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Halftime Report
The Return of Big Tech 12/11/24
00:40:53
Scott Wapner and the Investment Committee discuss Nasdaq crossing 20,000 for the first time and what it means for the market from here. Plus, the desk detail some of their stocks that are on the move. And later, the Committee debates the latest Calls of the Day.
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- [00:01]
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Scott Wapner
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Joe Terranova
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Joe Terranova
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Ford Pro Representative
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- [00:57]
Joe Terranova
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. Carl, thanks so much. Welcome to the Halftime Report. I'm Scott Wapner. Front and center this hour, the return of big tech. Nasdaq hitting 20k for the first time ever. It is right there right now. Several mega caps are also hitting record highs at this very moment. We're going to go through all of it. We're going to trade everything. Joining me for the hour, Joe Terranova, Shannon Sakosha, Stephanie Link, Rob Sechen. We will check the markets. I just told you what the NASDAQ is doing and NASDAQ's up by better than 300 points by the way, S&P, almost 1%. The Dow is the laggard by far. But we're going to start with the mega caps. And Rob, I'm just going to go to you first because you're the only one today who's got this position in Apple. But I've got Alphabet record high, Amazon record high, meta record high, and then Apple 9 straight intraday high for that name.
- [02:03]
Stephanie Link
So you know, the biggest challenge to overcome is the projected deceleration in earnings growth for these names. Scott, if you look at the market cap, weighted MAG7 earnings are projected to decelerate from 55% to 25% in 25. And will these stocks, we have no doubt that they'll be as strong into year end. We know a lot of them and own a lot of them, be as powerful leaders, particularly as in video and Amazon, kind of slow down. If you look at this, and this is as of right now, Tesla is the only Mag7 name projected to exhibit meaningful earnings acceleration. Not to say that can happen, but you know, that is the only one in video. And Amazon are expected to experience decelerating earnings growth. And Microsoft, Apple, Google, Metta are all projected to have steady earnings growth. So when you have 55% of the growth index, which is led by these MAG7 names projected to decelerate, can the rest of the index kind of lift and drive these forward next year? We think the answer to that is yes. And you just have to remain selective in that.
- [03:24]
Joe Terranova
Joe, people tried to write these stocks off for a while thinking that they were going to take this backseat, the rest of the market was going to lead everything. And it has proven not to be the case, particularly lately. It's why the Nasdaq has crossed 20,000 for the first time ever. It is why on not much news, Apple has hit a record high, has been on on this streak. You get a software update today, including chat. They're said to be working with Broadcom on new chips. I don't know if that is, you know, enough to get the stock to continue to work or not. But these other stocks too, just mag7 on track for four straight weeks of gains now.
- [04:02]
Rob Sechen
Well, these are core equity holdings in portfolios for certainly for retail investors and institutional investors as well. What's interesting to me is that we continue to play this game. We play this game of trying to pick the winner. We play the game of trying to pick the winner because of the environment of 2023. And I think as a speculator and as an investor, you just have to accept that was the environment in 2023. Here we are turning the page into 2024 and you have an optimistic environment. We go through these little cycles, these little cyclical moments where certain areas of the market receive inflows of capital.
- [04:38]
Joe Terranova
We're turning the page to 2025. You just said 2024. So we talking about here and now we talk about the new year.
- [04:45]
Rob Sechen
What has happened in 2024 is a different environment than in 23, where in 23 the conversation surrounded seven stocks only and we forgot about the 493. The optimism for 25 is built upon the environment of 24 where you have a broadening out of the opportunity. So that doesn't mean it comes at the detriment of the Mag 7. That doesn't mean it comes at the detriment of the other 493. I never understood the premise that you want to ignore the Mag 7 in your portfolio.
- [05:16]
Joe Terranova
It's not a matter of people weren't necessarily saying ignore it. Nobody was saying get out of it.
- [05:20]
Rob Sechen
Binary choice.
- [05:21]
Joe Terranova
Not necessarily, no. It was just that what was a tremendous level of outperformance was not going to be as such in the, in the new year. That that's where it all came down to.
- [05:32]
Rob Sechen
Yeah, but that's, that's completely fair and I still think you could have that expectation. Just because you have five of the Mag 7 names making an all time high today doesn't mean that they're going to see dramatic outperformance in 2025. And I know some people are suggesting that in fact that will be the case, but I don't know, given the environment we have here in 24, if that's the right way to think about moving at the 25.
- [05:54]
Joe Terranova
All right, Chan, what do we take from this move, this resurgence? We started calling it that in the last couple of weeks because that's what it's been. Alphabet up 13 and a half percent month to date. Amazon 10 and a half, met at 10 and a half. Apple 5 and a half. But Apple's been on this huge run. What do we make of this?
- [06:10]
Scott Wapner
Yeah, I mean, I think there's two things that are happening here, Scott. Right. First, we saw this rotation from semis to software. I think that we've seen meaningful outperformance from the software perspective. And what that's lending to is really this re emphasis on enterprise spending going into 2025 and you look at an area like cloud consumption for instance, which was expected to decline because of cannibalization, because of AI spending and you're actually seeing a reemphasis on cloud consumption. So that certainly helps a number of those max 7 names. If you think about Apple innovation for Apple, People threw Apple out the window in the first quarter because they hadn't yet had this articulated AI strategy. It was naive to think that Apple wouldn't come out swinging in the second half of the year and create a strategy for AI that would not only be competitive from an AI perspective, but also help to drive handsets and this refresh cycle that is so necessary for Apple to be successful.
- [07:02]
Joe Terranova
Would you buy these stocks right now? Would you, Would you do that?
- [07:07]
Scott Wapner
I think from the perspective of if you don't have exposure to these stocks, Scott, which to be fair, I can't imagine that anybody in the.
- [07:14]
Joe Terranova
Let's take it from that perspective then because it doesn't, I don't think that works for me. If you have exposure and you were thinking and maybe you were trimming along the way up because you were thinking there was going to be a rotation, should you start adding to these stocks again here with those month to date gains that we're showing you right now and the NASDAQ crossing 20K, I think.
- [07:34]
Scott Wapner
There'S probably still some vulnerability at these levels, Scott. So I don't, I wouldn't say I would necessarily be adding here. However, I think again when you think about these names in each of them, specifically if you think about the overhang for Alphabet, particularly on the regulation side, if you think about them being able to monetize their data, those are things that you have to start to parse out differently from name to name. But if you're looking to set yourself up to Joe's point on what we think will be maybe a compressing delta or spread between the performance of the Max 7 and the rest of the market in 2025, I don't know that necessary. This is the time to enter into these names because again, Scott, a lot of this has been driven by equity flows that have just been coming into the market since, since the election and a lot of that is being driven by going into some more passive or index based solutions.
- [08:21]
Joe Terranova
Steph, Amazon is I think by far your largest position now. This stock has as seen a breakout to say the least. It's up 24 and a half percent in three months. How would you address that question? Would you be looking to add to these names thinking that okay, maybe, maybe people got this a little bit wrong in thinking that these were going to take a bit of a backseat. I'm not, I was that would never suggest to say, well they're going to dramatically underperform. That is not the conversation. It's just that they were going to take a little bit of a performance backseat to the rest of the market. They're coming back with this resurgence with a vengeance. Saying not so fast.
- [09:05]
Bertha Coombs
Yeah, I think there's a little bit of chase going on, Scott, between now and the end of the year chasing the winners and they're all winners, to be honest with you. Would I put new money to work today? No. You know, I sold Apple in late August because I made 42% in four months from, you know, when I was adding to it in the springtime. And for me, Apple with earnings declining 33% and total revenue 6% and product revenue is only growing at about 4%. Yes. Services is growing 12. You add that all up. I added that all up. And at 34 times earnings, to me it wasn't really compelling. So I took profits, I put it into Amazon because they do have the numbers. Actually. The third quarter operating income rose 54%. EBITDA grew 22%. Operating margins expanded 320 basis points. Free cash flow is at $46 billion. They're probably, I hope, going to announce a bigger buyback and maybe even a dividend at some point. So the fundamentals match up in my mind to where the valuation is. It's not cheap on a P E by any means, but at 14 times EBITDA it's below its 17, 18 times EBITDA average. So that is the one that if we should see a pullback, I would absolutely add to it. I mean, just think about what they announced this last week in terms of what AI is doing to their cost structure. Fulfillment costs are going to be down 25%. So if you believe operating margins have upside from Retail International, well guess what, they also have upside from AI and they're seeing it real time.
- [10:43]
Joe Terranova
You know, it's funny Rob, I heard a lot of folks say, well if Nvidia stumbles or video doesn't do anything, the market as a whole is going to have a problem. Not really. Not really because that stock hasn't done anything, certainly not month to date. It's the laggard since the election and these other stocks have picked up the slack. So maybe those calls were not correct. Does it matter though at some point if Nvidia doesn't work given the size of the stock? I mean, we're talking about Apple near 4 trillion. So Nvidia's not even the largest market cap stock in the market anymore. It was for but a hot minute, but that's about it.
- [11:27]
Stephanie Link
Well, you know we own that, Scott. We bought it when it got a little cheap here midway through the summer. And occasionally these names are going to give you opportunities. So getting back to your point, are we buying the Mag 7 or not? I think you got to be selective. When you look at the mag 7 you have names like Google, which was a laggard year to date until here recently. But if you just look at the fundamentals of a business like that, it's PE is trading at 20 times right in line with its history. It's the cheapest of all its MAG7 peers. Profitability is among the highest, two times the sector average that it competes in high capital efficiency three times the sector average and they're starting to see a return on AI. So while we own all these, it's the when matters of how you buy them. You'll remember that we bought Meta at the end of 22. It's a double weighting to the index. It's also about how you size these names, right? And so I don't think you can paint all these with the same brush because they're experiencing different reactions related to the news of the day and the opportunity of the day. And I would argue that names like Microsoft, Microsoft names like Apple, which we own but we're neutral on, are trading at the high end of their ranges despite the opportunity that you see in those names. Microsoft's the most diversified software and AI business from cloud computing to copilot to open AI partnerships. And it may be a better long term hold. But when in the world do you want to buy them? You buy them when they become attractive. So even in a market that's running, there is opportunity.
- [13:11]
Joe Terranova
There are some saying that, you know, this is going to be a rising tide, lifts all boats moment like Dan Ives on the ftc. Andrew Ferguson is going to lead it. Lena Khan is going to be out. Dan, I've suggesting Christmas comes early for the tech world. Khan done deal, making ready. Also Sarah Fryer, OpenAI CFO, very well known in Silicon Valley sees President Elect Trump as the quote, AI president. What do you think?
- [13:37]
Rob Sechen
I like that narrative. I like it a lot. The fact that Andrew Ferguson has been nominated to the ftc, I think that's one of the catalysts behind why you're seeing the reason for the Mag7 rally.
- [13:47]
Joe Terranova
Funny that someone, some even on this program were trying to argue in the last few weeks that, well, you know, there's a good chance Alina Khan is going to stay on. We're like, really?
- [13:58]
Rob Sechen
No.
- [13:58]
Joe Terranova
According to who?
- [14:00]
Rob Sechen
That's an app. That was an, an impossibility and it never made much sense. I would say that, you know, let's go back again to what many have said. Josh Brown has said that as well. President Trump's scorecard is the stock market and his golf handicap. And that's true and it's clear. And I think that the technology sector is important in that regard and I think that he understands that and I think that the economic team around him understands that as well. So look, I look at the totality of these MAG 7, I said before they're a core equity holding tell me that they're going to outperform and I think there's Some form of an imbalance within the market. I think in one scenario, you've got a concern about yield spiking like we saw in 23, and you had the outperformance. Or maybe on the other side, if we see that the economy cool, or there are some concerns around tariffs and geopolitical tensions, they become a safe haven, a port of safety. So I think on either side, that's where you get the outperformance. In the middle, I don't know that you get the outperformance, candidly.
- [15:09]
Joe Terranova
Wolf Shannon today says the rally to refocus on the mag 7 in the first half after calling for a broadening out in the back half of 24 and favoring the other 493, we believe this dynamic shifts back in favor of the Mag 7 the first half of 2025 as the market pays up for, to Joe's point, defensive secular growth stocks in the face of D.C. policy uncertainty. The minute you introduce any kind of uncertainty but you're still positive on the overall environment, where do you go? Obviously people have been going back to megacap tech.
- [15:38]
Scott Wapner
Yeah, I think it's not just policy though, Scott. I mean, I think in order for that to play out, you have to, you have to be seeking out growth where growth is scarce. And I think that is the number one rationale, the broadening out is that this anticipation, at least from our perspective at Neuberger Berman, that there will be above trend growth next year really supports that. And so in the first half of the year, in order to create that scenario that Wolf laid out, I would say you would have to see significant policy uncertainty around industrial policy, around pro.
- [16:05]
Joe Terranova
But don't we already have this? The environment now for what they're suggesting will continue. You're talking as if something needs to change for the Mag 7 to, to lead in the first half of the year. Isn't this a bit of a precursor to what might be a 2025 early story?
- [16:21]
Scott Wapner
No, I disagree. I think it's more what Steph was saying. I think this is positioning in winners through the end of the year. I don't think that there is anything in the current environment, Scott, that points to the fact that we see anticipation of a deceleration of growth and anticipation that we won't see an industrial impulse in 2025 that supports cyclicals. And therefore, if I look at it from a valuation perspective, which truly does matter, and you think about what can grow into their valuations, there's not a lot of multiple expansion opportunity in small cap stock, but there's earnings growth opportunity that is cheaper than the earnings growth that you're paying for in the max.
- [16:54]
Joe Terranova
Steph, what do we make of what's been the blow up of sorts in momentum, which we pointed out the last several days now, as money has come out of those stocks, it's been finding a home in Mega Cap, you know, among other places. There was also a suggestion that if momentum continues to blow up, it was going to be bad for it was a yellow light flashing for the overall market. I don't necessarily believe in that either. If you look at some of these momentum trades, this is week to date. There's, you know, Kava and Applovin, Vistra, Robinhood. You get the idea. Now, you know, Applovin's having a bounce of some 2% today, but that stock's been down a ton this week. Does it matter about momentum trades not working for a while? As long as the Mega Cap ones are.
- [17:43]
Bertha Coombs
Well, as long as Mega Caps and other parts of tech are working, which they are, that's 35% of the S and P. The momentum names are much smaller. Some of them are not even in the S&P 500. So to the extent that you have a greater portion and the bigger names that are doing better, of course you're going to see the markets rebound. But I, I kind of come back to why does it have to be all Mag7 and no 493? Why can't it be a combination of both? Why can't it be parts of technology that are not mag7? And you and I talked about this yesterday with regards to cybersecurity. There are so many opportunities out there that I think will be positive for overall the earnings picture. And that's what I'm trying to get at the earnings picture for Mag7. It's going to be good. Maybe it's decelerating, like Rob said, into next year. But you have about 8 to 10% earnings growth for the overall S&P 500. But other sectors are having good earnings to anything tied to the grid. You're seeing anywhere from 20 to 40% earnings growth. Industrials overall are running at about 10% growth. Discretionary is running at about 12%. Utilities, the earnings are running 13. So there are other ways to make money. And I just don't think it's all or nothing. And as for DC Policies unknown. Sure, we do not know about tariffs. We don't know about immigration. But what we do know, we do know that Trump is pro growth. We do know he's deregulation. We do know he's lower taxes and that is going to be a nice offset, I think, to the questions that we have on the former tariffs.
- [19:20]
Joe Terranova
And one of the reasons, one of the reasons Joe Piper developers talking about the rally's got room to run. Small caps are going to lead Schwab's Kevin Gordon better breath for small caps. Tom Lee likes small caps heading into the new year as well. To Steph's point.
- [19:34]
Rob Sechen
Yeah, to Steph's point. To add to Steph's definition of what we know about President Elect Trump and his economic policies, he's visiting the New York Stock Exchange tomorrow. So I think that tells you a lot about what he thinks about the capital a market environment. But in terms of broadening out. All right, let's take the conversation towards positioning because I suspect, and I don't know this to be true or not, but, but you, you believe that potentially, potentially a lot of people are offsides. And I might agree with that if in fact that's what you think in terms of how they're positioned towards the Mag 7. Because if you think about it, Scott, over the last month, what has everyone come on the network and said only equal, equal weight S P, you have to be in the equal weight S P. Now do the fund flow support that? Without question they do. You've seen a dramatic inflows into RSP and equally weighted strategy strategies at the detriment of the Mag 7. So if I look at positioning right now, okay, I'll tell you what, this is against my book. This is against my strategy. I could see that if for an extended period of time you get multiple weeks of outperformance in the MAG7 to the detriment of the equally weighted S and P, you're going to turn the calendar into 2025 and there's going to be significant flows away from equal weighted and that's going to support further price appreciation and outperformance for the max.
- [20:56]
Joe Terranova
Tom Lee is going to come on closing bell today and give his 2025 outlook for the S and P and what he thinks is going to be the leadership into the new year. So I hope you'll join me. That interview, which we're looking forward to very much, but it does match up with what you're talking about with these cyclical trades along with maybe small caps, that you're going to have a continued boom in the economy that it's going to remain. As the Fed chair himself said the other day, remarkable. That's his word not mine. S and P targets. Oppenheimer is at 7,100. Wells is at 7,007. Deutsche is at 7,000. Breathing.
- [21:29]
Scott Wapner
Yeah. The reality of the situation that we're facing is that, you know, the economy has continued to be stronger than what we anticipated. And that has been primarily due to what was initially a very consumer focused stimulative effort from Washington. And what you're seeing is actually, you're seeing this outside of the US as well, is that countries who have not made that similar level of fiscal stimulus towards consumers are starting to second guess their policy and think about maybe they need to be a bit more, a bit less Oscar year as it relates to fiscal stimulus. But in 2025, you know, there's a lot of talk about this D.C. policy uncertainty, Scott, and a lot of it stems from what's going to happen with the CHIPS acts, what's going to happen with the highway bill, what's going to happen with the ira. A lot of that is going to remain in place. And the tail on those things are very long. And then you loop in national security, you think about, you know, maintaining the protection of our supply chains in areas like pharma. You think about the very strong interest right now in pipeline growth that's going to come out of the energy sector. And so all of these things really speak to a broader sense.
- [22:31]
Joe Terranova
But Scott, you're talking about in everything rally.
- [22:34]
Scott Wapner
So there's a, there's a clear, there's a clear potential for that. And even in tech, which, you know, you know, I have been talking about this broadening out for some time. We're entering this third wave of AI as well, you know, where we have agenda I which could potentially lift the boats that Stephanie was talking about earlier outside of the Mag 7 into other parts of the tech sector. So, you know, that is what our, our perspective is going into next year.
- [23:00]
Joe Terranova
All right, we, we take a quick break. Coming up, we're following some of the big stock movers this hour, including a pop for GE Vernova, a drop for Uber, plus a big price hike for a target hike for Netflix. We'll debate those trades coming up.
- [23:19]
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- [25:33]
Joe Terranova
We are back on the halftime report. Let's get to Bertha Coombs now with a news alert.
- [25:36]
Emily Wilkins
Bertha Scott we are watching the large insurers that own pharmacy benefit managers under pressure today. Their shares are down on a new bill being introduced called the Patients Before Monopolies or PBM act, by Senators Elizabeth Warren and Josh Hawley and also in the House by Diana Hershberger and Jake Auchincloss. It would prohibit joint ownership of PBMs and pharmacies, and that would prohibit not just PBMs, also insurers from owning a pharmacy business. It would also force those companies to divest pharmacy businesses within three years and would direct the FTC to distribute any revenue disgorged to what they called harmed communities, including consumers that have been overcharged. Emily Wilkins spoke with Senator Warren just a few minutes ago and she said it's important. Instead of nibbling around the edges and kind of looking for a piece here or a peace there, we go straight to the heart of the problem and that is the conflicts. This is an issue that has been bipartisan over the last couple of years. We've seen a number of bills trying to get at PBM reform, but this one would be much more strict than what we've seen in the sense of saying that these entities would have to divest their pharmacies, in particular both cvs. Of course it has CVS Caremark, that's their PBM Aetna, and of course they have the CVS pharmacies. Back over to you.
- [27:11]
Joe Terranova
But the timing of this proposed legislation, we'll call it that, Bertha, is certainly not lost on anybody given what the current debate in the public is and the discourse that has developed over healthcare since the shooting here in New York City.
- [27:31]
Emily Wilkins
Well, this debate has been going on for some time, particularly when it comes to pbm. Again, this is something that Washington has been looking at for over two years. Elizabeth Anderson, an analyst over at Everett Corps, says this is unlikely to move forward in the lame duck session, but it could very well be taken up in the year ahead. And given all of the furor now that we have heard, Scott, as you mentioned, you could see more momentum to actually pass some kind of PBM reform bill in Congress.
- [28:03]
Joe Terranova
Bertha, thank you. Bertha Coombs with the latest on a story we'll continue to follow. You know, Rob, you, you do own UnitedHealthcare, so I'd like your take on the fact that the stock is lower by 5%. But in the broader sense of what I was alluding to, the discussion, the conversation, the debate that is happening in the court of public opinion right now, to say the least, on these health care companies and what you think the ultimate fallout might be for the stocks, particularly the one you own.
- [28:36]
Stephanie Link
Yeah, you know, this is a name we've been slightly underweight and trimming, obviously has nothing to do with the tragedy that happened and obviously the public outrage that we've seen, you know, boil to boil to a point around this, around this tragedy. You know, I view this as very opportunistic for somebody like Elizabeth Warren to try to, to try to take advantage of this at this time.
- [29:04]
Joe Terranova
I think it's bipartisan, Bill. It should be pointed out it's bipartisan. It's Senators Warren and Hawley, who's a Republican from Missouri, of course, no doubt.
- [29:15]
Stephanie Link
That all health care companies, Scott, are going to, you know, be under some regulatory scrutiny and pressure as it relates to this. And I think we have anybody that owns equities in this space is going to need to re underwrite that risk because it's certainly going to have an impact. We have not done that yet with UnitedHealthcare. You know, obviously we will.
- [29:41]
Joe Terranova
All right, we'll talk Lilly as well because there's news regarding that company today as it's teaming up with RO to offer lower priced vials of the weight loss drug Zepbound. You own that, Joe Lilly.
- [29:52]
Rob Sechen
So it's in the Jyoti. And this is part of a larger conversation surrounding health care. I think there's universal sentiment, bullish sentiment surrounding health care. Everyone believes it's underperformed. It's going to come around and it's going to work at some point. Now Lilly has benefited obviously from the GLP1 investment and being able to bring a drug to marketplace. But the stock peaked in August. The stock is actually below its 500 and 200 day moving average. So technically the stock is broken. You could look at Novo Nordisk, you could find the same thing. There's something going on here in the totality of the health care sector. And I think they spent. A lot of companies spent too much of their resources during COVID and Post. Covid. Focusing on Covid itself, not enough investing in things like GLP1. And very candidly, the entire sector has limited positive momentum. But also you're really not seeing the revenue growth either. One of my favorite names has been Merck over the last several years. Merck looks awful right now on the chart. So it's a struggle to invest in health care for sure. While that sentiment is bullish and I think you have to reverse.
- [30:57]
Joe Terranova
Let me ask you this. When did you say the stock peaked? August.
- [31:00]
Rob Sechen
August 922.
- [31:02]
Joe Terranova
Let's take a look at a longer out chart of Lilly. Guys, if we could. So if it peaked in August, why didn't you get rid of it when your rebalance happened after that?
- [31:15]
Rob Sechen
Because if you pull the lens back, I mean, you're asking me now a complicated question surrounding how do we measure momentum. There was still a positive momentum score on the stock itself. If you pull back the lens, you measure it relative to 12 months, you'll see had a very strong move from April into July. So that's kind of where you maintain the thumbs up on momentum. I know there's proprietary factors that go into.
- [31:47]
Joe Terranova
I don't want to. I don't want to put you in a.
- [31:49]
Rob Sechen
No, no, it's not.
- [31:50]
Joe Terranova
It's not that you're putting me in bad positions. Like if you tell me. But it's like peaked in August. Theoretically the momentum was gone after that.
- [31:58]
Rob Sechen
No, the Momentum was not gone after that. The momentum broke down probably surrounding the election. I'm looking at the chart and I'm eyeballing it and I know what we look at from what the momentum score is. And I could see probably around the election, you took momentum to where I'd say it's a red light. You got a little bit of a bounce. But right now you don't have a green light on momentum for sure. You did have that green light in place for the better part of 2024.
- [32:24]
Joe Terranova
I got you, Steph. I got news on Vernova, GE Vernova and GE Aerospace today. So Brnova raised a multi year, raised its multi year outlook, initiated a dividend, authorized the buyback. Aerospace was named the top picket. Wells, you got both.
- [32:40]
Bertha Coombs
Yeah, I was a little nervous about GE Verdan, Nova. I thought they were going to be a lot more conservative. They were definitely conservative, but not nearly as feared, if you will. But we talk about us reshoring being a $10 trillion total addressable market in the United States. Scott, the US produces only 16% of the goods that we consume. Can you even imagine, as we see this trend in reshoring take hold in a big way, what that means for the overall total addressable market and a leader like G.E. vernover? We talk about spins working and man, this has worked in Spades. It's up 164% post the spin. They have more to it because the margins are so depressed to 2 1/2% in 2023, going to about 12% by 2028. So really good momentum there. Talking about momentum, GE Aerospace, I'm not really sure I agree. I like GE very much. I'm not going to change my position on it, but this was really a services story for 2023 and 24, as Boeing had, has had a lot of problems and you've had older planes needing to get more service. We care about services because it's higher margins for the overall company. I think that's going to start to reverse in 25. Probably more though, for like a 2026 story where we're going to go more on the O side, which again is lower margins. But if anybody can navigate through this, it's Larry Culp and his team. So I stick with, I stick with the name long term.
- [34:00]
Joe Terranova
All right, so got some calls the day to do. I've got Santoli and his midday word coming up in the setup as well on some stocks about to report earnings. We're back after this.
- [34:12]
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- [34:38]
Shannon Sakosha
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- [35:24]
Joe Terranova
All right, Nasdaq still above 20K. Hitting that for the very first time ever just as we came on the air today. Let's do our calls of the day. Netflix target today gets raised to 10, $10 from 850. That's at JP Morgan as they reiterate a buy strong, strong year end content add tier into 25 to record high. Another one of those stocks that's helping the NASDAQ today. You have that?
- [35:48]
Rob Sechen
Absolutely. I think you buy more. I think you could buy it right here out of an all time high. I think obviously it will exceed $1,000. You mentioned some of the reasons we know the strong fundamental tailwinds that this company has behind it and is there really true competition to what is the clear leader in streaming?
- [36:07]
Joe Terranova
Are you answering? Is that you're asking yourself the question.
- [36:09]
Rob Sechen
I was kind of asking you.
- [36:11]
Joe Terranova
I thought you were asking yourself, Boeing top pick for what am I supposed to do? Boeing top pick for 2025 staff at Wolf Research. You want to take that one first?
- [36:24]
Bertha Coombs
Sure. I mean I said it yesterday. It has a great setup for 2025. It was a horrible 24. But I think next year gets better. You have this new CEO. When he was at Rockwell Collins, the stock rallied 107%. He's good at execution, a proven execution specialist. And I just think that the overhangs are removed. You've got the balance sheet is short, the capital shored up at 21 billion. So they've got a couple of years to buy time. The 737 Max is now beginning production again. They'll get eventually to 38 planes a month. Eventually the FAA will allow them to do more than that as well. I think there's a little worry on their defense business, but I think again that we are seeing some reorganizing from the company so that should be fine.
- [37:06]
Joe Terranova
Robert how about Lamb Top Picket cow and Target 100 bucks. You own that stock?
- [37:14]
Emily Wilkins
Yeah.
- [37:14]
Stephanie Link
This company's got that has attractive profitability but the semi equipment space has been one of the weakest parts of the market since July. Sluggish demand because of excess inventories. Lam is one of those companies more leveraged spend given their focus on leading edge equipment. That said intel has remained a key customer and given the challenges there we've seen the impact on Lam's you know top line revenue but the industry has continued to expect to grow in these companies will have attractive opportunities but it's going to require some patience.
- [37:55]
Joe Terranova
All right. Travelers today Joe downgraded to underweight. That's at Wells Fargo the target cut down to 27017 from 256. That's a big drop from here.
- [38:07]
Rob Sechen
The analyst community is following price here in a lot of these insurance companies. We've seen recently some corrective price action in a large portion of the insurance industry. Difficult comps when you look ahead in 2025. I would say where Travelers sits right here at this price price level this is your last line of Support. Breaks below 235 you've got a problem. I understand what the analyst community is doing.
- [38:35]
Joe Terranova
Home depot top idea DA Davidson price target to 500 bucks from 466.
- [38:40]
Bertha Coombs
Stephanie Link yeah, so this was my stock of the year. Contrarian on it's taken a little bit longer Scott to work. To be honest with you, I thought it would be up much more this year but I think the setup for 2025 is good. They've had eight consecutive quarters of negative comps. Never in the company's history have they ever seen that. And so you have easy comparisons. You also have home improvement spending bottoming I think and at the same time the company's doing a very good job in terms of execution, profitability, margins etc. Etc. So I would stick with this one and I like it for 2025.
- [39:13]
Joe Terranova
Let's get the headlines now with Julia Boorstin. AJB.
- [39:17]
Shannon Sakosha
Hey Scott. To country's top luxury real estate agents along with their brother were arrested today in Miami on charges of sex trafficking. Federal prosecutors accused twins Tal and Oren Alexander along with their older brother Alon of a years long scheme to sexually assault and rape multiple women. Several of the alleged victims have also filed civil suits. The Alexanders have denied the allegations. Police in South Korea faced off with security officials as they attempted to raid the president's office Wednesday as the fallout deepens after a failed attempt to impose martial law. It comes as the former defense minister attempted suicide after becoming the first person to be arrested in connection with the martial law declaration and TPG co founder David Bonderman has died. The private equity investors spearheaded massive company takeovers and investments in startups including Uber, Airbnb and Consciousness Continental Airlines. Bonderman was also a member of a group of financial entrepreneurs that include David Rubenstein, who turned small buyout shops into Wall street powerhouses. He was 82 years old. Halftime report will be right.
- [40:43]
Rob Sechen
It is.
- [40:44]
Joe Terranova
Setup time, Adobe reports After the bell. The CEO is going to be on overtime by the way, so you want to see that. And Rob Sean needs to give us his take because he owns the stock. It has not made a new high, Rob, since August. The last high was in February of this year. So even while software has done quite well, this stock has not done much.
- [41:07]
Stephanie Link
Yeah, it's been a core quality holding for us and you know, we increased the position regrettably in January. But you know, despite this performance from a price standpoint it's T12 EPS has grown by 40% since that point and it's a great example of a high quality company that has posted healthy fundamentals but has been viewed as too slow to monetize AI and is viewed as a company that could get disruptive by disrupted by generative AI. I think this narrative will change. I don't know if it's in the next earnings release, but Firefly has seen 13 billion image creations since its launch and it's got industry leading text to video, text to image creation capabilities. And so ultimately we think that will continue to increase profitability and slowly that narrative will fade to the background.
- [42:09]
Joe Terranova
Costco tomorrow after the bell. Joe, you own it. It's up 50% year to date and it is a new record high today for those shares. Topping $1,000 today, topping $1,000.
- [42:19]
Rob Sechen
The stock has been a phenomenal holding for us in the ETF strategy. The expectations for the stock are very high tomorrow and the stock is extended. I will acknowledge that 7% revenue growth at a minimum must be reported. Free cash flow generation needs to be strong as well. I would not be surprised to see a good quarter and the stock not do much thereafter.
- [42:43]
Joe Terranova
We'll take a break. We'll do finals on the other side. Hope you'll join me. Three o'clock closing bell. Tom Lee is going to be here with his 2025 outlook. You don't want to miss that. Richard Fisher is going to be in the house here too. So is Ed Yard, Denny, so is Lauren Goodwin and Brian Levitt. So I hope you'll join me then. Stephanie Link, your final trade today for us is what?
- [43:10]
Bertha Coombs
Yes, is Rockwell. It's a 2025 story and a laggard in electrification going to automation. Their businesses are bottoming. They got a new CFO who's a rock star.
- [43:22]
Stephanie Link
Matter continues its near term momentum. Happy birthday, New Edge. Happy birthday, Megan. Sean, thank you.
- [43:29]
Joe Terranova
All right. All right, Good stuff.
- [43:31]
Scott Wapner
Shan Utilities. Stephanie mentioned it earlier there not as much emphasis right now on power scarcity, but continues to be something we need to solve for over the next few years.
- [43:39]
Rob Sechen
Joe on close today will be a buyer of ticker symbol ZM Zoom Communications.
- [43:45]
Joe Terranova
All right, good stuff. 44,300 on the Dow. We're not that far away from 6,100 on the S P and we are currently above 20,000 on the NASDAQ. I'll see you in a couple hours. You've been listening to CNBC's Halftime Report, the podcast. You can always catch us live weekdays at 12 Eastern Owners on CNBC.
- [44:09]
Shannon Sakosha
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 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.