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Halftime Report
The Moment of Truth for Mega Cap Tech 1/29/25
00:42:53
Scott Wapner and the Investment Committee debate mega cap tech stocks as Meta and Microsoft report earnings tonight amid all the questions about Deepseek and what it means for their AI spend. Plus, the Committee share their latest portfolio moves in Apple, Vertiv, Booz Allen and more. And later, the desk discuss the latest Calls of the Day and how to trade the names. Investment Committee Disclosures
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- [00:00]
Capella University
Our state has changed a lot in.
- [00:02]
Scott Wapner
The last 140 years.
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Capella University
We know because Multicare has been here guided by a single making our communities healthier. That comes from making courageous decisions, partnering with local communities to grow programs and services, and expanding healthcare access to those who need it most. Together, we're building a healthier future. Learn more@mycare.org Is it time to reimagine your future? The right business skills may make a difference in your career. At Capella University, we offer a relevant education that's designed to focus on what you need to know in the business world. We'll teach professional skills to help you pursue your goals, like business management, strategic planning and effective communication. And you can apply these skills right away. A different future is closer than you think with Capella University. Learn more@capella.edu.
- [01:03]
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. Welcome to the Halftime Report. I'm Scott Wapner. Front and center this hour, the moment of truth for the mega caps, Metta and Microsoft reporting earnings tonight. Amid all those questions now about Deep Sea, we will debate that. What investors must hear tonight, what you need to know, the investment committee. Joining me with the answers, Joe Terranova, Carrie Firestone, Jason Snipes, Steve Weiss. We do check the markets today. Dow is negative. It's all about the nasdaq obviously, which is negative today as well. I understand it's Fed day and that's big and we're going to get to that and what ramifications there are. But it is about mega cap earnings, Joe, especially with the fallout of the last couple of days. You own Meta in the Jyoti. What do you need to hear tonight?
- [02:02]
Joe Terranova
So they often say you never want to count other people's money, but that's exactly what we're going to be doing tonight. We're going to be counting to see how much everyone is spending. Now, Mark Zuckerberg has already indicated that they are going to exceed the consensus estimate on capex at 52 billion. He's targeted 60 to 65 billion. In addition to that, you want to see what expenses look like. Do they come in above the 108 billion consensus number and are they able to maintain operating margins above 40%? I feel confident about Metta because I think Metta has benefited in the fourth quarter from a very strong ad environment. I think they also benefited just in terms of ad placement from the Pending tick tock ban. I think that Realty Labs the spend there is also going to be critical but I think E Commerce sales could be a surprise here and the stock is trading accordingly over the last seven days at a new all time high yesterday and it seemed impervious to the tech sell off that we saw.
- [03:07]
Scott Wapner
Well because it's up 12% in a month by the way Kerry and it's by far the best performer this week in the face of the fallout from Deep Seek. How do, how are you thinking about your stock holding right now?
- [03:20]
Carrie Firestone
Yeah, well we've been overweight Metta and we are people who liked Matter back in November of 2022 when the world hated it and it has exceeded expectations and interestingly the whole positioning of LAMA and how they are going to benefit from Deep Sea or platforms becoming more ubiquitous.
- [03:42]
Scott Wapner
Open source, right. They've got, they got the open source.
- [03:46]
Carrie Firestone
Right now it's open source so they don't make any money on it. That's only possibly an upside. Can't be any lower than not making any money. It could be that this is a source of revenue and profit for them. It's definitely puts them in a leadership position if other competitors are using it and learning from it. So right now there is a lot going for matter. They're going to have a really strong quarter. They're going to talk about how what they're seeing will benefit them. I don't think it's going to be anything negative. They might have to spend less, not more if you go out a few quarters. So the year is going to be good. It's a strong set up but the stock has been fantastic and maybe the stock could be getting a little bit ahead of itself.
- [04:29]
Scott Wapner
Comm Services Weiss is looking for its eighth straight day of gains. This has now become the center of attention as a result of Deep Seek and we're thinking about we'll get to Microsoft in a minute and some of these others. Are you feeling pretty good going in tonight? Do you feel like new questions need to be asked and answered?
- [04:49]
Jason Snipes
Yeah, so. So I am feeling good about Metta. It's troubling to me that analysts have come out in expectation of the quarter already raising price targets talking about how they expect to beat. So they've set the bar pretty high.
- [05:03]
Scott Wapner
Guggenheim today for example. To your point they reiterate the buy. We continue to view Metta as best positioned within digital ads with several foreseeable tailwinds and consensus ad revenue estimates as relatively de risk. They don't even mention sort of their positioning in the, the AI race, but obviously that's viewed as a net positive versus a lot of others.
- [05:26]
Jason Snipes
Yeah. And as said on Monday when news broke that why should matter be down because their, their budget spending, you know, their budgets on AI, while Zuckerberg just came out and raised them, as Joe pointed, could very well go down. Those are flexible numbers. Are they?
- [05:44]
Scott Wapner
I mean, is that, that's an interesting point. You raise what happens if they, because the street has already modeled in the tens of billions of dollars that these companies are spending every quarter, they come out and say, well, our expectations are that we're going to spend, you know, $50 billion this year. What happens if they say, we're reviewing that, which we're assessing what the fallout of Deep Sea actually means for the arms race itself and we're reassessing what we are potentially going to spend. Is that a good thing or a bad thing?
- [06:11]
Jason Snipes
I think it's a good thing, but I don't, I think it's a very good thing, actually. But I don't think that's the way they're going to session. They're going to state it. I think they can say that we're always looking for less expensive opportunities to grow our technology, to improve our technology. I do think ads are, they are the brightest star in terms of ad revenues. But we still don't really know what Deep Seek is or what it means for anybody. Okay. I've heard Reid Hoffman on Today, you can listen to others like Jensen Huang, who generally talks his own book, say something else. So you just don't know. We know that it's open source as far. No, open source is deliberate for everybody because it exposes them to more developers, to more product going on their platform. So there's always a sunk cost because it takes a while to get to the open source technology and then you build on it. So look. So I like it in terms of Microsoft though, which is also reported, that one is always a little more iffy. And the reason is, is that what analysts will be looking for is their final uptake on their AI offerings. People believe they're expensive, they are useful, and to me, this quarter doesn't matter for either company, frankly.
- [07:30]
Scott Wapner
Jay, you own Microsoft, you don't own Meta, but you got a lot on Microsoft. So how are you thinking about that going in? As Barclays wonders whether this is the beginning of a comeback, there are obvious questions about being so leveraged to open AI and what the fallout is for open as it relates to Deep Sea. Like if OpenAI was a publicly traded stock. I can't imagine what that chart would look like this week. Microsoft for its part I can is flat. Well Microsoft week to date is flat. I think the market's taking a bit of a wait and see. Maybe it's become more of a show me story now more than it was last week. Yeah, you tell me as the investor and shareholder.
- [08:12]
Steve Weiss
No, I think so and I think a lot, a lot of the news on Microsoft is obviously in the stock. Right. Joe mentioned obviously the capex for metta. We know that Microsoft's going to spend $80 billion this year. That's already in the stock. We've heard about open air and now the exclusivity deal is no longer. Right. So that's also in the stock. And then obviously the news from Deep SEQ earlier this week and I think for me it spells potential margin growth and profitability for some of these software related names like a Microsoft down the road. Of course it will be positive if they talk about, you know, the advent of Deep Sea can potentially affecting their capex spend going forward. I don't think to Steve's point, I don't think they'll, they'll dig too deeply into that. But I still like the name. I think Azure growth will slightly decelerate this quarter. It was a really strong quarter last quarter up 33 plus percent. You know we're expecting around 30 to 31 so I think will be a solid, you know but I'm looking for.
- [09:10]
Scott Wapner
Springboard towards Barclays as, as what they say in the rest of the note. We're not expecting to your point the December quarter itself to show a reacceleration in Azure just yet. Initial guidance for the March quarter will in our view this shows the capacity constraints are easing which should enable better times ahead. Is that how you see it? Everybody owns Microsoft on this desk by the way.
- [09:31]
Joe Terranova
Yeah. Look, first, first of all Microsoft over the last 52 weeks I think is only up about 8% and it's well below its July 5th all time high. I think the best thing that happens this evening is that CEO Satya Nadella says something about what the spend looks like beyond 2025 to your point. So does the new LLM technology, this new open sourcing, does this allow them, okay, we're going to spend 80 billion in 2025 but after that as a consequence of the new LLM modeling we could spend less money that would, you.
- [10:08]
Scott Wapner
Know what's going to happen if they say that? Look out below for Nvidia.
- [10:12]
Joe Terranova
Absolutely.
- [10:13]
Scott Wapner
Which by the way, is down again today.
- [10:14]
Joe Terranova
I don't disagree, but he's, he's on the earnings call. So speaking about Microsoft, his concern is Microsoft. So Microsoft wants to spend less than 80 billion, I would think.
- [10:24]
Steve Weiss
Right.
- [10:24]
Joe Terranova
I want to spend $80 billion in 2026. Is there an opportunity to spend less than what they've indicated?
- [10:30]
Scott Wapner
Well, let's bring in our tech reporter Steve Kovac, who's going to let us know what is most important tonight and whether that question is now different than it would have been last week.
- [10:42]
Steve Kovac
It's completely different, Scott. If I was here on your program a week ago previewing Microsoft earnings, I would say, oh, it's just going to be another quarter. Let's look at Azure growth and, and what Copilot is doing. That's, that's not the case anymore with the Stargate announcement. Last week we learned that Microsoft is no longer the exclusive cloud partner for OpenAI, has the first right of refusal for those kind of things. And then we have the deep seek moment from Monday and it raises those new questions about capex. I'll, I'll piggyback on what Weiss was just saying here that we've heard Nadella say on the earnings calls numerous times over the last year that they are going to be dynamic in their spending. They're always evaluating demand and figuring out what they want to spend. In the meantime, though, as these questions about the relationship between OpenAI Microsoft come up, we see that Nadella and Altman are out there with this friendly selfie that they posted on social media yesterday, kind of showing everyone, look, we are still partners, which is true. And Microsoft still has early and exclusive access to the best technology out of Microsoft. That is their benefit for now. Until, of course, the they have their own thing. And then also to your guys's point, the fiscal 2025 CapEx, that $80 billion figure that we keep throwing around, that's over in July. We're going to be looking forward past this fiscal year. What are they saying the rest of the calendar year looks like for their capex spend and what they're seeing not just from the demand side, but this idea of the distilling of models, the idea that you can use other models to train your other model cheaper, maybe don't need the best and greatest Nvidia chips. All of that is on the table. And all of that, we're going to be hanging on to Della's every single word about what he says about how they think they can do this cheaper. And then also to Joe's point, Microsoft shares are just lagging behind its peers over the last one year, only down about 8% for the year where you see Apple, Metta, Amazon, Google all up double digit percentage points at the same time. So they're going to really have to show this growth is happening in artificial intelligence on Azure and and other monetization things like Copilot, which is still a big question.
- [12:43]
Scott Wapner
Scott, Nadella and Altman are putting a good face on it, literally and figuratively. But you do I hear you suggesting that they are perhaps a little more defensive coming into this this earnings report tonight and the kinds of questions that Nadella is likely to get.
- [13:02]
Steve Kovac
Yeah, that's exactly right. And on top of this idea of them losing their exclusive cloud capabilities with OpenAI just because they don't want the demand, they also have to take the losses from opening. We know that this quarter they're about to report they're expecting one and a half billion dollars hit to their earnings because of the losses that Open Air continues to suffer. So we're going to have to get some more guidance on that. It is, it is still a money losing proposition for them there and they're spending enormous amounts of money now to keep up in this race that we're seeing all at the same time. Scott, amid these questions of whether or not they need to be spending that much in the first place, it's going to be really interesting to see how Nadella on this call and his CFO Amy Hood really thread that needle and say look, we need to spend a lot. Here's why we need to spend a lot. Here's the demand we're seeing that is justifying all this. At the same time answering these deep seat questions whether it's too much.
- [14:00]
Scott Wapner
Good stuff. I'll see you later this afternoon, Steve. Thank you. Steve Kovac, our tech reporter on on top of all this last point, Kerry, on this and then we move quickly.
- [14:08]
Carrie Firestone
Don't we want to hear what he has to say about Copilot? It's not as if it's been a raving success. And if there's something that Open Air is really doing and streamlining and the efficiency and improvement in Copilot, that's what Microsoft should highlight.
- [14:24]
Scott Wapner
I mean one of the stories this week and the defenders, if you will, Jason, have tried to come out and you look at the declines, for example in Nvidia and Broadcom, Micron's down a ton again this week, I should say both those stocks are down double digit percentage points is that this is only going to Lead to more consumption, more chips, not less. Yeah. But as an Nvidia shareholder, as that stock was up quite nicely yesterday, giving half of it back again today, that's where the real questions still lie. And it relates exactly to what Steve was talking about with Microsoft and what we talked about with Metta. Any suggestion whatsoever about a reassessment of spend, you're going to look right at that stock and see the impact.
- [15:12]
Capella University
Yeah.
- [15:13]
Steve Weiss
And I think for me, you know, one of the things as I'm kind of reviewing the news with Deep Seek over the weekend, you know, obviously costs are undeniable. The cost to build out this, this large angle model that they did was obviously far cheaper than what the cost of to buy it in video chip. But the other thing that I think is somewhat debatable is performance. Right. What is the real, the real performance? Only enterprise and only consumers can make that determination. So for me, as it looks, as I look to Nvidia and I look to Nvidia earnings, to awards, you know, several weeks from now. Yes, I mean all beltways have led back to Nvidia and now this is a complete reset. We've heard from, from other players, asml obviously as an example, talking about this is only going to spur demand. We'll see. We'll see. I do think it's going to be a reset, but I do think they have the most important chips at play for this AI revolution. But it is somewhat of a reset and I think that's good.
- [16:11]
Scott Wapner
Evercore, you know, defending all this today, they call it generally a buying opportunity for Nvidia and some other names to AMD. Today was reiterated overweight at Wells Fargo. 165 is the price target that stocks near a 52 week low. They're like, okay, enough is enough with that, Joe, you own it.
- [16:31]
Joe Terranova
Look, it's in the ETF. It's a scary slope down. It's just literally down 34% in the last 52 weeks. It doesn't look good from a technical perspective. You want to make all the fundamental arguments about it being overdone. Okay, I'll accept that. I understand that.
- [16:48]
Scott Wapner
Give me one year.
- [16:50]
Joe Terranova
Yes, they have a decent balance sheet, but everything begins with me with an exploration of momentum. And I'm sorry, it just that that chart looks ugly.
- [16:58]
Scott Wapner
Well, I mean there's the ski sleep though. It's like the downhill. Not even a slalom. The downhill since, since the fall.
- [17:03]
Jason Snipes
I'll bet it won't be in the jyoti as of February 1st.
- [17:06]
Scott Wapner
When they rebound, we'll See, but in.
- [17:09]
Jason Snipes
Video this was inevitable and it's always been part of my thesis and why I don't have a big position regrettably because I would have made a lot more money in the stock. But part of that 80 billion in CapEx that we're hearing, the 65 billion in CapEx, I'm guessing, unless it's somewhere else. Going to be somewhere else in your income statement is going to develop of competing chips and cheaper ways to build out their AI capabilities. So it's no surprise, the only surprise with Nvidia is the timing because they were not going to be the first semiconductor company in the history of the world to maintain a technology lead forever.
- [17:49]
Scott Wapner
No, but of course not. But the speed in which we are asking this new question is largely unprecedented.
- [17:56]
Carrie Firestone
But the price at which the stock was selling implied that the monopoly could go on for a very long time, which we didn't own in video. And you know you missed a lot.
- [18:06]
Jason Snipes
You missed a lot.
- [18:07]
Scott Wapner
You know there's another view if you move past the hyperscalers and then you move past the chips that other Software names, the ServiceNows, the CRMs, HubSpot and some others are going to be the potential beneficiaries. That's what BMO is talking about today. ServiceNow and you.
- [18:24]
Steve Weiss
And it played out in the price action. Obviously this week you did not see ServiceNow pulling back. In fact through the sell off earlier this week it was actually moving.
- [18:32]
Jason Snipes
Right.
- [18:33]
Steve Weiss
So when I think about software as an example, I started to allude to this earlier it when I see costs coming down on, on, on the infrastructure part of this, it only spells more profitability and margin expansion for service software names like a service who's already, by the way.
- [18:48]
Jason Snipes
Hold on, hold on to that.
- [18:49]
Steve Weiss
Which is already monetizing their AI tools. So that's why I continue to like names like that.
- [18:55]
Jason Snipes
So if you democratize the ability to use very, very smart chips and GPUs, you open the establishment to competition. That's what always breeds competition, that the price of admission is a lot less expensive. So the premium pricing that a Salesforce or a ServiceNow charges. Right. And in some cases the complacency that they have, even though managers say we're not complacent at all. Yeah, right. You open that to new entrants coming into it. So I'm not so sure this can be so fantastic.
- [19:32]
Carrie Firestone
But there are scale and definitely not. Steve.
- [19:35]
Jason Snipes
Absolutely. Let me ask you a question. Okay, you may. Let me. Thank you. How much scale do perplexity have 5 years ago they weren't even around.
- [19:45]
Carrie Firestone
No, they weren't around.
- [19:46]
Jason Snipes
Right. They built a nice business. Right.
- [19:48]
Scott Wapner
Talk about nice.
- [19:49]
Carrie Firestone
You brought it up.
- [19:50]
Jason Snipes
Right.
- [19:50]
Carrie Firestone
So Salesforce is dominant in the CRM business and they are communicating. Right. Communicating within organizations which is why they keep other organizations is a whole lot easier if you're using Salesforce than if you're using somebody some no name serum and you're trying to touch.
- [20:08]
Jason Snipes
So you say, are you saying Google dominate? Are you saying Salesforce is impervious to competition?
- [20:15]
Carrie Firestone
It's a whole lot easier. You made it sound as if you know, you lower costs and there's tons of competition. Not necessarily.
- [20:21]
Jason Snipes
Additionally, there won't be tons of actual competitors, but there will be a mechanism to force them to lower their prices and lower their profitability.
- [20:29]
Scott Wapner
Okay, Carrie, you get the last 10 words.
- [20:33]
Carrie Firestone
I think you're wrong.
- [20:36]
Scott Wapner
Mic drop. Okay, Apple tomorrow, we might as well touch on that. It got downgraded again. It's like a pile on now API today they cut it to perform from outperform. They remove their target. You obviously have a lot of questions about iPhone demand. Now this stock's actually held up pretty well lately for for sure. As you know, it's largely been out of the fray of deep seek and all and all that. We want to bring in our Bill Baruch right now because he's got a move we want to tell you about. He, he bought more Apple. Why did you do that now ahead of earnings?
- [21:13]
Bill Baruch
Well, you know I talked about on the show we ended up trimming Apple the first day of the year. And last week on the show I talked about moving into the 200 day moving average. It's falling out of love. And that's when you really want to think about buying Apple. What really did it for me on Monday when we pulled the trigger on this was the entire tech space was getting bludgeon. Apple was turning positive and it told me from a relative strength space this is now, now ready to not go down anymore. So we leaned in Apple and started allocating back into it Monday morning.
- [21:46]
Scott Wapner
All right, so I mean where are your expectations going into the print? I don't know, maybe you know, you'd say, well the questions about demand are in the stock. But is that really true? And the stock spend, if you look at the chart once again more recently, it's been pretty good.
- [22:05]
Bill Baruch
I do agree with that. Now the thing Here is the iPhone 16 sales, they have had certainly a negative impact. So how much of that is already being priced in with this thing? Fell 15% from its highs. I think there's two things that being one and the other being flows. At the end of the year, there was actually big selling pressure last couple of days and then the first week of the year. I think there's different flows, some rebalancing flows. So I think at the end of the day, this thing is washed out. A couple of narratives and I'm expecting to see a decent report. But I also think a lot of the sellers have already sold and I'm a big believer, you know, in that sense of from a flow standpoint and from a supply, demand, technical standpoint.
- [22:44]
Scott Wapner
So you bought. You're selling all of Dell. That's interesting. Why are you doing that?
- [22:51]
Bill Baruch
Well, we sold all of Dell. As we moved into quarter four the second half of last year, we owned more names than we typically do, 42 names in our equity portfolio. That was to avoid idiosyncratic risks. A name like Dell fit the bill because we didn't know where the puck was going in AI next and we wanted to have some exposure there. I think here, getting rid of it, it hasn't performed. It's had a couple of decent earnings reports, but it has not come through with price action for us. So we thought this was a really good opportunity this week to move away from it and set the stage for some buying opportunities that we'll get to next.
- [23:25]
Scott Wapner
All right, good stuff. Thank you. We'll see you soon. That's Bill Baruch. We have a news alert out of Washington. We want to get down to our Megan Casella who has that for us. What do we know?
- [23:35]
Megan Casella
Hey, Scott. So we're watching this confirmation hearing for Congress Secretary nominee Howard Lutnick. A lot of news coming out of this hearing, particularly on two fronts. It's tariffs and trade, and then it's China and deep sea. So on the tariffs front, first, he was just asked specifically about the forthcoming tariffs on Canada and Mexico. The latest from the White House is that we should expect those to take effect on Saturday. Lutnick saying that those are not a tariff per se. In fact, these are domestic policy action trying to get Canada and Mexico to adjust their behavior. And he's giving them a way out. He says that both countries are acting swiftly to shut down their borders and stem the flow of fentanyl. And he says as long as they execute there, then there will be no tariffs. So giving them a way out without there to be tariffs. He's also been asked about whether he thinks that tariffs will drive up consumer prices. Take a listen to his answer?
- [24:24]
Scott Wapner
I can commit that the economy of the United States of America will be much, much better. A particular product's price maybe go up.
- [24:31]
Jason Snipes
But all of them, this is not inflationary. The two top countries with tariffs, India.
- [24:37]
Scott Wapner
And China, do have the most tariffs and no inflation. It is just a nonsense that tariffs cause inflation.
- [24:45]
Steve Kovac
It is nonsense.
- [24:47]
Megan Casella
And then, Scott, finally on Deep Sea, he's pledging to come out very strongly against China on Deep Seat, vowing to use both export controls and tariffs to make sure that the US Remains a leader on AI. He says that he does not believe that Deep Seq was done entirely above board. He says that the Chinese have stolen things, they've broken in, they've taken our intellectual property. And he's vowing there to be rigorous in our pursuit of restrictions and of enforcing those restrictions. Of course, Lutnick, if confirmed, would oversee that exports controls office. The Bureau of Industry and securities would have a lot of say in how to respond to China. Scott?
- [25:23]
Scott Wapner
Meghan, thank you. Megan casella down in D.C. with the latest for us there. We'll take a quick break. When we come back, we have more conversations, committee moves, Steve Weiss with three that I see in front of me at the very least, plus some new AT NOON reporting you don't want to miss. Next, what's at stake when administrations change from the first 100 days and beyond, EY brings insights on the issues that matter, executive orders, regulation of AI, the fate of billions in tax credit, global trade and workforce stability. No matter the policy shifts, EY helps business and government leaders remain resilient and seize dynamic growth. EY navigate the geopolitical and economic landscape with confidence.
- [26:07]
Capella University
Is it time to reimagine your future? The right business skills may make a difference in your career. At Capella University, we offer a relevant education that's designed to focus on what you need to know in the business world. We'll teach professional skills to help you pursue your goals like business management, strategic planning and effective communication. Communication. And you can apply these skills right away. A different future is closer than you think with Capella University. Learn more at capella.edu. learn how to use AI to be.
- [26:40]
Scott Wapner
More successful with CNBC Make it's new online course.
- [26:44]
Steve Kovac
We'll give you examples that can help.
- [26:46]
Carrie Firestone
You master AI tools.
- [26:48]
Scott Wapner
Go to CNBCmakeit.com AI and register now. Welcome back. New at noon today, a battle over the future of the membership club. Soho House. Daniel Loeb of Third Point sending a letter to that company's board of directors today over a plan to take it private. Third point holding a near 10% stake in Soho House. It revealed today it was an investor, by the way, in the ipo. Loeb says he is in favor of a go private move, but calls the $9 a share off offer made late last year with Soho House chairman Ron Burkle, who runs the investment firm ukipa, a quote, sweetheart deal, quote. Burkle's obvious conflicts of interest and undue influence on the board via his super voting share class make it imperative that the board open the sale process to outside bidders. That's what the letter said today. Mr. Loeb says there are numerous qualified parties with experience in the hospital hospitality industry that would be interested if their proposed sale was in fact open to the highest bidder. I'm told by a source familiar with the company that there is a belief that it's worth a lot more than $9 a share and that the sale process is just getting started. Soho House did go public right here on the New York stock exchange in 2021 for $14 a share. It has struggled financially. However, Third Point had sold that initial stake after it was disappointed in the performance. Performance. The market cap here, one and a half billion dollars. And this is a new stake, the near 10% one, which third point filed on today. We'll see how this all develops, of course, and we will keep you up to date on it. But an interesting, interesting setup here to keep our eyes on with Mr. Loeb and Soho House. Let's get to Mr. Weiss. I think you've been to Soho House before. You do have some moves to get to my family. Okay. All right, good.
- [28:37]
Jason Snipes
I'm not allowed to call this full disclosure.
- [28:39]
Scott Wapner
Yeah, they don't. They don't let you in now.
- [28:41]
Jason Snipes
They don't.
- [28:42]
Scott Wapner
You bought more Vertive.
- [28:43]
Jason Snipes
I did.
- [28:44]
Scott Wapner
Tell me.
- [28:45]
Jason Snipes
Look, the Stock was down 30% Monday. We talked about a Monday during the show. I just took the opportunity to buy some. What I thought was a compelling price and. And valuation. So look, if. If there is some risk here, of course, and that's what the stock is telling you where it is, but I think that risk is way overstated. You're still going to build lots of data centers. They're still going to run hot and need their cooling technology. So. So I'm very comfortable with the position. Of course, as we learn more about the deep sea and spending plans and all that, that could change, but I just don't see it right now.
- [29:22]
Scott Wapner
What are your defense moves suggesting today? You sold Booz Allen. You trimmed Lido as well.
- [29:29]
Jason Snipes
Yeah. My defense moves are are saying basically that it's chaos in Washington that we have a secretary of Defense who's not run any business whatsoever whatsoever. And if any one of us sat on a board and said here's somebody who we want to run the most important company in our portfolio and one of the most important companies in the world from defense with $900 billion budget he may be one of the last people went to we want somebody experience. So I have no idea if reason and logic and experience will control the the the non government employees of which Booz Allen has a ton of them in the government. That's a very easy place to cut expenses because the reason why that was created created was during the Clinton administration when they want civilian employees because they were so much easier to fire than union employees at the government or government employees. Now Leidos I shave because some of the same risks even though if you take a look at their business talk about tens of millions of revenue in a multibillion dollar company. So I just thought it was too much exposure. Booz Allen was a very new position. I thought that we had determined from what came out of Washington that the cutting was not going to be a path. But Elizabeth Warren then sends an email to or a letter to Hegseth and it actually made some sense. And frankly Elizabeth Warren is never at the end of the day impacted any of my holdings about a lot of bluster. But here with inexperienced managing DOD etc. I just thought prudent to cut risk on that position.
- [31:11]
Scott Wapner
You own booze.
- [31:12]
Carrie Firestone
Yeah, we've owned it for a long time and there have been times in the past where the stock gets hit because of concerns about spending on defense and well, you know, it's 30% down. There have been other times in the last 10 years there's been a 30% drop. It's selling for 17 and a half times next year's earnings. I understand your concerns about Pete not knowing how to run something but that to me implies that he's more likely likely not to do anything rather than to do a whole lot because this stock is already reflected. The cuts that you're talking.
- [31:43]
Jason Snipes
You don't believe in the recent moves and the proclamations that have been made where there is legality supporting the layoff and the severance pay for government employees. Forget about that.
- [31:53]
Carrie Firestone
Well, there's a lot of talk.
- [31:55]
Jason Snipes
What other time. What other time in the 30% drops is this analogous to because this is a case of first as is this.
- [32:03]
Carrie Firestone
Administration and you and you sold the stock. And we're looking at it and saying at this price level, this is a very good company, very well run. We're going to stay with it.
- [32:13]
Scott Wapner
Okay, Courtney Reagan has the headlines for us today. Hey, Courtney. Hi, Scott.
- [32:16]
Capella University
Good to see you. So the Justice Department asked a federal appeals court today to throw out the case against President Trump's co defendants in the Florida classified documents case. Now, the president's valet and Mar A Lago property manager were charged with conspiring with Trump to interfere with an FBI investigation into the case. The court still needs to approve the request in order to end this case. Hamas plans to release three Israelis and five Thai nationals in the next hostage exchange, which is set for tomorrow. That's according to volunteer group the Hostages Families Forum. Prime Minister Benjamin Netanyahu's office said those numbers do match the information gathered by Israeli intelligence on the release. And MGM Resorts agreed to pay $45 million to victims of a 2019 data breach and a 2023 ransomware attack. In both incidents, the hackers stole sensitive information from guests, including names, passport numbers and Social Security numbers. The settlement would bring 14 class action lawsuits to an end. It does still need final court approval at a hearing in June. Scott, back over to you.
- [33:16]
Scott Wapner
Okay, court, thanks. Appreciate that. That's Courtney Reagan. Just want to show shares of Soho House once again, as we have told you about this. Reporting here that Daniel Loeb of Third Point has sent a letter to the company's board. He is also filed on a new near 10% stake in the company. Wants the proposed sale process to be open to the highest bidder. And it is believed, according to a source that I have spoken with, very familiar with the company, that it is in fact worth more than the $9 a share that has been already offered by the company's chairman, Ron Burkle of ukipa, that the sale process is just beginning. That this whole scenario is far from over. We will keep our eyes on that story and on that stock. We'll be back after this with our calls of the day. What's at stake when administrations change? From the first 100 days and beyond, EY brings insights on the issues that matter. Executive orders, regulation of AI, the fate of billions in tax credit, global trade and workforce stability. No matter the policy shifts, EY helps business and government leaders remain resilient and seize dynamic growth. Navigate the geopolitical and economic landscape with confidence.
- [34:41]
Capella University
At Capella University, learning the right skills could make a difference. That's why our business programs teach you relevant skills. You can take from the course room to the workplace. A different future is closer than you think with Capella University. Learn more at capella. Edu.
- [34:58]
Scott Wapner
Let's do some calls of the day. As Wolf today says, the financial setup remains extremely strong. Now they break it down obviously they're talking about the large financial institutions, banks and private equity. They do note ahead of Apollo's earnings next week that the setup is not setting up well. Now these stocks have gotten a huge boost. Right. Right after the election it was like, okay, private equity is the place you want to be. Animal spirits, dealmaking, exits, realizations, whatever you want to call it is going to be good. Yeah. What do you think now all the below. Right.
- [35:33]
Steve Weiss
I mean we've talked about it ad nauseam. Obviously these are the themes that have been playing out in the price action for, for last year and kind of coming into this year. So part of me is, is, is of the, of the belief that yes, it's run a lot up into the print. That's partly part of the reason for this call. But I don't think any of those themes. I do, let me say this, I do think all those themes will run true. I think capital markets will come back meaningfully this year. Net realizations will double this year and I think fee related earnings will also continue to grow. So I continue to like most of.
- [36:03]
Scott Wapner
These names as well as there's a chart, right? This is the, the election bump, right? You go straight line and then Trump gets reelected. You're like, okay, dereg. And you're going to have a better environment of deal making pro business. What about private equity stocks like this.
- [36:18]
Jason Snipes
One, you know, not involved. We've got our. Maybe you should be.
- [36:24]
Scott Wapner
Well, you are, you know what you are involved in gold though.
- [36:26]
Jason Snipes
You put up a Goldman chartman and.
- [36:28]
Scott Wapner
Put up a Goldman chart. I'm sure it looks similar to that.
- [36:31]
Jason Snipes
Coincidentally, I ran David Solomon this past weekend and we.
- [36:35]
Scott Wapner
Sorry for him.
- [36:36]
Joe Terranova
Did he run and go the other way?
- [36:37]
Scott Wapner
Sorry for him. But did he know you were going.
- [36:40]
Jason Snipes
To reveal that it was unfortunate for David. Yes. But you know, the, the environment I think is going to be much better. We have a lot of direct holdings so we'll benefit from that from that standpoint. But with Goldman. The reason why I choose Goldman and I said this, David, is the culture. You've seen so many people leave and yet the next person up is as good as the one that left. So you have that kind of culture where it's performance culture and it's a quality culture and that's what I bet Our culture defines success or failure of any company and man do they have it culture in spades.
- [37:20]
Scott Wapner
So that's why I own that Sometimes people say, you know, that your conversations are off the record. How do you know the sighting and your physical reaction wasn't off the record as well? Maybe he didn't want anybody to know that he was with you.
- [37:36]
Jason Snipes
That's interesting point you make. Invalid but interesting. It's true of many others though, just not of him.
- [37:42]
Scott Wapner
I couldn't resist. Caterpillar price Target trimmed to 390 from 414. That's at Melius. Jason, you on Cat?
- [37:49]
Steve Weiss
So Cat had a really strong start last year and then kind of lost momentum towards the end of the year on the idea that sales volumes were slowing. But there has been some margin growth over the last three years, meaningfully at least. And what I continue to like about Caterpillar, they have a very strong balance sheet, a very strong, you know, very strong team there. And I just think that with this onshoring and industrial kind of feel that's in the market, I think Caterpillar can continue to be strong.
- [38:16]
Scott Wapner
Datadog was downgraded today. Sure. From buy to hold price target to 140. We can see the stock, Joe. Fairly full valuation is what they say.
- [38:26]
Joe Terranova
So the ETF owns this name. In December, early December it made the high, it's pulled back recently. I've bought the pullback personally little disappointed. I think I have to measure time here more than anything else because it does not look like it's participating in the software rally. Other names clearly Working Zoom, Working Twilio, Working Guidewire, DocuSign. The totality of software is a good environment, very resilient in the last couple of days and this is actually having poor relative performance. That tells you something.
- [38:59]
Scott Wapner
You want to hit Walmart real quick. Which was reiterated by today goes another all time high. That's ahead of earnings. The earnings are in February, later February.
- [39:06]
Joe Terranova
Yeah, it's the economy of scale. They have the economy of scale. They're winning in grocery, they're winning on price. But people talk about the potential impact on consumer products if there are in fact tariffs. In that environment Wal Mart will be able to judiciously manage their price. So it's been a core for an extended period of time on Wal Mart.
- [39:27]
Jason Snipes
Is their E commerce efforts are really bearing fruit. And as I talk to people, I haven't talked to you about this but that's what they're attract to in stock and driving it to new highs.
- [39:41]
Scott Wapner
All right, thank you Mike Santoli is here next with his midday word. We're back with our senior markets commentator Mike Santoli for his midday word. I feel like Fed meetings don't normally take a back seat to anything. But so with Metta and Microsoft and even Tesla for that matter reporting tonight and no move expected, feels like this one actually might.
- [40:06]
Jason Snipes
Yeah.
- [40:06]
J
I mean and by the way, I think that's probably a net positive when when you have essentially a virtual non event for the Fed in terms of its decision in terms of even how it probably is going to explain the decision. It means as Powell will no doubt say, policy is in a pretty good place place the economy is in a decent spot. You have a pretty persuasive idea that maybe you have further downside to inflation. Then it's a matter of, you know, the market's going to have to tell us how high or low expectations are embedded in stock prices for these big companies right now. I don't think there's a good way to handicap these stocks wouldn't move 5% plus, you know, on report when they have dozens of analysts covering them if in fact there was not an inability to know in advance just what's precisely is priced in. So I do think it's going to be somewhat clarifying by the time we get through the next few hours. And you know, look, I don't want to go away from the idea that there's a chance that Powell can say something that the market decides to trade on. But that doesn't necessarily mean that we're in for some other kind of bond market panic. Two year yield is below where it was at the December 18th 19th meeting. So I think that tells you the market is in in tune with where.
- [41:15]
Scott Wapner
The Fed is going to be asked obviously about, you know, tariffs. The Commerce proposed Commerce Secretary, you know, Lutnick today suggesting that it's ridiculous to nonsense I think was the word that he used to suggest that tariffs are inflationary. Sure, the Fed chair is going to be asked about that and also suggestions by President Trump himself that he's going to demand that interest rates go lower for sure.
- [41:40]
J
Now there are easy answers to those things for Powell, which is we'll have to wait and see. You're not going to not just anticipate the policy and how it gets implemented but what the impact is in advance so you can sort of fall back on. We are data dependent. We're not going to prejudge and for now the economy is not giving you too much reason to worry. We'll see what direction he thinks the risks are by the way, no dots today which means he doesn't have to explain too much about the range of views on the along the spectrum of.
- [42:10]
Scott Wapner
Yeah, I mean Atlanta taking their forecast down today just in a day changing it. So that's interesting too Mike, thanks. I'll see you later this afternoon. The setup is next. Let's do the setup for you now. Earnings that are right in front of us after the bell today.
- [42:24]
Joe Terranova
United Rentals, Jyoti United Rentals kind of in a sideways type of trading pattern. The key here is going to be be specialty retail, specialty rental kind of come in here above 20%. In addition overall revenue growth can it get out of the mid single digit territory. That's what you're going to need to see. Positive momentum reignited.
- [42:46]
Scott Wapner
Blackstone is Thursday tomorrow before the bell carry.
- [42:50]
Carrie Firestone
Yeah, we expect a good quarter. They're going to sound very positive because increased realizations in the private equity world.
- [42:58]
Scott Wapner
MasterCard also tomorrow Joe MasterCard I think.
- [43:01]
Joe Terranova
Visa might be as well. Both of these stocks are trading as we speak near an all time high. They're just literally in the sweet spot as is a Discover Financial Services and Synchrony all these payment processors. The economic environment works perfectly.
- [43:17]
Steve Kovac
All right.
- [43:17]
Scott Wapner
What about Pulte Group? There are awful lot of questions about housing.
- [43:21]
Joe Terranova
Yeah.
- [43:22]
Scott Wapner
These days given you know, mortgage rates and everything else. What about Pulte Group? That's tomorrow.
- [43:26]
Joe Terranova
The homebuilders went through a very strong cycle that reached its inflection point about six months ago. It's been in deterioration ever since. There's been an awful lot of incentives that have been offered. There needs to be something that fundamentally acts as a catalyst for the home builders. I'm a little skeptical we're going to see that anytime soon.
- [43:45]
Scott Wapner
Carrie, Thermo Fisher is tomorrow before the bell. What's your take on this stock?
- [43:49]
Carrie Firestone
Well, Thermo is a stock that has suffered because of the post Covid world where can't be selling a lot of tests when nobody is taking them. We don't have Covid everywhere. So the stock is underperformed. The earnings came way down, started to outperform and now is living under the cloud of what's going to happen with vaccine development, drug development and all of the spending that would come to them. We think it's a traffic attractive and that earnings growth should start to really accelerate in 2025.
- [44:18]
Scott Wapner
Want to give me something on tractor supply?
- [44:20]
Joe Terranova
Strong start so far for the year. Let's see if earnings can back that up again. The consumer environment is conducive.
- [44:26]
Scott Wapner
All right, we'll do finals next. All right, closing bell, Fed meeting and then Jeffrey Gundlock as usual, right after Chair Powell is finished with that news conference. And then of course, we're going to walk you right up to Meta and Microsoft. So we got a lot on our plate and I hope you'll join me at at 3:00 Eastern Time. Final trades.
- [44:42]
Jason Snipes
Weiss I also added, as you know, to Taiwan semi on Monday because no matter what happens, they are the winner.
- [44:49]
Steve Weiss
Sniper Palo Alto Stay long here.
- [44:51]
Carrie Firestone
Kerry Fortev Precision instruments for manufacturing the.
- [44:56]
Joe Terranova
Jyoti Chubb Strong earnings despite the costs in la.
- [45:00]
Scott Wapner
Okay, got a lot going on today and I hope you'll join me on closing bell. You've been listening to CNBC's Halftime Report, the podcast. You can always catch us live weekdays at 12 Eastern only on CNBC.
- [45:15]
Capella University
All opinions expressed by the Halftime Report participants are solely their opinions and do not reflect the opinions of CNBC, NBCUniversal, their parent company or affiliates, and may have been previously disseminated by them on television, radio, Internet or another medium. You should not treat any opinion expressed on this podcast as a specific inducement to make a particular investment or follow a particular strategy, but only as an expression of an opinion. Such opinions are based upon information the Halftime Report participants consider reliable, but neither CNBC nor its affiliates and or subsidiaries warrant its completeness or accuracy, and it should not be relied upon as such. To view the full Halftime Report disclaimer, please visit cnbc.com halftimereportdisclaimer@ Capella University, learning the right skills could make a difference. That's why our business programs teach you relevant skills you can take from the course room to the workplace. A different future is closer than you think with Capella University. Learn more at Capella. Eduardo.