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On this episode of “On The Tape,” Guy and Dan discuss the chart of the S&P 500 (2:26), how investors could be offsides in this market (6:13), homebuilder stocks bouncing (12:53), where the S&P could bottom (22:52), gold and crude oil (20:46). Dan sits down with Gene Munster of Loup Ventures to recap Tesla’s quarter (31:15), and preview mega-cap tech earnings from Apple (37:40), Microsoft (43:41), Amazon (47:10), Alphabet (51:00), and Meta (54:00).
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SHOW TRANSCRIPT:
Guy Adami: [00:00:28] CME Ad. [00:00:28][0.0]
Dan Nathan: [00:00:30] IConnections Ad [00:00:31][0.3]
Guy Adami: [00:01:21] So welcome back to On the tape, folks. So this is going to be an interesting one. Dan is going to sit down with Gene Munster, fast money fame Gene Munster of Loup venture fame. They’re going to talk everything f maga probably a lot of f a little maga, but it’s going to be great. But we don’t really have a run down and no run down. No run down, Dan. And you know why? Because Danny Moses is not here. It was. [00:01:44][23.3]
Dan Nathan: [00:01:44] No Danny Moses and no run down. no Danny Moses and no run down. And listen, we like to build the show around Danny. Danny is the epicenter of on the tape and with him not here, that proves to be a bit problematic. That’s okay. We’re going to figure this out. But by the way, for Danny’s birthday, I actually did go back and watch his movie. And what I took away from it was Tom Berenger genius. I mean, he doesn’t get enough credit. I got to tell you, Jobeth Williams in her day was smoking. So there it is. You know, I got a chance to see. [00:02:14][30.1]
Dan Nathan: [00:02:15] Chill the Big Chill. [00:02:16][0.9]
Guy Adami: [00:02:16] That’s the movie. [00:02:17][0.3]
Dan Nathan: [00:02:17] Yeah. No, it’s The Big Short, you know. [00:02:19][1.6]
Guy Adami: [00:02:19] Still haven’t seen. All right. Still haven’t seen it, people. Tough shit, Danny, but happy. How old was Danny, by the way? [00:02:24][5.4]
Dan Nathan: [00:02:25] You tweeted that he was 63. That’s not because a lot of people actually believe what they read on the Internet. I don’t know that they know that Guy. [00:02:32][7.4]
Guy Adami: [00:02:33] Danny Is younger than I am. You know, it’s amazing. I’m coming into a little bit of traffic in New York City, little bit. And somebody said, do you still they didn’t say it in a nice fashion. They said it in like an F U way. You still think the S&P is going to 3200? What we’ve said for a while here, Dan, is, yes, we think the S&P 500 is headed there. But before it was going to get there, we thought it would go to 4100. As we sit here now, you have an S&P 500 that’s either side of 4000. And that’s been pretty much not a straight line higher, but a, you know, a step higher, lower from that June 15th Fed meeting. [00:03:11][38.2]
Dan Nathan: [00:03:14] Any Johnson who would tweet at you and say that first of all they must know you well enough if they’ve been watching that’s for 27 years and listening to the podcast for a year and a half. They know you’re going to respond, they know you’re going to get annoyed, but they call him a Johnson because they just don’t get how the game is played. Things don’t go to certain levels in straight. lines. [00:03:35][20.6]
Guy Adami: [00:03:35] No straight lines. [00:03:36][0.8]
Dan Nathan: [00:03:36] No, I mean, but that’s the thing. And you know what? We also reserve the right to change our minds near term. I think that, again, I’m just looking at the chart of the S&P 500 on January 2nd of this year. It ticked briefly above 4800. You and I and Danny have been decidedly bearish for fundamental reasons, not just for shits and giggles or anything like that. We had a very sharp decline in January. We had a little bounce in February. We made a new low. In late February, we had a very sharp bounce after the Fed raised interest rates in March for the first time since 2018. And then we had a 4600, nearly a straight line over the next two months, down to 38. So you’re kind of directionally you’re getting it right if you’re getting it right for the right reasons, but not in a straight line. I mean, it still works, right? [00:04:28][52.1]
Guy Adami: [00:04:29] It is very difficult to navigate these markets. We never say with certainty anything. We have opinions. By the way, the person’s name is Minnie Hex. Well, from Minnesota, just in case anybody cares, they they actually, they actually tweeted it MKT Call and five other people I think EY from SoFi. Well yeah I said I’ll stand by our work without question. I’ll stand by our work in terms of what we’ve done. And on the tape, Mark, you call all those things and we don’t speak with certainty about anything. What I will say is this I still think the market is headed to 4100. Do we see an overshoot? Maybe. But I think 3200 is in the cards and it’s for all the reasons that we said. And since last market call, nothing’s really changed except the market. And oh, by the way, now you have Ford saying they’re going to lay people off. Now, seven of the biggest Nasdaq companies laying people off. And when we start hearing from the f maga complex that talked to Gene Munster about, we’re really going to have a pretty clear picture of what’s going on here. [00:05:28][59.5]
Dan Nathan: [00:05:29] All right So let’s talk about this because like, let’s separate the stock market from the economy. Yes. Right. And so, again, when the Fed raised interest rates 75 basis points in June, I think it’s really interesting. Remember that trial balloon that was floated? I think it was like June 8th or ninth that the Fed was going to actually do 75 Fed funds had been pricing a 50 basis point increase for June, July and September. So what did it mean? It meant that the Fed meant business about obviously battling inflation. They admitted that they were wrong. Remember that they did that apology tour. And what did the stock market do from the time that that journal article dropped? It dropped 10% in a week. It bottomed in a couple of days after that June Fed meeting. We had a rally. It wasn’t great we came back into at quarter end and now we’re up about six and a half percent in the S&P 500 over the last, let’s call it week and a half or so. We have. Of that Fed meeting next week, it’s near certainty they’re going to do 75 basis points. And so the question now, Guy, is what is the thing that causes investors to be offsides? After we’ve had this rally, we’re about 10% off the lows in the S&P 500. We still have a dollar index, the Dixie at 107. We have crude oil, which has come in a good bit. It’s trading about 96. We have the ten year U.S. Treasury yield at 2.9% and we have the two year yield at about 3.1%. Okay. So talk to me about putting those kind of major macro inputs together. What does it mean for the stock market? [00:06:58][88.7]
Guy Adami: [00:06:58] Let’s unravel there so ten year yields today as we’re taping this is Thursday move 12 basis points. The downside much. Well, I mean, we typically are now seeing 10 to 15 basis points intraday move in the ten year. Like it’s not a big deal. It happens to be a big deal. So what is that saying? I think effectively what it’s saying is people see growth slowing and it’s manifesting itself in ten year yields. You mentioned two year yields, which I’ve said for a while, are going to be sticky north of 3%, inverted by about 20 or so basis points. I think that can get to 50 basis points. How does it get there? I don’t know. I think two and a half in the ten year 3% and two year or thereabouts. How can people be offsides? Will people start believing that, oh shit, the bottom is in. We got to chase this thing, which we’ve done for the last decade or so. And I think that’s going to be a lot of the thought around where are people wrong? How is this thing going to continue to sort of grind higher? But I think people have to take a good look and say, well, wait a second, if you believe that the Fed is going to somehow take its foot off the pedal, because to your point, commodities have come in 30 to 35%. And that 9.1% print we saw a couple of weeks ago will in fact, be the high print people will say, well, maybe the Fed can back off. Here’s what I’ll say to that. 9.1 may be the high print I won’t back away from. That’s probably well be. But if commodities have come off 35%, let’s just do the math. If that CPI number comes off 35% ish, you’re still talking about an inflation rate north of 6%, which is still three times higher than where the Fed wants it to be. And that’s with commodities selling off the way they have. [00:08:38][100.1]
Dan Nathan: [00:08:38] Yeah. Jamie Dimon, he was quoted a couple of weeks ago right before JP Morgan reported their Q2 earnings by saying that he thinks that the Fed’s inflation target of 4%, that’s to the downside. They used to pray for 2% to the upside pre-pandemic. [00:08:52][13.4]
Guy Adami: [00:08:53] They were wishing, you know, the thing, because for years and years, literally they want inflate, we need and we want inflation. And I would push back and say, be careful, Dan, be careful. [00:09:06][12.8]
Dan Nathan: [00:09:06] I heard wish I heard it like probably once a week, but. [00:09:08][2.5]
Guy Adami: [00:09:09] Humorous to think they can control it, that’s. [00:09:11][2.2]
Dan Nathan: [00:09:11] Not what I was trying to. [00:09:12][0.9]
Guy Adami: [00:09:12] This pisses me off. So the fact that these geniuses think that they somehow could control something that they have no control over is what pisses me off. And we talked about this with Vinnie and we talked about it with Porter, and we talk about it with Danny all the time. That’s what infuriates me. Sorry you did it on purpose. [00:09:30][17.0]
Dan Nathan: [00:09:30] I kind of did. You did? The people love it. Amanda knows. No. She gets lots of tweeted. She gets lots of. [00:09:35][5.4]
Guy Adami: [00:09:36] People say, Oh, you’re so smart. Why don’t you do it? No, I’m not suggesting I could do it, but I’m not I don’t have. [00:09:41][5.0]
Dan Nathan: [00:09:41] I think, humorless enough that I am not. [00:09:43][2.2]
Guy Adami: [00:09:44] Humorless enough or smart enough. [00:09:45][1.4]
Dan Nathan: [00:09:45] I can I bring it back to my comment. So sorry. So interestingly, you did it. So what I was saying is that Dimon was saying that he thinks that they’re pretty aggressive on their downside target for inflation. Okay. So he’s in your camp. He’s in the camp is saying that it’s going to be pesky and persistent at much higher levels now, also at higher levels of interest rates that are not turning on a dime. They are not going to go from the fastest increase of, let’s say, two and a half percent in Fed funds probably ever, and taking their foot off the pedal as it relates to QE to QT the which they have done it in such a short period of time and all of that’s going to take a while to work itself into the economy. And you just mentioned a couple of things that I think are really important. So if major corporations are starting to slow hiring. [00:10:28][42.7]
Guy Adami: [00:10:28] Which they are. [00:10:29][0.4]
Dan Nathan: [00:10:30] Or actually cut jobs. [00:10:30][0.4]
Guy Adami: [00:10:30] Which we’re seeing. [00:10:31][0.3]
Dan Nathan: [00:10:31] Okay, so that’s likely to accelerate. So all of a sudden now, even if inflation comes in, right, you have rates that are not going down meaningfully, you’re having growth slowing. And that’s what you’re seeing in the ten year. We know that Europe is going to be a bit of a problem for some time to come. [00:10:45][14.3]
Guy Adami: [00:10:46] And quickly, we also saw the ECB raise interest rates by 50 basis points. Now, think about that. Europe is maybe in recession doesn’t really matter. I mean, Europe has issues clearly across the continent. Europe has issues. Yet they feel it necessary, Dan, to raise interest rates, not because they want to, because inflation’s out of control there. And you think net gas and your prices are high here. Look what’s going on in Europe anyway please go. [00:11:11][25.0]
Dan Nathan: [00:11:12] No so the last piece of the puzzle here. And this obviously is the thing that probably causes the Fed to pivot at some point later this year. Much later this year after this up meeting or something like that. And really the pause starts with we’ve done a lot of heavy lifting. Let’s see how the transmission into the real economy. We now are going to be very data dependent here. But if unemployment ticks up, it’s at three points, which is. [00:11:36][23.7]
Guy Adami: [00:11:36] Which it’s going to. [00:11:37][0.5]
Dan Nathan: [00:11:37] So it’s at 3.6% right now. We’re seeing some of the data, the job openings that we’re seeing that kind of turn the opposite way here. Then the Fed will have to, because if you throw on 4% unemployment, you know what I mean? Even David Rosenberg, who’s been on our podcast, is actually coming on next week after that meeting. Rosy. Rosy is coming back. [00:11:56][19.2]
Guy Adami: [00:11:56] By the way, there’s a GDP, I think, on that Thursday or Friday, that after July 28, we cut to that place. [00:12:03][6.6]
Dan Nathan: [00:12:04] So we’re going to cover all that with him. But he’s shown us some data that when you see unemployment tick up even 3/10 of a percent off of a multi-year low or something like that, the impact on the economy can be devastating. We’re already starting to see some of these hints in sub prime in a whole host of different levels as far as lending is concerned. We’re starting to see defaults push out AT&T, what they had to say about bills. Okay. So all this is kind of happening in the backdrop of horrible housing data. So housing has been a bedrock of the U.S. consumer of their kind of balance sheet. All of a sudden with mortgage rates where they are with maybe taking out second loans and stuff because people were refinancing the hell out of them when they could and valuations were skipping up year over year. Now, if we were to see housing to come in, let’s say 20, 25% give back, I don’t know a third of the gains over the last six or seven years because of the easy. We got a problem with the economy here. [00:12:57][53.3]
Guy Adami: [00:12:57] No question about it. And I’m going to throw this in here because that’s my want to do here on Thursday. You know, the market is what it is. But look at what’s sort of grinding higher in a small segment. I don’t want to say gold. Go to your little Google machine and type in the symbol, for example, DHI or homebuilding. Okay. And it’s interesting. They shouldn’t be trading higher. And one of the things that I’ve said is, listen, I understand that. But if rates are going to come down, these are sensitive the stocks are sensitive to rates. And you have a decent little bounce off the bottom that we made maybe a month or so ago. And these homebuilders that can continue as counterintuitive as that stands. With that said, Dan, I’m going to say this, you’re 100% right. And in the US economy, again, 73% driven by people buying shit. Yeah, people are going to start to get scared and don’t think for a minute this heat wave we have around the country. People are not going out and spending when it’s 100 fricken degrees out across the country. That’s going to curtail spending as well. [00:13:53][56.0]
Dan Nathan: [00:13:53] That’s interesting. I will say this that our friend Stephen who works with us here. [00:13:57][3.6]
Guy Adami: [00:13:57] Is that Stephen Rehfuss. [00:13:58][0.4]
Dan Nathan: [00:13:58] That is Rehfuss. [00:13:59][0.8]
Guy Adami: [00:13:59] He’s, I got to tell you something. He plays men’s lacrosse. He really has got to work on his week hand. I’m just saying, If I just had a critique his game. [00:14:09][10.1]
Dan Nathan: [00:14:10] Just so you know, that would be his right hand is his weak hand. [00:14:11][1.7]
Guy Adami: [00:14:13] I understand that. And he’s and he thinks by going left, he’s going to catch people off guard. [00:14:17][4.4]
Dan Nathan: [00:14:17] So I’m going to make. [00:14:18][0.4]
Guy Adami: [00:14:18] In high school that shit works. It ain’t working in the PLL. [00:14:20][2.0]
Dan Nathan: [00:14:20] And so obviously we wish Danny were here. Ding, ding, ding, ding, ding, ding. You know, you know that song, right? Wish you were here. [00:14:27][7.1]
Guy Adami: [00:14:28] Oh, isn’t that should cut? No, that’s wishing you here. That’s Pink Floyd. Wish you were here. [00:14:32][4.8]
Dan Nathan: [00:14:33] The fact that Pink Floyd. [00:14:34][0.8]
Guy Adami: [00:14:37] I do wish Danny were here. And not that I don’t love doing this with you. And I can go back and forth for hours. [00:14:40][2.8]
Dan Nathan: [00:14:40] We’re kind of sick of each other’s voices at this point. [00:14:42][1.7]
Guy Adami: [00:14:42] I’m not sick. I’m sick of my voice. I’m not sick of your voice. But I’ll say I do wish Danny was here. I hope he’s enjoying himself. He’s probably smoking the Mary Jane. [00:14:49][7.3]
Dan Nathan: [00:14:50] Oh you can’t. It’s legal. Maybe. Probably where he is, it’s legal. You know what the funny thing is about that? It’s still kind of taboo. My my twin brother lives in Boulder, Colorado, and it’s been legal. No, but it’s been legal in Colorado for years. And I often ask the question, you could be at a backyard barbecue, right? Right. And you could have families there, little kids on the trampolines, you know, thrown the lax ball around this. And the dads are just kind of getting sloshed. You don’t mean on bud lights and grill and meat and all that. [00:15:17][27.5]
Guy Adami: [00:15:18] Which is always been accepted. [00:15:19][1.0]
Dan Nathan: [00:15:19] It’s always been accepted. But if you now, even with it legal, if you pulled out a joint and just started ripping it right in front of the kids whatever. [00:15:26][7.0]
Guy Adami: [00:15:27] People would look at you cross-eyed. Yeah well having never having having never smoked a marijuana cigaret. [00:15:33][6.0]
Dan Nathan: [00:15:33] Magic dragon [00:15:33][0.3]
Guy Adami: [00:15:36] I got to tell my friends that in high school I was a I just never really wanted to do it. But that’s not [00:15:40][3.6]
Dan Nathan: [00:15:40] It was popular in the late sixties when you’re in high school, right? [00:15:42][2.9]
Guy Adami: [00:15:43] Yeah. Late fifties, early sixties. [00:15:45][2.0]
Dan Nathan: [00:15:46] You know, you were like a sort of discovered kind of a bit of a beatnik. Now, we totally got off. [00:15:50][3.9]
Guy Adami: [00:15:50] You were saying if Danny Moses. Oh. [00:15:54][3.3]
Dan Nathan: [00:15:55] This going back to Rehfuss, actually. So I was going to say I was going to make a sports prediction. The 1-4 Cannons in the PLL, which Rehfuss is a starting midfielder on. I think he’s going to have a breakout game this season. I think it’s going to turn the tide for the Cannons. [00:16:08][13.2]
Guy Adami: [00:16:09] Listen [00:16:09][0.0]
Dan Nathan: [00:16:10] I’m going to say two or two. He’s going to go two and two. [00:16:11][1.8]
Guy Adami: [00:16:12] Two goals, two assists. So in college, a breakout game is like, you know, six goals three assists. It’s not uncommon to see some cat. [00:16:18][5.9]
Dan Nathan: [00:16:18] He was an all-American at Syracuse [00:16:19][0.8]
Guy Adami: [00:16:20] Yes. He was up for that Tewaaraton Award or what did I say that correctly. Yeah. [00:16:24][4.8]
Dan Nathan: [00:16:25] Yeah. [00:16:25][0.0]
Guy Adami: [00:16:25] So good for I’m just messing. Rehfuss, I love Rehfuss. I mean we’ll get off the set. [00:16:29][3.4]
Dan Nathan: [00:16:29] But that was that was that was. Listen, we have no run down. You got me all sidetracked on this Rehfuss stuff. I wasn’t bringing his name up to talk about his lacrosse game. I was bringing it up because he mentioned something to me earlier today. He graduated college a year ago. He said a bunch of his friends who are recently graduated or graduated college in the last year or two, they had basically they didn’t have to pay back their student debt for a while. So think about this age group of consumer. They’re new to the jobs market. They had the luxury of not paying back their student loans. They were flush with cash. They were traded in crypto and meme stocks and SPACs and this, that or whatever. I’m not saying all we’re doing it, but a lot of them were doing it. They lost money and all that, and now all of a sudden they have to start paying back their student debts. That means less cash to buy other things, to do experiences, do whatever. So I just think that’s a really important point and let’s start to track that because that might be something that we hear a whole heck of a lot more of. [00:17:19][50.1]
Guy Adami: [00:17:19] The point about the US economy driven by the consumer. What is the consumer look like in the fall? What are we talking about with unemployment ticking higher? What are we talking about? With inflation continue to be persistent? You know, I’m not I’m not convinced that the US consumer is going to be as robust as this recovery seems to indicate, and that’s going to manifest itself in stocks and we have companies talking about that Dan just go across a spectrum of companies and you’re talking about now you’re starting to hear demand destruction. [00:17:50][30.9]
Dan Nathan: [00:17:51] Yeah So so bringing it back to the stock market again, you and I are not wishing for a horrible economy, a weak consumer. [00:17:57][5.7]
Guy Adami: [00:17:58] By the way, there’s a great in The Phantom of the Opera. I think the best song in that musical is a wishing you were somehow here again, if you remember, it’s sort of towards the end of it. Beautiful song I think they’re on there’s by like a cemetery or something and the again don’t care. [00:18:14][16.0]
Dan Nathan: [00:18:14] yeah eyes glazing over here. [00:18:15][1.3]
Guy Adami: [00:18:15] By the way, Emma, I think it was Emma Rossum. Is that right. Is that her name? She did a great job in the movie. Yeah. [00:18:21][5.7]
Dan Nathan: [00:18:21] So. So what I would. [00:18:22][0.7]
Guy Adami: [00:18:22] Say that’s. [00:18:23][0.3]
Dan Nathan: [00:18:23] So I was looking at. [00:18:24][0.9]
Guy Adami: [00:18:24] Can’t see this folks but that’s Dan completely dismissing me. Yeah. What were you going to say. [00:18:28][3.4]
Dan Nathan: [00:18:28] I will say this that I can’t do this. One of my favorite podcasts is It’s The Always Sunny in Philadelphia podcasts. [00:18:33][5.5]
Guy Adami: [00:18:34] I thought you liked. I thought you’d like that. The what I. [00:18:37][3.1]
Dan Nathan: [00:18:37] Love the pod save America Pod Save Everybody. Tommy Vetor has. [00:18:40][2.5]
Guy Adami: [00:18:41] Tommy listens to this. I know Tommy is scared shitless of the market. I shouldn’t say that. [00:18:46][5.1]
Dan Nathan: [00:18:46] Oh, no, no, no, no. He’s not scared shitless of the market. He loves the market. He’s a trader. It just is the way we’re. I’m a bit of a political junkie. He’s a market junkie. Well, I. [00:18:54][8.0]
Guy Adami: [00:18:54] Hope he’s listened to us because I think he’s done reasonably well in certain areas. In fact. [00:18:59][4.8]
Dan Nathan: [00:18:59] Now we just need to do reasonably well in the areas that he covers is as I care about so. [00:19:04][4.3]
Guy Adami: [00:19:05] Well It’s okay, but we will buy it because that’s going to, you know, why we shouldn’t historically. So we’ve done fast money. You know, I started about 28 years ago doing fast money. And you’ve done it obviously for the last 11, 12 years, maybe 13 almost. And politics never came into it. Unfortunately, politics has found its way into the market, and that started during the Trump administration. And now it’s carried over. And that’s just is what it is. We have to talk about it in the context of what it means for the market. You think about here Thursday, the market sold off early in the day on the headline that President Biden, you know, tested positive for COVID. It came back. But not that that is politics. But my point is. [00:19:43][38.2]
Dan Nathan: [00:19:43] But policy is a very. Yes. And regulation. [00:19:45][1.8]
Guy Adami: [00:19:46] Now intertwined. And that’s not going away any time. [00:19:48][2.4]
Dan Nathan: [00:19:48] We’ll stick around for my conversation with Gene because he had a pretty good pride. [00:19:52][3.5]
Guy Adami: [00:19:52] I love Gene, by the way. [00:19:53][0.7]
Dan Nathan: [00:19:53] About some sort of regulatory action in his space that I think you’re actually you know, you’re on this camp, but bringing it back to the market here, I just say, is that like given all the macro headwinds, given all the geopolitical uncertainty, given the we still have high valuations, given that we just talked about rates versus inflation versus the potential for unemployment to tick up, housing to tick lower, all those sorts of things. You know, the S&P 500 right here down about, I don’t know, 16% in the Nasdaq, down about 23 or so percent. It just doesn’t encapsulate again, I’ve said this a lot on this podcast have said in a market called and Fast Money, I just don’t think that that’s how this bear market ends. And I get it, man. There were pockets of overexuberance, whether it be new IPOs of tech or SPACs or crypto, and they’ve crashed. They literally, literally crashed. But I don’t think until we have a bit of a capitulation in the broader market, the stuff that is the wideless owned sorts of things that this bear market can be over because the reset, the sentiment reset hasn’t happened. People still think that the Fed has their back. When they don’t, they’re doing the exact opposite of the thing that they got really comfortable with over the prior ten years of the pandemic. [00:21:02][69.3]
Guy Adami: [00:21:02] I think you will see panic over the next couple of weeks. I think the panic you see will be panic to the upside because this week, for the first time in a while, we saw a lot of people, a lot of headlines, people trying to call the bottom, trying to be the next Mark Haines because they find that to be. Interesting. I mean, Mark Haines made that call. God bless Mark Haines. It was historic. But that’s not what we’re here to do. As you say all the time, nobody rings a bell at the bottom of top and we’re not going to be those people. I happen to think that you’re going to see buy side capitulation, people throwing in the towel. Holy shit, I missed it again. That fear of missing out and that’s going to manifest itself around 4100 or so in the S&P 500. And then I think the next leg lower makes sense. Why? Because slowing growth, slowing earnings valuations that are still too high in a lot of different places. And you talk about an S&P 500 historically traded around 17. Yeah. Again, Dan, you put a 200 or so earnings, which I think is where we’re going to come out. Yeah, talking about 30. [00:22:02][60.1]
Guy Adami: [00:22:04] Maybe we see the overshoot to 32. [00:22:05][1.4]
Dan Nathan: [00:22:06] So I think the new lows in the S&P, I don’t know, you know, where they bottom out. The new lows in the S&P could happen sometime in September when you have the realization of a unemployment ticking up so that that kind of august jobs data and then we get some other economic data as it relates to housing in that period. In between the next Fed meeting, that’s when I think people might start to panic to the downside and we could see some new lows. I want to say one thing and I want to get this in while Danny is not here and this is. [00:22:33][27.1]
Guy Adami: [00:22:33] And we do wish he was here. Great, great song by Pink Floyd. By the way, I have 748 songs on my playlist. Legit. [00:22:40][7.2]
Dan Nathan: [00:22:41] and Pink Floyd’s not one. [00:22:42][1.4]
Guy Adami: [00:22:43] Shine On You Crazy Diamond is the only pink floyd. That’s the only. [00:22:47][3.8]
Dan Nathan: [00:22:49] I love Pink Floyd. I saw them in 90 David Gilmour’s 1987 at the wall. A momentary lapse of reason. No, Danny saw him at the wall, I think in 90 or something. [00:22:57][8.6]
Guy Adami: [00:22:57] I don’t I just. [00:22:58][0.6]
Dan Nathan: [00:22:59] I just. [00:22:59][0.2]
Guy Adami: [00:22:59] Never got fired. [00:23:00][0.9]
Dan Nathan: [00:23:01] Up. Guy You know where Floyd guys, your Zep guy listen really quickly, please. We got to get out of here in a minute. So, Danny and I, when you were out a couple of weeks ago, we were going back and forth on gold. Gold had a really gold beat, a new 52 week low today. Right. Okay. [00:23:17][15.8]
Guy Adami: [00:23:17] The reversal. [00:23:18][0.7]
Dan Nathan: [00:23:18] 1680, and now it’s trading at 1718. And let me tell you something. [00:23:22][3.8]
Guy Adami: [00:23:22] The reversal. [00:23:22][0.1]
Dan Nathan: [00:23:23] Literally stopped almost to the penny of its early August 20, 21 lows. I mean, we want to get back in this trade and this is when you get. [00:23:31][8.5]
Guy Adami: [00:23:31] Some moving averages, I think correlate if you’re looking at your. [00:23:34][2.5]
Dan Nathan: [00:23:34] My factset. [00:23:35][0.1]
Guy Adami: [00:23:35] The factset machine, yeah today will be one of those days in gold we just have to bookmark I say it all the time. Every once in a while you get days. You have to put those little tabs in the day. Today I think it’s would be one of those days specifically for gold is be interesting to see what happens with crude oil the commodity obviously had the bounce subsequent sell off on the back Russia open Nord Stream I get it that doesn’t make a lot of sense to me. We’ll see. I still think there’s another chapter higher in crude. I’ve said it for a while incorrectly now for the last couple of weeks. But gold today, I don’t know what happened. Very interesting then. All right. [00:24:08][32.2]
Dan Nathan: [00:24:08] Fair enough. [00:24:08][0.2]
Guy Adami: [00:24:09] Danny Moses, as I’m sure is somewhere right now licking a spliff, looking at that gold chart and saying, this was the day that I say that. Right. By the way, gold looks like a [00:24:18][9.2]
Dan Nathan: [00:24:19] Gold looks like a straight shot to 1800. You just mentioned the moving averages, the 50 day moving average. [00:24:23][4.2]
Guy Adami: [00:24:24] Do people still say that, but how do people still say that? Or is that very like eighties? [00:24:28][3.5]
Dan Nathan: [00:24:28] That’s very eighties. But sorry, that’s but that’s very you. [00:24:30][2.2]
Guy Adami: [00:24:31] You know, I do like it’s funny, you know, I mentioned Pink Floyd, which I actually have a couple of Peter Tosh songs, I think. [00:24:38][6.9]
Dan Nathan: [00:24:38] Not Pink Floyd. [00:24:38][0.3]
Guy Adami: [00:24:38] No, and no, he’s not. And a couple of Bob Marley songs. [00:24:41][3.1]
Dan Nathan: [00:24:42] Amanda just texted me said, wrap it up. So I don’t think she I don’t think she like what we were doing here today but well. [00:24:48][5.6]
Guy Adami: [00:24:48] Because see the producer in her. Right. Because she wants to bring everything back on the rails, bring it back to the market. I think we’ve been extraordinarily positive over the last couple of weeks. I think we’ve outlined what we think is going to happen. I think we will continue to do that. I will say this, the VIX going down to 22 and a half, 23, which I think is where it currently is, people will say that’s bullish. I actually think that’s going to be sort of bearish. I think that will bottom out around 21 and a half. That’s going to be your signal as well. The HYG found a home around 73 and a half, 74. That’s been sort of moving sideways. That’s a good sign. We’ll see how that plays itself out. And to your point, the dollar, which have been ripping higher, has put the brakes on. So we’ll see. Again, a lot of things to talk about here. [00:25:31][42.7]
Dan Nathan: [00:25:31] Yeah, I think listen, I think my conversation with Jean was kind of enlightening to me because seven and a half trillion dollars in market cap of five stocks are all going to report next week. They may all cancel themselves out, you know what I mean? But I think taking some of the data points out of there might give us a sense that maybe enterprise is about to weaken. We know that a lot of consumer ad supported stuff was weak prior to this, so I don’t like to do a lot of things prior to earnings season. I like to kind of come out of it with a broader thesis, some individual names and kind of work bottoms up, tops down the middle. All right. Listen, Guy, we got to. [00:26:02][31.4]
Guy Adami: [00:26:02] Hold on, though. I don’t want to leave you because I will say this. Enlightenment is a great song by Van Morrison. Enlightenment, the album from tremendous album. What’s the sound of one hand clapping? There is no sound. So if you want to use another title, enlightenment, because I think that’s what we’re here to do. We have to bring up. Tesla, cause we would be remiss if we’d know only because people say, Oh, when Tesla goes high, you guys don’t talk about it. As we sit here right now, Tesla is trading eight, ten, eight, 14, thereabouts. I will tell you, I thought Tesla would rally into earnings and I thought you’d see an overshoot after earnings. I did not think it would get this high. I thought it would sort of fizzle out around 775 or so. And here we are, $40 higher. But I’ll say this, as much as people want to champion this Tesla quarter, this Tesla quarter was not nearly as robust or as strong as the quarter we saw on April 20th. [00:26:51][48.3]
Dan Nathan: [00:26:51] We’ll stick around. Gene and I talk about ourselves a shitty quarter. All right. Well, listen, we got Danny back to talk about it. Yeah, we got we got Danny back, but I had. [00:26:58][6.6]
Guy Adami: [00:26:58] To bring it up. I know you didn’t say, oh. [00:26:59][1.2]
Dan Nathan: [00:27:00] I thought we covered it. I lost money in it. My puts are going to be something like Danny’s back [00:27:05][4.9]
Guy Adami: [00:27:05] A little older, a little wiser. Right? [00:27:06][1.1]
Dan Nathan: [00:27:07] We’ll have Rosie on the Fed. We’ll have Rosie on GDP. So. So stick around. [00:27:10][3.3]
Guy Adami: [00:27:11] By the way, I have to say, we gave away books. A lot of people. Yeah, right we are. [00:27:16][5.1]
Dan Nathan: [00:27:16] So, listen, leave us a review on any of the podcast stores. Take a screenshot of it, send it to contact at RiskReversal, and you will get a copy of Jason Kanders book. He was our guest last week, fascinating book, Invisible Storm. [00:27:29][12.9]
Guy Adami: [00:27:29] People love. [00:27:30][0.4]
Dan Nathan: [00:27:30] Soldier’s Story of Politics. [00:27:32][2.7]
Guy Adami: [00:27:33] And PTSD. Yeah. And you know what? You know what? By doing that, you make Amanda Diaz. [00:27:38][4.4]
Dan Nathan: [00:27:39] It makes to extra work. I mean. [00:27:40][1.1]
Guy Adami: [00:27:40] She’s got to put put she’s got to like put stuff in a Fed Ex [00:27:42][2.3]
Guy Adami: [00:27:48] I’m sorry, Stephen Rehfuss. I love Amanda Diaz. She’s doing a crack job. Nick Robertson killing it. And Dan, if you’re listening, we do wish you were here. [00:27:57][8.5]
Dan Nathan: [00:27:57] CME Ad. IConnections Ad. Masterworks Ad. And we’re back. I’m here with Loup Ventures. Gene Munster I think our listeners know Gene here has been a prolific technology analyst for decades. He started Loup Ventures a few years ago. Gene and I did a really great podcast, on okay computer, a few weeks ago, just on his background, some of the things that he’s seeing and thinking in public and private tech markets. But we really wanted to focus this week on the pod here, on the tape, just kind of getting in front of next week. We have basically seven and a half trillion dollars in market cap among five massive tech names. You know what they are? They’re Microsoft. They’re Apple, Google, Amazon and Meta. Gene covers them all. He’s covered them all either for decades or from their inception in the case of like a meta or something. So, Gene, thank you for joining us on the tape. [00:30:54][177.4]
Gene Munster: [00:30:55] Thank you. [00:30:55][0.3]
Dan Nathan: [00:30:56] All right, man, you and I had a really good conversation, like I said, on okay computer. And we just kind of went back and forth. Ping pong did a little bit. What I really enjoyed about that conversation is that you and I have spent a lot of time together over, let’s say, the last ten years on CNBC, but really doing a very sound byte sort of way. Right. You’re there, you’re reacting. You’re either responding to something that’s going on in a company that’s in your coverage and you’re doing it real time. And I will tell you this, you in that red phone, there’s nobody better at processing that stuff. You know that. Let’s be frank there. [00:31:27][31.4]
Gene Munster: [00:31:27] There may be no red phones in use anymore. There might be a pretty small hurdle. But I appreciate the thought there. [00:31:33][5.8]
Dan Nathan: [00:31:34] About your ability to just kind of react kind of quickly. You’re always very prepared, you know exactly what to expect, but you also know what investors are expecting. And I think that’s really important. We’re going to get a bunch of that as we kind of think about next week’s earnings. But like I said, lots of soundbites. We don’t have to do that. What’s it feel like when you are talking to companies, talking to investors, talking to other analysts? Just the ability to kind of decompress and just chat a little bit versus the sound byte nature on TV. [00:31:58][24.1]
Gene Munster: [00:31:58] It’s pure bliss, especially. It’s a mutual admiration society here. Big fan of your work and your thoughts, too. And so it’s fun not only to catch up and this is kind of what we do all day long is talk to companies and talk to investors. And of course, it’s not in soundbites. [00:32:13][14.9]
Dan Nathan: [00:32:14] Yeah. Now the sound byte thing is interesting. I think it’s a great skill set because it makes you synthesize information really quickly and kind of get to the crux of it. And so let’s just say this is Thursday into the close. Tesla reported last night and you have been a steadfast bull in the story for a whole host of really big thematic reasons. And one of the things that I really appreciate a lot of your commentary in your work, whether I agree with it or not, I know that you’re doing much more deep, fundamental work. You haven’t shied away from being critical of the story of Elon, of some of the dalliances that he has, whether it be with crypto or with Twitter. Where are you right now? You were on fast money with us as the news was breaking last night. The stock had originally gapped higher in the aftermarket, then it kind of sold off and got unchanged. And here we are today. The stock is massively, I think, outperforming what a lot of people thought would have been the case, given the fact that automotive gross margin was down if they hadn’t taken the gain from the conversion of Bitcoin into Fiat, there would have been negative free cash flow, but the stock’s up 10%. So talk to me a little bit about what you think’s going on, because I think you probably had said a week ago you would not have been surprised if this stock sold off after such an epic quarter in Q1. Really the sentiment coming into the quarter. [00:33:31][76.7]
Gene Munster: [00:33:32] So I’m surprised that it’s up today. I had expected that that out of gross margin number would have kind of spooked investors and especially the commentary from the CFO about the component environment in the back half of the year, continuing to pressure investors. And so I am surprised to see that and ultimately is that I think what it is, is the market is clearly looking into 2023. That seems to be the X factor here is that they’re looking beyond the near-term. That’s my view is the market’s just simply looking forward. What’s your view on it? [00:34:03][31.2]
Dan Nathan: [00:34:03] It’s funny that you say that. So the market or at least investors in this name, I’ve long thought now, right now it’s got an $800 billion market cap. It’s down from 1.2 trillion in just three or four months ago. And there aren’t too many investors in other growth stories or other big secular tech stories that are actually looking into 2023 right now. Does that make sense? Because think about it, there’s a lot of great stories that you think have much better visibility than, let’s say Tesla does, that are trading at huge discounts to themselves to where they were trading just nine months ago. So again, this story remains massively disconnected, in my opinion, from the fundamentals in the here and now and even out into 2023. So I think I said this to you a couple of weeks ago. I’ve never seen a cult story in my 25 years in the business or a cult leader like Elon not have the story come unwound at some point as a bear market is working out and I just don’t think the bear markets over so I just think that this one has legs to the Dow. I’m just curious, what was some of the feedback that you got from some investors? Just kind of. Adding to this up 10% moved in one day. [00:35:12][68.4]
Gene Munster: [00:35:12] There is spooked as well I think in the cannon moments they were equally as concerned. I think that ultimately I think they were a little bit surprised to hear and I think this view that investors, you know, what is the scope that investors are looking at at this point? And I would suggest that Micron’s results. I think what we saw with Tesla today is evidence, because I want to just quickly play us forward to 2023, the back half of the year. I believe that there is risk to the delivery numbers you’ve talked about that risk there say they’re at an all time high in production, but we’re still in a pretty wonky environment and all the enthusiasm, this is simply stuff that’s out of their control. I think the investors are recognizing that it’s out of their control and we’re looking at 2023. At that point, we should have expanding gross margins. And Elon talked about the commodity market. He is not an economist. However, he does see what’s happening with carbon and steel prices and lithium prices. Lithium went up eight X over the last year and that’s probably going to be coming down. So when you play this forward and start to think about next year, it seems to set up to be pretty favorable. One other piece that I think I under appreciated right when the numbers came out and it’s just kind of sunk in to me today is this idea of how enthusiastic they were. I’ve been expecting that on this earnings report. Most companies are going to be pretty pessimistic about the September quarter. I would say Elon was pounding the table that demand was strong and that they were going to have a strong back half of the year. And it shouldn’t have been a surprise to me because ultimately is that they see their backlog. They know they have a year of pent up demand essentially for these vehicles. So really, it’s not a read. You can follow this line of thinking here that their optimism, Tesla’s optimism about the back half a year isn’t a read for other companies because they, I think, are riding a little bit of a different wave. But to bring it together here is let me just address the cult side of this. It’s something that really concerns me. I think just before fast money closing bell, there was a poll that was a percentage of people that thought that Tesla is going to be $1,000 by the end of the year. And it says waiting for the poll results. I was thinking to myself, please let that number be low because I’m positive on Tesla and please let it be low because the lower it is, I think that of course, that’s the psychology. And it came out like 45% of people thought it would be up a thousand by the end of the year. And that’s like a return on what it comes out to, like a 60% return towards the end of the year, which is incredible. Like a 7% return is a great return. So I still think this kind of cult mentality is going to be a big part of the stock. I don’t think it’s going anywhere because ultimately I think they’re going to continue to grow deliveries at a rapid pace and continue to innovate around the edges, which gets people excited. And so when I play this forward, I believe that this is a $2500 stock over the next few years, and I realize it seems disconnected from traditional valuation related to our companies. [00:37:58][165.4]
Dan Nathan: [00:37:58] So this part is dropping on Friday. We’ve already had Snap’s earnings and for the most part, who gives a crap about SNAP. It’s a 20, what, $2 billion market cap company. Expect to do $5 billion in sales this year, but it really did set some investor antennas going up last fall into the start of this year and even before some of these other larger competitors topped out and turned lower. I think a lot of what SNAP was seeing and I know there was a lot of stuff about Apple privacy and all that sort of stuff. So we’re going to definitely keep an eye on snap. I think that might be a good indicator for what we see next week. But let’s talk about the five big ones that we’re going to have here. And when you think about Apple, Microsoft, Google, Amazon Meta about seven and a half trillion dollars in market cap here. Let’s just kind of break it down. Let’s start with Apple. What do you think in here and what do you think expectations are and how would you be positioned in this after such a big run? [00:38:48][49.8]
Gene Munster: [00:38:49] Well, they’ve kind of taken a little bit of the bullet from Mark Gurman in his Bloomberg reporting about some of the small tweaks and not big reductions in headcount. But just I think teasing that out spooked investors in the stock is of course rebounded. And I think in general, I suspect that the June quarter is going to be very strong. I suspect that their guidance, they do give guidance is not formal, but they do give guidance. I suspect that that’s going to be somewhat muted. And as analysts and investors start to triangulate what their guidance is, I suspect that it will be below where the street is for the September quarter. And the reason it’s just a simple game theory is that I think Apple’s business is doing strong, but the risk reward for them to be optimistic, given what’s going on is relatively low. And of course, Apple loves exceeding expectations. So my belief is that they are going to be cautious. I suspect that the street’s going to be mixed on that. It won’t be. You’re actually negative because some investors will say they’re just playing the game and kind of giving a little bit of a low bar. Kind of going back to that view of investors. Minds are starting to think about the next iPhone cycle. What’s going to happen in 2023? In 2023 is a tough setup relative to the Mac and iPad. Those businesses have been, of course, doing exceptionally well, 20, 30, 40% growth over the last couple of years. And they’re coming up against some tough comps. And if you look at how investors that’s why I think most of the mindspace is going to be around is just trying to figure out 2023 what’s. When I’m with Mac and iPad and most investors have that down that business down call, that’s 25% of sales, down about 6% next year. Overall, Apple revenue supposed to be up 5%. So where I’m at, I think it’s just essentially what is the link, the strength, the legs into those two products. Historically, they don’t get as much attention, of course, as the iPhone, but I think they’re going to get more attention because of the benefit they’ve had. And just to finish the thought is, I believe that they’re going to ultimately exceed those expectations, because I think that the New Macs, they have been well received. And I think what’s going on related to hybrid, either work or learning is going to be more sustainable. So when you put it together, I think this just takes a step back on the earnings report and slowly moves higher. [00:40:50][120.8]
Dan Nathan: [00:40:50] Take on valuation here 25 times this year, 24 times next, we’re supposed to have mid to high single digits earnings growth for the next couple of years. We’re supposed to see revenues probably low to mid single digit growth. And you’ve been all over this. This has been, I think, a pillar of your bull case for Apple for years is just the margin expansion that we’re going to see over a better mix shift from a move from hardware into services. And we’re seeing that. We’ve seen margins move up to three percentage points over the last few years or so. So I’m just curious how you thinking about valuation in will services? I know that Morgan Stanley was out with the call me curious what you thought about that they see the greater percentage of services as a huge boon for the company. Do you think this is like something that continues over the next few years and really justifies amid 25 multiple for low single digits or mid-single digits earnings growth? [00:41:40][49.1]
Gene Munster: [00:41:40] This is going to fall into the category of seeming disconnected from the market reality right now. But I think that Apple can actually see some multiple expansion. And part of the reason is that I think that at least in the near term, near-term, be in the next six months and don’t expect margin expansion. I see that at the high end of where big tech is trading in terms of the multiple, it is at the high end and it’s a statement of fact. But the piece that intrigues me is again playing forward to 2023. What’s going to be the conversation? 2023 we talked about the Mac and I’m getting to answer your question about valuation and why I think they have a chance for multiple expansion is in 2023, you’re going to be talking about the Mac and the iPad and the tough comps and see how that does. The second negative is going to be related to what’s going to happen with greater regulation, potentially some changes that they may have to make with App Store take rates, which eats into that profitable piece you’re just referring to. And then on the positive side, I am optimistic that there’s going to be there’s activity announced. And so I think that they will start to drip, at least they’ll be reporting on them getting into more into health care. They’ve just dropped that big report we saw on Amazon as recently done with their acquisition in one Med. And I think that there’s opportunity in health care, big market. Second is this auto. I keep kind of coming right up to the edge of the cliff here and talking about it, but not willing to jump in and say that they’re going to do it. There’s history to that. And I think that either way, whatever they ultimately end up doing in the car, whether it’s something through CarPlay or through a car themselves, I think that that CarPlay isn’t going to be multiple expansion. But I think if they do ultimately get into a car, I think that that would be a huge deal. And so there’s still to put it to the goods, you have a stable business, great cash flow, and you still have these carrots out there. And investors love to have something to look forward to. And as long as they keep dangling the carrots around these big tams, I think the multiple can go up. [00:43:27][106.6]
Dan Nathan: [00:43:27] Just, you know, I mean, I always kind of played the heel with Apple on fast money because it was a universally bullish name. Almost every analyst who had come on was bullish on it. Most investors were very bullish on it. And a lot of the people on our panel have been very bold and rightfully so. Let’s just be really clear. Okay. So I always like to try to pick out what could go wrong. But when I start thinking about like a TAM, like you’re talking about if there’s analysts and investors like you who think the EV market could be this, the full self-driving market could be this. Apple is clearly in a position where they could benefit to the tune of hundreds of billions of dollars not even making a car. I’ll just kind of come back to the fact that off the lows in June, Apple’s rally, 20% now is trading at $155 as we speak. The S&P is up 10% from that same point. So I think expectations are kind of building here. And if there were to be something of a guide that is a little bit more than them just being cautious for the sake of it, then I do think that’s the sort of thing that might turn the kind of tech tide here. [00:44:25][57.8]
Gene Munster: [00:44:26] Let me put it a slightly different way. I wasn’t clear. I think that there is risk to this quarter. My sense is that their guidance is going to be conservative and usually it’s all not priced in. And so in it’s held in. I mean, it’s pretty simple. It’s held in there exceptionally well. And they probably are going to say something cautionary. So I think that risk reward, at least in this quarter, is more negative. I think that, you know how I feel about the long term. [00:44:49][22.7]
Dan Nathan: [00:44:49] I think the near-term setup makes it kind of hard. And I agree with you everything you just said. All right. Let’s shift over to an enterprise name. Let’s talk about Microsoft. So obviously, a lot of that Apple story is consumer led. They have obviously issues as it relates to supply chain and demand issues, whether it be in China that’s been locked down, Europe, that sort of thing. You know, Microsoft’s kind of a different story here and. Relative. Let’s say underperformance of Microsoft versus an Apple is notable. The valuations are pretty similar. The expectations for earnings and sales growth are much higher this year and next. So trading about 27 times this year, maybe a little over 25 times next. Given the expected growth there, it seems pretty reasonable, especially if you’re looking at Apple in your positively predisposed for the back half of this year into 2023. Curious how you’re thinking about Enterprise, because I think Bill McDermott’s comments to Jim Cramer, I think early last week on his show about just kind of maybe some softening enterprise demand and some of the headwinds that are starting to emerge after just a fabulous couple of years for kind of SAS based models. Thoughts on the enterprise here? And is this something that it’s not likely if we see some issues here, they’re not likely to be one quarter issues. We’re starting to see lots of layoffs at lots of different tech firms. And you remember the old thing 20 years ago, if you were a startup selling the startups, you’re kind of toast. Here. We’re seeing a lot of tech companies scale back on hiring, reduce headcount. But even at companies like Ford that just announced 8000 job cuts, these are companies like all these industrial companies, company. They’re all using these SAS products. Right. That’s the secular story. Are we likely to see a meaningful pullback in the back half of this year? Maybe that lasts into 2023. [00:46:27][98.1]
Gene Munster: [00:46:28] I think the headwinds for the set up is more negative for Microsoft relative to other big tech. For me, it’s the difficult comps that piece to it and a little bit of a lack of enthusiasm about areas that they can grow into. Of course, cloud is being one of their big areas of growth, but ultimately when you put it together, it just is a somewhat uninspiring story. It’s been a place of safety. It’s been a place of victory with growth in our last couple of years. As far as the enterprise is concerned, I suspect we’re going to see pullbacks in spending across the board. I think the consumer is going to pull back. I think that enterprise they’re going to pull back. I think it’s going to be a pretty consistent pullback between the two and kind of look across all tech companies. They have different exposure in different pockets. So I would caution that the safety and enterprise enterprise can kind of power through a recession a little bit better. I just am not a big believer. It’s not that people are going to turn off their office suite, but I think just some of the incremental hiring, when you hear people losing their jobs, like you said, the supplier piece, I remember doing that exercise back in the dot com days. When you look at a company go under and then look at all their vendors and you could just kind of almost like triangulate. When you hear companies talking about cutting back and office information workers, that does have an impact. At a minimum, it takes away some of the growth. And I think that that’s something that’s going to have an impact on Microsoft more than the big tech companies. [00:47:49][80.4]
Dan Nathan: [00:47:49] But is it one that you view as kind of growth at a reasonable price? Obviously, it’s kind of fat, multiple, 27 ish times this year, 25 times next, like you said, but with double digit expected earnings and sales growth, let’s just say even if it decelerates a little bit, you’re not going to see this thing trading at like 18, 19 times. [00:48:06][16.6]
Gene Munster: [00:48:07] No, I don’t think it turns 18, 19 times. But I just think they have the setup. They have more headwinds relative to other tech. And I think that you can do better someplace else. [00:48:15][8.3]
Dan Nathan: [00:48:16] Let’s talk about Amazon here, because this is one, I think at its recent lows, the stock just kind of rocketed a little bit. It had that what was it, 24 one split or something. I think at its recent lows last month, it was trading as low as like one or two and a half. Here it is right now at 124 and a quarter here. That’s one heck of a rally. It did rally like that off of its lows in May and off of its lows in May. The stock was down, I think, 45% or so from its July 2021 highs. Those highs came in the week that Andy Jassy took over for Jeff Bezos. I mean, talk about getting tagged with a big headline. Their thoughts here, forget valuation. You just mentioned this acquisition of $4 billion acquisition today. Andy Jassy is clearly going to put his own stamp on this company going forward. But what does the buy of one medical or its three and a half billion dollars? What does it mean to you about the direction in which he wants to take this company? [00:49:11][54.9]
Gene Munster: [00:49:12] We own Amazon. I’m very excited not only about the logistics piece, mostly about the logistics piece, about where commerce is at, the fact there’s still open ended growth for that. And the piece, what we’re starting to see develop around health and wellness, health care, I think it is encouraging and kind of helps the multiple because you always need to have something out there for investors to get enthusiastic about, to kind of keep the dream alive, to keep the multiple up there. And ultimately, I think that that’s one thing that they’ve done today with that acquisition. So I don’t know where it ultimately goes. The Wall Street Journal is doing some reporting today, I think was Joanne Sterne, and I liked her comment about Amazon primary like primary care, that idea of and maybe that’s ultimately where they want to go. I don’t really see how the products fit together. I’ve never really understood why Prime Video is part of it. I kind of get it. You know, families want to use it therefore. But this kind of fits into, I think, Amazon and some of the other big tech companies, the core issue that they have. Is growth, and that’s what keeps them up at night. You have to go after large markets. And I think that I’m encouraged as an investor in Amazon encourage that they’re starting to go there. Don’t expect anything, of course, for a long time in that segment, but they’ve got the resources to go after it. And I think investors are going to probably give them the benefit of the doubt because two out of three things that they touch actually works. [00:50:31][79.9]
Dan Nathan: [00:50:32] I agree with that. I mean, I would have liked to have seen some of these names get a little bit more beaten up. [00:50:37][4.5]
Gene Munster: [00:50:37] I would. [00:50:37][0.2]
Dan Nathan: [00:50:37] Too. I don’t think this cash for trash move that we’ve seen over the last month, it’s actually not that bullish to me. And we’re going to talk about some of the names that I’ve kind of been picking at over the last month and a half or so that we’re down 60, 70, 80% in some instances. And these things are not going to be bottom. Right. And so I suspect that you’re going to see Amazon at some point in the next few months maybe retesting those recent lows. But I just say this about like if you think about Megacap tech succession going back to cook for jobs, Satya obviously was the third CEO at Microsoft, our Google. I mean, these have all been really great second or third acts and I see no reason to believe that Jazzy shouldn’t be able to do the same, especially as he’s able to kind of put his stamp on a few things and really leverage that experience, like from turning AWS into what it is. So it seems like positively predisposed to Amazon. You probably like me, you don’t love the rally. It just had just to reset here a little bit. Apple very positively predisposed, but this outperformance of late probably doesn’t make it a great setup into next week’s earnings, especially if the guidance is a bit worse than maybe that people expect. And then Microsoft, you definitely sound a bit lukewarm and that you’re expecting maybe a bit of malaise on the enterprise and maybe the valuation is a bit rich here and maybe a couple of quarters of, I don’t know, banging around with lower expectations would probably set this thing up a bit better for kind of leading out for whatever you want to call the next bull run that we’re in or something. Is that fair assessment so far? [00:52:02][84.2]
Gene Munster: [00:52:02] Spot on. [00:52:03][0.5]
Dan Nathan: [00:52:03] All right. Let’s do this. Let’s finish off with this. So we have alphabet, okay. And this is one I’m just going to take a guess here. You think from a valuation standpoint, maybe this one is the most defensible, but possibly we haven’t kind of seen the worst of what’s likely to come in a consumer led, let’s say, if we have unemployment tick up and we really are in a recession at some point in the back half of this year, that maybe leads into the next year. We see some of the trends that we saw towards ad based models decelerate, but it’s kind of got a defensive multiple. What are you most focused on with Alphabet here and what do you think the risks are near-term? And then where do you get interested in this thing? [00:52:41][38.1]
Gene Munster: [00:52:42] We own it. I would put it in the category of just a great, stable business long term. A lot of people could kind of frame that that piece, and there’s not much new there. The set up here is pretty unique. It has some dynamics similar to what’s going on with matter related to advertising, the search piece of it. Obviously, if consumer spending slows, that’s going to have a negative impact on it. And the growth rates that the Street’s looking for next year are similar to what they are this year. And so the way I see this playing out is I see some softness in the numbers in the back half of this year. And I think that the numbers next year are actually the growth rates, at least the absolute numbers might come down. But I think that the growth rates are in good shape. So this kind of falls in a camp similar to Apple, more cautious than positive going into print, just because I think that the only card that kind of gets them out of this tight spot, at least regarding the September guide or any commentary on September, is just expectations. Like who doesn’t know that you can make that argument on a lot of companies at this point. So but I’m taking the playbook that 80% of the time it’s actually not priced in so long term. This is another great company. The fact that they’re open to breaking up the company. I mean, this has been reported, the sign that they understand that there is some regulatory heat around them that would even suggest that. And by the way, whatever that Google first gives, regulators are going to say we want more and what they’ve offered up to have an impact of. It’s basically their old ad network that they’re willing to give up the old DoubleClick and that’s about 3% of revenue. So when you put it all together, I still believe this is the auction on the Internet, too. How many times you touch a Google product every day and they continue to find ways to monetize those better and they still have other bets that for the most part haven’t really added up anything into the valuation. So I think that the set up long term is really good for Google. [00:54:27][105.8]
Dan Nathan: [00:54:28] Yeah, I think there’s more better monetization going forward. That’s a little inside joke here. All right. So just kind of looking at the estimates for next year, again, you said the absolute number may come down, but the growth rate stick around here. You know, expected earnings growth of about 20% after a flat year and 18% sales growth trading about, what, 18, 19 times? That’s probably about as good as it gets or you’ve ever been able to kind of buy this thing on the out years. That makes some sense. [00:54:53][25.4]
Gene Munster: [00:54:54] We own it. We’ve bought it recently even in front of what we think is going to be a messy guide. [00:54:58][4.3]
Dan Nathan: [00:54:58] All right. So this is the last one. And I bought a little of this in May, and I’m up on it, surprisingly. But this is the Meta and this is a company that I think the only time I bought the stock in the last ten years was to cover a short. It’s just. That a company that really enjoyed their products or feel that good about but on a valuation basis and you think about where the stock’s trading this year got cut in half. There’s just a few companies of this size with the sort of revenue base and the margin that they have and the dominance they have just installed base or whatever you want to call them, the 3 billion monthly active users. I mean, the thing trades really cheap. I mean, it trades like the like some really bad shit is going to happen. So I’m just curious, what’s your take here? I’m fully prepared to buy on another gap here. And I’m looking with like a 1 to 3 year time horizon possibly. I just don’t think the stock is going much below, let’s call it 60 anytime soon. [00:55:49][50.5]
Gene Munster: [00:55:50] We are a little bit of matter to buy recently and think that this is one when you if you’re going to ask which of the big tech’s going to do best, I think that it’s going to be matter. Of course, they have the negative impact on advertising, just like Google does. But I think the difference here is that there is this negative pendulum that’s going on. It’s three different things. It’s ADFA, it is related to tick tock and potential competition and the health of the advertisers and all of those. This is one where I’d say that the bad news is largely priced in. This is investment advice we’re giving here, but just making predictions on how it’s going to play out. And I think that the risk reward is that it goes higher with a piece that I think gets missed is something that’s very obvious, is just over 30% of global Internet population. It’s a Facebook property every day. That is incredible. Second is that this idea that they’re going to spend into perpetuity around the metaverse I think is incorrect. ZUCKERBERG He’s competitive and he’s hinted about the time that’s going to take to build out the metaverse monetization. 5 to 10 years. He’s talked about potentially making changes to the pace that they’re adding. People even letting people go comes in the wake of Sheryl Sandberg leaving. And I think that that is comforting to me. That is looking at the bottom line last, I think tick tock, say we get banned. This is not a political comment here, simply a prediction. [00:57:04][74.8]
Dan Nathan: [00:57:05] You can make a political comment. I make them. [00:57:07][1.9]
Gene Munster: [00:57:07] Pendulum is going to go back to the right for the next president and there’s going to be more pressure from regulators to ban and tiktok’s banned in india. Why would it be banned is a question. [00:57:15][8.7]
Dan Nathan: [00:57:16] Because my kids would freak the fuck out. [00:57:18][1.8]
Gene Munster: [00:57:18] They’ll find some other place to medicate. No worries. I think the reason it’s not about like China spying on some teenager about what funny video they’re watching about what it is is about their ability to influence and to change the algorithm to influence how we think. And I believe that social media has the power to do that. And so I think that that’s the reason why ultimately I think that it does get banned. And I think that that’s a plus. [00:57:41][23.3]
Dan Nathan: [00:57:42] I agree with that. You know, just real quickly on okay. Computer, earlier this week, we had a guy named Kevin Weil. Kevin is the president at Planet Labs. He was the head of product at Twitter for seven years prior to Planet. And he worked on senior product roles at Instagram and on GM working for Marcus and on their digital wallet. Lately, probably one of the foremost product gurus of the last ten years, and we were talking about Zuckerberg in just something you just said about him. It’s really interesting. He said he was not a well-liked piece time CEO. But let me tell you something, do not bet against this guy as a wartime CEO. And I thought that was really interesting. And so I find your confidence in their ability to turn down the spend, focus on the things that they think are going to be really important to kind of help monetize that 3 billion monthly active users, monetize WhatsApp for the first time. I’m sure those circle back to a digital currency once there’s a better regulatory framework, right, and they’ll make their own metaverse. It won’t be the metaverse. Zuckerberg is not going to be the overlord of the metaverse because there won’t be one metaverse. Right. So. All right, Gene, before we get out of here, let’s just kind of put our fast money hats on to see a whole heck of a lot of you next week on fast money as these mega-cap tech earnings are coming out. Which names we just covered five and they’re all reporting. Which do you think have the biggest potential for gap risk lower. You could choose one or two and which gap risk higher and let’s call it the implied move in the options market for each one of these names, let’s say give or take 5% on the next day. [00:59:12][90.2]
Gene Munster: [00:59:13] Not investment advice. I think Microsoft and lower Apple on lower and I think in order highest upside is better followed by Google. [00:59:22][8.6]
Dan Nathan: [00:59:22] I kind of agree with all that. I will tell you the names that I own. I’d love to see kind of a gap lower back to levels where they were a few weeks ago and see how they act at those levels based on the new information. Because really, if you want to come out of a bear market like this and some of these names have crashed, let’s just call it what it is. SNAP has crashed, PayPal has crash, meta has crashed, Apple corrected in a bear market. And those are really different things. You need to see the sort of price action like you’re seeing in Tesla today. I didn’t think it was good news. Stocks trading very well and you have to reprocess your thoughts. You know what I mean about how these works? So to me, I want to see how some of these good stories act on bad news. I want to see how some of the bad if it’s just incrementally good news, a little green shoots. So that’s what I find so fun about earnings. Listen, Jean, I really appreciate your time. We cover. A lot of ground. You are a brilliant tech prognosticator. We really appreciate you have it on here. [01:00:13][51.1]
Gene Munster: [01:00:14] Thank you. I enjoy it tremendously and look forward to seeing you talking sound bites. [01:00:19][5.2]
Dan Nathan: [01:00:19] All right, man. I’ll see you next week. Thanks, Gene. [01:00:21][1.7]
Gene Munster: [01:00:22] Over and out. [01:00:22][0.4]
Guy Adami: [01:00:23] Thanks once again to CME Group for sponsoring this episode of On the Tape. If you liked what you heard, make sure you hit, follow and leave us a review. It helps people find our show. And we love hearing from you. And we also want to hear from you via email at. On the tape at risk reversal dot.com. Any time of the day. Follow and connect with us on Twitter at on the tape pod and we’ll see you next time. [01:00:47][24.1]
Dan Nathan: [01:00:49] On the tape is a risk reversal media production. This podcast is for informational purposes only. All opinions expressed by me and Nathan Guy, Danny, Danny Moses and any other participants are solely our opinions and should not be relied upon for specific investment decisions. [01:00:49][0.0]
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