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CNBC's "Fast Money"
Walmart’s Consumer Warning… And Eli Lilly’s Latest Tip Of The Scales 5/21/26
00:43:36
Walmart raising the alarm bells on the consumer, as the big box retailer posts a disappointing outlook amid rising gas prices. How the oil shock is hitting shopper’s wallets, and what we can expect to hear about the consumer when competitors report results next week. Plus, details on OpenAI’s IPO timeline, how Spotify is raising the volume for its superfans, and Eli Lilly’s heavy hitter; how the pharma giant is moving forward in the weight loss drug space with its next-gen obesity drug. Fast Money Disclaimer
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- [00:00]
Narrator/Commercial Voice
What does it mean to live a rich life? It means brave first leaps, tearful goodbyes and everything in between. With over 100 years experience navigating the ups and downs of the market and of life, your Edward Jones financial advisor will be there to help you move ahead with confidence. Because with all you've done to find your rich, we'll do all we can to help you keep enjoying it. EDWARD jones, member, SIPC it's smart to
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- [00:58]
Melissa Lee
Live from the NASDAQ Markets in the heart of New York City's Times Square on a day the Dow sets its first record close in over three months. This is fast money. Here's what's on tap tonight. Wal Mart's warning the retail giant seeing its worst day in two and a half years after its latest earnings report. What the company had to say about the US Consumer and the ripple effects through the economy. Plus a quantum leap for quantum computing stocks. Spotify soars after its first investor day in four years. Lilly Legs higher in hopes for its next gen wave weight loss drug. And speaking of health care, we'll talk to the CEO of a company trying to revolutionize drug discovery. The head of iambic Therapeutics, number 33 on this year's Disruptor 50 list, joins us on set later this hour. I'm Melissa Lee. Come to you live from studio Be at the nasdaq. On the desk tonight, Dan Nathan, Gaia Dami, Steve Grasso and Julie Beal. We'll get more on what drove the Dow to its first record since February later in the show. But we start off with that retail red flag out of Wal Mart, the big box giant dropping more than 7% its worst day since November 2023 after company gave a disappointing outlook for the year painted a stark picture for the consumer. Wal Mart saying the pain at the pump is straining consumers budgets and that things could get worse in the second quarter when the boost from tax refunds goes away. Here's what the CFO had to say on Squawk Box this morning about what's becoming increasingly K shaped economy.
- [02:17]
Tom Miller
The high income customer continues to spend with confidence in many categories whereas the lower income consumer is a little more Budget conscious, even navigating some financial distress. Since we gave the guidance 90 days ago, we've seen fuel prices increase. And so it stands to reason that incrementally from 90 days ago there's a little more pressure on the consumer. This narrative around the K shaped economy, we see that in our business as well.
- [02:43]
Melissa Lee
So how should we think about this? Should we be more concerned about the consumer guy, what do you think?
- [02:48]
Guy Adami
I think it's just for me it's just reiteration of the fact that we've been talking about the consumer and the weakness for quite some time. So Wal Mart said nothing that I don't think all of us knew already. The question really is does Wal Mart win to that? I think they absolutely went to that. I understand the stock traded lower today. We've seen this before, maybe not to the magnitude but I think three or four quarters ago when the stock was making an all time high like the 106107 area, we had a report. Stock then subsequently traded down to the low 90s and bounced. I think that's what we're setting up for now. People get indict the valuation, I totally get that the valuation is rich. But the environment that Wal Mart is talking about, being cautious about is the environment that Wal Mart wins in.
- [03:26]
Melissa Lee
This is where they can take share, right? Because they can eat some of that cost maybe.
- [03:30]
Dan Nathan
I mean you saw the news out of Kroger this morning, right? So the CEO is talking about they're looking to cut prices to better compete and take market share back from Wal Mart. Listen, that's all good for consumers if you think about it. Have Wal Mart and Kroger beat each other over themselves, you know, to get market share, it's only going to be good for consumers. There's two things though, I take away from this and maybe this is as we get to the end of earnings season, it's worth noting. I mean Wal Mart is eating a lot of those in put costs, right? They're not passing them through. They're not in a position to do that. If you think about their competition now, Kroger, if they cut prices, well they're doing the same thing, right? And so at the end of the day when you kind of start to think about multiples, you start thinking about who's the contributors to earnings growth, that sort of thing, you might see margins that just kind of peaked out for a lot of consumer oriented sort of things. So again it's also a political environment where the administration is going to look, you know, not Particularly kindly to, you know, companies that are passing through, you know what I mean, costs basically increased costs that they've caused. For all intents and purposes, you think about a war, you think about tariffs, you know, to a consumer that's strapped right now.
- [04:31]
Melissa Lee
I think this is an interesting sort of test Julie, in terms of how you look at the same sort of data points because we have a very positive interpretation from Guy in terms of this being the exact environment that Wal Mart will thrive off of versus what Dan is saying and that is that the premium valuation that it stands out might be at risk here. What do you think?
- [04:54]
Julie Beal
I agree with, I agree very much that the, the valuation is a stumbling block for a lot of people because you can't really sustain this level of evaluation if you're going to have margin compression. And I think it's hard to see how they don't avoid margin compression. But for the longer term these periods are great opportunities for Wal Mart to introduce new customers, higher end customers who would never have shopped there to the brand and to recognize that they can be really profitable for them long term. So what could be an interim headwind in terms of margin compression and a high valuation could for a really, really long term investor actually be an opportunity. I think that the real question is how long will we see gas prices where they are? Because it is going to have a negative impact on their low income consumer. We just have to look at credit card data and see how it tapers off at the end of the month. You see that that kind of low income consumer is really pulling back right at the end of the they get paid. That's not a good sign.
- [05:53]
Melissa Lee
I mean this is a very interesting stat I thought out of the Wal Mart earnings release and that is the number of gallons per pump was below 10 for the first time since 2022. Steve. And that really shows you how stressed how paycheck to paycheck the consumer is right now.
- [06:08]
Steve Grasso
Yeah. And this is why when you have a supply shock that have anything to, to actually push for the demand destruction. So when you're looking at Wal Mart, Guy touched on it right out of the block valuation. I could buy Amazon for a cheaper valuation and for in large part for years why the stock ran was because it was supposed to be another Amazon like stock. But if now you're telling me that it's not going to grow as quick then I'd rather just go buy Amazon. The only thing I find is that if I look at ad dollars, ad revenue is up 38%. So now you might say, well, that's a very small portion of revenue, but it's 25% of operating income. So if you look at this and you think that to Julie's point, gasoline prices are going to come down in the next couple of weeks, slash months, then you want to be a buyer on this dip at Walmart.
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Melissa Lee
I think it's an interesting point in terms of, you know, maybe Amazon's the right way to go. I mean, they compete on many different things, including grocery buy the way at this point. And you get the kicker of it being an AI trade.
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Guy Adami
Yeah, well, yes, and you get a better valuation to see this point, which I get. I mean, if you want to compare the two, I understand why you would do that. I still think if you look at the way that Wal Mart's been able to integrate AI and what, what is meant to margins in an environment where a lot of margins for companies are going the wrong way, they went to this. Now, I know the guide isn't great and quite frankly, even with this move, you can make the argument that the stock is more expensive after today's close, that it was yesterday at a higher price. So I totally get that. But I will tell you, I think the environment that we find ourselves in and we will continue to find ourselves in, Wal Mart wins to that. And I think they've done everything right. If you want to nitpick a little bit, inventories are up close to 9% against 7.1% sales growth. So maybe they have a slight hint of an inventory problem, although I don't think they do. That's the one thing and the guide is the other thing. But I think you buy Wal Mart here.
- [08:04]
Melissa Lee
So if Wal Mart wins, Target loses. I mean, this doesn't seem like the environment for Target at this point.
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Dan Nathan
I think everything we've talked about really has to do with food. I mean, this is groceries and it's gas and I don't think that's somewhere that Target, you know, is obviously pretty exposed and apparel is a big thing for them and they seem to be like every other year just really screw up as far as trends, as far as inventory and that sort of thing. And you know, I'll just make one point about the Amazon and I don't think it's a great. Would you, would you rather.
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Comcast Business Advertiser
Right here.
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Dan Nathan
I think Steve's point about the advertising is really good one. I think that was something, was a big driver for Amazon too. And it's doing a lot of good stuff for Wal Mart because it's Basically pure margin for all intents and purposes. And the way that they're using AI guys been on this for about a year and a half or so, so. But with Amazon, like its Stock just rallied 25% has nothing to do with North American retail. I mean, like, really, it doesn't. Right. It all has to do with, you know, how the models are working on us, how their share is taking, you know, who they're invested in and that sort of thing. So to me, I think it, I know it doesn't sound like a pure play, but that's kind of how it's being valued right here despite that. And so, you know, this stock was in the tank just, you know, you know, a month ago, two months ago, it was not one that was performing particularly well. You saw reacceleration, you saw the stock accelerate.
- [09:15]
Melissa Lee
Yeah. At the same time, on the same day, in fact, we saw a couple of other very good data points out of retail. Ralph Lauren and William Sonoma. So that K Shape, Steve, is really, I mean, underscored by the reports we got out today.
- [09:28]
Dan Nathan
Yeah.
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Steve Grasso
And when you look at a Ralph Lauren, you see that the shopper out of China has deep pockets. And you could say whatever you want about that economy, but that's what really was reaching for that premium brand. But when you look at the premium brand, I think Julie mentioned this, Walmart grabbed the consumer that, that makes over 100,000. But they're very picky because they want cheaper prices. They will go somewhere else very quickly if prices rise. So there's no elasticity to defend a Walmart. But when you look at a Target versus a Walmart, the valuation, Target wins. New CEO. New CEO, but Target, much lower bar to jump over than a Walmart. But remember, getting back to where you started at Ralph Lauren, handful of premium retailers, they're one of them. If you're going to reach for one, that's the one to reach for.
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Melissa Lee
All right.
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Guy Adami
Tim was probably a Ralph Lauren model at one point, don't you think?
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Melissa Lee
I mean, if he wasn't, he should have been.
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Guy Adami
Should have been.
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Melissa Lee
There could still be time.
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Guy Adami
Always time, Mel.
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Melissa Lee
Let's bring in former Wal Mart US CEO Bill Simon. He's now on the Darden Restaurants board. Bill, great to see you.
- [10:44]
Bill Simon
Hey, guys.
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Melissa Lee
You know, I'm going to kick it off. I usually end the interview with this question. Bill. I'll kick it off with this question. And in this environment, based on what we heard so far, Wal Mart or Target for you?
- [10:57]
Bill Simon
Gosh, you know, it's, it's Always such a hard question. It's, it's hard for me to imagine that Target could get, could get worse. So you know, they've got a whole lot more Runway than Wal Mart. Wal Mart's got to be perfect to sort of maintain and you guys have been talking about the valuation, to maintain the momentum in the valuation. So you know, as a retailer Wal Mart is doing a much better job as a, as you know, a stock. A place I like might want to put my money, I might go with Target because I think there's more upside.
- [11:25]
Melissa Lee
So I mean in terms of the quarter Bill, I mean what did you make of Walmart's execution in the quarter? And is this sort of the kind of environment where Wal Mart will ultimately thrive? So as an investor you might not like immediately what you see. It might be very tough operating environment but you know, two, three quarters down the line it could be in a much better position.
- [11:46]
Bill Simon
Yeah, I mean I think they had a good quarter. Like it's hard to, hard to imagine that they're getting the beating that they're getting other than their, the, you know, the valuation is, is difficult to, to sort of rationalize. There's a couple of things in there that really stand out for me for the first time that I can remember seeing and Wal Mart, the amount of the digital sales that are, that are due to their E commerce business and that exceeded their total growth in the U.S. so if you, if you sort of interpolate that that means their physical store business was flat to down which you would expect with the gas price pressure. But the online business is growing. You know, I think it was six and a half percent or 650 basis points contributing to same store sales. That suggests that the, the upper branch of that K economy is still shopping at Wal Mart in sticky because we talk about, we talked about this a couple of quarters ago wondering whether that that affluent customer would stay and it looks like they are.
- [12:48]
Guy Adami
All right, Bill, you know, clearly when you think of Wal Mart you think retail. I understand that. But they obviously also came to the NASDAQ the biggest move from Exchange to Exchange, I think in history for I think one reason to position themselves as a technology company, which I believe that they are, which means in my book they deserve this valuation. So thoughts on that?
- [13:09]
Bill Simon
Yeah, 100%. I think they did a brilliant job with the investments that they made the move to NASDAQ and deliver it selling and then delivering on this story that they're a technology company and you know you could even sort of look at it that you can't even break out physical and digital anymore because an increasingly large portion of their, their digital business is done through the stores, are facilitated through the stores. We talked about their advertising revenue and they've done a really good job developing that.
- [13:41]
Dan Nathan
Hey Bill, you've been obviously watching retail names and been involved for a very long time and you know, there seems to be a lot of dispersion in the space right now. If I look at like a Home Depot that reported earlier this week or I'm looking at a Best Buy, I mean these two stocks are down, you know, at 52 week lows, multi year lows. And so where do you think that investors are getting, you know, like good signals versus bad signals? Because you know, you take a name like Wal Mart, it was trading at all time highs basically for the last couple of months. And then you take this thing down 10% in just a matter of days and then you have all these other names that are trading well below a market multiple. And we talk about turnarounds in the space all the time. Are there unusual values in some of these names that you have just been really thrown out with? The baby with the bathwater. There you go.
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Guy Adami
Yeah.
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Bill Simon
I think people have gotten so enamored with, you know, what could be that they're, they're failing to realize what is. This is a really good quarter for retail across a lot of categories. The department stores all had positive same store sales. Macy's, you know, Nordstrom's, Dillard's, the drugstores had positive sales. You know, Amazon was up 12, Walmart was up 5 or 6. Target was up for the first time. That's a lot of volume and a lot of growth coming out of retail which suggests that, you know, the economy is, might be better than a lot of people are thinking. General merchandise, apparel, Abercrombie was up, it's pretty good right now. And I think a lot of the retail names are undervalued.
- [15:11]
Melissa Lee
All right, Bill, we've got to leave it there. Thanks so much for joining us. Always good to see you, Bill. Simon. Julie, you think that, I mean, do you agree that maybe things are actually better than what we all think here?
- [15:24]
Julie Beal
I think that the economy right now and anything I've learned from first quarter earnings is that things in the moment right now are quite good and there's good solid earnings growth, drivers that are in the market. I think that the real question is, is can we have a good economy if the low income consumer is really struggling? Because that probably continues as long as gas Prices are high and can we continue to move more and of the growth into capex as opposed to consumer spend which was really the primary driver before. And I think if you can feel confident about those, then you can probably feel pretty good about the stock market. But it makes it harder to know longer term what the outlook is going to be. Because right now if you think even the high income consumer who's clearly motivated by higher equity prices, if there is any hiccup in the stock markets, does that change the consumer economy? Because a lot of it's been driven now by the equity markets, not housing.
- [16:19]
Melissa Lee
All right, meantime, we have an earnings alert on workday. That stock is popping after the HR and finance software company boosted its full year margin forecast. Workday also beating top and bottom line estimates even with tonight's pop of about nine and a half percent. Right now shares are down nearly 40% this year as the software trade struggles under the AI threat. So this is sort of one of these names that dash got decimated because of the fear about AI displacement.
- [16:44]
Dan Nathan
I think I would call it like throwing baby with the bathwater. That's what I want.
- [16:48]
Guy Adami
To be clear, I would not say throwing babies. I don't throw babies. Unless you're doing it in a playful way. Throw them up and.
- [16:54]
Dan Nathan
Yeah, well it's not even do that. You were obviously dropped on your head a few times back in the day. You know, listen, there's going to be some unusual values here, you know, and a lot of folks when you look at like a servicenow for instance too, I mean you're expecting 20% earnings and sales growth right now with 80% gross margins. The stock has been down 65% from all time highs. And all time highs came like two years ago when a lot of investors were actually really excited about the opportunity for AI within these businesses. Now, you know, they've been disrupted, there's little doubt about that. But right now the numbers have not come down meaningfully. And when you have a company like Workday put up a report like this and give that sort of commentary with that sort of guidance, it's really hard I think just to kind of wave a wand and just say the SAS names are done, they're moving towards, you know, consumption models away from seat models. And it just may take a little time, you know, for that to kind
- [17:44]
Melissa Lee
of play out a little bit in terms of the longer term plan. Steve. I mean, part of, for, for workday, it's unleashing all these agents, agents that will help with corporate travel, for instance, doing Expenses, all these things that we don't like to do and would love to have an agent do. And that's sort of where it is. The pop though we should, you know, just sort of caveat that because there's a 12% short interest in this stock. So part of that 10% pop, 9% pop we're seeing right now is fueled
- [18:09]
Steve Grasso
by that workday is back to the COVID lows or there or thereabouts within. Within reason. Do you think we're at the COVID lows for this stock? I would say no. And you have to, you have to look at the SAS companies and to through two different lenses. Which ones are the infrastructure plays And I think ServiceNow and Workday fit into that category. Which ones are the ones that could be replaced easily by artificial intelligence? That's front office, back office. So back office are the infrastructure plays that I'm talking about. But when you look at it on a chart, you go back, you know, obviously six years on this. Is there any reason why this should be trading at Covid lows? I think not. So I would be a buyer of
- [18:57]
Guy Adami
this March of 2020. Steve's talking about. I'm looking at the same thing he is. And we did it on big volume and we're bouncing. Listen, you want to play the valuation game. It's even with this move, it's probably trading at 10 and a half, 11 times next year's numbers, which is never a reason to buy these things on the way down, but something people will focus on now that you got a quarter out of the way. And it actually looks sort of interesting. So I think there's more left to this upside move and work day coming up.
- [19:20]
Melissa Lee
Even more after hours action. The details out of Deckers Ross stores take two and zoom ahead. But first, another IPO countdown. Investors gearing up for Open Air's blockbuster debut. What to expect from the filing and what getting to market first could mean for the air race. Don't go anywhere. Fast money's back into
- [19:40]
Comcast Business Advertiser
this is Fast
- [19:41]
Dan Nathan
Money with Melissa Lee right here on cnbc.
- [19:49]
Narrator/Commercial Voice
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- [20:46]
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- [21:14]
Melissa Lee
welcome back to Fast Money. The IPO boom about to kick into even higher gear with OpenAI expected to file for its offering as early as tomorrow. CNBC's Kate Rooney's got the latest.
- [21:24]
Kate Rooney
Kate hey Melissa. So OpenAI, from what we're hearing, is preparing to file for an IPO confidentially as soon as tomorrow. Looking to go public from what I'm hearing as soon as September. This is according to a source familiar with those plans. It would follow the Speak Ex listing that you guys have been talking about with its AI Business X. I am also told by sources that rival Anthropic has been getting IPO ready behind the scenes, but no word on exactly when it would file. OpenAI, though, really planting the flag here, getting out ahead of what is its biggest competitor, Anthropic, to try to frame its story and some of the financials to Wall Street. We're not going to see the numbers guys until the S1 flips. So that would be closer to the listing date, likely in the fall. But we have gotten some breadcrumbs of revenue growth. Of course, these are private companies, but a source tells me OpenAI's first quarter revenue was around $6 billion. That in Q1 was above Anthropic's revenue. The information was first to report this one, but in the second quarter Anthropic appears be to to be pulling ahead, from what we're hearing, almost $11 billion in revenue for Q2. That would double what it saw in the first quarter and mark its first profitable quarter. It would also top all of sales that the company saw last year, according to a source familiar with those numbers. OpenAI has taken a much more aggressive approach. When you look at data center spending and Compute argues that is a strategic moat amid a compute crunch. But it could also mean much larger near term losses. Guys, but we will see. Back over to you.
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Melissa Lee
Yep. Kate, thank you. Kate Rooney, do you want to see Anthropic be a profitable company right now or do you want to see it spending for growth?
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Dan Nathan
I think, you know, and Kate just said this, I mean both these companies are compute constrained. Right. And so one of the knocks on Anthropic over the last couple of years is they were not nearly as aggressive as Open I was. So, you know, to the point, I mean Open AI is losing money hand over fist, but they're also growing revenue at an astonishing rate. I mean, when you think about how much revenue, the tens of billions of dollars these companies have amassed over the last just couple of years, it's pretty astounding. At some point it will justify the spend and these companies that, you know, again, we don't know when it's going to end. We don't know what the demand is going to be, we don't know what the return on investment, you know, by the companies that are going to be using this compute. But the one thing I think is really important, if OpenAI is able to make this transition more towards enterprise and that's what Anthropic has been doing. It's a more recurring sort of thing, not relying on consumers paying $20 a month and not relying on an ad business that doesn't exist yet just yet. You know what I mean? So again, that's probably the bull case for OpenAI. If they are able to demonstrate that they're making inroads in the enterprise with this new coding product that they have and taking share away from Anthropic. But this is not going to be a winner take all right now. I mean there's a lot of folks, there's a lot of Runway. We just spent a lot of time talking about ServiceNow and Workday and how poorly positioned they are. This technology is going to help some of those, some of those companies come back from the dead.
- [24:12]
Melissa Lee
I agree in terms of the long term picture, but right now, I mean in terms of the snapshot going public, it seems like a bigger leap to say that OpenAI will have a meaningful enterprise business right now. Yeah, but traffic is so far in advance. You know, listen, we're going to have
- [24:26]
Dan Nathan
three companies that are coming public this year. They're probably equal to 5 or 6 trillion dollars in market cap and all of them are wildly unprofitable. This is not something that we have seen in The S&P 500, the NASDAQ 100, it probably ever, you know what I mean? So these are going to be some of the biggest companies in the indices and they don't make money in terms of size.
- [24:44]
Guy Adami
Yes. In terms of 20 something years ago, Amazon was a company that everybody's excited about that was not profitable for quite some period of time and they were given the benefit of the doubt. And so they weren't, if you recall, because there was a period of time where Amazon went down about 90%. People forget that. Dan does.
- [25:00]
Dan Nathan
Well, the irony also is that AWB was part of the bear story 20 years ago. I mean people like what are they doing spending on this? And now we just talked about this again, really surrounding the trade here. I mean now this is basically the valuation. The North American retail business is valued. What guy? Nothing. Yeah, yeah, that was a thing we used to do.
- [25:19]
Melissa Lee
But I mean it just shows you how, how fierce the competition is in terms of open air, really rushing. We had all those reports, Julie, about the CFO saying that, you know, basically they're not ready, the numbers aren't ready yet to go public. And yet here we are, we're hearing about that filing as soon as tomorrow.
- [25:35]
Julie Beal
It's pretty concerning if you're an investor to hear that you have a CFO that is not ready to publicly file because they're really concerned about the quality of the numbers. And all you have to do is go through the Space X S1, which I delightfully did yesterday, to see that these numbers are really not great. And unlike Amazon, I think what's really different about this whole scenario is that when we're talking about the build out of telecom, the build out of Rails, all of these kind of huge build outs, we were doing it with assets that were not depreciating on a two and three and four year cycle. And that's different in this case. And so I think that's the discomfort that a lot of us have is, you know, they're talking to us about adjusted ebitda. EBITDA is not relevant when you are spending this much on capex just to sustain your business, to say nothing of the margins that you're charging. So I remain really, really concerned. We really want to see these numbers to get a sense of what the potential be. We understand that businesses can be unprofitable when they come to market, but there has to be kind of a long term path and trajectory and it's really difficult to see that right now coming
- [26:43]
Melissa Lee
up, turning up the volume on Spotify. The headlines out of the music streamers. Investor Day that has investors tuning in. Why being a superfan could pay off in a big way. You're watching Fast Money live from the NASDAQ Marketsite in Times Square. Back right after this.
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Your data lives everywhere on prem in the cloud, across apps. Bring it all together with Everpure, the platform that acts like a living system, delivering the latest in data, performance, security and innovation without ever slowing you down. Sophisticated enough to anticipate your ever changing data needs, yet simple enough to feel like second nature. Tame your data chaos with Everpure and make storage and data management the simplest part of your business. Visit everpuredata.com to learn more.
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Bill Simon
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Melissa Lee
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Melissa Lee
Welcome back to Fast Money. Stocks posting some small gains today. The Dow jumping 276 points and closing at a record high, its first since February. The S and P and NASDAQ both with fractional gains. WTI crude pulling back again today falling 2%, selling just above $96 a barrel. Shares of Spotify jumping 13% its best day since February after hosting its investor Day, the company announcing a partnership with Universal Music to double down on AI in offering in unveiling new offerings allowing eligible premium subscribers to reserve concert tickets and an AI tool that generates custom podcasts from user prompts. Shares of Spotify still down more than 20% over the past year. Some after hours action. Shares of Estee Lauder jumping on a report the cosmetics giant ended a merger. Merger talks, I should say, with the Spanish beauty company Twig. The stock fell sharply in March when rumors of a deal hit the market. Imax also higher after WSJ report that the movie screen Company is exploring a sale. Shares are still down 20% from their 52 week highs. And some new adds to the S and P small cap index. Universal Technical Institute and Peloton will join the index on May 27. And more earnings to bring you Deckers, Ross Stores and Zoom all topping earnings and revenue estimates. Take 2. Also jumping after beating revenue expectations, the company adding its Grand Theft Auto 6 video game is still on track for a November release. That was a lot of information. Steve Grass, what do you want to trade?
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Steve Grasso
Yeah, so Ross stores is one of the obvious ones they don't have. We had a guest on last week we discussed what their tailwinds are. They don't have any tariff issues. They're domestic. They get to benefit from the over ordering that other corporations do to stay ahead of whatever tariff headwinds that they have. And then if you look at Spotify, this is a really interesting one. If there's one thing that I should in theory be able to disrupt, it should be Spotify. And if you look at the performance from April up into this recent pop stock wasn't doing that that well. And there's going to be label renegotiations. Margins probably get compressed. I think you actually sell Spotify off of this pop. Oddly enough.
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Dan Nathan
Yeah. I'll take the opposite of that. I mean if anything I think they're going to leverage AI. They have been. Right. So if they've been using machine learning for years now, we call it AI. Right. And there's so many different levers that they can pull as it relates to recommendations but also you know, content creation. And then when you think of the integration with some of the deals that they just mentioned today, I mean I think these are things that are going to be tailwinds. Right. And especially when investors have not been too excited about this. This if you look at the potential for margin growth which is what they are guiding to, that's what they spoke to at this investor day and they also guided towards, you know, a billion users. Half of those are paid that dwarfs what Apple Music has. So to me I find this one very interesting. And if guy was playing would you rather I probably go with this over Netflix right now.
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Melissa Lee
Interesting. You weren't that, were you?
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Guy Adami
I can but could I say something
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Melissa Lee
about Spotify quickly because this is supposed to be a short blog.
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Guy Adami
It upsets me. I have my Spotify playlist like 900 songs as I mentioned.
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Melissa Lee
Yes.
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Guy Adami
And then at the bottom of it has songs like they think that I would like.
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Melissa Lee
Yes.
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Guy Adami
Why do they think that? Why do they think I would like a Doobie Brothers song or a Chicago song? Both those bands suck. I don't like either one.
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Melissa Lee
Because you have 900 songs on your playlist, there's no way for AI to determine what you actually like.
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Guy Adami
Clearly.
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Melissa Lee
To all of you, thank you.
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Guy Adami
You made my point for me.
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Melissa Lee
What, that you're listening?
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Dan Nathan
No, that they can't figure out what I like.
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Melissa Lee
Anyway. Coming up, pharma in focus, the latest trial results on Eli Lilly's next gen weight loss drug and the stocks making moves after the ASCO data drop. All that when FAST MONEY returns. Welcome back to FAST money. Scientific abstracts are out ahead of the American Society of Clinical Oncology's annual meeting, otherwise known as asco, it offers an early look on the advances in cancer treatment set to dominate this year's conference. Anika Kim Constantino joins us now with some of the key readouts. Annika.
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Kate Rooney
That's right, Melissa. So we're watching moves in two familiar names. A lot of the major data is being presented next week, but we're still seeing some pops from Biontech and Merck. So Biontech is up almost 6% after mid stage data on its bispecific antibody drug combined with chemotherapy as the first treatment for patients with a certain type of lung cancer. Meanwhile, Merck is also up 3% on phase three results on a targeted cancer drug combined with Keytruda as a first treatment for patients with another certain type of advanced lung cancer as well. And so that column will reduce the risk of disease progression and death by 65% compared to Keytruda alone. And so what these two data sets have in common is that these are treatments in the first line setting. So they have the potential to challenge or expand the standard of care here. And we're going to come back to you with any other movers here.
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Melissa Lee
All right, Anika, thanks. Anika. Kim Constantino, well, today's other big health care story, Lilly rising 2% after giving fresh data on his triple agonist weight loss shot. Over 80 weeks. Patients on the highest dose of retatrutide shed 28% of their body weight. That's an average of 70 pounds. Almost half of patients saw weight loss greater than 30%. For more, let's bring in Mizuho health care specialist Jared Holz. Jared, great to have you with us. The expectations were already high on retatrue, Tide or triple G. And so I'm wondering, you know, how you think the actual data compared with what was expected.
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Jared Holz
Yeah, I mean, we were all sort of expecting 25 to 30% weight loss for this drug, which is obviously very powerful. And that's sort of what we got. So I wasn't shocked by the results. Again, you know, when we look at these things from a stock perspective, there's been such a hyper focus on percentage of weight loss. And so the company sort of delivered on expectations for sure.
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Melissa Lee
I wanted to ask you about this note from Bernstein. I know that's probably taboo to ask you, but basically the argument was that, you know, Lilly was going to cream Novo Nordisk because Lilly is a marketing machine and its oral pill will eventually overcome the Wegovy pill that is going to continue. Lilly will continue gaining on the injectable front, et cetera. And I'm wondering how much you agree with that, if at all.
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Jared Holz
Well, I feel like the execution piece of the Lilly vs Novo debate or discussion has sort of already played out. And going forward, it seems like if you're looking at these stories today, that Novo is gaining a lot of momentum in the oral market to just come out and say that Lilly is going to be victorious there as well. I think sort of negates a lot of the success that Novo has had early on with the Wegovy pill. On the injectable side, yes, I think. I think it's clear that Lilly is in the lead and probably will continue to be in the lead for a while, but I don't think there's anything totally new there. I guess my one pushback would be you've over a million patients now on the Wegovy pill and it's being completely overlooked again, in my opinion, versus what Lilly's doing.
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Guy Adami
I'm not throwing a curve ball at you, but I know you're capable. Jared, this Merck news, which we just heard seemingly could be not a death knell, but obviously a negative for Summit. Is that move lower that Summit's probably not enjoying right now? Is that going to be some sort of opportunity down the road?
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Jared Holz
It could be. I mean, the Summit was down a couple of weeks ago because they. They've basically not delayed their trial, but they didn't take an interim look. And so we're going to have to see, you know, when that, when the final version of that trial reads out what it looks like. I do think this Merck is a maybe a small negative for Summit. Again, it's really tough to look at these trials in a vacuum and say it's definitively bad for the other player. We still need to figure out whether this PD1VEGF combination is really the real deal.
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Melissa Lee
What are some of the other companies you're watching for in terms of big moves, big data dumps?
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Jared Holz
Well, I think the one that the Street's really looking forward to the most, and I am as well in part is Revolution. Just given the fact that Pancreatic has really taken center stage. I imagine this is going to be the one where investors and the clinical community sort of rally around and we'll get probably a little bit more durability or duration data out of Revolution at this meeting. I think the large cap pharma names are interesting. Obviously Merck Roche is going to have some data as well. Biontech was mentioned previously. And then there are a couple of small caps like Corpus and by Cara that will have ADC data. Again, probably more incremental versus stuff that is truly novel. But any time you're dealing with small cap stocks and they introduce something even on the margin, sometimes it's meaningful.
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Melissa Lee
All right, Jared, great to see you as always. Thank you. Jared Holtz of Mizuho. In terms of a cap pharma or I mean which one?
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Guy Adami
Merck this Merck News. And I can't speak intelligently about what this means to key Trudeau's patent cliff, but you know, when you start to use Keytruda with other drugs that might extend it or give them sort of a new lease on life. So I think Merck is a buy here.
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Melissa Lee
Julie, do you see health care as being an area to, you know, so you can like hedge AI in the market?
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Julie Beal
Do I do like owning health care. I don't like owning this kind of pharma. Especially when we're talking about small and mid cap. You're dependent on one drug and you're dependent on FDA submissions, but companies like a west pharmaceutical that provide the components around the drug delivery mechanism, those I'm all for.
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Melissa Lee
All right, Grasso.
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Steve Grasso
Yeah. So to Guy's point, Merck is up 10%, Johnson and Johnson's up to 10%, Bristol's up 10%, Lilly's down 3 and Novo is down 13%. There's going to be a string of pearls. I know Guy loves that saying approach to the patent cliff and Merck's doing it better than most. I dare say that the market is sort of moving away from the GLP story. And when you look at Revolution where Jared was talking about with pancreatic cancer, that stock stock is up 93%. The home player XBI revolution is actually the number one holding even though it's fragmented in XBI and that it has outperformed IBB by a large margin. So go with small cap biotech over the names that you all know and hear about every day.
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Melissa Lee
All right, coming up, a major move in quantum companies as the US takes a leap into the space. Who the grants are going to and how it could help power the group to new heights. Fast Money's back into. Welcome back to Fast Money. Quantum stocks surging today after the US government announced $2 billion in grants to nine firms working within space Inflection, D Wave, Arcade, Global, Global foundries all seeing double digit gains. IBM, which will get $1 billion in funding, having its best day in over a year and single handedly sending the Dow to a record close. Steve, you've been in these names.
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Steve Grasso
Yes, I mean I'm in currently IonQ and inflection and the IonQ is the I in my enigma trade our fast Money acronym game. This is something where the government gives you a validation of these companies, changes the complete landscape of the investment community. Everyone was looking at these being a 10 and 15 year time horizon. That time horizon has brought forward probably two to five and they are making revenue now, not profitable. But when you look at where the puck is going, I make the analogy of so quantum is where I was back in 2018 with a very strong tailwind current.
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Melissa Lee
There's still a long Runway out there for Quantum to actually materialize into something, you know, that actually works right now. But in terms of the government backing, guides proved to be right. That's along with the government worked at
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Guy Adami
intel, worked obviously MP Corp. Right. So people can say, you know what, I'm not going to make the same mistakes once, twice, three times and then again on back of this, my own if there's a problem in politics, bore that you know what out of me. But you know, picking winners and losers in companies to me is somewhat problematic. And that's what's going on now for any administrator, any administration.
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Melissa Lee
Coming up, the CEO of one of this year's CNBC Disruptor 50 standouts joins us next. How Iambic Therapeutics is shaking up the biotech space when Fast Money returns. Welcome back to fast money. CNBC's annual Disruptor 50 list was released earlier this week highlighting the most promising venture backed companies innovating and reshaping the economy. Iambic Therapeutics has made the list two years in a row. The biotech company develops medicines using its AI driven drug discovery platform. For more, CEO and co founder Tom Miller joins us here on set. Tom, welcome to Fast Money.
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Tom Miller
Thank you.
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Melissa Lee
What does AI Driven Drug discovery actually mean?
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Tom Miller
I think the, the basic challenge in drug discovery is to find a new molecule that's going to address a target and ultimately a disease. And that's a massive search problem. And AI helps us explore that search. And a platform that can turn those AI designs into experimental data extremely rapidly allows us to close the loop and drive forward discovery to make better medicines.
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Melissa Lee
So you've actually discovered candidates and you partnered. Right. So can you walk us through some of the big partnerships that you have so far?
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Tom Miller
So, yes and yes. We actually have a wholly owned pipeline that we've demonstrated got to clinic in less in a third of the industry average pace. So we now are gathering clinical data with AI discovered drugs in a way that really validates the platform. And you're right. In addition, we've done multiple major partnerships with Lundback, with Revolution Medicines, with Takeda that are using it also in partnership and providing revenue for the company as well.
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Melissa Lee
Why is it that it seems like you're so much farther advanced versus some of the bigger pharma companies that want to do this? Because it seems obvious, but seem to be farther behind and they're actually going elsewhere. They might go shopping. A lot of molecules are being bought in China, for instance.
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Julie Beal
Yeah.
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Tom Miller
Pharma partners have been great collaborators. They've been very interested in what we're doing with those partnerships that I mentioned. You know, it involves multiple challenges of not only creating those novel AI technologies, but integrating them in a way that can manufacture data on a effectively weekly timescale that really allows you to retrain the models and drive forward discovery very quickly.
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Guy Adami
A little bit of a sidetrack. So clinical trials cost hundreds of millions of dollars, sometimes billions of dollars.
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Tom Miller
Correct.
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Guy Adami
Is this a potential predictive model for companies that are going down a road where you could say, hey, we see what you're doing here, but our model suggests it's not going to work.
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Tom Miller
The tools can absolutely be used in that way. And equally they can be used to design molecules that not only get to clinic, but that can be predicted to succeed through clinic. And we're absolutely doing that.
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Melissa Lee
Do you think we'll ever see the day where I could supplant maybe early phases of clinical trials?
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Tom Miller
I think that we're already seeing that AI is allowing us to avoid many experiments and many dead ends that otherwise would have been the case, which in fact drive up the cost of clinical trials through the high probability of failure. And I do expect that with time that we're going to see that cross the boundary from the pre Clinical to the clinical side.
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Melissa Lee
As somebody who regularly develops new drugs and finds new molecules, I'm wondering what your thoughts are on why, why so many big pharma companies are going to China to buy molecules there as opposed to staying here in the United States. Is the innovation not happening here at a fast enough pace? What's going on?
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Tom Miller
I think there's great science being done the whole world over and I think with the rise of AI and with the sophistication of China, I just think there's always a rising tide of innovation and sources of potential new medicines and we compete in that environment and the timescales and the success that we're able to show is in that environment. So I think that, you know, there's always going to be the need for incredibly challenging new targets and new medicines and Iambic is showing that we can compete in that landscape.
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Melissa Lee
Tom, it's great to speak with you. Thanks for coming in from San Diego. We appreciate it. Tom Miller, Iambic Therapeutics Grasso, what are your thoughts here?
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Steve Grasso
Yeah, I mean the fact that you can do this, I'd be really interested in seeing what was back tested, how it would have changed the environment of the drugs that have already been out there. But it just leads me back to where I constantly keep going to is the smaller biotech firms. You're going to see a bunch of these flood the market with a lot more efficacy than we've seen in the past. So I think it's a really exciting
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Melissa Lee
time to be in small cap up next, final trades. Time for the final trade.
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Julie Beal
Julie Beal I remain skeptical of AI data centers in space, especially cooling them here on earth.
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Melissa Lee
Aon does it pretty well Stephen with
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Steve Grasso
this brand information that we received to the market today, I think you're going to see inflection, get more coverage, higher price targets and I think it's just the beginning for Quantum.
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Melissa Lee
Dan Yes, Spotify.
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Dan Nathan
I like the story here. I like the reframing of the story, the growth story and some of the new add ons they got.
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Guy Adami
And for those Spotify fans out there, please follow. Guys first playlist. Miles said I should say that apparently I've got 130 followers.
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Melissa Lee
It's only, it's only by the way
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Guy Adami
the next few blocks south of us play tonight. As you know. What are the chances you watching against game work?
- [46:36]
Melissa Lee
Okay, very good. Thank you for watching. Fast Money Mad Money with Jim Cramer begins right now.
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Narrator/Commercial Voice
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