← Halftime Report
Halftime Report
The State of the Tech Trade: Your Next Move 7/16/26
00:43:33
Leslie Picker and the Investment Committee debate the state of the tech trade and share their strategies in the space. Plus, the desk share their latest portfolio moves. And later, Josh Brown spotlights Target in his "Best Stocks in the Market." Investment Committee Disclosures
Loading summary
Transcript116 lines
- [00:00]
Edward Jones Announcer
At Edward Jones, we believe rich isn't about having life all figured out. It's opening yourself to all the possibilities. That's why your dedicated financial advisor provides long term planning built around you, meeting you where you are and helping you get closer to where you want to be. So no matter where you're starting from, you can move forward with confidence. The key to being rich is knowing what counts. Let's find your rich Edward Jones Member SIPC how do you turn your strategy
- [00:32]
Leslie Picker
into action and action into impact? Bold leaders do it through transformative strategy and transactions. Ones that work in practice, not just on paper.
- [00:42]
Jim Lamenthal
At EY Parthenon, we use an investor mindset to help you create value.
- [00:47]
Oliver Renick
How?
- [00:48]
Leslie Picker
By combining deep sector experience with AI powered technology. So you can reimagine your business for tomorrow while building it today. Shape your future with EY Parthenon. Learn more today. Thank you, Carl. Welcome to the Halftime Report. I'm Leslie Picker in for Scott Wachner. Today from center this hour, tumultuous tech as the roller coaster ride in semis weighs on the sector today, we're navigating the volatility with the investment committee. Joining me for the hour, Josh Brown, Chance Kosho, Malcolm Etheridge and Jim Lamenthal. Thank you all for being here. Let's get a quick check on the markets at this hour. The dow up about 0.2%, the S&P down about 0.2. Nasdaq down about 0.7% and the Russell up by about 0.3%. In Focus today, guys, is really this rotation out of semiconductors. The potential for the Mag 7 to capture some of that. JP Morgan had a note out about that this morning saying that retail investors in particular are kind of following that trade with Nvidia, Tesla and Microsoft leading the July buying here. Josh, you own Nvidia and Apple. What do you make of this rotation dynamic? How much do you think it has in terms of legs?
- [02:06]
Josh Brown
Look, you could take that JP Morgan retail radar and, and put it back in the envelope and I can just Kreskin like predict what that's going to say next week. I'll just look at what happened this week. I, I mean there's no information there. It's not important. I think that the key to this market this summer. Stop acting like a thirsty lunatic. No more thirst. We're grown men and women and we need to comport ourselves the thirst to own the IT trade every second of every day. And it's not even enough to just own it. You need to own it 2x in an ETF and that's not even good enough. You need to own it with a zero day till expiration option. This is what's killing people right now. And if you're not playing that game, your portfolio looks amazing. The median semiconductor stock in the SMH is in a 22% drawdown from its own high. Right now. 44% of the SMH names are in a drawdown of 25% or worse. That's real money. These are big drawdowns. Considering the fact that we're in an s and P500, that's within a couple of percentage points of record highs. Imagine having put yourself in that position because of how thirsty you are. There are only three semi names right now that are even within 10% of an all time high. Only three. The rest of them have been knocked out of the box. And people, they feel like, oh well, I'll do the dram drams. In a 34% drawdown, it's actually worse. Micron 29% below highs. Western did 36% below highs. SanDisk a little bit worse. This idea that you have to be all in to whatever's working right this second is kryptonite for portfolios. I was talking offset just now. I know a guy that moved a multimillion dollar portfolio just to get the SpaceX IPO. Like broke a relationship with his advisor at a major bank, moved all the money to another advice. I don't know what did he get? 500 shares. Now it's below the IPO locked up. Stop acting thirsty. It's going to kill you in this tape right now. It is not the time for that. You missed that time. It was May June.
- [04:18]
Leslie Picker
Yeah, I know. Shannon, you've been looking at momentum crowding at a 40 year high, concentrated in tech financials and industrials. When you see indications like that, you know, what do you think in using Josh's analogy, investors should be doing to kind of quench their thirst and move on?
- [04:34]
Shannon
Well, well, I think the challenge is too is that, you know, we saw 24 and 25 and there was clearly a very concentrated set of stocks, the Magnificent seven, where you could essentially press that easy button and get access to the front edge of this trade. And I think what happened in the second quarter is that investors were seeking that next easy button, that next concentrated basket of stocks that would provide them that same type of appreciation and have a longer tail. And the reality is, is that we're in a very different phase in terms of the A implementation cycle. We're looking at the fact that we have built a significant amount of capacity. This extended period of capital expenditure is likely to start to broaden into industries, sub industries, sectors that the companies that are going to implement AI have this innovation really impact and continue to drive earnings and margin over the course of the next 6, 9, 12 months. And I think the challenge is now is that to Josh's point, everyone was crowding into that kind of second basket of hardware, you know, chips, cpu, optical. The reality is, is that this next phase is going to be have a much longer tail. The benefits are going to accrete much more broadly and perhaps more modestly to individual companies. But having that diversification in your portfolio, looking at what are the next areas, financials, industrials, health care, wherever you think that that's going to be, the benefits of AI are going to accrete more modestly but more broadly and trying to find this next basket and be able to capture that. To Josh's point, if it's already run, you're likely not to be positioned to to benefit from that on a go forward basis. And so I think people just need to take a big step back and understand that the value of AI, you know, that front edge, that easy button, that's over. And you need to be much more selective in this next phase to find the companies that are going to have two, three, four, five years of benefit accreting from what they're investing in CapEx and AI right now?
- [06:35]
Leslie Picker
Well, those who would be in defense of the semiconductors would say this has been an earnings led upside in that there they have just these pricing benefits that they've been able to employ here and raise prices, protect margins, expand margins in many cases and that's why people have been riding it to the upside. Malcolm, I curious what you make of that argument and do you think that those benefits have all been seen and have all been priced in at this
- [07:00]
Malcolm Etheridge
point point yet based on that you're supposed to buy the rumor and sell the news. But we're right now seeing people selling the rumor because we haven't gotten the earnings to confirm whether or not that 27% growth this quarter, this past quarter from the S and P that we're expecting is actually going to come to fruition or something even better. So I think it's odd, I think to the point that Josh is making, that folks aren't willing to at least wait and see if those trades actually pay off. Right. The response to Taiwan Semi's earnings as an example is extreme in comparison to what you would Expect at a moment where just two weeks ago everyone loved the semis. It seemed like now where most of the earnings growth is coming from. Three semi names, right? You have Micron, Broadcom and Nvidia that supposedly were going to save the day. We don't even know what those numbers will look like. ASML saying we're going to raise prices. And the market hasn't responded as negatively to that as they have to Taiwan semi. Nvidia saying we got to raise prices. And the market's not responding negatively to that today necessarily because they're almost at their all time.
- [08:03]
Josh Brown
So the earnings could be great. The problem is, to your point, we don't, we don't get to actually invest in the earnings. We get to invest in the, in the stock. We get to invest in the response to the earnings. And if the response happens before the print, you missed it. This is the message of the market right now. We all know these, these earnings are going to be blockbuster. Everybody knows. Nobody doesn't know.
- [08:28]
Malcolm Etheridge
But I think what you're saying though supports the thesis that I've been sharing for a while. What I'm referring to is crazy town where we are right now, right? We're constantly having this debate about whether this feels more like 1997 or 1999. And I'm on record as saying it feels a lot more like 1999. And one of the reasons is because the thing that was driving this whole ship was the Capex. It was the idea that all of the hyperscalers would continue to throw more money into the dirt to build these data centers because the demand is so strong that it's just going to work itself out. And now what we're seeing with Meta suddenly walking back some of its expectations and saying we're going to turn that compute over to whoever's willing to lease it from us. And that's the second one because Xai was the first one. One they were lucky to have a friend in Anthropic who was willing to come and lease that additional compute from them. Who's next? Oracle. Right. So I think that what we're seeing in real time is the hyperscalers acknowledging that they probably have overbuilt unless you are Microsoft, Google or Amazon who's got the ability to also run that private cloud that can consume a lot of that already.
- [09:33]
Leslie Picker
Jim, I want to bring you in because you own Micro. Micron, right?
- [09:38]
Jim Lamenthal
Micron apparently only trades in increments of 5% a day or more. I got news for everybody listening, that's not Normal. That's not okay, don't. That's not how stocks trade. It's not worth $50 billion more or less on any given day. But what we've got here and what Micron Leslie is an indication of is there is a mismatch right now between the fundamentals that we're all talking about with the markets and the technicalities. Note my use of the word technicalities, not technicals. The charts are whatever they are. Josh, you can help me as much as you want on that, but that's not the point. The technicalities that I'm speaking of are things like this massive supply of capital raised going on in primary markets and secondary markets, things like margin and Shannon, I think you used that word. But it may have just been in terms of profit margin. Margin debt is what I mean, if you look at what happened in Korea three days ago, 320,000 retail accounts got liquidated on margin calls. I mean, that is an incredible blow up. And that explains why a lot of stocks in that market, a lot of the chip stocks had been hammered. As they say, when the margin clerk comes for you, he doesn't ask if you want to work the order, he just sells your stocks, period. End of story.
- [10:52]
Josh Brown
They just banned. They just banned the leverage single stock ETFs in Korea.
- [10:57]
Frank Holland
Yeah. Good.
- [10:57]
Jim Lamenthal
Does anybody disagree that that's a good.
- [10:59]
Josh Brown
We do in America, we're going to approve 3X.
- [11:02]
Jim Lamenthal
Yeah.
- [11:02]
Josh Brown
So we're going the other way.
- [11:04]
Jim Lamenthal
And guess how it's going to end. I mean, all four of us know how. It's got. Five of us know how it's going to end, but it's just a question of time. These technicalities, by the way, just to lump more on this, I think we know this margin debt in the US is 55% higher now than it was a year ago. I'll grant you the stock market's higher, but that's a lot of margin debt. This is what I mean by technicalities. It's a tough time when we see these rotations every day like this. And Micron Leslie is a great example. It tells me this is a market in need of a correction. And it's probably going to get.
- [11:34]
Josh Brown
And that margin is not balanced across the s and P500. We know, we know which equities are more likely to be owned with a lot of leverage and which aren't. And that's exactly what you see playing out on your screen in front of you is the reason why the banks, for the most part were able to react well to their earnings. People are sitting in 2x JP Morgan.
- [11:57]
Malcolm Etheridge
But also when you're, when you're buying a 2 or 3x levered ETF with margin, that's a third or fourth order.
- [12:07]
Josh Brown
I like to do the options on the 2x ETF with leverage. I call that the triple win zero.
- [12:13]
Jim Lamenthal
Time to expiration.
- [12:15]
Josh Brown
Playing it like, hey, I do want
- [12:17]
Jim Lamenthal
to put a coat on this because this is important for people viewing and I think this is consistent with all of us that what we're saying to you is don't play the rotations, all right? You have no idea how these technicalities are going to play out and with what timing. All right? Make your fundamental bet or if you're a chartist, make your technical bet and stick with it. Don't get flushed out because the cost goes down and liquidates hundreds of thousands of accounts.
- [12:40]
Leslie Picker
Well, the dollar value on this is huge. Evercore ISI had a stat this morning showing over the past three days, the average dollar volume traded in levered Korean ETFs was five times that of the US MAG 7 single stocks. So this, this is real here. And I curious to see how this ban on new listings of single stock levered ETFs works, changes things or if that, if that.
- [13:06]
Josh Brown
If you look at a chart train
- [13:07]
Shannon
has left the stage.
- [13:08]
Josh Brown
You look at a chart of South Korean stocks, like up until the last 18 months, they only have two. Well now, yeah, two that move the index. But if you just look at that market and it's funny, it's been sort of a forgotten market. Actually one of the big data providers to the index funds considers it to be emerging markets. The other one doesn't. There's always been a discrepancy around the Korean stock market, but now you could understand the enthusiasm amongst retail investors and traders in South Korea. They have for the first time ever, these like global giants that are so important to this international build out of AI. So I understand the enthusiasm, but like from a distance, not a game that I necessarily think we want to like join in on. It's like having a soccer team team go to the finals in the World Cup. Let them be excited about it and let them get all their, their enjoyment out of trading these things. But for a US investor to say, well, they're all doing it, so I'll do it too. I don't understand how you think the outcome would be any different than what it is.
- [14:15]
Leslie Picker
Yeah, well, Shannon, you know, right now the volume in the market is largely retail and passive. Very little in terms of Active equity involvement. How does that change the dynamic of these types of. I mean what we just saw with Micron today, for example.
- [14:32]
Shannon
I think that the challenge is, is that there is going to continue to be pressure in terms of pacifying into technology and that's going to only potentially be exacerbated as we look at open air anthropic inclusion of Space X in the benchmark, perhaps next year. S&P 500 has been, the S and P complex has been, been a bit of an outlier in terms of inclusion. But I think that the challenge is now is that, you know, those active buyers, those more selective buyers, it's really hard to Jim's point, to maintain your discipline as you look at that. Relative performance versus a benchmark, relative performance versus the market, whatever you want to ascribe to that definition. It's really difficult to not want to chase some of these names that have, that perform really well over a very short period of time. But the reality is, is that this is this difficult period where you have to determine which of these stocks are going to be able to potentially innovate and are able to potentially be those names that you want to invest in on a go forward basis. I think that the other thing we haven't seen as much is that normally we would see a pretty prolific amount of rebalancing coming out of the second quarter given the strong performance of equities. We have seen institutions, institutions do some of that rebalancing that we normally would see from them. But to your point, retail investors haven't rebalanced. They're not, they're not trimming back their equity exposure. And that's partially because there's people like us at Neuberger who are telling them that the second half of the year is still going to be strong. We're still seeing this earnings growth momentum. But the names that have appreciated, to Josh's point, to Jim's point, Malcolm's point, those are the names that you should be looking at and saying, okay, I need to be selectively trimming and I think that's an important piece, is that trimming the whole market is going to be difficult for retail investors right now, given the enthusiasm about earnings growth. But selectively trimming back some of these names that have astronomical gains over the last two quarters, that, that needs to be part of your process.
- [16:24]
Leslie Picker
Yeah. Malcolm, you selectively trimmed or sold IBM yesterday on those preliminary results. You. That to you was enough. You were, you're done, you're out.
- [16:34]
Malcolm Etheridge
Yeah. So I appreciate Arvind Krishna's candor, right as a CEO in this position. But man, is it sobering to hear a company talk about how much money is going everywhere. But to them, when you consider them to be a pretty critical component of the AI ecosystem, someone's got to come alongside these companies and help them understand how to actually implement AI inside of their organizations because they probably don't already have the person or the people internally who have that skill set. However, IBM is basically saying because the cost of everything else has gone up in this ecosystem, there's not a lot of wiggle room left for the budgets of the CTO and we're the ones on the chopping block for the foreseeable future. And I think that that's probably another one of those canaries in the coal mine across the board, across other companies we have to look at now. ServiceNow is going to report. We've got to look at Microsoft, Microsoft as an example because that is probably pretty telling when companies have to worry about investing in their hardware and then also the networking to bring their models local because we're also seeing this transition away from the large language models that were necessary for training. And now when inference is the focus, the information is actually coming closer to the people using it or the data is coming a lot closer to the people using it, which sort of cuts out the need for, for a lot of this excess build out that we've been talking about. So for IBM to be saying that for the near future it doesn't look good from here for us to grow this AI book of business that I've been really excited about for the last couple of years. It's been very encouraging to see what they built from nothing. I might come back to it eventually, but it's going to be a while.
- [18:12]
Leslie Picker
Yeah, Cyber is getting a boost though. And you own CrowdStrike as well. Potentially off of the the IBM story.
- [18:21]
Josh Brown
No question those stocks were the first ones to rip when that 8k came out from IBM market made a decision immediately. We're going to hear more of this. The thing that IBM said, and I phrased this as they said the quiet part out loud. It's just not a priority what they said. It's not that what they're doing is not the right strategy for IBM. What, what's going on now is enterprise customers are securing compute. That's the main thing. We understand that. We just talked about chips for an hour and a half. We won't do it again.
- [18:57]
Jim Lamenthal
We'll do it tomorrow.
- [18:58]
Josh Brown
And then the cybersecurity piece. And so we're a firm that's built out of Data Lake and we have all the stuff that we need to do internally on permissions. I have client facing advisors, I have client service associates, I have traders. I have different people who need different levels of access. So if we're going to use enterprise, we're going to use an enterprise interface like a Claude, for example, on our Data Lake. Not everybody is supposed to have access to the same. Okay? This is an entire thing that has to do with cyber security and identity and things that are just far away from what IBM does. But play right into the strengths of your crowdstrikes, your fortinets, your Palo Alto networks. Like, so we understand this and we're a, we're a business, we're not an entrepreneur, we're not Fortune 500 company. But just in a, in a microcosm, this is the priority, okay? We're utilizing data, we're putting an AI layer on top of it. We have to secure everything, lock everything down. This is what every company has.
- [20:01]
Malcolm Etheridge
I think there's, I think there's a much simpler explanation though. Not to say your Data Lake wasn't. I mean, it might have had a little mercury.
- [20:07]
Josh Brown
You can come by the lake anytime you want.
- [20:09]
Malcolm Etheridge
But I think the release of Mythos scared the crap out of CISOs at Fortune 500 companies everywhere. And they finally had the ability to go to the CFO and say, you have to allow me to invest more deeply in security. This is a moment where you cannot look at a breach and say, okay, well we've got a month or two months or three months to figure it out because these zero day attacks are getting worse and more infinite thanks to AI. And what that means then is that money has to come from somewhere. So not only are we pulling back on compute tokens from Anthropic because they cost too much, we also have to reduce the budget for those consultants and the other tangential things that we were spending money on as a tech buildout. And that is impacting IBM just as much as any other consulting shop that, like I said, has really been coming alongside the company to teach them what to do with that Data Lake versus the people internal who are actually doing the thing that generates the revenue.
- [21:06]
Jim Lamenthal
Great analysis, Malcolm. And I want to compliment you really, for just ripping the band aid off and saying, I'm moving on elsewhere. It's hard to do. Stock was above 300, now it's, you know, 220, whatever it is. But here's the important thing that you're telling the viewers, I think this is at best dead money for at least the next quarter.
- [21:22]
Josh Brown
At least it's going to be a V bounce.
- [21:25]
Jim Lamenthal
Yeah, there's no, I mean I can't come up with a reason and you're certainly not presenting one of a catalyst for why it would bounce back. Now if you're thinking about holding this stock, sure there are analogs. I could point to Cisco Systems about four years ago, which had a rough spot. Different reasons. Okay, it was supply chain issues back then, but at that time, I mean it took many quarters to come out of the penalty box and you're at least going to have to take a quarter or two of good results for IBM to come out of this penalty box because this stock was treating at a premium valuation that it hadn't seen in like 20 years or probably more or maybe even ever. This was a stock and I remember this because in the 2010s I was in this stock about three times. I may have made some money. If I did, it wasn't a lot. Stock perpetually traded 11 to 13 times. Recently it got up into the 20s. I'm sorry, I mean I really regret for those who held it. And now it's down around 17 times. But it's not going higher from here anytime soon.
- [22:20]
Leslie Picker
But then, Malcolm, if this is a microcosm of the overbuild of the token costs, is there more? Is IBM essentially a canary in the coal mine? Are there other stocks like that that just have yet to really disclose results or preliminary results that you expect could kind of be in a similar situation?
- [22:39]
Malcolm Etheridge
I think there likely are, but I don't want to get too far ahead of the earnings to say which ones are going to be which. I think that it's like I mentioned, I'm focused on servicenow, I'm focused on Microsoft. Those are two companies that I think could be similarly impacted because they're similarly situated in some of the offerings. But also they're diverse enough that maybe they don't get hammered the same way. So we'll see. But I think that this is one of those moments where to the point that Jim's making, you're not jumping in to buy the dip because you think that there's going to be this V shape.
- [23:10]
Josh Brown
Look at it.
- [23:11]
Malcolm Etheridge
Look at Accenture.
- [23:11]
Josh Brown
Look at Accenture. Put up. Put up acn. Give me a one year chart. This is the IBM story, but it happened in slow motion. It's the same reason. It's like we're going to be the company that implements The AI for all these customers and the customers are like, yeah, I don't know, I don't know. I don't know if we're going to pay.
- [23:32]
Malcolm Etheridge
Accenture is down 50% for the year.
- [23:35]
Josh Brown
It goes down to every week.
- [23:37]
Malcolm Etheridge
I think that, that at least, like, if you're looking at Accenture now, you could say they've already taken their medicine, they've had the pain over the last year. IBM to your point, was flying high. They've had a couple of releases that have sent the stock up because people are excited about things like their cyber security grouping that they just put together, you know, their AI book that I mentioned. And so they were at an all time high and on their way down from it. Accenture has been sort of waiting in the wings for a while and maybe there's an opportunity to rotate.
- [24:04]
Josh Brown
Ironically, if IBM had back all of those hardware businesses they spent 20 years spinning off and selling, the stock would probably look more like Dell.
- [24:14]
Shannon
So Shannon, I was just going to say, I think the other thing that the viewers need to think about is that, you know, we're talking about the potential for, for a V shaped recovery. We're talking about where are the catalysts for some of these stocks. This is a really tough quarter to have. A tough quarter. Like the expectations are so, so high. So I think if you want to take something like the IBM or any will have other disappointments in this earnings season, just be very cognizant of the fact that with earnings expectations so broadly positive and with so many upward revisions, it is potentially going to create a longer time in the penalty box. This is a major penalty, not a minor penalty for these companies.
- [24:53]
Jim Lamenthal
So now that we have beaten the absolute, you know what out of IBM, let's talk about what do you do after you've sold. And I just, I want to be helpful to the viewers here and say that there are many sectors. We've just spent 24 minutes talking about technologies. There are many industries that are rallying right now. Look at health care Again, look at UnitedHealthcare. Look at the pharmaceuticals. Look, look at financials. I mean, we have been talking about financials consistently, but don't feel like you have to stay in technology. You've got to sell IBM and buy Dell or whatever. Like there are entire sectors that are worth looking at.
- [25:26]
Leslie Picker
Well, it sounds like Malcolm actually did stay in tech with. After selling IBM, you bought Cerebras.
- [25:30]
Malcolm Etheridge
Yeah, yeah, I disagree. Stay in technology. So Cerebrus, this one's a little bit of a flat flyer. For me. Okay, so it, it's a company that is basically proposing to do the exact opposite of what the traditional semiconductor manufacturing process is. Where normally you're trying to get, you know, as many transistors as you can onto one chip, shrink the whole thing and get it into smaller and smaller devices. It's the reason that the Nvidia's latest GPU, the Vera Rubin cluster, not just the GPU, it's got like 72 GPUs on it. Right. Cerebras is saying, instead of that, give me the biggest chip you got and I'm going to put as many transistors on it as I can. And there's less latency and less lag between the information being shared between them. I'm kind of oversimplifying, but basically that's the goal. The reason I say it's a flyer, though, is because their core customer right now is Open Air. And that's a little bit tenuous position to be in because I'm also on record saying I think OpenAI is going to be walking back some of those spending commitments we, we've heard them make at some point this year as they try and get out to an IPO early next year. And so it could be a thing where if Cerebras can't find their next core customer before the end of 2027, where I think that contract with OpenAI is scheduled to fall apart, sorry to mature, then this whole thing goes nowhere. But it's fallen all the way back to its IPO price. Now, I looked at it as it IPO'd. I was very interested in the concept and the ideas of technology. It's not fully baked yet. And so that's why I say it's a flyer. I set my high water mark at 175 and I'll be buying on the way down as it has 10% moves to the downside thereafter. And so it's a way to average into it. But I at least wanted to start building the position now because it's a, I think a hedge if nothing else, against Nvidia's questions around their pricing power and their ability to continue to sell more and more GPUs that are the most expensive thing out there.
- [27:25]
Leslie Picker
All right, Those shares down 3% today, so keep an eye on it. Still ahead to set up on Netflix earnings coming after the bell today, we have ownership on the desk. We'll debate it. And as we head out, check out data center operator C Square, just making its public debut right here at the NYSE a price to $21 a share currently down about 4 per store. So kind of part of what we were talking about with regard to Capex over overspending data center build out all the questions surrounding AI. Half time is back in two minutes.
- [27:59]
Carl's Jr. Announcer
Maxing is so maxing right now, bro. Get ready for spicy chicken maxing because Carl's Jr. Is saving you big with a 599 maxed out double stack double stack double stack spicy chicken sandwich. Seriously just 5.99 double stack spicy chicken. This is unreal value in the bromosphere. The new spicy chicken Max wallet friendly Max tasty only at Carl's Jr available for a limited time at participating restaurants. Taxon included. Not valid for use within a combo or a combination with any other offered discount.
- [28:29]
Jim Lamenthal
Which are America's top states for business.
- [28:32]
Frank Holland
Get all the data and complete state by state analysis.
- [28:36]
Carl's Jr. Announcer
See how your state measures up America's top states for business. See the full list now at topstates.cnbc.com.
- [28:57]
Leslie Picker
Welcome back. Netflix reporting after the bell today, shares are down 32% in three months. Josh, you own Netflix?
- [29:04]
Josh Brown
Yes.
- [29:05]
Leslie Picker
What are you looking for?
- [29:06]
Josh Brown
When it broke below hundred, I started to buy it back after having been out of it. I've so this is my personal bias. Anytime I've bought Netflix in one of these moments in time where people said it's over or they're in trouble or Disney plus is gonna be beat them up or Nickelodeon or whatever, whatever. I always make money eventually in the stock. I, I don't think I've timed this one well because rather than starting to buy in the 90s, I could have been buying right here. I just think we've had this daisy chain of unfortunate events starting with them making a bid for Warner, which they ended up pulling out of. The narrative went from thank God they're not buying it to wait a minute, why do they think they need to buy it? And now there's like a maybe, maybe some like potential pressure on the stock because people are afraid they're gonna bid too much for NBCUniversal from Comcast. I actually think they should do that deal way better than the Warner deal ever could have been. It's an amazing film library and a lot of other things gets them into parks, blah, blah, blah. The bottom line here on tonight's earnings, they have to make the case that the content side away from sports is still solid. All of the talk in the trades like Variety and like the Hollywood people, this is huge concern about second seasons for some of their Hit shows not connecting with viewers. Their, their viewership numbers do not look as good relative to what they look like a year or two ago. Everyone's worried about YouTube. Everyone's worried about lack of engagement with Netflix. Yeah, I think it's going to be fine. I don't think Churn is moved at all. I think the ad supported platform will do 3 billion billion annualized, which is pretty good run rate for something that didn't exist two years ago. And I think there are smash hit shows it's hard to replace. Stranger Things.
- [31:01]
Jim Lamenthal
We all understand who's winning the bet with you and Jenny.
- [31:04]
Josh Brown
Jenny is winning. So the bet was Netflix and Disney were both at 100 and I said, I think Netflix gets to 120 before Disney. She is winning.
- [31:14]
Jim Lamenthal
I think I glommed on to that. I'll pick up the tip.
- [31:17]
Malcolm Etheridge
Okay.
- [31:17]
Jim Lamenthal
Now if you allow me to come.
- [31:19]
Josh Brown
The interesting, the interesting thing about, the interesting thing about that bet, I don't know if viewers care or not. It's not just that she has to buy me the cheeseburger of my choice anywhere in New York. It's that she has to eat one with me. I don't even know if she's aware that she agreed to that. In the heat of the moment,
- [31:35]
Jim Lamenthal
there was ice cream involved.
- [31:36]
Malcolm Etheridge
Here's the thing about Netflix. They've added in two years, they've increased prices twice. Right. But in that time they've added 40 to 50 million paid subscribers. This thing's a utility. Nobody's cutting their Netflix subscription anytime soon. So basically buying here at 73 or $74 a share, you're getting in probably at the lower end of where it's going to be. Here's an opportunity to start accumulating in a company that's not impacted all that much by what's happening in AI that we just talked about. It's not going to be negatively impacted so much by the consumer if and when they slow down spending. So I think that this is an opportunity to start accumulating.
- [32:13]
Josh Brown
I think of it like a utility too. And just so people have the numbers, 12.6 billion in revenue, 79 cents in earnings is what the street wants to see. That would be 14% top line growth and about 10% earnings growth over the same quarter a year ago. It's a 19 forward pe. It's 42% below its highs. Could it be a bad report? It could the guidance be weak? Totally. I'm not telling you. I think it's a slam dunk. I do think a lot of the risk has been de risked just given the price action over the last year.
- [32:42]
Leslie Picker
Yeah, but to your point, engagement will be in focus. And interestingly, UBS says it screens is one of the most defensive names in the large cap Internet space. So this will find into that utility element of it. Now on to Frank Holland with a CNBC news update. Hi, Frank.
- [32:56]
Frank Holland
Good afternoon, Leslie. Would you the Trump administration is moving to limit most foreign student visas to a maximum of four years, replacing the current policy that generally allows students to remain in the US for the duration of their academic program. Students needing more time would have to apply for extensions. Administration officials say the change is aimed at tightening immigration oversight, while universities warn it could discourage international students from studying in the U.S. president Trump fired Roger Rogoff less than an hour after 17 federal judges unanimously appointed him U.S. attorney for Western Washington. The Department of Justice says the judges failed to consult the administration. Rogoff, a former judge and a veteran prosecutor, says he is considering legal action. The Coast Guard is suspending his search for three people still missing after a deadly boat accident in the San Francisco Bay. Officials say about 20 adults, most of them family members, were taking part in a memorial service when a wave struck their vessel. One man died. Three others were hospitalized and then later released. Leslie, back over to you.
- [33:54]
Leslie Picker
Oh, so sad. Frank, thank you very much. Up next, Mike Santoli joins us with his midday work.
- [34:02]
Carl's Jr. Announcer
Yeah, maxing is so maxing right now, bro. Get ready for spicy chicken maxing because Carl's Jr. Is saving you big with a 5.99 maxed out double stack double stack double stack spicy chicken sandwich. Seriously, do 5.99 double stack spicy chicken. This is unreal value in the bromosphere. The new spicy chicken Max Wallet friendly, Max Tasty only at Carl's Jr available for limited time at participating restaurants, tacked on, included, not valid for use within a combo or a combination with any of their offered discount.
- [34:32]
Jim Lamenthal
Which are America's top states for business.
- [34:35]
Frank Holland
Get all the data and complete state by state analysis.
- [34:39]
Carl's Jr. Announcer
See how your state measures up America's top States for business. See the full list now at topstates.cnbc.com.
- [35:01]
Leslie Picker
We are back on halftime. Senior markets commentator and overtime co anchor Mike Santoli joins us with his midday word. Mike, what are you looking at?
- [35:08]
Mike Santoli
Well, I mean, Leslie, it's hard not to come in almost every day and look at this market and kind of marvel at the immaculate rotation. It just keeps in gear. It keeps working. We have memory stocks, the large cap ones, down 30% as a group in three weeks the S&P 500 is within 1% of its high. So we all know how that's happened. Non tech sectors have worked. And then of course mag7 was oversold enough to actually get this release Leaf bounce. Apple is going vertical just because it's neither of those other two categories. It's not chips. It's also not overspending on capex. Now I think the question is where are we going to see the years grind a little bit and where and where this process might, might falter? Maybe we won't but it seems as if every single day the dispersion trade just takes over and that's all we have. Am watching things like Microsoft, Amazon, Alphabet which have been leading a lot of the upside this week kind of coming up to levels where it's a little bit more of a test. They're coming up to their 50 day moving averages which are falling. So we'll see if this was more than just kind of rebalancing and resetting after the extremes of the first half of the year.
- [36:14]
Leslie Picker
Yeah. Mike, what would you say is kind of the best course of action for the second half of the year? Do you expect kind of the rotation theme to be some thing that continues?
- [36:25]
Mike Santoli
I would expect, I think that if you're bullish on the market, what you want is for this to just be an interlude I think and just have the broadening trade just sort of take up the slack while a lot of the overheated parts of the market cool off. And then if we get more confidence about 2027 CAPEX budgets and people are willing to tolerate the spend on the hyperscaler side, then you have I kind of resume a leadership role role and that probably carries the market higher. It's hard to fight with the earnings growth. I think the concern is, you know, the market is already giving a lot of credit for that earnings growth. The asymmetry seems to be numbers that maybe aren't good enough even when they're very good as you see with things like GE today. So you know I'm always in the camp that says stay involved but keep expectations low.
- [37:11]
Leslie Picker
Yeah. Even though to your point the bar is high this earnings season. Mike, Santa, thank you so much. Coming up, Josh Brown's best stocks in the market. He is revisiting a retail winner on the list. That name. We are back with Josh Brown's best stocks in the market.
- [38:01]
Josh Brown
It's already that time.
- [38:03]
Leslie Picker
What are you looking at today?
- [38:04]
Josh Brown
All right, so we wanted to update people on on Target. It's up about 16% from when we wrote it up originally in March. And exactly what the chart was indicating played out. Pull this back a little bit so I can show people what I mean. We were talking about 120 being resistance. The stock has broken through 120. We tested it repeatedly. 120 is now for me, the new line in the sand. If you want to stay long. This name. They reported their first positive comparable sales quarter in four or five quarters. Guided revenue higher, guided earnings per share growth higher for the rest of the year. And they're talking about now investing in new stores, upgrading existing stores. It's been a while since we've seen a Target go on offense. One of the most interesting things that's happened with the stock, Walmart had been just crushing it on every time frame. Month to date returns, year to date returns, one year, three year. If you look at the two charts now, you can see Target meaningfully catching up. That's, I think, shareholders saying to themselves, okay, Walmart's not the only game in town. We have another massive retailer making AI investments to improve the E commerce experience, run the business better. And look, here's Walmart pulling back now. Give me Target again. So this remains on the best stocks in the market list. The momentum is not overblown at all. You're talking about an RSI in the low 60s. And I think this thing has room. I think 150 is more likely than 120. So I like the risk reward here. And so long as you're moving your stops up, you can stay in the trade.
- [39:43]
Leslie Picker
So is Target actually taking back share from Walmart then with all of these changes, are we seeing the fruits of that?
- [39:50]
Josh Brown
Appears that this is more a story about improvement at Target than it is about Target beating up Walmart. I wouldn't say that couldn't happen the longer this goes on for. But Target had a lot to fix. It had a lot of years in the wilderness, it had a management change. And now the investments that they have been making starting to bear fruit in the fundamentals. And what a surprise. The technicals look good right alongside the fundamentals, which is the whole premise of why we write the Best stocks in the market column for CNBC Pro.
- [40:21]
Leslie Picker
Right. Better check it out. Shannon, you recently downgraded consumer staples to neutral on waning pricing power, which is something we've been talking a lot about, particularly as it pertains to Walmart, because they've had to decrease their prices to kind of combat some of the affordability questions.
- [40:36]
Shannon
Yeah, listen, I think there's this important differentiation here. If you look at the consumer, we talk about lot about consumer confidence and the disconnect with consumer spending. So this isn't a call on the consumer. This is really a call on a combination of the valuations and the multiple in this sector along with that waning pricing power. Yes, the lower income consumer is perhaps being hindered at a greater, you know, to a greater degree than than higher income consumers. And that actually might help Josh's target trade versus Wal Mart if we kind of take that to the next derivative. But I think in of terms importantly, like looking at consumer staples, looking at the, looking at the multiple and thinking about where they can actually pull price. Energy prices have come down but still are elevated and that's likely to persist at least for the next several months.
- [41:17]
Leslie Picker
Yeah, it was fascinating listening to the bank earnings calls. Everybody was born cold water on the K shaped consumer credit quality looked good, spending habits look good, debit credit card, I mean it was all very, very solid this quarter. Up next, options action. Oliver Reddick is tracking the the big moves in big tech. We're back after this. Welcome back. Let's get to today's options action. Our Oliver Renick is live at CIBO Global Markets in Chicago with more high. Oliver.
- [41:59]
Oliver Renick
Hey, Leslie. I've got some really interesting options analysis on the biggest tech companies ahead of earnings season. Using data from nations indexes, we looked at companies whose options fell into a Venn diagram of both expensive, far out of the money calls relative to puts, which tells you how much people are willing to pay for exposure to big rallies and then compared those ratios to how they traded over the past 52 weeks. That gives us companies where traders think there is not just big upside ahead, but also uniquely big upside compared to how they typically see that stock. Here are the top five. Microsoft Meta, Amazon, Tesla, amd, only one chip name and three Microsoft Meta. Tesla haven't seen a new high all year. So if these options bulls are right, these are great leaders for the market. But judging on recent performance, it would require some very real rotation.
- [42:54]
Carl's Jr. Announcer
Leslie.
- [42:55]
Leslie Picker
All right, Oliver, thank you so much. Oliver Renick at cbo. Coming up, more committee moves. Malcolm's ready with a new buy. Another new buy. That trade is next. Welcome back to Halftime. We have another committee move to hit. Malcolm, you bought some chub.
- [43:23]
Frank Holland
Yes.
- [43:24]
Malcolm Etheridge
So the commercial insurance space is a sector I think probably will be positively impacted from here on out by AI. And I think that ahead of travelers giving us their earnings in the sell that might happen there and the rotation into Chubb rather than wait for Chubb to report earnings next week. I thought it was a good idea to go ahead and get in position now for that rotation. But the commercial insurance business is one that I think, like I said, is going to be positively impacted by AI. It's already sort of taken its medicine, so to speak, with some of the bigger payouts they've had from the bigger natural disasters that have happened and everything else. And Shelb is one of the premium players in that space. And so I think if you do want to look for a place to rotate to, that's not tech, tech, tech, to Jim's point, this is a good place to be looking in the financial sphere that's not just owning another one of the big banks.
- [44:09]
Leslie Picker
And chubb up about 1.4% today. Final trades coming up on Halftime.
- [44:19]
Carl's Jr. Announcer
Are you following the Halftime Report podcast? What are you waiting for? Look for us in your favorite podcasting app. Follow the Halftime podcast now.
- [44:31]
Leslie Picker
We are back with Final Trades.
- [44:33]
Jim Lamenthal
Jim, we'll start with you talked about it earlier Micron. I mean it's been down today 6%. Tomorrow's probably up 6%. That's the way it's trading.
- [44:41]
Malcolm Etheridge
Malcolm yeah, Rocket Mortgage. Morgan Stanley had nice things to say about them today. I think whenever interest rates finally move, this will be the biggest beneficiary.
- [44:49]
Shannon
Shannon Health Care could be a hedge against any sort of tech sell off and supported by productivity tailwinds.
- [44:56]
Josh Brown
And Josh, all eyes on Apple. This is the biggest stock in the world on its way in my opinion. 400 which I've been talking about for 30 points now. I think they are becoming the winner of the game by not having even played and that thesis seems to be what's behind the action in the stock lately.
- [45:15]
Leslie Picker
Not too worried about margin pressures there?
- [45:17]
Josh Brown
No, I never. I never do. Though some it's not the kind of thing that I worry too much about.
- [45:22]
Leslie Picker
Not over a right there. Take a look at the markets as we close out the hour. That does it for half time the exchange starts.
- [45:30]
Edward Jones Announcer
All opinions expressed by the Halftime Report participants are solely their opinions and do not reflect the opinions of CNBC or its parent company or affiliates and may have been previously disseminated by them on television, radio, Internet or another medium. You should not treat any opinion expressed on this podcast as a specific inducement to make a particular investment or follow a particular strategy, but only as an expression of opinion. Such opinions are based upon information the Half Time Report participants consider reliable, but neither CNBC nor its affiliates and or subscribers 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 halftime reportdisclaimer which are
- [46:05]
Jim Lamenthal
America's Top States for Business?
- [46:07]
Frank Holland
Get all the data and complete state by state analysis.
- [46:11]
Josh Brown
See how your state measures up.
- [46:13]
Carl's Jr. Announcer
America's Top States for Business See the full list now@topstates.cnbc.com.