← CNBC's "Fast Money"
CNBC's "Fast Money"
The Health Of The Consumer… And An Old School Options Action On Apple 5/7/26
00:40:35
Consumer health in focus, as companies sound the alarm on spending. What we’re hearing out of fast food chains like McDonald’s and Shake Shack, and how even gyms, pet companies, and consumer staples are seeing signs of a pinch. Plus the latest results out of Coreaweave and Coinbase, the state of housing with the spring season underway, and The Chartmaster Carter Worth and Mike Khouw tag team an old school Options Action on Apple as the tech giant trades at a record high. Fast Money Disclaimer
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- [00:01]
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- [00:28]
Karen Finerman
Member
- [00:32]
Fidelity Advertisement / Marine Corps PSA
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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, the true tale of the consumer. What the massive moves lower in Shake Shack, Planet Fitness and Pet Med companies. A wedding. Tell us about who is spending now and what it means for the economy and the markets. Plus a slew of after earnings, after hours earnings from semis to crypto, from travel to health care. We'll dig into the numbers behind all these moves and bring you the trades and housing headaches. Whirlpool slashing guidance and homebuilder stocks sinking. We'll talk to Zillow senior economist about what he sees next for the industry and how much longer the pain could last. I'm Melissa Lee, come to you live from studio. Be at the NASDAQ on the desk tonight, Tim Seymour, Karen Feinerman, Mike Cohen, Person Day 2 and Carter Braxton Worth Stocks closing near session lows even after the Nasdaq and S and P hit fresh intraday records early in the day. And as we look under the surface, a couple of earnings reports paint a mixed picture for the consumer. First, there was McDonald's seeing a pullback in its lower income consumer who it expects to face continued pressure from higher gas prices. The fact the fast food giant did beat first quarter estimates though, as it gained share among wealthier households. That coming at the expense of chains like Shake Shack, whose shares posted their worst day ever. Earnings, revenues and margins all contracted in its latest quarter. The company pointed to weather disruptions plus shrinking tourism in the US And Middle east with higher beef prices also having an impact. Consumers also don't seem to be trading burgers for healthier habits. Planet Fitness plunging over 30% to close at April 2020 lows after cutting its full year outlook. The company seeing slower member SC and pausing price hikes for its higher end black card plan. Even Man's best friend is feeling the pinch. Animal health company Zoetis hitting levels last seen January 2019 after its report the CEO flagging growing price sensitivity among pet owners who booked fewer vet visits and opted for lower cost care options. And just yesterday Kraft Heinz sounded the alarm on the consumer saying shoppers are running out of money and dipping into savings in the current environment. So what do all these signs of the consumer mean for the macro picture? Tim, what are your thoughts here?
- [03:08]
Tim Seymour
Well, it was two weeks ago we heard that Domino's actually told us that the consumer sentiment was was at the lows they had seen in Covid. That sounded shocking except for when McDonald's says things are not improving and they might be getting worse. You combine that, we got a final Michigan consumer confidence that was effectively record lows back to 78 in the final print. We're back to hearing what you know, we love these special terms and phrases and metaphors. I mean the K shaped economy is very K shaped and special K probably is to tell us that. So I mean I think it's real. I think it's real. And I think the companies that have the ability to be resilient like a McDonald's with their the Super Mario meal you love to go out and buy, you know, I mean who doesn't? I mean but in other words, they have ways to get around it and to actually price up a little bit. They're going into beverages we hear. But there's no question add in student debt. You know, we heard from Warby, Warby Parker, student debt. We've heard about unemployment that's starting to take place in lower income consumers, but also just call it first, second job out of the market. So there are different dynamics here. And what everybody says and seems to say is they think that their energy costs are going up at least another 50, 50 cents to a dollar in the next year. So they people likely feel what the CEOs in the energy sector are saying, which is that you ain't seen nothing yet.
- [04:27]
Melissa Lee
Yeah, I mean gas prices above 450 a gallon at this point. Insurance costs are also up, which is weighing the consumer here. Mike.
- [04:33]
Mike Cohen
Yeah, I mean and in some areas, of course gas prices are substantially higher than that. I mean I'm visiting, I live in California. Premiums more than seven bucks a G where I live or at least it was when I left. It's probably closing on 8 by the time I get back. That's how fast it's going.
- [04:47]
Tim Seymour
Premium 87, 89 or 90. Are you like a 94 guy that's 91.
- [04:52]
Mike Cohen
They don't have 94 in California because they have special formulations, which is another problem actually for them on the energy side. Well, they have proprietary formulations for gasoline. That's one of the reasons why the prices are so much higher there. But it's the most populous state and it is a state that has a lot of drive throughs. It is a state that is sort of known for fast food and you know, the prices for many of these things had already gone up. So the consumer is being pressured by higher beef prices and all the rest of it even before the gas prices hit. And that's the thing that has both the most immediate but also the most visible effect on consumers. It is something that is going to set them back a little bit. They look at it, they have shock.
- [05:27]
Melissa Lee
Yeah, Karen.
- [05:29]
Karen Finerman
So I think we're going to see more and more. I think it's not getting better. Regardless of whether we're in a ceasefire or not. I think we're going to see this oil thing for a while. And I think there's this. The real K of it is the top of the K. They're long stocks so they feel very different than someone who is, you know, really the percentage of their overall spend which is spent now on gasoline is relevant and expensive to them where that same, you know, upper end of the K who's in the market, not so focused, not so sensitive. So I think we're going to see things like we saw, I think like for something like a kava coming up in two weeks. Yeah, I think that that will, you know, we saw Shake Shack and I think of those as similar.
- [06:16]
Melissa Lee
Right.
- [06:17]
Karen Finerman
Sort of the, you know, price point desire. Right. I think we'll probably see some pressure there and I think, you know, something like Tapestry, which traded. I don't know if we'll get to it later. I forget, I'm sorry if it's out of, out of order, but Tapestry, I
- [06:30]
Christina Parsonavilis
thought, wouldn't be the first time.
- [06:31]
Karen Finerman
All right, well, at least if your phone rings, then I'm totally off the hook. But so Tapestry, I actually thought it was sort of muted gu guidance. The quarter actually wasn't bad, but we haven't seen a quarter that really had a full oil move in it. Only partially.
- [06:46]
Carter Braxton Worth
I mean, the real tell to what you're discussing, of course is if you look at the equal weight S&P 500 consumer discretionary sector, which of course the actual sector, Amazon, Tesla, Home Depot, 50% weight. But if you take the equal weight index and look at its Relative performance to the actual. It's making five year lows right now, which speaks to under the surface, obviously Amazon's holding up well, so is Tesla. Generally there are problems that have been going on for a while. This is not a new thing now when you get these drop and gaps like a shake shack and others, it speaks to something that is not likely over.
- [07:20]
Melissa Lee
I mean, what is going on in the market is very much what is going on in the economy in that you have a certain sector that sort of, that stays strong and papers over the weaknesses in the other parts of the market or papers over the weaknesses in the other parts of the economy. And so at what point do you start thinking like this setup is not healthy and we're going to see it come home to roost?
- [07:43]
Tim Seymour
You know, it's great that the top line EPS for the market is going to have one of its best EPS growths after a very strong 25. And that's exactly, you know, we've just come out of the period where you got all the gusto in there. And then I would just get back to parts of discretionary that really are the outer edge of the discretionary dollar and the place where things are tapped. And I go to Athleisure and I go to Lulu and I go to Nike and I go to these places that they're brand specific issues. But there's no question at some point you look in your close, you've got like 15 pairs of running shoes you don't need any more. So I think we're in an environment where we are not even beginning to digest the impact of AI job loss. And I don't know what that means. And I know that's really again fed into the younger, call it demographic of people looking at that first and second job. A lot of them seem to be getting pushed out of the market here. We know that there's a dynamic where the Fed is not that worried about inflation because they kind of haven't told you that they think that I might be putting words in the Fed here, but I think that there's some sense that the labor market could be softening and if we get any sign of that, equities up 26% on the NASDAQ in 32 days. That's a little scary.
- [08:55]
Mike Cohen
Well, you know what is interesting, I was looking at this earlier today with respect to the Nasdaq specifically because that's basically the basket of winners. And I was looking basically at the price of 10% out of the money calls to 10% out of the money puts. And I was comparing that to how that was two weeks ago, a month ago, two months ago and back on January 28th, which was the prior high before the February 28th strikes that took place. And what's interesting is that the bullishness in options for the, for the NASDAQ index right now is higher now than it was in January at the prior highs. So and, but look, 85% of the NASDAQ is those top 25 stocks, which is basically all the big trade right now except for Costco and Walmart, which is also in that basket.
- [09:36]
Karen Finerman
Can I ask Mike a question?
- [09:37]
Kate Rooney
Yes.
- [09:38]
Karen Finerman
So that's skew. Is that, that just doesn't seem crazy to me. Is that a sort of historical high? I know it was higher than you saying January, but over the course of the market and I don't. However long timeframe you want it.
- [09:51]
Mike Cohen
Yeah. So when we. There's a couple different ways to think about when you're looking at options prices, upside calls versus downside puts and also where volatility is right now. So the way most of us think about concern and complacency, we look at something like the VIX index and we can see that's come in. It's actually below the historical average for VIX over the longest period of time, probably 19 and a half is what that is. But that includes a lot of really woolly periods in it. What we have right now is sort of mean volatility at the money, but it's the upside calls relative to the downside puts that are seeing that, that strength. So this is contextual the way I'm providing it right now, which is to say that we were pretty bullish in January, let's be honest. And it's more bullish now. That's kind of interesting. It's on the back of the earnings. That's, that's the story.
- [10:34]
Melissa Lee
Some new data gives more insight into the widening gap between high and low income households. For more on the K shaped economic divide, let's get to Steve Leesman. Steve, what are you seeing?
- [10:45]
Steve Liesman
Hey, Melissa. Yeah. Two studies looking at wealth disparities, one on wages, the other on gas spending, showing the K shaped economy getting bigger and wider. Bank of America, Sorry. The bank of America Institute finding the wealthiest Americans enjoy much bigger wage gains than middle and lower income families on a consistent and you can see their growing basis. That's that orange line there. The report, it comes from actual bank account data found wage gains of 6% year on year for the highest income group. One and a half percent for the lowest B of A. Economist David Michael Tinsley says GAAP could be related to bigger bonuses. Also automation could be. You guys were just talking about this could be undercutting the bargaining power of workers at the bottom end of the wage spectrum. Meanwhile, on the spending side, the surge in gas prices hitting the poorest Americans, as you might expect the hardest. The New York Fed finding that the wealthiest households, they paid more, but they kept their gas consumption the same. Low income families, they cut back on their gas consumption to make ends meet. Overall, you can see here, real incomes adjusted for inflation have been negative in four of the last six months. Inflation taking a bigger bite from those paychecks. Meanwhile, you know, Disney, Starbucks, gm, I looked at their reports. They said the consumer still looks healthy. Of course, Whirlpool saying appliance sales have fallen to recession levels. The head of Kraft Heinz saying today consumers are literally running out of money towards the end of the month. So I guess that's why you got the guys around the table, Melissa. They can figure out how to trade it.
- [12:15]
Melissa Lee
Walk us through what the thinking is in terms of AI. AI has led to inflation in many different pockets of the economy. We see it in memory prices, for instance. We see it in electricity prices, which consumers are acutely appealing. And yet AI in theory should be deflationary in the long run. I guess there's a, a handoff period though, that has to happen.
- [12:38]
Steve Liesman
Yeah, there's a transition period. There's two forces of, let's say, inflationary forces that come from AI. One is, I think the one when it comes to the cost of capital, you're gonna spend a trillion dollars, you're gonna really push up the demand for capital and that raises rates. But there's another thing, and that's the equipment that you buy. And I'm looking now at this index we have, which is an index of inflation in equipment. And that's up like 5.7% in the first quarter on an annualized basis. And that was either negative or zero for much of the time before the pandemic. It popped up. After the pandemic, it kind of came back down, but now it's popping up again. You know, Melissa, there's a calculation I did. If you look at information processing equipment, it's up 33% year over year. But take that out of overall equipment spending and it's just 3%. So it's all in the computer side. And that has it in inflationary impulse before perhaps the productivity seeps in. And then you have a deflationary impulse.
- [13:41]
Tim Seymour
Steve, if we think about the consumer and the inflationary impact, as you said, essentially negative wage growth, are there any readings as the Fed or any of the regional surveys giving us a sense of where this number is going? And I mean if we're extrapolating here, it's going a lot more negative. And what does the Fed think about that?
- [14:01]
Mike Cohen
That.
- [14:03]
Steve Liesman
Well, first of all, it's Melissa's job to pick the winner of the segment. But it was Karen earlier who I would pick and put that on the I would say when she talked about this idea that there's half of the country that owns stock and they're enjoying a wonderful wealth effect and half of the country that doesn't. There's also a part of the folks out there that think somehow you can raise gas prices as much as you raise gas prices and not have any issue when it comes to the consumer. That stuff doesn't disappear. It's out there. It's going to affect people and it's going to have a negative effect overall on spending, but it's going to be offset and probably then some when it comes to the upper income. So it's a very complicated situation. What I think the Fed is going to watch, Tim, is they're going to watch the job market and if the job market keeps on keeping on relatively low payrolls are needed to keep the unemployment rate unchanged in this immigration world that we live in right now. And so what you were going to get is if you stay and maintain a relatively modest unemployment rate, the Fed's not gonna cut not going anywhere especially cause of the upward push when it comes to gasoline prices and some of the other factors we've already talked about.
- [15:11]
Melissa Lee
All right, Steve, thank you.
- [15:14]
Tim Seymour
Steve Liesman and Steve calling what we always should be calling. Karen's usually the one.
- [15:18]
Melissa Lee
Karen's always the winner.
- [15:19]
Julia Boorstin
Thank you.
- [15:20]
Karen Finerman
Thanks, Steve. That's just the way I wanted you to say it. Thank you.
- [15:24]
Melissa Lee
By the way, don't miss Steve's interview with Chicago Fed President AUSTAN GOOLSBEE Tomorrow, 11:00am Eastern Time on Money Movers. And of course the April jobs report is going to be out tomorrow. So everybody's going to be watching that for any sort of evidence that the unemployment rate has budged, although that is not expected at this point.
- [15:39]
Mike Cohen
No, no, I guess not. I mean, look, we're hearing a lot of grim stories. You know, it was interesting. One of the things that Steve mentioned, he was talking a little bit about Whirlpool and I just happened to be looking at that because that one traded a lot of options, volume. This is just sort of a cautionary tale for investors in general because there are a lot of people who screen for stocks on things like Pennsylvania. And you, if you screen for stocks on something like pe, you would find yourself saying, oh, I want to kick the tires on Whirlpool. I can pick this thing up at eight, nine times. This is really one of those things you have to be very careful of. This is a heavily indebted business. Things go south and they're not going to have the cash flow. I mean, it's like seven times debt to ebitda, I think, is what it looks like right now. And that's one of the reasons that you see the options so expensive and so much volume, because the stock itself now has become an option on that capital structure.
- [16:28]
Melissa Lee
We have some breaking news out of the Middle East. Let's get to Megan Casella with the details. Megan?
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Megan Casella
Melissa, we've been tracking reports this afternoon in Iranian state media of several explosions heard near a port city in southern Iran and at an oil port near the Strait of Hormuz. And now it appears that the United States was behind those attacks. That's according to multiple reports. Fox News cited a senior US official who also told them this was not a restarting of the war or an end to the ceasefire. Now, I've gotten no immediate response from the White House on this, but it does come after attacks earlier this week on American forces protecting commercial ships in and around the Strait and attacks on the UAE and Oman. Now, US Officials had been clear that the ceasefire was intact at the time. They said none of that rose to the level of resuming military operations. But then there was reporting today that U.S. allies in the Gulf weren't so thrilled about that. They felt like the Pentagon downplayed the strike. So now we see the US According to these reports, returning some fire. Melissa the question will be whether Iran will look to retaliate, whether they consider this a violation of the ceasefire, and then, of course, what this means for those peace talks, Melissa, and what it'll mean.
- [17:31]
Melissa Lee
I mean, it seems like there's a wide band in terms of what can fall under ceasefire time, in terms of how many strikes can happen.
- [17:40]
Megan Casella
It's been so fascinating this week to see that on Monday we really saw a ramping up of the attacks, including at American forces that were protecting commercial shipping in the Strait of Hormuz as well as at the UAE that had to activate its air defenses for the first time since the ceasefire had been struck. But Then we saw very clearly on camera, on the Record on Tuesday a number of top Trump officials really downplaying that, saying none of that rose to the level of resuming military operations. So it is interesting now to see the US wading back into this, perhaps trying to find some sort of a line where they say they're not resuming full operations. This isn't an end to the ceasefire, but also potentially satisfying allies in the Gulf who did want to see more action. So how will Iran respond? Do they also consider this doesn't rise to the level of resuming military combat? That's what we'll have to see next, I think.
- [18:26]
Melissa Lee
Megan, thanks. Megan Casella it's interesting because it seems like the markets will forgive all of this as long as a ceasefire is preserved, even if it's on paper, then markets have permission to go higher.
- [18:37]
Tim Seymour
Yeah, we're kind of semantically describing what falls is outside a bomb that falls or a missile that falls outside of the ceasefire and outside. By the way, I think everybody wants to, I think both sides want to do that and I think we're going to continue to do that.
- [18:52]
Melissa Lee
Asset Manager TCW sees strong economic activity and is playing a key role in the firm's big bets on energy demand. Eli Horton is the Senior Portfolio Manager of the TCW Transform Systems etf, which is rated five stars by Morningstar. Eli, great to have you with us.
- [19:07]
Steve Liesman
Great to see you.
- [19:07]
Tim Seymour
Thanks for having me.
- [19:08]
Melissa Lee
This is interesting because you say we're basically witnessing the largest capital expansion in history, capital spending cycle, whatever you want to call it, but this is it, this is the mother of all of them. How confident are you that every dollar of this, of the cycle will be spent and that we are not spending double dollars on chips or on different various parts?
- [19:33]
Eli Horton
I mean, I think you nailed the punchline. I do believe this is the largest capital cycle that global economy has ever experienced. That being the energy transition. I think there's three drivers of it. IT1 energy security. These comments on the trade of Hormuz really highlight how important energy security is. Two, rapid growth in electricity and power demand. Three, ongoing efforts to decarbonize our energy system that's coinciding to be close to $5 trillion of capex by the end of this decade. It's close to that already. It's growing, it's structural, it's multi pronged in its nature. So we're quite confident in the durability of this being multi decade.
- [20:11]
Karen Finerman
Thanks for being here. What with all of this money going in, it's Hard to see that the return on capital will be good for all of it. Where do you think is the most vulnerable sort of sector of that spending?
- [20:23]
Eli Horton
Well I can tell you the most topical piece.
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Mike Cohen
Right.
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Eli Horton
So energy security I think we all acknowledge is important. That's an imperative for governments, for corporations. Efforts to decarbonize our energy system have been ongoing, will continue to be ongoing. Only more recently have we seen changes in electricity and power demand. So I think that's the place to start. If you go back from 1950 to the year 2000 energy demand grew or sorry electricity demand grew at about 5% per year. Just under two decades after that, from 202020 flat. We're now growing again. Why are we growing? We're bringing manufacturing back to the U.S. we're electrifying our economy broadly. Transportation, buildings and then of course AI capex. That's the most topical place to raise questions. Of course we see a lot of durability there. You can look at the hyperscalers earnings this last quarter. Microsoft Azure, Google Cloud, AWS revenue accelerated across the board. They're seeing returns.
- [21:19]
Tim Seymour
Eli, first of all congrats on being early on a lot of these trades. I know this isn't just you catching up with the news flow so that's fantastic. And I know core names have been Caterpillar which has had a monstrous run. G.E. vernova I look at Caterpillar on a 10 year relative P it's trading 100 times its 5 years, trading 120 years times its 10 year. Have we priced in too much? I mean I know this is data center play. I saw it in some reports months ago. That makes a lot of sense to me and I know earning cycle right now is extraordinary but at some point isn't this just Caterpillar?
- [21:52]
Eli Horton
I think Caterpillar really epitomizes our thesis here candidly. So they have essentially three lines of business. One's construction equipment, second is mining equipment and the third is power generation. Yeah, think about the past 15 years, all of maybe longer construction equipment. Well we moved a lot of manufacturing out of this country so we certainly weren't building those factories. We went through a mining equipment super cycle that ended in 2012. So there wasn't a lot of demand for mining equipment and we had that flat period of electricity demand I mentioned there was a lack of investment in our grid. So caterpillar faced 15 years of cyclical headwinds that needs to be addressed. There's a lot of repairs and maintenance that need to be done and there's structural growth in all of its business, its business lines now. And we're just seeing that.
- [22:32]
Tim Seymour
So a 10 year reference PE means almost nothing now I think you could argue.
- [22:36]
Melissa Lee
Well that's a smart point. I mean basically our historical PEs, historical valuations, you just throw them out the window because it's different this time. I mean that's basically what the thesis has to be. I mean you take a look at the gains in G Ver Nova which you own, and a lot of the cooling space. I mean history doesn't apply here, does it?
- [22:54]
Eli Horton
It, history always applies.
- [22:56]
Melissa Lee
Okay, so at what point then?
- [22:58]
Eli Horton
I wouldn't tell you it doesn't. But you have to be forward looking. That's the, the, the market's trying to discount the future. We're trying to have a differentiated view on the future of the businesses we own. GE Vernova is a wonderful example. Nobody wanted a natural gas turbine for a decade. They were shipping 50% of their prior 10 year average. Now they're sold out to 2030. There's three companies in the world that make them. They have a lot of power at the table. It's important to recognize that.
- [23:24]
Melissa Lee
Eli, great to have you here. Thank you for coming by. Eli Horton. TCW what do these charts look like, Carter, to you?
- [23:30]
Carter Braxton Worth
Well, I mean this is by Caterpillar. I mean just one week ago all the analysts that covered had a price target of 880. Stock is at 8.95. Now of course they move the price target up after it beat, but the sell side doesn't believe it either. Meaning taking the view that somehow history, this is too expensive. But maybe it is just what else said, you've got to not use traditional models and you have to sort of break your own rules and think, no, this is an exceptional moment in time. As to the chart, look, it's up and to the right. It's getting steep. And if I owned it, I'd sell calls or take some other defensive measures.
- [24:02]
Melissa Lee
I would imagine that it feels a little uncomfortable to say it should be different this time and that this is a new norm.
- [24:08]
Karen Finerman
I'd come up with a different phrase.
- [24:11]
Carter Braxton Worth
But think about how calmly and sort of deliberately he said it. Right. Cause he, he's done his work. That's what it feels like to me.
- [24:20]
Karen Finerman
Yeah, well you could have probably said that anyway about GE Vernova hundreds of points ago and had left a lot of money on the table. So good for him. I mean you can guess what inning you're in. We're in. That's a Fortune right.
- [24:34]
Melissa Lee
Coming up, a lot of earnings action to bring you the results, moving shares of Core Wheat, Coinbase and more and how our traders are positioning in the names. Plus a bank bump for City as the Money center lists profitability targets, the details from their investor day and whether the financial sector can shake off its rough start to the year. Don't go anywhere. Fast money's back into.
- [24:56]
Fidelity Advertisement / Marine Corps PSA
This episode is brought to you by Schwab Market Update, an original podcast from Charles Schwab. Join host Keith Landsford for this information packed daily market Preview delivered in 10 minutes or less, including projected stock updates, monetary policy decisions and key results and statistics that may impact your trading. Download the latest episode and subscribe@schwab.com MarketUpdatePodcast or find Schwab Market Update wherever you get your podcasts.
- [25:25]
Tim Seymour
To realize the future America needs, we understand what's needed from us to face each threat head on. We've earned our place in the fight for our nation's future. We are Marines. We were made for this.
- [25:40]
Melissa Lee
What made you confident that you could do something that hadn't been done before?
- [25:45]
Christina Parsonavilis
I have no fear of failure.
- [25:47]
Julia Boorstin
Trailblazing women, changing the game One of
- [25:49]
Melissa Lee
my favorite pieces of advice Think about
- [25:52]
Kate Rooney
what your boss's boss needs.
- [25:54]
Megan Casella
Leadership can look in many, many different forms. It really does come down to just trusting yourself.
- [25:59]
Julia Boorstin
Life is short and you just got
- [26:00]
Melissa Lee
to think big to accomplish big things.
- [26:03]
Julia Boorstin
Julia Boorstin hosts CNBC Changemakers and Power Players. New episodes every Tuesday, wherever you get your podcasts.
- [26:13]
Melissa Lee
Welcome back to Fast Money. We've got an earnings alert on Core Weave. The stock is down despite beating revenue expectations for the quarter. CNBC's Christina Parsonavilis joins us here on set with the details.
- [26:22]
Christina Parsonavilis
Christina well thank you Core we revenue like you said mentioned our top $2 billion for the first time with the backlog now almost $100 billion. To actually put that in perspective, this company has had $16 million in sales. Just four years ago contracted power to they announced on the call hit 3.5 gigawatts. That's roughly enough to power a city the size of Houston, so clearly growing. The customer diversification story is also now very real. In a single week in April, meta locked in $35 billion through 2032. Anthropic signed a multi year deal to run Claude Jane street committed $6 billion. Three very different customers all choosing Core Weave over building it themselves. On the earnings call right now, the CEO said 10 customers have now committed to spending at least $1 billion and he went on to say about all the GPUs. Given the relationship with Nvidia. He said the average pricing on the older models like the H100, the A100, have increased again quarter over quarter, with the fleet largely sold out. The overhang, though, remains the cost of building all of this. CoreWe closed the quarter with nearly $25 billion in debt. And operating expenses are growing even faster than revenue, which means bor borrowing. Bringing down borrowing costs is extremely critical to the path of profitability for this firm.
- [27:35]
Melissa Lee
Didn't they just do a loan that's backed by GPUs? I mean, it was something in very interesting finance. Right. GPUs.
- [27:41]
Christina Parsonavilis
That was a while ago. There was a new. No, they got some lower percentage debt.
- [27:47]
Melissa Lee
Right.
- [27:47]
Christina Parsonavilis
Very recently. Which.
- [27:48]
Tim Seymour
Yeah, investment grade.
- [27:49]
Christina Parsonavilis
Yeah, yeah, investment grade.
- [27:50]
Megan Casella
That's right, exactly.
- [27:51]
Karen Finerman
Meta. Meta being the, you know, the customer. Like, okay, that's an A Plus customer. And the GPUs as well.
- [27:58]
Christina Parsonavilis
I did speak about that on the call. I think that is a major selling point.
- [28:01]
Kate Rooney
Right.
- [28:01]
Christina Parsonavilis
Because the interest expense is such a large portion of.
- [28:03]
Melissa Lee
Right. So they're being creative and they're figuring out a way to do it. I mean, they really changed the narrative. I mean, Christina nailed it in terms of the. In April signing all those deals and the narrative changes. Right. It's not just Oracle, it's not just the worry customers.
- [28:16]
Tim Seymour
They're on the tape. Ten customers of a billion or more in terms, in terms of commitments and more than a billion in the case of a few of them, like significantly
- [28:25]
Christina Parsonavilis
five year contracts on average too, which is incredible.
- [28:27]
Melissa Lee
Incredible.
- [28:27]
Eli Horton
Right.
- [28:28]
Tim Seymour
So I mean that, that will give your lenders the ability to actually have a lot more confidence and lower that cost of capital.
- [28:35]
Melissa Lee
Yeah, I mean, down a percent. It was up 78% this year going into the quarter. Mike, what do you think of this one?
- [28:42]
Mike Cohen
Well, I mean. Well, first of all, probably people who follow me would know that their balance sheet's not the kind of thing that I really like to get behind. This one's a pretty leveraged situation. Serious negative free cash flow. That's. And here's the thing. Long duration equity has to have enough Runway. That's the thing that I'm, I'm looking at. I'm okay with negative free cash flow, but you have to have a lot of cash available to live through it. And you know, this is a constant capital raising enterprise for them to keep up with the growth models. And, and that to me is a little bit problematic.
- [29:16]
Melissa Lee
All right, Christina. Thanks Christina. Parts Navos. We got breaking news on President Trump's tariffs. Let's get back to Megan Casella with more.
- [29:22]
Megan Casella
Megan, again, Melissa, another big setback here for President Trump's trade agenda. The Court of International Trade has just ruled to permanently block the President's Section 122 tariffs. These are those global baseline 10% tariffs that the President imposed on everything the US imports from abroad. He moved to this after the Supreme Court knocked down the other big chunk of his trade agenda. Now this injunction goes into effect within five days, and the Court of International Trade is ordering that the tariffs that have so far been collected under section 122, that those have to be refunded as well. Now, the next step here would be to appeal the ruling first to the Court of Appeals and then to the Supreme Court. But interestingly here in this decision, the CIT cited the Supreme Court's ruling, Chief Justice John Roberts writing in that ruling in their decision. So he they cited him twice saying that when Congress grants the power to impose tariffs, it's it does so clearly and with careful constraints. They also cite him saying that the president enjoys no inherent authority to impose tariffs during peacetime, raising the question a little bit, at least for me, as to whether this one will even get to the Supreme Court now that these tariffs have been blocked. I will emphasize these tariffs were always only a temporary measure. The statute only allows them to be imposed for up to 150 days, about five months there. But it was the president's primary tool that he was using in the wake of that Supreme Court ruling. So still a major setback for their trade agenda here.
- [30:41]
Melissa Lee
Melissa, it will be interesting if any companies actually request refunds or fear perhaps. Yeah, retribution.
- [30:50]
Megan Casella
Yes. We know how difficult it's been for companies so far requesting refunds under the IPA tariffs. We also know those would be a much larger pool of money compared to this 122 tariff, which has only been in place for a couple of months now. So maybe they'll wait and see how that first refund process goes. Maybe it's easy to tack on the second refund. A lot more questions on that front.
- [31:08]
Melissa Lee
All right, Megan, thanks. Megan Casella. Meantime, shares of Citigroup higher after the Money center bank lifted its profitability targets for the next two years that at its investor day since 2022, the firm also unveiling a $30 billion share buyback program. Shares are now up over 80% over the last year. There's a little bit of disappointment at the ROTC that they released, but originally,
- [31:33]
Karen Finerman
but then I think the street sort of warmed to it. I like it. I'm long in I have more JP Morgan than I have Citi. I think Jane Fraser has done a very good job in what was an enormous effort to rationalize both as a you know cost and as number of lines of businesses and simplify and finally this is the you know firmly trading north of book value 1 point close to 1.3 times not crazy on a PEB basis. I mean 30 billion sounds like a lot of money to you and me but it's not a huge amount over time to do but I like it. I'm staying long. I think she's doing a good job.
- [32:12]
Tim Seymour
I'm longer city than I am JPM and I just you know I think what you're citing the, the, the obvious dynamic is especially in today's age and we have bank analysts on after bank analysts who kind of reluctantly tell you that they feel that the entire sector is rerating especially money center with what they're able to do in terms of their capital. Buying back capital is a lot more freedom. So I, I think at around 130, I don't know what car review, I mean this is a chart that actually has been struggling here. I think it's ready to take the next step.
- [32:38]
Carter Braxton Worth
I like it. It's, it's really the has been the best performing among its peer group. If you look at how Wells Fargo's been struggling. JP's a bit of a rollover. Citi's best in class in terms of the chart pattern.
- [32:50]
Melissa Lee
All right. And do not miss Leslie Picker's exclusive interview with Citi CEO Jane Fraser. That is tomorrow, 11:30am Eastern Time on Money Movers right here on CNBC. Coming up, we've got an old school away reunion on the desk tonight. Both the Chartmaster and Professor Co are here. So you know, we've got to dive into the options pits. We'll find out if the pair is biting into Apple as the iPhone maker claims climbs back to all time highs. Do not go anywhere fast money's back into.
- [33:21]
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- [34:52]
Melissa Lee
Welcome back to Fast Money. Stocks pulling back a bit today. The Dow falling more than 300 points. The s and P and Nasdaq touching fresh intraday records early in the session, but ending the day with small losses. Both indices still pacing for a six positive week in a row. Cloud security firm Datadog surging more than 31% after beating expectations this morning, raising its annual forecast. The company saying that it sees strong demand thanks to rising AI adoption shares up 78% over the past year. Biotech firm Insmed dropping nearly 24%, the biggest laggard in the NASDAQ 100 after its results this morning. The company posting a Q1 loss and missing on revenue. The stock now down nearly 40% in 2020, still up more than 50% over the past year. And some more after hours action. Coinbase missing estimates on the top and the bottom lines lift falling short of earnings expectations. DraftKings and Gilead Feeding on earnings and revenues. Cloudflare doing the same but falling as Guidance failed to impress. Meantime we see Block higher after beating EPS estimates affirm and JFrog both topping earnings and revenue expectations and Trade Desk falling after missing earnings estimates and posting weaker than expected Q2 guidance. It seems like every quarter quarter there's a big move for the trade desk. Meantime, Apple has quietly been putting together a solid rally since reporting earnings last Thursday. The iPhone maker hit its first record of the year today and is up 6% in the past week. And with both Co and Carter on the desk tonight, we thought it was the perfect opportunity for an old school options action. So let's start off with the chartmaster. Carter, what do you see in the technicals here?
- [36:28]
Carter Braxton Worth
Yes please. All right, let's get right to it. So we got five charts. They're always identical and that's the process. Let's go one by one. So the first, of course there are no lines, there are no drawings, there are no judgments. Moving on to the next, what we know is that the stock has after putting in a double bottom it's important has re approached that former high of December 3rd. It's been a laggard. It's underperformed the S and P one year, two years, three years and even worse for its sector. Next chart another way to draw the lines. Does it or does it not break out here? And that's the judgment we think that it does. And in fact the the title of the report that was written was simply this. At this point in a tape like this, it would almost be impossible for Apple not to make a new high. Two more I believe just another way to draw the lines. You can see the range in which the stock has been coiling. Ultimately that's what a breakout type setup is. And then finally bringing in the trend line that's been in effect since the lows of tariff about a year ago. A nice formation where buyers higher is 3.315.315 even higher as a price objective.
- [37:35]
Mike Cohen
You know it's interesting with the stock here on its highs, options premia are pretty close to their lows. So the low over the last 52 weeks about 22 and a half. We're at 24 right now. So options are cheap. I actually took a look at basically a five year back test of trading call spreads on this thing. Cause I was looking at this and I said I like to sell options premiums but I can't do it here. Turns out that if you did something like a 295, 325 call spread that would cost you about 10 bucks. So a small fraction of the current stock price. That's a trade that would have been profitable more than half of the time going back five years which is unusual to be able to make a long premium upside bet that actually makes money. And we did not confer before this. I figured 325 was a good level to sell. That gets us right into the sweet spot of Carter's target.
- [38:23]
Karen Finerman
What like O's? They didn't.
- [38:25]
Melissa Lee
They didn't. Right, right. They just.
- [38:26]
Karen Finerman
You didn't know what was going to happen. They just knew.
- [38:29]
Melissa Lee
325. 315. Is it looking better to you?
- [38:33]
Karen Finerman
Well, it's looking higher. I do think given what else has gone on and all of the. You know that they are likely to be rewarded with whatever AI functionality they come out with. And I think they'll do a good job of that. So yeah, probably goes higher. Likely with. Without me. Yeah.
- [38:51]
Tim Seymour
I think it's hard to say this but it's under owned and if you look at also the rotation that's gone on within mega cap tech, I'm not saying this is a Google story because it's very different. Except for the fact that there's no question that we're waiting for Apple really to show their hand in a place where maybe they don't need to show a whole lot. In other words, their legacy business may be enough. The ASPs around the 18 are going to be higher. They've offset memory costs with their ability to push on other parts of the production cycle and other vendors. I just think think Apple is a story. It's underappreciated. Their services business is actually going to be better than people think and it was better this last quarter. So I'm long, I've been long. I've been fighting this corner for a while.
- [39:31]
Melissa Lee
Coming up, the health of housing and what to expect from the builders with the spring buying market in full swing. Zillow senior economist will join us to dig into all that data. Data when fast money returns. We've got a newsletter on Open Air. Kate Rooney has a story.
- [39:48]
Megan Casella
Kate.
- [39:49]
Kate Rooney
Hey Melissa. So OpenAI is releasing a cyber security model. It's actually a version of its latest AI model that is specifically for cybersecurity. It's rolling out in a limited preview capacity to what they call verified cybersecurity teams. This might sound familiar. We've talked a lot about Mythos and what Anthropic has rolled out. This in a similar way is going to be a limited release, but it is slightly different. They don't have this group of partners like Anthropic did with big corporate enterprises. They announced names like Google and Amazon. This is a bit different in that OpenAI is saying that they are betting technical safeguards. So companies or whoever is using this, likely enterprises, needs to go through what looks like an application process, but they need to get verified to actually get access to this. In the blog post that just came out, they talk about this to ensure enhanced cyber capabilities are being placed in the right hands. They say it's for verified defenders working on defensive tasks and they talk about restricting requests that could actually enable real world harm. So this all comes down to AI safety and the risk of the capabilities that are being improved here. Getting in the wrong hands, getting in the hands of bad actors. It's been a big topic for Anthropic and when they talk about Mythos, you know, the potential for bad actors actually using this for nefarious use cases. Of course Mythos has Caught a lot of attention in Washington, but these companies are competing for enterprise, enterprise customers. That really is the bottom line here as they go and try to win over Fortune 500 companies. Cybersecurity is massive, so they've got to keep up with anthropic here. This appears to be OpenAI's answer.
- [41:19]
Mike Cohen
Mel.
- [41:20]
Melissa Lee
All right, Kate. Thank you. Kate Rooney. We've got a trio of travel and entertainment companies reporting results tonight. We've got Airbnb moving beating revenue estimates, posting higher than expected gross bookings There it is lower this hour. Expedia shares meantime, are sinking as well, despite a top and bottom line beat. The company missing estimates for booked room nights giving lower than expected guidance. And conced casino operator win is also lower despite beating on the top and the bottom lines. Do any of these charts look appealing?
- [41:47]
Carter Braxton Worth
Carter all look a little less appealing now.
- [41:50]
Melissa Lee
Well, yeah, but I mean, maybe more appealing depending on your but it speaks
- [41:54]
Carter Braxton Worth
to what we were the consumer. These are all sort of putting in regardless of results, putting in dodgy performance post earnings and not a one of them is a particularly compelling chart pattern.
- [42:06]
Melissa Lee
Yeah, Mike.
- [42:07]
Mike Cohen
I mean the one thing that they do have going for them at this point, in addition to the fact that you can buy them a little bit cheaper, hypothetically, I mean, cheaper is a relative thing and if they're not doing as well, then maybe they're not cheaper. But the options premiums have actually been going up quite a lot in these, which for those who are seeking income, which is not capital appreciation, we're not shooting for the moon looking for opportunities to sell some cash secured puts these names start to look a little more interesting in that respect.
- [42:31]
Tim Seymour
I like Airbnb. I mean, I think the bookings were excellent. The numbers and the estimates even for this year came in better despite cancellations that have been kind of obvious around the Middle East. And I know there was this whole sense of disruption for their business as well. That was part of the software thing, by the way. If anything, if you're following that tailwind, it's software. It's time to buy some of that stuff. But again, Airbnb on its pure, you know, the, the core dynamic of their bookings, it looks better.
- [42:58]
Melissa Lee
Up next, final trades, Final trade time.
- [43:14]
Tim Seymour
Timbo, I'm feeling even better about my fundamental and catalyst call and valuation call now. I've heard Carter's call on Citi's chart.
- [43:22]
Melissa Lee
Karen.
- [43:23]
Karen Finerman
Nice. I've been buying energy whenever I get a chance. Today was another one of those days,
- [43:27]
Mike Cohen
excelling Michael Koh, the big trade enter engineering, procurement, construction. That's got to play into it as well. Therefore, I like Lure, flr, cbw, Apple, get long.
- [43:38]
Melissa Lee
Thank you for watching Fast Money. See you back here tomorrow. Five Mad Money with Jim Cramer starts right now.
- [43:48]
Julia Boorstin
All opinions expressed by the Fast Money participants are solely their opinions and do not reflect the opinions of CNBC or its 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
- [44:21]
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the wrongs we must right, the fights we must win, the future we must secure together for our nation. This is what's in front of us. This determines what's next for all of us. We are Marines. We were made for this.