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CNBC's "Fast Money"
The Ripple Effects From Auto Tariffs… And The Next Move In Energy 3/27/25
00:43:49
Auto stocks in the red as President Trump announces 25% tax on vehicles made outside the U.S. And it may not be the only sector facing tariff trouble. The other areas of the market at risk, and the impact it could have on the broader market. Plus The next move in energy, as the group leads the S&P 500 this year. Where one top oil analyst sees the space heading, and where he’s going long in the energy sector. Fast Money Disclaimer
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- [00:00]
Brian Sullivan
Say you've always wanted to take a spontaneous trip to the Caribbean. Here's the thing, if you get smart with your money, you can do things like that. With Empower, you can start making the most out of your money so you can get out and live a little. Isn't that why we work so hard to have some fun with our money, like treating yourself to something special or spontaneously doing something extra for a loved one? So use Empower and get good at money so you can be a little bad. Join their 19 million customers today@empower.com not an empowered client, paid or sponsored. Our state has changed a lot in the last 140 years. We know because Multicare has been here guided by a single purpose, making our communities healthier. That comes from making courageous decisions, partnering with local communities to grow programs and services, and expanding healthcare access to those who need it most. Together, we're building a healthier future. Learn more@mycare.org and live for the NASDAQ market site. Right here in the heart of New York City's Times Square. This is fast money. Here's what's on tap. Trump's take on tariffs taking a toll on a big chunk of the automakers today. But could the effects be felt even more broadly? Or has the market completely overreacted because oil and energy are actually up this month? But if things are about to slow, is now the time to sell? Paul Sankey says he's ignoring all this and he'll give you his take. Plus, Lulu looks like it's putting on a lemon on guidance. Another big name decides to go public. And Robinhood is all growns up. And it's all growns up. But can the millennial trading app lure in the boomers? Big bucks? As Guy Adami might say, that's a lot of shell and I'm here for it. I'm Brian Sullivan in for Melissa Lee tonight. Coming to you live from Studio B at the nasdaq. On your desk tonight, Tim Seymour, Karen Fineman, Von Winson and Steve Grasso. Welcome, everybody.
- [02:02]
Tim Seymour
Welcome, man.
- [02:04]
Karen Finerman
Here we go.
- [02:04]
Brian Sullivan
It's a lot of show. All right. We are going to start the sour in the same place that you guys ended last night, that of course, tariffs, Motor City stocks got rocked today. GM and Ford, the auto parts makers, all down. In fact, GM the worst performer in the S&P 500 today. We're going to get more on all this and autos in a flash. But keep in mind, it was not just the auto stocks that took a hit. Many big pharma companies also selling off as the president signaled they could be the next industry to be targeted overall, the macro markets, yes, they were down today, but not by that much. So before we get to the trade, let's get you caught up on the actual news. Megan casella in in D.C. trying to follow. I mean, it's a 24 hour job, Megan, but somebody has to do it.
- [02:53]
Megan Casella
Somebody has to do it. Brian. We are doing our best to stay on top of every twist and turn. So first on autos, the White House emphasizing today that these new tariffs on cars and on car parts will stack on top of existing tariffs. So that means a 27.5% tariff on cars, 50% on light trucks, given the tariffs that were already on place on both of those items. And then for Canada and Mexico, because President Trump has already put 25% tariffs on those imports over those fentanyl concerns. Tariffs on cars and parts from those countries starting next week could now be as high as 50%. Trump had exempted autos for one month. That exemption is currently in place. But as of now, we expect that to expire next week. So we could be as high as 50% starting next week. Now, will any of that be negotiated down? It certainly could be. And that is one element of what auto companies are grappling with right now as they try to figure out how to respond. And I can tell you from talking with industry groups today, one challenge for them is simply where to focus. Do they look at pushing for exemptions? Do they focus on challenging the president on legal grounds? Or do they start looking at investing and trying to work around the tariffs? As for what comes next on the tariff front, as you hinted at April 2, the President said we can expect to see reciprocal tariffs on every trading partner on that day. And then beyond that, we know he has launched formal investigations into copper and lumber, paving the way for tariffs in those industries. He also continues to vow that there will be tariffs on semiconductors as well as on pharmaceuticals. So what's clear now, Brian, is that the April 2nd date we've been waiting for, that to me looks much more like the start to the tariff war and the start to the negotiations rather than the end to any tariff uncertainty.
- [04:34]
Brian Sullivan
Brian, so are we at the beginning of the end or the end of the beginning? I'm not really sure. Megan Casella, thank you very much. Tim Seymour, I don't know, but you probably know. And answer me this riddle me. This is why didn't the markets take more of a gigantic hit on this tariff news?
- [04:50]
Tim Seymour
Well, again There are absurd pieces of certain indices, especially industrial sides of this trade that are actually pro us. I mean there's an element of this also. If the view is this is just a negotiation and it's, we'd already certainly priced a fair amount of pain. I think some of the response in the auto sector was just that. But, but there's, there's a lot of dynamics here. If you look at growth type trades today and if you look at semiconductors, they were quite weak. In fact, we're only about a percent and a half above the lows before the market at a 10% rally. So I don't think that the markets were necessarily all that sanguine. I do think volatility is what concerns me more on some level. And some of the issues that we talked about are just dynamics in the market which include liquidity doesn't seem to be as strong. People seem to be kind of sitting on the sidelines. There are certainly a case that some of the most crowded trades are ones that still could have some more room to go. So I just think the math is really complicated. We all know this. There's a lot of elements that are still unclear. We do know that trade representatives around the world are kind of getting together and figuring out what we can do. We start hearing, you know, the EU has their anti coercion instrument, you know, and it sounds really scary but really it's just another way of saying, hey, there's a lot that the EU can't do politically. There's a lot they can do as a trade bloc. That's really what they are. So if you think that we've only just begun. Karen Carpenter by the way, great song. I know you're a big fan. I think this is a case where actually markets probably are not going to do a whole lot to the upside between at least now in April 2nd.
- [06:17]
Brian Sullivan
I think, Steve, you get my broader point, which is to tariffs have been driving this market theoret. That's what we're told. I'm not sure I totally believe that. But let's assume that is the case. We get this 25% announcement from the President. Yeah, the market was down today, but we didn't lose 4% on the S&P 500. The market was relative and a Vix at 19.
- [06:39]
Steve Grasso
I think Megan, you know, classified is. And you said is that the beginning of the end of the beginning? We don't know if they're ever going to even take place. So this could be. He can't say it's a negotiating tactic because then it's not a negotiating tactic. So he's got to say that it's.
- [06:55]
Brian Sullivan
Going to happen also. What are you negotiating? I don't know.
- [06:58]
Steve Grasso
Right. So I think no one has a problem with reciprocal taxes. Two and a half we're charging for European cars, they're charging us 10. No one has a problem with going 10 10. So I think there's a level of reciprocity is factored in. But there's also with the market, the market sold off in a big way, we're coming in at a different entry point. So when you think about the correction the market's done, we're below the 200 day moving average. Again, that average is 57, 58 or thereabouts, plus or minus 1. If you think that tariffs are going to take place, then you want to get into a cautionary stance. You don't know, but then you don't know how long they're going to last. So if Mary Barra goes in and.
- [07:43]
Brian Sullivan
Ahead of gm, the head of gm.
- [07:45]
Steve Grasso
Sorry, the head of gm, says to Donald Trump, President of the United States, we're going to build more plants. They're going to take two to five years or whatever the number is to build, but you have my word, we're going to build them. You're going to see that stock take off. I think he's going to say you have a carve out. So he's going to have a carve out for Ford, he's going to have a carve out for GM as long as you do the right thing. So by the right thing is I don't think this is the end of the auto production and manufacturing for the United States EVs when we have those mandates put in for just this last quarter is losing $132,000 per EV vehicle that they're building the whole year. They're losing between five and six billion.
- [08:29]
Brian Sullivan
Dollars and many are, most are made in Mexico, by the way, and most.
- [08:31]
Steve Grasso
Are made in Mexico this year. So that wasn't the end when you had this 2030, they had to be plug in hybrids, 2035, no more gasoline vehicles. That wasn't the end of the auto industry and tariffs will be a blip. I think you could still be successful owning autos.
- [08:47]
Guy Adami
So I think, I mean, I agree with Steve and Tim. We don't, we don't really know this. I wouldn't say that. We have great clarity. We know we have an event coming up, but I don't think that that will be the event that we know fine. And this is said and done. And April 2nd, we have clarity. I think the lack of clarity makes people uncomfortable. Right. The market hates uncertainty way more than it hates bad news. But we don't have yet for sure the bad news. So we also have some fear of inflation. We're sort of half afraid of these tariffs. What if they really do come to pass? That could be highly inflationary. And if that's the case, then that's bad for the market. Right. Bad for the economy. So trying to sort of figure out who are the winners and losers. Unclear if, because things may change. But if there's inflation, I think that's bad for the market more broadly.
- [09:35]
Brian Sullivan
And I guess, Byron, I mean, let's assume that the tariffs occur. The President said they would, so we have to take them. I get that they may not happen, but let's assume for purposes of this show that this actually occurs. Some of that will be passed through to the Eisen family and the Grasso family and others. Some of that will be eaten by the carmakers, which reduces earnings, which reduces estimates, reduces multiples. Is the market acting rationally?
- [10:03]
Byron Wien
I think the market is acting as rationally as it can, given the uncertainty. With the news, I'm in the camp that I think this is the beginning of the end versus the end of the beginning. And by that, I think a lot of us were looking for more clarity going into April 2, where it sounds like April 2 is a starting point of a much more protracted process. As you said, and I agree with Steve wholeheartedly, you can't say this is strictly a bargaining chip. And I'm willing to kind of like move. But he did use the term lenient. These are going to be much more lenient than then then perhaps feared. And I'm not sure.
- [10:38]
Brian Sullivan
The lenient spanking, though, I don't know. I don't.
- [10:42]
Byron Wien
So it's a punishment nonetheless.
- [10:43]
Brian Sullivan
And do you know what that means.
- [10:44]
Byron Wien
To your point about. So you mentioned earnings and she mentioned inflation and then going to the consumer or the ICE and family. So I can definitely speak to that. The growing. Yes, it is. It's done growing. What I can tell you is it feels like. Are you familiar with the game Jenga?
- [11:00]
Brian Sullivan
Of course. Yeah.
- [11:01]
Byron Wien
Okay. It feels like we're kind of playing Jenga here with the consumer. Right. So is it going to be somewhat of a transitory type of inflation situation? Are we starting to see tick ups slightly in the unemployment rate? Are we starting to see credit card balances? Are we starting to see tick ups in defaults. Okay. Now you have upward pressure on, on auto. So you have auto and you have housing which still remain somewhat sticky, although clearly off of the highs. And I think at some point you do have to call into question what the consumer ultimately looks like. Do they have the ability to bear additional costs?
- [11:33]
Brian Sullivan
I don't. Well, they have been. Okay, I'm going to say something really unpopular right now for everybody out there listening on the radio. Car costs are out of control before the tariffs. Okay, there are SUVs that are $150,000 that were $80,000 a few years ago. You got electric cars that are 75,000 that go 250 miles on a charge. That's bad enough, Tim. Now we want to layer this on. I guess one of my, I guess maybe if I was going to say I was confused about something today. Why did GM fall like 7%? Like should they benefit from more domestic manufacturing?
- [12:07]
Tim Seymour
Because in fact they've got some major changes that they have to make. I mean, you know, in terms of their exposure to the cars, at least the pieces of the cars that they import and, and the elements of that that are not fully built here. There's an argument out there that 75% of their EBIT in 2024, which is about seven and a half billion dollars, is at risk here. And that's before you figure out their end arounds and where they're going to work on some things. But the reality is GM was a company that traded cheap to, to anything really, to itself, but certainly to that, to that free cash flow number for the last three or four years at a time. It's never been run better as a company. I think to some extent I think GM should be limited to the downside here because it wasn't expensive. GM certainly since Thanksgiving has started to price in noise around tariffs and I think there's been a lot of concern there. The question really though is is this the kind of support that, that Detroit needed is, is our economy? And if we want to think bigger and yeah, more macro around this, are we really looking to become a manufacturing economy here? And I think that's the question, that's the question for the markets. Gets back to a place where I think markets really, you know, there isn't a sense that we know where policy is going and it gets back to all what we've said.
- [13:19]
Brian Sullivan
Well, let's bring in another voice to this auto conversation. Yossi Levy, better known as the auto dealership guy. Back when you were just an anonymous Twitter presence. Now you're out. You've got a beautiful studio. Yosi, I know you're talking to car dealers, you're talking to buyers, you're talking to sellers. We had a car dealer on Power Lunch today. He was kind of like, well, the consumer at some point will break, but so far they've been able to pay these higher costs. What are you hearing, Brian?
- [13:45]
Yossi Levy
Thanks for having me back on. You know, it's a very mixed bag at the moment. As you know, different automakers are exposed differently. And so there is a lot of anxiety from the dealers that are dealing with German manufacturers specifically. I would tell you that with the domestic dealers, Japanese, Korean, I sense, you know, not so much anxiety and almost like, hey, the auto. The auto market has been through crazy ups and downs over the last couple of years. You know, this is just another blip on the radar. Auto manufacturers will adjust, they'll run extra shifts to have all this added capacity in their U.S. facilities. And so I would tell you, you know, dealers are not too much into fuss at the moment, although some certain pockets are.
- [14:27]
Brian Sullivan
You know, it's interesting you brought up German company, and there's Toyota trades here, Honda's hmc, some of the German companies, Volkswagen, obviously, they own pretty much everything else. You look at the X5, BMW X5, it's made in South Carolina, so that theoretically would not be tariff. The three series, the five Series, I think are made actually in Germany. BMW stands for Bavarian Motorworks. So if you're running a car company, do you even think you know what you're facing right now? If you've got manufacturing in America, but other places as well?
- [15:00]
Yossi Levy
Here's the thing, Brian. These manufacturers don't want to lose market share. And so if you see what BMW did, they announced a week or two ago that they were going to price protect dealers up until May 1st. Right. Just as an example. And so at the moment, what it seems like is happening, Ferrari, which is not, of course, not a mainstream brand, right. Very much exotic luxury. They announced that they were raising prices by like 10% or so.
- [15:23]
Brian Sullivan
No, but the point I'm trying to make is that people talk about Ferrari and terror.
- [15:27]
Yossi Levy
I think there's actually. Well, there's an important point here. I think the point here is that. And BMW is another good example. They just. Their price increases are about 4%. So those are two examples, you know, two very different pockets of the market. But the point here, no one has said 25%. Right. So why. And I think I said people are. They're trying to see what their Competition is going to do. They're not, they don't want to jump the gun. There's a lot of uncertainty. And so they're taking these baby steps. And BMW in my opinion is one of the best examples of this because they have, they did send a memo to their dealers, which I got a hold of, and they're being. Price increases are only 4% at the moment, effective May 1st. And so I think these manufacturers are going to have to wait and see what is going to happen, what are their, what are the competitors going to do and then they're going to react accordingly.
- [16:13]
Steve Grasso
So Yoshi, if you had to place your bets where you just left off there, do they pull back on EV initiatives and put it into their manufacturing here or do they just pull back completely and just see where the chips fall? And the, and the, and the sea choice of all this is that does any of this in your opinion really take place or are we a month out and we're having a completely different conversation?
- [16:39]
Yossi Levy
I think it's, I think it's day by day at this point. I just haven't. There isn't a consensus among anyone or anything, the automakers and the dealers. You know, it's very much a mixed bag at the moment because everyone's reacting to the live news. But I will tell you that I haven't seen. It's been relatively positive in the sense that dealers are aware that their manufacturers have added some added capacity they can add to manufacture more cars and, you know, at least smooth this out. So if these do stick, that they can absorb it over some period of time, everyone's going to take a different strategy. Not everyone's going to price protect dealers. Some are going to pass, you know, half of it to the consumer, some more. You know, what's interesting is that if you look at the weeks of income required to buy a car today, it's about four less weeks or four fewer weeks than it was say a year and a half or two years ago. And so while we might not notice it and it does feel like things are still very expensive and cars are still, you know, roughly at 48,000 average price for a new car, that's still right around all time highs, the average weeks of income required to buy a car has actually come down. So I can't sit here and tell you consumers can't absorb more. They can. That's just the reality based on weeks of income. But I just don't think that this is going to all get passed on to the consumer. I don't think that's feasible. And I think that BMW has kind of showed us here that it might be baby steps by the manufacturers.
- [18:03]
Brian Sullivan
And by the way, we'll let you go. You'll see some of these margins are at record highs. So the companies have a little bit of ability to eat some of that. And to your point, we'll see what the consumer reads because right now they're buying a lot $140,000 SUVs. I don't get it. They are and somebody Does Yossi really appreciate that. Karen?
- [18:23]
Guy Adami
Well, one of the things that is interesting to see what's the effect on the used car market, right. If we're not going to have as many imports, you know, what does that.
- [18:32]
Brian Sullivan
Mean for the Theoretically it's going to go up, go higher, right?
- [18:34]
Guy Adami
No, it should go higher.
- [18:36]
Brian Sullivan
The rental car company stocks today.
- [18:38]
Guy Adami
Right.
- [18:39]
Brian Sullivan
I don't get that one at all.
- [18:40]
Guy Adami
But so it's the sort of flips. There's uncertainty there. That's positive uncertainty at the moment. But if there's a resolution then does that take the, you know, take the air out of the used car market? I don't know. So much uncertainty. It's hard to have a lot of conviction in any trade.
- [18:56]
Byron Wien
Financing and servicing, I think that's where you would.
- [18:59]
Brian Sullivan
So that's it. And that's what you're talking about is like can the consumer absorb it? Well, you used to have like a four year car loan and you had a five year loan. Now the average loans like eight and a half years. We'll just do a ten year car loan. TIM SEYMOUR and the financing companies will win.
- [19:14]
Tim Seymour
Yeah, although, but, but there's interest rate sensitivity. I mean look what we see in the housing sector. It's not like people are going to go out and necessarily with higher rates and auto loans aren't 0.9% for five years anymore. They might be 0.9% for three months until it jacks up. So I just think that this is gets back to policy and the uncertainty around where it's all going. You know, the prospects for Detroit and auto demand weren't great before this. And so you've only made things worse. I think that the question has got to be what is the end game here? Because I'm not sure we knew we were, you know, that there was an auto trade war going on three months ago. We certainly didn't know this going into elections. And I think this is why people are wondering where this goes. The retaliatory dynamics that Europe is able to put forth I think is are going to at least be significant on the headline.
- [20:04]
Brian Sullivan
That's right. And when you go to buy that new Fiat Punto, it's going to cost you. Remember that Seymour. Bobby Bonita. I mean you just pay forever.
- [20:12]
Tim Seymour
Yeah. Well, on the first day of baseball I had to bring it is important to elicit Bobby Bonita.
- [20:17]
Brian Sullivan
I had to bring that up. All right, on deck. Another big company wants in on the gold rush. The story of coreweave coming up. And later on, is Lulu a okay or will competition take the yoga pant maker to the mat? To the mat. You're welcome. We're back right after this. Explore the world's hidden wonders on the Atlas Obscura podcast. A village in India where everyone's name is a song. A boiling river in the Amazon. A spacecraft cemetery in the middle of the ocean. Every day the Atlas Obscura podcast will blow your mind in 15 minutes. You can find it on the SiriusXM app Pandora or wherever you get your podcasts. And don't forget to follow the show.
- [21:12]
Karen Finerman
So you never miss an episode.
- [21:17]
Brian Sullivan
Find YOUR hustle CNBC make it's new online course how to start a side Hustle Three industry experts break down proven paths to success. Get out there and do it. Go to CNBC make it.com/side hustle special offer ends April 1st. All right, welcome back. You are going to hear a lot about a company called Core Weave over the next few days. It is an AI related company. It's about all I can tell you about it and some believe it could be a big tell on AI and demand generally. Christina Parsonables knows a lot about Core Weave which is why you're now joining us on set.
- [21:53]
Megan Casella
Yes it is. And so let's start with think of Core Weave almost like a tech chameleon. It's more from a crypto mining company to a 3D video rendering firm than a GPU cloud service company. And now an AI hyperscaler. Renting out. This is to your point, Brian. Renting out GPUs and saving clients from hardware hassle. Their dance though with Nvidia is especially interesting. Nvidia simultaneously is a 6% investor which could get diluted a GPU supplier and second biggest customer and also a potential cloud business competitor in the coming years should they start to rent out their their hardware. Microsoft drives 2/3 of core weaves revenue. IBM Metta also have multi year contracts that investors find pretty appealing. But here's the major problem to your point, Brian. Debt Nearly 7.5 billion in debt repayments by the end of next year. Their prospectus admits they need to borrow even more money to fulfill a $12 billion five year open air contract. Interest payments are especially high. Their GPU assets usually are supposed to have a three to five year shelf life. Their prospectus also says it's six years according to Corey, but it does face accelerated depreciation from Nvidia's annual chip releases. Every year Nvidia puts out a new great one which means that the old ones become cheaper and lower in value and this means increasing monthly payments as their collateral loses value. So coreweave may be seen as a shapeshifter, but it's navigating some serious like complex financial terrain.
- [23:20]
Byron Wien
Yeah, I think Christina brings up a lot of good points. You talk about customer concentration, you mentioned Nvidia being 2/3 and then you add in Microsoft and I think that's like 75%. And then you talk about the cap structure, the debt load. I think this company went from 16 million in revenue in 2022 to 1.9 billion in 2024. Given the weighted average cost of capital, you're going to need to see this company continue to grow revenue and bottom line at this type of accelerated pace, which I just don't think is sustainable. If you look at interest payments versus versus net income, you have roughly 350, 350 million on either, on either side of that. So you're going to continue to have to see this thing grow aggressively in order to keep pace. I will say that if there is a time to ipo, it was likely last year or right now. And I think this will be a barometer of how much steam is left in this trade in the short term.
- [24:10]
Guy Adami
So they haven't priced it yet, right? We haven't heard yet. I thought it was actually going to be priced last night and we were.
- [24:17]
Megan Casella
Supposed to be getting it today. And my colleague Leslie Picker was reporting that it was anchored at about $40 from Nvidia aside. But the pricing we still haven't heard yet and according to the Nasdaq and it's still on for tomorrow.
- [24:30]
Guy Adami
So they don't get a price tonight. Nobody prices on a Friday night, right? A long weekend.
- [24:35]
Megan Casella
Precisely.
- [24:35]
Guy Adami
Ok, so assuming a price tonight, that.
- [24:39]
Megan Casella
Is the understanding and that it should open usually latest by 1pm Eastern tomorrow.
- [24:45]
Guy Adami
And so we're looking at 40. I know Leslie said that, but is that.
- [24:49]
Megan Casella
Yeah, so that's Leslie is saying is anchored according to Nvidia, $40, but that's a range and that would be the lower end of the range, which originally was 45 to 57. That is not the IPO.
- [24:58]
Brian Sullivan
Very quickly, Karen, if it come, do we, do we count this as some kind of AI proxy like for the whole thing or is core weave. Core weave.
- [25:06]
Guy Adami
It's an AI mood proxy. It's an AI sentiment proxy. Vibe shifts kind of. Right. I mean, if, if the, if the capital structure were different, then it wouldn't, you know, there wouldn't be this urgency.
- [25:19]
Tim Seymour
I just think it's a capex sentiment. I mean, and again, all we're talking about these days is capex. What's been appropriate, obviously, post deep sea. That's what this is. It's not a question about whether the technology and the client base and the support of Nvidia. It's extraordinary. The question is, was that yesterday's news at a time? The debt load is very much advantageous. Focus.
- [25:38]
Brian Sullivan
Yeah. And I do have to correct something important that you said, Christina, Leslie Picker is not your colleague.
- [25:42]
Megan Casella
She's our, she's watching. Right.
- [25:45]
Brian Sullivan
I just want Leslie to know that she's a part of the family.
- [25:50]
Megan Casella
Yeah. She's been digging into the pricing. So kudos to her for that.
- [25:53]
Brian Sullivan
Not just your family.
- [25:55]
Megan Casella
I'm selfish. She's great.
- [25:57]
Brian Sullivan
All right, coming up, we are going to take a look inside oil. If the economy is going to be so bad, why is oil still at 70 bucks? And why are some energy related stocks doing well? Paul Sanke is in the house and he knows. Plus Lululemon. They just reported their numbers. That stock is getting crushed. But are we misreading it? We'll talk about Lulu as well with Courtney Reagan. Lot more to do right here for the NASDAQ market site where we're all one big family. We're back right after this. Hey, this is Will Arnett, host of Smartless. Smartless is a podcast with myself and Sean Hayes and Jason Bateman where each week one of us reveals a mystery.
- [26:45]
Karen Finerman
Guest of the other two. We dive deep with guests that you.
- [26:49]
Brian Sullivan
Love like Bill Hader, Selena Gomez, Jennifer Aniston, David Beckham, Kristen Stewart and tons more. So join us for a genuinely improvised and authentic conversation filled with laughter and newfound knowledge to feed the smartless mind. Listen to Smartless now on the SiriusXM app. Download it today. Check out the all new CNBC sport podcast where sports, business and investing collide from media deals to team valuations, private.
- [27:19]
Karen Finerman
Equity moves and more.
- [27:20]
Brian Sullivan
Catch the biggest business stories on the CNBC Sport podcast. Listen on your favorite platform. All right, welcome back to Fast money. As East Snazzy Graphics says, we've got an earnings alert on Lululemon. Lulu's getting wax down 10.8% despite a beat on the top and bottom lines. Courtney Reagan is in the house. Courtney, I just said beat on both the top and bottom lines, and yet the Stock is down 10%.
- [27:47]
Courtney Reagan
I know, I know. So the conference call is going on right now. They're giving us a little bit more detail. But they also beat expectations, Brian, for gross margin, too, and that's a pretty nice number. Comparable sales, those grew 3%, but that was below. And sales in the Americas were flat, up 20% internationally, but that's a much smaller business. The forecast for the current quarter and the full year, that's the disappointing part. That's what's really pulling down the stock, and it's disappointing across the board for both this quarter and the full year on both earnings and revenue. And while investors always care about forward guidance, of course, it does feel even more important now in this environment of external uncertainty and disappointing forecasts from competitor Nike, which we just got. So, on the call, CEO Calvin McDonnell did note, quote, a more cautious consumer, and he said that Lululemon conducted a sur survey earlier this month and found that consumers are, quote, spending less due to increased concerns about inflation in the economy. And he added, Lulu is experiencing slower traffic. Now. McDonald's said that Lulu does expect to see modest growth in US revenue for the full year of 2025. Analysts kind of pushed him on that for the first question, said, well, can you explain what modest means didn't give us a lot, but more or less, you know, sort of guided very conservatively without giving sort of solid numbers there. So some concern, and I would say the tone is muted on the call.
- [29:04]
Brian Sullivan
All right, it was. And I'm gonna sound like a real dunce here. Okay. But I do live with some very beautiful women. I have my wife and daughter in the house. Athleta.
- [29:12]
Guy Adami
How does that affect your dunce hood?
- [29:17]
Tim Seymour
Actually, would have been really dumb not to have said it just like that with them being here. So actually, it was kind of. I don't. Not the duncy there.
- [29:25]
Brian Sullivan
No, I'm. You know, I'm a lot smarter than I look. Smrt comment. Here's. It used to be Athleta.
- [29:32]
Guy Adami
Athleta.
- [29:32]
Brian Sullivan
Athleta. That was the competitor, Lulu. It still is. Now this. Alo.
- [29:37]
Courtney Reagan
Yeah, Alo.
- [29:38]
Brian Sullivan
Alo.
- [29:39]
Courtney Reagan
Alo.
- [29:40]
Brian Sullivan
I don't mean animal liberation artists and band, by the way.
- [29:42]
Courtney Reagan
And Vuori, which we talk about.
- [29:44]
Brian Sullivan
And Vuori. So they have a lot of competition.
- [29:45]
Courtney Reagan
They do. They're private. So we don't exactly know the numbers, but if you look around on the street, you can see a lot of people wearing it.
- [29:51]
Brian Sullivan
But they can cut. They may be private, but they can cut into polls. Publicly traded Lulu.
- [29:54]
Courtney Reagan
Yes, of course, that's what I'm saying. We just don't know how much. Right. Because we don't exactly know what their financials look like. I agree. And then we also obviously know what Nike's going through right now. Karen, you and I were kind of chatting about this before and what do you make of the Lulu quarter?
- [30:09]
Guy Adami
So the quarter was good, but that seems totally irrelevant.
- [30:12]
Courtney Reagan
It doesn't matter, Right. I mean, Christmas is forever ago.
- [30:14]
Guy Adami
Right.
- [30:14]
Courtney Reagan
Like another world.
- [30:15]
Guy Adami
It's a different world. But I think though that we've seen company after company just give very conservative guidance. Why not? We don't know the shape. You know, we don't know what's happening with tariffs. We don't know how the consumer feels. We get. You do have some signs of weakness. The thing is sort of interesting to me, the reaction, this stock down $30. Ish. That takes it to about a 20 multiple. Right. Excellent balance sheet. We haven't seen Lulu with a 20 multiple. No. In I don't know how long.
- [30:41]
Courtney Reagan
That's a really, really good point. And even, even going into this print today, I think they were down something like 11% for the year, which is in line with the retail the XRT, but. But, well, worse than the S&P 500. So maybe you look at Lulu and say, hey, this is a deal. I mean, Calvin McDonnell was trying to talk about. So when we have fresh products, we are seeing consumers get excited. But he's not giving us a whole lot of detail about that excitement.
- [31:02]
Tim Seymour
How much of this could just also be the space. I mean, discretionary in athleisure is something that was ballistic for a long time. And if you look at. It's not just Nike that's on its heels. I mean, again, Deckers you look at, on, on, I mean, hot, sexy, whatever brands, at least those that are hot within this space have been under a lot of pressure. Lulu went into this earlier. In fact, they're, they're drawdown as a, as a, you know, in terms of multiple was something that really began about a year and a half ago. But again they went into this and this was an argument of a couple of the guys in the street. I think this has been an argument of Jefferies. They went into a competitive landscape at peak Margin peak, you know peak sales peak, everything.
- [31:38]
Courtney Reagan
Yeah, they really did. I mean how long can you put up the numbers that Lulu put up for so long and they were really getting rewarded to Karen's point for their.
- [31:44]
Guy Adami
Margin was really good.
- [31:46]
Courtney Reagan
Really good. Better than expected.
- [31:47]
Brian Sullivan
And.
- [31:48]
Courtney Reagan
And yeah above Dana Telsey.
- [31:50]
Brian Sullivan
I talked to her downstairs before she went on closing bell and she said the numbers weren't that bad. Like the guidance was not that bad and I trust her as much as anybody.
- [31:58]
Courtney Reagan
That bad. But below expectations for both the first quarter. But the car revenue and is it.
- [32:03]
Brian Sullivan
11%, $30 a share bad.
- [32:05]
Megan Casella
Right, right.
- [32:05]
Brian Sullivan
That's what the numbers weren't that if.
- [32:07]
Tim Seymour
You look at all relatively 1537 versus 15 mid. That's it. There was a big mess.
- [32:13]
Brian Sullivan
All right, we're done with yoga pants. Coming up we're going to talk about oil and Gas IT Energy, the XLE Energy leading the S&P 500 this year. It says in the prompter a top analyst but we're just going to say Paul San and then they just know.
- [32:29]
Tim Seymour
That it would be redundant.
- [32:30]
Brian Sullivan
I love his coffee.
- [32:31]
Steve Grasso
Have you ever had his coffee?
- [32:33]
Brian Sullivan
Sanki? It's in stock. We're back right after this. Welcome back to Fast money. Don't look now but oil kind of still hovering around 70 bucks a barrel. In fact oil is about at one month highs. You do have some concerns about tightening global supply. The threat of tariffs on Venezuelan oil. Should we do any military action against Iran? There's a lot of things that are going on. The energy sector, the best performer so far this year is the only sector out of 11s and P sectors that are higher in March. Joined joined now by Paul Sankey of Sankey Research here. It is interesting because we're leading the show with tariffs and the consumer and a slowdown and oil sitting at 70 bucks.
- [33:20]
Karen Finerman
Yeah, I mean the market's kind of in equilibrium right now but as you know OPEC still has barrels to bring back into the market. So that incremental supply that starts in April is a concern in like a couple of days. Yeah, exactly. And then of course you've got April 2nd as well in a couple of days. So there's major concerns about tariffs. And a big one for oil would be steel. You know, steel prices going up would actually raise the price of oil. And it may just be that oil is actually repricing as a hard asset here. You would normally sell it into a recession as you're implying. But if we're talking about a weaker dollar which we think we may be Then oil naturally would go up typically. Although it's a really complicated question.
- [33:54]
Brian Sullivan
So do you think then just spitballing here that a 25% steel tariff might negate a 25% potential auto. I mean do we really care about auto tariffs also when it comes to oil? Because maybe just people are going to drive their older car which gets worse gas mileage longer. I don't know.
- [34:12]
Karen Finerman
Well I tell you one thing, that's a mega story that hasn't been as high priority as people should be.
- [34:17]
Brian Sullivan
We're on national tv.
- [34:19]
Karen Finerman
Is the is the five minute charger by Bhiwadi. You know that, that if that's really going to happen and we're going to really have a five minute charge ev, then you know one of the biggest problems that we see for refining here is US gasoline is declining, Chinese gasoline is declining. So both your biggest markets are declining. So it's a tough one for refining I think. But the natural gas story, the story just keeps coming and coming. And so we like natural gas.
- [34:42]
Tim Seymour
Yeah. And it seems like nat gas over oil has been the way the market's been rewarding certain stocks and places like talk about all services because you know office has really underperformed especially in PS and it seems to me Schlumberger and long is been doing it about as efficiently as they could be. They're not back to where their earnings power was about six or seven years ago.
- [35:04]
Karen Finerman
What starts we don't like them. I mean we just think that the need for capital discipline which is being exacerbated by the new administration here just makes it a very tough group. And as you know, historically they had a premium multiple because if you grew at the oil price their revenues grew by 1.2 times. We just don't see that anymore. And you've seen this week Shell cutting its capex to below the low end of the previous range. You know, the list goes on. We had diamond back on our call last week. Again he's talking about capital discipline and no growth. Northern oil and gas guy Nick O'Grady, very impressive CEO. CEO on our call today as well. Capital discipline is absolutely now ingrained in what is a group of companies that are much better managed, much more attractive than they were historically. Shell by the way has a 15% free cash flow yield.
- [35:50]
Tim Seymour
Yeah, I love it.
- [35:51]
Steve Grasso
So Paul, when you, when you look at it. So Tim brings up services but when you look at the complex has chevron, ExxonMobil suck all the air out of the room for obvious reasons for the deal. When you should you go downstream upstream or do you sit here and say if oil comes in, can the stocks still perform?
- [36:10]
Karen Finerman
Well, they've all got buybacks. I mean the thing about what brand saying about 70 is 70 is a good price for these guys, 60 is not. You know, so you're right at the, on the cusp of what, as I just mentioned would be A, a 15% free cash flow yield for Shell, Exxon, Chevron, Conoco, Shell pretty much are in the best shape I've seen them in my career. So these big guys are looking really good and there's a group of sort of mid cap, more levered US simps which are really strategically challenged by the lack of inventory that's developing in the US So the good news for the oil balance is that you're not going to see any growth this year in all likelihood and you're probably going into decline. When we get that point, the bull run is on. And at that point is when you want to be talking about your more levered random question.
- [36:51]
Brian Sullivan
I asked him and he, of course he dodged. He would while so on the sea of Shell earlier this week I had him on squawk box. Think there's any chance Shell buys bp?
- [36:59]
Karen Finerman
We always thought they should merge. Perhaps John Brown's old idea was maybe.
- [37:03]
Brian Sullivan
Bought is the wrong term but kind of sitting there flailing.
- [37:07]
Karen Finerman
Yeah, I mean I think at the moment what we're waiting for is for the activist Elliot to come out with an actual statement of intent about what they want BP to do and they haven't done that yet. I think, you know, you could see a megadel. I could see Chevron, Conoco. I could see, you know, one of these very big deals getting done under Trump too. So don't be surprised if we got a huge deal. I wouldn't be.
- [37:24]
Brian Sullivan
Yeah.
- [37:25]
Byron Wien
I want to drill down on Chevron. If you could just kind of explain the move that we've seen this year. I think it's up 14%. Do you think that's more a reflection of people's perception around oil prices or a move in sentiment to more free cash flow, dividend paying type of stocks?
- [37:39]
Karen Finerman
Both. I mean it's idiosyncratic because they started this huge project in Kazakhstan which has been five years coming as a vast mega project that's actually Kazakhstan is 400,000 barrels a day above its OPEC quota. That's being driven by, by Chevron. Then you've got very high conviction now that they're going to buy Hess. They've been actually buying Hess stock in the market because their conviction is so high. So people like that. And then as you say, basically one thing I've never seen from an oil company is these guys proactively announced a 20% reduction in workforce. Normally they do that at the bottom. They don't do it when everything's going great and they just hit the idea of a 20% workforce reduction. So again, it speaks to what I'm saying about Exxon, Chevron, Koniko being in the best shape I've seen them in my career. Yeah.
- [38:22]
Brian Sullivan
And yet they're not getting a whole lot of love in the market. We'll see if that changes. Paul Sankey. Love having you on, Paul. Thank you very much. Speaking of love, a new target on app Lovins back a notable short seller tearing into the company. Talk about that next. Welcome back. Short selling for Muddy Waters disclosing a negative position in Applovin today that sent the red hot stock falling. Muddy Waters calling Applovin, quote, just another scammy ad tech company. That's their words, not mine. And that its business is built on violating third party platforms terms of service. It is the third time in the last month Applovin has been targeted by short sellers. Both Fuzzy Panda and Copper Research put out reports negative on Applovin. In February, we reached out for comment from Muddy Waters Co. Referred us to a previous statement saying it is disappointed that a few nefarious short sellers are making false and misleading claims aimed at undermining their success. That comment obviously, Steve, coming from Fuzzy.
- [39:30]
Steve Grasso
Panda always rubs me the wrong way. Brian. In February, mid, mid February, the stock was at $517.
- [39:37]
Brian Sullivan
517.
- [39:39]
Steve Grasso
So this is, this is a story that's been going on forever. When you're, when you start to look at what short sellers attack a name like this, it's always a lonely spot. And at a certain point I don't know what the short interest is. It's not, it's not that big in a name like this because all of them got washed out. But it's always whatever the last headline is. And the shorts really dictate and narrate a lot of the, a lot of the storyline. But at the end of the day, I would not be shorting a stock at this level coming from 517 two months ago.
- [40:14]
Brian Sullivan
We all listen, we all know Muddy water short firms, they've got their agendas, they've got positions, I get it. And they're not always right. But Tim, I mean you don't hear the term scammy much in Short reports, scammy ad tech company.
- [40:27]
Tim Seymour
I think you hear some, some very colorful language and you know, there's, there's an argument that there are, you know, there are Ponzi type issues. Like again, these are not my claims, so but you know, 25 to 30% in terms of E commerce sales and some deep platforming risks are what they're talking about. In other words, they're not that impressed based upon the multiple here that this is, you know, where you see growth on the company. You know, I think it's an environment going into this where there are a lot of puffed up valuations on a multiple of sales that make zero sense. And this is just another one. I mean, just on fundamentals alone, I think you see where there's a lot of weakness in high growth stocks.
- [41:07]
Brian Sullivan
That's it. And the stock fell 20% today, well off its highs of 517. But let's be clear, still has made a lot of people a lot of money. All right, coming up, speaking of making money, Robinhood wants to make more money off of the, dare we say the slightly older crowd. Kate Rooney will join us about Robinhood's big turn to win some of the big bucks from the boomers and Gen X. Sure. Welcome back. Robinhood announcing some major changes to try to appeal to a more mature crowd. Robinhood set to launch a low cost Robo Advisor private banking Service and an AI investing tool called Cortex. Kate Rooney chatted with CEO Vlad 10F today. She joins us now to break down the story. I assume, Kate, this is not just for us oldies. Anybody can take advantage of it.
- [42:06]
Megan Casella
You said it mature, you just have to be. Brian. Well, you're right. So the product suite from Robinhood is for one. It's the latest signal that the company is growing up with their client base. So when Robinhood went public, you might remember it did have the reputation for beans for sort of the meme stock traders. Now it's really looking to court high net worth individuals, more sophisticated investors and they are undercutting on price and on fees. So the Robo Advisor, for example, charging 0.25%, excuse me, annually, that is capped at 250 bucks. It's also offering certain transfer incentives, trying to get people to move from their other brokerage firms. But that is only for gold subscribers. That subscription model is a way Vlad Tenev tells me they're going to try to break even here. I caught up with him earlier out here in San Francisco. He acknowledged some skepticism since subscriptions haven't typically worked out in financial services. He does say they're using Amazon prime and Costco for inspiration. Robinhood, it's got about $200 billion in customer assets at this point. That pales in comparison to some of the competitors out there. Think of Schwab, Vanguard, Fidelity. It's also now going up against a lot of the banks on private wealth. Tenev says they are trying to position for the massive wealth transfer from some of the baby boomers. Also adding an AI research assistant. The bar is high, he Sundays, for using AI and investment advice. It's known for hallucinations. Still not going to be generating investment ideas at this point.
- [43:30]
Brian Sullivan
Brian, a fascinating story. Great interview with Vlad Tenev K Rooney. Really appreciate that Bottom and take.
- [43:38]
Byron Wien
Yeah, well, I give him credit for. For going after a new customer cohort. I mean, you've always got to look to grow top line. But I do have a couple of concerns here. One is like kind of reconciling the whole fiduciary responsibility with AI hallucinations. I think the bar is quite here that the bar is quite high there from a compliance standpoint. And then what are the implications for a multiple? So this thing trades at like 30 to 33 times, I think four times book. You look at some of the banks or the heritage assets.
- [44:02]
Brian Sullivan
Because if you're trying to trade, if you're trying to turn into Charles Schwab, that's a high multiple.
- [44:06]
Guy Adami
Yeah, right.
- [44:07]
Courtney Reagan
Yeah.
- [44:08]
Guy Adami
Charles schwab, less than 20.
- [44:09]
Brian Sullivan
Yeah. Okay.
- [44:10]
Byron Wien
But you've got to look at the other comps as well that trade at a much, much lower multiple, like a J.P. morgan or J.P. morgan or, or like a Morgan Stanley. All of them trading 12 to 14 times on a. On a Ford P E basis, one and a half, maybe two times depending on where you are in terms of price to book price.
- [44:27]
Brian Sullivan
Yeah. The point I was trying to make was I think one you would make yourself and you did in the commercial break, which is basically if you want to do these things, you're going to have to hire a lot of lawyers and compliance. Suddenly now you're. You're all growns up. And you're all growns up. Tim Seymour up next.
- [44:42]
Tim Seymour
Thank you.
- [44:43]
Brian Sullivan
Your final trades. It's final trade time.
- [45:01]
Tim Seymour
Tim, Great listening to Paul Sanke, who I do listen to all the time talk about the capital discipline that's going on in the integrated space. So rds, vp, but total energy TTE is how I play.
- [45:12]
Brian Sullivan
Karen.
- [45:13]
Guy Adami
Yeah, I just started building a position in a firm. It's come down a long way, I.
- [45:16]
Brian Sullivan
Think it's an intriguing business modeling.
- [45:18]
Byron Wien
Tim was the only one that listened to Paul. I did as well. CBX 4.2% Divya and I think it's a compelling case versus rushing into into the consumer staple.
- [45:27]
Brian Sullivan
Two energy companies wonder for you.
- [45:29]
Steve Grasso
You'll be back tomorrow?
- [45:31]
Brian Sullivan
Not back no way.
- [45:32]
Tim Seymour
I was here last Friday enough so we nice habits.
- [45:36]
Steve Grasso
Tesla bounced right where it should have bounced and now I think you take a little profit so look for a better entry on the way on the.
- [45:42]
Brian Sullivan
Way down take a little profits, look for a better entry. I like it guys. Great show. Thanks for taking it easy on me. See you soon. Thanks. Mad Money starts right now. All opinions expressed by the Fast Money.
- [45:54]
Courtney Reagan
Participants are solely their opinions and do not reflect the opinions of CNBC, NBCUniversal.
- [45:59]
Brian Sullivan
Their parent company, or affiliates, and may have been previously disseminated by them on television, radio, Internet, or another medium. You should not treat any opinion expressed on this podcast as a specific inducement to make a particular investment or follow a particular strategy, but only as an expression of an opinion.
- [46:15]
Courtney Reagan
Such opinions are based upon information the.
- [46:17]
Brian Sullivan
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 VisitForward/FastMoney disclaimer Pandora makes it easy.
- [46:33]
Karen Finerman
For you to find your favorite music.
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Brian Sullivan
Discover new artists and genres by selecting.
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Karen Finerman
Any song or album, and we'll make you a personalized station for free download.
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Tim Seymour
On the Apple App Store or Google.
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Brian Sullivan
Play and enjoy the soundtrack to your life.