Stock Buyers Boost Tech After AI Jolt | Bloomberg: The Close 1/28/2025
>> VAI TRADE IS BACK. THE QUESTION IS HOW DO YOU VALUE IT. I AM ROMAINE BOSTICK. >> I AM ALIX STEEL. I DON'T KNOW IF WE HAVE THE ANSWER YET BECAUSE TAKE A LOOK AT WHERE WE SET RIGHT HERE.
THE S&P IS UP 1%. IF YOU TAKE A LOOK OVER THE LAST THREE DAYS, THE S&P IS STILL DOWN .7% AMTEK IS STILL DOWN 1.5 PERCENT AND NVIDIA IS STILL DOWN 13% SO KEEP THAT IN MIND AS WE GO THROUGH THE CLOSE. THE RUSSELL WAS LESS BAD
YESTERDAY. THAT IS NOW UP BY .3% AND THE VIX DEFINITELY CALMING DOWN. ROMAINE: THE DIP BUYING THAT WE ARE SEEING TODAY ON A CERTAIN LEVEL IS A BIT CAUTIOUS, IF YOU WILL COME HERE.
IT IS BEING CARRIED OUT WITH A TINGE OF CAUTION ON THIS AFTERNOON GIVEN WE ARE SCHEDULED TO GET A SLEW OF EARNINGS OUT OF TECH COMPANIES OVER THE NEXT 24 HOURS OR SO THAT COULD CHANGE THE NARRATIVE ON AI ONCE AGAIN. THE EUROPEAN CHIP GIANT IS SCHEDULED TO REPORT OVERNIGHT TUESDAY AND THEN OF COURSE, WE GET IBM, MICROSOFT, TESLA ON WEDNESDAY. INTEL AND APPLE ON THURSDAY. A LOT TO KEEP UP WITH HERE WITH BARELY 1/5 OF THE S&P QUARTERLY EARNINGS OUT IN THE INDEX RIGHT NOW IS ON TRACK TO POST A GAIN OF 8.3% YEAR-OVER-YEAR. THAT IS WITH OR WITHOUT THE
HELP OF BIG TECH AND BETTER THAN PRESEASON EXPECTATIONS. THE INITIAL BOOST CAME FROM FINANCIALS A COUPLE OF WEEKS AGO AND TODAY, THE UPSIDE IS PRESENTED TO YOU BY ROYAL CARIBBEAN, BY A LANDING GEAR MAKER AND BY GLIMMERS OF HOPE OVER AT BOEING. THAT IS JUST ENOUGH TO COMPENSATE TODAY FOR SOME OF THE NEGATIVITY WE ARE SEEING SWIRLING AROUND AIRLINES, AUTOMAKERS, AND DEFENSE STOCKS. GM, JETBLUE, LOCKHEED, ALL DISAPPOINTING TODAY. AS INVESTORS DIGEST EARNINGS, THEY ARE STILL GOING TO HAVE TO DIGEST WHATEVER JAY POWELL DECIDED TO SPOONFEED THEM TOMORROW. THE MEETING UNDERWAY. TRADERS EXPECT A PAUSE IN INTEREST-RATE CUTS BUT THEY ARE NOT SURE HOW LONG IT WILL LAST AND THAT IS WHERE HIS TONE AT HIS PRESS CONFERENCE COMES INTO PLAY TOMORROW.
HOPING TO SEE YOU THERE. >> WE GET EARNINGS TOMORROW. HERE'S THE EARNINGS OUTLOOK. THE IDEA IS WHAT WE SEE, MAGNIFICENT SEVEN EARNINGS COMING DOWN AND THE REST OF THE S&P GOING UP. THIS CHART COMES FROM CAPITAL ECONOMICS. SORRY, OXFORD ECONOMICS, AND THEY SEE SOMETHING SIMILAR. LOOKING TO GROW 18% FOR 2025 BUT YOU ARE LOOKING AT THE BLUE LINE WHICH IS THE S&P WITH 13% GROWTH.
YOU CAN SEE OVER THE LAST COUPLE OF QUARTERS, THAT GAP HAS BEEN NARROWING AND IF WE WIND UP SEEING CONSISTENT MOVES TO THE UPSIDE WITH THE OTHER TECH STOCKS, MAYBE THAT BECOMES THE BREATH WE HAVE BEEN LOOKING FOR. MANUFACTURING AND THAT CONSUMER SPENDING. >> YOU ARE STARTING TO SEE THAT PLAY OUT SO FAR THIS EARNINGS SEASON. LAURIE JOINS US TO KICK US OFF TO THE CLOSE ON THIS TUESDAY AFTERNOON. IT ALREADY FEELS LIKE FRIDAY. THE GLOBAL CHIEF INVESTMENT
OFFICER AT STATE STREET GLOBAL ADVISORS AND LET'S START OFF WITH THE SELLOFF YESTERDAY AND I GUESS THE LITTLE REBOUND WE ARE GETTING TODAY. I KNOW WE HAVE NOT CLAWED BACK ALL OF THE GAINS BUT WHEN YOU TAKE THE TEMPERATURE OF MARKET SENTIMENT AND WHATEVER RATTLED THEM YESTERDAY, HAS THAT BEEN SETTLED? >> I DON'T THINK IT HAS BEEN SETTLED AT ALL. WE HAVE BEEN WRITING FOR QUITE SOME TIME NOW ABOUT STRETCHED VALUATIONS IN SOME OF THESE COMPANIES, THE FACT THAT THERE ARE OTHER THREATS OUT THERE. YOU THINK ABOUT ANTITRUST,
REGULATORY, TAX POLICIES. THERE ARE A NUMBER OF THINGS THAT COULD IMPACT SOME OF THESE HIGH FLYERS AGAINST A BACKDROP WHERE THEY ARE FULLY PRICED. IT IS NOT SURPRISING TO SEE A BIT OF A WOBBLE WHEN YOU HAVE SOMETHING TO PASS LIKE YESTERDAY. THE OTHER SIDE OF IT IS WE THINK THAT THESE ARE TECHNOLOGIES THAT ARE ENDURING AND IT WILL ULTIMATELY BE THE BENEFICIARIES, THE FINANCIAL COMPANIES, THE CONSUMER GOODS COMPANIES THAT WILL DEPLOY THESE TECHNOLOGIES TO GREAT EFFECT. ROMAINE: WHEN YOU LOOK AT SOME OF THE BUYING WE ARE SEEING TODAY, AND LET'S EXTRAPOLATE THIS INTO THE EARNINGS SEASON BECAUSE WE ARE GOING TO START TO HEAR FROM SOME OF THESE COMPANIES WHO GOT SOLD OFF YESTERDAY. ARE YOU CONFIDENT HEADING INTO
THIS EARNINGS SEASON IRRESPECTIVE OF WHAT WE LEARNED OUT OF DEEPSEEK YESTERDAY? ARE YOU CONFIDENT THAT THE BIG CAP NAMES WILL DELIVER ON EXPECTATIONS? >> THEY ARE LIKELY TO DELIVER ON EXPECTATIONS BECAUSE A LOT OF THAT IS ALREADY BAKED IN, IF YOU WILL. IT DID NOT JUST CHANGE YESTERDAY. FOURTH QUARTER OF 2024 THAT WE ARE TALKING ABOUT BUT IT WILL BE INTERESTING TO SEE WHAT THEY TALK ABOUT GOING FORWARD.
THERE IS AN ENORMOUS AMOUNT OF CAPITAL INVESTMENT IN THESE COMPANIES AND DEMAND FOR THESE PRODUCTS, LOTS OF KNOCK ON EFFECTS INCLUDING ENERGY UTILIZATION IT WILL BE INTERESTING TO SEE HOW THEY TALK ABOUT THE POTENTIAL THREAT THAT THIS KIND OF, YOU KNOW, EVOLUTION CREATES FOR THEM SO THAT IS WHAT WE WILL BE LOOKING AT MORE THAN JUST THE EARNINGS THEMSELVES. >> DO YOU SEE THAT CONTINUING? >> WE DO. THIS IS SOMETHING WE HIGHLIGHTED IN OUR 2025 ALEX. IT DID NOT TAKE THE MAG SEVEN CONTINUING TO HAVE DOUBLE-DIGIT GAINS TO PROPEL THE MARKET HIGHER AND THEN A BROADENING OUT AS WE SEE STABLE GROWTH GLOBALLY WAS WHAT WE WERE LOOKING FOR MORE. WE ARE SEEING THAT. WE ARE SEEING FINANCIALS AND CONSUMER GOODS AND EVEN HEALTH CARE. MANY OF THOSE PARTS OF THE MARKET THAT JUST HAVE NOT BEEN LOVED ARE NOW STARTING TO GET A LITTLE BIT OF A THEY DO.
>> DOES THAT MEAN YOU ROTATE INTO DIFFERENT SECTORS OR IS IT JUST REALLOCATING CAPITAL INTO THOSE OTHER NAMES? >> IT IS A LITTLE BIT OF BOTH, HONESTLY. SO SOME OF IT IS RATHER THAN JUST HAVE THE CONCENTRATION RISK OF THE S&P 500, CAN YOU LOOK AT SOMETHING THAT IS A LITTLE BIT MORE EQUALLY BALANCED AND PARTICIPATE IN THE MARKET BROADENING OUT? THEY ARE LIKELY TO PROPEL US HIGHER BUT IT IS ALSO LOOKING OPPORTUNISTICALLY AT WHERE TO THE PLOY CASH. AS LONG AS RATES STILL REMAIN IN THE 4% PLUS RANGE, CASH IS STILL RELATIVELY ATTRACTIVE. BUT IF WE DO BELIEVE IN THIS GLOBAL GROWTH STORY, THIS IS A GOOD OPPORTUNITY TO ENTER INTO SOME OF THESE UNLOVED SECTORS. >> I'M GLAD YOU MENTIONED RATES. I AM TOLD THE FED STILL MATTERS. I'M CURIOUS, IN ALL SERIOUSNESS, LOOKING PAST WEDNESDAY'S FED DECISION, LOOKING AHEAD TO SOME OF THE INFLATION DATA WE GET ON FRIDAY, THE EXPECTATION AT LEAST AMONG ECONOMISTS, WE WILL SEE AN INCREASE IN PERSONAL CONSUMPTION AND A SLIGHT INCREASE IN THAT KEY INFLATION NUMBER. SHOULD MARKETS BE A LITTLE BIT
MORE WORRIED ABOUT THAT OR ARE WE KIND OF IN I GUESS ENOUGH OF A SWEET SPOT WHERE THEY CAN CONTINUE DOING WHAT THEY ARE DOING? >> THE FIRST THING IS WE ARE LIKELY TO SEE THE FED STAY ON HOLD AND IT WILL BE VERY INTERESTING TO SEE HOW THEY DESCRIBED THAT BECAUSE ONE NARRATIVE IS THAT THEY HAVE ALREADY DONE ENOUGH WORK AND WANT TO SEE HOW THAT PASSES THROUGH TO THE REAL ECONOMY. WE ARE SEEING CORE MEASURES FLATTENING OUT SO THAT IS REALLY GOOD AND WE DON'T SEE ANY IMMINENT THREATS TO A SPIKE IN INFLATION ON THE HORIZON SO THAT WILL ALL BE GOOD BUT THE OTHER SIDE OF THIS IS ONE OF THE RISKS THAT THEY TALK ABOUT AND ONE OF THE THINGS THEY HAVE BEEN QUITE VOCAL ABOUT IS THERE ARE A LOT OF POLICY RELATED THINGS COMING OUT OF THE ADMINISTRATION THAT COULD POTENTIALLY BE INFLATIONARY. SO IT WILL BE MORE HOW IS THAT NARRATIVE OF WHAT THE PAUSE MEANS AND WHAT THEY WILL BE LOOKING AT GOING FORWARD THAT WE WILL BE WATCHING. ROMAINE: ALWAYS WONDERFUL TO TALK TO YOU. A GREAT KICK OFF HERE TO THE CLOSE. GLOBAL CHIEF INVESTMENT OFFICER AT STATE STREET GLOBAL ADVISORS. COMING UP ON THE PROGRAM, TECH STOCKS TRYING TO SHAKE OFF THE DEEPSEEK SHOCK. A CONVERSATION ABOUT WHAT
DEEPSEEK REALLY DID WITH PIONEER ANDREW AND THE FUTURE OF AMERICA'S AI DOMINANCE. >> XEROX STOCK UNDER PRESSURE AFTER RELEASING EARNINGS. THE CEO JOINS TO TALK ABOUT HOW THE COMPANY PLANS TO MAKE SURE 2025 IS NOT A COPY OF 2024. ROMAINE: BRIAN NICCOL DID A GREAT JOB. HOW IS HE DOING AT STARBUCKS? THE RELATIVELY NEW CEO SCHEDULED TO REPORT EARNINGS AFTER THE BELL. WE WILL SET YOU UP FOR WHAT TO WATCH THERE. STICK AROUND. THIS IS BLOOMBERG.
ALIX: AI STOCKS RECOVERING TODAY AFTER THE THREAT OF AI STARTUP DEEPSEEK SPARKED A MAJOR TECH SELLOFF YESTERDAY SO WE ARE GOING TO GET MORE INSIGHT ON THIS WITH THE FOUNDER OF EXPONENTIAL VIEW, A DIGITAL FELLOW AT STANFORD UNIVERSITY AND EXECUTIVE FELLOW AT HARVARD BUSINESS SCHOOL. BUSINESS LEADERS ON THE CHALLENGES AND OPPORTUNITIES PRESENTED BY AI. THE PERFECT PERSON TO TALK TO. YOU HAVE BEEN AWARE OF DEEPSEEK FOR A WILD, RIGHT? HOW DO YOU RATE IT? >> I QUITE LIKE IT, TO BE HONEST. AS A USER, I STARTED TO USE DEEPSEEK, THIS REASONING MODEL EVERYBODY GOT EXCITED ABOUT A FEW DAYS AGO, AND THE PREVIOUS VERSION.
AND I FIND IT IS ABOUT A QUARTER OF MY AI USE. IT IS A NICE, FAST PRODUCT AND IT HAPPENS TO BE FREE SO I THINK THEY HAVE DONE SOMETHING QUITE CLEVER HERE. >> IS IT ACCURATE PRESSURE MIGHT >> IT IS PRETTY GOOD HOW ACCURATE ARE THESE AI SYSTEMS EVER? THEY ARE GETTING MUCH MORE ACCURATE AND THERE ARE CERTAIN THINGS OF COURSE THAT DEEPSEEK BEING A MODEL THAT IS BUILT IN CHINA WILL NOT TALK ABOUT BUT THOSE ARE NOT THE KINDS OF THINGS MOST OF US ARE ASKING ABOUT ON A DAY-TO-DAY BASIS. ROMAINE: FROM AN INVESTOR PERSPECTIVE, ONE OF THE BIG QUESTIONS EVERYONE WANTS TO KNOW IS HOW DID THEY DO THIS AT THE PURPORTED COST THAT THEY DID IT? THIS IS A PARLOR GAME GOING ON AS WE HEAD INTO AN EARNINGS SEASON WHERE WE WILL HEAR ALL THESE COMPANIES TALK ABOUT THIS CAPEX SPEND IN THE TENS IF NOT HUNDREDS OF BILLIONS OF DOLLARS MEANWHILE YOU HAVE THIS COMPANY IN CHINA SEEMINGLY ABLE TO DO THIS FOR MILLIONS. CRACKS ABSOLUTELY.
I THINK $290 BILLION OR $300 BILLION EURO MARKED FOR THIS YEAR FROM THE BIG FOUR CAPEX, HYPER SCALARS, WHICH IS PRETTY TREMENDOUS AMOUNTS OF MONEY. I THINK THE ANSWER IS THAT NECESSITY IS THE MOTHER OF INVENTION. AND AS A RESULT OF THE FIRST TRANSIENT OF EXPORT CONTROLS FROM THE BIDEN ADMINISTRATION, IT HAS BEEN HARDER AND HARDER FOR CHINESE FIRMS TO GET ACCESS TO HIGH-END CHIPS. THE VENTURE CAPITAL MARKET IN CHINA IS PRETTY MORIBUND AS A RESULT OF SOME POLICY DECISIONS TAKEN IN THE LAST COUPLE OF YEARS SO THIS STAGGERING FUNDING ROUNDS THAT WE HEAR OPENAI AND THEIR COMPETITOR, ANTHROPIC, GET IN THE U.S. DON'T HAPPEN IN CHINA BECAUSE EVENTUALLY, THE CAPITAL MARKET IS NOT AS DEEP AND CHINA'S MEGA TECH FIRMS, ALIBABA, BAIDU, TENCENT, ARE MUCH SMALLER THAN THE AMERICAN FIRMS TO SELL WITHOUT AS MUCH CAPITAL TO GO AROUND, AND WITHOUT ACCESS TO THE HIGHEST END CHIPS, YOU ARE REALLY FORCED TO BE INCREDIBLY EFFICIENT, INCREDIBLY INNOVATIVE, AND VERY, VERY INVENTIVE AND THAT IS WHAT WE HAVE SEEN HERE. >> THAT SEEMS TO BE THE NARRATIVE UNFOLDING.
I WONDER, DID THAT CHANGE THE COURSE FOR SOME OF THE BIG U.S. COMPANIES? CAN THEY FIND A WAY TO BE KIND OF THAT START UP, THAT NIMBLE, SCRAPPY COMPETITOR THAT A LOT OF THEM ONCE WERE 20 YEARS AGO DURING THE INTERNET AND E-COMMERCE BOOM? >> I AM SURE THAT THERE ARE SOME VERY UNCOMFORTABLE CONVERSATIONS BEING HAD AROUND THE WEST COAST OF THE U.S. AND SOME ENGINEERS NO DOUBT WHO HAVE HAD SOME VERY DIFFICULT MOMENTS IN THE LAST FEW DAYS BUT THE THING ABOUT THE BOSSES AT THESE BIG FIRMS IS THAT THEY KNOW BETTER THAN ANYBODY ELSE THAT TECHNOLOGY ALWAYS GETS CHEAPER. THAT IS WHAT IT DOES. AND IF YOU WORK IN TECH, IN COMPUTING, IN THE INTERNET, WHAT YOU HAVE SEEN OVER THE LAST 50 YEARS IS THE CONSTANT DECLINE IN THE COST OF THE UNDERLYING TECHNOLOGY AND THESE EXECUTIVES WILL ALSO KNOW THAT IT'S NOT JUST THE HARDWARE. THE SPEED OF THE TECH INDUSTRY. IT IS ALSO THE OPTIMIZATIONS
YOU CAN MAKE IN SOFTWARE AND SOFTWARE OPTIMIZATIONS ARE OFTEN MUCH, MUCH BIGGER IN MAGNITUDE THAN HARDWARE ONCE SO I BELIEVE THESE EXECUTIVES WOULD HAVE KNOWN, WOULD HAVE EXPECTED THERE TO BE SIGNIFICANT COST DECLINES AND EFFICIENCIES. THE FIRST TIME YOU BUILD A FRONTIER AI MODEL, YOU DON'T CARE ABOUT EFFICIENCY. YOU CARE ABOUT PERFORMANCE. YOU HAVE TIMES IN THE QUARTERS AFTER TO IMPROVE IT. I THINK WHAT IS SURPRISING IS THE TIMING. I SUSPECT THAT PEOPLE ARE A LITTLE BIT SHOCKED AS I THINK MANY OF US WERE THAT DEEPSEEK WAS ABLE TO COME OUT AND ORDER OF MAGNITUDE CHEAPER AT THE END OF 2024 WHICH THEY DID AND I THINK THAT IS WHERE THE SURPRISES COME.
>> ON THAT POINT, I MEAN, FIRST OF ALL, THIS WAS SUPPOSED TO BE OPEN-SOURCE SO I ASSUME IT WOULD NOT BE TOO HARD TO REVERSE ENGINEER WHAT THEY DO. IT RAISES THE QUESTION AS TO WHY WE DID NOT SEE A BIT MORE COLLABORATION AMONGST COMPANIES. I KNOW YOU HIT ON IT PARTLY WITH THE EXPORT CONTROLS ON SHIPS BUT IT SEEMS LIKE ALL OF THIS COULD BE RESOLVED HAD WE SEEN MORE COOPERATION NOT ONLY AMONG COMPANIES BUT NATIONSTATES THEMSELVES. >> COOPERATION IS REALLY IMPORTANT FOR PUSHING TECHNOLOGIES FORWARD BUT SOMETIMES, THAT COOPERATION HAPPENS IN THE WAY THAT DEEPSEEK HAS DONE IT WHICH IS THAT THEY HAVE PUBLISHED A REASONABLY DETAILED TECHNICAL PAPER. THEY EXPORTED THE MODEL AS OPEN
WEIGHTS, WHICH MEANS ANYBODY CAN GO OFF AND RUN IT SAFELY ON THEIR OWN COMPUTERS AS I AM DOING AND THAT ALLOWS OTHER ENGINEERS TO LOOK AT WHAT HAS BEEN DONE AND TRY TO FIGURE OUT HOW THEY CAN APPLY THAT LEARNING INTO WHAT THEY DO. I THINK THE DEEPER QUESTION IS TO WHAT EXTENT WILL THE VERY LARGE AMERICAN FIRMS NOW START TO SAY, YES, WE HAVE THIS AT SCALE BUT WE ALSO NOW NEED TO PUT A LITTLE BIT MORE EFFORT IN BEING MORE EFFICIENT MORE QUICKLY. >> TO THAT POINT, TO ME, THE MICROSOFTS AND GOOGLES AND METAS, THAT SHOULD BE GOOD FOR THEM. WHERE AM I WRONG?
>> THE MARKET HAD TO RESPOND VERY QUICKLY. WE CAN TRUST IN THE MARKET OVER THE LONG-TERM BUT IN THE SHORT-TERM, SOMETIMES, THE ANIMAL SPIRITS GET THE BETTER OF IT. I THINK IT IS BETTER FOR GOOGLE, MICROSOFT, BECAUSE IT WILL REDUCE THE COST OF DELIVERY. IT IS PARTICULARLY GOOD FOR APPLE BECAUSE APPLE HAS BEEN SEEN AS AN AI LAGGARD AND ALSO APPLE IS A FIRM THAT HAS VERY DISTRIBUTED INFRASTRUCTURE. THEY NEED PORTABLE, EFFICIENT MODELS AND I THINK DEEPSEEK HAS SHOWN THE WAY SO MY OWN READING IS THIS IS GENERALLY GOOD FOR MOST OF THE BIG COMPANIES AND PARTICULARLY GOOD FOR APPLE BECAUSE IT PROVIDES THEM A ROOT IN AND IT WILL ACCELERATE THE DEVELOPMENT AND DEPLOYMENT OF AI SYSTEMS ACROSS THE U.S. AND GLOBAL ECONOMY. ROMAINE: GREAT STUFF.
ONE OF THE BIG THINKERS IN THE TECH SPACE, FOUNDER OF EXPONENTIAL VIEW AND HE WAS TALKING ABOUT APPLE. APPLE HAVING ITS BEST TWO DAY RUN GOING BACK TO JUNE. THIS IS THE FORGOTTEN STOCK. PEOPLE WERE CONCERNED. IPHONE SHIPMENTS WERE NOT WHAT THEY USED TO BE BUT THE SET UP HEADING INTO THE EARNINGS TOMORROW, THURSDAY, LOOKING PRETTY GOOD. ALIX: THEY HIT THE KEY TECHNICAL .
IT WAS UP YESTERDAY IN COMPARISON TO THE REST. >> MOST OF THEM NOW IN THE GREEN. THEY LED -- LED BY NVIDIA, UP 8% RIGHT NOW HEADING INTO THE CLOSE. AND COME BACK, WE WILL TAKE A CLOSER LOOK AT LVMH, DOWN 3% TO 4%. A PRETTY BULLISH COMMENTARY OUT OF THE CEO BUT WHEN YOU LOOK AT THE EARNINGS, INVESTORS DID NOT QUITE TAKE IT THAT WAY. YOU'RE GOING TO GET SOME INSIGHTS, COMING UP NEXT HERE ON THE CLOSE ON BLOOMBERG. ♪
ROMAINE: LET'S GET RIGHT TO THE BIG MOVERS ON THE BACK OF ANALYST RECOMMENDATIONS AND TOP CALLS. THE AI DARLING QUADRUPLED IN PRICE IN ITS MARCH IPO, GETTING AN UPGRADE TO OUTPERFORM AT NORTHLAND SECURITIES FOLLOWING THE DEEPSEEK RELATED PLUNGE. NORTHLAND SAYS THE STOCK -- THAT PLUNGE HAS OPENED UP AN ATTRACTIVE ENTRY POINT, SAYING THAT WHILE DEMAND MAY DIMINISH, THAT SHOULD BE OFFSET BY INCREASED DEMAND FOR AIA INFERENCE.
THE ARCHITECTURE DESIGN SOFTWARE COMPANY UPGRADED TO OUTPERFORM AT MIZUHO. THE PRICE TARGET GETTING A BIG BUMP FROM $280 A SHARE TO 400. THE ANALYST DECIDING HIS CHANNEL CHECKS AS WELL AS IMPROVING MACRO TRANSIT. HE SAYS THE ROLLOUT SHOULD BE A TAILWIND FOR REVENUE, FREE CASH FLOW, AND MARGIN EXPANSION. VICTORIA'S SECRET, TAKE A LOOK
AT THIS. RETURNING TO AN OVERWEIGHT RATING ON THE STOCK FOR THE FIRST TIME IN TWO YEARS, SAYING THE LINGERIE RETAILER FITS HER CRITERIA FOR A TURNAROUND STORY. POSITIVE SALES, PROMOTION GROWTH FOR ITS NAMESAKE AND PINK BRANDS WITH A POSITIVE DIRECTION IN LEADERSHIP WITH A NEW CEO PUSHING THE SHARES HIGHER. WE WANT TO STAY IN THE RETAIL SPACE AND TURN TO THE LUXURY LABELS RESPONSIBLE FOR HIGH-END BRANDS LIKE CHRISTIAN DIOR COME OUT WITH RATHER SUBDUED EARNINGS THIS AFTERNOON. SALES DOWN ABOUT 1% IN THE QUARTER ALTHOUGH THE CEO GIVING A RELATIVELY BULLISH COMMENTARY TO ANALYSTS AND INVESTORS EARLIER TODAY. THE MANAGER OF GLOBAL SELECT STRATEGIES AT ARTEMIS INVESTMENT MANAGEMENT. LET'S START OFF FIRST WITH THE
NUMBERS THEMSELVES. WE EXPECTED THEM TO BE DOWN. WHY? >> THE KEY FASHION AND LEATHER GOODS SEGMENT, THE PROFIT DRIVER OF THE GROUP, THAT IS EXPERIENCING A CYCLICAL SLOWDOWN ALONG WITH THE REST OF THE LUXURY SECTOR BUT IT IS IMPROVING. IT WAS DOWN MINUS 1% IN Q4. THAT WAS NOT ENOUGH GIVEN THAT PEERS HAVE REPORTED JEWELRY SALES WHICH IS THEIR FLAGSHIP BUSINESS UP 14% FOR THE SAME CALENDAR PERIOD. BURBERRY FLAGGING A SEQUENTIAL
IMPROVEMENT SO I THINK THIS WAS SEEN AS LACKING IN THE MAGNITUDE OF THAT IMPROVEMENT WHICH WAS NOT SUFFICIENT RELATIVE TO WHAT THE MARKET WAS EXPECTING. >> DO YOU THINK THAT IS BUDGET OR AN OVERREACTION? >> IN TERMS OF -- ONE ASPECT IS THE TOP LINE. ALTHOUGH IT IS IMPROVING, IT IS NOT BACK IN POSITIVE TERRITORY FOR THAT KEY SEGMENT IN THE SECOND IS THE EXTENT OF OPERATIONAL DELEVERAGE SO MARGINS FOR THE FULL YEAR WERE DOWN ABOUT 300 AND 40 BASIS POINTS, DOWN NEARLY 500 BASIS POINTS FOR THE SECOND HALF OF THE YEAR, AND THAT I THINK IS DIFFERENT FROM WHAT THE REST OF THE PEERS HAVE REPORTED WHO HAVE ONLY REPORTED TOPLINE UPDATES SO IT IS SOMEWHAT INDICATIVE OF PERHAPS WHAT THE COST OF DOING BUSINESS IN THE LAST YEAR HAS BEEN, THE FACT THAT PRICE INCREASES HAVE BEEN NEARLY IMPOSSIBLE TO TAKE GIVEN THE CONSUMER HAS BEEN FLAILING.
THAT ALL SUGGESTS THE MARGIN PICTURE HAS REMAINED UNDER PRESSURE. ROMAINE: WE KNOW LG MH, FOR ALL OF ITS LUXURY APPAREL BRANDS. I AM CURIOUS ABOUT THE WINE AND SPIRITS SEGMENT, DOWN 8% ON A YEAR-OVER-YEAR BASIS. THAT WAS WAY WORSE. THEY WERE LOOKING FOR A DROP OF ABOUT 7% HERE.
IS THERE ANY HOPE THAT COULD BE TURNED AROUND BECAUSE THAT IS A TOTALLY DIFFERENT STORY THAN WHAT IS GOING ON WITH PURSES, HANDBAGS, AND EVERYTHING ELSE. >> INDEED. THEY ARE FUNDAMENTALLY EXPOSED IN THE U.S., WHICH REMAINS VERY WEAK AND THEY SUGGESTED IT COULD TAKE UP TO TWO YEARS FOR THAT TO IMPROVE, WHICH DOES HAVE NEGATIVE READ ACROSS FOR PEERS. THAT PAINTS A PRETTY BLEAK PICTURE AS WELL AS THE FACT THAT CHAMPAGNE, THERE ARE OTHER KEY BUSINESS, DID NOT EXPERIENCE THAT SAME SEASONAL CELEBRATORY EFFECT THAT IT DID AT THE END OF LAST YEAR AS IT USUALLY DOES AND THE OTHER IMPACT HAS ALSO BEEN THAT THEY HAVE CATEGORICALLY RULED OUT ANY DIVESTMENT OF THE WINES AND SPIRITS BUSINESS SO THEY ARE COMMITTED TO CONTINUING TO OWN IT EVEN THOUGH IT REMAINS A DRAG ON GROUP TOPLINE AS WELL AS PROFITABILITY. >> WHAT IS YOUR TOPIC IN RETAIL -- IN THE LUXURY RETAIL SPACE AND WHAT WILL BE THE CATALYST FOR THAT STOCK? >> I GUESS THIS IS UNCONTROVERSIAL GIVEN IT IS DONE QUITE WELL ALREADY INNOCENCE.
THE GAP THAT HAS REALLY OPENED UP HERE, WHICH IS THAT IN THE THIRD QUARTER OF THE YEAR, THE CAP BETWEEN THE TOP LINE WAS NINE PERCENTAGE POINTS. WHEN YOU COME TO CALENDAR Q4, THE GAP IS 15 PERCENTAGE POINTS SO THERE IS SOMETHING DEEPER GOING ON WHICH IS THAT THE JEWELRY CATEGORY FUNDAMENTALLY IS ENJOYING DIFFERENT DYNAMICS. THE TAILWIND IS THERE AND THE BUSINESS -- THE BRANDS ARE EXECUTING IN A MUCH SUPERIOR FASHION TO MOST OF SOFT LUXURY AT THIS TIME. >> IS HE GOING TO BE CHINA THAT IS LEADING IT OR THE U.S. NOW? >> ALL EYES ARE ON THE U.S.. HE COMMENTED ON THE FACT THAT
HE EXPECTS A BOOM IN THAT MARKET AND HE WAS PROMINENTLY PLACED AT THE INAUGURATION LAST WEEK AND THERE ARE A LOT OF EXPECTATIONS THAT THE SEQUENTIAL IMPROVEMENT CONTINUES INTO 2025. >> THANK YOU SO MUCH FOR JOINING US. ARTEMIS INVESTMENT MANAGEMENT. TIMELY, TOO. IT IS OUR ONE YEAR ANNIVERSARY ALMOST. TIFFANY IS, RIGHT? >> MAY BE. WE WILL SEE.
I WAS GOING TO GET YOU ONE OF THE LOLLIPOP RINGS. REMEMBER WHEN YOU WERE A KID? >> I AM PRETTY EASY TO PLEASE, SURPRISINGLY. JUST TAKING A LOOK AT BOEING, REALLY ERASING ANY EARLIER GAINS. IT HAD A GAIN OF 7% AND NOW RAISING THAT. ROMAINE: I THOUGHT WE HAD A GLIMMER OF
HOPE THERE. WE WILL SEE. ALIX: APPARENTLY NOT. WE WILL SPEAK AT HEAD OF REAL ESTATE AMERICAS OVER AT J.P. MORGAN ASSET MANAGEMENT WHERE HE IS FINDING OPPORTUNITY WITHIN THAT SECTOR AND HOW YOU DIVERSIFY INTO THAT THIS YEAR IF RATES KIND OF STAY WHERE THEY ARE FROM THE SIDE. THIS IS THE CLOSE ON BLOOMBERG. >> THIS IS THE COUNTDOWN TO THE CLOSE. ALIX:
THE EQUITY MARKET PARING SOME OF LOSSES FROM YESTERDAY BUT WE ARE DOWN OVERALL THE LAST THREE DAYS, WE CAN'T FORGET THAT. ROMAINE: A MAJOR COURSE CORRECTION. AS THE DAY WENT ON YOU SAW A LOT OF PEOPLE LOOKING AT VALUATIONS AND THINKING IS NVIDIA AND MICROSOFT GOING AWAY? ALIX: IT'S NOT LIKE 2000 FOR EXAMPLE. THERE IS A NEW REPORT HIGHLIGHTING REAL ESTATE AS A SECTOR TO WATCH IN 2025, SAYING IT WAS REAL ESTATE PRESENTS A GENERAL -- GENERATIONAL INVESTMENT THAT APPEAR TO BE BOTTOMING OUT. WALKERS THROUGH WHY RIGHT NOW REAL ESTATE IS GOING TO DO IT FOR ME.
>> REAL ESTATE IS A GENERATIONAL OPPORTUNITY BECAUSE IT DOESN'T GO ON SALE THAT OFTEN. LAST TIME WE SELL VALUES DEPRESSED TO THIS LEVEL WAS OVER 15 YEARS AGO. IF YOU INVESTED COMING OUT OF THE GREAT RECESSION YOU MADE FOUR TO FIVE TIMES YOUR MONEY IN THE APPRECIATION CYCLE AND WE ARE SEEING FLOWS ACROSS OUR PLATFORM. I WAS HERE A MONTH AND A HALF AGO AND WE'VE SEEN A BILLION DOLLARS OF FLOWS COME INTO OUR FUNDS WHICH SHOWS INVESTORS ARE EXCITED. ALIX: AREN'T THINGS CHEAP FOR A
REASON? THE RETURN TO OFFICE AND QUESTIONS ABOUT OFFICE SPACE, AND DATA CENTERS WHEN IT COMES TO AI. CHAD: OFFICE IS COMING BACK AND REAL ESTATE IS CYCLICAL. BEFORE I CAME OVER A TRY TO MAKE A RESERVATION FOR A BUSINESS DINNER IN NEW YORK AND COULDN'T DO IT UNTIL MARCH. WHEN YOU GO ON LINKED IN, JOB POSTINGS FOR REMOTE WORK TOPPED OUT AT 20 PERCENT OF OVERALL POSTINGS IN 2022 AND TODAY IT'S 8%. RETURN TO OFFICE IS BACK, NEW YORK IS VIBRANT AND WE WILL SEE HOLDERS OF THE BEST OFFICE AROUND THE COUNTRY SEE GAINS. ROMAINE: THIS IS A GOOD SET UP BECAUSE A LITTLE LATER I'M GOING TO TALK WITH THE CEO OF PARTNERS GROUP AND THEY'VE BEEN DABBLING WITH THIS. THE CONVERSATION IS ABOUT DRY
POWDER, THE CASH ON THE SIDELINES, PEOPLE LOOKING FOR A HOME. I KNOW A LOT OF BIG INVESTORS ARE LOOKING TO REAL ESTATE WHERE? NOT JUST CLASS A OFFICES OR MULTIFAMILY, OR IS IT? CHAD: HOUSING IS A BIG THING, WE ARE SHORT IN THE UNITED STATES, PARTICULARLY IN THE SUN BELT. WE ALSO WONDER WHERE PEOPLE ARE GOING ON FRIDAY AFTERNOONS, GOING TO STRIP CENTERS. WHILE THEY ARE WATCHING THE CLOSE, EXACTLY RIGHT. THEY WANT TO SPEND MONEY ON EXPERIENCES. LAST IS LOGISTICS REAL ESTATE,
PEOPLE WANT GOODS FASTER. WHEN YOU ORDER ON THAT PHONE YOU WANT PACKAGES AT YOUR DOORSTEP AND INVESTORS LOVE WE ARE INVESTING IN THOSE SEGMENTS. ROMAINE: I ORDERED SOMETHING LAST THURSDAY AND IT HASN'T ARRIVED AND I DON'T KNOW WHAT IS GOING ON.
LUST AND WE HAD YOU ON WE ALSO ASKED ABOUT DATA CENTERS AND YOU MIGHT HAVE HEARD THERE WAS NEWS THAT CAME OUT YESTERDAY THAT SEEMED TO IF NOT ALTER EXPECTATIONS ABOUT THE AI TRADE AND DATA CENTERS AND THE POWER THAT GOES INTO ALL THAT, IT CERTAINLY COST OF THEM TO AT LEAST STEP BACK AND TAKE A CLOSER LOOK AT IT. CHAD: DATA CENTERS ALL OVER THE HEADLINES. WE ARE SEEING THE PACE OF TECHNOLOGICAL CHANGE. IT'S INCREDIBLY DIFFICULT. A DATA CENTER CAN BE OVER $1 BILLION BUT TWO THIRDS OF THAT COST IS THE POWER THAT IS SUPPLIED TO THE DATA CENTER INTO THE INFRASTRUCTURE. AT OUR FIRM WE LOOK AT REAL ESTATE AND WE ARE ABLE TO BUY REAL ESTATE BELOW REPLACEMENT COST TODAY, WHICH IS VERY EXCITING. WE DON'T BET ON TECHNOLOGICAL CHANGES IN DATA CENTERS. ALIX:
YOU DON'T HAVE ANY EXPOSURE TO THAT SORT OF BUILDOUT? CHAD: OUR FIRM IS PURE PLAY REAL ESTATE. ALIX: WHAT IS THE ALLOCATION YOU SUGGEST TO REAL ESTATE IN A PORTFOLIO? WE KNOW YOU LOVE IT BUT WHAT ABOUT MY PORTFOLIO. CHAD: IT'S NOT CORRELATED TO STOCKS OR BONDS, SO TYPICALLY PEOPLE INTRODUCE REAL ESTATE 10% TO 20% TO THE PORTFOLIO IN A REGULAR 60-40 PORTFOLIO AND IT GIVES THEM APPRECIATION, INFLATION PROTECTION AND A NATURAL HEDGE FOR INFLATION.
ROMAINE: THERE'S A LOT GOING ON IN WASHINGTON PARTICULARLY WHEN IT COMES TO TARIFFS AND YOU MENTIONED LOGISTICS AND THINGS LIKE THAT. RETAILERS WILL BE AFFECTED. IF TARIFFS DO MATERIAL INCREASE OR EXPAND BROADER, DOES THAT AFFECT THE REAL ESTATE PROPOSITION FOR WAREHOUSES AND LOGISTIC CENTERS, ETC.? CHAD:
I THINK IT STRENGTHENS IT. WHEN YOU THINK ABOUT TARIFFS IN SUPPLY CHAIN EFFICIENCY, OFF SHORING, GETTING GOODS TO CONSUMERS FASTER, THINGS LIKE INDUSTRIAL OUTDOOR STORAGE, TRUCK TERMINALS, THESE THINGS HELP GOODS MOVE AROUND THE UNITED STATES TO YOUR DOORSTEP TO GET THAT PACKAGE YOU ORDERED. ROMAINE: OPTIMISTIC. I DON'T NEED TO BE GLIB, BUT IS THIS THE BEST OPPORTUNITY YOU HAD IN YOUR CAREER IN REAL ESTATE? CHAD: WE COULD BE ENTERING A SUPER CYCLE FOR REAL ESTATE GIVEN THE CURRENT POLICY IN THE FACT THAT RATES WILL COME DOWN AT SOME POINT IN THE DEMAND DRIVERS IN THE ECONOMY. ALIX:
WHEN YOU SAY RATES COMING DOWN, THEY ARE NOT COMING DOWN AS MUCH AS WITHOUT SIX MONTHS AGO. IT'S MONTH AGO IT WAS RATES WILL COME DOWN HARD, THIS IS THE MOMENT, WE WILL GET OUT OF THE WATER. WHEN IT COMES TO REAL ESTATE UNDERWATER. WE DON'T HAVE THAT ANYMORE SO
HOW DOES IT MAKE SENSE? CHAD: EVEN IF RATES DON'T COME DOWN THE DEMAND FOR REAL ESTATE RIGHT NOW SPECIFICALLY IN LOGISTICS, INDUSTRIAL AND HOUSING IS SO STRONG THE CASH FLOW GAINS OVER TIME WILL BE A BOON TO THE SECTOR. IF RATES COME DOWN IT'S AN ADDED BENEFIT. ROMAINE: YOU NOT REALLY CARE WHAT JAY POWELL SAYS TOMORROW. [LAUGHTER] CHAD: WHEN RATES COME DOWN AND HOW FAST AND HOW SOON WE DON'T KNOW. ROMAINE: GREAT CONVERSATION. CHAD FROM JP MORGAN ASSET MANAGEMENT. A LOT OF MONEY FLOWING INTO THE SPACE.
WE WANT TO SWITCH GEARS TO XEROX, THE CONSUMER ELECTRONICS COMPANY OUT WITH EARNINGS, THIS ADJUSTED FOURTH-QUARTER EARNINGS BUT THE CEO OPTIMISTIC ON THE YEAR AHEAD, SAYING IN 2025 WE EXPECT TO BUILD ON CHANGES MADE LAST YEAR IN ORDER TO FOCUS ON EXECUTING OUR REINVENTION STRATEGY. JOINING US IN STUDIO IS THE CEO OF XEROX. GREAT TO HAVE YOU. >> THANK YOU FOR HAVING ME. ROMAINE: WHAT IS THE REINVENTION? >> GETTING ZERO EXPECT TO BEING A TECH POWERHOUSE AND DRIVING PRODUCTIVITY IN THE WORKPLACE. WE WERE JUST TALKING ABOUT REAL
ESTATE AND WHAT'S HAPPENING IN THE WORKPLACE. PEOPLE ARE WORKING ALL OVER THE PLACE IN DIFFERENT AREAS AND WE'VE ALWAYS BEEN DRIVING PRODUCTIVITY IN THE WORKPLACE. PART OF THE STRATEGY IS THREE THINGS.
ONE, HOW DO WE GET BACK DOWN -- BACK TO A DECLINING CORE BUSINESS, HOW DO WE GROW? THERE ARE SECTORS GROWING. WE GREW DOUBLE DIGITS IN Q4. WE HAVE THE ABILITY TO OUTGROW THE MARKET SHARE BY CHANGING PARTNERS AND PRODUCTIVITY IN THE SALESFORCE, SO FORTH. SECOND PIECE IS HOW DO WE GET 20% OF OUR REVENUE IN GROWTH AREAS, WE JUST ACQUIRED A COMPANY CALLED I.T. SAVVY AROUND I.T. SOLUTIONS AND IF YOU THINK ABOUT THE WORKPLACE TODAY, TECHNOLOGY IS COMPLEX, AI IS COMPLEX, THE MAJOR TRENDS ARE TOUGH AND THEY ARE LOOKING FOR A PARTNER LIKE XEROX WHO CAN BRING SOLUTIONS.
WE WILL BE A SERVICE DRIVEN, SOFTWARE ENABLED BUSINESS GOING FORWARD AND WE CAN HELP CLIENTS, ESPECIALLY IN THE MID, DRIVE AND HELP THEM. YOU THINK ABOUT SOME OF THE BIG TECH TRANSFORMATIONS. ROMAINE: AND FASCINATED BY THIS AND I ACTUALLY STARTED MY CAREER COVERING XEROX, IT WAS MUCH DIFFERENT THAN. WHEN I LOOK AT THE BREAKDOWN, THE SORT OF POST SALES REVENUE, IT'S BECOME MUCH MORE DOMINANT, WHAT IS THE COMPLEXION OF THAT, WHO ARE YOU SELLING TO, WHAT TYPES OF SECTORS AND COMPANIES? STEVE: TWO DIFFERENT WORLDS, WE HAVE OUR DIRECT SALES.
SMALL AND MEDIUM BUSINESSES, OVER 2000 ACCOUNTS. LARGE CHANNELS WHERE WE HAVE RESELLERS THAT SELL OVER -- SO ALL OVER THE WORLD. MEDIUM BUSINESS. MORE IMPORTANT AND WE ARE CREATING VERTICAL SOLUTIONS SO YOU THINK ABOUT HOW YOU CAN SELL INTO HOSPITALITY, HOW YOU CAN SELL INTO EDUCATION AND HOW WE PUT INFRASTRUCTURE AND DEVICES INTO EDUCATION. A LOT OF AI TODAY. PRINT HAS A LOT OF INTELLIGENCE
AND CAPABILITIES WE CAN HELP WITH DOCUMENT FLOWS AND INTELLIGENCE ON DOCUMENTS AND DRIVING PRODUCTIVITY IN THE SPACE. ALIX: TO BE HONEST THE STREET DOESN'T LIKE IT RIGHT NOW, OFTEN SLOWS BUT STILL OFF 6%. STEVE: I THINK THE REINVENTION STORY IS WHERE WE ARE GOING, THEY ARE LOOKING FOR US TO GIVE PROOF POINTS ON THE I.T. -- ALIX: THE ACCELERATION PART OF THE STORY YOU'RE LOOKING TO EXECUTE THIS YEAR AND NEXT TO YOU THINK IS BEING MISSED? STEVE: YES, IT'S A TIMING THING COULD IT'S DIFFICULT TO DO WHAT WE ARE DOING IS A PUBLIC COMPANY, AND THE CHANGES IS WHAT THEY ARE MISSING. WE ACQUIRED I.T. SAVVY AND LEXMARK RECENTLY AND
THE STORY GOING FORWARD IS WE WILL GET TO DOUBLE-DIGIT OPERATING PROFIT. ALIX: IT'S NOT A TROUGH REALLY BUT WHEN YOU SEE THE TURN WERE INVESTORS AND ANALYSTS CAN SEE MOMENTUM? STEVE: WE SEE IT INTERNALLY IN TERMS OF THE KEY PERFORMING INDICATORS, RATHER -- WHETHER AROUND ORDERS OR GROWTH. AS WE GET END OF SECOND QUARTER THIS YEAR, WE WILL SEE Q1 GROWTH YEAR-OVER-YEAR, AND THEY WILL START TO SEE AS WE GET TO THE SECOND HALF OF THE YEAR. ROMAINE: I WANT TO ASK ABOUT THE STRUCTURE OF THE COMPANY IN TERMS OF THE AMOUNT OF EMPLOYEES, ARE THEY ARE WORKING FROM THE OFFICE, MORE OF A REMOTE STRATEGY, WHAT HAS IT BEEN LIKE COMING OUT OF THE PANDEMIC? STEVE: MORE HYBRID. I'VE GOT 10,000 SERVICE TECHNICIANS THAT WORK IN THE FIELD SO BY THE NATURE WE HAVE PEOPLE IN TRUCKS AND TOUCHING CLIENTS ALL AROUND THE WORLD. THE REST OF IT IS A HYBRID
STRATEGY. PEOPLE WORKING FROM HOME, THEY HAVE CERTAIN EXPERTISE AND WE HAVE INDIVIDUALS THAT WORK IN THE OFFICE. ROMAINE: ARE YOU HIRING A LOT RIGHT NOW? STEVE: NOT RIGHT NOW BECAUSE WE ARE INTEGRATING COMPANIES AND WE WANT THE BEST OF THE ACQUISITIONS WE'VE MADE AND AS WE GO THROUGH THAT WE WILL LOOK FOR TECHNICAL SKILLS SPECIFICALLY IN SOFTWARE AND SOFTWARE ENGINEERING. . ALIX: WHEN YOU LOOK BROADLY, TALK ABOUT THE IMPACT OF THE STRONGER DOLLAR AND HEADLINING RISK WHEN IT COMES TO TARIFFS. HOW DO YOU THINK ABOUT THESE MACRO PROBLEMS? STEVE: EVERYONE IN THE TECH INDUSTRY IS DEALING WITH TARIFFS AND MACRO TRENDS SO WE WILL ADJUST, OUR SUPPLY CHAIN IS FLEXIBLE AND WE WILL ADJUST TO WHATEVER TARIFFS COME OUR WAY. DURING THE PANDEMIC WE SAW
CHALLENGES IN THIS IS THE SAME THING. EVERYBODY IS DEALING WITH IT. ALIX: STRONG DOLLAR FIGURE OUT? STEVE: DOESN'T BOTHER ME AT ALL. WE HAVE DIVERSIFIED BUSINESS, BUSINESS IN EUROPE AND IN THE U.S. DOESN'T BOTHER ME AT ALL. ROMAINE: A LOT OF INSTITUTIONAL INVESTORS LOOK AT YOUR ASSETS AND A COMPANY THAT COULD BE RIPE FOR ACQUISITION ITSELF.
HAVE YOU BEEN APPROACHED AT ALL BY OTHER COMPANIES? STEVE: WE'VE SAID AND I'VE BEEN VERY BOLD, WE WANT TO BE THE ACQUIRER AND CONSOLIDATOR IN THE INDUSTRY. WE HAVE MANY JAPAN PLAYERS IN OUR INDUSTRY AND WE THINK IS RIGHT FOR CONSOLIDATION. I WAS PART OF THE TEAM THAT BUILT LENOVO AND AT THE SAME TIME WE HAVE THE SAME DYNAMICS IN THE PRINT INDUSTRY. ROMAINE: IS THE BUSINESS ENVIRONMENT CONDUCIVE TO THOSE TYPES OF ACQUISITIONS, PARTICULARLY YOU MENTIONED THE PAN. DO WE GET ACROSS -- MENTIONED
JAPAN. DO WE GET CROSS-BORDER ACQUISITION? STEVE: THERE ARE A LOT OF OTHER ROLES WE CAN DO IN OUR INDUSTRY SO WE WANT TO BE THE CONSOLIDATOR. ALIX: AND I.T. SAVVY IS BEING INTEGRATED AND LEXMARK. THERE'S A LOT TO BE DONE ON THAT FRONT. TALK TO ME ABOUT HOW YOU SEE
YOUR COST CUTTING MARGINS VERSUS GROWTH. THE SYNERGIES FROM THESE ACQUISITIONS WILL HELP MARGINS BUT AT SOME POINT IT WILL BE THE TOP LINE. STEVE: GROWTH IS IMPORTANT AND PART OF THE INNOVATION IS GROWTH. I.T.
SAVVY, YOU THINK ABOUT THAT SPACE ALONE, MID SINGLE THE HIGH SINGLE-DIGIT GROWTH WITH THE TECH TRANSITIONS. 20% OF OUR REVENUE IN HIGH-GROWTH AREAS. DIGITAL SERVICES. WE TALKED ABOUT AI. AI WITHOUT DATA IS USELESS. WE SERVE DATA FOR THESE MODULES. WHEN YOU THINK ABOUT AI, IT'S ABOUT THE PROCESS AND ADDING AI ON TOP OF THE PROCESS THAT DRIVES VALUE.
WE HAVE A TREMENDOUS AMOUNT OF INTELLIGENCE IN INDUSTRIES LIKE EDUCATION AND LAW FIRMS, AND HOSPITALITY, IN EDUCATION, WE BRING A TREMENDOUS AMOUNT OF INTELLIGENCE, SERVE THE DATA AND AI ON TOP OF IT HAVE USE CASES THAT DRIVE THAT. ALIX: YOU SELL THAT DATA TO LARGE LANGUAGE MODEL FIRMS? STEVE: WE DON'T SELL IT BUT WE HELP OUR CLIENTS. WE WANT TO HELP OUR CLIENTS BE SUCCESSFUL AS A SERVICE. WHENEVER BUDDY THINGS ABOUT DATA, EVERYBODY THINGS ABOUT STATIC DATA, WHETHER IT IS CRM DATA OR FINANCIAL DATA, BUT THINK ABOUT SENSORY DATA AND DATA IN MOTION, HOW DO YOU AGGREGATE THAT AND MAKE IT SUCH THAT YOU HAVE REAL-TIME ACTIONABLE SOLUTIONS? VIDEO ON EDUCATION CAMPUSES IT'S ONLY AS GOOD AS THE AIA AND THE AI HAS TO TURN IT INTO SOME SORT OF ACTION AND THAT'S WHAT WE PLAY BECAUSE WE ARE REALLY GOOD IN THAT SPACE.
ROMAINE: WE ONLY HAVE TIME FOR A FINAL QUESTION, UNFORTUNATELY IT IS COMPLICATED, ABOUT EFFORTS MAINTAINING DIVERSITY. XEROX WAS A PIONEER IN THAT, YOU GO BACK TO THE 1970'S. I HAD FAMILY MEMBERS WHO FOUND THEIR WAY UP THROUGH OLD-SCHOOL COMPANIES IN THE NORTHEAST. DOES THAT EXIST ANYMORE? IS THERE STILL A COMMITMENT TO THAT? STEVE: FOR SURE.
WE ARE PROUD OF THE HERITAGE OF XEROX AND WE MIRROR THE ENVIRONMENTS WE LIVE AND AND WILL CONTINUE GOING FORWARD. WE WILL BE COMPLAINT TO ANY REGULATORY OR THINGS THAT COME OUT BUT XEROX HAS ALWAYS BEEN INCREDIBLY DIVERSE. DIVERSITY DRIVES INNOVATION AND WHAT WE DO IN COMMUNITIES AND WE ARE PROUD OF WHAT WE DO AND WE'VE ALWAYS BEEN VERY SUCCESSFUL IN THAT AREA WE LOVE OUR COMMUNITIES. ALIX:
THANK YOU FOR COMING IN, WONDERFUL TO SEE YOU. THE CEO OF XEROX. 15 MINUTES UNTIL THE CLOSING BELL. >> THERE IS AN ENORMOUS AMOUNT OF CAPITAL INVESTMENT IN THESE COMPANIES, DEMAND FOR PRODUCTS, LOTS OF KNOCK ON EFFECTS. IT WILL BE INTERESTING TO SEE HOW THEY TALK ABOUT POTENTIAL THREATS THIS KIND OF EVOLUTION CREATES FOR THEM.
THAT'S WHAT WE WILL BE LOOKING AT MORE THAN JUST EARNINGS THEMSELVES. ROMAINE: LORI FROM STATE STREET ADVISORS KICKED US OFF ABOUT 50 MINUTES AGO, A CLOSER LOOK AT EARNINGS. HOW THAT TIES INTO VALUATIONS AND THE SHOCK THE MARKET GOT YESTERDAY, RE-THINK OF THE AI TRADE. A BIT OF A REBOUND OFF OF LOWS FROM YESTERDAY. NVIDIA HAD AN AWFUL DAY. ABOUT AN 8% JUMP ON THE DAY, BACK UP TO THE 127, 128 LEVEL. MASTEC COMPOSITE UP ABOUT 1.9%. THIS IS NOT A BROAD-BASED RALLY.
ABOUT HALF OF THE MEMBERS OF THE NASDAQ 100 STILL IN THE RED. LIKE INTEL OR TEXAS INSTRUMENTS OR PEPSICO. ALSO GENERAL MOTORS FOLLOWING 9% ON THE DAY AFTER EARNINGS THAT WERE NECESSARILY BAD BUT NOT QUITE ENOUGH TO PLACATE INVESTORS WHEN IT CAME TO THE RUN-UP WE HAVE SEEN IN THE SHARES. MORE EARNINGS AFTER THE BELL TONIGHT. CORBO GETS ABOUT 40% OF REVENUE FROM APPLE, THERE IS AN AI TRADE AS WELL. THOUGH SHARES MOVING LOWER ABOUT 2%.
STARBUCKS, A MODEST BID HEADED INTO THE CLOSE AS WE EXPECT TO GET EARNINGS AFTER THE BELL, THE FIRST FULL QUARTER BRIAN NICCOL HAS BEEN AT THE HEAD OF THE COFFEE CHAIN. SARAH MALIK JOINS US, CHIEF INVESTMENT OFFICER TO HELP US COUNTDOWN TO THE CLOSING BELLS. ABOUT EIGHT MINUTES AWAY. WE HAVE TO START WITH THE FLIP-FLOP FROM YESTERDAY TO TODAY. I KNOW WE HAVEN'T QUITE RECOUPED ALL OF THE LOSSES FROM THE AI DRIVEN SELLOFF BUT BASED ON WHAT YOU'RE LOOKING IN THE PRICE ACTION, HAS IT IMPROVED? SARAH: YESTERDAY WAS AN EXAMPLE OF SHOOT FIRST AND ASK QUESTIONS LATER. ALL OF THIS CAPEX IN THE U.S. AND AI, AND RETURN ON INVESTMENT, DOESN'T COME THE QUESTION? THE ANSWER IS UNCLEAR YET. THE MARKETS WERE ALSO CAUTIOUS
BECAUSE WE HAD THE FED MEETING THIS WEEK AND EARNINGS, 40% OF THE S&P 500 REPORTS THIS WEEK LED BY THE MAG SEVEN. A LOT OF VOLATILITY. I THINK THERE WILL BE THREE THINGS TO FOCUS ON IN 2025, THE FIRST IS THE MARKET WILL BROADEN IN TERMS OF PARTICIPATION AND RETURNS AND WE ARE ALREADY SEEING THAT WITH TECH TAKING SOMEWHAT OF A BACKSEAT. EARNINGS WILL BE VERY IMPORTANT BECAUSE MARKET VALUATIONS FOR THE S&P ALMOST A 20% PREMIUM.
EARNINGS HAVE TO DELIVER. AND THIRD, THE IMPACT OF THE NEW ADMINISTRATION, WHAT DO TAXES, TARIFFS AND THE REGULATION MEAN FOR THE ECONOMY AND MARKETS? ROMAINE: TALK ABOUT EARNINGS BECAUSE THIS IS I THINK THE BUGABOO. WE'VE HAD VALUATIONS RUN-UP, A LOT OF IT ON THE HOPE THAT MONEY COMPANIES WERE SPENDING WOULD BE JUSTIFIED IN REVENUE GROWTH OR PROFITABILITY. DO YOU HAVE HIGH EXPECTATIONS
HEADED INTO THE 40% WORK AT CAP ABOUT TWO REPORT? SAIRA: FOURTH-QUARTER EARNINGS OVER A LOOK GOOD SO FAR, GROWING ABOUT 12% YEAR-OVER-YEAR, WE ARE SEEING ALMOST THREE QUARTERS OF COMPANIES BEAT EARNINGS BY ABOUT 10%. IT'S BEEN A GOOD EARNINGS SEASON. IN THE MAG SEVEN, WE WILL SEE WINNERS AND LOSERS BECAUSE OF THE TREMENDOUS GROWTH. HE SEEN WILL DEPOSE EXPAND FOR TECH STOCKS THE LAST FEW YEARS BY ABOUT 40%. THEY'VE DOUBLED THE PERFORMANCE OF THE BROADER MARKET OVER THE LAST DECADE AND TECH HAS A HIGH HURDLE TO BE. WE LIKE MICROSOFT AND APPLE, MICROSOFT -- WHAT WE LIKE ABOUT THEM IS FOR APPLE, NOT A TON OF NECESSARY TO BENEFIT FROM THE AI TRADE. WHAT IS EVERYBODY WEARING
ABOUT, HAVE WE OVERSPENT, AND THE CAPTIVE AUDIENCE WITH MICROSOFT OFFICE ALSO HAS A PLATFORM TO GROW AI ON PEER -- AI ON. THERE ARE QUESTIONS ABOUT WHAT IT MEANS FOR GOOGLE, AND META ALSO SOMEWHAT UNCLEAR. ROMAINE: META WITH A BIT OF A REBOUND, APPLE GOT LEFT BEHIND PRIOR TO THE LAST COUPLE OF DAYS, THEIR EARNINGS ARE ON THURSDAY.
I'M CURIOUS OUTSIDE OF TECH, YOU HAVE INTERESTING STORIES PARTICULARLY WITH STARBUCKS, IT'S BEEN A LIKE A FOR OBVIOUS REASONS. YOU HAVE THE CEO THAT CAME INTO THE JOB WITH A LOT OF LAURELS AND EXPECTATIONS AND IF HE CAN WORK THE SAME MAGIC THERE THAT HE DID IN TRIPOLI. DO YOU FIND VALUE IN STARBUCKS? SAIRA: IT WILL DEPEND ON MORE FAUX -- MORE SO WHAT ARE THE TRENDS, CAN HE GIVE CLARITY IN TERMS OF STRATEGY AND WHAT THEY PLAN TO DO? THOSE WILL BE KEYS FOR STARBUCKS, NOT SURPRISED TO SEE CAUTIOUS GOING INTO THE QUARTER. I THINK THE PRINT THIS QUARTER WILL BE LESS IMPORTANT THAN THE OUTLOOK AND HOW THESE NEW STRATEGIC CHANGES WILL ACCELERATE COMES FROM HERE. OUTSIDE OF STOCKS, TWO AREAS OF THE MARKET WORTH LOOKING AT GIVEN THE TURMOIL IN AI, ONE IS INFRASTRUCTURE.
THIS AREA WILL BENEFIT FROM ANY KIND OF CHANGE IN ARTIFICIAL INTELLIGENCE COULD INFRASTRUCTURE IS STILL A NICE WAY TO PLAY ARTIFICIAL INTELLIGENCE AND ACCELERATING DEMAND AND LOOK AT SMALL CAPS. THEY'VE BEEN THE LAGGARD FOR YEARS, EVEN DECADES BID WITH THE INPUT MENTATION OF DEREGULATION, THAT SHOULD BE GOOD FOR M&A AND TAX CUTS, GOOD FOR CONSUMER AND CORPORATIONS. DOMESTICALLY ORIENTED SMALL CAPS SHOULD BENEFIT. ROMAINE: DO YOU SEE STOCKS GETTING HELP FROM THE RATE ENVIRONMENT? NO EXPECTATION FOR REESE TO CHANGE BUT AS FAR AS THE FED COMMUNICATES, IS THAT STILL A FACTOR FOR INVESTORS? SAIRA: I THINK IT WILL STILL BE FRONT AND CENTER EVEN THOUGH THIS WEEK IT DOESN'T FEEL LIKE IT WITH EVERYTHING ELSE. WE EXPECT A PAUSE THIS
WEDNESDAY, WE DON'T THINK THEY WILL ANNOUNCE A RATE CUT. OUR CALL FOR THE YEAR IS TWO RATE CUTS AS EMPLOYMENT MARKETS CONTINUE TO MODERATE. I THINK THE FED TONE WILL BE IMPORTANT. HOW CONCERNED ARE THEY ABOUT INFLATION POTENTIALLY RE- ACCELERATING BECAUSE OF TARIFFS AND THE ECONOMY. I THINK THEY WILL BE POSITIVE ON THE ECONOMY BUT A LITTLE MORE CAUTIOUS ABOUT THE INFLATION OUTLOOK. WE DON'T KNOW ABOUT THE IMPACT OF TARIFFS. ROMAINE: ONE FINAL QUESTION, THE IMPACT
OF WASHINGTON POLICIES ON THE MARKET, ARE YOU WORRIED? SAIRA: I THINK MOST ARE PRETTY PROGROWTH. TEX GETS POSITIVE FOR CONSUMERS AND ORGANIZATIONS. TARIFFS ARE THE WILDCARD. I THINK IT COULD CAUSE A RE-ACCELERATION IN INFLATION, IT COULD IMPACT EMPLOYMENT MARKETS AND THAT WILL BE THE KEY ONE TO WATCH. ROMAINE: ALWAYS A PLEASURE. HELPING AS ACCOUNT YOU DOWN TO
THE CLOSING BELLS. JUST ABOUT 2.5 MINUTES AWAY WITH STOCKS NOT FAR OFF SESSION HIGHS, THE NASDAQ COMPOSITE OF 2% ON THE DAY AND NASDAQ 100 UP 1.5 COULD A LOT OF IT FUELED BY THE BOUNCE BACK IN NVIDIA. WE ARE ALSO GETTING HELP IN THE S&P OUT OF ROYAL CARIBBEAN AND BOEING WITH A GLIMMER OF HOPE. WE COUNT YOU DOWN TO THE CLOSING BELLS WITH FULL COVERAGE COMING UP RIGHT NOW ON OUR GLOBAL SIMULCAST. >> THE
CLOSING BELL, BLOOMBERG'S COMPREHENSIVE CROSS-PLATFORM COVERAGE OF THE U.S. MARKET CLOSE STARTS RIGHT NOW. ROMAINE: WE ARE TWO MINUTES AWAY FROM THE END OF THE TRADING DAY. I'M TAKING YOU THROUGH THE CLOSING BELL, A GLOBAL SIMULCAST STARTS RIGHT NOW. I'M JOINED BY VONNIE QUINN, ALIX STEEL AND SCARLET FU ON ASSIGNMENT TODAY. CAROL MASSAR AND TIM STENOVEC IN THE RADIO BOOTH AS WE WELCOME AUDIENCES ACROSS PLATFORMS INCLUDING OUR PARTNERSHIP WITH YOUTUBE.
IF YOU WATCHED YESTERDAY, IT'S A HUGE TURNAROUND FROM WHERE WE WERE 24 HOURS AGO. CAROL: IT'S KIND OF FASCINATING, WE HAD A GREEN ACROSS THE SCREEN, NASDAQ AND OUTPERFORMER AT 1.5% BUT YOU LOOK AT THE S&P 500, DESPITE BEING ON THE INDEX LEVEL, YOU LOOK AT THE INDEX AND YOU HAVE MOST NAMES IN THE S&P 500 LOWER, OPPOSITE OF YESTERDAY.
A LOT OF SELLING YET MOST NAMES WERE HIGHER. YOU MAKE SENSE OF THIS MARKET-RATE. TIM: I'M NOT GONNA MAKE SENSE OF THE TRADE, I WILL TELL YOU EVEN THOUGH NVIDIA IS CLOSE TO 8% UP TODAY, STILL A LONG WAY TO GO TO GET BACK TO WHERE IT WAS AT THE END OF THE DAY FRIDAY, ABOUT 13% STILL FROM THERE. VONNIE: THIS MORNING SOME WERE SAYING IT WAS A GOLDEN BUYING OPPORTUNITY AND I GUESS IT IS TODAY BUT WE DON'T KNOW ABOUT TOMORROW. THIS WHOLE REVERSAL DIDN'T EXTEND TO THE TREASURY TRADE, THE CALL YESTERDAY DIDN'T GET REVERSE. ROMAINE: WE'VE HAD A LOT OF GUESTS WHO WERE BASICALLY SAYING THIS IS AN OPPORTUNITY TO BUY STOCKS ON SALE, HIGH VALUATION STOCKS, I GUESS THE QUESTION, IS THIS GOING TO COME BACK? CAROL: THEIR EARNINGS THROUGH THE WEEK TOMORROW AND THROUGH THE AI TRADE, WE WILL GET CLARITY ON THAT. [BELL RINGS]
ROMAINE: WE GET THE CLOSING BELLS IN NEW YORK, SOMETHING TO CHEER ABOUT THE DAY WITH THE DOW JONES INDUSTRIAL AVERAGE UP MORE THAN 100 POINTS, MORE THAN PRETENSE OF A PERCENT PURE THE S&P GAINING ABOUT 9/10 OF A PERCENT ON THE DAY, MORE THAN 50 POINTS, RIGHT BACK TO THE 6067 LEVEL AS WE WAIT FOR NUMBERS TO SETTLE OUT. THE NASDAQ COMPOSITE LOOKS LIKE IT WILL CLOSE HIGHER BY ABOUT 2% ON THE DAY. THE NASDAQ 100 UP MORE THAN 300 POINTS AS WELL OR ABOUT 1.6% ON THE DAY.
I THINK CAROL WAS GETTING AT THE OVERWHELMING NUMBER OF STOCKS DOWN AND WE SEE THAT REFLECTED IN THE RUSSELL 2000 AND MID-CAPS. THE RUSSELL ONLY HIGHER BY TWO TENTS OF A PERCENT, MID-CAPS UP ONE TENS OF A PERCENT. DOW TRANSPORTS DOWN ON THE DAY ABOUT ONE TENS OF A PERCENT.
CAROL: WE HAVE SOME NUMBERS, LET'S GET TO THE OUTLOOK, FOURTH-QUARTER ADJUSTED EPS, $.90 TO A DOLLAR SHARE. WAY ABOVE THE ESTIMATE. ADJUSTED EPS OF WHAT 1.61 IN THE FIRST QUARTER.
INVESTORS PRETTY HAPPY. STOCKS UP 12% IN THE AFTERMARKET. TIM: THE PRESIDENT AND CEO SAID THEY ARE EXECUTING ON A BROAD SET OF STRATEGIC INITIATIVES TO EXPAND MARGIN, GENERATE STRONG FREE CASH FLOW AND INCREASE SHAREHOLDER VALUE. SAYING DURING THE DECEMBER QUARTER THE COMPANY CONTINUE TO SUCCESSFULLY SUPPORT OUR LARGEST COMPANY WHO REPRESENTED APPROXIMATELY 50% OF SALES. ROMAINE: HE WAS AT CUSTOMER?
[LAUGHTER] APPLE. TIM: IN THE 5G PRODUCT PORTFOLIO THEY ARE NARROWING TO THE PLEDGE JAPAN PREMIUM TIERS. VONNIE: ONE INVESTOR THAT'S REALLY IMPORTANT IS STAR BOARD. THEY WANT TO SEE SOME RESULTS AND CORBO IS PUTTING EVERYTHING INTO THE EARNINGS SEASON. ROMAINE:
IT YOU WONDER ABOUT APPLE, ABOUT 46% OF THE REVENUE COMING FROM THE COMPANY. APPLE WAS A STOCK REALLY TAKING IT ON THE CHAN PRIOR TO THIS WEEK BECAUSE EVERYONE WAS CONCERNED ABOUT A POTENTIAL SLUMP AND IPHONE SALES GOOD -- SALES. CAROL: LET'S GET TO GAINERS, NVIDIA ON THE LIST, ONE DAY AFTER SEEING A MASSIVE ROUT IN SHARE PRICE AND MARKET CAP, A RECORD DECLINE BY ANY COMPANY AND MARKET HISTORY NVIDIA STEPPING BACK ALMOST UP 9% ON TODAY'S SESSION, INVESTORS COMING BACK IN AND DOING SOME BUYING. WE'LL CARIBBEAN UP ABOUT 12% AT THE CLOSE, BRINGING THE CRUISE INDUSTRY HIGHER, AMONG THE TOP GAINERS IN THE S&P 500.
WE SAW THEM HITTING A RECORD TODAY, UP THE MOST IN TWO YEARS, THE TOP GAINER IN THE S&P. THIS AFTER A REPORTED FULL-YEAR PROFIT FORECAST THAT LOU PASSED EXPECTATIONS WE TALKED WITH THE CEO, OUTPERFORMANCE IN TERMS OF DEMAND AND ALSO EXCURSIONS AND NOW THEY ARE MOVING INTO RIVER CRUISES SO THEY ARE VERY UP BEAT. THEY ALSO TALKED ABOUT CUSTOMER BALANCE BEING REALLY GOOD SO ONE REASON WHY DEMAND CONTINUES IN THE CREWS INDUSTRY. CROWDSTRIKE TOP PERFORMER AND THE NASDAQ 100 AND S&P 500. THE SOFTWARE AREA CONTINUING TO OUTPERFORM IN THE MARKET TRADE, A BUNCH OF ANALYST TALKING ABOUT , IMPROVED CAPABILITIES AT LOWER COSTS, TALKING ABOUT THE NEWS YESTERDAY THAT ESSENTIALLY IF IT IS LESS EXPENSIVE YOU COULD SEE A RAMP UP IN TERMS OF SOFTWARE COMPANIES AND THEIR SERVICES AND MORE COMPANIES TAPPING INTO IT WHEN THEY WANT AI CAPABILITIES. CROWDSTRIKE AND OUTPERFORMER.
TIM: UNDERPERFORMERS, JETBLUE, SHARES FINISHED THE DAY DOWN 55%, PLUMMETED THE MOST EVER -- 25%, PLUMMETED THE MOST EVER TO THE DOWNSIDE. EARLIER IN THE SESSION IT WAS DOWN AS MUCH AS 29% HAD SOME REASONS INCLUDE RISING COMPENSATION IN AIRPLANE MAINTENANCE EXPENSES, MANUFACTURING DEFECTS. WE TALKED TO GEORGE FERGUSON ON OUR PROGRAM WHO MENTIONED CAP BLUE LIVES IN THIS AREA WERE NOT A LOT OF COMPANIES LIVE, NOT AN ULTRA LOW COST CARRIER AND NOT A PREMIUM CARRIER. THAT MAKES IT DIFFICULT IN TERMS OF PRICING AND MARKETING. GM SHARES FALLING TODAY, FINISHING THE DAY LOWER AFTER THE COMPANY REPORTED BETTER-THAN-EXPECTED PROFIT OUTLOOK WITH ADJUSTED EARNINGS 13.7 BILLION ADJUSTED TO 15.7 BILLION, SHARES DOWN MORE THAN A PERCENT.
IT DOESN'T ACCOUNT FOR PROJECTED TARIFFS ON CANADA AND MEXICO. ALSO IMPORTANT TO NOTE, PART OF THE IMPROVED OUTLOOK IS BECAUSE OF THE DECISION TO SHUTTER CRUZ. ROMAINE: STARBUCKS RESULTS ACROSS THE WIRE RIGHT NOW, THEY ARE SAYING NORTH AMERICAN SALES DOWN ABOUT 4% AND THAT WAS THE EXPECTATION. THE EXPECTATION WAS FOR A DROP OF 5% SO BETTER-THAN-EXPECTED DROP FOR NORTH AMERICAN COMP SALES. THE STREET WAS LOOKING FOR 5.3. THE COMPANY ALSO SAYING WHEN IT COMES TO OPERATING MARGIN, THAT CAME IN A LITTLE NARROWER THAN EXPECTED, THEY WERE LOOKING ABOUT 13% ALTHOUGH ON THE PLUS SIDE, AVERAGE TICKET PRICES, THE AMOUNT OF MONEY YOU SPEND EVERY TIME YOU GO THERE, UP 3%, THE STREET LOOKING FOR A GAIN OF ABOUT 1.9%.
I GUESS A SLIGHTLY BETTER START FOR BRIAN NICCOL AS IT REPRESENTS THE FOURTH QUARTER, HIS FIRST FULL QUARTER AT THE HELM AS CEO. CAROL: A STOCK UP ABOUT 4% IN THE AFTERMARKET. HERE'S SOME COMMENTARY FROM HIM, WHILE WE ARE ONLY ONE QUARTER INTO TURNAROUND WE ARE MOVING QUICKLY TO ACT ON THE BACK TO STARBUCKS EFFORTS AND WE'VE SEEN A POSITIVE RESPONSE. WE HAVE MUCH MORE WORK AHEAD OF
US BUT WE WILL CONTINUE TO PRIORITIZE SHAREHOLDER VALUE THROUGH DIVIDENDS, PROVIDING PREDICTABLE RETURN OF CAPITAL WHILE WE TURNAROUND OUR BUSINESS. INVESTORS SO FAR LIKE WHAT THEY SEE AND ARE HEARING FROM THE COMPANY, UP ABOUT 3.9%. ROMAINE: -- VONNIE: THAT REVENUE ALSO BUILDING. WE WILL SEE IF INVESTORS GIVE A
BRIAN NICCOL MORE TIME. INTERESTING TO SEE THE CHINA SALES MUCH BETTER THAN THE BAD NEVER ANTICIPATED. ANALYSTS WERE LOOKING FOR CHINA TO BE DOWN MORE THAN 9% AND ONLY DOWN 6%. TIM: I WONDERING HOW MUCH YOU CAN READ INTO THE RESULTS GIVEN IT'S ONLY BEEN ONE QUARTER AND A LOT OF CHANGES THE COMPANY HAS IMPLEMENTED DID NOT EVEN HAPPEN UNTIL THIS WEEK. WE ARE TALKING ABOUT REDESIGNS TO MAKE THE STORES GO BACK TO THEIR ROOTS, FOR IS USING SHARPIES RATHER THAN A PRINTED RECEIPT. I THINK IT WAS SEVEN LINES OF CARAMEL.
LITTLE DETAILS THAT MAKE A DIFFERENCE. ROMAINE: I REMEMBER WHEN HE GOT HIRED, HE TALKED A LOT ABOUT DECIDING TO TAKE A JOB AND HE SAID HE WENT UP AND DOWN CALIFORNIA WHERE HE LIVES AND WENT INTO STARBUCKS AND TOOK NOTE OF WHAT HE DIDN'T LIKE AND HE SAID IT WASN'T AN INVITING EXPERIENCE AND HE WANTED TO BRING THAT BACK. SOME OF US WHO REMEMBER STARBUCKS BACK IN THE DAY, IT WAS A PLACE WHERE YOU WENT AND HUNG OUT AND NOW AT LEAST THE ONES AROUND US IS JUST GRAB YOUR COFFEE AND GET OUT. CAROL: YOU THINK ABOUT HOW HE TURNED AROUND TRIPOLI --CHIPOTL E HE TURNED AROUND THE EXTERIOR AND SPIT WE LOOK FORWARD TO WHAT WE WILL GET ON THE CALL LATER ON. STARBUCKS UP ABOUT THREE, 4% IN THE AFTERMARKET. THAT'S A WRAP UP ACROSS FROM COVERAGE.
WE WILL SEE YOU SAME TIME AND SAME PLACE TOMORROW. ROMAINE: OUR COVERAGE CONTINUES HERE ON BLOOMBERG TELEVISION, A DEEPER DIVE INTO EARNINGS OUT OF STARBUCKS, WE HAVE A SENIOR >> THE COUNTDOWN IS ON. EVERYTHING YOU NEED TO GET THE EDGE AT THE END OF THE MARKET DAY. THIS IS "THE CLOSE." VONNIE: WELCOME BACK. ROMAINE: QUITE A TURNAROUND FROM YESTERDAY, WE DIDN'T RECOUP ALL OF THE LOSSES FROM THE AI RELATED SELLOFF YESTERDAY BUT WE GOT ENOUGH OUT OF IT, A ONE POINT -- 1.5% GAIN FOR THE NASDAQ. THIS WAS NOT A BROAD-BASED RALLY.
THE MAJORITY OF THE STOCKS IN THE S&P 500 WERE DOWN, ONLY HALF THE STOCKS AND THE NASDAQ 100 WERE UP BUT YESTERDAY'S SELLOFF WAS NOT BROAD-BASED EITHER. WE DID GET SOFTWARE STOCKS WITH A NICE REBOUND ON THE DAY BUT SOME OF THE SELLOFF IN ENERGY AND POWER NAMES YESTERDAY DID NOT REVERSE TODAY, THE PHILADELPHIA UTILITY INDEX DOWN 2% ON THE DAY AND WE HAD SOME RELATIVELY DISAPPOINTING MOVES OUT OF GENERAL MOTORS AND AUTOMAKERS. VONNIE: THIS SHOWS YOU EVERYTHING YOU NEED TO KNOW ABOUT THE MARKET ACTION, AT GENERAL MOTORS, THIS WAS THE REACTION AFTER EARNINGS WERE QUITE GOOD. INVESTORS NOT BELIEVING GENERAL
MOTORS HAS TAKEN INTO ACCOUNT TARIFFS THAT MIGHT COME ON MEXICAN AND CANADIAN GOODS AND OTHER GOOD. HOW CAN IT PROJECT FOR TARIFFS THAT WE HAVEN'T SEEN YET AND THE TREASURY SECRETARY MIGHT BE 2.5% PER MONTH. TRUMP HIMSELF SAYING 25%. INVESTORS SANG WE DON'T QUITE BELIEVE YOUR FORECAST. NVIDIA,
THE LEADERS BACK TODAY, WASN'T A BROAD-BASED RECOVERY BUT IT WAS A RECOVERY FOR PREVIOUS LEADERS, CRAWLING BACK UP 9% ALMOST. THAT'S ABOUT HALF OF YESTERDAY'S DECLINE AND WE HAD A DECLINE IN THE PREVIOUS SESSION AS WELL. ANY NVIDIA BUYER THAT BOUGHT THE DIP AS LONG AS WE DON'T SEE ANOTHER DROP TOMORROW, IS VERY HAPPY. ROMAINE:
LET'S GET TO AFTER-HOURS MOVERS, INCLUDING STARBUCKS, SHARES HIGHER AFTER THE COMPANY REPORTED A DROP IN COMP SALES BUT NOT AS BAD AS WHAT THE STREET WAS LOOKING FOR. BRIAN NICCOL IN HIS FIRST FULL QUARTER A CEO SAYING THEY WERE DOWN ABOUT 4%. THE STREET WAS LOOKING AT 5.3%. OPERATING INCOME DOWN 24% BUT THE AVERAGE TICKET WAS UP ABOUT 3% AND THE STREET WAS LOOKING FOR 1.8%. OUR GUEST JOINS US FROM BERNSTEIN INSTITUTIONAL SERVICES. AN OUTPERFORM RATING ON THE
SHARES COULD WHEN YOU LOOK AT THE REPORT WE GOT TODAY, I KNOW THERE WERE A LOT OF NEGATIVE SIGNS IN FRONT OF THE NUMBERS BUT WERE YOU ENCOURAGED BY WHAT WE HAVE SO FAR OUT OF BRIAN NICCOL IN THE FEW SHORT MONTHS HE'S BEEN THERE? >> THANK YOU FOR HAVING US. THE RESULTS WERE RELATIVELY EXPECTED, MEANING WE WERE EXPECTING TO SEE TOP SELLOUT INTO THE QUARTER, THE EARLY STAGES OF THE TRANSFORMATION AND WHAT IT MEANS FOR CONSUMERS AND INVESTORS, BUT IT'S STARTING TO BE ENCOURAGING. THE LEAKAGE WE WERE EXPECTED TO SEE, MOST PEOPLE WERE EXPECTING. I THINK WE ARE ON TO INITIAL RECOVERY SIGNS OF THE STOCK. AS AN ANECDOTE, EVEN GOING INTO THE STARBUCKS STORES THE PAST COUPLE OF DAYS WITH THE CHANGE OF THE CODE OF CONDUCT, AM STARTING TO SEE A DIFFERENT VIBE INSIDE THE STORE.
YOU'RE STARTING TO GET GREETED BY THE PRIESTESS, -- THEBARISTAS. THESE TYPE OF EXPENSES WERE MISSING FOR CONSUMERS AND IT WILL TAKE SOME TIME FOR THESE TO BE FULLY REALIZED BY THE CONSUMER BASE AND THERE'S ALWAYS A LITTLE BIT OF LAG BEFORE CONSUMERS PULL BACK AT THE LEVEL OF FREQUENCY WE WERE EXPECTING. VONNIE: ALSO SOME LABOR CHANGES, THEY HAD SOME NEW HIRES. IS THAT NECESSARY AND DO THEY ADD VALUE? >> I THINK SPLITTING THE ROLE INTO HAVING MORE IN STORE OPERATIONS AND MORE FOCUS ON THE DEVELOPMENT SIDE AND THE CHANGES IN THE LAYOUT IS PROBABLY THE RIGHT MOVE.
SPECIFICALLY I THINK THERE NEEDS TO BE EXTRA RESPONSIBILITY ON THE PERFORMANCE OF THE PARTNERS IN THE STORES AND HAVING SOMEONE WHO IS FULLY RESPONSIBLE FOR THE EXECUTION OF THE PERFECTION OF A COFFEE CUP HE'S LOOKING FOR, IT'S A NECESSARY ADDITION. I THINK THESE WERE MOSTLY RIGHT. I DON'T NECESSARILY THINK THE ENTIRE EXECUTIVE TEAM AT LEAST IN THE TRANSFORMATION, ARE OVER YET, A LOT TO COME STILL GIVEN SOME OF THE TOUGH DECISIONS BRIAN WILL NEED TO MAKE IN THE NEXT FEW MONTHS BUT I THINK HE IS TRYING TO GET SURROUNDED BY PEOPLE OF TRUST. ROMAINE: SENSITIVE QUESTION, IS HOWARD SCHULTZ OUT OF THE PICTURE? A LOT OF PEOPLE WERE SAYING THE LEFT FOR YEARS WITH THE PREVIOUS CEO THAT MAYBE THERE WAS THE SHADOW OF HOWARD SCHULTZ THAT INTERRUPTED POTENTIAL PROGRESS HE COULD HAVE MADE.
BRIAN NICCOL AT LEAST RIGHT NOW SEEMS TO BE OUT OF THAT SHADOW. DO YOU HAVE CONFIDENCE HOWARD SCHULTZ WILL STAY IN THE CORNER? DANILLO: I THINK SO. I THINK PART OF THE REASONS WHY BRIAN DECIDED TO JOIN STARBUCKS IS BECAUSE HE HAD A FULL MANDATE TO HAVE ESSENTIALLY AN OPPORTUNITY SEEKING TIMES AS STARBUCKS THAT MIGHT HAVE BEEN PREVENTED IF HE WAS UNDER THE SHADOW OF HOWARD. AS MUCH AS EVERYBODY APPRECIATED HOWARD SCHULTZ, A FRESH PAIR OF EYES WAS VERY IMPORTANT. I THINK RIGHT NOW HE'S ACTING WITHOUT GUIDANCE -- OBVIOUSLY HE RESPECTS THE TRADITION AND LEGACY BUT HE'S RIGHT NOW LOOKING TO FIND HIS OWN FOOTPRINT IN THE COMPANY. RIGHT NOW HE IS ACTING INDEPENDENTLY AND I THINK YOU WILL CONTINUE TO ESPECIALLY IF STARBUCKS GOES INTO A RECOVERY TRANSITION. VONNIE: THANK YOU SO MUCH FOR YOUR TIME.
ROMAINE: WE WANT TO TAKE A LOOK AT ANOTHER AFTER-HOURS TRADE, THAT IS CHUBB, THE INSURANCE COMPANY, NET PREMIUMS UP 4% IN THE MOST RECENT QUARTER, OPERATING EPS AT $6.02 PER SHARE. MATTHEW JOINS US TO WALK US THROUGH NOT JUST NUMBERS HERE BUT WHERE THE GROWTH FOR THE COMPANY COMES FROM. MATTHEW: THEY ARE ONE OF THE BIGGEST INSURANCE COMPANIES IN THE WORLD AND THEY PRINT REDUCING ALMOST 10% GROWTH YEAR-OVER-YEAR THE LAST COUPLE OF QUARTERS, IT MAY BE DOWN A LITTLE BIT BUT YOU HAVE TO LOOK AT THE X CURRENCY NUMBER THAT I HAVEN'T SEEN YET. VONNIE: THEY ARE EXECUTING MORE THAN HALF $1 BILLION IN A PRETAX COST FOR THE CALIFORNIA WILDFIRES IN Q1.
WHAT WILL THAT DO? MATTHEW: EVERYONE WAS EXPECTING THEM TO HAVE LOSSES. THEY ENSURE HIGH NET WORTH HOMES IN CALIFORNIA SO WE EXPECTED THEM TO HAVE LOSSES. SURPRISE THE NUMBER CAME OUT FOR THE FIRST QUARTER BUT I THINK GIVEN THE SPECULATION THEY PROBABLY WANT TO PUT IT TO REST. THAT'S A DECENT SIZED NUMBER BUT FOR CHUBB IT IS MANAGEABLE. ROMAINE: YOU DON'T THINK THAT WILL GO UP
MATERIALLY? MATTHEW: I DON'T THINK SOME. ROMAINE: ALL RIGHT, GREAT STUFF. A QUICK LOOK AT CHUBB, SHARES UP ABOUT 2/10 OF A PERCENT. AFTER THE BREAK, A CONVERSATION YOU WANT TO HEAR, THE CEO OF A COMPANY CALLED ME SO -- MISO ROBOTICS. WE WILL TALK ABOUT MORE AUTOMATION IN THE RESTAURANT INDUSTRY. IT COULD POTENTIALLY SAVE A LOT OF MONEY.
A CONVERSATION WITH THE CEO IN A MINUTE. THIS IS BLOOMBERG. ROMAINE: A LOT OF STOCKS MOVING IN AFTER-HOURS TRADE, ORBITAL IS YOUR BIG GAINER, UP 18% WITH STARBUCKS GIVING A DECENT BIT AS WELL, UP 4% ON THE BACK OF DECENT EARNINGS, EARNINGS WORK GREAT BUT THERE'S A TURNAROUND AT THE FEET OF BRIAN NICCOL. WE WANT TO FOCUS ON THE BROADER RESTAURANT INDUSTRY, PARTICULARLY FAST CASUAL CHAINS AND HOW THEY INNOVATE AND KEEP COSTS UNDER CONTROL. IF YOU'VE BEEN IN A JACK-IN-THE-BOX OR WHITE CASTLE NEAR YOU YOU MIGHT SEE SOMETHING CALLED THE FLIPPY FRY STATION, IT IS IN A HIGH-POWERED ROBOT THAT OPERATES FRIED ITEMS TO STREAMLINE FOOD ORDERS.
RICH HAS THE DECISION IS -- A DELICIOUS JOB BEING THE CEO OF MISO. I KNOW COMPANIES HAVE BEEN EXPERIMENTING WITH THIS FOR SOME TIME. THE BUS A SENSE AS TO THE ADOPTION, THE INCREASE IN THE PACE OF ADOPTION AND WHERE THESE RESTAURANTS ARE LOOKING TO USE AUTOMATION. RICH: THANK YOU FOR HAVING ME. I'M NOT SURE I AGREE WITH YOU ON THE ADOPTION OF AUTOMATION BEING SO PERVASIVE. REALLY THE AUTOMATION SPACE AND RESTAURANT KITCHENS HAS ONLY BEEN AROUND FIVE OR SIX YEARS. RESTAURANTS HAVE LARGELY OPERATED COMMERCIAL KITCHENS THE SAME WAY OVER THE LAST 50 YEARS THERE HASN'T BEEN A TON OF INNOVATION. WHEN WE CAME ONTO THE SCENE AND
WE ARE SORT OF THE FIRST MOVER IN RESTAURANT INNOVATION FOR KITCHENS, WE INTRODUCED FLIPPY, OUR FRY STATION ABOUT, HE STARTED FLIPPING BURGERS AND HE MOVED TO THE FRY STATION AND NOW EXCLUSIVELY DOES THAT. IT HAS LAUNCHED A NEW ERA OF AUTOMATION AND LARGELY DRIVEN THESE DAYS BY LABOR COSTS AND SHORTAGES. LABOR SHORTAGES ARE GOING UP AND RESTAURANTS ARE HAVING A HARD TIME HIRING KITCHEN WORKERS INTO THEY ARE FINALLY TURNING TO AUTOMATION TO SOLVE THAT PROBLEM. ROMAINE: GIVE ME A SENSE OF WHAT FLIPPY COSTS. MY UNDERSTANDING IS THE BUSINESS MODEL IS A LOT OF RESTAURANTS WOULD RENT THIS MORE OR LESS RATHER THAN BUYING IT OUTRIGHT, IS THAT CHEAPER THAN HIRING US TO FLIP BURGERS? RICH: IT NEVER COST MORE THAN THE EQUIVALENT OF FULL-TIME HUMANS EVEN IF YOU COULD HIRE THEM SO THERE'S NOT A LOT OF RISK FOR RESTAURANT OPERATORS. $5,500 A MONTH IS THE RENTAL SERVICE.
IT'S A LITTLE OUTDATED TO THINK IT COST MILLIONS OF DOLLARS TO ADD A I AUTOMATION INTO THE KITCHEN TO SOLVE LABOR ISSUES. IT'S THE OPPOSITE. YOU WILL NEVER PAY MORE THAN YOU WOULD WITH HUMANS AND FLIPPY DRIVES A LOT OF VALUE IN TERMS OF REVENUE AND COST SAVINGS SO YOU WILL BE MAKING MONEY, ALL OF WHICH DROPS STRAIGHT TO THE BOTTOM LINE WHEN YOU PUT IT INTO YOUR RESTAURANT AND START TO AUTOMATE PARTS OF THE COMMERCIAL KITCHEN.
WE BUILT FLIPPY IN CONJUNCTION NOT ONLY WITH RESTAURANT PARTNERS BUT TECHNOLOGY PARTNERS. YOU MENTIONED NVIDIA EARLIER, WE COLLABORATE WITH THEM, THEY ALLOWED US EARLY ACCESS TO SOME OF THEIR VISION AI SYSTEMS AND MOTION PLANNING SYSTEMS SO WE GET TO BE THE FIRST PARTNER THE GET TO ROLL THAT OUT INTO THE RESTAURANT SPACE AND I THINK IT'S A VALIDATION OF THE FACT THAT AI ALLOWS US TO DO AUTOMATION IN A WAY THAT DID NOT EXIST THREE OR FOUR YEARS AGO. VONNIE: I UNDERSTAND THE AUTOMATION PART BUT WHERE DOES AI COME IN? FLIPPY HAS MADE ALMOST 4 MILLION BASKETS OF FRIES NOW BUT WHY YOU NEED AI FOR THAT? RICH: A GOOD QUESTION. LUPE IS BUILT AROUND A ROBOTIC ARM, ONE OF THE MORE RELIABLE THINGS WE HAVE, USED FOR DECADES IN AUTO FACTORIES, BUT THE SECRET SAUCE IS THE AI THAT POWERS THE ARM. IT HAS TO MAKE MILLISECOND METH DECISIONS ABOUT HOW MANY FRIES IT WILL PUT DOWN AND WHEN HE TAKES AMOUNT BECAUSE HE CAN'T UNDERCOOKED OR OVERCOOK. HE WORKS TWICE AS FAST AS A
HUMAN BUT COOKS 100% PERFECT EVERY TIME AND HE GETS SMARTER AS HE GOES BECAUSE EVERY RESTAURANT IS DIFFERENT. NOT TO MENTION THE FACT THAT NOW FLIPPY HAS AI POWERED SELF-HEALING SO HE KNOWS WHEN HE WILL GET SICK AND FIXES HIMSELF. HE'S ABOUT TO LAUNCH A SELF-CLEANING. THAT IS AI POWERED. WE'VE FILED ABOUT 25 PATENTS ON OUR DIFFERENT AI INNOVATIONS WHICH IS ONE OF THE BENEFITS OF BEING THE
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