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Halftime Report
Can Stocks Reverse Course? 4/29/25
00:42:48
Scott Wapner and the Investment Committee discuss whether stocks are poised for a major comeback as we mark the first 100 days for President Trump. Bill Baruch calls in with reaction to Spotify. Josh Brown details his latest portfolio moves. The panel debates the red-hot cyber trade. The Setup is on Eli Lilly and Shake Shack. Investment Committee Disclosures
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- [00:03]
Janice Henderson
At Janice Henderson Investors we believe working together is the way to work better. Like combining your portfolio plans and our in depth strategy, your valued assets and our valuable insights, your vision and our mission. Working in harmony to seek the right investment opportunities. Janice Henderson Investors Investing in a brighter future together.
- [00:31]
Ryan Reynolds
Ryan Reynolds here from Mint Mobile. I don't know if you knew this, but anyone can get the same Premium Wireless for $15 a month plan that I've been enjoying. It's not just for celebrities. So do like I did and have one of your assistant's assistants switch you.
- [00:45]
Bill Baruch
To Mint Mobile today.
- [00:46]
Ryan Reynolds
I'm told it's super easy to do@mintmobile.com.
- [00:49]
Scott Wapner
Switch upfront payment of $45 for three month plan equivalent to $15 per month.
- [00:55]
Janice Henderson
Required intro rate first three months only.
- [00:57]
Scott Wapner
Then full price plan options of 8 DOL.
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Janice Henderson
Taxes and fees extra.
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Scott Wapner
See full terms@mintmobile.com I'm Scott Wapner and.
- [01:04]
Ryan Reynolds
You'Re listening to CNBC's Halftime Report, the podcast the most profitable hour of the trading day. We record this live weekdays at 12 Eastern. Listen in. Welcome to the Halftime Report. I'm Scott Wapner, front and center this hour, 100 days in for President Trump, not the market performance many had hoped for, at least so far. We will debate whether stocks are poised for a major comeback with the investment committee. Joining me for the hour today, Josh Brown, Stephanie Link, Shannon Coach and Jason Snipe. We will show you what we're doing now. Mixed day. The majors are all good. The Russell's red will follow all of that. S and P is, by the way, trying for its sixth straight day of gains. But as I said, 100 days in, not exactly the performance that people were looking for. The S and p is down 7.6% over that period. The Nasdaq's down 11 and a half and then the Russell's worse than that. As many of you know, the USA is the fifth worst performing country etf. Only Turkey, Thailand, Indonesia and Taiwan have performed worse. Wall Street Journal's editorial board today says at 100 days, Trump 2.0 is in trouble. I think the point here is it is certainly not what many people expected, not back on election night. When we talk to investors, many of whom, you know, let's watch.
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Scott Wapner
If Trump.
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Ryan Reynolds
Gets elected, we think those tax cuts will provide further stimulus. So we're not going to need as many rate cuts. So I think the backdrop looks incredibly constructive.
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Scott Wapner
So you have a lot of these positions actually are going to start to take off if you continue to see him.
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Ryan Reynolds
Him Gaining the lead tonight.
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Janice Henderson
If animal spirits come back for companies and if businesses have cost of money fall and if there is a general wave of mergers and regional banks work and actually biotech start to work. You have so many reasons for the Russell 2000 to go from trading at 10 times median PE towards 15. That would be a 50% move.
- [03:06]
Ryan Reynolds
All right, Josh Brown, you were on the panel that night as well. The American exceptionalism trade hasn't worked out that way thus far. Can we get back to the level of optimism that you and others had on that night in November?
- [03:24]
Stephanie Link
Well, the trade had worked and then in February everything fell apart. And so I think you had a really nice November, December, January, half of February. So the honeymoon was, was a good one. It was short and now we're in a different situation. And I think what's most interesting about the reports that we're Getting from, from Q1 earnings is how irrelevant they are. Like these are companies telling you how things were going in January. And it was just to your point, it was a different world, it was a different era, it was a different mentality. So the important thing, and I've said this before, I think, is how many companies use this opportunity to yank guidance or to give like very wide broad guidance that's not really very useful to anyone. And we're seeing a lot of that. And so far the market has been okay with it. The market has been accepting. They understand they don't necessarily need very specific guidance. People that are trading these stocks understand that they're trading them under this cloud of uncertainty. And so far we've kind of been okay. It really hasn't been as bad as a lot of people had prophesied. So that's kind of where we find ourselves. It's not that bad, but it's also not that good. If you think about the blended net profit margin for the s and P500 for Q1 it was 12.4%. That's still better than the five year average which is 11.7. So it's not a bad quarter. The beat rate is a little bit less than usual. It's just that guidance piece. But so far we're muddling through.
- [04:59]
Ryan Reynolds
Stephanie Link never, I think did, did most people think that we mentioned the words American exceptionalism countless times on this program. Countless times I did. Others did because that was the expectation coming in. S and P down 8%. Just about American exceptionalism trade has turned into sell America trade. The dollar's on track for its biggest two month decline in more than two decades. The DXY is down almost 10% since President Trump took office. You can say it's good for international businesses, I get that, but that's not what people expected. Bonds sold off hard, not what people expected. Firms have taken down their S and P targets, not what people expected. Got another one today. Hsbc goes to 5600 from 6700. Can we get the optimism back? And if so, how?
- [05:52]
Scott Wapner
Well, sure we can. We have to get some tariffs and we have to get through tax cuts and we have to get more deregulation, which will come, but we've got to get through tariffs and the uncertainties regarding tariffs. In the meantime, we have a lot of wood to chop. This week alone, with 30% of the companies in the S&P 500 reporting earnings. Big tech report reporting earnings, lots of economic data, including big PC inflation data and jobs as well. So we have a lot to get through. But let's just step back. First and foremost, yes, the market is down 5% year to date, but it's also up 8% from the lows. The Qs are up 10 and a half percent from the lows. And the Dow Jones Industrial average is actually up 5% from the low. So we have seen a, a recovery of some sort, 50%, not 100%, 50%.
- [06:39]
Ryan Reynolds
And I'll tell you why. From the February, I mean, from the high to a post Liberation Day low, we've gotten 50% back.
- [06:45]
Scott Wapner
We have a nice move back. We have. And I think the reason is because earnings actually have been better than expected. We are getting some clarity, some clarity on terrorists, not a lot, but the earnings picture. So 36% of the companies have reported so far. And you're running up 15% in earnings growth. Sales growth is up 4.1%. What does that tell you? That tells you what Josh was just talking about in terms of margins. Margins are doing their job. They're going higher. And so you are seeing better than expected, a bottom line. And that is why I think the markets have actually recovered. And we have gotten a lot of guidance. We got decent guidance from the banks. I didn't think you're going to get any guidance from the banks on industrials. All last week, every single one of my industrial companies gave guidance either that was in line or maybe bracketed numbers. So, yeah, I mean, we don't have a lot of certainty, but we're at least getting some, something from these companies. And we headed into the PR not expecting anything. So that's, I'm encouraged by the action in the markets. The action in some of the cyclical stocks and let's see what happens with technology.
- [07:52]
Ryan Reynolds
Well, Royal Caribbean, to your point, they raised their annual guidance on strong demand, defying, you know, what some had expected because there's all sorts of negativity around the consumer, which we'll get to, but we'll stay on the the business side of things. First, Honeywell had better than expected results. Coca Cola reaffirmed their full year outlook as well, saying that the effects of the trade war should be in their words right now. At least did James Quincy manageable. We'll see what develops. But that is the picture currently. Jason Snipes, speaking of industrials, you sold Caterpillar ahead of its earnings tomorrow before the bell, which is an interesting move to make now, trade war related or not.
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Jason Snipe
So, you know, I look at a name like Caterpillar, which for me is in the eye of the storm in terms of a pure cyclical play. And I think what folks are looking at, instead of buying equipment, they're looking to rent equipment. And prior to the announcements on tariffs, this was suggested to be a tough year for Caterpillar, as it was already. So they have a new CEO coming in in May. The stock is down close to 16% year to date. It's been a tough year year over year. But for, for us, it was time to take this name off the desk and look for other opportunities because there are other cyclical plays that are working. So for us as it relates to kind of construction, data center build and power, which I think is a bright spot for them, we decided to kind of move elsewhere and look at some other opportunities.
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Ryan Reynolds
And Steph's optimism in the market stems largely from the fact of, you know, what she obviously said in her own words about earnings and guidance, but also the fact that the consumer has hung in there, that the soft data the surveys hasn't translated into the hard data actual numbers, that the consumer confidence number you got today at 86 is the lowest since May of 2020 until it shows up into the actual numbers. Steph says okay, whatever JP Morgan says, though, the clock is ticking on hard data resilience. We know that the surveys have been bad ups is cutting 20,000 jobs. Torsten Sloke at Apollo says you have the possibility of a negative number on Friday. But how do you see things in context of what you've heard from companies, what people are saying about the consumer, where we find ourselves 100 days in, which is a different picture than many had started to paint back in November?
- [10:21]
Josh Brown
I think the challenge is is that we, we, we don't want to fall into the same trap that we, we fell into with consumer confidence during the sort of post pandemic era. Because Scott, the consumer hasn't been particularly confident for the last several years. What I think is more predictive, however, is business confidence. And so what you're seeing is if you look at, for instance in the last, in the last couple of earnings seasons, you've actually seen companies continue to talk about capital expenditure over the course of the next 12 months. Those that, you know, 2.3 times is higher than, you know, kind of your typical range for, for capital expenditure announcements. We haven't seen capital expenditure being pulled back. But Scott, to your point, like what could be the tipping point for US Consumers if businesses, business activity, business confidence continues to decline. That is actually going to translate into slower activity. And when you translate into slower activity, you not you're in not only a high, a low hiring, low firing environment, but you start to see tick ups in firings. Right. Right now we're seeing a little bit lighter, Joel's report, a little bit lighter on job openings. That makes sense given the uncertainty. I think the challenge here is something that stuff talked about. This, these, these animal spirits, this business confidence that we were anticipating. If I'm a business and I haven't reinvested in my business in the last couple of years, Scott, why would I do that right now? Why wouldn't I wait until the second half of the year or into 2026? The challenge is going to be the tipping point for the US Consumer is going to be when they start to lose their job. And we're not seeing that. We actually saw quit rates tick up. So for me, when I read through, through some of these earnings announcements you talked about, for instance, Royal Caribbean, look at Lufthansa versus Delta, look at Hilton, which actually reported pretty good numbers considering some top line slowing. There is a lot of divergence in the market right now because, because people.
- [12:09]
Ryan Reynolds
Think it's a little too soon. It's too soon to see business activity fully fall off. It's too soon to see consumer activity fully fall off. There was a lot of pull forward in anticipation of tariffs. Labor is obviously a lagging indicator. So this could actually be the first real read coming on Friday because Liberation Day was on, you know, the second, the beginning of the month. So you've had some weeks to see. You may not get, you know, a huge number of firings, layoffs or what have you, because that would be too soon for that. But you could Certainly get a super slowdown in the hiring process because the.
- [12:51]
Scott Wapner
Uncertainty weekly jobless claims are more leading indicator than nonfarm payrolls. That's backward looking. So that's why I always focus on the weekly jobless claims and I smooth it out though I don't look at just the week, you can't and if I look at the three month you're running at 220,000, that's well below the recessionary levels of 353, 75. So I think that the weekly jobless claims are the most important, not the Friday number. That's my mind.
- [13:17]
Ryan Reynolds
We got to see. Also Josh, you know, price increases that are, that are starting to make their way into the system. Adidas warning it's going to raise prices on all of its products in the U.S. telsey has started, you know, tells the advisory they started tracking price increases over the past week. Publicly traded Abercrombie Jean prices up 33% target Barbie doll prices up 43%. Amazon just for example, Echo up almost 39%. You know, retail giants are saying they're going to try and keep their the lid on prices but that might only last so long. And then you have consumers faced with the prospects of paying up. There are two sides of that story. One has an obvious direct economic impact. The other is the ability and pricing power of businesses to do that, which translates potentially into a more positive stock trajectory. So you have to look at it from two different places, from an investor and then from a consumer and an economist. I guess.
- [14:21]
Stephanie Link
I think it's actually more complicated. It's more, it's not two sided, it's like six sided. It's a Rubik's cube. I spent some time talking to Rebecca Patterson about this and she had been in Washington for a week talking with heads of state, people running institutions. The big takeaway, what people are really saying is it's like impending doom. They know it's coming, it hasn't hit yet. That's why it's all about these Q1 reports being basically irrelevant. It's documenting the quarterly earnings for companies that were in a different world than they're in today. And Scott, to your point, like we don't know what the calculus for investors is going to be. Would we rather have empty shelves or shelves filled with merchandise inventory that nobody wants to buy because the prices are too high? I'm actually not sure which the investor class would rather hear about when they look at retailers as one example. The bigger issue that you're going to come across is we're already seeing in the leisure and hospitality sector, other than the top decile of consumers, everyone else is done. Look at the prices of the airlines. They're done. They were done before the tariffs. That like a lot of these drivers of the economy, the consumer economy have already been running out of gas going into this. So are they going to pay higher prices for things when they already were getting exhausted of the spending they were doing? It's hard to imagine. So look, I think we're in this period where the results are, okay, 73% beat rate. The historical average is 77. It's like good enough. The company's giving guidance like Coca Cola. Okay, fine. It's a consumer staple. You're hearing from other companies saying, we have a game plan. A lot of the industrials and materials company, we have a game plan. We know how to deal with this we dealt with the last time. Okay, that's all fine. So you've got like this environment. You had the $8% drawdown. Stephanie has made this point and she's right. The dollar being in an 8% drawdown since the start of the year definitely is more of a tailwind. May not be great for US stocks versus international stocks, but it's better for earnings that way. So we're kind of in this weird period before the storm actually hits. None of us know what investors are going to want to see when it does.
- [16:44]
Ryan Reynolds
Well, we're going to, we're going to really get into earnings, as everybody knows at this point this week with, with big cap tech. You know, Amazon reports on Thursday. It finds itself today in the crosshairs of the White House. I'm sure another story that most have heard about by 12:15 on the east coast because it sort of dominated the news cycle for a while of the briefing at the White House today where the press secretary called a report that Amazon had planned to display tariff costs for consumers on its site a hostile and political act by Amazon. Amazon put out a couple of statements on this. The most recent is a more direct one than its first, which says the idea of disclosing import charges on some products, quote, was never approved and not going to happen. So the stock was down a bunch on the Levitt criticism. The stock comes back from, from the bottom on its comment that never approved, wasn't going to happen, ain't going to happen and whatever. So let's move on from that to Metta.
- [17:52]
Stephanie Link
Yeah, actually times were good.
- [17:55]
Ryan Reynolds
Yeah. No, they don't want people to know what the price increases are going to be. I do have some breaking news with Megan Casella at the White House. Meghan hey Scott.
- [18:05]
Christina Parts Nevelos
We have just gotten off a call with senior Commerce officials who have been detailing exactly what we can see later today on auto tariff relief when the President signs an executive order that we're expecting. So there are two main parts to this auto tariff relief. The first is that there will be what the White House calls a destacking of tariffs for auto companies. The short of this means that the auto manufacturers will pick the highest tariff that applies to them and they will only pay one. That means they are very likely continuing to pay the 25% auto tariff on cars and car parts, but they will no longer have to pay any steel and aluminum tariffs, any Canada and Mexico fentanyl tariffs that might also apply to them. It's just the 25%. The second part of this is a little more complicated. It's an offset or a credit that's going to be paid back to auto manufacturers. So it's a 3.75% credit in the first year and a two and a half percent credit in the second year and then it gets phased out that is going to be paid back to auto manufacturers. And the way that they got to those amounts, Scott, is that they said they spoke the Commerce Department and the White House have been speaking with auto manufacturers who told them that about 15% of a car is the amount that they would not be able to source from within the United States. So 15% of a car, a 25% tariff. If you multiply those together, you get to that 3.75% credit that will be paid out of that tariff revenue straight back to those manufacturers. Now this is designed to give the companies some Runway to give them at least two years in which they have this credit that can get offset some of that tariff impact. And while they continue to move more manufacturing into the U.S. so if they have at least 85% of their car sourced from within the U.S. in the first year and at least 90% within the second year, then they won't have to pay any tariff at all after that. It's up to them. All of it, the White House says should be sourced from within the US at that point. Otherwise you're paying a tariff on the non American content. Just a couple of notes here. This would apply to both domestic and foreign manufacturers. They say it doesn't matter where your company is based. If your manufacturing is based in the US Then you would be allowed to collect this relief. They also say the offsets, as I mentioned, will be paid using the tariff revenue. A senior Commerce official says that means there will be no direct cost to government. Of course, that does mean there will be less tariff revenue coming in than previously estimated. They could not give me an estimate on exactly how much less revenue is coming in. But at a time when that is a big focus for this White House saying they're going to be making a lot of policy decisions based on that tariff revenue, we should note that a little bit less of it now will be coming in. Scott?
- [20:33]
Ryan Reynolds
Okay, Meghan, thank you. Appreciate that. Megan Costello. Not confusing at all, right? Shannon, I saw you, I saw you listening to this report. You're like, okay, well, you know, when.
- [20:45]
Josh Brown
It comes right down to it, I mean, at some point, you know, when you announced the tariffs that you announced on Liberation Day, and everybody thought that that was, you know, obviously unpalatable to the, the market, but to companies in general. Each of these companies is now going to speak with the president and speak with his advisers about what that really means and what they can actually do. And I think what we're finding is that this is the type of deal where there is a, there is a realization and an acknowledgment that there is not much that can be done here. And so instead, what we're going to start doing is we're going to take this tariff revenue and instead of actually using it for deficit reduction and some of the things that they're looking at in terms of tax cut and Jobs act, just going to be moving it around with, this is what we've seen in past tariff execution. This is what ends up happening.
- [21:27]
Ryan Reynolds
All right, so we'll watch all those stocks. Obviously, many have moved off their lows of the day. Tesla is a good one to look at those. Stellantis is getting the biggest boost at 4%. And Tesla tried to, but it's still down by more than 1%. And you go right back to where we started this program of the stocks that people thought were going to be a home run, and this one looked like it was going to be for a while, and then in the whole tariff controversy and then obviously some other issues related to Musk and his role within the apparatus of the White House. You've had a real different story and there's a good picture on our screen. Thank you for throwing that up. But can we get to meta? So it's Wednesday. All right, you bought more on Friday. That's when they report it's going to be, you know, with Microsoft that day. What are your expectations here as we now have lot riding on these results. We always do. I feel like given their performance we have even more.
- [22:19]
Scott Wapner
Yeah, I bought more because Alphabet showed us that advertising was okay and 96% of Meta's revenues are advertising. So I think with 3.3 billion users they're somewhat insulated, number one. Number two, the stock's down 27% from its highs and that's when I started buying. Actually was down 30% when I started buying it back again because you're going to see about 20% total revenue growth. I think you're going to see something like 40, 42% margins and they're going to do fine in terms of advertising. So I think at 17 times 20, 26 numbers it's kind of been de risked and I think a 13 times EBITDA definitely been de risk.
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Josh Brown
And Alphabet and Meta both cheaper than the communication services sector at this point right there. They're actually bringing down the multiple on that sector.
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Ryan Reynolds
I do have another little nugget here. I thought we had moved on from the Amazon story but not so fast, not so fast because this is interesting because NBC, NBC News has confirmed that President Trump called Jeff Bezos this morning to express his displeasure over that report that I mentioned, the one where Amazon. There was report that Amazon said it was going to display the tariff increase cost next to the regular price to show just what the impact was from the trade war. Amazon later disputed that said it was never approved, they were never going to do it. But that little nugget from NBC News is quite interesting and we will follow that. I just wanted to make sure everybody had that. All right, Microsoft. Yeah, Wednesday, what do you got?
- [24:01]
Jason Snipe
So I think you know what's interesting about SAP earnings and, and ServiceNow, I think, I think those blowout reports will be a read through to, to what Microsoft potentially report. I think again not that they're not immune to all the tariff exposure as a software company, but it's a little bit different. And I think what the investor class is looking at is what, what businesses are less immune and have have accretive products and are also drive down some expenses.
- [24:34]
Scott Wapner
Right.
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Jason Snipe
In a kind of a tariff and uncertainty environment. So I think Microsoft will be strong. I think the Azure number will be up 30% year over year. You know and I think, I think it will be a solid report. Less exposure to OEM and PC. You know, I'm not very concerned about that. So I think will be a solid solid one here.
- [24:53]
Ryan Reynolds
Okay. The last piece I want to get to has nothing to do with the Mega caps. But it has everything to do with Wells Fargo. You've been buying more.
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Scott Wapner
Yes.
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Ryan Reynolds
You bought more in the pullback. They announced a new dividend today. You see that?
- [25:04]
Scott Wapner
Yeah.
- [25:05]
Ryan Reynolds
And a $40 billion buyback.
- [25:06]
Scott Wapner
Yeah, 40 billion.
- [25:07]
Ryan Reynolds
There's a stock reaction to that news.
- [25:09]
Scott Wapner
And they have 6 billion left on the current authorization. So this is good news. I wonder if either they have Basel 3 end game timing or do they have the asset cap lift decision. So those two things we have to keep an eye on, those are catalysts for sure for the, for the industry. Basel 3, the capital levels, that's going to be an industry wide thing. You're going to see buybacks across the board. Once you see those, that news come in. But in terms of asset cap, that's obviously going to be very accretive for Wells Fargo. Something like 5 to 10% earnings accretion once we figure out what the details are.
- [25:39]
Ryan Reynolds
Okay, we have a another news alert and I'm going to go to Christina Parts and Evolos for that. It's on Intel. What do we know?
- [25:46]
I
Well, Intel's Foundry event just kicked off at 12pm Eastern and we're not getting any new financial figures today, but we are getting a clearer picture of how they're advancing their manufacturing business. So Intel Spotlight is on their cutting edge 18 a process which essentially is just a super precise recipe for building smaller, faster and more power efficient chips. But the big news today is that intel expects to actually hit volume manufacturing later this year, though they haven't named any specific customers. That's probably why you're not seeing the stock really react. But there have been other reports over the last few months that tech giants like Nvidia, Broadcom and AMD are testing chips made with that specific process. This now does put intel in direct competition with TSMC's 2 nanometer class process. So again, super precise. And TSMC has that process slated also for production in 2025. Looking even further ahead though, in this news today, intel revealed plans for their next generation 14A process technology. There's clearly customer interest, according to the company. Multiple companies have already committed to building test chips on this future platform, which is a strong vote of confidence in Intel's manufacturing roadmap. Again, no customer's Name production for 18A will start in Intel's Oregon facilities first. With Arizona manufacturing ramping up later this year. Intel has made it clear that all of these processes, as well as 14A research and development wafer production will remain firmly on American soil. Shares not even up 1%. Scott.
- [27:09]
Ryan Reynolds
All right, Christina, thank you. Christina. Parts Nevillos. Up next, we track the trade Spotify dropping after earnings. Bill Baruch, he joined us yesterday. He was all bulled up. He bought the stock. He's not happy with the reaction today. He joins us next to tell us what he's doing now. Plus, Josh Brown has a new update on a trade that he's made as well. We're back in two.
- [27:28]
Scott Wapner
Our state has changed a lot in.
- [27:30]
Janice Henderson
The last 140 years. We know because Multicare has been here guided by a single 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@ multicare.org you@ Janice Henderson INVESTORS we believe working together is the way to work better. Like combining your portfolio plans and our in depth strategy, your valued assets and our valuable insights, your vision and our mission. Working in harmony to seek the right investment opportunities. JANICE henderson Investors Investing in a brighter future together. Are you still quoting 30 year old movies? Have you said cool beans in the past 90 days? Do you think Discover isn't widely accepted? If this sounds like you, you're stuck in the past. Discover is accepted at 99% of places that take credit cards nationwide. And every time you make a purchase with your card, you automatically earn cash back. Welcome to the now it pays to Discover. Learn more@discover.com credit card the February 2024 Nelson Report.
- [28:58]
Ryan Reynolds
All right, we're back. I told you about Spotify. Take a look at the stock. Down 4% off the lows of the morning importantly. But they missed revenues were in line, monthly actives were in line. Bill Baruch, maybe his buy of this stock was out of line. He joins us now. So you were pretty positive going in. What do you say now? Billboard?
- [29:23]
Bill Baruch
I'm still happy with the, with the buy. Although, yeah, of course I want to see it higher. It's all about sizing the position properly and a 75 basis point position here. I want to buy another 25, 35 basis points. I'm not pulling the trigger yet. I like seeing come off the lows. The revenue growth was okay, operating income strong, free cash flow strong. But this is really a margin story. And they did beat in first quarter margins. It was the outlook on gross margins for for the second quarter coming in at 31 and a half. And here's the thing is they're continuing to increase the costs as that gets laid out. I think, you know, you Start to see a gravitation in the coming year of more premium subscribers. And I think that continues to improve margins. The other thing is here are they sort of, you know, lowering the bar given some of the recessionary like talks and then they beat gross margins 7/4 in a row. So lowering the bar here for a beat in quarter two. I like the setup. If we trade down closer to 500, I see us adding, if this thing breaks out, I see us adding. So we're right here in no man's land right now. And I still like the trade.
- [30:28]
Ryan Reynolds
You suggested yesterday, if I recall correctly, that they not only had, you know, pricing power and you may have even compared it in some respects to Netflix. I can't remember exactly, but I think so. And you implied that they were recession resilient as well. Does the margin guidance call that into question at all with you?
- [30:49]
Bill Baruch
You know, I don't think that calls into question. I think what we're looking at here is, is there was a worry of just companies probably throwing guidance out the door given the environment. They're raising costs in Europe and Latin America. They've been raising costs here in the US And I think as that trickles through, I mean, of course you get some subscribers that say they don't want to pay more, but then they lose out on, on the tools that they, that they may have. And I think that kind of works through and it's a little bit of a wonky start. And I think as we look at this year evolve, we're going to see those margins pick back up. I think they actually beaten quarter two and they surprised. What they're doing is lowering the bar. And then the ad revenue I think will continue to increase, I think will be a bigger part of the generation, revenue generation. And I'm pretty upbeat of the trajectory of the name. You know, it fell off really sharply from the level it was coming into the earnings report earlier the year. And I think it's as the market has unwound some of the momentum names, this being one of them, there's going to be a regain of who is are the momentum names now in this sort of second half of the year. And I think Spotify can find themselves right in the midst of it.
- [31:56]
Ryan Reynolds
All right, good stuff. I appreciate you calling in. Nice to hear from you after to yesterday for certain. Let's talk Pfizer for a minute. We can take a look at that stock too. There it is. It's up quite nicely today. Four and a third percent. They expand their cost cuts, top quarterly Profit estimates sales down EPS beat. Josh Brown has sold half of his Pfizer position. That's our news today regarding that name. Why?
- [32:22]
Stephanie Link
Just using the strength here. The earnings report was fine. It's like the best they can do given the circumstances. They have declining sales in all of their most important drugs, which is very well known and understood. That's why the stock has spent the last few years down here in the 20s. They really didn't have anything for a longer term investor to hang on to to give you the impression that anything's going to change here anytime soon. And I just think the world has changed since I first got into it. So there's another stock that has roughly the same dividend but a much better outlook for the second half of the year. And I decided to reallocate. But I'm still here and if Pfizer could figure it out, I'll still make some money. I just didn't need to own as much.
- [33:06]
Ryan Reynolds
Got a take on Uber in office requirement three days. Clawing back remote workers as well. Does that have any impact to you in the way you think about the stock market from here?
- [33:20]
Stephanie Link
Judge Dara is a certified boss, so whatever he says goes. Do you understand that Uber is up 30% on the year? How many Internet companies can you honestly say that about how many technology companies? There's like six. This is one of the best stocks in the S&P 500 year to date. He knows what he's doing. Trouncing Tesla share price performance, announcing huge partnerships, companies all over the world. We don't have time for people who want to lay around their house in pajamas taking phone calls here and there. We need to drive forward as a shareholder. I like this. I want to see more of it.
- [33:55]
Ryan Reynolds
All right, up next, we get the committee's hot take on the red hot cyber trade, because it is just that. First though, we get to Pippa Stevens, who has today's headlines for us. Hi, Pippa.
- [34:05]
Christina Parts Nevelos
Hey, Scott. Mexico has received almost 39,000 immigrants from the US since the start of President Trump's administration in January. That's according to Mexican President Claudia Sheinbaum, who said today 33,000 of those sent back are Mexicans. Last year, between February and April, Mexico received about 52,000 immigrants deported from the US during the Biden administration. Metta is launching a standalone app and going head to head with chat. GPT maker Open Air. The tech giant said today the new offering will use its Llama AI to power an AI assistant for users and it will be able to create images and the only black all female unit to serve in Europe during World War II, known as the Six Triple Eight, will receive the Congressional Gold Medal today. In 2022, Congress unanimously voted to give its highest honor to the battalion, which was credited with clearing out about 17 million pieces of mail in three months. Halftime report we'll be right back.
- [35:11]
Josh Brown
At.
- [35:11]
Janice Henderson
Janice Henderson Investors we believe working together is the way to work better. Like combining your portfolio plans and our in depth strategy, your valued assets and our valuable insights, your vision and our mission. Working in harmony to seek the right investment opportunities. Janice Henderson Investors Investing in a brighter future together Are you still quoting 30 year old movies? Have you said cool beans in the past 90 days? Do you think Discover isn't widely accepted? If this sounds like you, you're stuck in the past. Discover is accepted at 99% of places that take credit cards nationwide. And every time you make a purchase with your card, you automatically earn cash back. Welcome to the now it pays to Discover. Learn more@discover.com credit card based on the February 2024 Nelson report show cyber because.
- [36:10]
Ryan Reynolds
The cyber ETF CIBR is coming off its fifth day of gains, the longest since January, BCA research says now's the time, a good time to build or top up positions. Stephanie Link, do you agree with that you own crowdstrike and Pelosi Altdo?
- [36:26]
Scott Wapner
Yeah, I do. I don't think you could go wrong with just about any of these names. I've owned Zscaler as well. Or you can own a hack which is the ETF as well. It's not as volatile, but I mean we've been talking about cyber for such a long time that it's probably bigger than AI. And because of AI, it's actually that big. So you know, when you have cybersecurity companies themselves having cyber attacks on them, that's a problem. Right. So I think you're going to see massive consolidation. You have four things, thousand cybersecurity companies around the world and as I say, you can pick whichever one you like. CrowdStrike has had a nice run. So actually I've been, I have been trimming that. Scott Palo Alto has not. It's been a laggard. So that's why. And it trades at half the price to sales multiple. So you could pick which one you want. I like them both. It's kind of like a barbell for me.
- [37:09]
Ryan Reynolds
You like Palo Alto more than the others?
- [37:10]
Jason Snipe
I do. I mean, you know, obviously it's lagged only up 2% year to date, but up 25% in the last year. I really like talking about AI. They just, they just announced they'll be acquiring a company called Protect AI which I think is going to be huge. And you talk about the advances in the Gentek AI and everything AI related cyber is just going to be really important to protect these companies.
- [37:33]
Ryan Reynolds
Josh, you called this a couple of weeks ago or a few weeks back a secular bull market, regardless of what the economy does.
- [37:42]
Stephanie Link
Yeah. And look, CrowdStrike being up 24% on the year as the largest and most important name in the space, I think kind of cements that idea. And I've been looking at names like Zscaler, which is in the same space. That stock was on my best stocks in the market list when the, when the Liberation Day thing happened, it immediately got destroyed below the 200 day. But then look at the recovery. It's not back 50% like the S and P. It gained it all back. And I think that's so emblematic of the accumulation that's taking place in these names. People are using any pullback to own their favorite one or ones. And even the ETF has managed to raise money during this pretty tumultuous time. Whether you're looking at Cyber CIB R or hack, this is just like a secular trend that people are seeing, seeing through the tariffs and they want to be here.
- [38:40]
Ryan Reynolds
All right, Mike Santola, he's next with his midday word. Mike Santoli, our senior markets commentator, is right here at 9. We keep moving higher. So we got over that 5450 hurdle and now we're trying to get to the next one, 5550, which looks like a little bit of resistance there.
- [39:00]
J
There's a whole kind of block here where it's sort of, there's some freedom to operate because really, I think the next test is like a little bit higher than that. Let's say the low, the close on April 2, that's more like 5,670. And then even people looking at the longer term moving average, it's like, okay, fine, even if it's just a rebound rally within a downtrend, you have room for that. There is this kind of low drama bid in the market. Most days have finished above the midpoint of the day. So it feels as if people did a whole lot of selling, you know, into the purge in the beginning part of April into tax day. And now it's sort of okay, our exposures are low enough. If volatility is coming in, we can earn a little more. Now where it gets Complicated is bond yields crashed this morning on the confidence data and the stock market's treating it as, the more the survey data crashes. It's almost like a stock market crash. Well, it can't stay down there for long. It's like political conditions tighten so so much it forces a policy response. And so we're waiting and waiting for the backtrack of the day and I guess that's enough for now. As long as that's sort of theoretically the carrot that's being held out in front of this market.
- [40:04]
Ryan Reynolds
Yeah, I mean there's still a firm belief in the, in the two puts. I mean they were maybe repriced from where they were originally thought.
- [40:10]
J
Right.
- [40:10]
Ryan Reynolds
But they still exist in the minds.
- [40:12]
J
Of the higher you go, the farther it is down to the strike. Right.
- [40:16]
Ryan Reynolds
So that's the, essentially it's like, you know, when you, when you, when you work your way back.
- [40:20]
J
Yeah.
- [40:20]
Ryan Reynolds
Unless they really want to let it go back.
- [40:22]
J
Unless the way there people consider the strike 5% on the 30 year treasury yield, in which case you're farther from it and if the economic news worsens, you're not going to get back there. I just, I understand why the market's doing what it's doing and there's room on the upside, but there's this. The jaws of the hard versus soft data are still open really wide and we're enjoying that because so far the actual numbers seem fine. If that changes. That's the, that's the question.
- [40:48]
Ryan Reynolds
Yeah. Well, all roads are going to lead to Friday's jobs report. We'll get past the mega caps and then we focus on that. I'll see you three. Mike Santoli, he'll be back. Of course. On closing bell, Josh Brown has another move to tell you about. We will tell you next. All right, welcome back. Josh Brown has bought more Chevron ahead of earnings which come this Friday. Why more?
- [41:11]
Stephanie Link
It's definitely not an earnings call per se. I have no idea how the quarter will go but this stock's been absolutely creamed in the month of April and I saw an opportunity to swap out of Pfizer and buy Chevron. Chevron's a way better company with I think a better outlook going forward this year. Probably 10 or 11% earnings growth and roughly an equivalent dividend yield about valuation. So you got a stock right now at a 9Pe forward, you got a dividend yield just under 5%. Massive buyback authorization in force, $75 billion announced last year. They only did $15 billion worth probably because the stock price Was okay. But it's a very safe yield. That dividend that, that payout ratio is about 65% of its expected fund forward earnings, 73% of its free cash flow. So I like the opportunity here to just upgrade the portfolio. Concentrate a little bit more heavily on one of the cheapest stocks I own. And it's not out of the question that these commodity names could have a good second half. First half hasn't been great, but it's not totally out of the question. They're pricing these stocks as if there's no chance.
- [42:24]
Ryan Reynolds
Steph, you prefer Diamondback and Slumber?
- [42:27]
Scott Wapner
Yeah, but they've been painful. I mean, absolutely painful. But Diamondback actually pre announced their quarter so that they actually could buy back more stocks. And they're buying about 2% of the shares outstanding because they think their stock is, is cheap. It is cheap. I just don't know what the catalyst is going to be short term.
- [42:43]
Ryan Reynolds
Were you in Chevron before or might think of somebody else?
- [42:45]
Scott Wapner
Yeah, I was.
- [42:46]
Ryan Reynolds
You were what you sold. It was like six months ago.
- [42:48]
Scott Wapner
No, no, I sold it a couple of years ago and I bought Exxon and I made money in Exxon. That was the right call. But I don't, I just don't want to be overweight energy at this point and I have enough.
- [42:58]
Ryan Reynolds
Okay, we'll, we'll step away quickly. We'll come back with the setup. Setup time. Lily is on Thursday before the bell. Stephanie Link, you own it. Expectations are always high with this name. We talked about it on the show yesterday. I think it was where the price target got demolished at, at one shop. Yeah. Who really took expectations back? I mean this stock was, was viewed as like the other mega cap. Right. If you didn't want the Magnificent seven, you added this like the fifth Beetle. So you threw this one in the mix.
- [43:32]
Scott Wapner
It's very, that's very true.
- [43:34]
Ryan Reynolds
What about now?
- [43:34]
Scott Wapner
I bought it two quarters ago when it fell 13% on a disappointing quarter. Only 40% earnings growth and 25% revenue growth. So I actually like the pipeline very much. I like what they're doing in terms of their investing in R and D. It's actually double of what its peers are investing in. So I think this growth has longevity to it. It's had a nice run off the bottom, but I still like it.
- [43:58]
Ryan Reynolds
Okay. Josh Brown Shake Shack is also Thursday. What do you think?
- [44:03]
Stephanie Link
This name is now 37% off its all time high. It's in a 19% drawdown relative to, to the 200 day any time historically since this company came public more than 10 years ago that you've been able to buy it in a 40% drawdown. Historically, you have made money. I think you'd make money right here. I don't know why they always hit this whenever they're worried about the consumer. The shake shack consumer. Can't stop, won't stop. You could take my word for it.
- [44:31]
Ryan Reynolds
We will man with experience. Final trades your next big closing bell today. BlackRock's Rick Reeder is with us, along with Morgan Stanley's Chris Toomey from their private wealth management. So we'll look forward to catching up with them. We'll see what the final hour holds. The Commerce Secretary is coming up at 2:00 on CNBC as well, which could have market moving implications. So we'll see you then. Josh Brown, your finals. What Netflix thank you Jason Snipe ABB.
- [45:07]
Jason Snipe
V really strong earnings quarter.
- [45:09]
Josh Brown
Okay, Shannon Industrials. There's some insulation for aerospace and defense from tariffs.
- [45:13]
Ryan Reynolds
Well, I thought Stephanie Link was going.
- [45:15]
Scott Wapner
To pick that Sherwin Williams.
- [45:17]
Ryan Reynolds
Ask Sherwin Williams. What are we asking of Sherwin Williams here?
- [45:20]
Scott Wapner
Sherwin Williams had a great quarter market share growth too.
- [45:23]
Ryan Reynolds
All right, good stuff. I'll see you guys. 3:00 on closing bell. You've been listening to CNBC's halftime report, the podcast you can always catch us live weekdays at 12 Eastern only on CNBC.
- [45:40]
Janice Henderson
All opinions expressed by the Halftime Report participants are solely their opinions and do not reflect the opinions of CNBC, NBCUniversal, their parent company or affiliates, and may have been previously disseminated by them on television, radio, Internet or another medium. You should not treat any opinion expressed on this podcast as a specific inducement to make a particular investment or follow a particular strategy, but only as an expression of an opinion. Such opinions are based upon information the Halftime Report 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 Halftime Report disclaimer, please visit cnbc.com halftime reportdisclaimer this episode is brought to you by Freshworks AI powered service software that makes work easier and processes less complex. Are you working harder than your software? Uncomplicate your business with fresh service for it and freshdesk for customer support. Stop wrestling with clunky tools and start focusing on what matters delivering exceptional employee and customer experiences that drive ROI in weeks versus years, all with no hidden fees. Start working smarter, not harder, with freshworks uncomplicated service software. Learn more at Freshworks Com.