Halftime Report: How to Trade Tech (February 5, 2025)
Hosted by CNBC's Scott Wapner
Introduction
In the February 5, 2025 episode of Halftime Report, CNBC's Scott Wapner delves deep into the current dynamics of the technology sector, focusing on major players like Alphabet, Amazon, and Apple. Joined by top market investors—Bryn Talkington, Joe Terranova, Terry Nova, Steve Weiss, and Jim Lebenthal—the discussion navigates through recent market movements, earnings reports, and strategic investment moves. The episode provides listeners with nuanced insights into trading tech stocks amidst fluctuating revenue growth, increasing capital expenditures (CapEx), and evolving market sentiments.
Big Tech Under Pressure
Scott Wapner opens the discussion by highlighting the pressure on major tech companies such as Alphabet, Amazon, and Apple. Despite Nasdaq's green status, Alphabet is experiencing a decline due to slowing revenue growth and escalating CapEx.
Jim Lebenthal [00:00-01:17]:
“We were worried about competition on search… search came in better than expected, up about 12.5% year over year… CapEx is going to keep the competitive advantage for Alphabet.”
Jim emphasizes that while Alphabet's CapEx has surged, the company's long-term performance remains strong, suggesting current stock dips are more about profit-taking than fundamental weaknesses.
Steve Weiss [03:16-05:21]:
“CapEx is really just like planting the seeds… it's fine.”
Steve supports Jim's perspective, arguing that increased CapEx is essential for future growth and not a cause for concern. He views Alphabet as a solid buy opportunity despite short-term setbacks.
Joe Terranova [05:23-06:18]:
“It's up 31% over the last year… bullish on Nvidia.”
Joe discusses his investment in Alphabet based on strong momentum and bullish sentiment around Nvidia, which has positively influenced Nasdaq's performance.
Valuation and Growth Concerns
The conversation shifts to the implications of Alphabet's increased CapEx and slowed revenue growth, with Scott Wapner [02:38-03:32] questioning whether high spending amidst decelerating revenue is sustainable.
Steve Weiss [03:32-05:21]:
“CapEx increased by 50%… needed to drive the growth going forward.”
Steve reiterates the necessity of CapEx for Alphabet's growth, comparing it to planting seeds for future benefits. He dismisses concerns about increased costs, asserting confidence in the company's strategic investments.
Joe Terranova [06:02-06:53]:
“Mag 7 position is extremely bullish… trailing is Apple, trailing is Tesla.”
Joe explains his bullish stance on the Mag 7, highlighting that while some names like Apple and Tesla are trailing, the overall sentiment remains positive.
Bryn Talkington [07:00-09:44]:
“Google is really flying in the face of the deep sea Flash crash… I think Metta is doing the right things.”
Bryn underscores Google's strong performance despite market volatility and expresses a preference for diversifying beyond the Mag 7 through investments in other sectors like NVIDIA and Tesla.
Meta's Resilience and Option Activity
Scott Wapner [08:30-09:00] brings attention to Meta's 13-day winning streak and significant option activity.
Bryn Talkington [09:00-09:44]:
“I have large positions in Jeff Ques… Metta is doing the right things.”
Bryn explains his strategic allocation through ETFs like Jeff Ques, allowing him to benefit from Meta's performance without overexposure.
Joe Terranova [09:00-11:28]:
“Momentum has evaporated… cannot have it both ways.”
Joe discusses the potential slowdown in revenue growth for the Mag 7, indicating a need to reassess positions as growth moderates.
Jim Lebenthal [11:28-15:03]:
“Getting a great company at a great price… forward multiple.”
Jim highlights Alphabet's attractive valuation and diverse revenue streams, advocating it as a strong buy despite recent misses in cloud services.
Apple's Challenges in China
Scott Wapner [16:14-16:58] transitions the focus to Apple, discussing its struggles in the Chinese market amidst regulatory probes and declining sales.
Steve Kovac [16:58-19:33]:
“China App Store investigation… tariffs could put 10% on imports from China.”
Steve Kovac details the multifaceted challenges Apple faces in China, including regulatory issues, competition from local brands, and potential tariff impacts, all contributing to an 11% decline in China sales.
Uber's Sell-Off and Strategic Moves
Scott Wapner [19:33-21:13] shifts to Uber's 7% drop, prompting a discussion on its recent guidance and market overreaction.
Bryn Talkington [19:57-20:59]:
“Exogenous events causing guidance hits… call an audible.”
Bryn attributes Uber's sell-off to external factors like natural disasters impacting Q1 performance and suggests that the market's reaction is an overreaction of algorithmic trading.
Bill Baruch [21:13-22:21]:
“Opportunity in buybacks… stock remains undervalued fundamentally.”
Bill Baruch supports a buy strategy, citing strong free cash flow and undervaluation, anticipating future buybacks and continued strength in core metrics.
Steve Weiss [22:21-23:30]:
“Company can navigate tough circumstances… not unreasonably priced.”
Steve agrees with the undervaluation perspective but remains cautious, emphasizing the need for companies like Uber to consistently demonstrate resilience.
Other Tech Stocks: Chipotle and Disney
Scott Wapner [23:30-25:03] briefly discusses Chipotle and Disney's recent earnings, noting the mixed results.
Steve Weiss [23:43-24:34]:
“Maintaining position… face new catalysts.”
Steve indicates confidence in Chipotle despite lighter same-store sales, focusing on long-term growth catalysts.
Jim Lebenthal [24:34-25:17]:
“Good long-term buy… multiple is forgiving.”
Jim shares a positive outlook on Disney, emphasizing its diverse offerings and long-term growth potential despite subscriber losses.
Portfolio Rebalancing and Sector Exposure
Scott Wapner [25:17-28:10] explores the committee's recent trades, highlighting increased exposure to financials and decreased exposure to technology.
Joe Terranova [25:47-28:10]:
“Financials are exhibiting strong performance… double down on sector.”
Joe explains the strategic shift towards financials, citing strong earnings and growth in banks and insurance sectors, while reducing reliance on the volatile tech sector.
Steve Weiss [28:10-28:55]:
“Energy exposure considerations… robust fundamentals.”
Steve touches on the energy sector's potential, noting historical performance and current strategic investments.
Cryptocurrency and Final Trades
Scott Wapner [28:55-39:03] transitions to cryptocurrency discussions and final investment moves before the break.
Joe Terranova [29:09-29:58]:
“Coinbase momentum evaporated… adjusted position.”
Joe discusses exiting Coinbase due to lost momentum and explains his strategic move into Ethereum Trust following a significant market dip.
Bryn Talkington [30:04-30:43]:
“Bought Ethernet Trust after market dip… good opportunity.”
Bryn capitalizes on the Ethereum price drop, viewing it as a prime buying opportunity for the iShares Ethereum Trust.
Market Headlines and Sector Analysis
Christina Parts Nevelos [30:48-31:55] presents key headlines, including legal decisions, sports league settlements, and cybersecurity concerns related to Deepseek's chatbot.
Scott Wapner [31:55-35:39] and panelists discuss the implications of these headlines, focusing on legal and cybersecurity risks impacting tech investments.
Energy Sector and ExxonMobil Discussion
Jim Lebenthal [32:22-35:34]:
“ExxonMobil's diversified operations… attractive valuation.”
Jim advocates for investing in ExxonMobil, highlighting its diversified energy operations, strong dividend yield, and strategic share buybacks.
Steve Weiss [33:35-35:34]:
“Commodity price fluctuations… geopolitical stability.”
Steve emphasizes the importance of commodity prices and geopolitical factors in determining ExxonMobil's future performance, acknowledging potential risks.
Joe Terranova [35:39-36:06]:
“Energy sector's strong performance… strategic investments.”
Joe reaffirms the commitment to increasing exposure in the energy sector, citing robust performance and strategic investments in regional banks and insurers.
Robinhood and Final Thoughts
Bryn Talkington [36:50-37:32]:
“Robinhood's strategic position… market share growth.”
Bryn discusses the initiation of coverage on Robinhood by Raymond James, emphasizing its potential in equity, options, and crypto markets.
Mike Santoli [37:51-39:03]:
“Market resilience… Treasury yields monitoring.”
Mike Santoli provides a macroeconomic perspective, noting market resilience amidst potential rate changes and the importance of monitoring Treasury yields.
Conclusion
Scott Wapner [39:39-42:38] wraps up the episode by highlighting upcoming earnings reports and final investment moves, including increased exposure to energy and financial sectors. The episode concludes with a disclaimer emphasizing that all opinions expressed are those of the participants and not CNBC.
Notable Quotes
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Jim Lebenthal [00:50-00:59]:
“This is a stock that's going to keep going down. This is a great company right now at a great price.”
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Steve Weiss [03:35-03:57]:
“Capex is really just like planting the seeds on a plant or on a tree.”
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Joe Terranova [25:55-26:36]:
“Generating alpha… strong earnings growth.”
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Bryn Talkington [30:04-30:43]:
“It's a good opportunity to buy that iShares Ethereum Trust.”
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Jim Lebenthal [32:22-33:30]:
“Unless you don't want to own energy, I think you have to.”
Key Insights
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Tech Sector Dynamics: Major tech firms are under pressure due to slowing revenue growth and increased CapEx, yet investment professionals view these as strategic moves for long-term growth.
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Valuation Considerations: Attractive valuations in companies like Alphabet and ExxonMobil make them compelling investment opportunities despite current market fluctuations.
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Sector Rebalancing: A strategic shift towards financials and energy sectors reflects confidence in their strong performance and growth potential.
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Market Resilience: Despite potential macroeconomic headwinds, the market exhibits resilience, with targeted investments in high-performing sectors and companies.
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Strategic Opportunities: Price dips in high-potential stocks like Ethereum Trust present buy opportunities for informed investors.
Conclusion
The February 5 episode of Halftime Report provides a comprehensive analysis of the tech sector's current state, balancing short-term pressures with long-term growth strategies. Through insightful discussions, notable quotes, and expert opinions, listeners gain a nuanced understanding of navigating the volatile tech market and strategically positioning their investments for future gains.