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Halftime Report
Trading Big Tech’s Big Beats 5/1/25
00:44:01
Scott Wapner and the Investment Committee discuss big tech as Meta and Microsoft drive stocks higher with Amazon and Apple on deck. Josh Brown highlights his Best Stocks in the Market. CNBC Senior Markets Commentator Michael Santoli joins with his Midday Word. The panel reacts to the day’s biggest stock movers. Investment Committee Disclosures
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- [00:00]
Jenny Harrington
What does it mean to live a rich life?
- [00:03]
Josh Brown
It means brave first leaps, tearful goodbyes.
- [00:08]
Jenny Harrington
And everything in between.
- [00:10]
Josh Brown
With over 100 years experience navigating the ups and downs of the market and.
- [00:15]
Jenny Harrington
Of life, your Edward Jones financial advisor.
- [00:18]
Josh Brown
Will be there to help you move ahead with confidence. Because with all you've done to find.
- [00:23]
Jenny Harrington
Your rich, we'll do all we can to help you keep enjoying it.
- [00:28]
Josh Brown
EDWARD Jones, Member, SIPC how do you make an Airbnb a vrbo? Picture a vacation rental with a host who's showing you every room like you've never seen a house before. Now get rid of them. There you go. No host ever. Now it's a Vrbo. Make it a Vrbo.
- [00:47]
Scott Wapner
I'm Scott Wapner, and you're listening to CNBC's Halftime Report, the podcast the most profitable hour of the trading day. We record this live weekdays at 12 Eastern. Listen in. Carl, thank you very much. Welcome to the Halftime Report. Up. Scott Wapner front and center this hour. Two down, two to go. Big tech earnings in focus and driving stocks higher. Today, we're trading all of it with the investment committee. Joining me for the hour, Josh Brown, Joe Terranova, and Jenny Harrington. We're all at post nine. We're going for eight straight today on the S and P. And we are looking pretty good right now. We're about 1% there. Nasdaq, no surprise to anybody, is leading the way after Metta and Microsoft. By the way, look at this day for Microsoft. Now, you take out that massive rebound we had post Liberation Day sell off, and you don't often see a move of this magnitude For Microsoft near 9% Azure growth, Josh, was strong. Price targets going up 515, 520, in some cases even higher than that. And in many ways, this took the edge off the whole group, really.
- [01:55]
Joe Terranova
That's right, Scott, and let me put some meat on those bones. Microsoft being up 10% today is so notable that there have only been 13 other days of a 10% single day rally for Microsoft since the company's inception as a publicly traded stock in 1986. So this is really something that you've only seen a handful of times in the last 40 years. Of those 10% upside days, one of them happened in early April when it became clear that tariffs would not apply to technology names. So that was a big exhale stock had a huge single day. And then to have another one Today inside of 30 days, this is just really, I think, a highlight of the notable moment that we're living and trading in the numbers were spectacular. 346 versus 322. Revenue was 70 versus 68 expected. Like what else would you want to see? If you're long the name, what would make you sell it here? Revenue up 13% net income up 18% year over year. Think about how mature this business is and still finding ways to deliver top line and bottom line growth. Everyone was salivating for capex number you got exactly what you wanted excluding finance leases. 16.75 billion. That's a 53% growth in capex which not only made people in Microsoft feel better that they would continue to invest and we're not worried about the environment, it made everyone in every NASDAQ stock feel better given how much is riding on this continued capex boom supporting the current valuations in the, in the space. So look, this is an extraordinary comeback. It's a magnificent company. I think it's a little bit dangerous to look around and say oh There are probably 500 other Microsoft's. There aren't going to be. This is a very uniquely positioned company at a specific moment in time in this technology revolution and I think everyone involved deserves a feather in their cap. But I don't think that should extend to the next, you know, 200 names in the NASDAQ, in software, in semis, etc. We should just take this for what it is.
- [04:05]
Scott Wapner
So what was already the best mega cap performer year to date shows you exactly what's going on. A big sigh. That's a sigh of relief rally not only for the stock but it's a sigh of relief for the space, for this space. The hyperscalers are still hyper scaling and that's the bottom line.
- [04:26]
Stephanie Link
Datadog, ServiceNow, Oracle. Take a look at all those stocks today and you can see exactly what you're speaking towards Lifting the software cloud stocks name the azure growth at 35% well ahead of the consensus which was somewhere around 29 to 31. But I think what's most important about this is that I suggested the concept a few weeks ago about first in, first out and why I believe first in, first out really does work. In particular an environment where you have a market correction is it allows for the rebuilding of positions. And think what you have now. You have a huge price gap 397 to 428. In Microsoft you gapped. We came in below the 100 day and the 200 day moving average. So I would characterize positioning as incredibly lean in Microsoft relative to the other Mag 7 names. That allows for a tremendous Amount of portfolio rebuilds. And I believe that's exactly what's happening. And guess what? Price is not giving you the chance to do it at your convenience. Price is going to ultimately make you chase, but I think you'll be rewarded for that.
- [05:34]
Scott Wapner
Lean to your point on lean ownership. Lean ownership on the desk. Nobody owns it, but you guys can speak smartly enough on it because you, you know the story. Which brings me to Meta, which does have pretty widespread ownership. Jenny, you got that stock, it's only up almost 5% today. Beat their, you know, they met eyes, got nearly a billion monthly users. They increased their capex range for more data center investments. They're not slowing down in any way. Maybe if anything you can call it doubling down. Yeah, Jenny, price targets to 690 in a couple of places. And then, you know, you've had a bit of a reset obviously as people have reset their expectations. Pivotal is still up at 830. They dial theirs back a little bit, but they're still that high. What's your thought here on this quarter?
- [06:24]
Jenny Harrington
So I think, you know, our starting point is always today. And when we look across the Magic 7 for all of them, I still see matter as one of the most compelling even after this. It trades at about 22 times earnings. It's got mid to high teens earnings growth ahead of it. I think what to us really differentiates matter too is that the free cash flow generation is still high and you know, for our growth strategy the bar is a high free cash flow yield. But one of the things that that's differentiating too is there they're very efficient at growth. So they actually increased their operating margin from 38% last year to 41% this year. That's really significant. And this is something, you know Scott, that we've talked about when I've said we've, we've taken some off and if we, if we got in, you know, we got in way back and then when was it? End of 2020. Right. When it was the end of 2020 or end of 2021 when, when Mark Zuckerberg. Zuckerberg said I'm going to have our year of efficiency. And finally the stock took off. And one of the things who 22. Oh boy, it feels like 100 years.
- [07:20]
Joe Terranova
Ago after the stock crashed.
- [07:21]
Jenny Harrington
Yeah, I just, you know, at all everything around then just blends together.
- [07:25]
Scott Wapner
The mix of member, you know, Metta had its worst year ever, followed by its best year ever.
- [07:29]
Jenny Harrington
Right.
- [07:29]
Scott Wapner
And it was because of what you're talking about.
- [07:31]
Jenny Harrington
Right, right. But what's interesting then was, you know, or rather what we've worried about is if Mark Zuckerberg was very keen on efficiency when the shares were $89, when they're 400, 500, 600, 700, will he still be keen on efficiency? And I think the answer is yes. And he's proving that to be yes over and over, which is why we continue to hold the shares. But the valuation isn't crazy.
- [07:52]
Joe Terranova
So he's spending more money than ever. But here's what's different.
- [07:56]
Jenny Harrington
It's efficient.
- [07:56]
Joe Terranova
Well, Ken, money, he. That's number one, you're 100% right. But more important to the investing community, what is he investing on? The bet on AI is a bet that has an rock. I attached to it today.
- [08:08]
Jenny Harrington
Correct.
- [08:08]
Joe Terranova
The bet on metaverse in 21 was like sniff and glue. It was, it was like people buying virtual land and by buying and selling JPEGs. Nobody was into the Metaverse. The shareholder base loves the investments Metta is making and you can see that as evidenced by the share price.
- [08:26]
Jenny Harrington
And in defense of the Metaverse misstep, you need to kiss a lot of frogs, you know, and props to him for at least trying and staying ahead of it. And now he's getting it right. But yet to your point, you got to swing. Yeah.
- [08:35]
Stephanie Link
I also think you have to credit the management team for the acquisitions that they have made because that's actually what is funding the AI spending. If you think about, well, I mean, Instagram, once you start. Once you start.
- [08:47]
Scott Wapner
Once you start, of course it was. And they were all bought at just, you know, bargain basement prices, you could say, relative to what their value is today. But when you start bringing those things up, then you introduce the risk around the regulatory issues and you really don't know what the outcome of that is going to be. You know, people like Stephanie Link would suggest, okay, worst case scenario, they, you know, you look at the sum of the parts you spin. If you have to divest of certain things, it's worth more anyway. So that was her take on the other side. Which sets the stage for tonight. Amazon and Apple. Let's start with Amazon. It's down three straight days now. It's got a lot going on between the tariffs and then you had the controversy about the prices, the White House criticism. Kate Rooney joins us now. There's really been nowhere to hide. And that's the focus of your reporting today.
- [09:41]
Kate Rooney
Yeah, you haven't had this hedge, you know, in the past. It's been the E commerce business and cloud and there's been a little bit of this offsetting factor. We haven't had that lately with all of the tariff noise. But Amazon's guidance and forward looking comments with that in mind around tariffs is going to be key today. So investors have already been shaken up by the tariff impact. Stocks down double digits on the year then E Commerce of course the hardest hit in that category. Half of third party sellers on Amazon are based in China at least according to William Blair. There has been a lot of chatter around the advertising drag as well from China and then politics you mentioned Scott. That may come up. Andy Jassy, the CEO is expected if asked. We'll see what happens on the call. But that back and forth with the White House on tariff costs this week he will need to address that. And then there is the all important cloud business. You guys have been talking about 17.6% growth for us that is the number to beat. But citizens GNP this morning writing that investors are now expecting closer to 20% growth after what we saw from Microsoft and that strong cloud quarter. Watch for any changes in Capex as well what that means for the story. Last count was $100 billion in spending. And then any update from Amazon on what is actually contributing to us. Possible bright spot Amazon prime, the streaming service has been rolling out ads and moving deeper into live stream sports. We'll see if they get any sort of Netflix effect there. Scott, back to.
- [10:57]
Scott Wapner
All right, good stuff. Thanks K. Rooney with a good setup for us to talk about Amazon and we'll do it in the context of the rebalance of the Jyoti, which obviously happens at the end of every quarter. Your move is that you sold Amazon from the Jyoti.
- [11:13]
Stephanie Link
Yeah, that's correct. You know it's interesting because look, it's very difficult when you have 125 stocks that you have to buy because it's 100% equity holdings in this type of environment. So it's kind of measuring someone hitting 35 home runs in, in the juiced era in baseball where everyone was hitting 35, 40 home runs. It's basically 180 degrees difference. So Amazon, we purchased it in July of 2020 for the, the entry price which does matter for us was186,698. So if you think about that since July of last year, it's gone nowhere. Now you can make the argument, you could say okay, basically you bought it at the right time, the wrong time. Rather, rather, and I'm okay with that argument. But for what we look at when you have a stock that literally over a nine month period doesn't go anywhere then that momentum score is going to fall off dramatically. I am holding the position in the near term. Personally I'm going to hold the position. One of the reasons why is I like their score on the revenue growth. So I've got these two conflicting positions. We'll see if the rules based nature ultimately is going to be right in the Jyoti or basically neither one of us could be right. It could just basically move sideways. But that was the reasoning behind moving out of Amazon.
- [12:31]
Scott Wapner
You own it too Josh, what do you make of the move?
- [12:35]
Joe Terranova
Well, fortunately the position that I have here is personal and not part of a rules based strategy. So I understand why Joe's fund would be forced to sell it. It's not sell it and do nothing, it's sell it to buy stocks that are better on his screen. But from my perspective, Amazon is a core holding number one. Number two, it's one of my biggest conviction longs. I've said this before and I used the opportunity of the massive sell off two weeks ago to add to it in the 170. If the stock has a negative reaction to earnings, I'll probably do the same thing again. I would not go into tonight thinking that the odds are in your favor for some sort of explosive move. Allah Microsoft, of course it could happen. I have no idea what the earnings will be but I will tell you Amazon has experienced negative one day returns following 60% of its of its earnings announcements over the last five years. So this, this is not like a great buy the stock for earnings name the median negative return during that 60% of post earning sell offs has been minus 6.1% which means a lot of them were much worse. The worst one was negative 14. So I'm not going into tonight saying like that's it. This is the trade from my perspective. If there's an overreaction to something that the market doesn't like, I'll probably use that as a chance to buy more. Here are the big things that we're looking for. 100 billion in total 2025 capex is the expectation. I think everybody wants to hear them reaffirm that they reported 24% growth for the advertising business advertising revenue last quarter when they reported to 14.6 billion. Bank of America is looking for 18% so again maybe it's 17, maybe it's 19. If they can comment on that ballpark, people will feel better. The last thing I want to point out and we did a Chart about this. The other day, Amazon and Walmart's PE ratios have crossed. Amazon is a cheaper stock. Wrap your head around this. Amazon is now a cheaper stock than Walmart. Over the last five years, Amazon's averaged an 82 times trailing PE and today it's 34 times. Is that absolutely cheap? No. Is it relatively cheap? Hell yes. So I would point out this is not a huge expectation story, which does give you room for a rally post close. So that's where I stand on the name and I'll be opportunistic if it doesn't work out tonight.
- [15:06]
Jenny Harrington
So we've actually done a tremendous amount of work on Amazon for our growth strategy over the past few weeks. And you may remember I was on a couple weeks ago and I said, I think we'll probably get the chance to add this. And I was all excited. As it turns out, we're not adding it. And it's very disappointing and frustrating because we love this business, you know, number one in E commerce, number one in cloud and obviously everyone knows that.
- [15:24]
Scott Wapner
Why are you adding it?
- [15:25]
Jenny Harrington
No, we're not.
- [15:26]
Scott Wapner
I said why aren't you?
- [15:27]
Jenny Harrington
Why aren't we? Because here's the problem and it drives us nuts, which is we think they're going to continue to pour money into those businesses and what that does is it reduces their free cash flow. So when we look at a meta, the free cash flow is high enough for us, but on Amazon it's not because they've got operating cash flow of 150 billion, they're saying capex of 100, which billion. Which leaves free cash flow of only 50 billion, which leaves it at a two and a half percent yield. And when you have this like super tight discipline like we do, you can't justify that. And it's really frustrating.
- [15:55]
Joe Terranova
Why are they pouring that much money into capital?
- [15:57]
Jenny Harrington
Because they know it's profitable and they know it'll grow.
- [15:59]
Joe Terranova
But, but here, why not? So why not anticipate the free cash flow will come?
- [16:03]
Jenny Harrington
Okay, so.
- [16:04]
Joe Terranova
So it's not here yet. That's why the stock, historically this is.
- [16:08]
Jenny Harrington
Where you bump into valuation. And so in the case of Uber way back, it was very clear that that free cash flow was not just going to come, but come in short order and render the free cash flow yield.
- [16:18]
Joe Terranova
Too early to say that.
- [16:19]
Jenny Harrington
It's too early to say that. And so I just want to say, you know, it's frustrating to not own.
- [16:23]
Stephanie Link
It because do you want a better capital allocation strategy? You want them to buy back more?
- [16:27]
Scott Wapner
No, no, no.
- [16:27]
Jenny Harrington
You Know what I want? I want the market to tank and take the share price down for 15 minutes so I can get in at a free. It might, it might.
- [16:35]
Joe Terranova
What do you want? It was once. It was one. It was 160 like 10 days ago.
- [16:39]
Jenny Harrington
Right.
- [16:39]
Joe Terranova
What do you want?
- [16:40]
Jenny Harrington
So we've been working it. I don't remember the exact number that it has to be 159. It's got to be about 20% lower. It's got to be 20% lower.
- [16:47]
Scott Wapner
But I mean 160.
- [16:48]
Stephanie Link
161 on Amazon.
- [16:50]
Jenny Harrington
To your point.
- [16:51]
Scott Wapner
You know what I bet happened? I bet, I bet happened is when it went to 161, the market looked like garbage. You were afraid to buy it then because you thought it was going low.
- [16:59]
Jenny Harrington
No, no, no.
- [17:00]
Joe Terranova
I'm calling you out, girl.
- [17:01]
Jenny Harrington
Okay.
- [17:02]
Scott Wapner
As the market looked like garbage, nobody wanted to buy anything.
- [17:04]
Jenny Harrington
No, you know, I was buying it. I was buying Ryman on iPhone.
- [17:07]
Scott Wapner
Yeah, but you weren't buying this one.
- [17:08]
Jenny Harrington
No, because the work was being done and the numbers still weren't there. And I'm saying it because I think a lot of people don't own it and it's frustrating. But here's an important thing to remember too. To your point, Josh, the valuation is relatively cheap, but not absolutely cheap. We need to remember that Amazon and valuation matters. Amazon has tripled their free, their EBITDA in the last few years. Meanwhile, the Stock's only up 10%.
- [17:30]
Scott Wapner
That's right.
- [17:30]
Jenny Harrington
So valuation matters. And this is one where, where what I want to have happen is I want the shares to trade.
- [17:35]
Joe Terranova
This is where you might get your wish.
- [17:37]
Jenny Harrington
No mistakes by the company.
- [17:38]
Joe Terranova
Yes. Somebody said, like, what are you worried about? Well, not much, but like the big thing is not the results of the tariffs because they're reporting Q1 numbers and it wasn't a problem.
- [17:48]
Jenny Harrington
The power of.
- [17:49]
Joe Terranova
Yes. Morgan Stanley talked about this. 18% of the products on Amazon are imported from China. 60% of the third party sellers on the platform. And by the way, third party sellers are like 62% of, of all e commerce for Amazon. 60% of those sellers have, quote, some China exposure. And where that really, where that rubber hits the road is the third party sellers doing the advertising is where that ad business comes from. So you get hit twice, you lose the transaction and you lose the ad revenue. So that's if, if you're going to get your opportunity to buy this thing significantly lower, it's going to be because of that. In my, in my opinion, that's part.
- [18:30]
Scott Wapner
Of the reason that you know, Kate Rooney said there's nowhere to hide. And if I, if I move the ball forward a little bit, obvious tariff impact directly on Apple.
- [18:39]
Jenny Harrington
Right.
- [18:40]
Scott Wapner
How will they navigate that? The stock's up seven straight days. Okay, we're coming off that into the print. So does that raise the bar? Steve Kobach joins us now from Cupertino where he always is on earnings day with what the big issues are going to be here.
- [18:58]
Steve Kobach
Yeah, and you nailed it, Scott, it's tariffs. This is what we're expecting to really dominate the conversation on earnings today. And expecting in addition to that, the first comments from Apple today on how it's going to manage tariffs. Now here's what we know so far going into these earnings report about all of this. Now the Financial Times reporting last week Apple is planning to shift production of all iPhones sold in the US To India from China. Already making some in India, of course, but still China is heavily dominant there. India, though, is exempt for 90 days, unlike China from those tariffs. And China still has the so called 20% fentanyl tariffs on that country, even though Trump gave Apple that exemption on the Liberation Day tariffs from early April. But it's still going to take a while for Apple to ramp up production enough to fulfill the demand for all those US iPhones. That's up to 65 million units a year. That's according to the research firm IDC estimates. And we're expecting this to really be the theme of the earnings call today. Are we going to see prices, price increases? What will this do to earnings and margins? The plan has to be in place pretty soon though, Scott, because the new iPhone lineup is expected in just four months and many of those are going to be made in China. Scott.
- [20:13]
Joe Terranova
Hey Steve, it's Josh Brown. You are wearing the hell out of that shirt jacket and I love it. I wanted to just start there. In the first quarter, Apple shipments in China fell 8 to 12% and that's pre tariffs. Now you've got three substantial phone players domestically, you have Xiaomi, you have Honor and you have Huawei, of course. And they have made substantial inroads in that country at the high end for smartphones. And again, that's before all this tariff stuff we saw with Tesla in Europe and in Asia. When the populace of a country turns against a brand that's looked at as a symbol of America or a symbol of Trump's trade war belligerence, you really could have a downside surprise. And that as an Apple shareholder is the thing that I'm worried about. What Are you hearing about the potential for Apple to see even continued loss despite the fact that we have carve outs and all of these other kind of loopholes?
- [21:15]
Steve Kobach
Yeah, that's exactly right. And Josh, thanks for. I call this a shacket, by the way. It's part jacket, part shirt. But look, besides that, you kill what's going on in China. That. Well, that Huawei story is nothing new. I mean, we've been seeing this for a couple years now since Huawei came back on the scene and started making phones again. Every quarter they eat into Apple's market share there. Some of that could be nationalism and wanting to buy a Chinese homegrown brand. We've been seeing that trend for a number of years now. And of course that could accelerate. At the same time though, a couple of things that could be a little bit positive in China, Josh. One is the iPhone 16E, that's that cheaper model of the iPhone 16 lineup that is for sale in China. There's some ideas that maybe that could boost things. And then don't forget, Josh, there's also those government subsidies in China that is going to apply to some of the iPhone models. Tim Cook did hint last quarter that they might be seeing a little bit of a lift from that. But again, you are totally right, Josh. China has not been growing. It's been. That's been the story for many quarters now. And it does not seem to be anything on the horizon. At least that seems to be improving. One other thing that is putting that barrier to that or a headwind to that is Apple Intelligence, which still has not launched in China and that is obviously seen as a big catalyst to potentially boost sales there. While all these other Chinese brands have their own AI solutions, Chinese customers are really into the specs and technical aspects of all this stuff. So without launching Apple Intelligence in the country, that is another headwind. But Josh, you nailed it. This is. There is just no out right now for Apple in China.
- [22:54]
Scott Wapner
All right, the fashion forward, Steve Kobach, thank you very much. We will see you throughout the day and certainly afterwards when these numbers do hit the tape. So the strategy of yours, Joe, sometimes it taketh and sometimes it giveth.
- [23:08]
Stephanie Link
Yes, sir.
- [23:08]
Scott Wapner
And in this case it has giveth. You have bought Apple for the strategy.
- [23:13]
Stephanie Link
In October we sold it at 225 91. We bought it back. And the reasoning behind buying it back was specifically related to momentum. It's had a very strong near term recovery recovery off of that low of nearly 23%. That obviously contributed to a higher momentum score. I share Some of the concerns that Josh suggested to Steve surrounding what revenue growth is going to look like in particular coming out of China. And I look at this addition really in the totality of the portfolio and saying, okay, we're adding to the port. We're adding to the port portfolio stock that has a 6% weighting. Right. We are eliminating from the portfolio Amazon, a stock that has a 3.81 weighting. And we'll get to another Mag7 name later on that we eliminated from the portfolio. So I kind of look at that.
- [24:07]
Scott Wapner
When you're done with this, as a matter of fact.
- [24:08]
Stephanie Link
So I kind of look at it like, all right, we're stripping away 5%. We're adding 6%. And guess what? We don't, still don't own Microsoft. So from portfolio construction, I'm kind of okay with this. Although fundamentally I share the concerns that others have about how in fact Apple could accelerate the revenue growth without receiving significant exemptions from the administration.
- [24:32]
Scott Wapner
Okay, you sold Alphabet.
- [24:34]
Joe Terranova
Yes.
- [24:34]
Scott Wapner
The other move that you have, and.
- [24:36]
Stephanie Link
That strips away about around 2%. We bought Alphabet at 171, I believe, leave in January. So obviously selling out of that. Now that, that rings a register as a losing trade. We hold four Mag seven names right now. We held five previously. And the one that's kind of puzzling to me is we are still in possession of Tesla. I never expected that. Never expected that. We maintain the position in Tesla. But again, Tesla had a remarkable recovery in the near term off the lows. And I would say this, Scott, if you go to rank 125 stocks based on momentum, Tesla comes in at 125.
- [25:15]
Scott Wapner
Yeah. You got a quickie on Alphabet?
- [25:18]
Joe Terranova
No. I wanted to point out that we are heading toward LOD on all three major averages. I'm not aware of anything breaking it. Just like it looks like, okay, you have these earnings. Everyone was all excited. And the fade is. I mean it's not crazy, but it's, it's notable.
- [25:35]
Scott Wapner
Yeah, well, because you still obviously have the overhang issues which we really didn't talk about in any economic magnitude, only really what it is, an overhang to an Apple or a Microsoft to some of these mega cap names too. But let's do this. Let's, let's squeeze a break. Your NASDAQ is still obviously the Leader today. Up one and three quarters percent. Good for 300. We're back at this with committee stocks on the move today. A big sell off in one of Jenny's names she needs to discuss and tell you what her strategy is now we'll do it next.
- [26:12]
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- [27:42]
Steve Kobach
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Scott Wapner
But that's weird.
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Steve Kobach
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- [28:25]
Scott Wapner
All right, we're back. Let's show you shares of Oregonon. Look at that. Yikes. Down 26%. What's the worst Day ever. Oh, it's terrible for the name that Jenny owns. What's going on here?
- [28:37]
Jenny Harrington
So this one leaves me with a special version of angry. If you can feel my anger straight through the screen like, that's real. So they announced earnings, and they were fine. They beat by a penny. Sorry, they beat by three pennies. They reaffirmed this year's guidance. They said, we're going to deliver 900 million of free cash flow. By the way, the dividends, only 300 million, so it's completely covered. They've got like $3 and change of earnings, dividends a buck. And then they went ahead and cut the dividend from A$12 to 8 cents. Now, this is why I'm so angry. I'm so angry because three months ago on their earnings call, this is what the CEO said. He said, we're committed to our regular dividend as our number one capital allocation priority and for delivering on the promise of our growth products and pipeline. You do not say that and turn around three months later. What you see usually when these things happen is the language starts to get a little bit squishy. They start to call the big shareholders and say, hey, this is what's coming up. Oh, and by the way, the excuse they're giving on this is that they want to do it from a position of strength. And so they're going to deleverage. Okay, fine. You are already going to deleverage. The balance sheet is at 4.4times leverage. And they want to buy their way to grow selling. I'm going to have to. But I'm not doing it today.
- [29:45]
Joe Terranova
It's a $2 billion market cap just like this.
- [29:48]
Jenny Harrington
I got to keep riffing. Don't. Don't take me off my. Like, the anger needs to come out and, like, you know, channel somewhere.
- [29:55]
Scott Wapner
Go ahead.
- [29:55]
Jenny Harrington
I actually said I want to pick something very. I am. You know, in the old days, you'd pick up a phone and throw it across the trading floor keyboard for me. But, yeah, like, here's my phone. Okay, so Jim Cramer was on two weeks, three weeks ago talking about this, and he was quite negative on it. And even in his negativity, he said, I got to stress this. If the dividend is not an immediate concern, the company is not saying anything when talking about the dividend. So even Kramer, who's negative when I was positive, was very much of the belief that the dividend was safe. Kramer's criticism was that the balance sheet had a lot of leverage. There wasn't a lot of growth ahead. There Are maturities coming in 2020, and they need to deal with them. For me, where my primary focus was on the dividend, that was okay. That was surmountable. This is inexcusable. So to answer your question, Josh, what do I do? I don't sell today. What this company did that was so dumb was underestimate or misunderstand who their shareholder base was. The shareholder base is dividend owners. You wouldn't own this stock for anything else. It's like a 3% grower. So they've completely flushed out this dividend. This dividend shareholder.
- [31:00]
Scott Wapner
Can I ask you one question?
- [31:01]
Jenny Harrington
Yeah.
- [31:01]
Scott Wapner
Does anyone you know this way better than me? Does anyone ever cut their dividend at a point of strength?
- [31:10]
Jenny Harrington
Yes, actually. Yes.
- [31:12]
Stephanie Link
No.
- [31:13]
Jenny Harrington
Yes. Sometimes.
- [31:14]
Joe Terranova
Like.
- [31:14]
Jenny Harrington
Like, there was this. Okay. A lot. Okay.
- [31:17]
Joe Terranova
Not in other words, not often.
- [31:19]
Scott Wapner
Not really.
- [31:20]
Jenny Harrington
Not really. But the answer is occasionally. So there was, like, Farmland Partners.
- [31:23]
Scott Wapner
I know, but that. Whatever. But you get my point.
- [31:26]
Jenny Harrington
Fair enough. Your point?
- [31:27]
Scott Wapner
They try and say it's, we want to know.
- [31:28]
Jenny Harrington
You're right.
- [31:29]
Scott Wapner
I'm picking on dividend at a point of strength.
- [31:31]
Jenny Harrington
You're exactly right. Fine. Fair point. Well taken. Like, you know me, I go in the weeds. I'm like, okay, well, I can talk about, you know, why Farmland did it four years ago, but you're right. No one really does it from a point of strength. So extra BS on that. So, okay, so what do you do? You sell it, but you're spending too.
- [31:48]
Stephanie Link
Much mental capital on it.
- [31:49]
Jenny Harrington
I.
- [31:50]
Scott Wapner
We're spending too much time on it. So give us quick, what do you know?
- [31:52]
Jenny Harrington
People have followed me.
- [31:53]
Joe Terranova
You'll get a dead cat bounce out of it.
- [31:55]
Jenny Harrington
I think what's going to happen is right now it is trading at 3 times earnings, and they will buy their way to growth. And so the shares are not reasonably priced at $9 or $10. And I think if you say, should it be at 12, you know, should be at 13, then you can say, yeah, there's 20 or 30% upside from here. It's hard to find that in a market like this. So I sit patiently and wait for, yeah, a little bit of a dead cat bounce. And I'll tell you one other petty thing that I do. I take a lot of solace in the fact I go and I look up what the CEO owns in terms of shares and equity compensation. He's getting roasted today, too. So that makes me feel a little better.
- [32:29]
Scott Wapner
Okay. All righty. You good?
- [32:31]
Jenny Harrington
Want to know how I really feel?
- [32:32]
Scott Wapner
You good? Now you feel good.
- [32:33]
Jenny Harrington
I'm A little better. I'm a little better.
- [32:35]
Scott Wapner
All right.
- [32:35]
Joe Terranova
Should we get him on the phone? All right.
- [32:37]
Jenny Harrington
I don't think he works.
- [32:39]
Scott Wapner
Yeah. Leslie Picker, bail us out with the headlines, please.
- [32:43]
Leslie Picker
No phone throwing here, Scott. A federal judge just ruled the Trump administration cannot rely on the Alien Enemies act to speed up deportations. The Trump appointed judge finding the administration went beyond the limits of the 18th century wartime law. It used to deport people it said were alleged members of the Venezuelan gang. The Justice Department has yet to comment. The Department of Health and Human Services is working to develop a universal vaccine to target multiple virus strains such as influenza and coronavirus. HHS officials said today the vaccine would be an accountable alternative to the COVID vaccine and other treatments, but didn't say how much the project would cost, though. The Wall Street Journal, which first reported the story, said there would be a $500 million federal investment. And more than 80 Harvard University professors are pledging to take a 10% pay cut to support the school in its fight against the Trump administration's move to freeze billions of dollars of federal funding. The faculty said they were aware Harvard faces financial difficulties in, quote, its defense of academic freedom. I'll send it back to you.
- [33:50]
Scott Wapner
All right, Leslie, thank you. Leslie Picker. Straight ahead, Josh Brown's best stocks in the market list new name just hit the radar. Halftime. Back after this.
- [34:00]
Ryan Reynolds
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- [34:29]
Scott Wapner
A huge hour of earnings.
- [34:31]
Stephanie Link
Apple and Amazon reporting their reads on.
- [34:34]
Scott Wapner
Tariffs and consumer spending. Plus earnings from Roku, Airbnb and Block. John Ford, Morgan Brennan Closing Bell over time today, 4 Eastern. CNBC, SiriusXM100. All right, we are back and this is exciting. Starting today, CNBC Pro subscribers can get access to Josh Brown's best stocks in the market. They are names that Josh and his team at Ritholtz Wealth Management have identified based on a number of factors, like the stock's relative strength. Josh has a new name today that just hit the radar.
- [35:17]
Joe Terranova
Yes. What is it so Spotify and we wrote it up today. It's available on CNBC Pro. But one of the reasons why I think it's so important to talk about the best stocks in the market. My friend dearly departed John Boorman once said if you want to buy a stock because it'll go up, buy one that's already going up. Spotify looks incredible right now. It's under substantial accumulation. It is acting exactly like Netflix has been acting and there's a really good reason why. But I want to talk about that outperformance because I think that that sets this up for a really good second half. This is the best year to date performer out of the 20 communication sector stocks that trade on the New York Stock Exchange with a market cap above 10 billion, it is the second best one year performer behind only Reddit. It's doubled in the last year. It had this post earnings pullback. The earnings were phenomenal. This is now company that has approximately 700 million monthly average users. There are almost no companies on earth with a user base that size. And they are monetizing which is really key. Free cash flow has been taking off. Their premium subscription business is 254 million of those subs. And I like the setup here both for a trade or for an investor. So from a trading standpoint point you can use that key support level at 540. That's the bottom of that candle wick from right after they reported earnings. The stock recovered immediately the next day. That's a nice pivot for traders. For investors. What I would do is look at the 50 week moving average that has acted as a guardrail to the downside since early 2023. If it gets below there, something has materially changed. So long as it stays above above. I think you could ride this name. RSI is 54, so a lot of relative strength here. But not overbought. And I think it can get back to those 52 week highs. It's not far away.
- [37:15]
Scott Wapner
Joe, this is a stock we talked about yesterday, this week earlier, isn't it?
- [37:19]
Stephanie Link
We've been talking about.
- [37:20]
Scott Wapner
Bill Baruch came on and he said he bought it. Malcolm Efric and the stock went down a bunch.
- [37:25]
Joe Terranova
It did right back though.
- [37:27]
Scott Wapner
Yeah, right back. And you came right back.
- [37:28]
Stephanie Link
Still own it. Josh, how many, how many names are on the best list?
- [37:32]
Joe Terranova
It changes every day but on the case of Spotify it's been on the list for 23 straight weeks. Okay, so we're looking at this, we're looking weekly and we're looking for stocks that break down because either an earnings report or something they may get eliminated. They may not. What's notable in the case of Spotify didn't even come near the 200 day.
- [37:52]
Steve Kobach
No.
- [37:52]
Joe Terranova
And has held that uptrend. I'm using a weekly for an investor, a weekly average. Because what I don't want people to do is get whipsawed as they might have after that earnings report. The earnings report was good, the reaction was stupid and it was rectified immediately.
- [38:08]
Stephanie Link
So this is why. Here's why I love it and obviously I love it because I believe that you buy stocks that are going higher because they'll continue to go. I believe you buy the confidence and one of the reasons you buy the confidence is because the industry is moving towards systematic trend following. It's moving towards looking and observing price. Sorry Jenny. Those funds are not different. They're not. So in the case of Spotify, we purchased this stock on Halloween. It was clearly a treat at that time. We're up 54% on it. And when we initially bought the stock you saw the momentum begin to build. You saw the revenue growth begin to build, build. And then from there the acceleration happens. But the critical point of all this is you have to have stocks like this in your portfolio where you ride the winners. That is the only way you defend against an environment where markets correct. You have to be able to ride winners. And it's been proven that non discretionary rules based strategies are better at it than discretionary.
- [39:08]
Scott Wapner
All right, good stuff. We will do Shaq and the earnings.
- [39:13]
Joe Terranova
Quite as of the show.
- [39:14]
Scott Wapner
I know you are. Well, we're going to do it before the show's over. All right. And you can feel even better about.
- [39:18]
Jenny Harrington
What might happen after the show.
- [39:19]
Joe Terranova
You're in.
- [39:20]
Scott Wapner
Be sure to sign up by the way for CNBC Pro for Josh's best stocks in the market. You will get insight into each name plus exclusive market commentary. Go to cnbc.com Josh Brown or scan the QR code right now on your screen. It'll take you right there. Santoli is next. We are back. Senior markets commentator Mike Santoli is here at our desk. As I said at the top of the show. Two down, two to go. Yes, so far so good.
- [40:02]
J
And we talked about it before the close yesterday. There was a chance that some of the mega caps that had sort of taken their medicine, had their valuations compressed, maybe could protect this tape again and take control at least on a one day basis. That's what's happening today. Brett is so so today the S and P went up and just tagged that April 2nd level. Maybe it's enough for now in terms of the rally, but if the mega caps hang in there, they're not tariff impacted. I guess you can, you can say you're supported even though we now need some more hard progress before you get much upside in the cyclical stocks.
- [40:31]
Scott Wapner
And we'll see what happens obviously with Amazon and Apple couple after the bell that we can look ahead to the jobs report too. We'll do that at 3 today. But since Josh is here and you're going out to the Berkshire annual meeting with Becky, I thought, you know, I wanted to get your expectations and have Josh, you know, sort of give you his ideas on where things might be going from here. What you really want to hear more than anything else is what it's an interesting moment.
- [40:52]
J
The stock has done so ridiculously well relative to the market. It's been kind of quality on top of quality and defensive on top of defensive probably means it's expensive, but because of the cash holding, they're not getting the benefit of that. What I would want to hear maybe a little bit is if there's going to be a roadmap. I mean, there's a lot of optionality built into this balance sheet right now and built into the way the company is structured. They always say they're looking for businesses. They haven't made a significant acquisition in quite a long time. So I almost feel as if they're in this. We're happy to sort of sit there and let opportunities go past because we're not being penalized for being super conservative.
- [41:29]
Scott Wapner
Right. They're cash heavy and they're somewhat equity light. I guess you possibly say they've been selling down some positions and raising a bunch of cash and it's proved to be really prescient in this period of uncertainty and volatility.
- [41:41]
Joe Terranova
Look, if this stock were in like a 20% drawdown because people chose to focus on the negative, which is like a slowing consumer and the railroad business, the conversation about how much cash they have would take a much different tone and the move to make would be obvious. Buyback stock. It's literally not the case. This name made a new all time record high like within the last six weeks. That's number one. Number two, just versus the S&P 500. You could, you could chastise them for not buying businesses or doing transactions, but honestly this thing is beaten the s and P3 year, 5 year, 10 year and not by a little. It's not neck and neck. It's five year number. I think it's 170 versus 100 like so it's, it's really hard to say that the cash position is penalizing in any way when you have T bill yields still 4% plus and you know.
- [42:34]
J
And they own 5% of the outstanding.
- [42:36]
Joe Terranova
Here's a theory I'd love, I'd love to hear what people say this weekend. The theory is he wants to set his successor up.
- [42:42]
J
Yes.
- [42:43]
Joe Terranova
With a clean slate. But why would you at 97 years old or whatever he is.
- [42:47]
J
Almost five.
- [42:48]
Joe Terranova
Yeah, almost 95. And by the way, here's one other thing no one's talking about. Might have just done the greatest trade ever done by any human being outside of Jesse Livermore proportionally with Apple, bought the absolute bottom eight times earnings netting out cash and then sold the absolute top. Nobody is talking about this. And Buffett doesn't call himself a trader.
- [43:11]
J
He still owns a bunch. But you're right, he reduced that almost of it.
- [43:15]
Scott Wapner
Yeah.
- [43:16]
Joe Terranova
That's literally maybe dollar wise the greatest trade that any human being has ever done ever. Proportional to like and that could be.
- [43:23]
J
You know maybe a final flourish as opposed to some people thinking he wanted to do one last kind of eye catching deal.
- [43:30]
Joe Terranova
Do me a favor, say what up for me.
- [43:32]
Scott Wapner
You got it.
- [43:33]
J
Yeah.
- [43:34]
Scott Wapner
All I'll see you three. All of this obviously a big reason why you should tune in this Saturday, Mike, as I said and Becky will be in Omaha. It's going to be live on CNBC 8:30am you can catch that the entire meeting. It's going to stream on.com and plus don't miss it. It's a master class anytime you get a chance to hear from the greatest to ever do it. Warren Buck coming up we're breaking down the shake shack quarter with Josh next Shock reported which is why we're going to talk about it. Stocks not doing too much. But what'd you make of the report?
- [44:20]
Joe Terranova
321 million versus 328 million expected so, so very, very slight revenue miss earnings per share $0.14 versus $0.16. But the stock's okay because restaurant level profit is increasing. That was the promise when the new CEO came in that they were going to look at those unit level economics and boost them 17.3% year over year. Restaurant level profit growth. That's the most important thing. So when you think about this business expanding from a few hundred stores to a few thousand stores, which is the plan and you ask yourself like is this the kind of thing where they can execute along the way, not just make investments and wait years for them to pay off. There's your answer. It's coming from that specific number. So I'm still in shock. Staying long, ride or die, et cetera, et cetera. And that's the story.
- [45:12]
Scott Wapner
All right. And on a day when many are, you know, looking at McDonald's and talking about that, we go Shaq for. For obvious reasons. We'll take a break. We'll do finals next. Let's do final trades. Josh Brown, you start us off.
- [45:28]
Joe Terranova
I want to talk about Uber hitting 81 today. It's backed off with the market, but has not seen that level since February. This is a Stock that's up 35% year to date. Looks incredibly strong, and it's just.
- [45:41]
Scott Wapner
So he's talking about momentum.
- [45:42]
Stephanie Link
Yep.
- [45:43]
Scott Wapner
You front ran. I couldn't even make the segue. You're so excited about adding.
- [45:46]
Stephanie Link
I'm so excited about it. Added to Jyoti yesterday. How could we not own the top industrial stock year to date?
- [45:53]
Scott Wapner
All right, you still own it or no.
- [45:56]
Jenny Harrington
Yeah, still own it. Love owning it.
- [45:58]
Scott Wapner
Yeah. All right. A lot of love for Uber. Yeah. What's your final then, Joe?
- [46:02]
Jenny Harrington
Okay, wait, Joe. Oh, Joe, sorry.
- [46:04]
Stephanie Link
Final trade is because I know Josh.
- [46:05]
Scott Wapner
He was so excited about Uber.
- [46:07]
Stephanie Link
Josh is going to be dork dashing a lot of shake shack to his house.
- [46:09]
Scott Wapner
All right, enough strategy.
- [46:11]
Stephanie Link
Yesterday, entered a position in dash. Take a look at the chart.
- [46:15]
Scott Wapner
All right, Jenny.
- [46:16]
Jenny Harrington
All right. This one lowers my blood pressure. Shell, it trades at 10 times earnings, has a 4.3% yield. Is down 12% on the price of earnings. Sorry, price of oil. But meanwhile, the majority of their revenues come from lng, which is on super long term contracts. So good price right here.
- [46:30]
Scott Wapner
So it doesn't necessarily matter if oil continues to stay in this range?
- [46:33]
Jenny Harrington
Not really.
- [46:34]
Scott Wapner
Okay, we'll keep our eye on those stocks. Obviously. Today we see Uber move in a little bit, and the market is green across the board. I'll see you at 3. You've been listening to CNBC's Halftime Report, the podcast you can always catch us live weekdays at 12 Eastern only on CNBC.
- [46:56]
Josh Brown
All opinions expressed by the Halftime Report participants are solely their opinions and do not reflect the opinions of CNBC, NBCUniversal, their parent company or affiliates, and may have been previously disseminated by them on television, radio, Internet, or another medium. You should not treat any opinion expressed on this podcast as a specific inducement to make a particular investment or follow a particular strategy, but only as an expression of an opinion. Such opinions are based upon information the halftime report participants consider reliable. But neither CNBC nor its affiliates and or subsidiaries warrant its completeness or accuracy, and it should not be relied upon as such. To view the full Halftime Report disclaimer, please visit cnbc.com halftime reportdisclaimer. How do you make an Airbnb a Vrbo? Picture a vacation rental with a host who's showing you every room like you've never seen a house before. Now get rid of them. There you go. No host ever. Now it's a vrbo. Make it a vrbo.