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Freight Fright, Consumer Names Report and Uber's Slide 11/4/25
00:43:56
The freight industry is giving off Great Financial Crisis vibes, according to one CEO. The earnings trades as consumer names take the spotlight. Plus, can driverless cars steer Uber back in the right direction?
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- [00:01]
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Courtney Reagan
Are you ready to get spicy?
- [00:32]
Fidelity Trader Plus Announcer
These Doritos Golden Sriracha aren't that spicy.
- [00:36]
Courtney Reagan
Maybe it's time to turn up the.
- [00:37]
Fidelity Trader Plus Announcer
Heat or turn it down. It's time for something that's not too spicy. Try Doritos Golden Sriracha, spicy but not too spicy.
- [00:46]
Courtney Reagan
You're listening to the Exchange. Here's today's show. Thank you, Frank. Welcome to the Exchange. I'm Courtney Reagan. And today for Kelly Evans, stocks broadly lower as evaluation concerns once again take center stage. Palantir reigniting the debate of how fast and how far stocks have run down nearly 7% on the back of earnings, but still up more than 150% this year. More on that ahead. We're also watching consumer stocks with some in the books and more on deck. We look at the trade from here in travel, food and retail. An ugly season for Norwegian with shares on pace for the worst day since early April. And a quick check in on crypto Bitcoin down again, sliding 5%, getting closer to the 100,000 level, down 11% in just one week, hitting its lowest level since June. We begin with the markets as concern over sky high valuations begin to take hold. The S and P now trades at a forward P of more than 23, near the highest level since 2000. Remember what happened that year? This has been led by the trade which has pushed those valuations to sky high levels. AMD with a forward P of 51, intel with a forward P E of 165. And today's big focus is Palantir at a forward P of 259. So how concerned should investors be? Joining me now is Matt Mishkin. He's co chief investment strategist at Manulife John Hancock Investments. It's great to have you here. I mean, this is a really great place to start. Yesterday on the show, we talked about Palantir before they reported earnings. We didn't know what they were going to be. The analyst here said he had great expectations but still had a hold on the stock and a lower price target because of the valuation. Do you feel like we're in dangerous territory with Palantir and some of these Higher flying tech stocks. Because so much of the market, Matt has really ridden coattails of these trades.
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Fidelity Trader Plus Announcer
Yeah, Courtney Palantir is likely in the epicenter here of this kind of a euphoria for us. We don't like companies that are trading at 100 plus P E ratios, but the way that we're looking at valuations today is relative to the growth. So we use what's called a peg ratio. So it's the P E divided by the growth rate. And while Palantir's growth rate is pretty compelling, you're coming off a very low base. And we're looking for high quality companies with low peg ratio. So things like the return on equity, good balance sheets. Because to us moving up in quality makes a lot of sense when there's valuation risk. We want to make sure these, these businesses are built to last for a long time. We think about investing in a longer term nature. Earnings growth is coming in great technology is a big part of that. We're just trying to cipher through this market, find the best companies with higher away and low peg ratios.
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Courtney Reagan
Okay, so that is, that's interesting, the peg ratio as opposed to this P E ratio ratio that we're so focused on. Can you give us some examples now that we understand your theory? What are you looking at?
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Fidelity Trader Plus Announcer
Yeah, I mean within the technology sector, the earnings growth in aggregate is 20%. So while the, the P E ratio is elevated when you normalize aversa 20% earnings growth run rate, it's pretty reasonable. Frankly. Communication services is actually pretty compelling. Health care and even industrials, when you look into 20, 26 and industrial earnings have actually been really compelling in this quarter. So overall, the hardest part about this market has been keeping up with these great growth companies because of the valuations and the concentration risk. In our view, having that lens where you're normalizing the valuation to the growth rate can help you keep up with this market, but not necessarily outperform. We're actually okay keeping up with this market and not necessarily outperforming. We're trying to draft it. So being a bit behind is okay. In a more heavily valued market, we're just holding on to those companies that have the best growth rate earnings potential.
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Courtney Reagan
That, that is an interesting theory. I like that you gave us some examples there too. And I'd love to talk about obviously the economic situation that we're dealing with right now. It's a little bit hard obviously to tease one out from the other when we're talking about companies versus the economy, but because I think we have to sort of put them together when we heard what the Fed had to say or Jerome Powell at least and sort of the discussion that we've now understood might have happened before they came up to their decision. It seems like there is some fear that the economy is slowing down, but companies are doing fairly well. And you're talking about the overall 2025 earnings growth estimate being revised up. Also the 2026 earnings estimate being revised higher. So is the economy not having a drag down effect?
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Fidelity Trader Plus Announcer
So at the end of the day we need the US consumer to spend and the US consumer needs jobs. And so at the end of I can't spend money. I mean I know that's the biggest reason why the feedback loop of this AI narrative just doesn't work because I can make businesses more productive. One of our mega themes is doing more with less having businesses more productive. How do you invest in that? But at the same time we need consumers to have jobs in. The jobs market is weakening. We think the Fed made a policy mistake last week coming out more hawkish in a bit of a conspiracy theory. It may be that they're trying to be hawkish now because they believe that there's going to be a different Fed in terms of, you know, how they're going to attack their goals into 2026. That hawkish tilt going into the end of the year with the government shutdown may produce more of a negative impact to the economy than they're looking for. So we're just going have to see actions speak louder than words for the Fed. So they did cut. They are stopping Kutty, which are definitely dovish and good things for the economy. But being a bit hawkish at the press conference from Powell to us is not what you want to signal to the market in a pret. Pretty fragile economy.
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Courtney Reagan
I'd love to kind of finish this where we started talking about AI valuations and the names like Palantir that you said is sort of maybe becoming this poster child as we talk about this. I understand you prefer the idea of the PEG ratio, but does that mean Palantir is not something you would be interested in looking at?
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Matt Mishkin
No.
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Fidelity Trader Plus Announcer
Even with that huge. Well the good earnings growth, the multiple is too high to even still make that PEG ratio attractive. There's a lot of other really good companies that are not the meme stocks, the retail favorite, the kind of you know what what is being day traded a lot and they're a bit more boring. Boring is actually exciting in a market like this in our view. And so we're holding on to those higher quality companies that to us have the earnings growth to back up the valuation.
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Courtney Reagan
Matt Michigan with Manulife John Hancock Investments, thank you for joining us.
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Fidelity Trader Plus Announcer
Thank you, Courtney.
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Courtney Reagan
Matt sort of teased this next segment. Maybe not on purpose, but as the trade continues to dominate the market, the recent surge in LA laughs it's raising concerns that is already replacing corporate jobs, but that may not necessarily be the case. Steve Liesman has a closer look. Okay, what's the truth telling of this?
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Steve Liesman
Let's not jump to AI conclusions as a way to think about it. Courtney. A slew of mass layoffs, 8038,000 at UPS, 14,000 and Amazon, sorry, 34,000 at UPS, 1800 at Target. It's raised fears that AI is already whacking corporate jobs, but not so fast. In some cases, companies could be involved in AI washing, attributing job loss to AI, when in fact it could be a downturn in the business or restructuring Amazon CEO Andy Jassy. Jassy actually had to walk back the impression created by both the media and the company itself that recent corporate layoffs were linked to AI. The layoffs he said the day after were, quote, not really financially driven. And it's not even really AI driven, not right now. It's culture. UPS mentioned AI and automation when it announced 34,000 layoffs. But many of those cuts seem linked as much to closing buildings and right sizing the staffing levels in the wake of the online shopping boom from the pandemic. MIT economics professor David Autor telling NBC News, quote, it's much easier for a company to say we're laying off workers because we're realizing AI related efficiencies than to say we're laying off people because we're not that profitable or bloated. Goldman surveyed 100 of its investment bankers to gauge how AI is impacting hiring at their clients. They found AI related job losses could lead to workforce reductions of around 4% next year and accelerate to 11% over the next three years. Those are big numbers. But these are early days for the new technology responsible for mass layoffs. It could be coming, but investors need to be wary of regular old job cuts wrapped up in AI clothing.
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Courtney Reagan
I think this is really powerful and I think that this makes a lot of sense. How will we know? Is it just up to the journalists to dig a little deeper and get real answers? I mean, how will we really start to tell when it.
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Steve Liesman
Courtney, that is the next phase of our reporting, which is to understand how these big job cuts I can get how you had a person in there and there's AI and we can replace that person. We can even replace a small team. But I don't quite understand how you're going to say we're going to take 14,000 people and replace them with AI. We don't know how that process takes place yet. And we don't understand the companies. They have an off site place where they're monitoring what the people are doing. These are bespoke jobs, a lot of them. You know, this guy or this person handles this region and has these people working. Are they going to replace that person with the same software, similar software or some other build that's going to replace that person over here? We don't know yet. I don't know that the companies have figured it out. One thing we are seeing, first of all, we've seen low, low, low, low skill jobs be replaced by AI. We've seen entry level jobs. That's. Those two things seem to be the early part of this thing. What we don't know is how do they go about this process of creating AI that can replace vast swathes of people.
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Courtney Reagan
I see. And automation seems like also that's part of the, maybe those entry level jobs as well that may be powered by AI, but then it gets a little.
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Steve Liesman
Fuzzier when we get a little careful, like automation. Automation is what we've, for 300 years, since the Industrial Revolution. Automation is not AI. If you come and say we're going to use robotics, we're going to. Okay, I get that. That's automation. That's sort of regular productivity stuff, but it's not AI. I think the issue here, Courtney, is there's so much investment on the front end. Everybody wants to see the results, we're all hungry to see the results. And so we're a little bit, what's the, what's the right word to say naive or vulnerable to the story that says it's AI. When the question should be how are tariffs affecting your business? How's the consumer doing? I mean, in your thing that you cover retail, it's going to be in that business. But I also think there'll be a lot of AI washing in retail for things. Oh, well, we're going to replace jobs with AI. No, business is down.
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Courtney Reagan
Got it. Good stuff, Steve. Yeah, we're going to all have to sort of keep companies honest. Really try to dig in.
- [11:49]
Steve Liesman
Exactly.
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Courtney Reagan
Are these layoffs the result and how.
- [11:51]
Steve Liesman
Do you do it?
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Courtney Reagan
Yeah, yeah. Well, you tell me when you figure that out.
- [11:54]
Steve Liesman
Thanks.
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Courtney Reagan
Mass layoffs may be taking place at large companies, but the freelance economy is still booming. Global workplace firm Upwork posted record earnings in the third quarter thanks to AI and raised its revenue forecast for the year. The stock trading higher. On the news, it was up as much as 20% earlier, still up at about 11 and a half percent. Joining me now is Hayden Brown, President and CEO of Upwork. Hayden, thank you so much for joining us. I'd love for you. Just to get started, give me a clarifier on freelance versus gig because it's not always the same thing and what you're seeing in this freelance world.
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Hayden Brown
Absolutely, you're right. That gig is a tiny fraction of really a much bigger ecosystem around freelancing contingent work, which by the way is a $1.5 trillion market in the US and 28% of US knowledge workers are engaged in some kind of contingent or flexible work. So this is a huge ecosystem. The gig work is really a tiny component of small transact projects. You know, on our platform, projects under $300 in spend are only about 5% of total spend. And I think that's pretty representative of the market as a whole. This is really a market for big complex work by knowledge workers.
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Courtney Reagan
Okay, so when you're talking about freelance, I guess even still I understand what you're saying about the gig work being, being a small percentage of it. But is a freelance job as high paying as. As connected to a bigger company as a non freelance job? How should we look at that in the grand scheme of work? Is it as permanent?
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Hayden Brown
You know, this has been a rising tide for many years now and actually it's more and more a choice that people are making because they really want to work flexibly for themselves. They want to have their own kind of shingle hung out as an entrepreneur and frankly feel more control over their future in an economy that is very uncertain. What we hear from freelance workers is they're choosing this way of working because of all the benefits. And many of them have told us, you cannot pay me enough to go back to a full time job where I'm exposed to potential job loss. I'm at the whim of my employer. Instead I want to chart my own course. And we see this in every successive work generation. Gen Z is freelancing at 53% of that like knowledge workforce. They're choosing to work this way because it gives them control and freedom.
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Courtney Reagan
Wow, that's a big number. 53%. Now your gross services volume from AI related work jumped 53% as well, year over year in the third quarter. We just had a segment with Steve Liesman, our senior economics reporter, if you were able to hear any of that. But can you explain, explain what this means? What is AI related work? So in this case it's AI that is helping a worker, not replacing one.
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Hayden Brown
Yeah, let me unpack that. And Steve made a lot of great points in that last segment. We're seeing some consistent trends around. Number one, businesses of all sizes are trying to figure out how they can get ROI from these AI investments. 95% of AI pilots are failing. We saw that data from MIT just recently. And yet they also don't have the skills and expertise in house to do this work. So they're coming to platforms like Upwork to find the skill, talent they need. We have 250,000 AI experts on our platform and this is really where Upwork is an equalizer for small and mid sized businesses who are really trying to compete and get value, and also for large enterprises who are trying to build programmatic AI solutions.
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Courtney Reagan
Hmm, really interesting. And so your GSB growth did turn positive, up 2% year over year. You are expecting it to improve in 2026. Why? How are you confident it can continue after you've seen a number of quarters where it's fallen the other way?
- [15:19]
Hayden Brown
Yeah, we really turned the page for our business this quarter. After several quarters of work where we were rewiring upwork for the AI era, this work is now paying off. And we're seeing tailwinds from both our own implementations of AI in our platform which are driving better performance for customers. We have an AI agent called UMA which is helping customers get through their workflows and that's delivering $100 million of incremental GSV just from our AI investments on search and UMA, things like that. We're also seeing tailwinds this AI category as more businesses are looking for these experts. And also a little bit of fractionalization is starting to happen where, you know, whether it's layoffs or just new types of work are coming into the enterprise with AI at the core. The type of workers that businesses need on top isn't always in the shape of a full time employee. Often they need a flexible or contingent worker to come in and supplement AI. That's another tailwind for us that is really just starting to build and led that category of AI work to be, you know, growing 53% in the quarter. So those are tailwinds for us. In addition to opening up the small business market, we have a new business plus offering just for SMBs that grew 33% in the quarter. And we're also seeing a lot of tailwinds with our enterprise strategy. So when we look to 2026, we're very confident this is now a growth era for us and we're going to be accelerating next year on top of these strategies.
- [16:35]
Courtney Reagan
Really interesting stuff. Please keep us updated on how AI continues to impact work and the future of work with all those trends Steve and I were talking about trying to dig into and really get to the bottom of. Hayden Brown with Upwork, CEO and President, thank you for joining us.
- [16:49]
Hayden Brown
Thank you.
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Courtney Reagan
Well, coming up, fears of a freight recession are finally reaching Wall Street. After the break, we will tell you how companies are pivoting and where they're starting to feel the pain. Plus, we're cutting through the commentary on the consumer to bring you the trade on three names in earnings this week. We're talking restaurants, retail and travel ahead. The exchange is back right after this.
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Frank Collin
This is the exchange on cnbc.
- [17:18]
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Courtney Reagan
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- [17:46]
Fidelity Trader Plus Announcer
These Doritos Golden Sriracha aren't that spicy.
- [17:49]
Courtney Reagan
Maybe it's time to turn up the.
- [17:51]
Fidelity Trader Plus Announcer
Heat or turn it down. It's time for something that's not too spicy. Try Doritos Golden Sriracha, Spicy but not too spicy.
- [18:00]
Nordstrom Rack Announcer
CNBC's Changemakers 2026 list spotlighting women who innovate, lead boldly and are transforming business. Do you know someone who is rewriting the future? Nominate them now as@cnbc.com changemakers.
- [18:28]
Steve Liesman
From a competition perspective, you have to get more efficient.
- [18:31]
Courtney Reagan
There's no question about it.
- [18:32]
Steve Liesman
So the technology and tools that get.
- [18:34]
Courtney Reagan
You do that, then we have to do that. So we have to look at that. That was FedEx CEO Raj Subramanian talking to our Seema Modi about the impact that it will have on the workforce. Shares of rival UPS up 4% since its earnings last week. The Courier reporting it has cut more jobs than expected this year, eliminating nearly 50,000 roles. Frank Collin has been following this story for us. And Frank, it's not just drivers, is it yeah.
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Frank Collin
Hey, good afternoon, Courtney. It's not just drivers, also 14,000 corporate roles that were eliminated. But really it's the elimination of those 34,000 operational roles at UPS and the fact that it came ahead of the holiday season that's raising some eyebrows and concerns that AI or automation are taking jobs and what many people see as the real economy. So we've spoken to ups, they've said the use of automation and AI is not the catalyst, but instead it's a shift in their business, including the decision to reduce Amazon volume and focus on higher margin freight and health care. And in returns, since the company announced that plan to reduce their Amazon volume in Q4 fiscal year of last fiscal year, there's been a major decline in average daily volume falling from more than 19,000 packages per day in fiscal 24 to under 17,000 this fiscal year. Also, if you look a bit deeper in the numbers, if you look at both the 34,000 operational jobs and those 14,000 corporate jobs at UPS, eliminated, headcount overall has declined 10% this year, while volumes also fallen 13% year to date from the daily average last year. At the same time, over the last two years, Amazon has increased its staffing for operations both in house and forest delivery service partners, those are contractors that drive those blue vans and handle last mile delivery. They've also seen double digit growth. So I spoke with Jason Miller, supply chain economist at Michigan State, who analyzes all these trends and he sees a trend of allocation of volumes and workers to other companies, not automation or AI, driving the changes at ups.
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Matt Mishkin
Yes, always underneath that there's what we call this reallocation of jobs across establishments that are doing well and expanding versus establishments that are, you know, downsizing or being closed as well as, you know. And we're not worried about firms closing here, but it's just sort of this reshuffling that's taking place.
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Frank Collin
All right, to the point of reshuffling. Miller points to Fed data showing jobs in couriers and messengers. That's the category that includes delivery companies like a UPS. It's actually grown year over year by just about 5%. Courtney, back over to you.
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Courtney Reagan
Very interesting, Frank. Again, understanding maybe it's just a shift and not really a replacement by AI. Thank you. My next guest says I has nothing to do with the collapse in freight demand and that these signs of strain bear some similarity to the great financial crisis. Joining me now is Craig Fuller. He's founder and CEO of Freight Waves, which compiles high frequency data on the freight market for customers Trying to navigate it. I think I got to start right there. What in the world are you talking about? That it's compared to the great financial crisis. Maybe that worries me more than I.
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Matt Mishkin
Well, we should be worried. The goods economy, certain portions. The goods economy are collapsing right now. So year over year trucking volumes. This is really predominance of freight that moves across the United states is down 17%. It's important to unpack. Exactly. What we're talking about is the retail freight. The freight tied to the trucking market, which is really local distribution is actually flat. So it's seeing deterioration. It's probably why the Federal Reserve isn't overly concerned because the consumer staying pretty persistent. You see it in a lot of the retail earnings. But when you look at the industrial sectors, the folks are the freight that moves over the long haul. This is energy, automotive, housing and manufacturing. We're down 30% year over year which is very great financial crisis levels of concern.
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Courtney Reagan
So why are those sectors I'm still not totally understanding as I'm reading, I mean obviously heavy exposed to manufacturing. You think just because those areas of those businesses are slowing down because of the macroeconomic pressure.
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Matt Mishkin
Yes, macroeconomic pressure. It's high interest rates, it's companies afraid to make long term investments. It's really if you think about where we've seen inflation related to tariffs, a lot of the tariff cost has been in wholesale prices and wholesale goods. And so it's not showing up necessarily in consumer prices, but it is showing up in those wholesale prices. And so those imports that companies are getting, raw materials is really taking a pretty a pretty big hit to those big manufacturers. Of course housing story has been talked a lot on cnbc. Auto has its own issues with credit quality. Energy is an oversupplied market. But a lot of it comes back to the fact that manufacturing is the portion of the economy that's impacted most. I think it's really interesting because Trump's tariffs were really supposed to drive manufacturing and economists thought we would see the concern related to retail goods and higher prices for consumers. That's not showing up, but where it is showing up is the fact that a lot of demand in the manufacturing economy has basically gone south. And so that's the stuff that we're concerned about because it means that underlying base of employment. There are 35 million people who work in jobs tied to the long haul goods segments. This is again energy, auto, housing and manufacturing and transportation as part of that versus 2 million dubs in the hyperscalers.
- [23:53]
Courtney Reagan
Hmm, very interesting. I Would love to get your take on the elimination, if we can, of the de minimis. I was doing some reporting about. There's an awful lot of focus of course on the Tamus and the Sheehans of the world that had used that previous loophole, if you want to call it, but just that standard where you didn't have to pay certain tariffs and duties if you used the de minimis threshold, but other American brands were using it as well by potentially having a distribution center say in Mexico or in Canada and then trucking things over. I mean, since that has gone away, have you seen any change in the movement of freight?
- [24:28]
Matt Mishkin
Well, it certainly has had an impact and you see it in the parcel companies. This is why one of the reasons UPS's volumes are down is de minimis would show up in parcel, wouldn't necessarily show up in truckload. And so what we're seeing in the trucking volume is a very different story. And what we're seeing in and parcel is where you would see the de minimis exemption going away. And that's one of the reasons that FedEx and UPS have reported a much less bullish outlook over the last year. But a lot of this is the fundamentals of the US consumer and the industrial sides of the economy is that effectively is a K shape economy. Consumers that are affluent are doing exceptionally well and consumers and the industrial segment are actually doing quite poorly. So de minimis is a factor, but it's only one of many factors that's driving to slow down in freight demand.
- [25:16]
Courtney Reagan
Okay, well if I can try it, I'm going to try to leave this on a positive note. What should, what should we be watching for? To see things change around, to see the trend going the other way?
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Matt Mishkin
Yeah, look, I think housing has got to come back. We've got to see the Federal Reserve ease rates. I think that's the most important thing for the freight market. As much as 20% of the trucking market is related in indirectly related to housing. So when people buy a home, whether they're buying a new home that's built or even an existing home, they're doing things like putting in new cabinets, putting in new appliances, furniture, changing out the carpets and the floor coverings. All of that drives a substantial amount of freight, as much as 20%. So without the housing market come back, it's hard to believe that the trucking market would follow. And so we want to see housing come back. And if housing comes back, then I think we can start to see a real recovery in the trucking Markets.
- [26:07]
Courtney Reagan
Okay, got it. We're going to watch the housing markets turn around then and see if freight turns around with it. Thank you very much, Craig Fuller, Fuller of Freight Waves. Well, coming up, Uber the disaster du jour making a U turn despite an earnings beat. We'll tell you what's weighing on the stock and where the company stands in the ride sharing space. We're back right after this. Are you ready to get spicy?
- [26:36]
Fidelity Trader Plus Announcer
These Doritos Golden Sriracha aren't that spicy.
- [26:40]
Courtney Reagan
Sriracha sounds pretty spicy to me.
- [26:44]
Fidelity Trader Plus Announcer
Um, a little spicy, but also tangy and sweet.
- [26:48]
Courtney Reagan
Maybe it's time to turn up the.
- [26:50]
Fidelity Trader Plus Announcer
Heat or turn it down. It's time for something that's not too spicy. Try Doritos Golden Sriracha. Spicy but not too spicy.
- [27:02]
Nordstrom Rack Announcer
CNBC's Changemakers 2026 list spotlighting women who innovate, lead boldly, and are transforming business. Do you know someone who is rewriting the future? Nominate them now at cnbc.com/changemakers.
- [27:18]
Courtney Reagan
Go back to the exchange. Stocks are on the red across the board, but off their lows of the day, the Nasdaq, the worst performer, down about 1.8%. Tesla's annual meeting is just two days away, and the world's largest sovereign wealth fund says it will vote against Elon Musk's $1 trillion pay package. Norway's Norges Bank Investment Management, which manages $2 trillion of its fund. It's a major Tesla shareholder. It issues a statement saying, quote, while we appreciate the significant value created under Mr. Musk's visionary role, we are concerned about the total size of the award, dilution and lack of mitigation of key person risk consistent with our views on executive compensation. We will continue to see constructive dialogue with Tesla, Tesla on this and other topics. The full amount of the pay package is only paid out if Tesla gets to an $8.5 trillion market value. That would take him to about 25% of the shares outstanding, versus his current 12%. So about double. We'll bring you the results of the vote at Tesla's annual meeting on Thursday. Now over to Brian Sullivan for a CNBC news update. Hi, Brian Courtney, thank you.
- [28:21]
Frank Collin
The FBI announcing this afternoon the two arrests have been made in connection with a weekend explosion at Harvard Medical School. The two men are charged with conspiracy to damage a building, receiving federal financial assistance. They allegedly used fireworks in a wooden locker to cause the blast. No one, thankfully, was injured. The building houses labs and offices from the school's neurobiology department. Flights in and out of Reagan national airport in D.C. briefly halted this afternoon after a security incident on an arriving United flight. Several reports suggesting there was a bomb threat. The FAA says the plane was moved to a remote area to investigate and passengers were bussed to the terminal. The airport just announced flights are resuming and election officials in New Jersey say they acted swiftly. This morning we secure polling places in six counties after a number of bomb threats were reported there. Thankfully, they were all later to be deemed hoaxes. Series of bomb threats in battleground states, also disrupting voting during last year's presidential election election. Luckily, nobody injured. Lots of hoaxes. Courtney, back to you.
- [29:23]
Courtney Reagan
Oh, gosh, yes. It's kind of a difficult day for that kind of stuff. Thank you, Brian. Well, coming up, we'll trade some of the names. Seeing big swings on earnings and the consumer Bellwether reporting before the bell tomorrow. That's next. Welcome back to THE exchange. Another big week of earnings underway with consumer names. Taking the spotlight. Here with how to trade them is Victoria Green. She's CIO of G Squared Private wealth and a CNBC contributor. Victoria, let's start with McDonald's shares fractionally higher ahead of its before the Bell report and not doing this much this year, up about 3%. Analysts expecting a bit of a slowdown in traffic this quarter, closely watching promos and those extra value meals. You're a buyer here. Why is that a bid on the consumer?
- [30:09]
Hayden Brown
It is.
- [30:10]
Victoria Green
And it's also a bid that where Chipotle loses, McDonald's going to pick up. People are still spending money. They're just being super cheesy about it. And they want value, value. And McDonald's excels at value. Brought back the $5 meal. They got the buy one, get one for a dollar. They fixed their pricing a little bit and they're selling a lot of chicken as well as burgers. And So I like McDonald's. I think they're going to get about 7.1 billion. I think maybe a little bit of US slowdown could be picked up internationally. They have a massive presence internationally, especially in Japan and China, which I think those markets are going to help outpace. They also have monopoly coming back and they tend to do well with monopoly and loyalty. So I think the stock could overperform here. I'm looking for it to get back to the 320 levels, back to their because I really think as the consumer trades down a little bit, maybe a little less at carbon, Chipotle, a little bit more at McDonald's.
- [30:55]
Courtney Reagan
Very interesting. Of course, Chipotle didn't think that they were losing out to competitors. But maybe, maybe they are. We'll see what McDonald's has to say tomorrow. That Monopoly, does anybody ever win that? Anyway, next up, Norwegian shares down 15% on a revenue mess and lower fourth quarter earnings guidance. This is just the latest cruise line to fall following earnings. Royal Caribbean shares down nearly 19% since reporting last week. This one. Victoria, you're a seller.
- [31:19]
Victoria Green
I'm a seller here. I think this is going to retest the 15, $16 level and there are a lot not to like under the hood there. They're trying to go into more family friendly, which is a little bit lower margin. They're taking on a lot of debt as they expand their fleet. Their interest costs went up 200% and they're also getting less on experiences. Experience came in at like 880 million, about 40 million light of where we wanted. That was a huge benefit to cruises, right? Not just for people cruising, but they were buying the drink package and the Internet package and this upgrade and that upgrade they were spending freely. Now if that slows down and they're seeing their yields slow down, we're just a little bit concerned. The stock is still pricey here even with the fall off today. I'm just, just worried you got a little bit longer to leg down.
- [31:58]
Courtney Reagan
Ooh, okay. Wow. And Ford P E ratio on that one is just eight, which is a far cry lower than those tech names we talked about earlier in the program. Finally, let's hit Shopify. So, shares down 7% despite posting a 32% increase in revenue from last year. The company's operating income missing estimates while transaction and loan loss has more than doubled to 148 million. Victoria, what's your take on this one?
- [32:20]
Victoria Green
It's a buy for me. This is a growth shop. It's a growth shop, it's a growth stock and it's going to have a little lumps. But this stock has done this about three times in the last three months, has gone down about 9 to 11%, pop back up, very strong uptrend, very strong support with the 50 day moving average. And it's a fantastic growth stock. We're looking at a really good Q4 and it's all about the integrations and chat, GTP integrations and the enterprise wins. They're getting, they're expanding, they're making shopping easier and their whole tagline on their earnings was Internet everywhere. They're going to continue to pick up e commerce business. So for me the growth story is very much intact. If you believe in E Commerce. If you believe AI is going to change a little bit how we shop, shopify is where you're going to want to be.
- [33:00]
Courtney Reagan
Wow, Interesting. That stock up more than 4,051% year to date. Victoria Green, thank you for your takes on those three names. Well, coming up, shares on pace for their worst day since December after fourth quarter guidance came in late. We'll dig into the numbers on how Uber's big bet on a top autonomous driving is going. That's next. And we're watching shares of Starbucks lower on the news that it will sell control of its China business to a private equity firm in a deal valued at $4 billion. The firm will hold up to 60% interest in retail operations, while Starbucks will retain 40% and then license branding and IP to the joint venture. Starbucks shares down about 3% as mentioned. The exchange will be right back. Welcome back to the Exchange. Want to mention bitcoin briefly dipped below 100,000 moments ago. That's the first time it's traded below that level since June, down 6% today, down 11% in a week. You can see, though, now slightly above 100,000. Shares of Uber falling today after the rideshare giant posted lower than expected EBITDA Outlook. But the quarter did give us some details on how the robo taxi race is evolving. Mackenzie Seagal Wallace has the story in today's Tech Check. Hi Mac.
- [34:13]
Hayden Brown
Hey Court.
- [34:14]
Mackenzie Seagal Wallace
So because of that light Q4 guide, now more than ever, Uber is under pressure to prove its driverless strategy has real upside. CEO Dara Khasrow Shahi told Squawk Box this Morning that Uber's AV offerings are live in four cities and will scale to 10 by the end of next year. Now, Austin and Atlanta, powered by Waymo, are already growing twice as fast as other US market, with Waymo's vehicles busier than 99% of human drivers. But Uber says the driverless option isn't cannibalizing business for their human drivers. They're actually outpacing the national average with their earnings. But it's been a while since Uber signed a new deal with Waymo, and that's part of why they aren't betting on just one Autonomy partner. It's working with Lucid and Neuro to roll out Robo taxis, and it's teaming up with Baidu to launch driverless rides across Asia and the Middle East. So even as Waymo expands into new markets without a rideshare partner, Baidu may actually prove the more formidable partner for Uber. It's now matching Waymo in weekly robo taxi volume, a sign of just how quickly the global market is accelerating. Hence why Uber is also piloting fully autonomous service in the UK with a startup wave. And Courtney, for the first time, Uber is now aiming to build a its own fleet of 100,000 Nvidia powered AVs. Part of its push to make self driving cars cost effective at scale and really own that AV stack.
- [35:40]
Courtney Reagan
Wow, this is incredible. And I don't mean to throw a curveball at you, but where are we sort of in this global regulation idea of robo taxis? I mean, is it apparently it's allowed in China and allowed in some areas of the uk. How do they regulate it in a different or a similar way than we do here in the United States?
- [35:58]
Hayden Brown
States.
- [35:58]
Mackenzie Seagal Wallace
It's such a great question. And at this point it's a patchwork of rules, which is part of why you've seen this more limited rollout. Amazon just jumped into the game through Zoox in Las Vegas. And so we've seen people be later to enter this market just because it's still being decided. Now what I will say is that Tesla, I mean, look at that comp, right, it's at $1.4 trillion in terms of its market cap right now. A large part of that is a product of its robo taxi ambitions. And right now they are gated access Access just in Austin, which is just a reflection of the fact that shareholders really want to see that you have an AV plan, even if it's limited rollout as you navigate all those regulations.
- [36:35]
Courtney Reagan
It's wild stuff. I feel like we're talking about this every day and I don't know, it still scares me to get into a car without a driver, but I just.
- [36:41]
Nordstrom Rack Announcer
Took away last week.
- [36:42]
Courtney Reagan
You did get out and here you are, you're here to talk about it. So maybe I should just get over it. Mac, thank you so much. I really appreciate it. Well, coming up, real estate, one of the worst performing sectors so far this year. But new data reveals a few recent bright spots. We'll dig into those and the pain points.
- [36:57]
Steve Liesman
Points.
- [36:58]
Courtney Reagan
That's next. Welcome back. It's been a rough year for commercial real estate dealmaking, but we have a new day. We have new data that's showing which companies are buying and which sectors are heating up. Who else to bring it to us but Diana Olek. She's got the details in this week's property play deal report. Hi, Diana.
- [37:29]
Hayden Brown
Hi, Court.
- [37:30]
Nordstrom Rack Announcer
Yeah. Our new deal report tracks the top 50 CRE property sales across the US with monthly data provided just to us by Moody's. And it's showing that dealmaking is now stalled at well below pre Covid levels, with the overall dollar volume in Q3 growing just 5% from last year. That's the overhead view. Now let's look at trends in September, its flight to quality, economic uncertainty hitting the hotel sector and signs of recovery in office and open air retail. So on flight to quality, the average dollar size of sales in September is up to $12.7 million, compared with the average of 11.2 million over the last two years. Of the 50 top deals closed, 29 were over 100 million. The volume of $100 million plus deals in Q3 was up 35%, just over last year. Now let's hone in on Office. Apple spent $365 million on an office property portfolio in Sunnyvale, California. In video spent 83 million on a single office building in Santa Clara, California. Meanwhile, MetLife got a roughly 39% discount deal on an office property in Newport Beach, California. Now we've seen Microsoft get deals like that recently in Seattle as well. On the retail front, both Tanger and Nuveen did hundred million dollar plus deals in open air retail, a sector that's really starting to see some heat. Not so hot though is the hotel sector where deals are dropping off due to uncertainty in the economy. Now there is so much more in the deal report in the Property Play newsletter. You won't see it anywhere else, so Please sign up cnbc.com propertyplay or use that QR code.
- [39:08]
Courtney Reagan
This is fascinating stuff. Everybody loves to talk about retail deals. I'm interested in the mall idea. Of course, you know I would be the open air shopping centers. What more can you tell us about that? I know what happened there with the Simon and Tanger deal, but give us a little, a little bit more juice.
- [39:23]
Nordstrom Rack Announcer
Yeah. So we're seeing Nuveen heavy into it. Tanger, of course, Open Air has been really interesting. In fact, we had a big feature on it in last week's Property Play report when Nuveen was talking why they were going so heavy into it. This is a sector that kind of pulled back after the pandemic and is really starting to come back now because there's not enough supply and there's a lot of demand because this is where you go, this is your grocery anchor chain to get your nails done, your dry cleaning, all the stuff that consumers really need to do, not necessarily that they may want to or not so not so discretionary, but needs.
- [39:54]
Courtney Reagan
Got it. Thank you very much, Diana. Make sure you all check out more on that report online. In the meantime, we do have a news alert on Papa John's. Kate Rogers has that story. Kate, what's going on?
- [40:03]
Hayden Brown
Hey, Court. That stock is halted for volatility right now. Now this on a Reuters report here that Apollo Global has withdrawn its offer to take Papa John's private at $64 a share. That's according to two people familiar with the deal. Reuters says here you can see the stock is down over 17% now. The P E firm according to this report pulled its bid about a week ago. Consumers, of course, kind of tightening and.
- [40:28]
Mackenzie Seagal Wallace
Pulling back some of their spending, particularly.
- [40:30]
Hayden Brown
At these fast food, fast casual and in some cases cases pizza chains here. Apollo and Papa John's didn't immediately respond to their, their requests for comment. But oh, shares reopened I'm hearing in my ear. So now they're down 18% court. But once again, interesting just in the broader picture as we're kind of seeing some consumer pullback, particularly the lower income consumer kind of tightening their belts. We're going to get a lot more insight into that this afternoon from Cava, tomorrow from McDonald's and then later in the week from Papa John's. But news on two pizza companies this and then also Pizza Hut this morning with Yum, you know, exploring some strategic options for that business. So Domino's kind of looking like the leader once again in the category for sure.
- [41:11]
Courtney Reagan
Wow, really interesting. Kate, thanks for following this. I know it's a very fluid situation. As you mentioned was halted now. Now it is, it is back open. I'm sure you're going to bring us more when you have it. And coming up, perfect Segway, we're going to stick with restaurants. Shares up 12% of a restaurant. We're talking about on strong sales. Sales and guidance raised but the company flagging persistent commodity and wage inflation issues on the earnings call. What is it? Wait to see. The CEO joins us to discuss next. Welcome back to the exchange. Shares of First Watch Restaurant Group that was our mystery chart up as much as 12% after reporting stronger than expected revenue and comps on pace for the best day since April. First Watch is a chain serving breakfast, brunch and lunch with more than 620 locations across 32 states. States. And while foot traffic grew nearly 3% in the second quarter, it's been a tough year for fast casual restaurants as consumers get more cautious. Even with today's big move, First Watch shares down more than 6% year to date while Dine Brands, parent company of IHOP is lower by 17% and Cracker Barrel is down 38%. Obviously some other issues going on with some of those names. Joining me now to discuss is first watched CEO Chris Tommaso. Thank you so much for being here, Chris. I mean, really interesting report here. Obviously you're seeing same store sales growth, growth, but it's not without some other pressures on the business, other cost pressures. Can you talk through what you saw? I guess first of all on the front end when it comes to diners, how many diners are coming in and what they're actually buying, if they're shying away from any price increases you've had to do because of those higher commodity costs.
- [42:48]
Steve Liesman
Sure.
- [42:49]
Chris Tommaso
So yeah, we've seen same restaurant traffic and same restaurant sales growth sequentially higher for the fourth consecutive quarter for us. And early in the year we had some higher inflation costs that has subsided and that's led to our, our margin improvement. We've had significant margin improvement. We had restaurant level operating profit margin of 19.7% compared to 18.9%. So we've really managed through those commodity costs really well as far as the consumer goes. Obviously a lot of talk about, you know, their visitation and frequency and things like that. And again with us having same restaurant traffic growth of 2.6% for the quarter, we're very pleased with that result. And likewise, we're not seeing any difference in their behavior when they come in. We're not seeing any check management. In fact, we had some positive mix for the quarter. So as it relates to us, you know, we've seen positive signs. Now we do appeal to a higher income demographic and I think we under indexed to some of those other demographics that have been mentioned as struggling a little bit more. So I think that's helped us as well.
- [43:56]
Courtney Reagan
Okay. Yeah. So I think it was pointed out by Chipotle that it's that consumer between 25 and 34 under 100,000 that he thought he was seeing some issues with in their willingness maybe to spend at his restaurant. But I also note that you took some incremental pricing in late August. You raised menu prices by around 5%, but you still saw the restaurant sales grow 4%. So consumers not necessarily potentially buying less or having smaller check sizes is what you're saying.
- [44:22]
Chris Tommaso
No, and I think, you know, really one of the things we did that we're most proud of is at the beginning of the year we were looking at commodity inflation of around 8% and we chose not to take pricing to cover that. What we consider to be transitory commodity inflation. And I think by being conservative throughout the year and allowing the consumer to, you know, increase their frequency and give us some trial, I think that gave us a little bit of latitude to take what would end up being a normal price increase for us in a very abnormal commodity inflation environment. So, well, you know, we should average out for the year a pricing of around three and a half percent, which puts us right in our typical 2 to 4% to, to cover what we consider to be actual inflation annually.
- [45:05]
Courtney Reagan
Got it. Obviously, there's been a lot of discussion on this show and otherwise about the labor situation in this country potentially starting to see some cracks with employment. Are you seeing any impact in the areas where your restaurants are if there have been layoffs and a lower willingness to spend or to visit a restaurant like First Watch to eat out?
- [45:25]
Chris Tommaso
Actually, we haven't, and not only in the restaurants that we have, but, you know, in the quarter we opened 21 new restaurants in 14 states. And from a, from a labor standpoint, we've been able to staff those restaurants really well. And we haven't seen anything from a consumer standpoint in those markets that maybe have been hit harder with some of those layoffs or even as it relates to the government shutdown. So again, we've been fairly insulated from a lot of the more macro issues.
- [45:52]
Courtney Reagan
Got it. Chris Tomasso, thank you very much for joining us from First Watch Restaurant Group. I used to frequent one in my hometown of Dayton, Ohio. Thank you, Chris. Well, that is it for us. Thank you so much for watching the exchange. As we see the NASDAQ under pressure here today by the tune of 1.6. It is definitely the laggard of the group, but markets are lower across the board. Power lunch starts right now. You've been listening to the Exchange. Make sure you're subscribed to get each episode every day, same time, same place. Are you ready to get spicy?
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Fidelity Trader Plus Announcer
These Doritos Golden Sriracha aren't that spicy.
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Courtney Reagan
Maybe it's time to turn up the.
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Fidelity Trader Plus Announcer
Heat or turn it down. It's time for something that's not too spicy. Try Doritos Golden Sriracha spicy but not too spicy.