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CNBC's "Fast Money"
Fast Money 5/15/25
00:43:55
Listen to our traders take you behind the money...how to play the volatility...pops and drops and the movers you missed. Fast Money Disclaimer
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- [00:02]
Bank of America Representative
As America's leading business lender, bank of America is on your corner and in your corner. With $215 billion in business loans and over 3,700 business specialists across the nation, we help businesses thrive so communities prosper.
- [00:17]
Melissa Lee
What would you like the power to do? Learn more@bankofamerica.com LOCALBUSINESS bank of America Official bank of FIFA Club World Cup 2025.
- [00:26]
Bank of America Representative
Copyright 2025 bank of America Corporation.
- [00:28]
Melissa Lee
All rights reserved. Hey Fidelity, what's it cost to invest.
- [00:34]
Courtney Garcia
With the Fidelity app?
- [00:36]
Melissa Lee
Start with as little as $1 with.
- [00:38]
Courtney Garcia
No account fees or trade commissions on.
- [00:41]
Melissa Lee
U.S. stocks and ETFs.
- [00:43]
Tim Seymour
Hmm.
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Melissa Lee
That's music to my ears.
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Courtney Garcia
I can only talk.
- [00:48]
Michael Ha
Investing involved risk, including your surplus. Zero account fees apply to retail brokerage accounts. Only $0 commission applies to online US equity trades and ETFs and Retail Fidelity.
- [00:54]
Melissa Lee
Accounts Sell order assessment fee not included.
- [00:56]
Michael Ha
Some account types and securities excluded. Details@fidelity.com Commission Fidelity Brokerage Services, LLC Member NYSE SIBC.
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Melissa Lee
In the heart of New York City's Times Square, this is fast money. Here's what's on tap tonight, an unhealthy week. Shares of UNH notching another big drop. The stock down close to 30% this week alone. Is this now a no touch name and if so, how long can the ugly sentiment hang over it? We'll debate that. Plus not such great soul mates. Dick's Sporting Goods tripped up on its deal to buy Foot Locker. Why investors aren't lacing up on this merger and is Foot Locker trading like another suitor would be waiting in the wings? Later, Coinbase dropping in concerns about a potential SEC investigation. President Trump bites into Apple and CEO Tim Cook and Starbucks brewing up a fresh pot for its China business. Lot going on so much tonight. I'm Melissa Lee coming to you live from Studio B at the nasdaq. On the desk tonight, Tim Seymour, Courtney Garcia, Steve Grasso and Guy Adami. We start off with a mixed day for the market. CSB notching a fourth straight day of gains, while the NASDAQ ending its six day winning streak. Meanwhile the Dow posting a 270 point gain. But the rise would have been much more robust if not for the weakness in UnitedHealth. That stock closing down nearly 11%. This after the Wall Street Journal reported the DOJ is investigating whether the company committed criminal Medicare fraud. UNH has lost almost $100 billion in market cap since Monday, is now trading on April 2020. Lows UnitedHealth putting out a statement in respons Wall Street Journal Saying the company has not been notified by the Justice Department of any investigation and that it stands by the integrity of its Medicare Advantage business. Today's drop putting the stock down 55% from the all time high it hit on November 11th. It's been battered by a host of headlines since then, from the murder of Brian Thompson, the CEO of its insurance unit, to a disappointing first quarter report to withdrawn guidance, plus a CEO change just earlier this week. So how long can the ugly sentiment hang over the stock? Would you trade it?
- [02:58]
Tim Seymour
Tim, first of all, welcome back, Mel.
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Melissa Lee
Thank you.
- [03:01]
Tim Seymour
Were missed as always. And trading is what you're doing here because I think you see an opportunity in what was two months ago the best stock, best long term chart in the market and certainly a company that I, over the last two or three years have really felt deserved the higher multiple they were. It was a margin story in, in addition to growth that was above its peers, it was a dominant position. I think you're careful here. I think what I love about trading this stock from the long side though is, you know, everything I have heard is at least some reaffirmation. Even if guidance is pulled, there's, there's some sense that we're in the middle part of the 25 guide. And if we're in the middle part of the 25 guide based upon those EPS multiples, this is, you know, at around 26 bucks a share. You guys, you can now do the math. We're trading yesterday. I talked about it being around 12 times. Now it's about 11 times. I think you're in a very interesting place. You start to get into the headlines from today, bring this into a very different place. The business we had yesterday was something where it was to me starting to really just be a valuation call. You never feel like you have to jump in when that falling knife is falling. But I think this is a stock I am inclined to trade from the long side.
- [04:16]
Melissa Lee
I think the sentiment seemed to have been an era of forgiveness for precisely the reason you outlined. It had been a monster, a historic run in terms of a stock, a heroic stock. Carter called it a godlike stock until April 17th when it became clear that UNH was suffering something more UNH specific compared to its peers. And that's when that sort of forgiveness went off.
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Steve Grasso
Yeah, they have industry issues without question. We talked about that. They have specific company issues as well. I think we've done a good job navigating people away from this. So here's the good news, if there is any. What Tim just said and then I'll add these three things. Three analysts made comments today about unhappy RBC maintained a $525 price target. UBS maintained thereby Bernstein has an almost $600 price target. All said constructive things. And unh, management today said the Wall Street Journal article was quoting deeply irresponsible. Well, for them to say that, they must have some conviction that it's deeply irresponsible. All those things in the mix, I don't think they've done a particularly good job getting in front of this. And if you go back to the March 2020 low, I think it was like 2 10ish. I mean that's where it seems headed for. Despite the fact that it traded about 14 times normal volume today.
- [05:27]
Guy Adami
Yeah. So guy brings up that, that pandemic low and I think that's what you have to eyeball. But how do they not know if it's a criminal charge or not? Don't you think some. Are they not opening their emails? How does that happen? How do we know? How are we talking about it? But they don't know.
- [05:41]
Melissa Lee
Well, they said they've not been notified. So yeah. So saying there's effectively that they don't.
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Tim Seymour
They don't have.
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Melissa Lee
There isn't one.
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Leslie Picker
Right.
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Guy Adami
So if, if there isn't one, the stock off of this dramatic fall based on this. But I don't think to Tim's point for a bounce. I don't think to Tim's point that you have to catch a falling knife. I think if you look at it, 15% of their membership is Medicare Advantage. 30% of their revenues is Medicare Advantage. It's only second to Humana right now. The stock can't get out of its own way. It's had a terrible year thus far. I think you got to wait and see. But I am looking at that level the guy's talking about.
- [06:18]
Melissa Lee
Or maybe this makes other players in the same space look that much better. A player like Elevance for instance, which came out April 17, saying we don't have those same issues as you. And yeah.
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Courtney Garcia
And I think when you're looking at you and H. I mean a lot of this stuff isn't going to go away for them. So yeah, you maybe you do want to start to look at some of these other players. But the medical utilization costs are going to continue to weigh on margins, I think more so than the headlines we saw today. The fact that they lowered guidance significantly a month ago and they just cut guidance just now. I mean that I think is a bigger issue that they have already had some sort of look ahead and they're really pulling back on that. So I think what that means for them moving forward, there's probably more downside to come here. So I'd probably stay away from this.
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Melissa Lee
To be fair though, they could pull the guidance just to give the new CEO some, some room. No doubt kitchen sink himself. I'm not saying that all is clear that they pull guidance. I mean, who knows what, what's going to come out when he actually gives guidance.
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Steve Grasso
He's the right person. Yeah. I think without question, he was there for what, nine or 10 years. And under his leadership, they did extraordinarily well. So it's the right person to come back. But you know, you mentioned other companies, our crack staff and EC put up a Humana chart over the last six years. That stock is lower than the 20 lows, which is remarkable if you think about it. So if you don't think UNH has more room to downside, I just don't think you're paying attention.
- [07:30]
Melissa Lee
All right, well, our next guest sees more downside in store for UNH shares. Baird senior research analyst Michael Ha joins us here on set. Michael, great to have you with us. Welcome. You've got an outperform still on on unhappy.
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Michael Ha
I do, and thank you for having me.
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Melissa Lee
So walk us through what you see in the next 12 months that makes it outperform relative to others in your coverage list.
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Michael Ha
Great question. And I would say yes, we are outperform, but tactically very, very cautious on this outperform, especially near term. I think the question that we need an answer to is what will stop the bleed? I think there are a lot of really good points made. Falling knife to 10. And I think right now there's very, very little that they can do to immediately stop the bleeding and stop the near term sentiment. I think the immediate need is 2025 guidance. They pulled it right now. I don't believe investors are willing to jump in and buy the dip until we get visibility on that. So I think that's step number one and that will at least stop the bleed and create some stability. But for now it is a falling knife. And what is the bottom? I think right now investors are looking at pre Affordable Care Act. So to 2009, 2010, nine times P E off of our 26 earnings. That puts us right around 228. So if you are holding, I would just caution there could be some downside to 228. So around 15%.
- [08:48]
Melissa Lee
That's a. That's a lot especially we are in a vacuum effectively in terms of guidance. I mean they just reported earnings in April and so the next earnings report is going to be sometime this summer. So for that long we're going to live in a vacuum. And that's not to say even that Hemsley is going to come in and give a guidance that's even lower than before because typically a new CEO will kitchen sink it. So it could be a rough entire back half of the year here for your outperform stock.
- [09:13]
Michael Ha
Absolutely. And I think what gives me even more caution is that they're not committing to give a 2025 guidance on their second quarter earnings calls. That puts everyone in this unknown prolonged period of uncertainty. So you couple that with business risk as well. It's a tough combination, tough near term setup.
- [09:30]
Tim Seymour
Michael, that's really kind of the point because I was, you know you do this every day but my speculation was we're somewhere in the midpoint of 25 which makes this a valuation like a screamer it seems to me based upon where it was. So in that context help folks understand, you know, outside of today's story on investigation and there's, there's an argument humana and look you said this in your notes that there are investigations going on out there. Therefore maybe this is just confusion around something we know is going on within the related players. But, but talk about the difference between how you viewed this company before April 17th and how you view it now. And really I'm curious where you went from your price target then to now because it's amazing where people were at 600 are now down to 50 and what they needed to do to get there.
- [10:15]
Leslie Picker
Right.
- [10:16]
Michael Ha
Great question. So I think the level set back in February when The stock dropped 15% on Bill Ackman the battle, it was different then because investors were willing to step in by the dip. But today it's different. It's fundamentally driven and we talked about the 25 guidance revision. What gives me more caution is that a lot of it comes from Optum Health. Optimal health is their crown jewel. Their value based care. What was supposed to usher in the next decade of growth, multiple expansion, margin expansion. So to see any cracks there I would almost prefer there to be any other issue in any other part of the business to change health care and other cyber hack would be better. Investors would still buy the dip but for it to be Optim Health that makes me very cautious and that's my focus. And you mentioned outperform. That's what I'm looking For next because clearly stock is down 50%. I've missed the downgrade potentially, but we're looking to do more diligence on health and our price target has come down significantly. At one point we're over 600. Now we're right on 350ish.
- [11:16]
Melissa Lee
You know, just listening to you, you don't sound like an analyst would now outperform rating on this stock saying that there's no visible catalyst in sight at all. Especially when you know that for instance, Senator Grassley sent UNH a letter back in February. So there will probably be, I would imagine, congressional investigations of some, some level on top of a potential DOJ investigation. You know, you know this from just watching other stocks in similar sort of predicaments where the sentiment is so poor, the fundamentals look terrible. A hero CEO is brought back in, but the turnaround takes much, much longer and the trust with investors take much, much longer to build back up.
- [11:55]
Michael Ha
Absolutely. So I think Stephen Hemsley coming back, it's a very, very big first step in the long road to building back that trust. And I am longer term still optimistic that United will be able to fix it. It's just right now we don't know what the earnings bottom is on 25. We don't know exactly how 26 will look and the EPS range is incredibly wide. So that's why near term, very cautious. And we do highlight there are other attractive names, as you mentioned, elevance, alignment, health, names that have been caught up in this, this downturn in the past week but are likely insulated from the pressures that United seeing. So we think there's attractive opportunity there.
- [12:34]
Melissa Lee
Do those stocks gain not only because their fundamentals look better relative to UnitedHealth, but also they, they actually gain from UNH is weakened position at this point.
- [12:42]
Michael Ha
I think that could definitely play into it as well from a relative competitive advantage perspective. But right now, the way I see it is that a lot of United's cost pressures may be idiosyncratic and company specific. So it's not even just elevance and alignment health, it's across the board humana, cvs. It's just we like elevance and alignment near term as a tactical play.
- [13:03]
Guy Adami
So Michael, when you look at it, just to piggyback on that question, when you just stay away from Medicare Advantage because even if this criminal DOJ issue goes away or it doesn't exist, do you just stay away from Medicare Advantage? And to your point, so you have elevance, you have Sentine, you have cvs they all have dramatically lower Medicare Advantage. Is that what the eye on the ball is for investors should be the Medicare Advantage exposure versus the criminal activity? That's, that's a one off, you would think.
- [13:33]
Michael Ha
I think really it's a United versus the rest of the group. I think right now what we're seeing is a lot of the Medicare Advantage trends. In terms of cost trends, I guess that's number one bucket. Number two is the criminal investigation. The cost trend bucket right now seemingly is just UnitedHealth. Right. So everyone else seems immune for the DOJ bucket. At the moment, United is denying it. So we don't know who's right or wrong. Wall Street Journal, United, we would be cautious on that. But this is no surprise in terms of DOJ has had investigations on Medicare Advantage over the past decade. I mean, they announced one with Elevance, Humana, Aetna, I believe earlier in May, Cigna, they settled with them for Medicare Advantage.
- [14:14]
Tim Seymour
For how big of a deal is that, though? Because it sounds to me like, as you say, this kind of news is sort of out there for these other players. And, you know, is this UNH going through their likely kind of, you know, tap on the shoulder, which should be expected.
- [14:26]
Michael Ha
That's what I. That's my suspicion. And at any given point in time, Medicare Advantage is always under scrutiny from the government. So in this news alone, if it weren't for the culmination of everything we've talked about, I don't think we would have seen the reaction we saw today.
- [14:41]
Melissa Lee
Michael, thanks so much for coming by. I appreciate it. Michael of Baird.
- [14:45]
Steve Grasso
So UNH is in 91 ETFs, of which it's one of the top 1515 holdings. Everybody knows the XLV, right? So it works on the upside for these stocks and these ETFs works on the downside. So what's gotten dragged down on the back of unh? Well, pull up Johnson and Johnson over the last month. It's not surprising that stock has not performed. Abbvie is another one. And you want to throw a Merck in as well. The Merck has its own problems. Those we have to be looking for the names that have gotten dragged down on the back of the ETF selling for no other reason. That UNH has been a huge drag.
- [15:15]
Tim Seymour
Look, I like JNJ and JJ has had its own issues. They certainly have had their own litigation hanging over them with talc. And there's some sense that there is some conclusion there. We're kind of waiting on the final answer. But today Was an interesting day for at least down the middle of the fairway pharma. And I realize that has many different definitions, but I'm talking about big cash rich companies that haven't necessarily outperformed the market. In fact, a Bristol Myers or a Pfizer or a J and J, these are stocks that actually were very defensive today on a day when I think people recognize they are safe places to be.
- [15:48]
Melissa Lee
Meanwhile, Apple shares falling for a second day in a row. It's the only MAG7 stocks still negative since President Trump's Liberation Day tariff announcements on April 2nd. Trump calling out CEO Tim Cook over the tech giants plans to ramp up iPhone manufacturing in India. Steve Kovac's got the details. Hey, Steve.
- [16:03]
Guy Adami
Hey, Melissa. Yeah, here's the president from earlier today bringing Cook up publicly like you said, for the third time the last four days. Take a listen what he said.
- [16:12]
Melissa Lee
I had a little problem with Tim Cook yesterday. I said to him, tim, you're my.
- [16:15]
Guy Adami
Friend, I've treated you very good.
- [16:16]
Melissa Lee
You're coming in with $500 billion. But now I hear you building all over India. I don't want you building in India.
- [16:22]
Guy Adami
Now look, we already know why Apple is shifting production to India. It's of course to avoid the worst of Trump's tariffs on China. The eventual goal, iPhone sold in the US Will be sourced from India. But the President clearly wants more from Apple than he's already got. Like Apple's promise to invest $500 billion in the US over the next four years. That includes a new factory in to make artificial intelligence servers. So now we have this public pressure campaign from the President to get Apple to increase its manufacturing here. Of course, no indication from Apple that's going to happen.
- [16:54]
Melissa Lee
Well, all right, Steve. Thank you, Steve Kovach. We've gone through the math here before when we thought about the tariffs and what it would cost to make an iPhone here. And it would be a whole lot more than what you are paying for an iPhone at this moment in time, Courtney. And that's the reason why the production is not coming back here.
- [17:14]
Courtney Garcia
Correct. And even when they were going to move production to India, I think that was another like $900 million in short term costs. And that would be excessively more if they have to use it here to the US and this is really just one of many problems with Apple. I mean they're really having issues slowing. Their story just hasn't really been there. Right. Everybody had this super cycle upgrade that doesn't happen. They keep pushing that out. So I just don't really see when you're trading this at such a multiple to the overall market. Yeah, it's lined with its own average. But what is going to get people to upgrade, especially if they have to start moving production here or increase those costs? It's only going to make that worse.
- [17:46]
Guy Adami
We think it's going to cost. It could cost a lot more. I don't know if it's going to cost double, triple, whatever that number is going to be. But when you look at it through, you know, Apple, you hear me parsing my words a little bit here. Apple virtue signals a lot and you're manufacturing your product in China that maybe they have different regulations than we do here. So if you're going to start to adhere to USA regulations, it's going to cost more if you want. If you want, we could always make it cost less.
- [18:19]
Melissa Lee
It's not just regulation, Steve, it's labor costs.
- [18:22]
Steve Grasso
Yeah.
- [18:22]
Melissa Lee
That will have to pay in America. If we could use an iPhone and if we could. What you would pay if we could use.
- [18:28]
Guy Adami
And I know this is not everybody there, but if we could use child labor here, it would be a hell of a lot.
- [18:36]
Melissa Lee
Now you're making an unfair allegation, I have to say.
- [18:37]
Guy Adami
Unfair, unfair, unfair. It's a blanket. I'm not saying that.
- [18:40]
Melissa Lee
I'm saying Apple will not vehemently and say they do not.
- [18:44]
Michael Ha
Of course they will.
- [18:44]
Guy Adami
Of course they will. But there's a lot of regulations. Do you think that there's other regulations that they have to adhere to that make that.
- [18:51]
Melissa Lee
I'm not familiar with all the regulations. All I know is that labor costs alone are probably triple, quadruple or more than here.
- [19:00]
Guy Adami
I think that at first the phone will be dramatically more expensive and I think the longer you get. Apple's a savvy company, they will figure out how to make it cheaper here. Whether it's through automation, whether it's through using robots, they can make an affordable phone here.
- [19:15]
Tim Seymour
I don't think it's trading on tariffs at all. I mean, I think it's trading on people being really disappointed on the refresh cycle and the super cycle and, and the valuation. I, because, you know, I'm at a point here where, you know, and maybe this is going to be the old reverse whammy that I don't want, but actually think a lot of the tariffs.
- [19:33]
Steve Grasso
There'S workarounds in terms of the stock we thought it could get back. Was that June 10th date last year.
- [19:39]
Melissa Lee
What they call that WWE.
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Steve Grasso
WWE. I went to that. It was a wrestling event. I mean, it might as well store.
- [19:46]
Melissa Lee
You went there? I went.
- [19:46]
Tim Seymour
You wear the belt.
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Steve Grasso
I did. It was fantastic. We thought, I mean, I know what I thought that day. And it was a big deal. Gene Munster came on the show, thought it was a huge deal.
- [19:55]
Melissa Lee
And it was for a while.
- [19:56]
Steve Grasso
And proceeded to go up to what, to 70? Well, you retraced that entire move on April 9th. We traded down to 172. Yeah, the stock has bounced. I think it's sort of no man's land here, quite frankly, in terms of all the things we just talked about, not least of which, you know, an economy that's slowing down and a consumer that's probably a little strapped right here.
- [20:12]
Melissa Lee
Coming up, Matters Llama Drama reports a social giant is postponing a key rollout of its flagship AI model. What it means for the stock. But the delay says about the hardware next. Plus digging into copper if the US can keep up on the supply side as President Trump looks to pull back on our reliance on China's raw materials. We'll go live to a refinery outside Salt Lake City. Straight ahead. Don't go anywhere. Fast Money is back in June.
- [20:41]
Courtney Garcia
For 140 years, MultiCare has been in Washington prioritizing long term solutions, partnering with local communities and expanding access to care.
- [20:51]
Melissa Lee
Together, we're building a healthier future. Learn more@ multicare.org Introducing CNBC, the new.
- [20:59]
Leslie Picker
Streaming platform from the number one source in business news. Watch, live or on demand. Access any market, anytime, anywhere. Start Streaming. Go to cnbc.com/stream now.
- [21:16]
Melissa Lee
Welcome back to Fast Money. We've got a news alert on some 13 filings. Leslie Picker's got the details. Leslie. Hey, Mel.
- [21:21]
Courtney Garcia
Berkshire Hathaway selling down its exposure to some of the big banks here, unloading its entire billion dollar stake in Citi, paring back B of A by more than 7%, in capital one by 4%. Berkshire Hathaway, on the other hand, adding to some of its consumer facing companies, doubling its stake in Constellation Brands as well as Pool Corp. And increasing exposure to Domino's as well. The firm, however, did not touch its $67 billion stake in Apple during the quarter. Other managers weren't so hands off with their US Tech stakes, though. Appaloosa's David Tepper took a new position in Apple worth 277 million at the end of March and doubled its stake in Uber. The firm also slightly increased Metta and.
- [22:03]
Melissa Lee
Alphabet, but it cut in half its.
- [22:05]
Courtney Garcia
Equity exposure to Microsoft and Nvidia. And speaking of Nvidia, Michael Burry, Scion disclosing put options against Nvidia with a notional value there of about $100 million. And just a reminder, guys, these positions are as of March 31st. They may have changed in the six weeks since then. I'll send it back to you, Mel.
- [22:23]
Melissa Lee
All right, Leslie, thank you. The getting rid of the entire city stake was very interesting.
- [22:28]
Tim Seymour
Fascinating. And depending on again when in that quarter he did it, it might have been heroic. I mean, if you think about Citi was trading up near 85. It was trading at a price to book almost of one, which for Citi is like, you know, the high rent district. But, but Mr. Buffett has been, I think, a major advocate of banks, especially during difficult times. And it's fascinating to think that he's really taken that down.
- [22:50]
Steve Grasso
Constellation Brands. So he doubled, more than doubled his position. They get a 5 million share stake. Now it's up to 12. Look at the sell off in that stock. So he's buying at levels we probably haven't seen since 2019 almost. So that's the one that sticks out to me. In addition to the banks.
- [23:05]
Melissa Lee
All right, let's get to Meta now. Shares dropping on a report from the Wall Street Journal that the tech giant is delaying the rollout of the next generation of its flagship Llama AI model. The report saying Met as engineers are struggling to make significant improvements versus prior versions. The rollout had been slated for next month, according to this report, but now will not come out until fall at the earliest. Medica declines to comment on this report. I look forward, but Metta has nowhere ever actually given a timeframe or a deadline as to when this model would be rolled out. So while it may have been expected by analysts that it would be around this event, there was never a firm deadline slated. So take this report with a grain.
- [23:44]
Tim Seymour
Of salt and I do, and I take it as more of a market dynamic of kind of what Matter is doing as a response to that. But also, I mean we, you know, a Matt, I mean we're at a place here where this market went from being overbought, excuse me, oversold to overbought. This is the kind of action you get. And I just, you know, I will have more of a market conversation. But, but Meta specific, I don't. This isn't why you're selling matter. I think you're selling MET on valuation at a time when it looks pricey to itself.
- [24:12]
Melissa Lee
Is it expensive? Court?
- [24:14]
Courtney Garcia
Yeah, Well, I think what you want to look at too with it is though, though we don't know when the time frame was going to be for it. They're, they're spending in the ballpark of $72 billion in capital expenditures, which is all going towards AI. And the question is when is that going to be monetized? And this is not just them, but all of your big AI players in the space. So I think the question is, yeah, we didn't know when it was going to happen, but it's now getting rolled out. So is it expensive compared to the amount of capex they're putting in? I think that's the question. That's what people are trying to figure out. The longer you push this out, the more that that becomes an issue.
- [24:47]
Guy Adami
And they're working on their own AI the same way Google's working on their own AI. So so they pull away from their investment within video chips and in videos ecosystem, even though Nvidia is figuring out a way to survive without their four top clients. But I think this is a bullish tone for matter regardless, as everyone has said, it doesn't matter the timeline. It matters when they monetize, as Court said. And the fact that they're doing it on their own, I think is you're going to see some efficiencies where that cost comes down.
- [25:16]
Melissa Lee
All right, coming up, copper in focus as President Trump cracks down on mineral importance to the US but with demand expected to increase more than 40% over the next decade, can supply keep up? Pippa Stevens is live at a copper refinery outside Salt Lake City to find out. Hey, Pippa.
- [25:32]
Bank of America Representative
Hey, Melissa. I'm at Rio Tinto's Kennecott Copper warehouse. All of this has been processed. It's ready to go. More than £3 million in here. Taking guesses on how much all of it is worth. I'll have the details coming up Next on Fast Money.
- [25:51]
Leslie Picker
Exclusively on CNBC.com Criminal gangs are attacking America's supply chain through widespread cargo theft. CNBC investigates. They literally have a license to seal cargo theft. End of the road. Watch now on CNBC.com.
- [26:08]
Melissa Lee
Welcome back to Fast Money. Big news here. Our next Fast MONEY live event for June 5 has sold out thanks to all of our loyal fans who are coming to see the show live. But if you didn't get your ticket already, you can still join the waitlist. There is a chance you can score one ticket. That is if you are interested, scan the QR code on your screen. Go to cnbc events.com fastmoney to join that wait list. Plans change, people drop out, take people.
- [26:32]
Tim Seymour
Off the waitlist scalping like Damon.
- [26:36]
Steve Grasso
Don't even say that.
- [26:37]
Tim Seymour
He was.
- [26:37]
Steve Grasso
Let's do that. Damone was not. Do you know who Damone was?
- [26:40]
Melissa Lee
No, I don't know, but I'm just saying he should scout.
- [26:43]
Tim Seymour
But he claimed he wasn't a scalper, so.
- [26:45]
Steve Grasso
They all do.
- [26:46]
Melissa Lee
I don't know what you're talking about. Anyway, I want to move on. It's not just manufacturing. President Trump is looking to bring back to the US Mineral mining now coming into focus as the White House tries to lessen its reliance on China for raw materials. Pippa Stevens is live at a copper refinery near Salt Lake City with more on this. Pippa.
- [27:04]
Bank of America Representative
Hey, Melissa. So the US imports about 50% of refined copper demand. And so with resource nationalism on the rise, domestic operations like Rio Tinto's Kennecott Mine are becoming increasingly important to satisfy that demand. All of this copper here has been processed. It's ready to go. But the first step is actually getting it out of the ground. What you see there is one of Rio Tinto's blasts. They carry out one of these every single day, creating more than 500,000 tons of new ore. That's equivalent to 10,000 humpback whales. There were 120 holes drilled there with 1600 pounds of explosives per hole. So that was the first step. This is the final step. All this copper has now gone through the crusher, the concentrator, the smelter, and the refiner. It is ready to be shipped out. About 11 rail cars pull up every single day to ship this out all across the Midwest, the East coast, even up to Canada. This whole process takes about two weeks. And the copper in here, more than 3 million pounds. It's worth, Melissa, about $15 million.
- [28:19]
Melissa Lee
Wow. Pippa. In terms of the input costs, I would imagine that energy is one of the biggest input costs for a lot of this. And that's down. Right? So margins are pretty good right now for Rio Tinto on copper.
- [28:32]
Bank of America Representative
So energy costs are certainly a big consideration for mining, and that's why a lot of that production has moved abroad to places where it is cheaper, like China. But actually here at Kennecott, Rio has really worked to decrease their carbon footprint. So they moved over to renewable diesel for all of their tractors. They also have a solar plant in order to power it. Decarbonization and then also decrease their operating costs. But on the margin point, what's interesting is that actually the smelters and the refiners, those have by far the thinnest margins across the industry. A lot of the money is made at the mine itself. Even though it's so capital intensive, getting that resource out is where the mine is. And so that's also why we are seeing a lag in US smelting and refining capacity. The margins are just not there. And while there is so much focus on the upstream, on the mine itself, there's got to be more focus on bringing facilities like this one online if we really want to satisfy some of our raw material needs.
- [29:25]
Melissa Lee
And in terms of the refinery, I would imagine that it takes a lot of permits, it takes a lot of capital, and nobody wants that in their backyard.
- [29:33]
Bank of America Representative
Exactly. There is not a lot of political appetite, social appetite, to have one of these in their backyard. There's also not a lot of appetite to have one of these, one of the mines themselves in your backyard. And so those are some of the challenges facing the industry. And there is a lot of federal support now for all of these things. But one thing the mining industry continuously talks about is, is a lack of cohesion between all of these federal agencies. You have to double up on your paperwork constantly. It just takes forever. There is a reason why the US is so slow, because of those inefficiencies. You look at places like Australia and Canada, their mines take a long time too, but they ultimately come online. What's really the biggest barrier for the US mining industry is that uncertainty. You have no idea what your litigation risk is. You have no idea what your permitting risk is. And that's why a lot of players just are not looking at the US right now.
- [30:20]
Melissa Lee
How many humpback whales again, Pippa? That really stood out to me.
- [30:23]
Bank of America Representative
Ten thousand. Ten thousand.
- [30:25]
Melissa Lee
Ten thousand humpback whales was like a standard unit of measurement, so I thought that was fascinating.
- [30:33]
Bank of America Representative
Elephants, humpback whales. They're both really big.
- [30:37]
Melissa Lee
Yes, exactly. We get the point, for sure. Pippa, outstanding work. Thank you so much. Pippa Stevens. I miss being in a mine.
- [30:45]
Tim Seymour
How great is Pippa rocking that green.
- [30:47]
Melissa Lee
Hard hat with her name on it? I mean, if I. If it were not for the label, I would not who. I'm. No.
- [30:54]
Tim Seymour
Unbelievable.
- [30:54]
Melissa Lee
Anyway, we've been on the copper train for a very.
- [30:57]
Steve Grasso
Tim has. And there's a lot of things to like about copper. The supply, demand imbalances are only going to get worse in terms of what copper means, the world, number one. Number two, Rio Tinto has been in this downtrend for four years. They're going to invest $1.2 billion, I think they announced today in a hydroelectric power plant in Quebec. So they're trying to modernize thing. And if you just look at in terms of valuation, which I know you can't do, I mean this is about as cheap as this stock gets. It maybe, I don't know, eight or nine times forward numbers. So despite the fact that it really hasn't done anything, Rio is pretty interesting here.
- [31:27]
Tim Seymour
If we're in the uk, we'd say cheapest chips guy and good thing we're not. It is. And full disclosure, I'm long in ido, my international etf, BHP and Rio Tinto integrated miners. I like Rio more. They own about half of the sheet. She pointed out the amount of copper that's coming from Chile and they own at least half of the biggest mine there. But again, the valuation is fascinating. And look, if you think that China gets a small bit of an upgrade, their 50% of industrial metals demand globally and if just better tariff dynamics of the US means higher China gdp, these names are going higher.
- [32:01]
Guy Adami
A little bit different story. The MP Materials, very small company. Rio huge company. And Rio might look for some acquisitions here. MP Materials up 37% year to date. Rio is up about 7% year to date. 50% out of my materials trade. I'm staying on with it. I'm up from $16, is trading at around 22.
- [32:21]
Steve Grasso
There was a time we were able to play music, Tim. Yeah, if we still could do that, we'd be playing the Duran Duran song right now.
- [32:27]
Tim Seymour
Which one would that be?
- [32:27]
Steve Grasso
Her name is.
- [32:28]
Tim Seymour
Her name is Rio. Sure.
- [32:29]
Steve Grasso
And she danced one of the great.
- [32:31]
Tim Seymour
Great first videos on mtv. In fact, I would make an argument that that was really the defining moment for mtv. Simon Labonte, let's go back to that.
- [32:39]
Melissa Lee
Let's that in the break. Coming up, your neighborhood. Wal Mart may soon get more expensive, but is it really necessary? We'll get answers from Wal Mart's former US CEO Bill Simon and soul mates. Look into whether Footlocker is the right fit sporting goods based on Dick's market drop today. Maybe not. We'll get some answers. More Fast Money next.
- [33:10]
Steve Grasso
Tv.
- [33:10]
Melissa Lee
Tim welcome back to yes, We Are. In fact, we're on TV. Welcome back everybody to Fast Money on live TV. The S&P 500 climbing for a fourth day in a row, up 410 of a percent. The Dow jumping 271 points. But the NASDAQ dropped about 2. 10 of a percent. Some after hours action here. Shares of Applied Materials lower despite surpassing earnings expectations. Earnings and raising guidance. Kava meantime, beating on the top and the bottom line and take two beating on revenue estimates but lowering the 2026 net booking expectations. Alibaba dropping more than 7% today after the Chinese e commerce giant posted a big profit. Missed shares up still up more than 46% this year. And Coinbase also falling late in the session down more than 7% on reports the SEC is investigating the crypto exchange for misstating its user numbers. Well, Wal Mart closing lower today but off its lows this session. The nation's largest retailer delivering a quarterly earnings beat and stuck by its full year forecast. But Wal Mart also announcing price hikes that could start as early as next week. The reason? Tariffs. Wal Mart reporting they will affect some products including toys and bananas. CFO John David Rainey telling CNBC that Walmart is trying to navigate the best that we can. Here to talk price increases, tariffs and more. Bill Simon, former Walmart US CEO. Bill is now on Darden's board and is chairman of Hanes Brands. Bill, always great to get your input, especially on Walmart. Great to see you.
- [34:32]
Leslie Picker
Great to see you. How are you?
- [34:34]
Melissa Lee
Good, good. So you know 90% of Americans are customers of Walmart. Should we expect price increases because you say that Walmart really theoretically should be able to absorb a lot of the cost of the tariffs. Why is it announcing price increases prices?
- [34:50]
Leslie Picker
Well I think they'll probably raise prices episodically on certain items. But if you look down deep and dig into the details of their their earnings release today, you know, this quarter they grew their gross profit margin in the US business 25 basis points. So they're expanding their margin. They also reported their general merchandise categories were flat ish because they had mid single digit price deflation. So so all that product that has the tariffs on it they reported last quarter actually went down in price. So that sort of gives them room in my view to manage any tariff impact that they would have. And I think they're really, really effective at doing that.
- [35:34]
Steve Grasso
They're the best without question. But let's take it to 30,000. What's your view on just now the state of the consumer given everything that Walmart just said, we've heard from a slew of different people going to pass on costs, are going to try to. What do you make of all this? Because I don't think the consumer is in a particularly good spot.
- [35:51]
Leslie Picker
I don't think, you know, you look at the drivers of the middle of the economy, the upper end is different but the middle of the economy is very job employment dependent and very gas price dependent. And both of those numbers keep coming back pretty Pretty good. We're, we're near, near full employment. So everybody who wants a job has one. Gas prices year on year are down. I think the consumer is fairly buoyant and you know, housing costs which were a real catastrophe 24 months ago have sort of peaked and started to, started to head down. So I think the consumer feels pretty good on the one hand. On the other hand, you know, all the doom and gloom we hear about price increases and tariffs like we heard from my friends at Wal Mart today, I think it scares them some.
- [36:36]
Melissa Lee
Do you think that Target is going to be particularly hurt in this sort of environment as Wal Mart is able to hold prices lower?
- [36:46]
Leslie Picker
Target has the disadvantage of having a bigger, much bigger, as you, as you well know, general merchandise, non food business and the non food categories are typically very heavily import dependent and depending on where their footprint is these days. Most retailers, including Target mitigated some of their China risk several years ago when the first round of China tariffs were put into place. But a lot of them still have exposure to places like Vietnam and those tariffs are still, you know, out there impending. I think Target will have a much more difficult time mitigating and absorbing the tariff, the tariff costs than say Walmart or Costco that have a much bigger food business.
- [37:28]
Guy Adami
So Bill, during your tenure you had some manufacturing initiatives with Wal Mart. There's obviously a higher premium buyer now above 100,000 yearly salary. For people that are shopping at Wal Mart, that's a big part of their revenues. What can retailers do for to prevent the next pandemic, the next tariff war? What can they get ahead of here?
- [37:51]
Leslie Picker
You know, manufacturing is a math equation, right? It's input costs, labor costs, transportation costs, cost, sum it all up and get it to the customer at the best possible price. And for many, many years because of the low labor costs and a relatively high, relatively low, relatively low labor costs in markets like Asia and relatively low transportation costs and oil prices, it resulted in shifting of the manufacturing basis. As we well know, the tariff situation didn't, didn't help. It didn't, you know, had been discussed but never fully, never implemented at all. And those that math equation is changing with an emerging middle class in Asia. The labor rates in Asia are rising as the consumerism rises. Oil prices are now at fuel prices. Transportation costs aren't as cheap as they once were. So that equation is changing and companies have to constantly look at that equation and find out where's the best place to produce to get the product to the customer at the most efficient way closest to the point of consumption is the most efficient and now it's becoming increasingly the most cost effective.
- [38:59]
Melissa Lee
Bill, I always play would you rather. With you. And we're going to do it tonight again, if you will, but with a slight twist. So would you rather Walmart or Target, or. I'll let you go off the board and pick another retailer, the one that is best poised to handle the tariffs. Bill is thinking, but he's actually frozen. So there you go. Technology interfered with getting that answer. But when we do get it, we'll let you know what he said. But I will pose that same question to Timothy.
- [39:29]
Tim Seymour
Thank you.
- [39:31]
Melissa Lee
To go off the board.
- [39:32]
Tim Seymour
If only I could answer in French or maybe I'd say our core or one of their. But anyway, what I would say is Target. And I'd say it because I actually think improvement in US China relations only help Target, who is more exposed in a higher tariff dynamic. So if I, if I. But I think Bill's back, right?
- [39:48]
Melissa Lee
So it's back.
- [39:49]
Tim Seymour
I want to hear him.
- [39:49]
Melissa Lee
So Bill asked me. Answer the question, if you will. Wal Mart, Target, or pick another retailer which is best poised to weather tariffs.
- [39:59]
Leslie Picker
Best to weather the tariffs would be Wal Mart. Best. I think from an investment standpoint, Target, so beat down is so beat down. They're such a good company. They're not going anywhere. You know, I think if you could find a way to, you know, sort of stomach a long play on Target, you'll do really well.
- [40:17]
Melissa Lee
Always great to have you, Bill. Thank you. Bill Simon likes Target.
- [40:21]
Guy Adami
I never thought he'd say that.
- [40:23]
Tim Seymour
I'm glad we tag teamed on that one.
- [40:26]
Melissa Lee
Coming up, the perfect fit. We are lazing up for a closer look at Dick's Sporting Goods tying the knot with Footlocker. Why investors are sending mixed signals. Next. That's when he's back in. Welcome back to Fast Money. Foot locker jumping over 85% today. Its best day ever after Dick's Sporting Goods announced plans to acquire the company for $2.4 billion. Dick's, on the other hand, having its worst day since August 2023. The retailer down more than 14% today. Foot Locker would operate as independent company within Dick, an independent unit. Courtney, do you like this deal? Yeah.
- [41:06]
Courtney Garcia
And I think clearly investors of Footlocker are happy with this. But I think when you're looking at Dick's, the question was, why are they doing this at a 90% premium to what the price was on Wednesday. Realistically, this is what are not what follow was trading last year, but it was in the 20 range. And I think this is one that's really gotten hit with the tariff news where you see a lot of manufacturing happening in Asia. So I do wonder if this is as much of a premium as I think people initially thought. So I think it'll be interesting to see how these two synergies come come together.
- [41:32]
Guy Adami
We don't know if the deal goes through. We don't know if there is a white knight or black. It's a white night, right? I think it's a white night. Somebody else comes in. We don't. If somebody else comes in right now, Dick's winds up rallying aggressively from here. So I think with the discount I'd still be a buyer of Dick's here.
- [41:50]
Steve Grasso
In Die Hard, the guy that thought he was the white knight. Remember that whole movie? Remember that scene in Nakatomi?
- [41:55]
Tim Seymour
Yeah, Nakatomi Tower.
- [41:56]
Melissa Lee
Yeah.
- [41:57]
Steve Grasso
And it didn't work. Christmas movie by the way was a.
- [41:59]
Melissa Lee
Hundred percent Bruce Willis in it. It.
- [42:01]
Michael Ha
Yeah.
- [42:02]
Melissa Lee
Just clarifying, can we get to the trade?
- [42:06]
Steve Grasso
Yes we can because if we, if our crackstaff and EC can put up a chart over the last four years you will see today on huge volume we trade it right up to a downtrend line. It's been in place for the last four years. Karen thinks there might be another bidder out there but if you don't, you pull the ripcord here in NFL you.
- [42:23]
Tim Seymour
Know the argument that they would then have 38% of the Nike, you know retail business, I mean is crazy. As an anti monopoly, I mean it's absurd. So that is not a reason to cancel this deal. I think the deal goes through.
- [42:35]
Melissa Lee
Coming up inside Starbucks Grande plans group a bigger business in China. Why they're revamping efforts next. We're fast and to. Welcome back to Fast Money. Starbucks sourcing new ideas for its China business. According to reports including a possible source stake sale the transaction could reportedly value the assets at $7 billion. This moves, this move comes as shares are down more than 4% year to date. Is this an answer Courtney, do you think?
- [43:07]
Courtney Garcia
I think it's part of the answer. Right. I mean I think they're clearly saying that consumers are really pulling back on spending. A lot of their non loyalty programs are pulling back. They have a lot of pricing pressures and competition in China. So I think any way they can turn this around and what they can do with that China business is a big piece of that. So I think we're, you know the news is just breaking today so I think we'll see how that plays out. But investors are going to be eager.
- [43:27]
Guy Adami
To see that you always buy for the management team. I think you have a great management team. But I think he's having a much tougher time than he thought he was going to have in turning around some internal issues with Starbucks. But if you look at it on a chart, you're definitely starting to see some momentum at the very least. But it's not, it's not as aggressive as I would have hoped and I'm sure Brian would have hoped you either.
- [43:48]
Steve Grasso
As Fast Money fans know, the only answer was Allen Iverson. Tim, I know the answer Allen Iverson was go to your Google machine and check it out. But I will say this. The fact that Starbucks traded down the levels that it was when the announcement of that CEO I think is encouraging that we held maybe play from the.
- [44:06]
Tim Seymour
Long can they get back to brewed coffee instead these new machines by the way, I don't understand how they could completely change the product and think we're not going to notice. You hear that?
- [44:13]
Melissa Lee
Tim's on to you start you know, pay attention. Up next, final trades, trade time.
- [44:25]
Tim Seymour
Tim, I talked about Rio Tinto valuation.
- [44:27]
Courtney Garcia
Called Div call Rio Courtney also in copper fcx. I think it's worth taking a look. It's down about 10% over last six months even though copper prices are up.
- [44:37]
Melissa Lee
Coppery.
- [44:37]
Tim Seymour
Nice.
- [44:38]
Guy Adami
Steve, another metaphor. Steel letter X. I think it has a little more gas in the tank to go higher.
- [44:44]
Steve Grasso
We got Georgetown University. Make noise so the people know you're here.
- [44:49]
Melissa Lee
Wow, they are here.
- [44:50]
Steve Grasso
Crystal Myers. That'll get you done.
- [44:52]
Melissa Lee
All right, thanks for watching Fast. See you back here tomorrow at 5. For more fast Money. Mad Money with Jim Cramer starts right now. Wave Georgetown.
- [45:04]
Courtney Garcia
All opinions expressed by the Fast Money participants are solely their opinions and do not reflect the opinions of cnbc, NBC Universal, their parent company or affiliates, and may have been previously disseminated by them on television, radio, Internet or another medium.
- [45:17]
Melissa Lee
You should not treat any opinion expressed.
- [45:19]
Courtney Garcia
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 exclusively on cnbc.com.
- [45:46]
Leslie Picker
Criminal gangs are attacking America's supply chain through widespread cargo theft. CNBC investigates. They literally have a license to seal cargo theft. End of the road. Watch now on CNBC.com.