← Halftime Report
Halftime Report
How Long can the AI Trade Carry Stocks? 5/7/26
00:44:20
Scott Wapner and the Investment Committee debate whether AI stocks can carry the market and how you should position yourself in this environment. Plus, the Committee share their latest portfolio moves. And later, Josh Brown spotlights Devon Energy in his "Best Stocks in the Market." Investment Committee Disclosures
Loading summary
Transcript148 lines
- [00:00]
Julia Boorstin
A rich life isn't a straight line to a destination on the horizon. Sometimes it takes an unexpected turn with detours, new possibilities and even another passenger or three. And with 100 years of navigating ups and downs, you can count on Edward Jones to help guide you through it all. Because life is a winding path made rich by the people you walk it with. Let's find your rich together. Edward Jones, Member, SIPC before we had
- [00:31]
AT&T Business Wireless Advertiser
AT&T business Wireless coverage, our delivery GPS wasn't the most reliable. Once our driver had to do a 14 point turn to get back on route. A 14 point turn, an influencer even livestream the whole thing. Not good for business. Now with AT&T business Wireless, routes are updating on the fly and deliveries are on time. And the influencer did get us 53 new followers though.
- [00:55]
Scott Wapner
AT&T business Wireless connecting changes everything. I'm Scott Wapner and 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. Thanks, Carl. Welcome to the Halftime Report. I'm Scott Wapner. Front and center this hour, the record run for stocks, the AI trade drawing in even more buyers. We will discuss and debate how long it can all last with the investment committee. And joining me for the hour today, Josh Brown, Kerry Firestone, Malcolm Etheridge and Rob Secchin. Let's check the markets. Here it is about the NASDAQ yet again today, modest gains nonetheless. We are in the green. Other areas are in the red. The NASDAQ is extending those record highs up 3.5% just about this week. Retail is getting more engaged. According to JP Morgan's retail radar, retail buying and tech reached a one year high. That's notable. JPM says there's also room for the pros to get more involved. They say institutional investors and in particular macro managers have room to further increase their equity exposures from here. And there is bullishness abound. The billionaire investor and the philanthropist Paul Tudor Jones was on Squawkbox this morning, gave his take on this record run.
- [02:22]
Josh Brown
Watch.
- [02:23]
Paul Tudor Jones
I kind of think Claude Code January of this year would be the equivalent of when Microsoft came out in 81 and then 95. You kind of look at when we finally allowed the Internet to be used for commercial purposes. I think that was May of 95 and Windows 95 came a few months later. Those were both the beginning of the productivity miracles that lasted four to five and a half years. We're kind of, I'd say 50 or 60% if I had to pick a period. We've got another year or two to run.
- [03:05]
Scott Wapner
All right, there's PTJ talking about runways as I think a lot of people are thinking about looking at these incredible moves that we've had and thinking about how much is left and he says a lot, so it's a lot.
- [03:16]
Kerry Firestone
Well, you've got the big stocks back in gear and this is very important for sentiment. We have seen markets rally without those stocks. We know that can happen. But what we also know historically over the last 10 years, when the big stocks that everyone owns that drive index performance that are widely held, when those names are moving and not just moving but making new highs, as is the case with some of the biggest blue chip tech companies, it really does do a lot for sentiment and it absolutely drives increased retail flows which are obviously important to the tape. So it should not be a shock. I also think one of the more positive stories that we see right now, the beaten down software names are leading the rally. That's really exciting.
- [04:02]
Scott Wapner
Four straight weeks of gains for the igv. That's what we're working on. And that is to Josh's point and I'll give it back to you in a sec. The longest streak since September. So there is life again. Now there are a couple of stocks we'll get to in a moment that are leading the charge today. But your point is is well taken. This area that was so beaten down has woken up.
- [04:20]
Kerry Firestone
Yeah. Look, the leadership group obviously has been anything even tangentially related to the Capex build out. That's where people have been making money all year. But we understand that when you get a group of stocks where they're about to start reporting earnings or in some cases they have reported earnings and these stocks are at a 20 to 40% discount from their prior highs like these software names. When you get a group like that back in gear, obviously led by Microsoft. But even looking at non mega cap software, large cap, even mid cap, when those names start to move higher and people feel some relief in that portion of their portfolio, I do think it helps the animal spirits overall. And if you get a little bit of a pause in the semis, get a little bit of a pause in the air, capex build out names, that's okay. Many of those stocks have just doubled. So I like that the ball is being passed and people are starting to re engage with stocks that we haven't been talking about for a long time as being winners.
- [05:22]
Scott Wapner
Sorry. Let's have a conversation guys about durability which is very much what Paul Tudor Jones is talking about versus fragility. Because there are two interesting points of conversation, I think, and it's how the FT is addressing this story today. Yes, it's been all about carry AI. The question is, is it too much about AI and nothing else? As they point out, Wall Street's rebound since late March has been driven by the smallest number of stocks on record, pushing the US equity market concentration to an all time high and prompting warnings about the fragility of the rally. Just five tech stocks, Alphabet, Broadcom, Amazon, Nvidia and Apple have accounted for more than half. Okay, just five tech stocks have accounted for more than half of the S&P's recent gains. Issues or no?
- [06:20]
Malcolm Etheridge
Well, definitely, whenever we've had this before, we've had a situation, as we saw a couple of months ago, that an event such as the beginning of a war can hit the market hard or there's a fleeting away from names that have had these enormous runs. That however, does not mean that they don't recover, which they've recovered. We've had a series of setbacks to the market over the last few years where the leadership, which has been these concentrated tech names, Mag 7, 5 for whatever, they take a hit because they got overheated and then they come back. And we had expected them to come back because they started to lag the S and P in terms of multiples. You know, you were getting many of them selling at market multiples or lower. You still have a couple who are. And that meant that there was an opportunity. Does it mean it's over for them? Absolutely not.
- [07:14]
Scott Wapner
Does it mean they can take a rest like feels like anything.
- [07:17]
Malcolm Etheridge
But yeah, they're very, very hot names.
- [07:19]
Scott Wapner
Look at the, look at the gains since the March 30th low stacked for the stocks that the FT was calling out today. Right from the March 30th low, Alphabet's up 44%, Broadcom's up 43. This is like in, what is this? Six weeks? Five. Six weeks? Amazon 35. So Alphabet hits a new all time high. Amazon hit one yesterday, Apple hits one today as well. You can be both durable and fragile, can't you?
- [07:51]
Rob Secchin
I think that's the perfect way to characterize it. I think the FT is pointing at fragility properly, but pointing in the wrong place. Because I think this past earnings should have made people very aware of just how much we're on borrowed time in the sense that you have four companies, it's Amazon, Microsoft, Google and Oracle, whose backlogs that we now know are about $1 trillion combined. That's half of all of the backlog related to two companies, OpenAI and Anthropic. That's all coming from just those two companies supposed pronouncements of how much they plan to spend. Those are only commitments and handshake deals. So when we do get one of those companies finally come public this year, probably anthropic, before OpenAI, it'll be our first opportunity to see just how likely they are to hit those targets as far as revenues are concerned. And I have a suspicion that it's not going to be what the street actually expects and wants to see. So all of what this is built on top of between those four companies I just named could come crashing down. So I don't know that we have two years like PTJ thinks it could extend to maybe one year.
- [08:58]
Scott Wapner
What do you think?
- [08:59]
Josh Brown
Listen, I think you have to remain constructive. I think this momentum, it's tough to find fight in earnings boom. It is really tough to fight and what it's done. And I heard Ken Griffin talk about this out at the Milken conference, listening to his, listening to what he said to the group. And the reality of it is is there's a derivative benefit of this. There is now a renewed focus in energy, in technology among the executives at these companies. And what that leads to is a very virtuous cycle investment and a rigorous focus on productivity and profitability. And I think we're at the very early stages and those that are winning should be winning. They're laying the foundation for this. But there's a lot of winners that are going to come out of this in terms of that. And listen, there's questions about what's going to happen to the labor force and what we've shown a history of being able to redirect and re rig and retrain labor to be able to take advantage of what's new. When the Internet came out, there were no social influencers, there were no web designers. You know, there's businesses that are born out of these changes that are step changes in, in productivity. I'm going to, I'm going to tell you something, these numbers are ridiculous. Q Q1 EPS is up 27%.
- [10:26]
Scott Wapner
That right. That's for the S and P. If you look at tech and comm services, you're talking about double the 27 for those groups. We're talking like 50ish percent for tech and comm services. Now they've gotten a boost as well as people have been writing about which I think is interesting too, these companies and their stakes in private companies, the open air.
- [10:47]
Josh Brown
But even after that, you know, it's still up 16.
- [10:50]
Scott Wapner
No, of course it's been.
- [10:52]
Kerry Firestone
This is the, this is the, this is the build out. And during the build out, these types of eye popping earnings growth numbers from box makers, hardware companies, this could go on for years. We saw it like, I think all of us on this desk can remember the original build out to the dot com. It didn't start in 1999, started in 1995. The Netflix IPO, I think, was it 95 or 96? So like you had a four, four year Runway. And then the question becomes, at what point do the comps. This, you know, 2028 versus 2027. Is that where finally it's like, okay, we're still growing, we're still building this out. Maybe it's at a slower pace, but we're not there yet. I think that was the point that Paul Tudor Jones was making. I think it's the, I think it's the right point.
- [11:38]
Josh Brown
I do too. But if I thoroughbred, these are the thoroughbreds that are running and you know, each one of them's winning a different point of the race. And right now it happens to be Alphabet.
- [11:49]
Scott Wapner
If I told you that the analog to today wasn't 99 but 97, as you can extrapolate, perhaps that he is channeling thinking, well, we maybe got two more years left. Would you make any different investing decisions
- [12:03]
Kerry Firestone
today if we told you, yeah, that there was the analog in 99 we had multiple expansion. We have multiple contraction this year.
- [12:11]
Malcolm Etheridge
We had expansion multiples that were obscene in 99. I mean, I ran a growth fund in 95, 96, and people watched as their stocks went up 10% a day.
- [12:23]
Josh Brown
I mean, I don't know if ETOY should have been going up the way it was going. And this is concentrated on.
- [12:30]
Scott Wapner
I was sitting in a newsroom, okay, before I came here in Dallas, Texas. Okay, a general newsroom.
- [12:38]
Kerry Firestone
All right.
- [12:38]
Scott Wapner
And everybody was watching cnbc. And the topic of conversation every single day among producers of shows was about.com stocks and who owned what as they were going straight up. I don't necessarily feel like we're in the same kind of euphoric field where you get literally the topic of conversation everywhere.
- [13:00]
Kerry Firestone
When you get the, when OpenAI and SpaceX and probably anthropic, when those, when those IPOs actually come and we start hearing about, to Scott's point, people in pop culture talking about how much anthropic they got and how. Okay, at that point, I'll say this might. This might need to chill out a little bit, I would argue, but I just don't think it's that moment.
- [13:24]
Rob Secchin
I would argue the cold water could be coming from a different direction. You mentioned the enthusiasm, enthusiasm over energy. And that's what made me think about the fact that this could all be coming to a head as we lead up to this midterm election cycle. So Texas, you mentioned Wisconsin, Virginia. These are all very important states as far as the data center buildout are concerned. And those are all places that right now are having these reckonings between their citizens and the companies that are putting shovels in the dirt and actually building out. I think that could actually be the bigger challenge that, that we're kind of whistling.
- [13:56]
Scott Wapner
That's why you want to put things in space. You know what? Data. Data centers up in space.
- [14:02]
Malcolm Etheridge
Just on the topic of how far this has to go, we should all remember that there are cycles. No matter how extraordinary these companies are. And these companies are so much greater in every sense, their revenue, their profitability, the dollars that they earn, than what we saw in the dot com. Because having invested in companies with no revenue and no profit and then watch them all disappear. I am a veteran of what I call booms and then the explosion where everything crashes. And you don't wish that on anybody. I'm not talking about professional investors, but the people who buy into them because they're talking to their hairstylist about it or the guys.
- [14:41]
Scott Wapner
You know, that's sort of what I was alluding. That was the period, careful, that we were literally in, where the topic of conversation every single day on a, on a general newsroom floor was fixated.
- [14:53]
Kerry Firestone
We might be like a year away. It'll happen. Like, of course it'll happen. But like in 99, if you turned on CNBC and watched for three hours, you would see commercials with Anna Kournikova and Shaq and Jackie Chan and Phil Jackson and people from acting and movies and sports doing day trading commercials. I have seen.
- [15:15]
Josh Brown
So another thing that you saw is you do a Morgan Stanley conference, tech conference, and everybody that was presented, presented at the conference, no matter who it was, was up 50% the next day just because they said this is so fundamentally supported by a build out that is driving until.
- [15:37]
Scott Wapner
Until it isn't. When you wrap enough fiber around the earth 50 times and then realize that you overdid it.
- [15:44]
Josh Brown
Yeah, you know, maybe we'll get to
- [15:46]
Scott Wapner
that point from a data center perspective. No it's, it's not today, but I think it's worth having having at least that conversation. I do want to tackle something else though, and that is the fact. If you look at now we showed you these tremendous gains from the March low. If you look at the gains from the last month every. Everybody's had a nice month, a nice move from the mega cap tech space. And we threw Broadcom in there too. For all intents and purposes, it belongs in the group. But look at Metta, right? It sticks out like a sore thumb, doesn't it? Seven and a half percent over the last month relative to everything else. And I think we need to discuss what's happening here. And I thought there was a really good article this week, a column in the Wall Street Journal. They're heard on the Street Met as cheap stock can be a warning. They say, quote, meta shares look like a stock market steal, but their bargain basement price is more of a warning about its uncertain prospects than an opportunity for investors. Now I'll submit, at first glance, you're like this thing. You own the stock. At first glance, this thing's super attractive. 18 times. It's cheaper than the others. Okay. The premium for an Alphabet over a meta is the highest since 2022. Jensen Huang told us out at the super bowl in the conversation that we had with him. Nobody uses AI better than meta. And sure enough, maybe nobody does use AI better because it has helped their ad business by leaps and bounds. However, user growth, is it positive? It is. Is it slowing? It is. And it declined sequentially for the first time since they've broken out those numbers. They don't have a cloud business. We're sitting here talking about Google, cloud, aws, Azure with Microsoft. They don't have that. Will their spending pay off? That's the critical question.
- [17:37]
Kerry Firestone
They're seen as a user of a user of compute, whereas Google and AWS are seen as a provider of compute. And that's the dividing line. Microsoft, somewhere in.
- [17:47]
Josh Brown
I think the dividing line is simply the digestion that they face all the time when they have significant capex. It's happened time and time again. But they do not care. They see an opportunity in front.
- [18:03]
Scott Wapner
That's I. They do care when their stock goes down, okay, they had no. Zuckerberg had no choice but to care. The last time their stock went down,
- [18:13]
Josh Brown
he got a lot of pressure and
- [18:14]
Scott Wapner
Gerstner had to write him a letter saying, get fit. What are you doing here?
- [18:20]
Josh Brown
Me out. I think cap X spending has to continue because I think this is an arms race. And I think where they win the arms race is eyeballs. Everybody uses that every day. If I told you where we spend ad dollars and we spend a lot, that's a platform boy. Let me tell you.
- [18:41]
Scott Wapner
It's also a narrow. It also makes them more narrow in the levers that they have relative to some of these other power players in the AI arms race. Yes, we get it. Their ad businesses dominance and their data
- [18:55]
Josh Brown
is unbelievable and their per ad impressions are growing. But you're back, you're back telling me
- [19:03]
Scott Wapner
about the ad business. I want to know where all this AI spend is going to go as I look at the others who seem
- [19:10]
Josh Brown
to be accelerated 33% in the latest quarter. Okay. It's not like they're not monetizing it.
- [19:18]
Rob Secchin
Scott, are they monetizing fast enough to keep up with the debt?
- [19:21]
Kerry Firestone
I don't know what the ROI is. We don't know what the ROI is on the customer facing AI projects and they've made a lot of acquisitions. Made a lot of acquisitions.
- [19:31]
Rob Secchin
They've a lot of money. We also made a lot of layoffs and that's where I was going. Right. I can divide. So you're trying to lay off enough employment employees to offset the debt service redirect which may or may not happen fast enough. Right. You're looking at Oracle Meta, Microsoft now today literally sending out early retirement Office because we're trying to keep up with the cost of the additional opex related to building out these data centers and the debt we've had to take on. So I think it's important to at least consider the fact that at their last earnings it was not lost on
- [20:01]
Josh Brown
how much is reflected in price. It's the cheapest to the group, but
- [20:04]
Rob Secchin
they didn't buy back their stock.
- [20:05]
Scott Wapner
But that, that's part of the point of the article.
- [20:07]
Josh Brown
It's the cheapest of the group debate in December 22.
- [20:12]
Scott Wapner
But they suggest that it's cheap perhaps for a reason. It's the, the cheapness of it is more of a warning than an opportunity.
- [20:19]
Josh Brown
And you don't think they'll pivot, so.
- [20:22]
Scott Wapner
Pivot to what? What do you mean?
- [20:24]
Josh Brown
The same thing they did last, stop spending. They can, they can reduce spending for sure. I don't think it's. Personally, I don't think it's the right strategy yet, but they can.
- [20:33]
Rob Secchin
But the moment they announce they're reducing capex, doesn't that send a negative shock through the market?
- [20:39]
Josh Brown
I don't think so.
- [20:40]
Rob Secchin
Really. So one of these hyperscalers Says we're actually reducing our capex. And you think that doesn't.
- [20:46]
Malcolm Etheridge
Yeah, I mean this is hypothetical.
- [20:49]
Josh Brown
That's going to happen in the next few years. Everybody that we talk to in this space says they're spending more, not less until they don't more. Okay, let's worry about that when the time looks like it's on. When do you sell semis?
- [21:04]
Rob Secchin
That's a whole conversation I know we, we were prepared to have and I think that that goes hand in hand.
- [21:09]
Scott Wapner
I think the bottom line is the market's unsure whether they can it. The market can trust meadow spending relative to the others.
- [21:17]
Josh Brown
Right now the grass is green and you can go eat some of it at some point. Point you might be. You might get eaten by the lion if you're not paying attention. The point is you have to pay attention and watch for those signs of deceleration. And do you. Do we think maybe, maybe it's going to happen? Maybe Nvidia is going to come out and say we're seeing a deceleration? Yes. Then I agree with everybody.
- [21:40]
Malcolm Etheridge
So I just want to defend matters. And we bought more of the stock in 2022. Let's remember that this is a company that attracts criticism, it attracts attention. The management has some, you know, kind of questionability when it comes to broad acceptance among Wall street at times. And so when the stock sort of fell apart and it is up 600% since the end of 2022 other than Nvidia which is up 1400 percent since then, met as the next by a lot. And at the time everyone was skeptical. Nobody said they could figure their way out of the problems they had with Cambridge analytics and privacy. And Facebook was declining. They changed their name. How can they figure this one out? They figured it out. Now I'm not just a Pollyanna and say oh yeah Zuckerberg, you got it covered. But people decide to be negative about this stock and they can be very, very wrong as they were with Google at the beginning.
- [22:42]
Scott Wapner
Depends when you say they could be very, very wrong. Give me a. Let's do a five. Just throw me a five year chart if you will because that's. You had the huge questions about the spend, right. The stock had the worst year ever. And then Gerstner writes the letter. They find their religion and then the stock has the best.
- [23:01]
Josh Brown
December 22, it bottomed. It's 12 times earnings.
- [23:05]
Scott Wapner
Had the worst year ever followed by the best year ever. So now it's a laggard before they had to stop or at least pare back their spending and be more focused and targeted. Right. They're throwing all this money before this thing called the metaverse. People like, what the hell is that? And when's it going to pay off? So the spend is a little different this time because they feel probably that they have no choice but to spend because everybody else is spending and they need to build out whatever business they think they're going to be able to build to make sure that they are uber competitive in this AI arms race, in this new era of technology that we are, they're embarking on.
- [23:39]
Josh Brown
There's a lot of CEOs that are saying the same thing. They're ignoring. I mean, didn't Oracle do this?
- [23:44]
Scott Wapner
I don't.
- [23:45]
Josh Brown
We don't own Oracle. But wasn't it the exact same thing? We are going to keep spending. We think this is a, a Manhattan Project.
- [23:52]
Scott Wapner
But is it Oracle, Oracle spending more, that's more debt financed in many respects.
- [23:57]
Rob Secchin
I don't know that that's the concern,
- [24:00]
Kerry Firestone
but so I think, I think Met is cheap and I do think they have a track record of ultimately figuring things out. Okay, I agree, however, on Oracle, just
- [24:10]
Josh Brown
as a for instance, don't own it. So maybe a bad example.
- [24:14]
Kerry Firestone
But you know what they're spending toward. They want to be one of the top five clouds in the world and they want these AI world workloads. Every time an organization uses more OpenAI, uses more anthropic etc, they want that to happen in the Oracle cloud, like for obvious reasons. That's how they get paid. You understand A, if they do more of A and they add a little bit of B, the result is C. On the meta AI project, we understand that they are the best monetizing entity in the world when it comes to ads and they know their user base better than any other company knows its user base. They know what to serve next. They know how to keep you on reels for 10 minutes, then 11 minutes, then 12 minutes. Nobody is better. What are all these other things that they're spending on meant to accomplish? If you ask five meta shareholders that question, you might get five different answers. I'm not saying that's permanent, I'm just saying that's why the stock is not lagging. It's reflected versus Google.
- [25:16]
Scott Wapner
I think it's a good summation of what's reflected in the stock performance. Nobody suggested definitely change that, the story's finished or whatever.
- [25:25]
Josh Brown
But the question largest overweights Google right now. And you know, we did that on the show when everybody was talking about that. It is the end. They haven't figured this. Beginning of the year, that's when you want to buy the these names.
- [25:41]
Scott Wapner
Okay, let's hit something quick before we go because Josh alluded to what's happening with software. Four straight weeks of gains. We're on pace to do that, which would be the longest streak since September. Datadog, Fortnet, they're, they're two of the stocks that we need to mention today. Look at Datadog first. Nobody owns it on the show today, but it is a standout. No question about that. Look at that. Up 29% now show up Fortnite because it's a big day today for cyber and that's right in the center of it. Rob, you have the name. They got upgraded today to a buy. Look at that.125 is the price target at BTIG. Now they say they're more confident in the company's ability to sustain mid teens revenue growth over the next few years.
- [26:24]
Josh Brown
You think this is one we had to be patient with for a long time. As you know, we talked about, about all the, all the cybersecurity providers, they were very integrated. They're best in class, kind of in the data center space. So that's certainly, that's certainly helping them. They're a great fit there. And you know, from our lens, it was cheaper when we went in and it's one of the more durable growers in the space. Certainly not as much enthusiasm around it as there was related to CrowdStrike and in some of the other names. But our patience has paid off and glad to see that year to date it's up 40%.
- [27:04]
Scott Wapner
All right, so let's do this. We'll take a break. We got to get Josh's take on Shake Shack. Obviously. We have to get Josh's take on Uber, obviously. And Malcolm's got a move in private equity too that you're going to be surprised out perhaps because just won't tell you what it is Next.
- [27:28]
AT&T Business Wireless Advertiser
Before we had AT&T business wireless coverage, our delivery GPS wasn't the most reliable. Once our driver had to do a 14 point turn to get back on route. A 14 point turn, an influencer, even livestream the whole thing. Not good for business. Now with AT&T business wireless, routes are updating on the fly and deliveries are on time. And the influencer did get us 53 new followers though.
- [27:53]
Scott Wapner
AT&T business Wireless connecting changes everything.
- [27:59]
Malcolm Etheridge
What made you confident that you could do something that hadn't been done before? I have no fear of failure.
- [28:05]
Julia Boorstin
Trailblazing women, changing the game.
- [28:08]
Julia Boorstin (voiceover)
One of my favorite pieces of advice, think about what your boss's boss needs.
- [28:12]
Leadership can look in many, many different forms. It really does come down to just trusting yourself.
- [28:17]
Julia Boorstin
Life is short and you just gotta think big to accomplish big things. Julia Boorstin hosts CNBC Changemakers and Power Players. New episodes every Tuesday. Wherever you get your podcasts,
- [28:45]
Scott Wapner
Show me Shake Shack please. It is on pace today for its worst day since the IPO. Back in January of 2015 they had their earnings miss, but this suggests something more. What? What?
- [28:59]
Kerry Firestone
It's a dark day in shake shack land. You know what, if you listen to the call, you're probably not a seller, but this stock had a premium multiple and they don't deserve it. There's a shock loss. We understand why there was a loss. They cited paper costs and beef costs having surprised the upside. They also mentioned spring break falling in April. So they didn't get the benefit of that in the March quarter. Okay, that sounds like information we probably would have had 90 days ago. I'm not sure whether, I'm not sure why there wasn't a pre announcement here, but it caught the market off guard. The thing with small caps is when you piss the analysts off, you're probably in the penalty box for a minimum of two quarters. So if you're like trading for a dead cat bounce, maybe there's an opportunity here. But I think traders just abandon the stock and I really don't think there's going to be a material lift until they can atone with with better results.
- [29:54]
Scott Wapner
The punchline is that all that said you bought more of the name?
- [29:58]
Kerry Firestone
Well, I'm an investor and I buy every time it crashes and it always comes back. So I've been building a position in the stock over the course of years. I buy the disasters and if you actually listen to the call, you're not a seller. The reality is I think the revenue miss was like 10 basis points. Like this was not a situation where they completely had a destructive quarter. Fundamentally they just had a surprise loss due to rise in price prices and they didn't give anyone the heads up. So that's the story here. But long term, they actually raised the guidance, the number of physical stores they'll be opening this year up to a range of 60 to 65. The licensing business had a little bit of a problem in the Mid East. They do have a lot of places where there's tourism and a lot of that was on hold. So they had just sort of a perfect storm. But the plan is still the plan. They're on track and they gave guidance that I think people. Obviously it's not apparent today, but I think people can feel good about 3 to 5%, same shack sales for the rest of the year. So it's not as disastrous as a stock price makes it seem. That being said, nobody likes a surprise. And in a small cap stock like this, a couple of billion in market cap, when you alienate the analysts and you catch them off guard, you make them look stupid to their bosses and their clients. And I don't think anyone's going to trust this company until they're able to come back with a couple of quarters. So as an investor, I'm taking advantage of it. If I'm somebody shorter term, there are way better places to be.
- [31:26]
Scott Wapner
Okay, so let's get your assessment of Uber Target today to 110 from 105 overweight JPM on the back of the earnings report that we didn't get a chance to do yesterday.
- [31:36]
Kerry Firestone
I know, but shout out to Jenny. Hey, Mark Mahaney. Mark Mahaney. We reiterated one.
- [31:41]
Scott Wapner
Josh.
- [31:42]
Kerry Firestone
Yeah, mark me reiterated the $150 price target. That's where I think the stock belongs. I think it should be 100 right now. I understand that there is a spell that's been cast over this company by Waymo and Tesla. Competitive concerns. I think Uber will have more autonomous vehicles on its platform two years from now than any of its competitors will. And that's by virtue of the fact that they are working, working with virtually everyone. The announcement, the deal with Santander to finance fleets of autonomous vehicles in Europe is very interesting to me. The deal with Nvidia, the deal with Lucid, the deal with Rivian, and the deal with all of the large OEMs. There will be autonomous vehicles all over the place, all over the world. Most of them will be hailed on an Uber app. In addition, Dara went deeper into travel. Remember that he ran Expedia prior to running Uber? 700,000 hotels now available on the Uber platform via this partnership with Expedia makes perfect sense. I don't know why they wouldn't. 15% of all Uber rides have something to do with going to or coming from an airport. So I think going deeper into travel, this is an area that is not at risk for any kind of autonomous competition. Uber will have it to themselves. Doing more things like that while they build out the autonomous fleet, I think gives investors confidence that this is going to be an everything app. This is going to be Amazon esque when all is Said and done. And I like everything I heard.
- [33:16]
Scott Wapner
All right, so Apollo got a target raised substantially today to 166 from 139. We've had so many conversations about private equity and private credit. Malcolm, you sold Carlyle. You're totally out.
- [33:29]
Rob Secchin
Yeah, I give up. I give up on this space. I bought Carlyle. I started buying Carlyle in August of last year and basically since that point has done nothing that cost me money. And so the earnings was just so left of center that I just don't even know where to go. So the expectation was a billion dollars in revenues, up from 973 a year ago. Instead, we're looking at 254. That's pretty significant. We also saw a 28% drop in distributable income, which is what I should care about as a shareholder. That's basically the only reason I want to own a stock like this instead. Everything is going in the wrong direction. And so typically when you look at the way that waterfall happens, as far as capital being returned, the LPs or the shareholders inside of the individual funds or who get priority on payments coming out to them first, that's basically where all of the earnings and the revenues have gone. In this case, even though they've increased their AUM over that period. Secondary is the shareholders of the individual stocks or the gps. And that has gotten tough to substantiate why I'd want to own the stock and receive those payouts. And so I think this is a point where the space itself has gotten a little wonky. Maybe I have an opportunity to buy it back later on down the road at a cheaper price. But the whole reason I wanted to own these stocks in the first place was because we were supposed to be getting regulation that made it easier to sell these shares out into the broader markets. I think that is unlikely to happen anytime soon given all of the sentiment change on the space. So I'm moving on.
- [35:05]
Scott Wapner
Okay. Mackenzie segment. Gallas has a news update for us. Hi there.
- [35:09]
Malcolm Etheridge
Hey, Scott.
- [35:10]
Julia Boorstin (voiceover)
Michigan GOP Congressman Tom Barrett is introducing legislation to authorize military operations in Iran, but also to wind down the conflict and impose a 90 day deadline to end the war. The measure would allow President Trump to use military resources and enforce the blockade, but block having troops on the ground or holding territory in Iran. The war hit a key city 60 day threshold for congressional approval on May 1, but White House officials have said Operation epic fury is over. Amazon said today that its pharmacy will stock Ozempic pills to treat type 2 diabetes. At its kiosks as well as same day delivery. It currently offers Novos Wegovy and plans to add Eli Lilly's Found a Pill. Amazon says it won't stock the injectable form of Ozempic and kiosks because it needs to be refrigerated. And the U.S. air Force is targeting a July 4th delivery for the luxury Boeing 747 gifted by Qatar in time for the nation's 250th anniversary. That is, according to Reuters, which also reports the new Air Force One could possibly be delivered three weeks earlier to align with Trump's birthday on June 14. Scott, sending it back to you.
- [36:19]
Scott Wapner
All right, Mac, thank you. That's Mackenzie Segalis. Coming up, Josh Brown's best stocks in the market Market and an update to one energy name on that list. We'll do that when we come back.
- [36:31]
SOHN Conference Announcer
The song conference May 12 in New York City. Be there in person to hear market moving ideas from the biggest names in investing. This year's lineup includes Jim Chanos, David Einhorn, Mark Lasri and Orlando Bravo. Plus Nvidia's chief software architect Jonathan Ross for his insight on what's next for the AI industry. All proceeds go to Memorial Sloan Kettering's Pediatric Cancer Fighting program. The SOHN Conference is where Wall street unites to fight childhood cancer. For tickets and more information go to soneconference.org
- [37:03]
Julia Boorstin (voiceover)
not every sale happens at the register before AT&T business Wireless, checking out customers on our mobile POS systems took too long. Basically a staring contest where everyone loses. It's crazy what people will say during an awkward silence. Now transactions are done before the silence takes hold. That means I can focus on the task at hand and make an extra sail or two. Sometimes I do miss the bonding time. Sometimes.
- [37:27]
Scott Wapner
AT&T business Wireless connecting changes everything.
- [37:33]
Malcolm Etheridge
What made you confident that you could do something that hadn't been done before? I have no fear of failure, trailblazing
- [37:40]
Julia Boorstin
or women changing the game.
- [37:42]
Julia Boorstin (voiceover)
One of my favorite pieces of advice? Think about what your boss's boss needs.
- [37:47]
Leadership can look in many, many different forms. It really does come down to just trusting yourself.
- [37:51]
Julia Boorstin
Life is short and you just gotta think big to accomplish big things. Julia Boorstin, hosts CNBC Changemakers and Power Players. New episodes every Tuesday, wherever you get your podcasts.
- [38:22]
Scott Wapner
All right, we're back. Josh Brown's best stocks in the market today with the spotlight on an energy name. Which one?
- [38:28]
Kerry Firestone
Yes, I wanted to do something away from the AI Capex story because we've been relentlessly talking about that energy has been pulling back with the price of oil and I thought I'd take a look at one of the names that's down, but that I think is still in a zone that it can be bought. Basically what happened is yesterday this company finally closed its merger with Kotera. And now the combined entity, they are going to be the leading operator in the Delaware Basin. The Delaware Basin is in the Permian, but it's the area that's got the best economics in, in all of energy. And basically now the combined company, they're talking about a billion dollars in synergy. Post merger, they're talking about returning a ton of capital to shareholders, a new $5 billion buyback, an enhanced dividend. And I think this is going to be the type of stock where. Give me a little bit longer on the chart very quickly so I can show you guys. So I think this is a very well defined risk reward. We're saying four, forty dollars a share somewhere in that vicinity is sort of your get out of Dodge area on the chart. That's where the sellers just completely overwhelm the buyers. And this uptrend is crushed. So long as it can remain above. I think you'll get another attempt at that 50 to $52 area that you can see here in the chart right now. It's looking a little bit like a double top. We get another assault on that level. Once the post merger arbitrage kind of goes away and the stock trades on its own fundamentals, I think it'll break through. Third time's a charm. So I like the risk reward basically less than 5 points. Downside, the upside. This was $125 stock 20 years ago. So I like that set up here. And it's not at its high. You got a pullback that you can
- [40:12]
Scott Wapner
buy into it, you own it, Right.
- [40:14]
Josh Brown
We bought it in December. It's up 25% since we bought it. Listen, this is a high quality, quality producer with great profitability and low production cost. And if they get the synergies that Josh is talking about, that's just, that's going to raise their earnings and ultimately valuation.
- [40:31]
Scott Wapner
All right. Yeah, Cool, brother. Okay, Mike Santoli's next. All right, we're back. Our senior markets commentator and overtime co anchor Michael Santoli joins us now for his midday word. We're going to be jumpy, obviously on any headlines related to Iran and the war and the deal that we were so hopeful about a day or so ago. But you do have some decent moves today in the software space. Apple hitting that new high and you know, the conversation and what Paul Tudor Jones had to say to the squat gang this morning was interesting for sure.
- [41:20]
Michael Santoli
I mean, I think the big question just short term, tactically was semis mega overheated. Everybody knows that they pull back a couple of percent, 3% and by the way, be much worse if in video wasn't now the, the stodgy defensive name in the group that's actually up today. And the question was whether the rest of the market would do anything to absorb, absorb it and, and take up the slack that's happening so far. I do think you have to be aware that two weeks ago when the semi chart looked kind of similar and had this crazy vertical one day move higher, you did get a two day shakeout. It was down 7%. Then it went right up again to new highs. Now that was because you also had earnings coming through. So I feel like we bought ourselves three months of comfort and the Capex plans in general and now it's about whether the broad market has gotten far enough that it's going to go looking for an excuse to have a little more of a, of a pullback or not. And you know, I know everyone's talking about how overbought the NASDAQ 100 looks. There's no doubt about it. But I keep, I keep returning to over six months. You know, the S and P is up like 6%. Right. Because you did have that high back in late October. And it's hard to talk about bubbles actually peaking when you've had that kind of a six month rate of change and the valuation of the market is only halfway back to the peak of that period. So, you know, I feel like that talk is premature even if, you know, we need to churn for a little while to see if this all made sense.
- [42:43]
Scott Wapner
Yeah, well, that's why you are who you are. Much needed context, I think, for everybody. As always, Michael, thank you. We'll see in a bit. Mike Santoli, the setups next.
- [43:16]
SOHN Conference Announcer
Are you following the Halftime Report podcast? What are you waiting for? Look for us in your favorite podcasting app. Follow the Halftime podcast now.
- [43:43]
Scott Wapner
Through the setup for you. We have rocket companies today after the bell. Malcolm, you get the first shot at this. Go ahead.
- [43:48]
Rob Secchin
Yeah, I don't know that anything they say is going to matter as much as interest rates actually finally starting to move. Until then, they keep digesting the acquisitions they made. That looks great. They keep getting vertically integrated. That looks great. But it really doesn't matter to homeowners or sellers until interest Rates start to come down.
- [44:05]
Scott Wapner
Agree with that 100%.
- [44:07]
Kerry Firestone
I mean this is like like energy companies are in the end at the mercy of the price of natural gas, the price of oil, anything housing related is at the mercy of what mortgage rates are doing. Not just the level but the direction. Direction and the direction is it's no
- [44:21]
Josh Brown
man's land and they're likely to set the table differently with with the upward pressure and rates I think.
- [44:28]
Scott Wapner
All right Gilead is today. That's you right Tonight overtime a bar
- [44:32]
Josh Brown
is low so likely upside and this is one of the real diversifiers this year away from the AI ecosystem so I think it'd be fine.
- [44:40]
Scott Wapner
Kara, what about healthcare, biotech? Can they get anything going? I mean small and mid cap biotechs have been doing okay as Michelle Ross told us the other day on closing bell otherwise kind of not so much.
- [44:52]
Malcolm Etheridge
Well I think you can start to see some inflection points. We saw that the Lilly quarter was met with applause. Novos quarter, very good quarter but they had got it done at the last quarter that stocks on a tier right now I think that you can start to see UNH helping the the group move up. No reason that you can't see continued strength in health care.
- [45:16]
Scott Wapner
Okay, we'll take a quick break and we'll come back and we'll do finals. All right I'll see you on closing bell three o' clock eastern. Bryn Talkington will be back at post nine. Looking forward to that. Stephanie Aliaga, Chris Heise and low Tony on the latest with Anthony traffic and open air and everything else as we talk about the race to go public. Susan, final trades Mr. Siet Qualcomm.
- [45:44]
Josh Brown
It's emerging as an AI infrastructure. Play custom chips for handling workloads.
- [45:51]
Scott Wapner
Nice move in that stock. Wow. 8%. All right Malcolm, what do you got?
- [45:55]
Rob Secchin
I'm going bug. M and A is going to pick up throughout cybersecurity throughout this year. That's one way to play it.
- [46:01]
Scott Wapner
Okay, well fortnet was a massive winner today. That's one of the key stories of this market. Who's got Apollo?
- [46:07]
Malcolm Etheridge
I've got Apollo stock we own. It's up 28% from the bottom recently because they are in the private credit business one of the best. Not exposed much at all to the problems. 14 times this year, 12 times next year's earnings.
- [46:20]
Scott Wapner
All right, well there's crowdstrike. I mean that really has set this space on fire today.
- [46:25]
Kerry Firestone
Yeah, it's crazy. I thought I was going to put all these cybersecurity stocks out of business. But look at this screen. It said $500 again.
- [46:31]
Scott Wapner
All right.
- [46:32]
Kerry Firestone
I don't know how that happened.
- [46:33]
Scott Wapner
Six and a third percent. I'll see you three. You've been listening to CNBC's Halftime Report, the podcast. You can always catch us live weekdays at 12 Eastern only on CNBC.
- [46:47]
Julia Boorstin
All opinions expressed by the Halftime Report participants are solely their opinions and do not reflect the opinions of CNBC or its parent company or affiliates and 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 opinion. Such opinions are based upon information the Half Time 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 halftimereportdisclaimer what made you
- [47:22]
Malcolm Etheridge
confident that you could do something that hadn't been done before? I have no fear of failure.
- [47:28]
Julia Boorstin
Trailblazing women, Changing the game One of
- [47:31]
Julia Boorstin (voiceover)
my favorite pieces of advice Think about what your boss's boss needs.
- [47:35]
Leadership can look in many, many different forms. It really does come down to just trusting yourself.
- [47:40]
Julia Boorstin
Life is short and you just gotta think big to accomplish big things. Julia Boorstin hosts CNBC Changemakers and Power Players New episodes every Tuesday. Wherever you get your podcasts.