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Halftime Report
How to Trade Tech 2/5/25
00:43:17
Scott Wapner and the Investment Committee discuss the big tech trade as Alphabet, Amazon and Apple all under pressure today. Plus, Joe Terranova details more of his JOET rebalance. And later, the Committee discuss the latest Calls of the Day on Exxon and Robinhood.
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- [00:01]
Scott Wapner
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. All right, Carl, thanks so much. Welcome to the Halftime Report. I'm Scott Wapner. Front and center this hour, the big tech trade with Alphabet, Amazon, Apple, all under some pressure today. We do have some new moves in those names and elsewhere as well from the investment committee. Joining me for the hour, Bryn Talkington, Joe, Terry Nova, Steve Weiss and Jim Lebenthal. Carl just told you what we're doing in the market here. We're green across the board. Nasdaq's just gone green as well, which is notable given the slide that we have seen today in Alphabet. I do want to begin with these questions about the biggest names in tech, Alphabet among them, which is sinking today on that revenue growth. Their capex spend is just exploding. Obviously, as you know, Jimmy, you're in the stock. It's one of your biggest positions. Morgan Stanley today says not quite sticking the landing to start the year. Bernstein says now range bound. Wells Fargo, more questions than answers. Tough setup. From here, six target cuts. Ubs, jpm, Citi, Morgan Stanley, Bernstein and Wells all taking their targets down.
- [01:18]
Jim Lebenthal
So let me start with what, for me is the most important thing. We walked into this print worried about competition on search. We talked a lot about perplexity over the last several weeks and months. What we found yesterday was that search came in better than expected and was up about 12 and a half percent year over year. I know everybody wants to talk about cloud services. The miss there miss while up 30% year over year. I mean, that's, that's a little bit of an oxymoron. But I want to remind everybody the setup here. The setup is we were worried about search and competition. Right now you don't have to worry about it. If that competition was going to show up, it would have shown up by now. So as far as the capex goes, that's what's going to keep the competitive advantage for Alphabet. Obviously, the market doesn't like the higher CapEx number and the cloud services miss but put this into perspective. This is a stock that over the last one, two and five years has outperformed, not just versus the S&P 500, versus the NASDAQ comp, which is the more relevant benchmark to work against. So sure, it's giving back something today, but it's had great performance and I think this is more profit taking than anything with the Excuse being the cloud services miss and the higher capex. I'm not worried about this at all to be very clear if you don't own this stock, this is an opportunity to buy it. This is not a stock that's going to keep going down. This is a great company right now at a great price.
- [02:39]
Scott Wapner
Do you want to take a shot at that Weiss? Because I mean they've revised up their, their CapEx from 50 mid 50 billion to 75. We're talking a 30% increase in cost and spending and you are having a decel in revenue growth, the lowest growth rate since 2023. Jimmy sort of is dismissive of that because he focuses more on search which he says is more important but there's got to be a rub somewhere in that. If you're spending a lot more and your revenue growth is slowing, isn't that an issue?
- [03:17]
Steve Weiss
Well it's an issue today obviously.
- [03:21]
Scott Wapner
Is it just today because I went through the commentary of now it's going to be range bound and now the setup is tough from here. That doesn't sound like it's going to be over by 12:59 today.
- [03:33]
Steve Weiss
No, but I recall that same commentary in the 140s and then 170s when they missed and look where it is now. So Jimmy's right basically in everything that he said. His only admission was YouTube which has done very, very well. So look competition in search could be a factor going forward. You don't know. You know we've seen some advertisers go back to X that's going to come from somewhere where they're increasing budgets but that was an issue. I'm comfortable with it and I believe that yes the capex increased by 50% this year is substantial. However it's what's needed to be done to drive the growth going forward. So Capex is really just. It's like planting the seeds on a plant or on a tree. You're doing it now, you're doing the spade work now so you can benefit from going forward and that's exactly what's happening.
- [04:25]
Scott Wapner
Why did you buy more of this Stockton? Why, why didn't you buy more this morning?
- [04:28]
Steve Weiss
That's why it's a full position for me. It's a full position for me. So I'm not going to, I may, you know, frankly I may later. It's still very cheap, it's at a discount market multiple looking forward so I'm very, very comfortable with it here. Look the. I want to talk about Capex. I think part of the surprise for the CapEx in addition to what we saw from Matter was that hey wait, you've got Deep Sea which is told you they can do for a fraction of what's currently being deployed in CapEx. Trust me, if these companies see a more efficient way to utilize their capital, if Deep Seek is real, if Deep Sea gives them ideas, and I doubt the latter, then they will adjust their capex spending but they're not doing it right now. So I'm glad to see the Capex where I rather them say we can get done, we need to get done with 50 billion instead of 75. Of course, but look, it's fine.
- [05:22]
Scott Wapner
I mean Joe, you just bought it in the rebalance.
- [05:24]
Joe Terranova
Well, it was purchased purely off of momentum. It's up 31% over the last year. It's up 18% in the last six months. And when you think about sentiment and positioning before Collectively for the Mag 7 position is I would say extremely bullish. When you're talking about Alphabet, it's performed relatively well. I agree with the point that Steve's making here. I think that they were clearly in a position when guiding on CapEx to say, okay, we're going to go to the high side here and that number you could expect potentially is going to come down. It's Obviously good for Nvidia. Very good for Nvidia. Today Nvidia is up 4.7%.
- [06:02]
Scott Wapner
That's why the NASDAQ is green as we came on the air today. Otherwise it was going to be a very different looking picture. If you have Apple red and Amazon red and Alphabet red and the NASDAQ's green, well, the first place you look is Nvidia.
- [06:18]
Joe Terranova
Yeah. But I do think it initiates a conversation. Here we are February 5th about the Mag 7 and if you look at all of them so far, you've got only two that are positive year to date with Alphabet today falling below that line of positive versus negative. So Metta very strong with good reason and we'll discuss that. Amazon very strong with good reason, we'll discuss that as well. But trailing is, is Apple, trailing is Tesla, trailing is Microsoft. And there's reasoning behind it.
- [06:54]
Scott Wapner
All right, Brian, you, you don't have Alphabet, right?
- [06:58]
Bryn Talkington
No, no.
- [07:00]
Scott Wapner
I mean, how do you, how do you view this in the context of the other names that are in the wheelhouse of your port?
- [07:07]
Bryn Talkington
If I look at, if I look, if I look at Google's chart, first of all, it's a nice chart. It's done, it's done well. So I agree with what Jim said, right. It's, I think it's an overreaction and the chart still looks nice. What doesn't look so great is Microsoft, which I own. Right. So Microsoft on one side juxtaposed with Nvidia, like Google is really flying in the face of the deep sea Flash crash. Right. We know it didn't cost $6 million. Google's going to spend 75 billion. I'm just curious, like what is the output, the end output that these companies are actually trying to create with Microsoft, you know, their intelligent cloud grew 20%. They're focusing on Copilot. But I think with me with Microsoft, it is flat for like the last year. And so I think through what catalyst is the market going to demand for Microsoft specifically to get it off this zero return over the last year? And I'm not sure there. And I do think of those Mag 7 names. I think this year I think Metta and Amazon, which I own for the Qs and Jeff Q are positioned better than a Microsoft. So we'll see. I may be buying some Amazon. I know it's already moved up, but I love Satya and Amy Hood. But just flat for a year when you have a lot of money being made is tough to swallow.
- [08:30]
Scott Wapner
Let me ask you this about Medic. I mean anybody can say, well, I own it through the qs. I mean that's not really like, that's not really owning it. I hear you. But you could easily own it individually and you don't. I'm curious as to why, because that stock is continuing to rip. It's on the longest winning streak ever, by the way. This would be 13 in a row. 13 days in a row for Meta. You can see the chart right in front of you. Tells better story than anybody else can. Why don't you own that?
- [09:00]
Bryn Talkington
Well, so I mean if you look from portfolio allocation, I've large positions in Jeff, Cue the qs, Nvidia and Tesla, smaller positions in Microsoft and Apple. So like I just can't have my whole portfolio be a levered up MAG7 trade. So I'm happy to enjoy the return via the Qs and Jeff Q. But no, I mean Metta with Lama. I think the market is leaning in that Metta is doing the right things. And I will say with Metta, from an advertising and from an AI spend, I think more and more people are going to continue to spend on Instagram, Facebook and WhatsApp because that's a really good way for them to monetize their AI spend. So I have so much of these securities already. I'm leaning into Nvidia and Tesla versus a Metta.
- [09:45]
Scott Wapner
There's a big lean into thinking that Meta for one, along with all these other names is going to continue to go higher. I thought the Wall Street Journal had an interesting tear today on some options trades that have been made in these stocks. One being more than $40 billion in options contracts tied to the MAG7 changed hands last week. That's the biggest weekly tally thus far. That's according to the cboe global markets data. 26 billion of the 40 call options and call option activity tied to Meta reached its highest level since April of last year. April of 24, also from the same source, activity tied to Microsoft hit levels not seen since July of 23. Well, the bears are still being placed.
- [10:31]
Joe Terranova
Yeah, the bears will tell you though that that's indicative of a market that's reaching a top. I'm curious how much of that is related to correlating with the introduction of the zero dated options. But overall you can't dismiss that. There is clearly engagement, there's clearly activity. And in the case of just kind of following along here for a second on Metta, you over the last several years got everything about the Mag 7 right. All this interest in call option. Everything was about, well, they were delivering such strong revenue growth and they were delivering the revenue growth because of this innovation, generative AI. And we saw the significant contribution to Nvidia where we are now. You can't dismiss if you see a slowdown in that revenue and if you think about matter for a second, okay, we know Nvidia is still benefiting from revenue related to generative AI. Met is still growing at 20%. The rest of the Mag 7 is seeing a little bit of a deceleration.
- [11:29]
Jim Lebenthal
In the revenue growth.
- [11:30]
Joe Terranova
So you can't have it both ways. You can say as revenue growth is accelerating, okay, let's applaud it, everything's great. And as you see the moderation of revenue growth, you can't ignore that either. And it's beginning to happen.
- [11:41]
Steve Weiss
Oh, I don't, I don't. Factually you're correct. Google Group, Google grew slower, but if you look at their cloud growth, 30% and I think it was 35.
- [11:54]
Scott Wapner
Right.
- [11:54]
Joe Terranova
But that matters.
- [11:56]
Steve Weiss
Let me finish.
- [11:57]
Joe Terranova
Sure.
- [11:57]
Steve Weiss
But 30% is still unbelievable growth on a much larger base, number one. Number two, we're still. Even though you've seen the biggest uptake in technology ever with AI, it's really yet to come as the business cases get defined. So I think you'll see a reacceleration and then if you do lower the costs for getting in like deepsea has done or says they've done, you'll see the democratization of AI tools. Now what what they will get from it where they will drive revenue is that those tools they put in the cloud and the extra data or the additional data that's being mined and created also goes into the cloud. So if you don't have those tools to accommodate that in the cloud like Amazon having to buy those tools from Microsoft 10 billion then you will be out. But we're talking about a moment in time you should never ignore to your point that there's a possibility of a slowdown. We've seen such rapid growth but I personally think it's going to continue.
- [12:57]
Scott Wapner
Are you. Are you bullish on Amazon ahead of the number on what's tomorrow after the bell stock did hit a hit a record high yesterday.
- [13:05]
Steve Weiss
Yeah, yeah, yeah and I do own it. It's not it's a decent sized position but Meta is my biggest position and has been for some time uncomfortably big. So I may cut it back shortly because weights move but in Amazon. Look I don't get all that work about about the quarters I felt and I said this before any of them report I felt strong about Metis quarter in terms of Avenue Amazon. I do think retail will be strong. I don't know what the cost will be associated with that. So the top line should be strong. I do believe cloud will be strong but this gives me some caution in terms taking a firm stand that cloud is going to surprise the upside. Don't know if it's that or if it's a slightness to the downside. So so I'm there. I'm not going to buy or sell it you know unless it's an extraordinary move by the way tomorrow or Friday morning.
- [14:00]
Joe Terranova
I don't I think the direction of revenue growth matters more and it's one of the reasons why Amazon's at an all time high double digit revenue growth. We were talking about double digit revenue growth for this company a couple of years ago. That's why it was side but that's.
- [14:12]
Steve Weiss
Why it was reported Google was moving also.
- [14:15]
Joe Terranova
Wait a second, hold on a second. To their Amazon has reported double digit revenue growth for the better part of the last year and a half. That's not something that you could say when it was in a sideways pattern. So again I'm not disagreeing with you. I like the Mag 7. I own a bunch of Mag 7 names. But you can have it both ways. You can't say I'm going to pay a premium for accelerating revenue growth and not acknowledge maybe it's time to pare back a position as the revenue growth moderates. And I know in the case of.
- [14:44]
Steve Weiss
Apple you agree, in the case of Apple you agree. Well, that's been clear for years. Flat, flat, flat. And guess what? Stock's still up. The point I was making, Joe, is that the Google revenue growth looked great until they reported. Amazon's revenue growth looks great. But they're going to report tomorrow night the other maybe the same story.
- [15:03]
Scott Wapner
You're also, if you're hung up on the Alphabet revenue growth number going from 35 to 30, you're still paying a below market multiple for that stock.
- [15:15]
Jim Lebenthal
What I said earlier, we haven't, we really haven't dissected it. Well, give me a second.
- [15:20]
Scott Wapner
It's forward is 20, 20 and a.
- [15:23]
Jim Lebenthal
Half, which is, which is below the market. Brin loves just below the below the market multiple. So when I said something in the beginning that I said you're getting a great company at a great price, I mean, let's just define this. You're getting Alphabet, you're getting everything from search, YouTube, as Steve mentioned, the cloud services, Waymo, any of the other moonshots. You're getting all of that for just below the market multiple. That is a great price. And you know, we're poo pooing, it's fine. You know, the cloud revenue growth came in below expectations, but it was still 30%. There's going to be tremendous cash flows here. There's going to be buybacks. This, this is a rare opportunity and by the way, just a distinction because Brian brought up Microsoft, Microsoft had kind of the same thing, a disappointing cloud number and capex a little bit higher than expected. The difference is Microsoft is still trading at 30 times forward earnings. I am the guy who usually talks about valuation and I'm telling you it matters right now. Valuation.
- [16:14]
Scott Wapner
Well, I think people are trying to figure out, you know, what the right valuation at the current time is for a stock like Apple, which is down, as we said, the latest report to push it down is one that suggests China is reportedly considering a probe into App Store practices. We already know and we learned yet again from the earnings report, most recently that sales continue to be an issue there. We're talking about 15% of revenues or thereabouts from the China region. It's clear to me, Steve Kovac, our tech reporter on all this, that Apple has a migraine related to China and it doesn't seem to be able to get rid of it anytime soon.
- [16:58]
Steve Kovac
Yeah, that's right. And it's just not letting up, especially with this new tariff situation going on in this brewing trade war. Let me give you four things right now, Scott, that's happening in China that are causing this migraine, as you put it. First is that China App Store investigation that you had mentioned. Bloomberg reported that overnight. And this is the same kind of thing we've heard about from regulators all around the world, including in the United States and in Europe, that those App store fees, the 30% so called Apple tax, is a antitrust potential violation. We're seeing the DOJ here sue Apple over that. EU put out that big meaty Digital Markets act to kind of combat this. But there's a caveat here because this investigation, at least according to Bloomberg, started last year before Trump even took office. So this may not be a direct retaliation for the tariffs that went into effect this week. This has been in the works. In fact, our union over in China, she sent me a couple articles of state media talking about this Apple tax tax as far back as October of last year. So not necessarily directly aligned to this tariff battle that's going on. Second of all, Apple intelligence that is still not approved in the country. And when I sat down with CEO Tim Cook last week, he cited that as one of the reasons that China sales had their slump in the December quarter. People want that, according to him, want those Apple intelligence features and without them, they probably go to other Chinese brands. And speaking of Chinese brands, they've been eating into iPhone market share for the last couple of years. Here, I'm going to show you a chart here in a second that shows of all these brands that you're looking at right now, Apple's the only one that has lost market share in China. The other ones, Vivo, Huawei, show me they're all gaining market share against Apple. Unison also did some good reporting on this last week showing people are really in China gravitating towards these homegrown brands. And then you got the tariff issue here that could put 10% on imports from China. Of course, Apple makes most of its stuff in China. Morgan Stanley's Eric Woodring this week was telling me he expects if this tariffs do go into full effect against Apple, a 3% hit to earnings. And that would be a big problem that Apple would have to navigate either diverting manufacturing from India or something like that. But again, China is just the bulk of the manufacturing. And then we got that crummy data last week from the December quarter for China sales, it was down 11% to eight and a half billion. Look at the China business in this chart that I'm showing you right now. It's just been down for much of the last couple of years here and that is just not going the other way anytime soon. Scott?
- [19:34]
Scott Wapner
Yeah, Steve, thank you for that. That's Steve Kovac. The other stock I want to get to, and I'm glad we had insight into that, is Uber today because it's selling off on its guidance today. We do have considerable ownership. Brian, what do you make of this stock move today? Joe sold it in the rebalance last week. That was fortuitous timing, obviously. What about this move down 7% in Uber?
- [19:57]
Bryn Talkington
The market is so fickle. The. So I listened to the call. It was a wonderful call. I mean, Dara was great. The whole team on the guidance for Q1 they talked about, because Q1 has obviously already started, that you had the horrible devastating fires in L A which caused part of that. Number two, you had the snowstorm that we had down here in Texas, Louisiana, Alabama, and then number three, effects was going to be a five and a half percent hit versus three and a half last quarter. So when I, when I look at those, those are all just like exogenous events. The call, the guidance, Uber 1 gained 5 million new users there. I think they have a total of 30 million users or 60 million, which was up 60%. Sorry. Year over year. Their free cash flow is strong, but it's like if, if the Algos are just looking at soft guidance, I call, I call an audible on that because the guidance was very specific around events that have occurred that were acts of nature for the most part.
- [20:59]
Scott Wapner
Yeah, I think Bill Baruch would agree with you. Certainly must be his take because he did buy more this morning around 10am joins us now via Skype to discuss why was this the moment?
- [21:14]
Bill Baruch
Yeah, I think it's an overreaction. Brin highlighted some of the weather around the country here in the prior quarter. I think there's opportunity. Yeah, the big headline beat was it was a big tax tailwind, margins a little weaker than expected. But the excitement around the call, I think is very notable. The CFO even said that the stock remains undervalued fundamentally and the company is going to be active buyers of the stock here in the future. So I see buybacks coming. The free cash flow gets us really excited. 122% year over year and then gross bookings coming in at 17.6% year over year increase above the 15 and a half estimated. And quarter one, they're looking at 17 to 20%. So there's a lot of. A lot of good strength inside of this. Not only that, technically you go back $60 is a good little floor that gave us back in December $55, that August low. So we're leaning into this. We've doubled our position in our concentrated portfolio where we own no more than 10 names, made it a 7% holding, and we increased our holdings in the main portfolio by about 10%. So we like this year right here as a buying opportunity.
- [22:21]
Scott Wapner
Yeah, those are sizable moves, Bill. Thank you. Appreciate you for that. You own the stock too. What do you make. What do you make of, you know, brain overreaction, Bill. Overreaction buys. Buys more. Takes his positions up, you know, pretty sizably.
- [22:36]
Steve Weiss
Yeah, look, here's what I'd say that the quarter was obviously excellent. The guidance, because it traded up nicely until he gave the guidance. We're at the point with this company where the reliable print and guidance was always higher. So to me, truly great companies can. Can navigate any tough circumstance and they're not a truly great company at this point because they haven't been able to. So there are always issues that pop up during the quarter. You just don't know what they're going to be. So snow storms, not unusual. I mean, they navigated pretty well with what happened in the fourth quarter, so there's not a lot of extra there. Now, having said that, I don't think it's unreasonably priced here. When you look at the multiple and what their revenue growth is and what their cash flow growth is. So I'm not selling it at this level. May buy a little more, but I'm not very excited about.
- [23:30]
Scott Wapner
Let's run through a couple more names before we get out of here. Chipotle, take a look at the stock, please. It's lower. At least it was after earnings. Earnings beat. There it is down two and a third percent. You still own the stock?
- [23:43]
Steve Weiss
We do.
- [23:44]
Joe Terranova
Same store sales came in a little bit light. 5.4 versus 5.7. I don't find that particularly troubling. I think the challenge here for owners of this company is what's the catalyst as we move through 2025? What had been the catalyst is the ability to pay a premium relative its peer to its peers because of much stronger traffic. So that was always the case with Chipotle. Now, if you're going to see a little bit of a moderation of a slowdown, it really becomes a conversation about they have to prove themselves over the coming quarters in 2025. So maintaining the position, I think you just raise awareness more than anything else. I certainly wouldn't sell it.
- [24:24]
Scott Wapner
What's your take on dis on the Disney quarter? We take a look. The two big surprises obviously was profitability from dtc but also the decline in subs for Disney.
- [24:34]
Jim Lebenthal
And the last thing is the thing that bothers me. I'm not going to. I'm sticking with the stock overall. Overall I'm quite happy. I think the results were fabulous except for the loss of subscribers. And while that was expected, the problem is we think about Netflix two weeks ago and Joe and Steve, I know you guys own it. They added subs like crazy. Now the excuse here is probably that they raised rates on Disney plus, so maybe that caused some churn in the end for the quarter. Operating income came in better than expected. So on net that was good. But here's the thing. We're now going to have to wait for another quarter to see if that churn continues on or if it was a 1/4 response to rate hikes. I happen to think this is a good long term buy. You've got experiences going great. DTC should grow. I think the multiple is forgiving here. So I'm definitely sticking with it.
- [25:17]
Scott Wapner
All right, we'll take a break. We'll come back. We will track more trades today from the committee. We will break down more of Joe's big moves in his Jyoti rebalance. Plus Brin just made a new trade in the crypto space. We have that as well when we come back. All right, we're back. Let's go through some of these moves here as we usually do with your rebalance. What's interesting to us, you raised your financial exposure. You were already big in that group. Now you are 31%.
- [25:48]
Steve Weiss
Yes.
- [25:49]
Scott Wapner
Exposed in financials, that's more than double the S and P. So is that correct, sir?
- [25:55]
Joe Terranova
I believe.
- [25:56]
Scott Wapner
Isn't that correct?
- [25:57]
Joe Terranova
That is correct. Your honor entered as I believe where we are in the marketplace right now is let's ignore focusing on which way the S and P is going to go higher or lower. That doesn't matter. It's about generating alpha. And there's a lot of negative correlation trades that are going on with the market right now. Semis to software, India to China and financials to technology. So Scout, one year ago our exposure to technology was 28%. Our exposure to technology is now 16%. One year ago our exposure to financials was 14%. Our exposure is now 31%. Could you make the argument that we're stretching the limit in that exposure to financials? I'll acknowledge that, yes, absolutely you can.
- [26:37]
Scott Wapner
Well, you think you're at more than double the S and P. At some.
- [26:40]
Joe Terranova
Point that negative correlation trade is going to begin to have some mean reversion and you'll see the capital go to technology away from financials and you'll see the mean reverse in performance. But right now you have to acknowledge that financials are a sector that has exhibited very strong performance. And also the earnings are there. You're talking about 20% EPS growth, you're talking about 12% revenue growth on the 50 plus names out of the 77 financials that have reported. Look at names that we own like bank of New York Mellon, JP Morgan, both up double digit year to date, strong earnings growth. So there's a reason to be there. Interactive Brokers, another really strong name that we own.
- [27:23]
Scott Wapner
All right, so the new ones that you now own include US Bancorp, pnc. So you really like the regional trade.
- [27:33]
Steve Weiss
Super regional.
- [27:34]
Joe Terranova
I call that super regional.
- [27:35]
Scott Wapner
Super regional, yeah. Thank you very much. Visa is new there.
- [27:39]
Joe Terranova
Visa joins MasterCard. Not surprised at all. Visa has been in the ETF previously. It makes it return once again on both strong quality and strong momentum.
- [27:51]
Scott Wapner
Capital One, cme Gallagher, Aon. You like insurance too?
- [27:58]
Joe Terranova
Insurance is right now one of the largest industries that we own, followed by financial services, software and banks. Semiconductors, by the way, down to only 4%.
- [28:09]
Scott Wapner
It's now the time to get bigger in the financials.
- [28:11]
Steve Weiss
Weiss, I think there's a real question that's bubbling up in the financials, which is that will this will 25 again restart both the M and A cycle and the IPO cycle. And people I talk to have real questions about that. Keep in mind it wasn't supposed to start until mid 25, but the way we're seeing some of the stocks, some of the sectors act, it's a very, very legitimate question if that's going to occur. And part of that is basis is the basis for loving the financials. From my standpoint, I think Goldman outperforms any environment and that has so many levers to pull and so many solid businesses that I'm not as concerned about it. But for others that are highly dependent upon that, I think there's reason to be right.
- [28:55]
Scott Wapner
So you also sold Coinbase. You did, Joe. Bryn, you bought at the Ethereum Trust etf, the etha. So first, Joe, why'd you get out of Coinbase and then, Bryn, you can tell me about this buy.
- [29:09]
Joe Terranova
But okay, so here's an explanation of momentum. You have to look at the momentum and measure it in terms of what's the distance and how quickly does it get there and then what's the response to that? So on October 31st, the strategy takes a position in Coinbase at 179. By November 11th, the position is up 80%. Since November 11th through the rebalance, which was January 31st, that momentum has evaporated. That position in Coinbase, basically, it went nowhere. So that's the acknowledgment for that time period. You completely lost the momentum. And that doesn't confirm the initial position that you're taking. On 10-1-31st, it says, we think momentum is building from our starting point. Momentum built and it went away.
- [29:59]
Scott Wapner
Okay, Brian, what do you think about that? I know you follow that stock as well, but what about your own trade?
- [30:04]
Bryn Talkington
Yeah, well, good trade, Joe. That was a good entry, good exit. So on Monday, or actually over the weekend, there was a huge amount of leverage that got unwound in the crypto, the native crypto market. And so when Monday opened, etherium opened down 20%. So I bought the ETH, which is the iShares. I think that this trades back up to 25. I think you're going to fill that gap to 25. And so it's a trade. I just took the opportunity. You don't see, you don't see an asset go down 20% in one day so quickly. So I just thought it was a good opportunity to buy that ishare Ethereum trust trade back up to 25.
- [30:43]
Scott Wapner
Okay, thank you for that. Let's get the headlines now with Christina Parts Nevillos. Hi, Christina. Hi, Scott.
- [30:48]
Christina Parts Nevelos
Well, a second judge has blocked President Trump's executive order to end birthright citizenship in the United States. The U.S. district Judge in Maryland issued a preliminary injunction nationwide today, which is more permanent than the 14 day temporary restraining order issued last month by a federal judge in Seattle. The National Women's Soccer League has agreed to pay a $5 million settlement over past mistreatment of its athletes. That's according to a joint announcement with the league and three attorney generals. The settlement will fund compensation for players who experience any type of abuse. The league says it has made changes to its hiring and policies in response to these allegations. And researchers say Deepseek's chatbot is linked to China's state owned telecommunication company, Canadian cybersecurity company Faroot Security says it found code in Deepseek's account creation as well as user login areas on the web version that connects to infrastructure owned by China Mobile, which is banned from operating in the US over claims that has close ties to the Chinese military. Fruit CEO Ivan Sarani will be on the exchange today to talk more on the code linking Deep Seq in China.
- [31:54]
Scott Wapner
Scott?
- [31:55]
Christina Parts Nevelos
Agreed.
- [31:56]
Scott Wapner
All right, Christina. Thank you, Christina. Parts of Neville coming up, calls the day five calls on five committee stocks you need to know about. We will debate them next. All right, let's do some calls here. We're going to start with Exxon today. Price Target cut to 131 from 134. Neutral Mizuho lowered on their weaker chemicals. Outlook, you have it in the tee. You have it personally and you like it a lot.
- [32:22]
Jim Lebenthal
I like it a lot. I mean, the Target is a 20% increase from here. I think Mizuho might have just been a little bit ahead of their skis in terms of where their prior target was. I think this is very simple. Unless you don't want to own energy at all. I think you have to own ExxonMobil. I think it's your first purchase within the energy space. It's diversified across the entire chain. That goes into energy production, by the way, the chemicals and products. That's a very small portion. But scale matters here. If energy prices go down, scale is where ExxonMobil is going to still be profitable. And if energy prices go higher, they're going to make money hand over fist. 3.7% dividend yield. They've got a free cash flow yield of about 7%. Attractively priced again, unless you don't want to own energy. I think you have to.
- [33:06]
Scott Wapner
Well, let me, let me ask you this.
- [33:07]
Jim Lebenthal
Yeah.
- [33:08]
Scott Wapner
Because you just painted a scenario in which the stock wins either way.
- [33:11]
Jim Lebenthal
I did.
- [33:12]
Scott Wapner
Right. But that's not, that's not how the practical. The world doesn't work that way. This.
- [33:21]
Jim Lebenthal
Well, you may.
- [33:21]
Scott Wapner
You just gave me a scenario or oil goes up, stock great. Oil goes down, stock great. The stock is up like 7.5% over the last year. I'm just saying, like, there's got to be more to the story. I'm sorry.
- [33:34]
Steve Weiss
Yeah. No, no, wait.
- [33:36]
Jim Lebenthal
Slow down, slow down, my friend. He didn't ask you the simple answer here. The simple answer is the starting point matters here. At roughly 14 times earnings, 3.7% dividend yield, and the free cash flow right now is going to be about $33 billion this year. What are they going to do with that? They're going to buy back shares. The share count bumped up when they bought Pioneer. Now they're going to be buying back those shares.
- [33:58]
Scott Wapner
Let me ask you this.
- [33:58]
Jim Lebenthal
The starting point matters.
- [34:00]
Scott Wapner
What if their arms are twisted into drilling more by the president. Ever laughable. You may think that that is what. What if that is a part of the equation here, that what was essentially free reign to do whatever you want. You don't have to drill. We don't have any interest in doing that. We'd rather give the money back to shareholders and watch our stocks go up.
- [34:24]
Jim Lebenthal
I'm going to take your question at face value. If that happens, that's bad for the. No, no, no. If that happens, that's bad for the stock. I don't think that's going to happen. Now every investor and every name has to make a decision about what they think is going to happen. I would counter this with GM where I said I think these tariffs are going to happen and I sold it. If I really thought what you just asked about were going to happen, I would not want to own ExxonMobil here. But I really think a long road of hoe between telling everybody you want to drill, baby drill and actually getting ExxonMobil to put drill bits in the.
- [34:55]
Scott Wapner
Other point of sort of like a no lose, right?
- [34:58]
Steve Weiss
Let me address that, please. If the commodity goes down in price, the share price is going down, period. End of story. So it's not a win win situation.
- [35:09]
Scott Wapner
Why are you looking at me and given the.
- [35:11]
Steve Weiss
Because. Because he's annoying me right now, but not to look at him.
- [35:15]
Jim Lebenthal
But I'm glad to turn the tables for once.
- [35:18]
Steve Weiss
But in the geopolitical landscape that we're in, let me ask you another question. Suppose with his good friend Putin, we settled the war in Ukraine and then we take the embargo off Russian oil. What happens then? Chevron's not going up, Exxon's not going up. They're going down.
- [35:34]
Jim Lebenthal
What if Yukorns start flying from post 9 New York stocks? We can do this scenario analysis all day.
- [35:40]
Joe Terranova
Let's get back to allocated to energy. We carry no energy exposure into last Friday. We now have the same exposure that you get in The S&P 500 towards energy. Four names. Diamondback, EOG, Exxon, Jimmy Entry, Price Matters. And the one I'm most excited about is Baker Hughes. Credit Tony Pascarello with this. Energy was the only sector during President Trump's first administration that was negative.
- [36:06]
Scott Wapner
All right? I mean, everybody knew that. What do you mean, Tony what are you gratuitously. Why are you gratuitously calling out Tony?
- [36:14]
Joe Terranova
Tony sent me.
- [36:14]
Scott Wapner
I mean, Tony, all due respect, but I mean, Tony sent me the note. We've said that a thousand times in like during the election coverage.
- [36:21]
Steve Weiss
Okay, so let me take you.
- [36:22]
Joe Terranova
He refreshed my memory yesterday.
- [36:24]
Steve Weiss
So it took you four years for Tony's note to realize that energy was down during Trump's administration.
- [36:31]
Joe Terranova
We own a break.
- [36:32]
Jim Lebenthal
I mean, Joe, apparently you're annoying him, too. But you know, it's only a one way.
- [36:36]
Scott Wapner
Just give me something. I want Joe to just squirm a little bit in his chair. Just give me something on Robin Hood, which was initiated today at Ray J, which you own. I don't want to go to break yet. I want the camera shot on Joe individually too. Okay.
- [36:48]
Joe Terranova
Put it on me.
- [36:50]
Jim Lebenthal
Can we please?
- [36:50]
Bryn Talkington
You at Robin Hood? Is he throwing shade at Robinhood? So, so like, like Palantir last year. I think that Robinhood is under owned and under followed by analysts. So the Raymond James analyst initiated coverage. Right? Initiated coverage. He wants to follow it. It's a neutral for him. But this company is at the crossroads of equity investing options in crypto. And I think this company is going to continue to get stronger and stronger. Their earnings come out next in seven days. I think they're going to blow it out of the doors. And so I think this is a stock to continue to watch and a company that's going to continue to gain market share not only from a coinbase but also from the traditional custodians.
- [37:32]
Scott Wapner
All right, thanks for that. Now we will go to break. And on the other side, Mike Santoli joins us with his MIDDAY Word. All right, we're back. Senior markets comics commentator Mike Santoli here at the desk of this MIDDAY Word. Also, by the way, great admirer of Tony Pescarello's work, right?
- [37:52]
Steve Weiss
Yes.
- [37:52]
Scott Wapner
Did you come, you come with any sector stats from great friends and resource?
- [37:56]
Mike Santoli
Of course. No, I don't think, you know, I think you guys chewed through most of the ones I would have mentioned.
- [38:01]
Scott Wapner
Well, Joe. Yeah.
- [38:04]
Mike Santoli
What I find interesting though is this pattern of look, the markets had multiple excuses to sort of really take a break to the downside to have one blow up kind of morph into a broader pullback. It hasn't happened. That said, you know, we're not going to escape velocity either. It's churn, it's range bound. We're plus and minus 3% from the November six levels in the S and P. So you have to give credit to this pretty resilient bid that's in this market. Just not to let things come in too much. Definitely paying attention to treasury yields. It's worth asking the question just how much you'd like to see them come down from here. The two year really starts to crack and maybe seems like the Fed is offsides. That's not happening yet. But I think you want to be alert to it. Of course jobs number on Friday could, you know, could change that equation.
- [38:52]
Scott Wapner
I mean you also don't want to get where you're asking yourself if rates are starting now to go down for the wrong reason. Sure. That if you're talking about tariffs and everything else, if you're worried about a run on effect effect into the economy.
- [39:03]
Mike Santoli
Initially you can say sentiment positioning against bonds was really skewed and now we're just seeing an unwind of that and people are confident about inflation. So to me it's not a growth scare in a panicky way just yet. But it's sensitive to any soft data and it's showing up in the market. So you know, we'll see it. I think it's still comfortable at this point.
- [39:24]
Scott Wapner
All right, good stuff. I'll see you on closing bell. That's Mike Santoli. We're back with the setup. Next setup time. Some companies that are about to report earnings, including Qualcomm today after the bell, which Jimmy, you own.
- [39:39]
Jim Lebenthal
So the recent quarters have seen the stock go up wildly, down wildly and it's all been about smartphone demand. I really would like to see this company and the investors reaction to it move past that because they are doing a good job diversifying into automotive and and Internet of things. We will see if that happens tonight. I think expectations are low for smartphone and can be easily exceeded. I think expectations are high and could be met on the other two sectors.
- [40:05]
Scott Wapner
High because the stock's up almost 13% year to date. So off to a good start.
- [40:10]
Steve Weiss
But given the valuation, don't you think this quarter will be win win.
- [40:15]
Jim Lebenthal
You are just a source of hilarity every day.
- [40:18]
Scott Wapner
And I appreciate in his own head Allstate is after the Bell today, which you own. Yeah.
- [40:23]
Joe Terranova
Let's add to the hilarity before I make my remarks. None of the statistics come from Tony.
- [40:29]
Scott Wapner
I think we've like Allstate literally. I know at this point.
- [40:32]
Joe Terranova
But Weiss is ready.
- [40:33]
Scott Wapner
He's just ready to go.
- [40:35]
Joe Terranova
It's about auto profitability. Allstate should see a recovery in auto profitability. I also think you're going to hear a lot about the impact, Scott, of tariffs on auto insurance.
- [40:45]
Scott Wapner
Okay. AstraZeneca is tomorrow before the bell. Jim.
- [40:49]
Jim Lebenthal
Yeah. Very, very solid pharmaceutical company. Broad range of products, oncology, cardiovascular, rare disease. But the real opportunity here is that in the summer it was knocked down on news of Chinese authorities investigating their practices that gave a buying opportunity that still exists. Good dividend yield, good multiple, good space.
- [41:08]
Scott Wapner
Okay. Yum. China is tomorrow before the bell. Recently added to the journey.
- [41:13]
Joe Terranova
I don't like where it is. I mean, this. The momentum has basically evaporated here. You need 15 plus revenue growth.
- [41:19]
Scott Wapner
Wait a minute.
- [41:19]
Joe Terranova
Acceleration.
- [41:20]
Scott Wapner
You just added it to the Joe tag. You're telling me the momentum is gone? You add things on momentum.
- [41:24]
Joe Terranova
You can't. You can't. Well, momentum and quality, both factors. This was added more on quarter leading than it was added on momentum.
- [41:32]
Scott Wapner
You just added it.
- [41:33]
Joe Terranova
I know we did. I'm telling you, I don't.
- [41:35]
Scott Wapner
You're telling me to check the momentum box last week and then it doesn't check it this week.
- [41:39]
Joe Terranova
Scott, there is no way that you can own a portfolio. What you're missing is that there's no way you could own a portfolio of stocks and love each one of those stocks equally. There are certain stocks you're going to have in your portfolio you're going to be skeptical about. You're going to question.
- [41:52]
Scott Wapner
You don't like or love anything. It's all based on the rules. Right?
- [41:55]
Joe Terranova
And I'm observing the rules. And I'm telling you I don't like where I see yum. I need to see yum. Have very strong revenue growth to see an acceleration and a return to restoring the momentum.
- [42:06]
Scott Wapner
Okay, thank you for the explanation. Final trades are next. Let's do final trades. Bryn, what do you have?
- [42:13]
Bryn Talkington
Energy transfer.
- [42:15]
Scott Wapner
All right. Farmer Jim.
- [42:17]
Jim Lebenthal
Vertex pharmaceuticals.
- [42:18]
Scott Wapner
Steve Weiss, UnitedHealth.
- [42:19]
Steve Weiss
Unh.
- [42:20]
Joe Terranova
Accent Enterprise.
- [42:21]
Steve Weiss
Wow.
- [42:22]
Scott Wapner
I didn't even call your name. Alright, thank you. See you on the closing bell. You've been listening to CNBC's Halftime Report, the podcast. You can always catch us live weekly days at 12 Eastern only on CNBC.
- [42:38]
Unknown
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