← CNBC's "Fast Money"
CNBC's "Fast Money"
Google’s Chrome Dilemma… And MicroStrategy’s Crypto Connection 11/21/24
00:42:16
Shares of Alphabet getting hit as the Department of Justice looks to have Google divest its Chrome.browser. What it could mean for Search… and how the proposed break-up would impact the tech giant. Plus Bitcoin keeps surging. How $100K could change the crypto landscape, and how Bitcoin proxy MicroStrategy is betting big on the continued climb. Fast Money Disclaimer
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- [00:00]
Melissa Lee
This episode is brought to you by Merrill with a dedicated Merrill advisor. You get a personalized plan for your financial goals and when plans change, Merrill's with you every step of the way. Go to ML.combullish to learn more. Merrill, a Bank of America company. What would you like the power to do? Investing involves risk. Merrill Lynch, Pierce, Fenner and Smith Inc. Registered Broker Dealer Registered Investment Advisor Member.
- [00:24]
Tim Seymour
Sipc First and foremost, the thing that powers your business is power. And when it comes to power, Ford Pro has options. Now scratch that. We've got every option. Diesel, gas, hybrid and all electric. Plus they're all connected, so you're always in the driver's seat. The power is yours.
- [00:48]
Melissa Lee
Visit fordpro.com today to learn more. Live from the NASDAQ market site in the heart of New York City's Times Square. This is fast money. Here's what's on tap tonight. A target on big tech. Alphabet and Amazon plunging today as regulators across the globe take aim when we see breakups for these behemoths and what could it mean for the stocks? Plus, banking on gains, regionals and money center banks leading the market today. Is there more juice left in the trade? And which name should you bet on? And later, a bitcoin bonanza, the crypto hitting another all time high and inching closer to that key $100,000 mark. Meantime, a key reversal in shares of MicroStrategy. What's next for stock? I'm Melissa Lee, come to you live from Studio B at the nasdaq. On the desk tonight, Tim Seymour, Karen Feynman, Dan Nathan and Courtney Garcia. We start off with a massive fallout from Google's antitrust woes. Shares of parent company Alphabet dropping 5%, erasing $100 billion in market cap in just one day. This coming after the Department of Justice recommended that Google sell its Chrome browser to fix what regulators call an illegal monopoly in online search. Reports of the DOJ recommendation had come out earlier in the week, but the stock wasn't rattled until today's session. Eamon Jabbers got more on this. Eamon.
- [01:56]
Eamon Jabbers
Hey there, Melissa. Remember, this is just the DOJ's Ask and Google will have a chance to respond in court. Ultimately, it's going to be up to the judge and we don't expect that decision until the summer of 25. What the government is asking for here is a breakup of Google. And we haven't seen something this sweeping since the government ordered the breakup of Microsoft in the early 2000s. But remember, that decision was overturned on appeal. Now what the DOJ is asking for here is to force Google to sell the Chrome browser, which has about 65% of global browser market share. And they're also asking for Google to sell Android or for the government to put in what they call behavioral remedies that would block Google from using Android to favor its own search services. Now, finally, the DOJ requests that Google be blocked from paying Apple the billions of dollars each year that it pays now for default placement on Apple devices. Google reacted to all this harshly in a statement this morning saying DOJ chose to push a radical interventionist agenda that would harm Americans and America's global technology. Wildly overbroad proposal goes miles beyond the court's decision. It would break a range of Google products, even beyond search that people love and find helpful in their everyday lives. So this fight goes into the final stages with the government making a big ask of the judge. And now we're going to have to wait and see how he responds. Melissa, back over to you.
- [03:19]
Melissa Lee
Is it in the thinking, Eamonn, according to your experts, that the judge is unlikely to actually pursue an outright breakup simply because Microsoft's breakup order was overturned?
- [03:30]
Eamon Jabbers
That's a really good question. And I think the judge is going to have to take that precedent into account and if he does push for a breakup, to make sure that he does it in such a way that it is stronger on appeal. Because there's no question this is going to go to the summer of 25 before the judge makes his final decision. And just no question here that Google.
- [03:48]
Melissa Lee
Will appeal this thing, right, Eamonn? Thank you. Eamon Javers in D.C. google not the only big tech name getting hit with antitrust headlines. Today the EU reportedly could considering a probe of Amazon's e commerce business and whether the company is prioritizing its own brand products. If found guilty, Amazon could be fined up to 10% of global annual revenue. I don't know where we want to start with this. There's an overarching sort of regulation on big tech. The Google story is very interesting because the stock is definitely reacting. We haven't really seen that.
- [04:17]
Tim Seymour
Shockingly, I mean, we've sat on this desk, I think, for a decade talking about the headwinds of regulatory stuff. And we've just kind of been very dismissive about what it means for the stocks. And I think to the point that Eamonn just made is like, yes, here was a proposed remedy, but yet it has to be, you know, I mean, there's a whole host of things that has to happen. The fact that it lost 100 billion-plus in market cap is very odd to me. The other thing I'll just say is so the FTC or the DOJ basically has suits against Apple, Amazon, Meta. I don't know what they have against Microsoft right now, but all those companies actually have beef with each other and they actually support some of the other cases that are being brought against their competitors. So it's a pretty weird situation. I'll just say this. It's like these are our national champions. Make no mistake about it. This is the place for innovation. One of the things that I really underestimated over the last couple of years is just how pissed off so much of the tech community, so much of the investor community, so much of Wall street, you know, has had. Think about Wall street, okay? These guys who do a lot of M and A, there's been no M and A in the tech space because of the regulatory overhang. So a lot of these folks are really upset about this. It'll be interesting to see how this plays into 2025. But again, I think some of these opportunities, when you have a stock down 5% off of something, probably good buying opportunities.
- [05:26]
Karen Feynman
Yeah, I tend to agree. I mean the ask, that's what he point out. And even as well, that's the most. Well you can ask for whatever you want to ask for, right? So whether that actually ever comes to. If that in fact came to pass, the stock would be I think a fair bit lower than here. However, between here and there is. There's a lot to happen, right? We haven't heard Google's response. Also, I think that the landscape is changing anyway in search. I think there was just a little while ago another competitor, you know, who wants to enter into search. I also wonder, so who would you sell Chrome to?
- [06:00]
Melissa Lee
And then that's the sticking point. Nobody can figure out who would be the natural buyer for Chrome.
- [06:05]
Karen Feynman
Who does that then make the target?
- [06:06]
Dan Nathan
I was going to say then they have 2/3 of search.
- [06:09]
Karen Feynman
Exactly.
- [06:09]
Dan Nathan
So nothing's changed.
- [06:11]
Tim Seymour
That's why I think, well, they don't have 2/3 of search. I mean, so think about it. Because the case here is that Chrome, if you have Chrome and it's already embedded, you're much more likely to search on Google. Right. But if, let's say they sold it to OpenAI, who's working on a browser right now, well, all of a sudden there's going to be lots of choice where that search go to. Open air right now is a search engine for all intents and purposes. So I mean, to me, I do think there's not too many buyers of it for regulatory reasons.
- [06:36]
Karen Feynman
Well, I think the buyers are potentially very powerful as well. So it's also not.
- [06:41]
Dan Nathan
I'm sorry.
- [06:42]
Karen Feynman
No, no, go ahead.
- [06:43]
Dan Nathan
I was just going to say I don't even think where it's where the big grievances, I mean, the big grievance is really more on the ad tech side, which is another lawsuit that's just been filed. Again, all this is timing to rush stuff through before a new administration comes through. Now, I realize you can make an argument that the filing in 2020 on search is something that has had its hands in maybe the previous administration, certainly in this administration. But we are talking about many years and possibly multiple administrations of DOJ pushing on these companies. So it's not as if suddenly the Trump administration would necessarily be looking to unwind all this. But that's the sense you get by the activity over the last couple days. You get the sense that there's some rush to actually get stuff in before this next 2.0 Trump possibly dismantles years and years. And again, I would just get back to where are the grievances? They're really more on ad tech, more for marketers, more for advertisers.
- [07:35]
Melissa Lee
Is this a buying opportunity?
- [07:37]
Courtney Garcia
I would say so. You know, I think realistically, when you look at what is actually being proposed, they're going to divest Chrome. Theoretically, that's if it actually goes through. This is relatively a small part of their actual business. Right. I mean, it's been estimated they'll probably divest this for like 20 billion and their market cap is like about 100 times that. But I think the bigger issue is the regulatory concerns and just in general that environment. And Tim, you bring up the current administration because everybody's saying, okay, well, if Trump comes in, there's gonna be less regulation. But when you look at Amazon, this isn't just a US problem, this is coming from abroad as well, saying that's a question. Is this a global regulatory phenomenon that's just starting? If so, that that could put pressure on these companies. But short term, I think there's probably an overreaction.
- [08:15]
Tim Seymour
I think though, if you think about what the number would be, 20, 30 billion, it is really important to their search business. Right. So I read a stats that if you were going to go from Internet Explorer to Chrome, you're 50% more likely to do a Google search. So you think about the default is. So if the FTC is basically saying this is non competitive Right. It's hurting, you know, consumer choice, that sort of thing. It is important then if you think about the dominance that Google has in search.
- [08:39]
Gene Munster
Right.
- [08:40]
Tim Seymour
And if you cleave that off and you don't have that connectivity to the search process, then it could be a huge hit to Google. But again, to your point Karen, it's going to be probably at least a year or two away.
- [08:50]
Melissa Lee
Well, it's summer is when the judge decides and then Google will appeal. That could be tied up for years. So that's, you know, and it's a negotiation, right? Yeah, exactly. All right, let's add Deepwater Asset Management Managing Partner Gene Munster to this conversation. Gene, how are you thinking about this? Ask of Judge Maddox.
- [09:08]
Joseph Vaughn
Well, my initial reaction is to go to the worst case scenario, which would be in fact that Chrome gets spun out. In that case, Google's call it 90% search share within kind of the, I think what I consider developed countries. 90% share is going to drop. It probably goes to 80%. In that case you probably get a search business that was growing at 10 to 14% over the past several quarters to quickly drop down to low single digits, maybe potentially even going negative for a little bit. And so this says the reason why the stock's down 5% is that this really gets to the core of half their business, which is search. And they will claw that back over time if this does get spun out. People love Google and they will slowly come back just like they did with Yandex when they switched out their core and Firefox. And so that's the first place my mind goes to. The second place is what's the probability of this actually happen? And I think the panel outlined it appropriately. I think it's the odds of this, anything actually going anywhere are low. Not just because it's a difficult task to get a big spin out like this, but there just simply isn't precedence to it. And so I think that ultimately this too shall pass. I do think that there are other things within what the Department of Justice and the FTC are doing against big tech that's going to rear its head in the next several months. But I think this chapter around Chrome getting spun out is going to just kind of blow over effectively.
- [10:36]
Melissa Lee
Let's though pursue that worst case scenario pathway. Gene. I mean what does Gemini look like without a Chrome?
- [10:47]
Joseph Vaughn
Well, it doesn't look very good. I mean it goes back to this 90% share that is going to drop and Gemini needs it's right now AI Overviews is riding on top of Search. That is the mechanism that Google is fighting OpenAI with is using their search dominance to do that. And so that, that is, that's been a key piece to this puzzle. The puzzle of Gemini is to leverage search. And so anything you do, anything that happens that has a negative impact on their search share. This loosely circles back to something else that was buried in this. This Department of Justice letter that came out was related to Apple and their deal, related to their search deal. And on both of these, if that deal got voided, that would have a negative impact. So this does. Again, I think it's a very low probability. I don't think this is the atopic on Google. I think it's perplexity is the A topic. But since we're talking regulation here, I think it's something that if it does happen, the stock would definitely go lower. I mean, Karen mentioned it will go lower. I bet it will go down another 10, 15% on that.
- [11:55]
Karen Feynman
Gene, it's Karen, thanks for being on. So about this default, is that what would be the default or is it there is no default and you have to choose from a menu in which case you might very well choose Google to get back to your point of keeping a good percentage of market share, do you know what, what the remedy would be looking for?
- [12:16]
Joseph Vaughn
The remedy would be so if Chrome got spun out, what would happen is when you start up your browser, they would randomize which option comes up first for you to select. And so that would be some sort of equal playing field to do that. Presumably people would look down and check and go with Google. And so I think that's why they're not going to lose a huge percentage of their share because I think a lot of people. But that's probably what the remedy ultimately this Chrome business without a deal where Google would pay for placement or somebody paying for placement, that business is a horrible business. I don't know who would want it. I wouldn't pay $20 billion, I wouldn't pay $5 billion because I'm out of fears that the Department of Justice would block any of these kind of payments. And so Karen, I think that it's a randomized piece. I think that anybody who's interested in purchasing this would want to have some assurance that they could sell placement on that.
- [13:13]
Tim Seymour
Hey Gene, you just mentioned the Apple search deal, that they pay about $20 billion. That would be Google to Apple, 15% of their profits. When you think about that, is there a way that that deal could be blocked and not the Chrome deal? I'm Just curious how you're thinking about that.
- [13:29]
Joseph Vaughn
I'm a big believer in Apple. I think this company is going to have accelerating revenue growth with the iPhone. The piece that keeps me up at night is what happens with that search deal. And came up on the Google last earnings call, Sundar said that there'd be unintended consequences if in fact that deal got voided. But the fact that that language reappeared in the Department of Justice and this Chrome and not only did the language reappear, but it almost outlined language to the effect of don't try to work around this, don't try to work around us, the Department of Justice in it. And so Dan, I think that again, it's a low probability because this would be a very negative event. I think there's just a lot of lawyers on Google and Apple that would fight hard for this. But if in fact that did happen, the reality is that your numbers are right. Mine are pretty close to that 13% call it but it's a measurable impact to earnings. And so I'm surprised that Apple was again big believer in Apple. I own the stock. I think it's going to do well over the years, but I'm surprised the stock didn't react more today.
- [14:31]
Melissa Lee
Gene, great to see you. Thanks so much for your time.
- [14:34]
Joseph Vaughn
Thank you.
- [14:35]
Melissa Lee
Gene Munster. I want to go back to the point that we were talking about beginning of the show, which is why today, why today of all days did Google decide to react to an antitrust headline when so many headlines have passed, we've sat here on the desk and nothing happens to the stock?
- [14:51]
Dan Nathan
Well, I think it gets back to what a timeline is, both in the context of possibly a change in administration. But I think it also gets back to really what the upcoming dates again, December 20th, Google produces, I think their final remedies. Then you get into this post discovery period and then you're, you're really into the summer. And I just think at some point there has been pressure on the company to, to respond and respond aggressively and I think that's part of what it is. And think about classic negotiation overreach on each side. And when you talk about Google remedies, you're already on some level acknowledging okay, we'll do X, Y and Z. And I think it's, it's important for them to get out there and act reasonable even though they have to be very vocal in opposition.
- [15:30]
Melissa Lee
All right, let's get to Nvidia now. The roller coaster ride for share. Since earnings last night, the darling initially fell more than 5% after hours, but opened today's trade in the green, rising nearly 5% and then fell back into the red midday, down as much as 3 1/2 percent, clawed its way higher to finish the day just above break even. We were talking here, we were saying, what does it do tomorrow? You said down 5%. I said up.
- [15:51]
Gene Munster
Yeah.
- [15:51]
Melissa Lee
Somewhere. Somewhere in the middle. But somewhere in the middle we're both right.
- [15:55]
Tim Seymour
I mean this price action tells you that this is. They're not done with this one yet, you know, I mean, so again, you.
- [16:00]
Dan Nathan
Know, that quarters day and what has done me, I'm just, just, I mean.
- [16:06]
Tim Seymour
The ones who bid it up like 1,000% over the last, you know, three years. So retail investors, by the way, listen, and we've seen the hyperscalers, their biggest customers kind of fall by the wayside. Microsoft can't get going. Google can't get going. You know, Amazon still doing pretty well. Met is still doing pretty well. Supermicro is not doing particularly well. Those are their top customers, 50% of the revenue. So they're just not beating the way they were before. Sooner or later they, Tim, are going to not be as impressed anymore with the several, you know, the magnitude of the beats and then ultimately it's going to become a story like some of these other ones, a bit more mature.
- [16:38]
Melissa Lee
They were okay though. They were with the smaller beat. They were right. Courtney, were you okay with the smaller beat?
- [16:44]
Courtney Garcia
Yeah, I think this really wasn't enough to take the stock down or I wouldn't be surprised if it trades kind of flat here because it also wasn't enough to be that catalyst higher. But realistically it is the fastest growing of your mega caps. You're seeing this risk on rally, right? I mean you're seeing that with Bitcoin and that is where the retail investor wants to put their money. They want the thing that's doing the best, which is an Nvidia. It's in many of your ETFs which as people put money in, it's going to continue to push it higher. So. So it's not where I'm adding our money. Most of our clients are over allocated there because it's done so well. But I wouldn't get out of it by any means.
- [17:10]
Melissa Lee
I will play the role of the Nvidia bond because it was a smaller than expected beat. Right. It didn't match the whisper number and it struggled higher and it still managed off of record highs, still managed to close higher.
- [17:24]
Karen Feynman
All right, you're the bull, I'm the Bull. I'm long, so I want to be the bull.
- [17:28]
Melissa Lee
Okay, well, are you the bull for in real life? I'm the bull in real life at these levels.
- [17:33]
Dan Nathan
Else they successfully downshifted all expectations last night. I mean, to me, we have a more modest outlook for Blackwell. We have a dynamic where we know if anything there's a slow transition going on. And yet it's. It's trading at 33 times forward 26. To me, that is something that ultimately look around the market right now, considering the growth you're getting from Nvidia. I mean, you know, I know we like to sometimes be revisionist around here. I mean, I feel like I've felt this way about Nvidia for a long time. I think it's a case where this is growth at a reasonable price given what their growth is.
- [18:05]
Karen Feynman
I think you had to listen to the conference call. To me, that was where all the context was. And Jensen Huang was very, very bullish about the being in the early innings. Right. And that we have tremendous more growth. And I think that this, this sort of changeover from Hopper to Blackwell, which they cited. All right. We will see lower margins as Blackwell scales and that won't happen probably till the beginning of April or so. So we are going to see margins go down. But it is not a demand problem. Right. So that would be the problem, that the beaten raise wasn't enough. If it's because demand isn't there. That is not the way they painted it. And I tend to agree. Tend to believe him.
- [18:46]
Dan Nathan
Dan is not the bulls.
- [18:48]
Tim Seymour
What is Dan? I think there's so many other things that are telling you that we're going to have overcapacity built out. If you look at so many other names in the ecosystem. I will say this though, to the bulls. You saw Dell act pretty well today. You saw Micron act pret. So you saw like a reemergence of some of the ecosystem that had come off pretty hard.
- [19:05]
Melissa Lee
You can be right. But the problem here is when do you pull the trigger and sell?
- [19:08]
Tim Seymour
You know, I'm not going to. I mean, I mean, I think, I think Courtney's point is a great one here. If you've owned this stock, it's become such a bigger part of your portfolio. Sooner or later you have to do something because you are so concentrated in this one name.
- [19:20]
Melissa Lee
All right, coming up, we're watching Gap on the move and extended trading shares are higher. After reporting results, the details in the numbers in the quarter next, plus a first class ticket to airline technicals Nice. The head and tail wins. Get it? Head and tail wins. In this space in the Chartmasters plane pairs trade ahead. Don't go anywhere fast. When he's back in two.
- [19:41]
Joseph Vaughn
What does.
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Melissa Lee
It take to design and deliver a.
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Courtney Reagan
Corporate strategy with confidence?
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Melissa Lee
How will you drive long term value by understanding the risks and rewards within.
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Courtney Reagan
A challenging geopolitical environment?
- [19:53]
Melissa Lee
EY Parthenon has 10,000 strategists with deep sector knowledge backed by the real world economy of the EY global network that can help start your journey with us@ey.com us ey parthenon every day thousands of Comcast engineers and technologists put people at the heart of everything they create. Like Kunle, a Comcast engineer who began to approach work differently after becoming a father with two teenage boys at home, Kumle thinks about the generation that he is building technology for. This continues to inspire him and his team to build a fast and reliable in home wi fi solution for millions of families like his so everyone can work, learn and play together under one roof. Learn more at ComcastCorporation.com waiting for dinner Spice things up with Golden Nugget Online Casino with hundreds of the hottest games, Golden Nugget lets you live it up in your downtime on classics like Cleopatra or exclusive games only found on Golden Nugget Online Casino. Forget about waiting. Golden Nugget keeps the action rolling while your dinner simmers. New players can get $50 instantly in casino credits. All you have to do is sign up with code FASTMONEY and deposit just $5 to get 50 in casino credits. Make any moment golden gambling problem. Call 1-800-GAMBLER or in West Virginia, visit www.1-800gambler.net Please play responsibly. 21 plus physically present in Michigan, New Jersey, Pennsylvania and West Virginia only void in Ontario 1 per new customer minimum $5 deposit max 50 dol issued in non withdrawable casino credits that expire in 168 hours. See terms@golden nuggetcasino.com welcome welcome back to Fast Money Shares a gap popping 14% after beating top and bottom line estimates and raising its guidance ahead of the holiday quarter. CNBC's Courtney Reagan joins us on set with more details.
- [21:47]
Courtney Reagan
Courtney, this one I feel like has had so many stories over the years, so many CEOs, but it looks like they're starting to gain some traction here. So Melissa, good point. They beat earnings per share by a decent margin. Revenue a beat slightly in line. Kind of kind of depends on how you want to look at that. And Then comparable sales, maybe slightly light, but they were positive overall. If you take all those brands together and then the Gap namesake brand actually turning in really strong sales, up 3%. Old Navy was flat this time around and that had sort of been the winner. But they're talking about gaining market share 7/4 in a row at Old Navy, which I thought was really notable. And then the fourth straight quarter of positive comp growth at Gap, Athleta seems to maybe be inflecting. Those comps were higher by 5% to just at a time when Athleisure really seems to be taking off. I know you spoke with a Viori Viori CEO that was on here recently. We talk about aloe a lot, but Athleta still trying to hang into this game and so it seems like they're doing well. The call is ongoing right now. They continue to talk about the financial rigor, getting back to basics when it comes to the finances and the operations, and then that's what it's going to help these brands take off. So, you know, we'll see. Obviously, new denim silhouettes might have also helped sort of sparkle. The wide leg, the high waisted.
- [22:55]
Dan Nathan
And should I be wearing it? Yeah.
- [22:57]
Courtney Reagan
And you're our denim guy, so I.
- [23:00]
Melissa Lee
Feel like anyone should know. It should be you.
- [23:02]
Courtney Reagan
Which also, by the way, usually means you end up buying new tops and new shoes. Because when you've got a new silhouette. Yeah, everything has to change.
- [23:11]
Dan Nathan
Can I wear a jean shirt on air? Is that all right?
- [23:13]
Melissa Lee
Yes, Tim, go ahead, please.
- [23:15]
Courtney Reagan
With jeans. And then we call that a Canadian tuxedo, which actually Levi says is very popular right now. Denim on denim, believe it or not.
- [23:22]
Melissa Lee
Is very popular right now. You would be worried our Canadian friends would be writing in.
- [23:26]
Courtney Reagan
No, no, no. You would be on trend. But yes, so, so so far, you know, they're starting to be maybe little bits of trends in the right direction for Gap, but they've got a long way to go. And Banana Republic is definitely still a point that really needs to be fixed. Men stronger there than women's, but overall business weaker there.
- [23:42]
Melissa Lee
So basically less bad is great. Less bad is up 14.
- [23:45]
Courtney Reagan
I mean, look at that. Even Ross stores which reported after the bell, not a great quarter and those shares were higher as well. So really interesting. Also want to get some more detail from Richard Dixon. I'm going to speak to him actually later tonight and then we'll have the interview tomorrow. Just about sort of the intricacies of the apparel selling and discretionary is a weaker, is it not? It seems like it Depends on who you are. So maybe it's not a consumer thing and maybe it's really down to what you're selling.
- [24:09]
Melissa Lee
Court. Thanks.
- [24:10]
Courtney Reagan
Thank you.
- [24:10]
Melissa Lee
Courtney Reagan. Courtney Garcia, what do you say about.
- [24:13]
Courtney Garcia
The companies are here? I mean, I think there's a lot of positives to be said about this. They do seem to be closing a lot of, you know, stores in there and there. I think Athleta is actually, actually could go either way. Right? Because I think some of this you're going to see like with Nike, they're actually talking about a shift away from athleisure and towards traditional. But actually as you're starting to see them gaining share, I think that's actually a really positive sign here, especially with a lot of competition like an aloe and a lululemon here, you're nodding your head. So I love it.
- [24:38]
Tim Seymour
I love the Athleisure trend you're talking about. Well, I just say this as our chief denim correspondent here, I find the Levi really interesting right here. It's down 40% from the 52 week high score here. Trades at a very reasonable multiple. I guess there were definitely a downgrade in their guidance. If you go back about six months, I'm seeing it more and more people, I see it in my house, all my kids, they're wearing the Levi's again.
- [24:57]
Karen Feynman
I just love the margin improvement here. The gross margin was good, the operating margin was good. I think they got some good momentum. I'm sad it's up so much. I have too small a position. I should have none or more.
- [25:08]
Melissa Lee
There's a lot more fast money to come.
- [25:10]
Tim Seymour
First and foremost, the thing that powers your business is power. And when it comes to power, Ford Pro has options. Now scratch that, we've got every option. Diesel, gas, hybrid and all electric. Plus they're all connected so you're always in the driver's seat. The power is yours.
- [25:32]
Melissa Lee
Visit FordPro.com today to learn more at Capella University. Learning the right skills could make a difference. That's why our business programs teach you relevant skills you can take from the course room to the workplace. A different future is closer than you think with Capella University. Learn more at Capella Edu. Welcome back to Fast Money Shares. A United Airlines outperforming Delta this year. But could it be a short flight for the name Carter Braxton Worth are worth charting out with a pairs trade on these two high flyers? Nice chart, Master Carter.
- [26:05]
Carter Braxton Worth
Yeah, obviously there's a high correlation. If you look at any rolling five year period, these two airlines, they do the same thing. And of course, the beta is about 85% correlation. But the comparative chart here tells the tale. Two lines, two colors. One has doubled the other over the past 12 months. United, of course, being the one that's really so far ahead. Look at a three year comparative chart and you start to see here just how highly correlated they are. And then of course, this recent period, really since the August low, when United's up 150% versus Delta up 7. So that's one of two ways to look at it. Another and really more accurate way is to look at what is known as a ratio chart depicting relative performance. And that's what this is. Going back over 10 years, it's simply United divided by Delta, which gives us simply this. When the line is going up, United's outperforming. When it's going down, it's underperforming. It's not about the scale. Next iteration, three in a row. If you look at where it is in relation to the 150 day moving average, United is so far above just as it's been in the past or below that mean reversion becomes highly likely. Final chart. We tried to annotate the peaks and troughs of this relative strength line. One line, the relationship between the two. And at this point, one is right by my work to be short United as a pair and long Delta.
- [27:31]
Melissa Lee
All right, Carter, and while we have you, we've got to point out your trade on MicroStrategy. Yesterday you said to sell it all today it looked like like an outside reversal day, hit a record high and then it closed basically on its lows on very heavy volume. What is next for this one?
- [27:47]
Carter Braxton Worth
Yeah, that's what's known as Q reversal day. And as you point out, it often reflects exhaustion, meaning something that's in a persistent uptrend that then on the day in question has yet shocking new highs. Gapped up at the open, in fact, and then starts to slip, slip and then falters, closes almost on the low and volume expands dramatically to a record. It marks a reversal of a longstanding downtrend, or in this case, uptrend.
- [28:16]
Melissa Lee
All right, Carter, thank you. Carter Braxton, Worth. We're going to trade MicroStrategy just ahead. Hold those thoughts. But let's get to airlines.
- [28:23]
Dan Nathan
So I've always said that airline stocks are your trading stocks. And there's been a reason why investors haven't trusted airlines for years. And we also love the airline acronym, so Rasmussen. Right. Revenue per, available, see mile. So in Delta's case. The reason this is now an investment and not just a trade is that the rasm, which was about 15 cents or.15 five years ago, is now up to 18. In other words, these companies are making more money airlines, but Delta specifically, and they laid that out in an investor day today that put a three to five year target on it. I think this, this stock continues to go higher because the company is rerating on a multiple example that the market was unwilling to give it before. And I think, you know, I think.
- [29:02]
Courtney Garcia
We'Re there and I think they've always been really well positioned. They have a really clean balance sheet compared to their peers. And even when you look at them pre Covid levels. So I would absolutely take something that's been underperforming UAL when they're so highly correlated, like Carter pointed out there, I would absolutely take that trade.
- [29:16]
Gene Munster
All right.
- [29:17]
Tim Seymour
Jets is probably the way I would do it. I just kind of short it. And I'll tell you why.
- [29:20]
Dan Nathan
New York Jets.
- [29:21]
Tim Seymour
No, the jets. The ETF is 15% of that. Delta is about 12% of it. I think a sign of the top is Delta just announced what Shake shack. Shake shack on the planes. That if that's not a sign of the top for Delta shake, you're feeling it a little too much here, people. That's the sort of behavior that you would see when things are getting a little too frothy. I think jets is actually up 45%. I think that's a well distributed ETF. I would sell that.
- [29:46]
Melissa Lee
Coming up, crypto crushing it. Bitcoin nearing the $100,000 level. And proxy microstrategy hitting records of its own. The big bet they're making on the crypto and how options traders are handling the boom. More fast money to welcome back to Fast Money. Stocks closing in the green today. The Dow adding 461 points. The S&P up a half a percent, its fourth positive session in a row. And the NASDAQ squeezing out a small gain. Shares of Disney slightly higher today. That stock now up 26% over the last three months as the media giant CEO search continues. Disney planning to replace current chief Bob iger in early 2026. Comcast also higher today. The company yesterday announced plans to spin off its cable TV channels, including cnbc, msnbc, the Golf Channel and others. And some changes to the S&P 500 to tell you about. Texas Pacific Land will be moved from the Mid Cap Index to the benchmark S&P 500, replacing Marathon Oil. The changes take effect Tuesday, November 26th. Meantime, Bitcoin hitting another all time high. Getting tantalizingly close to that $100,000 milestone. One major beneficiary of the cryptocurrency's rise has been MicroStrategy. That stock also hitting new highs today before that huge reversal that we talked about before. Short seller Citron Research calling a top in the stock. It's still up more than 500% this year. And with more than 331,000 bitcoin on its balance sheet, well, fundamentals like earnings even matter. It hasn't. Let's bring canaccord Genuity Managing Director, Equity Research analyst Joseph Vaughn. Joe, great to have you with us. Thanks, Melissa. The stock has been up more than Bitcoin itself. So how do you, how do you make heads or tails of the stock in the move?
- [31:25]
Gene Munster
Well, I think, Melissa, the best way to look at MicroStrategy is you've got an operating company balance sheet that can take advantage of equity and debt to be able to opportunistically buy Bitcoin. And the company embarked on their Bitcoin acquisition strategy in, I think, August of 2020. And since that, since then, MicroStrategy is the best performing stock in the Fortune 500. You called out that it's outperformed Bitcoin. It's outperformed Bitcoin by double or more in that period of time. And so, you know, you look at, you know, investment companies, they can't leverage an operating company balance sheet to exploit the opportunities that MicroStrategy has. That's, that's the high level.
- [32:15]
Melissa Lee
So how do you think about the premium in which MicroStrategy trades versus Bitcoin and what that should be? Because it can't go to the sky, I would imagine. And today it was a key revert. I mean, it was a key reversal in that it hit a record high at the open close, at the lows on very heavy volume. This was a signal technically that maybe things are going to slow down. How do you think about that premium? Premium, sure.
- [32:37]
Gene Munster
That premium is clearly a point of discussion for investors. The premium has expanded. The premium, which is basically the value, you know, the value of the stock relative to how much Bitcoin they have on their balance sheet. That is what the premium is. It's over 200% right now. So you can look at that as a risk, but you can also look at it as an opportunity for the company because again, they've got an operating company balance sheet that can exploit that premium to continue to Buy Bitcoin and you know, just this month the company has acquired another $4 billion of Bitcoin using equity. And earlier this week also priced a very successful convertible notes offering to raise another two and a half billion, which we expect the company will put to work, or perhaps already is putting to work in acquiring more Bitcoin, exploiting that premium to be able to expand Bitcoin per share.
- [33:42]
Karen Feynman
Joe, it's Karen. Thanks for being on. So if you were to back out a valuation for the operating business, I have no idea what that is. What is that? And so then you back into an embedded price for Bitcoin where it, where, how big is that, that premium when you do that exercise?
- [33:58]
Gene Munster
Sure. So when, when Microstrategy embarked upon this, this bitcoin acquisition strategy of theirs, you know, it was mostly a software company. It was very successful business intelligence software company. The bitcoin strategy has taken on the majority of the enterprise value here. And today the software business is less than 10% of overall enterprise value here. So when you back that out and you do perhaps a sum of the parts analysis, looking at that as well as equity and debt on the balance sheet, you end up with a 200% premium, which is basically the value of the stock versus how much Bitcoin they have on their balance sheet.
- [34:46]
Melissa Lee
So it's basically the same. It's the same. I mean the operating business is so de minimis that it's. The premium is the same even if you back it out.
- [34:53]
Gene Munster
Yes, but the key is, is they have an operating company balance sheet to be able to exploit capital markets to accretively buy Bitcoin. If you were to look at this, say in comparison to a Bitcoin etf, Right. They don't have an operating company balance sheet.
- [35:09]
Melissa Lee
Right. What's the floor in your view for the stock? What do you tell investors?
- [35:14]
Gene Munster
You know, the risk is the price of bitcoin. So you have to look at it that way. You know, I think the company uses leverage intelligently. They don't take their debt anywhere above 30% relative to how much Bitcoin they own. I mean, the, the convert they priced earlier this week had a zero coupon on it. It was a very successful deal. So the strategy is to continue to exploit the premium to buy more bitcoin accretively. I think a good analogy for people is, you know, think of corporate M and A. When a business acquires another business, the first thing investors ask is, well, how accretive is that deal to earnings per share after extra share issuance After M and a related interest expense. And what's the time period to get to that accretion goal? So here MicroStrategy is not buying another company, but they're buying bitcoin accretively. And so at that premium level, after they buy more bitcoin, every shareholder that owns MicroStrategy is going to own a little bit more bitcoin per share and you don't have to wait three years for the merger related synergies to kick in to get to the accretion.
- [36:34]
Melissa Lee
All right, Joe, thank you. Nice to talk to you. Joe Baffy. All right, so he laid out the case. It's got the operating company balance sheet. It's superior to just buying a Bitcoin etf. Is it in your view? Well, this isn't embedded. Would you rather Bitcoin ETF or MicroStrategy?
- [36:51]
Dan Nathan
It depends if you want leverage because again, you can talk about 30% leverage, but 30% leverage in anything could be a cancer if something falls 80%, and I'm not saying it will, but this is a call on bitcoin. So this is an option. This is an options market. Market. How many investors do I talk to that say, hey, when are they going to have options on cbtc? When can I sell calls? When? So I mean that's what this is. And the only real questions I actually had for Joe were is there, is there a regulatory dynamic? And it's not like it's a big surprise to anybody, but at one point it kind of was, you know, in other words, when they transformed this company into a company that had a software business. And now they make no mistake about it, by the way. Yes, it's kind of genius. And it's all this time. It's interesting. This is on a day when Gary Gensler has announced his resignation. Bitcoin rallies in sympathy, even though we expected this. But the SEC has been oppositional to Bitcoin and that's made options markets and a whole lot of other ways to get this kind of leverage very difficult, which is what's made this almost ingenious. It won't be forever when bitcoin is unlocked.
- [37:49]
Melissa Lee
Meantime, big bets on if and when bitcoin will cross $100,000. They're coming in thick among options traders. Mike has got the latest on the action amid Bitcoin's record run. Mike?
- [38:00]
Gene Munster
Yeah, so ibit, I mean this thing has only had options listed on it for a very short period of time, but they're going gangbusters already. Calls out, pacing, puts by about 4 to 1 today. The most active contracts were the January 55 calls. We saw 24,000 or so of those trading for about $6.40 a contract. Buyers of those are betting there's about 10% upside in Bitcoin between now and January expiration, which is about about eight weeks away. And one quick point I would like to add with respect to what Tim was just saying. When they issue Converge, that gives access to an entirely new class of investors, fixed income investors who can't buy bitcoin, can't buy ibit, can't buy options on any of these things or can't buy.
- [38:41]
Melissa Lee
The futures can get exposure to the.
- [38:43]
Gene Munster
Asset class through a fixed income instrument. Instrument in the form of converts. And I think that's kind of what Michael Saylor is on to there.
- [38:49]
Melissa Lee
Yeah, that's a good, good point, Mike. Thank you Mike. Co Coming up, financial flexing big banks well in the green today as the group continues to outperform the broader market this year. But can the good times last? We'll debate that. And shares of Zillow getting a boost. Why analysts are knocking the door of that trade when Fast Money returns. Welcome back to Fast Money. Banks getting a boost today with the financials one of the best performing sectors in the S and P. The money centers all well in the green. Goldman Sachs leading the charge up more than 2%. It was the biggest point contributor to the dow and the carry regional bank ETF keeping up with the gains up almost 2% as well. What is giving the banks a boost, Karen?
- [39:27]
Karen Feynman
I don't really know. I think everything was up today so they should participate in everything being up. I mean they're there. They've always been less expensive than the market on a P E basis. That gap is closing a little bit but they're still, I mean to me they've traded higher than this in just picking JP Morgan just because I love Jamie Dimon but I think it's on the expensive side for them. But it's traded higher than this. And I think that all the reasons that the market's going up, less regulation, the economy's, you know, set free and all of that helps banks a lot. M and A, all of that. So I'm hanging on. I know some somebody downgraded this week. I'm not doing that.
- [40:04]
Melissa Lee
Yeah.
- [40:04]
Courtney Garcia
And I think some of this is that like broadening out of the markets like when you're seeing the markets continue to do well even when like your mega cap 7 are taking a back seat is a really good thing. That the markets can probably continue to run and people are starting to look at the cheaper valuations and those things that are better positioned arguably in a new administration. I think the only like fear is that is some of that pull forward happening. Like has a lot of the optimism with the new administration already been priced in that my only hesitation with it. But I do still really like the banks and I think they're really well positioned here. So I would stay in them.
- [40:32]
Tim Seymour
Well, it's funny you mentioned that. I mean, I think going back to late 16 into early 17, how many times in the desk did we say, well, is the Trump trade priced in? You know, I mean it kept on going and kept on going into some degree relation, then it kept on going to tax cuts or whatever. I think it's a different, different market right now because I think you would argue even JP Morgan is trading at a multiple that we haven't seen in a long time, you know, relative to tangible book and the like. So we're getting to a point where a lot of stuff is getting stretched from a valuation standpoint.
- [40:58]
Dan Nathan
I don't think so. I think there's five things that are working for banks and each one of them we've been wanting over the last couple years, including loan growth, a steeper yield curve, the ability to give capital back, the fact that regulatory, you know, dynamics come up and now we have M and A coming back. So I could, I could make an argument they paid nice debt lives and I think there's a reason to sit in these names long term.
- [41:16]
Melissa Lee
Coming up, some fast movers on our radar today. How our traders are handling the ups and downs in Zillow PD holdings and the pot stock. That's next. More fast money into. Welcome back to Fast Money. A couple of stock moves catching our eyes today. Let's start off with Zillow surging almost 6% to 3 year highs. The real estate stock getting a boost from strong housing data this morning is this. Existing home sales rising nearly 3% in October from a year ago. The first positive year of a year read in over three years. Karen.
- [41:44]
Karen Feynman
Okay, so that we were talking, why would it be up this much? That that is the direction that they certainly need. But I do think though, I mean, I like Zillow a lot. I loved their last quarter. I love how this flywheel is really working. And if, and if existing home sales actually ended up being more than just one month's worth, that would be fantastic for them. But I was surprised at the magnitude of the move here.
- [42:05]
Melissa Lee
Yeah, especially because Existing home sales is for October. They still capture the dip in mortgage rates and now rates are higher. And so you got to wonder what that data set is going to be, you know, next month.
- [42:15]
Dan Nathan
We've been talking about Zillow for a while. Karen's been talking about it. I nibbled on some a few weeks ago in a long term portfolio and I think it's time to add and again it's never been about, at least for the last couple of years about the valuation here. It's really. And the disaster scenario is obviously when they get very asset heavy. And that was really the day the music died for this stock. I think it's starting to pick up again.
- [42:34]
Melissa Lee
All right. Shares of PD holdings dropping nearly 11% today. The parent of Chinese e commerce site profit and revenue that came in below estimates for the quarter. The stock was the worst performer in the NASDAQ 100 today. Courtney, what do you make of that?
- [42:47]
Courtney Garcia
Yeah, and I think just investing in China has been really frustrating for a lot of investors because it just has not come back the way that people had hoped it would. And that stimulus just clearly is not coming to fruition. But I thought it was interesting. They're really citing competition issues. And so you're seeing with she and you're seeing Amazon is actually now coming with a lower cost competitor. I mean these are real problems for them when you have these other people coming out. So I think it's something to continue to watch. I mean overall I still like emerging markets. We still have our Chinese exposure. When you look at these individual companies, you're going to see these big swings.
- [43:14]
Melissa Lee
Like this and if they pull back on advertising.
- [43:17]
Tim Seymour
Yeah, we talked about that over the last year and again some of the trends in TEMU because of the competition that Courtney just mentioned. The other thing is tariffs. I mean like the crap that they're selling at the price point they're selling, it's going to make it pretty unaffordable.
- [43:29]
Karen Feynman
You make 60 cents more.
- [43:31]
Tim Seymour
Well, but you know, we've seen, look how selective the consumer is. We're seeing that again and again and we're going to see a very promotional holiday season and I think when we come out of it, I think that we're going to see more pressure on the lower end consumer.
- [43:44]
Dan Nathan
I love Dollar Tree and just for.
- [43:45]
Melissa Lee
The record, I love a daughter store.
- [43:49]
Dan Nathan
It's a party anyway.
- [43:51]
Melissa Lee
Pot stocks fizzling out today. Shares a cure Leaf, Prescott Labs, Truly Green Thumb all turning sharply lower midday that after Matt Gaetz pulled out of the running to be the Next, Attorney General, the Republican had been seen as friendly to the cannabis industry. Is a pot trade going up in smoke?
- [44:07]
Dan Nathan
Not enough time to talk about this. I think based on the ag, whether it was Trump's original AG or the ag, you're not playing cannabis based upon the ag. You're not going to get legislation, hope for rescheduling. And these are companies, the ones that are doing well are the ones that are traded. You know, they've, they've, they've operated all the way through this. That's how you have to invest in cannabis by those companies.
- [44:26]
Melissa Lee
Up next, final trades. Time for the final trade.
- [44:31]
Dan Nathan
And $50 a share on bank of America is a level. It's a level. I think it's probably going to struggle out for a second and then it's going through their bank of America with that div. Still attractively priced.
- [44:42]
Melissa Lee
Karen yeah, so I think it's a.
- [44:44]
Karen Feynman
Little bit overdone in the short term. I would be buying some Google calls here.
- [44:48]
Melissa Lee
Dan.
- [44:49]
Tim Seymour
Yeah, I love half of Carter's trade. It's the sell ual, but I just do it with the Jets.
- [44:54]
Melissa Lee
J E T S E T L.
- [44:56]
Courtney Garcia
Courtney well, I'll take the other half of his trade here and I would go with a Delta here. I actually, I think it has a lot of optimistic characteristics. I think it's something you'd take a look at.
- [45:04]
Melissa Lee
All right, thank you for watching Fast Money. See you back here tomorrow at 5 for more fast. 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. 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@ Capella University, learning the right skills could make a difference. That's why our business programs teach you relevant skills you can take from the course room to the workplace. A different future is closer than you think with Capella University. Learn more@capella.edu.