← CNBC's "Fast Money"
CNBC's "Fast Money"
Tesla On The Move After Reporting Results… And Picks & Shovels Of AI Trade 4/22/26
00:43:35
Tesla on the move after reporting results, as investors dig into the EV makers latest numbers. What top tech analyst Gene Munster makes of the quarter, and the headlines out of the company conference call. Plus, it’s not just Tesla, we’ll wrap up all of the other after-hours movers, and dig into the “picks & shovels’ of the AI trade as chips, memory stocks, and data center providers take a leg higher. Fast Money Disclaimer
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- [00:00]
Narrator/Advertiser
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- [01:02]
Melissa Lee
Live in the NASDAQ marketsite in the heart of New York City's Times Square. This is fast money. Here's what's on tap tonight. Tesla takes off. Shares of the EV make are popping after an earnings beat. What the company had to say about margins, its humanoid robot and when we will finally see cybercaps on the road. We're surrounding the trade this hour and the picks and shovels of the trade in rally mode today with the gains in everything from semis and memory stocks to power providers say about the state of big tech. Plus, pot stocks light up. Boeing shares soar after earnings and Best Buy names a new CEO. What new leadership will mean for the electronics retailer and how you should trade the stock now. I'm Melissa Lee, come to you live from studio. Be at the nasdaq. On the desk tonight, Tim Seymour, Dan Nathan, Steve Grasso and Katie Stockton, founder and managing partner at Fairlead Strategies. We start off with Tesla moving higher after posting first quarter numbers. Earnings coming in ahead of estimates while revenues fell slightly short. The company also saying it's making meaningful progress in its robotaxi and robotics business businesses. Philippe's got all the numbers and the details, Phil.
- [02:02]
Phil LaBeau
Melissa, a lot to like in these numbers if you are a Tesla bull. The company earning 41 cents a share. That was 4 cents better than the street was expecting at 37 cents a share. Revenue, as you mentioned, coming in a little bit shy of expectations. Coming in at 22.39 billion. The street was at 22.6, 4 billion. And then some key numbers within the numbers in the first quarter, gross margins north of 19%, anything between 15 and a half and 17% is where most of the analysts were expecting. So this is better than expected at more, more than 19% free cash flow, 1.4 billion. A pleasant surprise. That's because Capex was not as great as many were expecting. And then you have FSD subscriptions, 1.28 million for a point of reference. At the end of the fourth quarter, it was 1.1 million FSD subscriptions. By the way, that 1.28 million 51% jump year over year. And in terms of production, you talk about the Cyber Cab, there has been some news. At least this is what Tesla is saying in its earnings report. The Cyber Cab and Tesla Semi will be going toward volume production. They are on track for that to happen this year. And the Optimus factory is expected to begin production shortly in Q2. That's according to Tesla in its early earnings report. As you take a look at shares of Tesla over this last year, keep in mind the real mover of this stock is coming up in about 25 minutes. That's when we'll hear from Elon Musk during the analyst conference call. Melissa, I'm going to send it back to you, but this is one of those days where if you were a Tesla Bull, you're looking at at least the numbers right now and saying, all right, I like what I'm seeing.
- [03:41]
Melissa Lee
Yep. Phil, thank you. Keep us posted. Philippeau, with all the sort of puts and takes of the Tesla quarter, you know, part of the Bull case is physical AI and we are seeing it. I mean it is a reality. It's not just humanoid robots out in the future. It's beginning production in Q2. Cyber Cab, Semi truck, it's out in the future. It is volume production this year. It is playing out, Tim.
- [04:02]
Tim Seymour
It is. And it's doing out at a gross margin that, as Phil pointed out, 19.7% ex. The regulatory credit is a good story and a story that's greatly improved over where it was. I think the dynamic around energy storage is also kind of interesting. Although those numbers were slightly lower quarter over quarter. I think it gets back to really, where are we with Optimus, where are we with Cyber? And those are details we're going to get at 530. I think there's still some unknown about what's going on with Tesla and Space X too. Even though I think that's, I don't think that's something we're we're getting or something we're going to hear about. But it is something the market wants to know.
- [04:38]
Steve Grasso
Is it interesting that I don't think Phil really built out on cars? I don't think Tim really built out on cars, did you say?
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Tim Seymour
I said nothing about cars.
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Steve Grasso
So. So this is not a story about cars anymore. So it's about a story about fsd. Free cash flow and margins. And they're hitting on everything right now. And then you throw in some humanoid or some, some robots. So I think they've changed the narrative enough to put the bar where they know they could step over it.
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Dan Nathan
Margins, it looked like one time thing. It looked like early tariff refunds and then some warranty reserves, everything, you know. So if I want to see you really well, I mean, you know, I know how to read. And quads amazing. I mean this guy, this guy Claude is real time more than, I mean, like, you know, margins was a thing that, you know, used to drive it. It was deliveries. Right. And it was, you know, the fact is that, you know, Elon used to guide, you know, 50% year over year, those sorts of deliveries. They started falling short or whatever. But I'm with you guys. I mean didn't. If they print 7 point, 17.6, I don't think it really would have mattered. And you know, if you look at FSD and they're looking at the, the progress they're making there and you know, miles driven and all that sort of stuff. But it is interesting to note that, you know, their FSD is still supervised. FSD for the folks that actually own the car, that's not going to be a robotaxi. So again, you know, maybe it's not about the cars that they're selling to individuals right now. It is more about the production that's going to go into a fleet.
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Katie Stockton
To me it's one of the more attractive mega cap stocks. It's actually kind of diverged from the group and it tends to have a weak first quarter, which is of course what we saw this time around. And because of it, it came into this print pretty oversold on a weekly basis. Retests are somewhat common. Very strong Support in the 351 area and resistance honestly is not that strong until you get to the highs around 488. So I think it's an interesting setup. Secular uptrend.
- [06:34]
Melissa Lee
Hmm. You know, if you are wanting to invest in the physical AI story, there aren't that many pure plays out there. There aren't many other companies that you can do that with, I mean Waymo is a very small part of the Alphabet story. I can't even think. I mean robotics companies out there, I mean, I don't even know. I mean Tesla fills that sort of void in the AI trade.
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Tim Seymour
Funny that this is now a pure AI trade and not a, not an auto company.
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Melissa Lee
Yeah, I mean I don't know if it's a pure AI trade but I mean it fulfills that sort of notion of a physical AI.
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Tim Seymour
No, and I still think we just don't know from a capital markets perspective what Elon might put through here and he's well incented to take this market cap higher. So I think your point is well taken. I think there are other parts of the story. I mean FSD approval in Netherlands, where is it going to be next? I mean there is really some decent follow through on some of the stories that again don't get me excited. But I think it's interesting what Katie's bringing up and I give Dan some credit who called this stock back in November which is this stock has these, these moments where it has in fact lagged and in fact you see almost a rotation by people that are not 1.0 Tesla investors. They're people that are opportunistic and tactical. This is a market right now, at least the market we have where semis are going to all time highs where this, this company is supposed to rally. And I think because you know, someone like me might hold my nose on the valuation and say I don't even understand it. There are plenty of people that aren't that predisposed and I think are buying it.
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Steve Grasso
It reminds me back in the back of the day with Amazon when you had us and people didn't understand the US angle that they could turn that spigot on, they could turn it off whenever they wanted. He's got a bunch of flows now that he can really look to but he did definitely did attract in the stock. Maybe Katie can speak to this. I'm long from right around here so I suffered with it a little bit on the downtrend and now I'm staying with it. I'm looking for probably 10% move to the upside. Where do you see it stopping? Technically?
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Katie Stockton
You know, so there is a minor level around 410 which maybe that is tested soon. The problem is that the influence of the market is very real on the chart of Tesla. Right. So as he bought it and it went down that was probably mostly related to the market. Right. Not something specific to Tesla. So the Market influences are very real. And I think it largely depends on whether you think the equity market can continue higher from here after such a strong move as to what kind of gains we'll see, at least in the near term.
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Melissa Lee
Hmm. If you're a believer in Elon Musk and his vision of the future, are you an investor in Tesla or you investor in the Space X IPO to come?
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Dan Nathan
Probably Space X, and partially because I think these companies will ultimately merge, if you think about it. And you know, if you think about this incentives that Tim just mentioned that he had for Tesla when that came out, I mean, there was not really a whole heck of a lot of talk about Space X and the valuation was coming out and that valuation has been skipping higher, you know, went from 250 to 500 to where they're talking about right now. And he's going to have similar incentives as it relates to Space X. The other thing, thing that's really interesting came out, I think the information was reporting this the other day that in a secondary sale, obviously in the private markets, Elon bought $1.4 billion worth of stock in Space X. Now, if you go back since the IPO of Tesla, what was this? This was, I think either late last year or early this year. And it's kind of indicative of what he used to do with Tesla. They used to have all these different offerings. This is, you know, after their ipo, secondaries, converts, that sort of thing. He used to buy on all of them, like when the stock, when they were like not producing a whole heck of a lot of cars. This is 11, 12, 13, that sort of thing. So I think that actually bodes very well. He's obviously all in. He's obviously going to be the first trillionaire out there. He's got a couple of different levers in which to play it. And so why not buy in if you have this vision of the future that he has.
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Steve Grasso
Dan. Sorry. Dan brought up an interesting fact when you said, what are you more excited about? And he said, I think they merge them. I think that's the only way that he actually gets his pay package. Right. So the trail to getting that trillion dollar paycheck.
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Melissa Lee
Yeah.
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Steve Grasso
Is merging every company that he's ever thought about.
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Tim Seymour
Isn't Tesla cheaper?
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Melissa Lee
I mean, that's, that's a backdoor way into Space X. Right, yeah.
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Tim Seymour
So that's why here.
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Steve Grasso
Yeah, yeah, I would say that's what that was my point.
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Melissa Lee
But thank you for more and I would. Tesla bulge monster. Jean, great to have you with, with Your of course managing partner, Deepwater Asset Management, somebody we would never replace with. Claude, by the way, what was your take on the quarter and why do think the stock is higher?
- [11:01]
Gene Munster
Melissa? The stock is higher probably because of this margin piece. It was essentially 19.2% was the outermost garage ex credits. Dan did mention there was some noise in there. If we back out that noise, we're still looking at a high 18% number. That compares to 17.9 in the previous quarter. Now stick with me is that deliveries were down 14% quarter over quarter. Typically when deliveries decline then you have lower gross margins on auto. And so I think that that was kind of the initial reaction once the numbers came out. As investors were looking at that, we saw that 4% pop. As I dug through the numbers, a couple themes really reinforce this idea that they're doing well when it comes to physical AI. But I want us to underscore how early we are. And so based on me looking at the charts in their shareholder deck, they probably grew their FSD miles 93% quarter over quarter and they doubled their paid miles for the Robotaxi. But I want to quickly put those into perspective is that sounds great. They're doubling right now Tesla as those doubling on the FSD miles. That accounts for about 0.2% of total miles driven in the U.S. it still is just a fraction of a fraction when it comes to autonomous miles driven. If we take what Waymo is driving and what we just reported with Tesla, it accounts 2.5% of the total ride share miles. So very early last fun fact. If you look at the Robotaxi paid miles driven and compare that to Waymo, waymo is about 50 times bigger.
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Melissa Lee
Wow, that is a fun fact. Gene, I want to ask you about the transition or you know the increase in production that we'll see in Optimus and how it will impact sort of what is going on elsewhere in the company. In the, in the shareholder deck, there was some language around turning off basically a couple of lines of vehicles and putting Optimus in there. What does that mean in terms of margins and just sort of mix shift as this transition happens?
- [13:11]
Gene Munster
Well, the units are going to be just so small. Of course, Elon's talked about that million optimists for calendar 27 and we all know how to kind of factor in that million number. And so I think that this is really about storytelling related to what they can do. Even they're in physical AI. It is storytelling today. But if you fast forward five, 10 years from now, I think there is going to be some substance around this humanoid opportunity. As far as your question about the impact to margins, since units are going to be still so small and the investment relative to everything else they're doing is still relatively small, I wouldn't expect too much disruption there.
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Steve Grasso
Gene, when you look at this, you sound like you still look at it as a car company and you're still factoring in car and delivery numbers and pricing overhang on the story. What are you most focused on for the future? And do you just buy this stock as an access point to Space X?
- [14:05]
Gene Munster
I think you had it right in the setup here, Steve, that this, it's not a car company. I talk about that because those are important because deliveries are part of the network that eventually they can monetize through FSD and kind of car production is a way that they can build robotaxis that can further monetize that. So yes, I think that this is a physical AI company. I think we're starting to see the substance in these numbers. They are very small right now. And as far as like an access point to what's going on with SpaceX, you know, this relationship eventually is going to come together. I agree, Dan, with your commentary on that. It's probably a couple years out and I just want to come back. I mean, my thesis on SpaceX is this is not going to. They're not going to position themselves as like a space company. It's going to be a sovereign AI company. And Tesla is. This is essentially the physical AI piece. You really can't have sovereign AI unless you have the whole story, unless you have a physical AI piece. And they need Tesla to do that.
- [15:04]
Dan Nathan
Hey Gene, you know, you gave a great example why physical AI is really, I guess, really a big part of both these stories. Right. And ultimately they're going to merge together. It's going to be one big story. Where else are you thinking about that as a play? Right. If we think about AI in general, we kind of have the ecosystem down here and you know, it's the components go in the servers and they go in the racks and they get cooled and they go in the data centers, all that sort of stuff. But where else are you thinking about this and as this kind of broadens out away from just data centers?
- [15:32]
Gene Munster
Well, I mean, AI is a theme and then within that we have sub themes. And the probably the most exciting sub theme right now is energy, I think. And then separately optics. And on the energy side, some of those companies have gotten bid. There's some companies that are really boring companies that traditionally we wouldn't look at. We have an ETF Loup that invests in these smaller sub 500 billion companies that kind of play into this. But safe to say is that what we're hearing, what we're seeing in the Tesla numbers today and what we've seen more broadly from TSM and ASML last week is that I think we're still early and I think that this energy piece is going to be an underappreciated for probably a matter of years in terms of the investing community or will soon be appreciated in the coming years.
- [16:23]
Melissa Lee
Jean, keep us posted on the conference call that gets underway in just about 15 minutes time. Elon Musk should be on it. Jean, we'll check in with you later. Thanks Munster. Meanwhile, the proverbial picks and shovels of the trade leading the NASDAQ to new records today. Chip stock stocks for one soaring the SMH ETF hitting an all time high led by big breakouts in Micron, AMD and Broadcom. The memory stock darling is also making big moves. Sandisk, Seagate, Western Digital with outsized gains, Brown hills, new DRAM ETF. Yes there is a DRAM, there is an ETF for everything. But that is seeing more than $1 billion of net inflows in just 10 days and strong earnings. And guidance from data center provider GE Vernova this morning lifting names like Constellation Energy, Talon, Eaton as well. So what do these moves tell us about the trade? Where do you see strength? Katie?
- [17:12]
Katie Stockton
Gosh, I mean mostly semiconductors as you mentioned. So I went into the S&P 500, I sorted it by month to date returns and every one of the top stocks is a semiconductor stock of different varieties. But it's just a broad based move within the complex and it really needs to sustain itself in order for the market to sustain its rally. We do have a lot of breakouts on the charts. These breakouts are not confirmed yet though. So what we like to see is more than just a week above but a second week above. We don't want to see the gaps from last week penetrated very quickly. That's another thing for folks to watch when you see these very fast and furious rallies like we have done. They're more often fragile sort of counter trend. So with that in mind I just be managing risk but but hopefully enjoying the returns while they're here.
- [18:03]
Tim Seymour
And Katie, where is that breakout on Nvidia by the way? Because I think if we get a breakout in a video lookout is my view. And the move on semis While you're checking that, what's that chart level?
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Melissa Lee
Because for.
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Katie Stockton
Yeah, so for Nvidia the resistance, the final resistance is around 212 but Broadcom is already through equivalent resistance. So I see them almost as one in the same just by the way they act. So I'm sort of treating Nvidia like it's very close to all time highs, treating it as a pending breakout with the rest of the group and indeed, I mean it's really lifted the major indices in a meaningful way. So we're going to translate what we see in the semis to that. But there are very widespread short term sell signals from the demarc indicators and these are the first sell signals that we have seen on the way mark and they show exhaustion and they are pretty timely in general and they only have short term implications on the daily charts. But for about two weeks we'd expect consolidation.
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Dan Nathan
It's so I mean this is what you do and you talk about DeMarcus and exhaustion and all that. I just look at things like Micron that breaking out up 8 1/2 percent. It doesn't seem like there's any slowing down there. And the SanDisk, it's up 70%, you know, in less than a month or so. And I think all of us have been around in the markets for a while and you know, you can call something a bubble. It doesn't mean you're calling the top, it doesn't mean you're saying that, you know, the fundamentals of these companies that are rallying these ways don't make a lot of sense. But you know, at the end this is a bubble and it will burst. And so a lot of folks, you know, are only things and it's fabulous. And you just said about ETFs and these things are becoming outsized positions in a lot of different ETFs and that's a great way to participate it. But make no mistake about it, I mean there is idiosyncratic risk in some of these things. Of a sandisk goes from $20 to $1,000 in a year. If it were to go from a thousand to five hundred you should not be surprised if that happens at some point.
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Steve Grasso
So I thought that Micron topped out mid March and I look good for about a month and now it's overtaken that level. This is something where it's 75% DRAM, 25% NAND and if you look at it, Nvidia's chips, they're riddled with HBM high bandwidth memory that's where Micron has their sweet spot. I do believe this is in a quasi bubble and I wouldn't be a buyer here in my micro.
- [20:19]
Melissa Lee
Coming up, we'll keep an eye on shares of Tesla in the after hours. The conference call about to kick off. We'll be listening and bringing you all the headlines from that as well as the other reports tonight. But first, Boeing soaring on its own Report this morning what the CEO had to say about 737 production that had shares taking off. Don't go anywhere Fast money's back into.
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Katie Stockton
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Katie Stockton
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Dan Nathan
Hey, how's it going?
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Tim Seymour
Yeah, good. Thanks.
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Katie Stockton
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Melissa Lee
Welcome back to fast money. Boeing flying to the best gain of the year after reporting better than expected results for the first quarter. The planemaker seeing a narrower loss on increased deliveries and improvements in the defense and services parts of its businesses. CEO Kelly Ortberg spoke to our Phil LaBeau about the ramp up in production and its cash flow goals.
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Tim Seymour
I think we posted a better first quarter in terms of free cash flow than we anticipated. So we're on track for a second half positive cash flow and a full year positive cash flow. It's all a part of our recovery.
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Melissa Lee
He also talked about potentially the meeting between President Trump and Xi yielding some new plane orders which could benefit Boeing. I mean you've been in this one for.
- [23:23]
Tim Seymour
I love this one and boy I wish it was the B in Timbo.
- [23:26]
Melissa Lee
It's not, it's not. What is the biogen.
- [23:28]
Tim Seymour
I mean I just been fine but I mean this is Boeing's time to shine and. Yes, but Boeing was on the beauty tour with President Trump to a year ago or at least around, you know, tariff dynamics and it should be. There's no question we know how important the company is in terms of what's going on in aerospace and manufacturing. We know about the duopoly. But the most important thing here is this company is generating free cash flow. We heard about Capex. It's kind of in line with where we thought it was going to be be. It's not getting out of control. I think you know that that's really the story. I think the margin beat is, is something in BCA that's very important and I think that's something else. If you can get a margin story on top of that, that free cash flow starts to become a bigger story.
- [24:12]
Steve Grasso
They're out producing Airbus. I think you know, head to head competition there. And if you look at the stock itself, it is about free cash flow, return to positive free cash flow. CEO says that they're looking for the back half of this year or 2026 to actually get there. That's what you're buying the stock for? I bought it below 200, sold it in the 2 30s. I am not got back in. I think the lid on the stock right now is probably 250.
- [24:36]
Katie Stockton
You agree? It looks like it. Well, it looks like a big six year basing phase, doesn't it?
- [24:41]
Melissa Lee
Yeah, longer the base. Base.
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Katie Stockton
That's right. So. So on the monthly chart, the cloud model that I use, Boeing is actually breaking out like today. So even though it's not clearing previous highs, which would be a more traditional resistance level. This could be a breakout for Boeing, assuming it's confirmed. And then the next resistance would be at the top of the range around 278 looks good.
- [25:05]
Melissa Lee
Coming up, more earnings action. The results moving IBM ServiceNow and more. But first, cannabis stocks smoking today. New hope the Trump administration will reclassify marijuana. Is this time finally different? Can the trade keep rolling higher? You're watching Fast Money live from the NASDAQ markets at Times Square. Back right after this,
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Steve Grasso
It feels good to geico.
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Melissa Lee
what made you confident that you could do something that hadn't been done before? I have no fear of failure.
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my favorite pieces of advice Think about
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Melissa Lee
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- [27:00]
Melissa Lee
Back to Fast Money Cannabis stocks lighting up today and reports the DOJ is getting ready to reclassify marijuana as a less serious Schedule 3 drug soon. The president signed an executive order to loosen federal regulation of the drug back in December, though efforts to reschedule have stalled in the past. We've had these reports come out in the past stocks rally. It doesn't happen now What? Tim, is this time for real?
- [27:24]
Tim Seymour
It really looks like the DOJ is ready. There had been some buildup on this news in the last week that that President Trump was really Kind of asked, and it was almost like, yeah, we need to. We need to get done what I said we were going to do. This executive order was formed months ago. And to remind, reclassification effectively takes cannabis from schedule one to what we don't totally know. But, yeah, I mean, Schedule 3, which would certainly remove punitive tax dynamics for the sector, which means that companies would be generating a lot more free cash flow. And it's also notable that a lot of the companies have essentially withhold taxes payable, seemingly have discussed this with the irs, and so have already kind of begun this process of at least feeling like the world had changed for them. But. But the executive order was four months ago, and this issue went so quiet. So the fact is, this is moving very, very fast. And this is finally, to me, at a place where the doj, who has to still work out some details on what reclassification actually means. It's. It's a very exciting time for a sector where people, as you said, have been through these headlines before. This does not federally legalize. Do not expect federally legalized. I'm not even sure in my lifetime. I'm not sure that that's important here. I think the most important thing is the profitability of the companies. Obviously, access to capital markets, exchange listings. Opening up the market to traditional investors is the next step.
- [28:45]
Melissa Lee
All right, we've got a news alert out of Washington, and the Senate Banking Committee, Emily Wilkins has got the details. Emily?
- [28:51]
Emily Wilkins
Hey, Melissa. I just spoke with Senate Majority Leader John Thune, who said that the Senate Banking Committee will be going ahead and opening up an investigation into cost overruns with the Fed building construction. And this could potentially provide that off ramp that everyone has been looking for that would allow Senator Thom Tillis to vote for Warsh if and only if, of course, the Department of Justice ends their criminal investigation. And we should just be clear here. There are kind of sort of two different things that are closely related. A DOJ criminal investigation into Powell's testimony over the cost overruns, and then this proposed Senate investigation into the cost overruns. That would not be criminal. Technically, they could both go at the same time, but at this point, everyone in D.C. is trying to figure out what that off ramp is. That would unlock Tillis's vote and allow the committee to move the Wash nomination onto the floor and get him confirmed. Ideally, of course, before the May 15 deadline. That would be Powell's last day. If, of course, there is no one. There is no one to replace him as chairman.
- [29:52]
Melissa Lee
Guys, Emily, thanks. Emily Wilkins. Coming up, a lot more earnings action to bring you the after hours moves in. IBM service now and more and all the numbers when Fast Money returns.
- [30:05]
Dan Nathan
Missed a moment of fast.
- [30:06]
Financial Advisor/Empower Representative
Catch us anytime on the go. Follow the Fast Money podcast.
- [30:10]
Tim Seymour
We're back right after this.
- [30:19]
Melissa Lee
Welcome back to Fast money. Stocks jumping after President Trump extended the US Cease fire with Iran. The S and P and Nasdaq both jumping more than a percent, closing at fresh records, the Dow climbing nearly 350 points. WTI crude settling just below $93 a barrel. Bitcoin meantime taking a leg higher today. The trading around $79,000 and up more than 15% over the past month. Etherium climbing as well and crypto adjacent names like Robinhood, Coinbase Strategy. They were also up some after hours action. Shares of Lululemon down as the company announces a former Nike exec would be its next CEO taking over in September. Lulu is looking to turn things around after a rough year with shares down nearly 40%. On the earnings front, Southwest falling after missing EPS and revenue estimates. Texas Instruments jumping after topping expectations, hiking Q2 guidance, rail company CSX higher after beating earnings estimates and LAM Research beating both on the top and the bottom lines and hiking Q4 guidance. Meanwhile, we are getting the first read on tech and software earnings for the first quarter tonight. IBM and ServiceNow both down sharply after reporting results after the bell. John Ford has the latest on those numbers.
- [31:27]
John Ford
John was a rough reaction for software. Maybe it's investors rethinking the idea that the bottom is in and around. Negotiations will take oil price pressure off. That optimism had some software names bouncing for the last two weeks. So IBM first it's off about 6% here trading at levels from around April 10. CEO Arvind Krishna telling me today it's prudent to maintain, not raise guidance despite the strong quarter given that macro uncertainty. The software business was up 8%. Constant currency for IBM. Red Hat did rebound a bit for them. And then you've got ServiceNow that is down 13% right now despite solid growth and a guidance raise. CEO Bill McDermott telling me their rule of 56 they're confident they're leveraging AI. Annual contract value of customers spending $1 million is up 130%, 5 million plus is up about 80%. Now. Bill McDermott himself is going to be on with Jim Cramer in Mad Money. I know he'll have more to say about what he thinks investors are missing.
- [32:32]
Melissa Lee
Melissa but to be clear, John, they are both both companies are acknowledging that there is an impact from the war from energy shocks on their outlook as well as what they've seen so far in the, in the second quarter in a way.
- [32:44]
John Ford
So the reason I'll say in a way is what Arvind Krishna is saying is we really don't know what the long term impact of that will be. So given that it's just Q1, we're not going to raise our guide now. So not so much that he said seeing the impact, but just that he might see it now in McDermott's case with service now, yes, for data centers, we even saw some data centers getting hit by Iran. For those installations there is an impact, but he had already talked about that. So that's not new information that wouldn't necessarily justify specifically this reaction.
- [33:19]
Melissa Lee
All right, John. Thanks. John Fort, what do you make of this? Obviously it'll be interesting to see how it plays out in the software trade. IGV trade tomorrow.
- [33:27]
Tim Seymour
Yeah, I mean look, it's been, it's been a fantastic bounce in software, I guess. You know, I think some of the concern around the, the war and energy costs is something that has been a later part of the software trades down. I still think it's about people just don't know what to do with the companies that have big multiples going into this. On IBM, I think expectations were very high, especially on the software side, but consulting was light and I think that was something that else it's not terribly cheap here. It's certainly been a very good run for IBM that for a long time we said was a big underperformer.
- [33:58]
Melissa Lee
Quick on the charts, Katie.
- [33:59]
Katie Stockton
Yeah, for software in general, I mean we've seen a nice bounce as to mentions, but it's not enough to suggest that they're done going down. We need a series of retests and this could be one of them. When I look at ServiceNow, it's not likely to break down on this move, but a retest can be pretty severe.
- [34:14]
Melissa Lee
All right, we got some more breaking news out of Washington we want to get to and the Secretary of the US Navy, Amy Jabras, details on, on this one. Amen.
- [34:22]
Amy Jabras
Melissa. The Pentagon says the Secretary of the Navy John Fellon, is stepping down from that position. The statement here from a Pentagon spokesperson is short and sweet. It says simply, secretary of the Navy John C. Phelan is departing the administration effective immediately. On behalf of the Secretary of War and Deputy Secretary of War, we are grateful to Secretary Fallen for his service to the department and the United States Navy. We wish him well in his future endeavors. Under Secretary Hung Cao will become Acting Secretary of the Navy. So no explanation given for this unexpected departure of the Secretary of the Navy. Melissa and no recent flare ups that would suggest anything in public that might be precipitating this right now. CNN did have a story earlier this year that said that Phelan had been spotted on Jeffrey Epstein's plane years ago. That may be entirely unrelated to this, though. It is unusual to replace the Secretary of Navy in the middle of an active war, particularly a war that involves naval operations in the Strait of Hormuz. So we'll push the White House for some more detail on what exactly happened here. Back over to you.
- [35:37]
Melissa Lee
Keep us posted. Eamonn thanks. Eamon Jabras let's get another check on Tesla. The stock just taking a leg lower. Elon Musk Musk making some comments about capital expenditures. I leg lowering mean down a percent or so. Let's bring back Deepwater managing partner Gene Munster for more. Down a percent from where it was. It's still up. Gene, what's the latest here?
- [35:54]
Gene Munster
Melissa Elon started the call talking and the first thing he said was that we're going to be making substantial increases in our capex investment and that will down the road have substantial increases in revenue. And if you think about just kind of the reason, the takeaway here is not only should we expect a meaningful step up in their capex and is the fact that he's highlighting that at the beginning of the call he doesn't want to hide from that. And he talked about investing and really across all of their businesses, batteries, AI training the and the chips all the way down to new storage opportunities. And so I think that you know, investors are kind of getting their hand. He did say something like, you understand this because this is what all the other big tech companies are doing. And so right now investors are just going to try to wrap their heads around how much is substantial.
- [36:45]
Melissa Lee
Yeah, a number would be good. Gene thanks. Keep us posted. Down up 2% right now. I mean I say that seriously though, I mean we want to find a number out in terms of this math. I mean is it the scale of the other hyperscalers that's hundreds of billions of dollars.
- [37:01]
Dan Nathan
But, but do investors care? I mean like that's the thing. If Elon's going to spend their money and you know, it's shareholders money, then you place this, this faith in already. Right. And so like we shouldn't assume that he's probably doing the right thing to achieve the goals that he wants to achieve. I mean I'm not, you know, Endorsing, I have no idea to your point what the numbers are, but if he came out and said they're spending $50 billion on CapEx over the next 12 months, I don't think the stock would get hit. You know, I think it's just kind of giving some clarity. I mean, you know, Amazon is going to spend $85 billion or I don't want.
- [37:30]
Tim Seymour
The thing that's difficult about this is we don't know for which business we're talking about and again there's, there's four or five different verticals here that are all part of the exciting pure AI story and we don't know where this could be going in addition to not knowing the number. So when I hear about it from Microsoft, I hear about it from Metta and I hear about it from, you know, we have some understanding of what this means in terms of infrastructure, especially around cloud and the chip side of it and building those platforms we don't totally know. I agree with Dan in that Tesla, historically the detail has not mattered and I'm sure there'll be a lot of goodies on this call that will get people excited.
- [38:08]
Melissa Lee
So far we do have a couple more headlines from the call which is about 11 minutes in at this point. Elon Musk saying Optimus with the company's biggest product. Also that Tesla has a pipeline of major improvements to full self driving that will lead to unsupervised full self driving which I guess is you know, the holy grail when it comes to.
- [38:26]
Steve Grasso
Yeah, that's the linchpin when you talk about Robotaxi and when you look at these funding or Capex, it's return on investment that the investors are worried about. But if we talked about that circular financing within the Tesla network or within the Tesla ecosystem, I don't know what's legal, what's not legal there. Can he just borrow from another company, invest it into another one? Is he self funding, whatever. Capex?
- [38:53]
Melissa Lee
Are you questioning where the Capex dollar is coming?
- [38:55]
Tim Seymour
Yeah.
- [38:55]
Steve Grasso
So that might change a lot of cash flow.
- [38:57]
Melissa Lee
I mean they can use their cash
- [38:59]
Steve Grasso
and he could use it from wherever. Wherever he borrow.
- [39:01]
Melissa Lee
Right.
- [39:01]
Steve Grasso
He could use it from wherever. So I don't think it's a reason to sell the stock. I think it's a reason to get more excited about the ecosystem.
- [39:07]
Tim Seymour
He could issue equity, I mean, you know, there's seem to be, that's going on. There could be converts, there could be different things. And building a war chest right now in terms of the capital markets is something we've seen out of Mega Cap tech, sure, Definitely.
- [39:21]
Melissa Lee
The stock Tesla is up by about 1 1/2 percent. We'll see how this conference call plays out and what else Elon Musk has to say. Coming up, one rental car company pulling a ue big drive higher while shares of Avis are pulling back after surging 350% over the last month. That's when he back in two. Welcome back to Fast Money. The tires on the Avis trade finally going flat today.
- [39:51]
Steve Grasso
Oh, boy.
- [39:51]
Melissa Lee
The car rental stock falling almost 38% but still more than tripling just this month. Two hedge funds have recently bought heavily into the stock, according to SEC filings, now holding about 70% of shares. But still short sellers keep keep piling in with short interest now standing at more than 60% of the float. This according to S3 partners. The Chartmaster was out with a note this morning saying sell it all. He said today is the day. And after the bell said there could be days or weeks more pain to come given the heavy volume that we saw today's session. I mean, this is, I mean, it's almost like they took a page book out of Roaring Kitty in terms of the Gamestop short squeeze.
- [40:29]
Steve Grasso
Yeah. I mean, the first thing to look at is the short interest whenever you buy a stock. And it could be a bullish theme and most of the time it's a bearish theme. This stock fundamentally is in trouble and then you get people chasing it and it creates that sense of urgency of that meme stock approach to it. But don't confuse the price action with the fundamentals. This business is in trouble. And it was usual. It's usually sparked by some bullish headline that gets everyone feeding frenzied on it.
- [40:57]
Tim Seymour
I feel like Avis has been a meme stock since before Roaring Kitty kicked the slats out of his litter box. I mean, this is definitely one that, you know, the story here is certainly one of, of structurally broken and how it got here. Again, I'll leave it to the hedge funds that are on the other side of this trade, but not one I'd get in front of.
- [41:18]
Melissa Lee
All right. Meantime, the broader transportation sector in which Avis is a part of took a hit today. Dow Transports falling 8% but still up since the start of the Iran war. So, Katie, what do you see in the technicals here?
- [41:29]
Katie Stockton
Yeah, so I mean, they're major breakouts on the monthly charts of transports and that even includes some of these beleaguered names previously. But to me, it's overdone in the short term and I think Avis is exemplary of that. Today we have outside down days for Avis for also the Dow Jones Transportation average and Avis was down I think about 50% intraday. And of course that's going to be a drag on the index itself. Self down more than 8% today. There's still another 8 or 9% room to initial support for the transports. However, once we see a deeper pullback, I think that's going to be a really compelling entry point for the transports because when you zoom out and look at the long term setup, you'll see a major breakout. And just as important, we also have a major bullish reversal in the transportation average relative to the S and S&P 500. If you look at the curvature of the 200 day moving average, you'll see that it has turned to the upside. So it follows multiple years of underperformance for these names. And if you dig into the group, you'll see some really interesting setups among the shippers. UPS is an interesting turnaround longer term. Kirby, which is a marine shipping company, has a nice setup as well. Good momentum there. JB Hunt and a lot of the truckers also have major breakouts that just a little bit overdone.
- [42:50]
Melissa Lee
In the near term people might listen to you, Katie, and think, okay, I believe that I'll go to iyt. But the construction is completely different. Transport is market cap weighted, right? IYT is not, I think. So the impact of Avis, for instance on transports is huge. The impact on IYT is very small. So what do you see for IYT?
- [43:13]
Katie Stockton
We always have to break apart the ET ETFs and know what you're buying when you buy them. There's the same problem with some of the consumer discretionary areas where you have no idea really what the underlying are and you could be buying something totally unrelated to Amazon and the things that you're going for. So I y t is really nothing like the transportation average and the way it sets up. So I'd keep that in mind. It wouldn't be the best way to position for what we feel as an entry following this major breakout.
- [43:39]
Melissa Lee
Coming up, the pops and drops. In today's session we are digging into the moves and best by Philip Morris and Masco. All the headlines moving those names when fast Money returns. Welcome back to Fast Money. Shares of Best buy tumbling almost 5% after the electronics retailer announced a CEO transition. Jason Bondfig, the current chief customer, product and Fulfillment Officer, will take over from Corey Barry on October 31, he started at the company in 1999 as an inventory analyst. Barry has served as CEO since June 2019. Shares are basically flat under her tenure. What do you think of Best Buy Grasso?
- [44:20]
Steve Grasso
So when I look at it on a chart, it doesn't really give you that much clarity. But I would have to assume that margins with the expense of memory chips and the expenses all around the process, everything that they sell, margins should be crimped. So I wouldn't be a fan of jumping in at this price level.
- [44:36]
Melissa Lee
All right. And tobacco giant Philip Morris jumping almost 7% despite giving disappointing second quarter earnings guidance, cutting its full year forecast. The company behind Marlboro and Zinn tobacco nicotine pouch I should say did beat on the top and the bottom lines for the current quarter thanks to strong sales of smoke free products as a major driver. Tim?
- [44:54]
Tim Seymour
Yeah, I like this one. Kids at home, I don't like you out there with the tobacco. I do think that the, the heated tobacco as a product category was a nice beat. Zen slippage. A little bit free cash flow. Fantastic. This is continually a story of these guys having better numbers than the street was expecting from them. And I think it's a stock along with Staples that have actually sold off a little bit going into today's move. I think you stay in this one.
- [45:21]
Melissa Lee
All right. Shares of home improvement company Massco having a banner day. Up almost 11%. The company inflates its earnings report, seeing improving demand particularly in its plumbing supplies business. Quarterly earnings and revenue both beating estimates. Shares are now up 26% over the last four weeks. Katie, how does the chart look?
- [45:39]
Katie Stockton
Nice. Gap up today. So I'd watch that gap and it's around 73. Wouldn't want to see it fall right back within the gap. To me it's a longer term range, but short term upside within that range.
- [45:51]
Melissa Lee
All right, want to go back to Gene Munster. We got some more commentary from that conference call. Jean, what's the latest here?
- [45:57]
Gene Munster
So we did get that number, Melissa. In terms of what that Capex looks like, it sounds like 25 billion this year. That comes from like up 8. From like 8 billion or so last year. So pretty big step up year over year. I'm scrambling to see where the street was at, but you kind of saw shares kind of drift lower. The tone on the call is basically, trust us that we've made these kind of investments in the past and they've paid off handsomely.
- [46:23]
Katie Stockton
Right.
- [46:23]
Melissa Lee
And free cash flow will be negative as a result.
- [46:25]
Gene Munster
That's correct. Yep. For the next three quarters.
- [46:28]
Melissa Lee
All right Jean, thanks for keeping us posted. Jean Munster and as Jean had mentioned, we went from up by about 4% on the back of the earnings results to about up about a half a percent, quarter of a percent as a conference call is about 55 minutes in. Up next final trades, Final trade time.
- [46:56]
Tim Seymour
Timbo Constellation Energy along with the other high octane parts of the market this once was and I think they are trading together but the fundamentals support this one.
- [47:03]
Katie Stockton
Katie Stockton I have to go with Boeing. I like its long term potential on the chart.
- [47:08]
Melissa Lee
Great to have you on the desk tonight.
- [47:09]
Dan Nathan
Katie Dan yeah, IGB software ETFs had a nice run here. I think tonight's results suggest you probably let this one go.
- [47:17]
Steve Grasso
Steve United Airlines been in the news for probably the last week or so. I like it down 5% today, better entry level United Air thanks for watching.
- [47:26]
Melissa Lee
Fast Money Mad Money with Jim Cramer starts right now.
- [47:35]
Narrator/Advertiser
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- [48:07]
Financial Advisor/Empower Representative
Men are struggling with their mental health at some of the highest rates we've ever seen, but most aren't getting the support they need and and that needs to change. I'm Dr. Guy Winch, your host for season three of the Visibility Gap, presented by Cigna Healthcare. This season we're focusing on men's mental health, bringing together real stories and expert insight to explore the pressures men face every day and why opening up can feel so difficult. Join us for the new season wherever you stream your podcasts.