← Halftime Report
Halftime Report
The State of the Tech Trade: Your Next Move 7/17/26
00:44:09
Dom Chu and the Investment Committee debate how to navigate the momentum trade as sentiment shifts in the sector. Plus, the desk share their latest portfolio moves. And later, Netlix on pace for it's worst day since April 2022. It's our Chart of the Day. Our very own Malcolm Ethridge is buying more, he joins us to explain why. Investment Committee Disclosures
Loading summary
Transcript116 lines
- [00:00]
A
Are you as confident as you should be when it comes to growing your business? Is your strategy ready to execute today? If cash flows aren't where they need to be, growth could be at risk, especially in the eyes of your investors, board members and the business press. But when your business is operating in top shape, you've earned the right to grow. EY Parthenon can help you reimagine your business and execute a game plan for long term growth. EY Parthenon solutions that work in practice, not just on paper.
- [00:30]
B
The board recommends approving regarding that seat on the committee. We're promoting quarterly earnings. Every day shareholders meet to discuss important matters about the companies you invest in. Now you can easily make your voice heard. Vanguard Investor Choice gives you a say
- [00:44]
C
in the companies you invest in.
- [00:45]
B
With just a few taps, you can set your proxy voting preference for your index funds. Visit vanguard.com investorchoice to learn more. Vanguard investors own shares of our index
- [00:54]
C
funds, which own shares of the companies they invest in.
- [00:56]
B
Available for Vanguard index funds that participate in Investor Choice. Vanguard Marketing Corporation Distributor I'm Scott Wapner and you're listening to CNBC's Halftime Report, the podcast the most profitable hour of the trading day. We record this live weekdays at 12 Eastern. Listen in. All right, thanks very much, Carl. Thanks very much, Sara. Welcome to the Halftime Report. I am Dominic Chew in for Scott Wachter. Today, front and center this hour, big news out of China sending shivers through that tech trade. The investment committee at the ready to break it all down, including the fallout. Joining me for the hour are Steve Weiss, Jenny Harrington and Kevin Simpson right here at the New York Stock Exchange. Let's get a check on the markets overall. Right now we are seeing a down day fractionally so for the Dow Industrials off about now just about 110 of 1%. It's about 52, 5, 26. The S&P though, down 1/2 of 1%, sitting right below the 70500 mark. And the NASDAQ composite, the tech heavier index down about 1% right now. The semiconductor trade, the real pain point again as China rolls out a powerful new AI model. Now to the scorecard for the semis. As you can kind of see here, it's moving a little to the downside. Nvidia shares, AMD the lot are going to the downside right now. That's driving the momentum. ETF on pace for its worst week since April of 2025. The DRAM ETF on pace for its worst week since inception. And the Soxx ETF is now in a quote unquote bear market off 20% from its recent highs. All of these things are happening at once. But it has become the epicenter of that momentum AI tech, overall trade. So let's go to the committee for what's going on right now and maybe I'll start Steve, with you. The sentiment. We've seen this before, just not to the degree recently that we've seen over the past week and a half with the chip trade. Is this finally the rollover or are we just going to buy it after it goes down a little bit more again because the valuations have become more compelling?
- [02:58]
D
Yes. So there are multi points to that question. First of all, it's not just been a week and a half, it's been a longer time. We've seen huge volatility in the semi trade but they keep making lower highs which if you look at from technical standpoint is troubling in terms of, of what drove it. You know, the market always talks about that, that the market stay irrational for longer than you could say solvent. That works both on the upside and then when you're coming down on the, on the downside, upside in terms of being short, downside in terms of being long. So where I think we are is that the market is beginning to pull forward. And I said, I've said this repeatedly on the show, the end of the cycle, if everybody's saying the cycle is going to be over and I'm talking about they'll never spend again, I'm talking about peak spending. Only the market has been anticipating, has not been anticipating peak spending, it's been trading like spending is going to continue to increase. We saw a hint of that on better News where say we're going to increase by 40 billion, but that's what's anticipating. Then you take some of the, in other words, they were anticipating the spending will keep going and make new peak, new peak. The others. And what's been the controlling narrative over the last month or so is that okay, everybody say we've got a year or two and I'm not going to be the last one out. So the ones that were in the earliest are the sellers and then you've got the nervous hands, the weak holders who came in at the end of momentum trade, right. And they're the fastest ones to sell because they're booking losses. Now here's where I'd say where we are. I don't think it's over completely. I'm not sure the reset is over either. China, which you're bringing up as a new point is not a new point. I referenced it this week, I referenced it last week. You have to be sleeping not to have known that China has much cheaper models, whereas tokens have gotten very expensive here and much more effective AI. So the market, meaning the buyers like the metals and everybody else have been going to that. So that is an issue. But what's not talked about, even though again I mentioned on Wednesday and what we seem to be, you know, sleepwalking past, is the risk of higher inflation and the war in Iran, which is not going to end. This is my view and my view is very well informed on this. It's not going to end until we do much more significant damage, which will include damage to the energy infrastructure, which will drive up oil prices, drive up inflation. And that of course we bad for growth stocks.
- [05:31]
B
That's like a non virtuous cycle. By the way, what you're kind of talking about right now, Kevin, do you feel the same way about whether or not I only bring it up because bank of America kind of put out some commentary on that semiconductor trade right now. Basically they're saying we see correction as a summer reset, not a fundamental reversal, and remain positive. On leading compute, that's Nvidia, Broadcom Memory, micron networking, Marvell CPUs, AMD and Intel and Semicap, that's, you know, Lam research, applied materials, the ASML type names. Do we feel as though this is the pause that refreshes? It doesn't seem like a pause right now. It really feels like in some ways people want to get out of this trade.
- [06:13]
C
Yeah, pause always feels like what? Always feels like that when you're in the middle of it. But I don't think that changes stock Steve's narrative at all. In fact, I think it's pretty congruent to what I'm expecting because we were in a period dom where it was just like if you mentioned artificial intelligence, you were rewarded. The stocks were moving higher. I think a lot of these have been validated by earnings growth. But what I would say is we're in the most important earnings season for several years right now because we know the numbers are going to be really, really good. Even your Taiwan semi was fantastic. But the problem is they're spending a little bit more. Even though the guides are good, if we're at or near this peak spending period, it becomes problematic that every single trade isn't going to work. So I think what we're going to see this earnings season is a have and a have not story and Those companies that can execute, that can deliver a return on investment for all of this money that's being spent, they'll be rewarded. And if you come up just a little bit short, not on your earnings, but on your guide, and I think it gets slammed.
- [07:12]
B
All right, so I want to bring up another piece of commentary because we want to kind of frame this around how this debate is playing out to the downside, predominantly today. You've also got Wolf research on semis and momentum. They say how the next bounce in semis unfolds will be extremely telling as longer term momentum is cresting and on the verge of breaking. Following the parabolic advance, we'll need to see a powerful acceleration to reverse these headwinds. If not, this is the key point. The early stages of a topping process are likely upon us. Jenny, does that seem to resonate? A lot of people have called a lot of tops over the course of the past 10 years that have not really come to fruition. But is this time different? Famous last words.
- [07:56]
E
Yeah. So, you know, I hate, I hate talking about feelings, but it feels like we're in that topping process. And I think the reason it feels that way to me is because I'm not looking at just the semis. I'm looking at this from a much broader perspective. And I think, I think to think about the semis, you have to think about everything else that's going on. So, for example, dvy, which is a dividend ETF that I like to reference just kind of as a poster child for everything else, it's up like 0.1% or something today and it's up 15% on the year. And what their top holdings are, things like Verizon, Kinder, Morgan Dominion, General Mills, Target. And so the way I'm seeing, seeing this is that there's, there's valuation talk and valuation work really creeping back into what's going on. And the speculation trade of. To like, to infinity and beyond asking, you know, speculation putting a price on stocks that's fading. Well, valuation is coming back in. I've also been thinking of it, Dom, in terms of like, you know, what if, what if we're at a peak moment in stock friendliness and, and that would mean, you know, not that things are going to get terrible, but if we, if we think forward for the next year, like, do you really think corporate taxes are going to get lower than they are now? No. Is the regulatory environment going to get better and easier? Probably not, especially if we get a divided Congress is, you know, are earnings going to get significantly better. And to Kevin's point, Kevin said, we know the numbers are going to be good. We know those numbers are going to be good. Analysts adjusted the S and P up, up to up 24% year over year a couple of weeks ago as Q1 earnings finished up. So like we know these are good and now we have these big cash cows converting into cash guzzlers. So what if we're at this moment where it's kind of as good as it gets for now, then what does that mean for the future? What that means for the future is long dated cash flows are less valuable today and short dated cash flows are more valuable today. And this. So you've got short dated cash flows being more valuable. I think that halo heavy asset low absolute lesson still holds. And I also think you need to pay attention to where there is a target on the back of a company. So what's in the government or what's in society's crosshairs? And I think you want to get away from that. And if you look again at those, at those stocks that I mentioned that are in the DV Y etf, which are, you know, the kinds of things I invest in there, they're kind of like in the epicenter of the things that you'd want. You know, they have heavy assets, they've got low targets, they've got high cash flow. So I think, I think I feel like they're a topping in the semi because of what I see going on outside of it.
- [10:24]
D
You know, I'm not willing to say that earnings are going to be good in the absolute. They'll show good growth, they'll be good for any company. But will they be good enough for the market? That's the question.
- [10:35]
E
That's the case.
- [10:36]
D
And as we've seen with past quarters like Broadcom, great numbers, not just good numbers. Great numbers. But guess what? They weren't good enough in the aftermath of Micron reporting phenomenal numbers. Just not good enough to sustain the company's stock moving up.
- [10:52]
B
Forget about past quarters, just in the last week and long ago. Yeah, right. So the expectations going into many of these prints, even though they're going to keep reporting double digit earnings growth.
- [11:05]
D
So is it the expectation going to the print of a whisper number or is it holders saying this is going to be a great quarter, the stock's going to pop on the quarter I'm going to exit and they get the pop for a nanosecond and then they exit anyway. So we really don't know what's driving it. So the important thing is, you know, all the stuff you read, interesting, good data points, but you sort of have to ignore that. You have to pay attention to what your discipline is. The profit you're willing to take, the losses you're willing to tolerate and where you think it's going, not try to bet where other people, others think it's going.
- [11:38]
E
Right?
- [11:38]
D
And so, so I sold Micron. I believe there was more upside to it, but not at that point in time. Guess what? I made enough money, so why put that at risk, right? It was a great return the stock. So just know when to pick up the chips and go home.
- [11:54]
B
Okay? So to that point, if you are, I mean this is a trading desk right now. There are some shorter term tactical views that we take and there are longer term strategic ones. Because you brought up Buzz Lightyear and To Infinity and Beyond. I mean the Barclays team seems to feel like there is a Buzz Lightyear to infinity and beyond trade over the longer term. The comments are interesting. They talk a little bit about the tech volatility trade right now. They say while tech volatility may persist in the near term, we believe that the reset in positioning should ultimately prove healthy, creating more attractive entry points for long term investors. Targeting the structural AI theme. So maybe this is just a time where some of the weaker hands are getting out and creating a longer term opportunity for people who can wait 3, 5, 7, 10 years. Is that a good assessment or not?
- [12:46]
E
I think it's a dangerous assessment to put a broad brush on that. And I think you can look at the tech index over the last quarter, you know, and then bring it down to that level where tech, you know, tech was up what, 30, 31% for the quarter. You had Micron up 244% for the year and you have Salesforce down 31% for the year. And I think even within that AI space as we go forward three and five years out, it's going to be very much the same where you need to buckle down and like do your valuation homework. I don't think you can bank on just speculation and saying like, oh, AI for everyone. AI forever AI to infinity and beyond. If it has AI attached, I'm going to buy it. I think that trade is done, gone and I think there's like real granularity coming in and I think there is an increasing demand to see or there will be an increasing demand to see return on the investment that these companies are making. So I don't think you can paint that broad Brush. I just want to like beef on something else. But one of the things that I've been really frustrated about is looking at like as some of these stocks have really started falling off, looking at the analyst recommendations. So you look at Space X right now and you've got like every single analyst with a buy. I think there's maybe one that says it's like a performer or hold and the valuation targets are crazy, like twelve hundred dollars and stuff. Or you can look at Netflix and on CNBC Pro it says there's 52 analysts covering Netflix. Not one of them even has, has like underperform on it. No sells. And the lowest price Target says it's $80 and the average price target is like 112. And so I think there's going to be this moment of reckoning where people need to realize like you have to make money to actually be rewarded. And so I really think, yeah, I don't think you can just broad brush and say, yeah, it's all okay.
- [14:26]
B
So one of you guys is not broad brushing it. Kevin is not broad brushing it at all. Because Kevin, you actually added to a position in Nvidia a stock that at one point and maybe still arguably is the poster child of the kind of a revolution, industrial revolution that we're in right now. You added to it. And by the way, you're not the only one out there feeling that way because it trades at a Forward multiple of 20 times earnings on a 12 month forward basis. Some would argue that's almost a value stock at that point. Is there a reason why you can't be opportunistic about buying this trade if there are valuation at least tailwinds for some of these stocks?
- [15:01]
C
I mean, you using the word value investment in videos like music to my ears. So I appreciate that, Dom. I'll take the other side that Jenny just brought in with respect to Barclays because I'm not sure that they're painting a broad brush. I think they're looking at this and saying as things get a little bit more sane in certain trades there are opportunities. And I'll pivot specifically to our Nvidia position. Here the stock was 230, what, six weeks ago, four weeks ago. Here we're back down in the 200 range. And I do look at this as a company that's in a maturation process maybe a la Apple over its history. History, because lots of people made a lot of money over this name. You know, you could put 5 cents into Nvidia and then it's worth 5 million two years later. We're looking at it now as a true investment longer term. So they have an 80 million, excuse me, an $80 billion share buyback. They're paying a dividend which is close to a half a percent yield. Not enough yet for your dividend strategy, but enough for ours from a dividend growth perspective. And then if you look at what they're doing under the surface, this is almost at $100 billion a quarter in revenue. So I think that Jenny's point about which stocks are going to be specifically winners and losers is spot on. I'll just take Barclays back a little bit and say I don't know that they were painting a broad brush or at least I was thinking or talking my book as I was reading it. So I think there are great opportunities here and if you step in when there's problem, when things are under pressure, that's where you make money.
- [16:23]
B
Steve, I want to go back to a point that you made about whether or not you, you made this money in a memory name like Micron. There might be more to be had, but you want to protect what you've got and you take that, you raise the cash and you deploy it somewhere else at some point. One other place I'm curious, that you raised cash in has been an ancillary play on that AI revolution on the industrial side. And that's Caterpillar specifically. And I want to talk about the trade that you did because you sold that Caterpillar stake. And by the way, just from a valuation standpoint, I just want to bring it up for Relativity's sake. Sake different industries, right? Micron and Nvidia versus Caterpillar. But Caterpillar right now trades at around 35 times forward expectations versus Nvidia's 21 times forward expectations. How much do investors really have to toggle around with just where to take profits from and where to deploy them to?
- [17:13]
D
Look, that's insanity. And I said it while I own the stock, I wait. So I sold most of it by the way, and you know, I guess maybe even close to a month ago, a number of weeks ago. And this is tag end. And to me, 35 times forward, 12 is insanity. For a highly cyclical, capital intensive company. It's just lunacy. It should be in the mid teens and that's because Catch, you get a premium, a premium to its historical. Now what we don't know is how long this is going to be. But what we do, the cycle we do know it's a cyclical company, always has been, always will be. There are different cycles that drive it and that same thing with Micron. So Micron, I don't think it's going away. I just think the markets lost track of what, how this stock trades historically and why it trades that way, which is a commodity company and they add capacity, Cats adding capacity and eventually dries up. Now what we don't know is how much pre ordering has happened and this applies to Cat and Micro and all the others. What we do know is Meta came out and said, hey, we're going to get into the cloud business. Now is that because they see a tremendous opportunity in cloud or is it because they bought too much and now they want to put what they bought too much? So we're going to come back same cycle with all these semis where there was over ordering because nobody could get their orders filled. So it's like when I allocated all the IPOs when I was at Lehman and you know, funds would put in an order for 10% in the book knowing they're only getting 2% right of what they, what they wanted. So it's the same type of phenomenon. It's the same phenomenon in every single industry. If supply is tight, you order more than you need and if you get it, great. You're surprised if you don't. Cat, specifically, it's just basic. It's. I'm not saying the end is over for the stock. I do expect to report a good quarter but for me valuation was just too much. As I look to raise cash, I've raised significant cash. This is just one that had to go.
- [19:19]
B
Can we talk a little bit more about. Because you brought up the idea of the kind of the mega cap hyperscaler kind of theme that's going on here with the spend and the ordering and everything else with Metta. I also want to bring in a couple of names that we're keeping a close eye on right now. Apple has been on a quiet run on a relative basis compared to the Mag 7. It at one point briefly retook the most valuable company in the world kind of level. We're watching the $5 trillion market cap level at this point. This is not the first time that Apple has been talked about as a relative value within Mag 7 and a so called, maybe even safety trade. Right. For some of those things that that's
- [19:59]
D
why money is going to. In my view, nothing changes in fundamentals. And Apple, they're still way behind in AI with no plan that we know about to get there. It's still a Consumer product company valuation is a little more reasonable than it was. It's still slow growth. It's money looking for a home and then making a story out of it. So that to me is. It's pure and simple. That's what it is.
- [20:21]
B
Kevin, you have a story on Apple though, because you've done some work in trading positions around it. What exactly have you done with your Apple?
- [20:28]
C
To Steve's point, there's a lot of money going into it, but 2.5 billion devices is no joke. And if we can deliver the AI on these 2.5 billion devices, that's why this stock is working. So I don't think we're near the end at 330, but what we did, Dom, is we wrote a covered call on the position. So we've got a 350 strike. We still got $20 of upside. We brought in a nice premium. We covered half the position. If it stalls here for a little while, we get paid a little option premium, top of a modest dividend. If it goes up and we're out at 350 on half of it, well, heck, this thing was $300 also a few weeks ago. So I mean, I love the name. We've, we've been in and out of this for the past 15 years. I always talk about the fact that I love the company. I don't always love where it's trading at. So it's getting up against the multiples that you get a little nervous here. But I think the next cycle with respect to the flip phone, what they're doing with China with AI, there's a lot to like about Apple and I would not be abandoning it here. The covered call isn't a bearish statement. It's just harvesting a little volatility.
- [21:25]
E
It's just smart to cover calls. You're welcome.
- [21:28]
B
Well, especially when volatility is at a premium in certain parts of the market right now, you can be opportunistic with it. Other places you can be opportunistic are outside of that Mag 7 hyperscaler trade, but having a, an exposure to it. And Jenny, I'll turn to you for this one because you've been active as well. You've put on a position in a certain real estate company, investment trust that is kind of tied to communications and to wireless and to everything else. Talk to us about that.
- [21:55]
E
Right. So we added American Tower AMT, which has a 4.2% dividend yield, generates four and a half billion dollars of cash. But interestingly, Dom, we didn't add it to our dividend strategy. We added it to our discipline growth strategy because there's a decent earnings growth trajectory ahead for it. So what they have is they have 150 cell phone towers in 22 countries. And you see that the stocks traded down like 45% since its peak in 2021. That had some to do with the T Mobile Sprint merger. And then there is another layer of pressure on it that came as and we saw this, by the way, the same thing that I'm going to talk about when I added Comcast to the dividend strategy a few weeks ago. But with this Space X ipo, there is so much focus on Starlink and how Starlink so amazing, which by the way, it is, but how that was just going to take over all, you know, all the traditional forms of broadband and wireless and it was going to get rid of towers. It's not so far, Starlink's really a compliment. I mean, even professionally for us at Gilman Hill, we've used Starlink as a compliment, but it's certainly not a replacement. It's just there's physics involved that make it not trustworthy or not dependable quite enough. So you've got this stock that was on sale, you've got a huge free cash flow, you yield, you've got huge dividend trading at 14 times FFO. It again fits into this, into kind of the middle of the Venn diagram of all the things we're looking at. So it's not like, hey, let's go hit a home run. It's just here's a stock that's going to mint cash. That's going to be highly necessary for probably decades to come.
- [23:22]
B
By the way, we're just getting started. We mentioned a couple of the names that we're going to delve further into, like Netflix, like SpaceX and everything. But coming up is our chart of the day. Netflix again under pressure on its earnings report. But one halftime committee member, as we alluded to, is buying the pullback. Those details ahead. Halftime is back after this. Commercial break 2 minutes time. Good morning, students.
- [23:50]
A
Soccer teaches us teamwork, leadership, geometry, art,
- [23:54]
B
physics, and a lifetime of lessons we can take with us long after we leave the field. That's why bank of America and US
- [24:01]
D
Soccer are committed to helping bring soccer to every school. Soccer is officially in session. Raise your hand to help bring soccer
- [24:11]
A
to schools@bofa.com soccer at schools hello from Etsy. So we've got a pretty personal question. What moments mean the most to you? Big firsts like your first home, baby or pet? Or what about hosting a party, getting a freelance gig, or ending a toxic relationship? One moment isn't bigger than the other. They're all special. And for each one, there's an Etsy seller who makes and picks the perfect piece. Like custom drinkware, personalized portraits, jewelry, and more. Celebrate your moments and celebrate being human with Etsy.
- [24:45]
E
Not every sale happens at the register. Before AT&T business Wireless checking out customers on our mobile POS systems took too long. Basically a staring contest where everyone loses. It's crazy what people say during an awkward silence. Now transactions are done before the silence takes hold. That means I can focus on the task at hand and make an extra sail or two. Sometimes I do miss the bonding time.
- [25:09]
D
Sometimes AT&T business Wireless Connecting changes everything.
- [25:30]
B
All right, welcome back. We've got a news alert on shares of Metta platforms which are moving off their lows of the session right now. Let's bring in our own Pippa Stevens. Pippa, what can you tell us?
- [25:39]
A
That's right, Dom. So Meta is reportedly in talks to lease computing power to Anthropic. This is according to the New York Times, in a deal that could potentially be worth $10 billion over two years. Now this does, according to the report, mark a potential step toward a new AI business for the social networking company. And again, this could be worth some $10 billion over two years, Dom.
- [26:02]
B
All right, Pippa Stevens, thank you very much for the news update there. I'm going to go to you for this one, Steve, because you had just alluded to Metta, the excess compute, the leasing, the Neo cloud type stuff, the reaction here, I mean, is this something that we should maybe focus a little bit more on hyperscalers now, giving out that capacity, not giving, I should say, financially benefiting from it.
- [26:21]
D
I don't know how many others have it, but think of what that's going to do to data centers. Think about what it's going to do to others, which is that it's going to lower, that it's going to lower prices. Right now we don't know. While this is a good headline and has cut the drawdown today and matters significantly, we actually don't know what their margin is going to be on that. So what did they pay for it versus what are they leasing out? I don't think we'll ever know those numbers. But, but I should create a new
- [26:50]
B
metric, net interest margins for the financials and net compute margins for these.
- [26:55]
D
That's a good one. So, so that's really the Question how many others have done this? And does that back into the chain where you lower your price, you know, that you're willing to pay for compute.
- [27:07]
B
So everybody on the, everybody on the desk owns meta platforms, by the way. So Jenny, what about you?
- [27:11]
E
Here's my bottom line on it. What I like is that we see Mark Zuckerberg being financially savvy and I like that it's a statement of him maximizing returns. I don't really need too much more on that for this move.
- [27:22]
D
Well, if not, maximize returns, cutting his losses.
- [27:26]
E
Okay.
- [27:29]
D
No, he, my view is he's. And I said my view is he's playing chess.
- [27:34]
E
Yeah.
- [27:35]
D
Microsoft is playing checkers.
- [27:36]
E
I think that's right.
- [27:37]
C
We'll find out with earnings with the guide and what their capex looks like. Because if that comes down, then you know that this is a problem where they've overspent and then that could be something that has a ripple effect across.
- [27:47]
D
Yeah, but, but there's so many companies that by accident. Right. Gone into, tripped into a great business. Now, I'm not underselling Zuckerberg because he's brilliant, but think of what he's done. The businesses created.
- [28:00]
E
Yeah.
- [28:00]
D
Since, since Facebook launch. And going to cloud is brilliant. There's going to be so much need.
- [28:06]
E
And you also see him maturing and being flexible over and over. You know, he became flexible when he's like, okay, fine, we're going to pivot to efficiency. And the maturity that he's shown over the past 20 years is pretty exceptional. So I like seeing this. It's just
- [28:20]
D
my largest position.
- [28:21]
B
Perfect. So from one mega cap comm services company to another one, that's. It's very much in the headlines today. Let's talk about Netflix. It is our chart of the day for its worst day, by the way, going back to April 2022 following its earnings report. Let's get the news and the context with Mackenzie Sagalos on that big drop. Mac, what can you tell us?
- [28:41]
A
So, dom, at least 17 firms cutting their price targets on Netflix after the company reported slowing revenue growth and a weaker Q3 outlook, which would mark a third straight quarter of deceleration. The debate here really centers on engagement. Netflix says total viewing hours rose 2% in the first half of the year, slightly faster than 2025. But JP Morgan says that viewing fell in the US and Canada. Wolf calls the broader picture a murky mosaic and cut its 2027 revenue outlook, really suggesting that the slowdown could last longer than investors had hoped. And that's why Bernstein is focused on whether live programming can offset the weakness by driving outsized signups and ad revenue. There's also an M and A overhang. Citi saying investors are still pricing in the risk of a major acquisition despite record buybacks by Netflix. So bank of America, they may sum it up best the quarter changes. Neither the bull nor the bear thesis really leaving the stock without an obvious catalyst. Shares are down nearly 50% over the past year and seven and a half percent right now.
- [29:41]
B
Dom. All right, Mac, thank you very much for the update on Netflix, currently down seven and a half percent off at session lows. By the way, one halftime committee member in Malcolm Etheridge actually just bought the pullback and Netflix added to the position. He joins us now. Malcolm, why Netflix today on this dip and are you scared that there could be bigger dips to come in the coming months?
- [30:05]
F
Hey Dom, so I we talked about this on the show yesterday and the thing that I really liked about Netflix initially was the fact that one, they've already gotten past that WBD distraction. They finally sort of decoupled themselves from that and that was initially the pressure on the shares. However, they've increased prices over the last two years and they've also increased the paid subscribers by 40 to 50 million people over that same time. So we're seeing the street and the actual consumer going in two completely different directions. So to me, this is a chance to own a really great company that exists in a lot of people's lives and is not going away anytime soon, that has pricing power. They've shown us that because I just mentioned the price increases and it's the ability to own it at about a 45 to 50% discount from its most recent highs. And so to me, the sell off following the earnings, I completely get it. The bears really wanted to hear something positive about the engagement numbers to make them change their mind and instead they got the opposite. Netflix basically said instead of telling you how bad our engagement numbers are in the near future, we're just going to eliminate that report and only tell you about it once a year, which is not what you want to hear. However, they did the same thing last year when they said they weren't going to tell us about their paid subscribers anymore and the market seems to have forgotten about that metric altogether and we can kind of estimate what it looks like. So to me this looks like a great opportunity to be buying if you are a long time, long term minded investor because this is not another semiconductor company that's going to be up 80% in a month. But it's an opportunity to own a really quality company that's basically a utility at this point for a very cheap price in comparison to what you'd have had to pay for it about a year ago.
- [31:52]
B
All right, Malcolm Etheridge, thank you very much for joining us to give us the case for why you bought the dip. We appreciate it. Have a nice week. Weekend, sir. All right, let's go to Kevin because you actually earlier this week sold some of your position going into this earnings print. Why? And would you maybe take profits on that kind of position and then reposition for a higher on this particular pullback?
- [32:16]
C
So we sold some on Tuesday, Dom. At 74. I wish we had sold it all. I like Malcolm's entry point here. I love the long term thesis on the stock, but when it comes to streaming content does matter. So let's just think about your friends and neighbors, boys, Dutton Ranch House of Dragon, the Bear. These are shows that people are watching. None of them are on Netflix. So for the time being, I think they need to straighten out the content if we're going to see the stock get back on the right trajectory. How can they do that? Well, I think live sports is the easy answer. So you think about NBC and what they own the property in NFL football, NBA, the Olympics. Imagine if Netflix was to pivot and own those properties. Now you've got something where the eyeballs are not only going to be there, but they're going to stay there. Nothing draws the viewer like Monday Night Football. Imagine if that was on.
- [33:04]
B
I mean they're kind of already putting that marker out there. Right. So.
- [33:07]
D
So I exited the rest of my position earlier in the week and the reason why I did it and I mentioned that, look, I could be wrong. So typically have quarters where they bounce back after that quarter. I would just frankly edit what Malcolm said, which is that this is a. Where you said this is a good time to buy it. This is another good time to buy it because it's continued to miss. And the issue is, and they said this very clearly, we're worried about growth. That was my concern, remains my concern. Head of landscape has been enhanced quite a bit. It I think that, you know, if Malcolm want to park money, there are other places to park it. I think this is dead money for at least the rest of the year and maybe longer. Now if they do buy, if they do try to engage in a bidding war for sports, you know, good sports, that's going to limit their ability. Number one, get back money shareholders and to get other content and see other content, not the same sports that people sign up with for a trial, one day or one week trial. It's the constant contact that you're streaming repeatedly the 10 episode series, so forth that keeps viewers engaged. So I think it's dead money. Yes, it's a great business, solid business. Yes, it's utility, but you don't get paid like utility, as Jenny will tell you. So I just don't see any point in buying it here.
- [34:30]
B
What do you think?
- [34:31]
E
I don't think it's the utility and I think what Steve said is Steve said the competitive landscape has been enhanced. I think that's a very kind, very gentle phrasing of what's gone on. I would say the competitive threat is dramatically increased versus any time in Netflix's history. So today content can be created more cheaply, more easily, more robustly thanks to the amazing AI generation tools behind it. And that is a significant competitive threat to Netflix. Trading at about 18, 19 times. Right. Markets at about 20 times. It should have a bigger discount to the market because this thing's under threat. Like however you cut it, it's under threat. Unlike Disney, where Disney and I hate going into Netflix, Disney. So I really don't want to drag there. But just Disney's content, for example, is more of a library. They're not totally dependent from a content perspective on creating new content. Netflix is much more, is much more dependent on new content creation. So they're competitive, competing in a very competitive space already. And then in the worst part of that, I think, which is new content creation is what drives yours. Everywhere I go, even sitting on the desk sometimes you're like, oh, I stopped. You know, I cut off my Netflix. I'm just not using it, I'm just not watching it. There's so many other places to go for interesting things to watch. So I think it deserves a multiple. I don't know of like 15 times or 14 times, but it deserves a discounted multiple. That's where I might ever consider it again. But still with roughly a market multiple at best, it's dead money.
- [36:00]
B
There are some folks who believe that that higher multiple could be commanded if they get the capital budgeting correct. Between the pivot between content, movies and studios versus that live sports component and what the ROI is on investing in both of those vis a vis your AI creation and everything else.
- [36:19]
D
So that's, that's a completely different analysis than our Is subscription growth accelerating? They've got very, very low churn. Churns almost, I mean, two and a half, two and three quarters. That is negligible. But where does the growth come from? You see, their issue is, is that they've had to shortchange the American consumer where it started in terms of viewing to go global.
- [36:40]
F
Right.
- [36:40]
D
So they have to dilute their budget globally. And you may not have the same growth over there as you have here.
- [36:47]
B
All right, guys, big conversation. We need to have more time for that one. Coming up next, though, Mike Santoli joins us now with his midday word. Keep it right here. We'll be back after this.
- [36:59]
A
My community gives me the confidence to ask myself, what would you like the power to do? So every time I'm on the pitch, I play for more than myself.
- [37:09]
D
Oh, what a tackle from Naomi G. Absolutely brilliant.
- [37:14]
B
Bank of America champions U.S. women's national
- [37:17]
D
team member Naomi Girma.
- [37:19]
B
And everyone who dares to ask, what would you like the power to do? Bank of America proud to be the
- [37:24]
D
official bank of US Soccer bank of
- [37:26]
A
America NA member fdse.
- [37:28]
D
Before we had ATT Business wireless coverage, our delivery GPS wasn't the most reliable.
- [37:33]
F
Once our driver had to do a 14 point turn to get back on route.
- [37:37]
D
A 14 point turn.
- [37:39]
F
An influencer even livestream the whole thing.
- [37:42]
D
Not good for business.
- [37:44]
F
Now with AT&T business wireless routes are updating on the fly and deliveries are on time. And the influencer did get us 53 new followers though.
- [37:52]
D
AT&T business Wireless connecting changes everything. Which are America's top states for business. Get all the data and complete state by state analysis. See how your state measures up. America's top states for business. See the full list now@topstates cnbc.com.
- [38:27]
A
Welcome back to the Halftime Report. I'm Pippa Stevens with your CNBC news Update. The man accused of breaching security at NBC's Today show has pleaded not guilty to hate crime charges. Police say 41 year old Andrew Truelove entered a restricted area at Rockefeller center, asked for Al Roker, then confronted Craig Melvin while shouting a racial slur. No one was hurt. Bail was set at $10,000 and protection orders were issued for both hosts. Coca Cola says a cyber attack has temporarily shut down Fish Life milk production in the U.S. the company says an unauthorized third party accessed Fair Life's production systems in what it believes was a ransomware event. The company says product quality and safety were not affected and Fair Life operations in Canada are running normally. And Britain is getting a new prime minister. Andy Burnham, the former mayor of Greater Manchester, has been named leader of the governing Labour Party and is expected to take take office Monday. He replaces Keir Starmer, who is stepping down after a rebellion inside his own party and weak election results. Burnham says he wants to move power away from London and focus on the economy, public services and restoring trust in government. Dom, I'll send it back to you.
- [39:40]
B
All right, Pippa, thank you very much for the news update there. Thank you. Senior markets commentator and overtime co anchor Mike Santoli joins us now with the midday Word. We are in some ways a little bit clearer now than we were just a couple of hours ago with regard to how this market is starting to digest things. So what exactly do you think is going to be that next possible step beyond what we've seen with the sell off today?
- [40:03]
D
The most evident thing continues to me to be how the market reaches into its bag of tricks and always pulls out rotation, always pulls out this way of kind of trading one thing off another, mitigating the losses in the highly pressured groups of, of semis and essentially saying we can hold this range for now. So it's not a clear message to me coming from what actually is working today. It's net defensive, you know, a little bit of pharma doing okay and, and things like that. I do think you have to give credit to this market for not fully losing its composure. I've been questioning for a while how, how much we can expect of this to continue where you're not going to have these violent moves in individual stocks and sectors spilling into the broader tape to just sort of make it a little messier. So give it credit. We started we first hit 70500 in the S&P May 14th. Keep talking about that Cerebras IPO Day. Lots of other good stuff going on. And I think the big question the market's been struggling with is have we overplayed the AI Horizon hardware bottleneck trade? Now that we've dialed back on that,
- [41:09]
B
do we have another answer to that point? And I'll leave it with this. The DRAM ETF is now up 3 1/2% on the day.
- [41:16]
D
I did note that, yeah, Micron is, you know, down a lot but found
- [41:20]
B
some footing and Sandisk has as well and all those others. All right, Mike Santoli, we'll see you on closing bell overtime later on this afternoon. All right. Coming up next, our top calls of the day. Keep it right here.
- [41:31]
C
Foreign.
- [41:44]
B
Welcome back to the Halftime report. Let's get to our calls of the day right now. We're going to start with one on the hospitality and leisure side of things. That's Marriott. It's over a reiterated overweight. Over at Morgan Stanley, the Target goes up to 380 bucks. It was 350. 53 over at Morgan Stanley. Jenny, you're a Marriott owner.
- [42:00]
E
Yeah. It seems like every week someone's loving Marriott even more so. We've owned this from the beginning of our growth strategy inception. It's up 425% and we'll probably own it for the next 10, 15 years too. It's a, as Steve says, a permanent compounder. And they've got earnings growth of mid teens. It's driven by the global demand for travel. There are 618,000 new rooms coming on in development. It's just a great, great company. Great story. A little expensive, but again, something that you ride out those valuations.
- [42:27]
B
All right, let's stick with the consumer here. Dick's Sporting Goods reiterated a top pick at BTIG with a $300 target price. And Steve Weiss owns Dick's Sporting Goods.
- [42:36]
D
Well, I do own it. I do like the position quite a bit. I kind of read that report because I don't know how you get to 300 on this. But if that's a long term target, they can do it. Look, this is, this is one of one in terms of, of national franchise, terms of buying power, in terms of being a destination for sporting goods. You still want to go and try most of them out and don't buy as much on Amazon or other online although they have a great online interface. So if you're doing, you can go right to Dick's.
- [43:04]
B
Yeah, I mean they say stronger brand portfolio, operational flexibility, strong, strong management. All right, one more to add to the mix. Chevron's reiterated a buy rating trading at ubs with a $220 price target. And Kevin, you're a Chevron guy.
- [43:18]
C
Yeah, it seems like a stretch, but I think they can get there. They're one of the most disciplined capital allocators in the energy space. There's a handful of names that you can go with. We love Chevron growing production fortress balance sheet and a growing active dividend.
- [43:31]
E
And you know what, yesterday there was saying that they're like Chevron's trying to figure out ways to get oil out of Iraq, you know, and working around, around the Gulf of Hormuz, the Strait of Hormuz, which is just. No, out of Iraq, Iran, around Iran, around Iran. Yeah. Like they are savvy and clever and quick.
- [43:47]
B
All right, coming up on your show here, the options action with Oliver Renick tracking some big trades in SpaceX. Today. He's going to break down those trades coming up next. Keep it right here. All right. Welcome back to the halftime report. Let's get today's options action. Oliver Renick is at the CBOE global markets platform in Chicago. What's the floor saying? What's the options action today, Oliver?
- [44:23]
C
Retail traders and Wall street have something in common this morning, Dom. They are both underwater on SpaceX. The banks that chose to issue an extra $11 billion after the stock's strong start a little over a month ago. And the traders who stormed into bullish call options are in the same boat today with SpaceX trading 9% below its IPO price of 135. The NASDAQ 100 was just half a percent off its all time high last month when SpaceX peaked. And the nine day straight route in the stock is giving fodder to bears who said the market couldn't handle all that supply. What's amazing is that these traders aren't going down without a fight. 80% of today's almost half a billion dollars in SpaceX options premium is tied to puts but over half of that is being sold and risk takers are diving right back into. Brace yourself, Dom. The 330 strike calls expiring next week. Those need SpaceX to rally 164% and right now are the most popular contract by volume.
- [45:25]
B
All right, Oliver Renick with that big, big movement there in SpaceX options, we appreciate that. Let's talk a little bit more because we had brought it up in the A block of this show way back in the first 10 minutes but SpaceX, we'll get into a little bit more. Steve, what exactly does the options action and the trading today tell you about what you think SpaceX should be worth?
- [45:44]
D
Well, I don't think anybody can tell you what it should be worth. I don't think that Elon Musk could tell you what it should be worth because you don't have the typical metrics to base on. Look, I think at this point Space X is, it's a great company. It's, it's a true innovator. And like Musk has done with Tesla and others, he's establishing the market. However, that doesn't mean it's going to be a great stock. Kevin, still an immature stock, but what do you think?
- [46:10]
B
One thing I just want to say,
- [46:11]
C
Kevin, we own the stock. I think long term it's going to be in really good shape. We've got good a get through this lockup period in the summer. I love that 3:30 July call. That's got some big kahunas.
- [46:20]
E
All right.
- [46:20]
B
All right, guys, thank you very much for that. Coming up, final trades. Keep it right here. All right, we're back with final trades. Kevin, we'll start with you.
- [46:31]
C
I'm going to go with Apple. Dom. Apple Intelligence is just getting started. I think it can help with a multi year upgrade cycle. And they don't have to win the AI race. They just have to to bring it to their $2.5 billion devices.
- [46:43]
E
All right, Jenny, one from our international strategy, Rio Tinto, four and a half percent yield. As China's export economy is booming, their iron business should do well.
- [46:52]
B
And Mr. Stephen Weiss, UnitedHealth had a great quarter.
- [46:55]
D
I think it continues to move higher. Steve Hemsley is a star. Wayne the cfo, tremendous.
- [47:01]
B
All right, that does it for the Halftime Report. Thanks for joining us. Have a great weekend. I'll see you at 3:00pm Eastern Time on closing. The exchange with Contessa Brewer starts right now. You've been listening to CNBC's Halftime Report, the podcast. You can always catch us live weekdays at 12 Eastern only on CNBC.
- [47:22]
A
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 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 yeah, maxing is
- [47:57]
D
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. 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.