called out that increase in capex. She says that is going to increase pressure on the pnl primarily in the form of higher depreciation. The profitability picture been trending much better in the last few years. So this is something that investors probably don't want to hear. They're also saying that they're expecting some headcount growth in 2025 in key investment areas such as AI and cloud. All of this to say that it feels like Goo Alphabet is back in spending mode and that could hit sort of the margin. So that may be what's taking shares lower about by about 9% right now.
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Melissa Lee
All right, Deirdre, thanks. Keep us posted. Deirdre Bosa. Savita, how do you feel about the trade at this point?
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Dan Nathan
Look, I think these companies, the hyperscalers are damned if they do and damned if they don't because they have to spend a lot to remain competitive. But they are cutting into their cash flow, right? And more and more. So what we found in our, you know, our numbers of backtests that we've done on everything, what you don't want to own are companies that are accelerating their spend on capex because they tend to cut into their profitability. What you do want to own are the companies that are getting the money. And right now it seems like these AI plays are missing on expectations in terms of revenue and monetization. But they have to spend and that's not a great recipe. Look, I don't think it's game over for big cap tech. I think these are big companies with lots of optionality. They can, you know, they can do what they did in 2023, cut costs, they can, you know, shore up balance sheets, do big buybacks and they're doing a lot of that. But they have to hire more, they have to spend more. It's not the same, it's not the same profit story that it used to be.
- [08:24]
Savita Subramanian
One thing I noticed about this release, their headcount is actually already up a little bit. And you think, you know, I and the promise of efficiency and all of that and how much you can say brought it. Yes, but not yet. And then it sounded like Deidre said they're going to go even higher.
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Dan Nathan
Yeah, right.
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Savita Subramanian
And so everyone with this spend, except for Metta, which got a pass.
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Melissa Lee
Well, got a pass. But also is monetized and.
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Savita Subramanian
Monetized. Yes, well, yes, that's right. Monetizing it a much more efficient way.
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Tim Seymour
They don't report a number like Azure, like Google Cloud and like the US So like to your point that they're monetizing is they've converted a lot of the spend that they did in Metaverse. Right. And they cut a ton of jobs. This is back to Sabita's point, about 20, 22 and 23. It's just a very, very different story. But you asked her, what about the Jenny trade? Well, let's break it down a little bit.
- [09:12]
Karen Finerman
Right.
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Tim Seymour
So the chips, look at Nvidia is down 22%, right. Just in the last month or so. Look at Micron, it trades horribly. It's basically round, tripped in its tire move. So there are some components that go into the servers. Look at Dell, look at Super Supermicro that make the servers. Right. Look at some of the data center names that we're seeing, how they're trading. We just went through this on, you know, on the Capex and everything like that. It feels like some of the pillars of the bull story are coming undone. And the price action in the stock market is kind of telling you that if Nvidia goes and makes new lows and these other stocks aren't going to be the recipients of a new cycle, then we're kind of out of the, you know, we're just kind of out for a couple of months or a couple of quarters actually for that matter, because I just don't know how you turn it around. Especially when you just saw we saw 65 billion from Metta and CapEx, we saw 80 billion in Microsoft, now we're seeing 75. And look at how these stocks trade.
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Melissa Lee
Unless we're seeing the next pillar, next leg of the trade. Already we started seeing that with the deep sea sort of route where we.
- [10:07]
Dan Nathan
Saw software, software names, software came back.
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Melissa Lee
Gentic AI is really pick up. We saw Palantir go gangbusters on its results. This is sort of. Could this be the next place that investors are going instead of the hardware?
- [10:19]
Karen Finerman
Well, it has been all along. And if you look at the move in, in CRM or if you look at some of the other software names, I mean, they really after that pullback in of last year in the chips, which then took them to fresh highs, they never stopped giving, gaining, gaining ground. And I just think that the software story is part of what we took out of Deep Seat. And it's also the place where other folks even like an Apple suddenly look like they suddenly have a little bit more of a seat at the table. In a world where you have a broadening AI story, more efficiency AI for the masses, a productivity story that I'm sure Savita likes for industrials. I mean, this is part of the EPS story.
- [10:56]
Dan Nathan
I mean, absolutely. And I think, you know, there are 10 other sectors besides technology. Tech was the only sector that was down in January. Everything else was up. And I think that's kind of telling us that we're moving from an environment where every company spent only on tech to tech spending on everything. They're spending on power, they're spending on chips, they're spending on hardware, but they're spending. And that I think is the important shift.
- [11:20]
Melissa Lee
For more on Alphabet's results, let's bring in fast money friend Jean Munster. Gene, your take on the quarter. The Stock is down 8.8% right now after hours.
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Gene Munster
Melissa. I don't know if Deirdre covered this in her kind of recap from the call, but they did say that there are two headwinds with related to effects and the loss of one day of leap year. It's going to have a negative impact on the March quarter. But they also said, and this was what really caught my attention is that the cloud segment is going to have variability. That was the comment variability quarter to quarter based on when capacity becomes available. It all makes total sense. But when you play it into investors hyper focused on the near term what it means for the March quarter in terms of Google Cloud growth, the streets at about 30%. When you talk about variability, it probably means that the numbers should be closer to 27%. So I just want to highlight the stock is really trading on one data point which we need to start there and just acknowledge of course that this is all about Google Cloud. But I think that that is largely missing the point. The search business saw a fractional acceleration in growth. They've rolled out from 300 million customers that saw overviews to over a billion. Remember that's the big negative here is that is generative AI and perplexity going to take away. We're not seeing that yet, but I think that that is an impressive YouTube 2 1/2% upside that was in part driven by some of the election spending so don't read too much in that. But overall I put this in general my money's on that this is an overreaction what we're seeing here. And then one final piece Melissa, as Dan was kind of doing some of the setup here talking about the derivatives relative to this and the concept that we're shifting to a software focused AI trade and I understand that that that concept around that but I think there is much more room left for these hardware companies to grow again. Of course the 47% increase in capex that Google talked about tonight, they got to run the table. Amazon needs to say something positive about capex. If they say something negative then all bets off. But my suspicion is that they're going to also be spending like drunken sailors. And I think that this AI hardware trade still has another year or two years left in it.
- [13:27]
Melissa Lee
I know those are real issues but effects and the leap year thing really sound like lame excuses. I mean everybody, Google's got a calendar, we know that. So they know, they know that leap year is not, you know, it's weak, right? It's kind of weak. Putting that aside though, in terms of the capex spend, as an investor are you confident that that additional spend there's going to be a return on that? I mean I think that is a critical issue here. A ramp of 47% that's major. And what are we getting out of it?
- [13:54]
Gene Munster
Yeah, it's major. Just some quick context to that. They, they generated this year 72 billion in cash. They've got 97 billion in cash. They're talking about taking their capex from 51 billion to 75 billion. They've got plenty of money to spend and I understand the concept of wanting to see a return on this but they've got the money to invest and then you know, how do we see this forward and unfortunately I can't put a stake in the ground and say that all of this is going to have this incredible outcome. I believe it will for all the virtues around AI. But that's going to be a question that's going to be nagging. I would say that where are they spending that more specifically on the infrastructure. Sundar said that this year is going to be the most innovative year in search. Every year should be incrementally more innovative of course but I think that that speaks to still this underlying question is the Google search results is still pretty junky. It's pretty messy. It's not as clean as perplexity by any measure or GPT And I think they need to really overhaul that in the next year, two years, while not really jeopardizing the golden goose around their search business. They still got to thread the needle here, still feel confident they can do it, but there's a big task ahead of them.
- [15:03]
Savita Subramanian
Gene, it's Karen. Thanks so much for being on. Just to clarify something for you, were you saying they were not constrained, capacity constrained in Q4 but would be in Q1?
- [15:14]
Gene Munster
What I was saying was that just there, there was no capacity issues there in Q1. There's just variability in saying that. I guess that form of capacity is that they just don't have some of the data centers up and running. So yes, I guess that is a form of, in an indirect way saying that they're capacity constrained. She did not explicitly say that they got too much demand, but she said that based on availability of hardware, when these, when these data centers are up and running is going to have an impact. And that's understandable. But I don't think investors are going to really like that tomorrow. Again, I think this is an overreaction. I think the stock should be flattish on these results versus down 8%.
- [15:55]
Melissa Lee
All right, Jean, thank you. Keep us posted on the call. Let's get to the latest now out of D.C. president Trump signing a slew of new executive orders this afternoon and making comments on USAID, the Department of Education, China and much more. CNBC's Eamon Javros joins us now to break down all the headlines. Eamon?
- [16:12]
Tim Seymour
Hey there, Melissa. It looks like there's going to be no call between President Trump and Chinese leader Xi Jinping today, despite what officials had been signaling early in the day. President Trump spoke to reporters in the Oval Office in the last hour. He played down the significance of a call with his counterpart in Beijing.
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Melissa Lee
You know, we'll speak to him at the appropriate time.
- [16:31]
Dan Nathan
I'm in no rush.
- [16:32]
Melissa Lee
I'm in no rush at the appropriate time. Do you think that conversation can lend.
- [16:36]
Evan David Siegerman
Itself to the type of freeze that.
- [16:39]
Melissa Lee
It meant for the tariffs for Canada and. Well, we'll see what happens.
- [16:43]
Karen Finerman
Well, there's a short term freeze with.
- [16:45]
Melissa Lee
Mexico, as you know, and with Canada, but they've agreed to be very, very strong on the border, stronger than they.
- [16:53]
Karen Finerman
Ever were by far.
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Tim Seymour
Trump was also asked about the retaliatory tariffs that China imposed on American goods overnight, calling them fine, predicting that the US Will do very well against China. Now in Beijing, officials announced a slate of new tariffs and other retaliatory measures, including a 15% tariff on coal, liquefied natural gas and other commodities. A 10% tariff level on crude oil, agricultural machinery, pickup trucks and other goods. There a Chinese antitrust investigation into Google and export controls on tungsten and other metals, along with rare minerals as well. Tungsten, Melissa, is used for everything from light bulbs to microwave ovens, but it's also used in armor plating and armor piercing projectiles. So that restriction there could, over time, impact US Military supply chains. Back over to you.
- [17:45]
Melissa Lee
All right, Eamon. Thank you, Eamon Jabbers. So, Savita, how are the markets taking all this?
- [17:51]
Dan Nathan
Well, I mean, we've had a positive start to the year. I think there still is a lot of liquidity out there looking for a home. I think there's still a lot of cash on sidelines. We still get the question. My client has a lot of cash. Should they buy now or wait for a better entry point? Which means there's probably not going to be a better entry point until we stop getting that question. Look, I think that it's tricky right now because where we are is an environment where the uncertainty is, is, is high. The other factor that we need to think about is, you know, are our allies going to continue to trade with us if, you know, if we're playing hardball with them right now. So I think that's the other kind of longer term ramification here. I mean, I think that so far what we've seen is that US Corporates are actually in a position where they can handle tariffs, the extra tariffs reasonably well, especially for China, because they've already had this learning curve since 2018. Half of the economic activity that we used to do with China is now being done with Mexico and Canada. So that's the bad news is that it's been transported to other areas that are starting to be in the crosshairs. I think that, you know, from an inflationary perspective, this is potentially negative. We've dialed back our Fed call to no hike, sorry, no cuts this year. We're not talking about hikes yet. So no cuts this year. But, but I think that where we are is an environment where you want to, you want to sort of prepare yourself for upside pressure to rates, to inflation, to the idea that we don't have an all clear on policy decisions until maybe, you know, closer to the second half. And that could stymie corporate planning, et cetera. What I would play the easiest theme to kind of invest in with Trump 2.0 is deregulation. And I don't think that gets as much play as it should because that is a theme where it's easier for him to get a lot done. It's not as negative for the economy. It's actually positive for productivity. It's positive for rates, it's positive for growth. So I feel like the lens on tariffs is obviously that's where the headlines are right now, but there are a lot of other ways to think about policy changes and how to invest to make.
- [20:05]
Melissa Lee
What is that? Deregulation trade? Is it financials? Because that seems like the easiest and we've already seen the lift in financials on the back of the expectation of deregulation.
- [20:12]
Dan Nathan
Yeah. But you know what's interesting? Even in financials, if you look at the stocks that are most crowded by professional investors, they're private equity and regionals or private credit and regionals. You know, the larger banks are still underweight and I was surprised to see that data in our latest run because I would have expected to see this huge bid in the most regulated area. So it's kind of surprising to see that positioning is still very overweight. The the sectors and the areas that have less to gain, maybe more on M and A activity or other facets.
- [20:49]
Melissa Lee
Coming up, earnings season in full swing. Shares a Chipotle snap and AMD all on the move after reporting the numbers. Moving those names next. And speaking of results, here's a Merck plunging on theirs. The stock sinking more than 9%. What China has to do with the drop and why it's having such an impact on the company's outlook. Don't go anywhere. Fast money's back in two. Business. It's all the things that keep this world turning. And behind every one of these companies is a partner helping to keep it all moving. It's why the local flower shop and your favorite pizza joint, the startup in the stadium, hospitals and hotels, banks and restaurants nationwide all choose the advanced network cybersecurity solutions and round the clock trusted partnership from Comcast Business, the company that powers more businesses than anyone else. Comcast Business Powering possibilities Restrictions apply.
- [21:36]
Savita Subramanian
Call or visit comcastbusiness.com to learn more.
- [21:39]
Courtney Reagan
What's at stake when administrations change from the first 100 days and beyond, EY brings insights on the issues that matter. Executive orders, regulation of AI, the fate of billions in tax credit, global trade and workforce stability. No matter the policy shifts, EY helps business and government leaders remain resilient and seize dynamic growth. EY navigate the geopolitical and economic landscape with confidence. File your taxes the free and easy way with TurboTax. New to TurboTax didn't file last year with TurboTax, no problem. Switch to TurboTax and file for free. If you do your own taxes on the TurboTax mobile app by February 18, all the tax forms you have can be assisted. All 100% free. Now this is taxes intuit TurboTax. New filers and filers who didn't use TurboTax last year only must start and file your own taxes in the app by February 18th. Excludes TurboTax Live full terms@turbotax.com.
- [22:39]
Melissa Lee
Welcome back to Fast Money. We got an earnings alert on Chipotle, the burrito chain Stock lower after hours despite a slight earnings beat. The conference call is underway. Courtney Reagan has been listening and she joins us now at the very latest court.
- [22:50]
Deirdre Bosa
Yeah.
- [22:50]
Unknown Speaker 1
So question and answer session going on now was the first full quarter with Brian Boatwright at the helm. Quarter large, largely as expected. Maybe some weakness here for the sales. The revenue comparable sales up 5.4%, slightly below expectations. Comps gaining though every quarter but one over the last seven years. Transactions up 4% for the quarter now the full year. Comparable sales guidance also coming in as expected. The company also authorizing a new $300 million buyback program. Sort of the details that came out after that initial release and then higher food and beverage costs as a percentage of revenue was quote, primarily due to the higher usage of ingredients as we focused on ensuring consistent and generous portions. Yes, they heard the people and the smoked brisket offer too. That was part of it. Chipotle did call out higher avocado and dairy costs, but that wasn't the primary reason there. And they said that the increased costs partially offset by those higher menu prices. Now on the call, the CFO just said that guidance does not include the impact of new tariffs on items imported from Mexico, Canada and China, adding that if the recently announced tariffs go into full effect, it would have an ongoing impact of about 60 basis points on our cost of sales. But the CFO also added the company is actually confident it can offset that through investments it's already made and then some other identified efficiencies. Now CEO by Brian Boatwright, she tried to say said the digital sales made up more than a third of total, which is pretty interesting and details some kitchen process improvements like new slicers increasing speed and consistency. And get excited guys. Honey chicken coming soon. That's coming soon for the new protein offer.
- [24:21]
Melissa Lee
That sounds great. So basically they made their portions more normal. That is bigger. Yeah.
- [24:27]
Unknown Speaker 1
Generous and more consistent. After, you know, people sort of started noticing that perhaps they were shrinking that.
- [24:32]
Karen Finerman
And then does that mean they were shrinking them?
- [24:34]
Melissa Lee
I mean, it's just that they got smaller somehow.
- [24:37]
Deirdre Bosa
Yeah.
- [24:38]
Unknown Speaker 1
Yeah. Have you noticed? I feel like the burritos are.
- [24:41]
Karen Finerman
Well, there's a candy bar. I won't give the brand maker, but those minis have gotten really many.
- [24:46]
Unknown Speaker 1
Sorry, really many. And the prices have really gone up on that candy too.
- [24:49]
Melissa Lee
Courtney, thank you.
- [24:50]
Savita Subramanian
You got it.
- [24:51]
Melissa Lee
Courtney Reagan, what do you make? I mean avocado prices. I know.
- [24:55]
Savita Subramanian
I'm very into the avocado prices.
- [24:57]
Melissa Lee
Very closely following that market. Yes, they will go up.
- [25:00]
Savita Subramanian
They will go up. We talked about this. It's hard to hoard because they ripen too fast. But I'm wondering, they say, well, we can compensate for that with some other things we can do more efficiently. Do they do those anyway? Regardless of whether they would think that.
- [25:12]
Melissa Lee
Right. But it's not like, oh, we are paying higher costs. We'll look for new other efficiencies.
- [25:16]
Savita Subramanian
I think they should do that anyway. But it wasn't a bad quarter. I mean, I've always found it too expensive. The restaurant margins were actually fine. It was a decent quarter too expensive for me.
- [25:26]
Karen Finerman
It's interesting that this is happening at CMG at a time we thought that their margins were going to decline. We were certainly seeing the economies of scale boosting all the elements of their DTC business paying off. Everything we heard here says it sounds like there's going to be some pressure on margins and we don't even know what's happening to avocados. So I don't like it either. But what's interesting about CMG is, and I, you know, I've been quoting this five and ten year p E because it is relevant relative to something and they're cheap relative to themselves, which means they're growing into being a massive company now. Doesn't make them cheap though.
- [25:57]
Melissa Lee
Right? And do not miss an exclusive. First on interview with Chipotle CEO Scott Boatwright. Catch the full interview. Top the money. Top of the hour on Mad Money. There's a lot more fast money to come. Here's what's coming up next.
- [26:10]
Tim Seymour
Merck in reverse shares hitting 2 plus year lows as the pharma company pauses shipments of a key vaccine into China. What it means for revenue and the.
- [26:21]
Karen Finerman
Next move in the stock plus streaming.
- [26:24]
Tim Seymour
Center stage as Netflix hits all time highs and Fox plans their own foray into the space.
- [26:30]
Karen Finerman
And with Disney on deck to report, can the media giant keep up with the competition?
- [26:35]
Tim Seymour
What to expect out of that report ahead? You're watching Fast Money live from the NASDAQ market site in Times Square.
- [26:43]
Karen Finerman
We're back right after this.
- [26:46]
Courtney Reagan
What's at stake when administrations change from the first 100 days and beyond, EY brings insights on the issues that matter executive orders, regulation of AI, the fate of billions in tax credit, global trade and workforce stability. No matter the policy shifts, EY helps business and government leaders remain resilient and seize dynamic growth. Navigate the geopolitical and economic landscape with confidence.
- [27:14]
Karen Finerman
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- [27:45]
Melissa Lee
Welcome back to Fast Money. Some big moves in pharma today. Amgen shares down after hours despite reporting a top and bottom line beat for the Q4. The company saying its obesity drug candidate Maritide is moving into late stage studies this year, but adding that regulators are pausing early stage studies of another obesity drug the company is developing without citing a reason. Meantime, Merck dropping 9% in the regular session after giving full year revenue guidance that fell short of expectations. The company saying the lower sales range reflects a decision to pause shipments of its HPV vaccine Gardasil in China through at least the middle of the year, citing sluggish demand there. For more on all of this, BMO Managing Director Evan David Siegerman joins us on the fast line. Evan, great to have you with us.
- [28:25]
Evan David Siegerman
Thank you for having me.
- [28:27]
Melissa Lee
I want to start off with Amgen and the news on its obesity assets. How does that shake out in terms of maritime being pulled forward and the other one being discontinued?
- [28:36]
Evan David Siegerman
I'm most focused on maritime. They on the earnings call they announced that we're going to get the phase two presentation at the ADA meeting in June, which I see as a positive. The other data, the other drug that they had mentioned was not anything to do with the safety or efficacy as a more regulatory issue. They said they're working through that. So again, not concern there.
- [28:55]
Melissa Lee
Okay, let's move on to Merck because that was a huge decline. Yeah, exactly. I mean the underlying problem and Gardasil is a problem. The underlying problem is that Keytruda comes off patent in 2028. So it's, it's a looming cliff that it is facing and Gardasil is not going to provide any sort of ballast to that drop off. How much do you write down that business at this point? How much are you assuming just never comes back for a long time?
- [29:21]
Evan David Siegerman
Well, let's face it, you know, they started talking about this back in July and on again, off again and I feel it as a management credibility issue at this point and I hate saying that, but you know, right now they withdrew their $11 billion of long term guidance. This is their second largest product. China is becoming a black box. We're entering a trade war. This is not a good place to be. And then you have Katrina coming off patent at the end of the decade. So you have these two huge holes to fill. Yes, they have a good pipeline. Yes, they bought an oil blip one. Is that enough to really fill the gap and get investors comfortable as we get to 2029, 2030? I don't think.
- [29:57]
Melissa Lee
Well, the oil glyp one we should note, I mean that's early stages. It's $114 million. So it's, that's not going to fill the, the gap at least in the near term. Dan, you got a question?
- [30:06]
Evan David Siegerman
Yeah, so exactly right. Yeah.
- [30:09]
Tim Seymour
Our friends have been on the desk here, just mentioned one big theme that she's excited about is possibly deregulation over the next few years. Look at how poorly I know, you know this Pfizer, Merck, Biogen. So these stocks did really badly in the history over the last 20 years we've seen some big pharma mergers. Do you think that's something that you might expect if some of these companies can't get out of their own way? For a lot of the issues you just talked about lack of progress on some of these new drugs and then others going off patent.
- [30:34]
Evan David Siegerman
No, for sure. I think ftc, you know, becoming more business friendly is great. Although I don't necessarily think big pharma mergers are necessarily the answer. The biggest one of recent we had Abby and Allergan and of course Bristol and Shelgene. And while for Bristol and Shelton you got a lot of free cash flows, you still have a lot of issues that Bristol is working through now from that. So I don't know if that's the answer. You want to buy a lot of these 10 to $15 billion companies that are great assets to Mosaic out of pipeline. You got to be smart about it. Otherwise you become like a pfizer or.
- [31:03]
Dan Nathan
Maybe even cross border M and A. I think that might be an interesting theme. It's not just the Russell 2000, but it's also Europe and, you know, a bunch of really cheap stocks in other regions of the world.
- [31:15]
Melissa Lee
Right, right.
- [31:15]
Karen Finerman
Evan, I want to go back to Mark because I know we've just talked about the key true to Gardasil dynamic here, but it just seems to me, look at Pfizer. Look how this has been dead money. Look, it's dead in the water. It fell off a cliff. And it seems to me that the analyst community, you take away Gardasil and Keytruda, that's 70% and remove animal health, there's nothing left of the business. I mean, the risks we're talking about, why isn't this stock dead? And I mean dead for a while? Because it had a big move today. Why did it take till today to. For a China headline when we knew these two other things were out there? The stock. It makes me not want to go near Merck any time soon.
- [31:53]
Evan David Siegerman
Well, for what it's worth, we did downgrade the stock on these.
- [31:56]
Karen Finerman
You did.
- [31:56]
Courtney Reagan
Good job.
- [31:56]
Evan David Siegerman
Number. So not to do a little victory. I agree with you. These are big problems that we need answers for, and I don't know if management has them.
- [32:07]
Melissa Lee
All right, Evan, we're going to leave it there. Thank you.
- [32:10]
Evan David Siegerman
Thank you guys so much.
- [32:11]
Melissa Lee
Evan, David Siegerman of bmo. Karen, what do you make of this Merck drop?
- [32:15]
Savita Subramanian
Yuck. I think it's more expensive today than it was yesterday. Yeah, right. I mean, the level of uncertainty is much higher. I didn't get the sense that was a kitchen sink kind of Gardasil. Right. So, yeah, I don't like it.
- [32:30]
Melissa Lee
Okay, coming up, Disney on deck. The media giant gearing up to deliver earnings before the bell tomorrow. And with competition heating up in the streaming space, will the numbers open up a whole new world for investors or. Or is it time for them to let it go? Don't go anywhere. Fast Money's back in time. Welcome back to Fast Money. Stocks climbing despite China's retaliatory tariffs. The Dow jumping more than 134 points. The S&P up three quarters of a percent. And the NASDAQ up 1.3%. Shares of Spotify jumping more than 13% its best day in more than three years after the music streamer reported their first full year profitability. Spotify also saying it saw a Q4 record for monthly active user growth. Shares of Palantir surging to a record high in the Back of strong AI driven earnings and guidance last night. The stock up nearly 24% and breaking through the $100 level. Shares of Netflix briefly topping $1,000 for the first time, but losing steam midday. The Stock up nearly 16% since reporting results two weeks ago. And some more after hours action. Shares of AMD taking a big turn lower after initially popping on an EPS and revenue beat for the quarter. And Disney delivers its first quarter earnings report tomorrow. Before the bell, shares have been on a tear, ripping 18% higher over the past three months. But is the bullishness overdone? Let's get answers from media Trailblazer and CNBC contributor Tom Rogers. Tom served as NBC Cable President and is now Executive chairman of Orbit Media and Entertainment. Tom, welcome. It's always a pleasure to have you here.
- [33:59]
Courtney Reagan
Great to be here. Thanks for having me.
- [34:01]
Melissa Lee
What are you expecting?
- [34:02]
Courtney Reagan
Well, let's put Disney's tear in some perspective. The stock is basically where it was 10 years ago, so it's got a ways to go. Some things to prove. Profitability of streaming was obviously a big milestone. The fact that revenues for the streaming business now exceed revenues for the linear business, also a major milestone, something that puts it in a different class than the other traditional media companies. But speaking of Netflix being on a tear, last quarter they reported 19 million new subs, which was just a blowout number. But Disney guided this quarter to losing subs on Disney plus. That that doesn't compute. Either they're going to beat the hell out of expectations or something's very wrong that Netflix could have that big a sub growth quarter and Disney plus could be losing subs. So the question goes to if that does happen, what are the catalysts here to get Disney subs going again? And that goes to ESPN flagship launching, which is in and of itself got a bunch of issues attached to what kind of impact that will have on the cable bundle that you can get ESPN now as a streaming service just as it appears as a cable channel. But more importantly, what I'm interested in is ESPN plus as a bundle with Hulu and Disney plus. How is that going to be priced? Because that could be a huge catalyst for the entire Disney family and the pricing on that. I don't know if they'll touch it, maybe too early, but that the answer to that question is going to have a lot to do with how Disney distribution is going to be ignited or not.
- [35:48]
Tim Seymour
Hey Tom, I just holding a message here from Guy Dami. He told me to tell you that you're a stud. Okay. I just Want to get out of the way before I get to my question.
- [35:56]
Courtney Reagan
I just want to thank God for me.
- [35:59]
Tim Seymour
Yeah. So you talk about Catalyst, you're talking about Disney plus. And again, it seems like the stock has been rewarded for that progress. But what about the pullback in original content and some of these studios, obviously, that were driving a lot of the performance initially? I'm just, is that, is that still a problem for them as they pull back from some of the Marvel and some of the Lucas stuff?
- [36:16]
Courtney Reagan
Well, I think certainly engagement is, is a, is a big deal. And Hulu was somewhat disappointing in terms of its overall viewership, say in the last month about 2 1/2% of total viewership, whereas over a year ago it was hitting about 4% of total viewership. So they do have to focus on what it means to cut back on entertainment programming. But some of that is a function of how aggressive they've been on sports programming and wanting to make sure that they maintain their primacy in sports as they launch ESPN flagship. And that's clearly going to have that kind of impact. So I think where you really have to watch this is on the advertising front. Disney is the number one viewing destination. When you aggregate all its linear and streaming services together, people watch off of Disney more than anything. YouTube A close second on the television set, but Disney's number one. They are not exploiting that relative to ad revenues as well as they need to. ESPN flagship streaming when it launches probably can be priced in a way so that when people come off the cable bundle and take that instead, they can make up the loss of sub fees on the cable side by how they price ESPN streaming, even though the cable bundle loses multiple Disney channels. But they got to make up the advertising piece, they're losing too. And the advertising side clearly needs some work network.
- [37:58]
Karen Finerman
So Godfather, oversimplify this one force because the inflection in DTC and profitability is huge. But there's still people out there talking about experiences and talking about studio and content has never been better. And, and historically, you know, before we had this secular change in the linear TV world, we were driving Disney on a different factor. If I'm seeing these numbers tomorrow, is it all about profitability in DTC and subs?
- [38:22]
Courtney Reagan
Well, I think that'll be the best part of the story, profitability, because the year over year comparisons will be, will be. I think people will be watching parks and experiences pretty closely. As you know, in the third quarter, attendance was down year over year. Last quarter they were flat. It's a tough quarter to assess things because there was a hurricane impact this last quarter. They have the challenges of Universal Epic's launching, which is ahead of it. But Universal and Disney tend to perform pretty close in tandem and Universal beat expectations when Comcast announced. So that may be a surprise. On the upside in terms of Disney, what I think Disney really has to look at is its international streaming business because they really are much closer to Netflix domestically than people realize. They have about the same number of subscriber relationships domestically and Netflix's total substance subscriber revenue about 17 billion domestically, Disney's about 14 billion, not that far apart. But Netflix has three times the number of international subs. And that is just such an advantage relative to amortizing programming cost, not to mention what it means in terms of additional sub fees and revenue. So they really have to play some catch up on the international side.
- [39:46]
Melissa Lee
Tom, always good to see you.
- [39:47]
Courtney Reagan
Great to be here.
- [39:48]
Melissa Lee
Thanks for having me, Tom Rogers. And do not miss a first on CNBC interview with Disney CFO Hugh Johnston. That is tomorrow morning, 7:00am Eastern Time right here on CNBC. Coming up, more earnings action shares. A snap on the move after hours of social stock reporting results in the last hour. We'll bring you the details and the numbers from that quarter next. FAST money's back into. Welcome back to Fast Money. We've got an earnings alert on Snap, the social media stock popping after the company beat on the top of the bottom lines. Julia Borson joins us now with the very latest from the call. Julia, Melissa, Snap CEO Evan Spiegel explaining how Snap is reaching more advertisers and bringing those ads to more consumers. With the number of advertisers they had in the last year doubling from in the fourth quarter from the year earlier. While the new ad formats sponsored Snaps and promoted places, those are the ads on the map, helped reach 30% more Snapchatters with ads. Spiegel also weighing in on TikTok, saying that uncertainty around TikTok is benefiting the business both in terms of advertisers and in terms of creators. And as for Snap's subscription, a chat bot called Snapchat plus Spiegel saying that they are seeing a lot of adoption of personalization features and with the product driving that division to an annual annualized run rate of half a billion dollars, he says he sees room for price increases for that chat bot. Speakels also asked about Deep Seek. He praised the innovation, noting that capital is not a long term moat in the tech business. He said that hopefully this will make their AI more Efficient. He also said they're in the early experimentation phase for some open source work. Melissa. Julia, has SNAP been ramping up their capex as well? They have, but they're not doing it in the same way as others are. One thing that they said they're going to be spending a lot of money on this year is hiring but they are using other people's tools. So it's not like they're Metta or, or, or Google and, or Microsoft and doing that kind of capital expenditures. Definitely working with some of the resources that are already out there. Julia, thank you. Julia Borsten, who's got a trade on snap. That guy I feel like, you know.
- [42:00]
Tim Seymour
I saw Evan Spiegel speak, I want to say back in October and it was an unruly crowd. You know, I think some of them were long it or used to work there and he had a very good sense of calm about what they were doing. They had already laid out how they're going to change their ad business. More direct response and you know, more short form marketing and some of the stuff they're going to do on the maps. They talked about their vision for air and VR. It sounds like they're just kind of heads down and doing what they need to do. It's a $20 billion enterprise value company. I mean it's a rounding error for most of these things. Gross margins like 55% there is so much room there. They're basically haven't had a gap profit since they went public in 2017. So they could buy. There could be an inflection point for this company in the not so distant future.
- [42:41]
Melissa Lee
Coming up, Estee Lauder and Pepsi making some major moves in today's session. The details in the quarters that had investors canceling the contour and bubbling out of the soda stock. More fast Money into. Welcome back to Fast Money. Shares of Estee Lauder dropping more than 16% the worst performer in the S&P 500 today despite an earnings and revenue beat this morning. The beauty company giving a disappoint Q3 outlook citing weaker demand especially in Asia as a Lauder also saying it would cut up to 7,000 jobs shares are down nearly 50% over the past year. It is of course or was of course the E in Tim's bicep trade the acronym of 2024 still need to.
- [43:21]
Karen Finerman
Get punished for this to me every night in 24. So that's fine but we can talk about it because not surprisingly I would be buying into this week weakness. I think there was nothing awful in These numbers. I think there's a lack of visibility. I think there's a bit of a management vacuum. We're waiting for leadership, but I think the cost cutting efforts are taking hold. I think the cyclicality in their business. I think there's some concern about need for more product innovation. But. But that's not what was taking the stock down before. So this was an overreaction to a stock that needs sponsorship it doesn't have, and rightfully so. But I'd be buying weakness.
- [43:55]
Savita Subramanian
It's still not cheap though, right? I think so. There's that. I mean, I'd rather.
- [44:00]
Melissa Lee
Sorry.
- [44:00]
Karen Finerman
Self.
- [44:01]
Savita Subramanian
Would my ra. Okay, I know we play the acronym game ulta. I mean, you don't have Chinese exposure, which could cut both ways.
- [44:07]
Melissa Lee
Right.
- [44:08]
Savita Subramanian
There's a chance. It could really be great, but I'd rather an ulta.
- [44:10]
Melissa Lee
All right. Meantime, shares of Pepsi getting a hit after reporting down 4 1/2 percent. The soda giant missing revenue expectations, seeing a fifth straight quarter of declining demand in North America for its snacks and drinks. Pepsi now down more than 16% over the past year. A staple. What happened?
- [44:25]
Dan Nathan
What happened?
- [44:26]
Melissa Lee
What do you think?
- [44:26]
Dan Nathan
Yeah, we're underweight. Consumer staples were underweight. Health care, underweight. Most of the defensive areas of the market. I mean, I feel like consumer staples is no longer this high quality defensive play. Right. I mean, today it looks a little more interesting because it's so bombed out. But I do think it hasn't been behaving very well. It hasn't been behaving the way it's supposed to. It's not as high quality as it used to be.
- [44:50]
Melissa Lee
Up next, final trades. Time for the final trade. Let's go around and hoard Savita Subramanian.
- [44:58]
Dan Nathan
Okay, listen, I like large cap value. It's very boring, but that's my ticker.
- [45:03]
Melissa Lee
All right, we're listening.
- [45:06]
Karen Finerman
When Sabita says, okay, listen, I listen.
- [45:08]
Savita Subramanian
So Everybody gather it.
- [45:10]
Karen Finerman
PayPal. If you listen to me, last year this actually did okay. These numbers were not terrible today. Bad on brand and guidance branded products. And I think this is a stock going higher.
- [45:20]
Melissa Lee
The P and B. Yes, people, if you've been waiting to.
- [45:25]
Savita Subramanian
Buy Merck, keep waiting. Keep waiting. And I'm long. This is. This was terrible. Least wait three days.
- [45:32]
Melissa Lee
Dan, listen, I think it's okay here.
- [45:37]
Tim Seymour
It's not up or down 20%. And maybe people are focused on the fundamentals.
- [45:40]
Melissa Lee
All right, thank you for watching Fast Money.
- [45:43]
Deirdre Bosa
All opinions expressed by the Fast Money participants are solely their opinions and do not reflect the opinions of CNBC NBC Universal, and their parent company or affiliates, and may have been previously disseminated by them on television, radio, Internet, or another medium. You should not treat any opinion expressed on this podcast as a specific inducement to make a particular investment or follow a particular strategy, but only as an expression of an opinion. Such opinions are based upon information the Fast Money participants consider reliable, but neither CNBC nor its affiliates and or subsidiaries warrant its completeness or accuracy, and it should not be relied upon as such. To view the full Fast Money disclaimer, please visit cnbc.com fastmoneydisclaimer File your taxes.
- [46:24]
Courtney Reagan
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