Stocks Sink as Tech Hits in Late Hours | Bloomberg: The Close 8/01/2024
>> THE COUNTDOWN IS ON. EVERYTHING YOU NEED TO GET THE EDGE AT THE END OF THE MARKET DAY. THIS IS THE CLOSE. ROMAINE: COMMODITIES SLIDING AND SMALL CAPS SLUMPING.
LIVE FROM STUDIO TWO IN NEW YORK. ALIX: A TRULY UGLY DAY IF YOU HAVE EQUITIES IN THE MARKET. IT IS A BAD NEWS IS BAD NEWS SITUATION. THE SELLER PAID UP STEAM AFTER THE MANUFACTURING DATA CAME IN.
WE FELL THE MOST DENSE NOVEMBER 2022. S&P DOWN. TECH GETTING HIT, DOWN OVER THREE PERCENTAGE POINTS. THE MONEY GOES TO THE BOND MARKET. NO BETTER WAY TO TELL THE STORY. YOU SELL EQUITYZEN BY BONDS. ROMAINE: THE TARGET CELLS -- THE CHART TELLS IT ALL.
THE FED DECIDED -- ENCZ MARG YIELDS CONTINUING TO DRIFT DOWNWARD TOWARDS THE LOWEST LEVELS GOING BACK TO JANUARY. THE 10 YEAR TREASURY POSTING ITS FIRST KICK BELOW 4% IN ABOUT SIX MONTHS. A DROP THAT SOCGEN ROGER SAYS IS TOO FAR TOO FAST. >> IT
FEELS LIKE THEIR FRIEND END OF THE BOD MARKET IS OVERPRICED FOR CUTS GIVEN THE GENERAL HEALTH OF THE ECONOMY. ROMAINE: HOW HEALTHY IS THAT ECONOMY REALLY? WHEN YOU HAVE A REPORT SHOWING U.S. MANUFACTURING ACTIVITY SHRINKING THE MOST IN EIGHT MONTHS OR ANOTHER REPORT SHOWING THE NUMBER OF AMERICANS ON CONTINUING UNEMPLOYMENT BENEFITS HITTING THE HIGHEST SINCE 2021. AND THE EARNINGS REPORTS FROM WENDY'S, STARBUCKS AND HERSHEY ALL NOTING A RETREAT IN CONSUMER SPENDING AS INFLATION TAKES A TOLL. THAT PUTS MORE PRESSURE ON BIG TECH TO SHOW AND PROVE THAT THEIR RUN-UP IN VALUATION WAS JUSTIFIED. EARNINGS AFTER THE BELL FROM APPLE, AMAZON AND INTEL. APPLE UNDER A LOT OF PRESSURE
TO GET MORE INFORMATION ABOUT DEMAND FOR ITS NEXT IPHONE WALL CONTRIBUTIONS FOR AI WILL BE FRONT AND CENTER. ALIX: IF YOU GET BAD NEWS EQUALS BAD NEWS, DOES THAT WIND UP MEANING THE FED WILL CUT SOONER? OR JUST CUT MORE? THE SWAPS MARKET IS SAYING CUTTING MORE. THIS SHOWS THE AMOUNT OF QUARTER-POINT RATE CUTS BY DECEMBER. THE NUMBER IS GOING UP TO THREE. IT LOOKS LIKE THE MARKET IS PRICING IN THREE CUTS FOR THIS YEAR. ALL OF THAT PROPELLING AFTER WE
GOT THAT WEEK ISM MANUFACTURING NUMBER, WE TALKED TO TIM FUREY ON RADIO AND HE SAID DEMAND IS NOT EXISTENT. IF YOU NEED REASON FOR THE FED TO CUT RATES, THIS IS THE DATA. ROMAINE: LET'S KICK THINGS OFF. YOU SAW THE REACTION IN THE TREASURY MARKETS.
A LOT OF THAT STEMS FROM WHAT WE LEARNED YESTERDAY OUT OF THE FOMC ARE GETTING THE MANUFACTURING DATA THIS MORNING AND THE UNEMPLOYMENT CLAIMS NUMBER IS NOT HELPING THE CASE AND IT RAISES THE QUESTION -- WHAT ARE PEOPLE PRICING IN WHEN IT COMES TO THIS DROP IN RATES? IS ABOUT THE FED OR IS ABOUT WEAKER MACRO CONDITIONS? >> A LITTLE OF BOTH. A RECOGNITION THAT THE FED IS IN AN UNCOMFORTABLE SPOT. THE STATUS QUO IS UNLIKELY TO HOLD TO THE END OF THE YEAR. AND MORE QUESTIONS ABOUT
WHETHER THE FED WILL HAVE TO PROVIDE ACCOMMODATION TO THE ECONOMY AND STIMULATE IT AT SOME POINT NEXT YEAR. AND THAT IS WHAT THE RATES CURVE IS PRICING IN. ROMAINE: WERE YOU SURPRISED THE FED WAS NOT MORE DOVISH IN THE STATEMENT AS WELL AS JAY POWELL'S PRESS CONFERENCE YESTERDAY? WOULD YOU BE SURPRISED IF THEY DID NOT CUT RATES AT THEIR NEXT MEETING ON SEPTEMBER 18? ED: THE FED HAS BEEN OPERATING WITH A FAIR AMOUNT OF INERTIA. THEY HAVE INTERNALIZED THE FACT THAT DATA OVER THE LAST THREE YEARS HAS BEEN EVOLVING IN THE RIGHT DIRECTION BUT RELATIVELY SLOWLY WITH A LOT OF SURPRISES ALONG THE WAY. THIS INERTIA IS BUILT INTO THEIR STRATEGY. AND WHAT WE ARE SEEING RIGHT NOW IS THIS INERTIA STARTING TO COMMENT A CONFLICT WITH THE FACT THAT THE DATA APPEARS TO BE TURNING. THE RISKS TO THE LABOR MARKET
ARE INCREASING PRETTY RAPIDLY. WHAT I BE SURPRISED IF THEY DID NOT CUT IN SEPTEMBER YES. THAT WOULD BE QUITE DRAMATIC. THEY ARE AWARE THAT MARKET EXPECTATIONS ARE VERY ELEVATED. AND NOT CUTTING INTO THE END OF THE YEAR WOULD TIGHTEN FINANCIAL CONDITIONS AND PUT THEM INTO A MORE UNCOMFORTABLE SPOT. ALIX: THE WORD ON THE STREET IS THAT THE SYSTEMIC FUNDS HAVE MORE EQUITY POSITIONS TO SELL. DOES THAT MEAN EQUIVALENTLY WE
WILL SEE MORE MONEY GO INTO THE BOND MARKET? ED: MONEY HAS BEEN COMING INTO THE BOND MARKET ON A SYSTEMATIC BASIS SINCE THE SECOND HALF OF 2023. WE HAD A BIG DISLOCATION. SIGNIFICANT DRAWDOWNS AND OUTFLOWS AND PEOPLE HAVE BEEN RECOVERING FROM THAT FOR THE BETTER PART OF THE LAST 12-18 MONTHS. I THINK WHAT THIS REFLECTS IS THE FACT THAT STARTING WITH YIELDS, ACROSS THE FIXED INCOME LANDSCAPE REMAINS ATTRACTIVE. A LOT OF THOSE BREADS ARE GONE.
THE WIDE SPREADS THAT WE HAD IN THE MIDDLE OF LAST YEAR HAVE COMPRESSED SIGNIFICANTLY. THE LEVEL OF YIELDS IS STILL ATTRACTIVE. THE INCENTIVE REMAINS QUITE COMPELLING. ALIX: 3.5 ON THE 10 YEAR BY THE END OF THE YEAR, WHAT DO YOU THINK? >> DOABLE. WE STARTED THE YEAR AT 3.8.
AND THAT WAS IN AN ENVIRONMENT WHERE THE ECONOMY WAS STILL VERY HOT. AND THE LABOR MARKET WAS IN BETTER SHAPE. 3.5% ON 10 YEAR YIELDS BY THE END OF THE YEAR IS WITHIN THE REALM OF POSSIBILITY. ROMAINE: WHEN YOU LOOK AT THE ECONOMIC PICTURE, I'M CURIOUS AS TO WHAT IS GOING TO BE THE DATA POINT THAT YOU, AS AN INVESTOR, NOT AS A FED CHIEF OR ECONOMIST, WHAT IS THE ONE YOU WILL TRACK THE MOST TO GIVE YOU A SENSE OF THE DIRECTIONALITY OF THE FED AND THE SPEED OF THE RATE CUTS AND HOW THAT MIGHT SHAKE OUT? >> AS INVESTORS WE ARE SENSITIVE TO FINANCIAL CONDITIONS AND CREDIT SPREADS. CREDIT SPREADS ARE TIGHT REFLECTING THE FACT THAT UNDERLYING CORPORATE FUNDAMENTALS ARE GOOD AND IN SOME SENSE EXTRAPOLATING THE GROWTH OF THE DEMAND STORY AND A NEXT YEAR. IF THAT PULLS BACK AND WE SEE MORE OF A WIDENING OF CREDIT SPREADS, PICK UP RATE VOLATILITY, THAT TO ME WOULD BE A STRONG SIGNAL THAT THE PRESSURE ON THE FED CAN MOVE POTENTIALLY FASTER TO GET POLICY INTO A MORE NEUTRAL STANCE AND THAT WILL RISE. ROMAINE:
WHAT IS YOUR EXPECTATION IF WE GET THAT FIRST RATE CUT THAT THAT IS THOUGH START OF A CYCLE MEANING THEY KEEP GOING WITH US OR DO YOU THINK THIS WILL BE A CUTS AND THEN A WAIT AND SEE? >> I THINK WE ARE PAST THE POSSIBILITY THAT IT WILL BE INCREMENTAL ADJUSTMENTS. IT MAKES SENSE FOR THIS TO BE A CYCLE TO AT LEAST TAKE US TO NEUTRAL. DOWN THREE POINT PART PERCENT ON THE FED FUNDS AND THEN QUICKLY PIVOT TO THE QUESTION, DO WE NEED TO PROVIDE ACCOMMODATION TO THIS ECONOMY? HAS RISK ELEVATED TO THE POINT THAT WE NEED TO PROVIDE ASSISTANCE TO THE ECONOMY AND STIMULUS? THAT IS BUSINESS FOR NEXT YEAR BUT GETTING TO THE NEUTRAL STANCE WILL REQUIRE SEQUENCE OVER THE NEXT SIX MONTHS. ROMAINE: ALWAYS GREAT TO TALK TO YOU, ED, FROM COLUMBIA THREADNEEDLE KICKING US OFF TO THE CLOSE WITH STOCKS HITTING SESSION LOWS. WHEN WE COME BACK WE WILL TALK
ABOUT ONE OF THE MOST REMARKABLE TURNAROUNDS WERE A PUBLICLY TRADED COMPANY. A CONVERSATION WITH THE CEO, EARNIE GARCIA OF CARVANA. ALIX: AND THE CEO OF CONDOR BRANDS -- CONDOR BRANDS AFTER A STRONG EARNINGS PRINTS. HIS VIEW OF THE DURABILITY OF THE CONSUMER. ROMAINE: PRICING IS NOT THE WAY TO DRIVE SALES ACCORDING TO THE CEO OF SHAKE SHACK. THE BURGER CHAIN OFFERING UP A SURPRISINGLY BIG BEAT IN THE MOST RECENT QUARTER AND A MORE SURPRISING READ WITH ITS GUIDANCE GOING FORWARD. LOVE THAT AND MORE COMING UP IN
A SECOND RIGHT HERE ON "THE CLOSE" ON BLOOMBERG. ALIX: WE ARE LOOKING AT SOME RETAIL MOVERS TO THE DOWNSIDE. IT IS BEEN A ROUGH GO WHEN IT COMES TO RETAIL SALES. DOWN SIGNIFICANTLY. CONSUMERS STRUGGLING. ROMAINE: I WONDER HOW MUCH OF THIS IS LINKED AND HOW MUCH OF IT IS IDIOSYNCRATIC.
WE WILL TALK LATER ABOUT SOME RESTAURANT CHAINS. THEY ARE ALL SAYING THE SAME THING, PEOPLE ARE MORE COST CONSCIOUS AND MAKING DECISIONS TO NOT BUY OR TO BUY LESS. ALIX: AND NOT TERRIBLE IS NOT ENOUGH TO SUPPORT THESE GUYS. EBAY, NOT SEXY. ROMAINE: IT IS INTERESTING TO SEE THE COMPANIES THAT ARE SOMEHOW MANAGING TO BUCK THE TREND.
ALIX: LET'S STAY WITH REID TOUR AND GO TO KONDOR BRANDS. REPORTING EARNINGS THAT MEET EXPECTATIONS AND RAISE ITS FULL YEAR OUTLOOK. SCOTT BAXTER JOINING US. THAT'S PICK UP ON THAT, WHAT LED TO YOUR OUTPERFORMANCE -- TOPLINE, MARGIN EXPANSION, PRICING POWER? SCOTT: IT IS ALL THE ABOVE, NEW PRODUCTS RESONATING WITH THE CONSUMER AND REAL ESTATE GAINS WITH OUR BIGGEST WHOLESALE CUSTOMERS AND OUR PRODUCTS ARE WORKING ON THE MARKETPLACE.
WORK IS IMPORTANT TO OUR PRODUCTS AND PEOPLE ARE STILL WORKING AND WE HAVE A GREAT PRODUCT LINE WITH GREAT VALUE. PEOPLE CAN AFFORD OUR PRODUCTS AND WE ARE SEEING THEM CHOOSE US. ALIX: WHEN YOU SAY VALUE CHALLENGE? >> WE HAVE PRICING POWER WITH WHERE WE SIT. OUR CONSUMERS LOOK AT US TO BUY A GOOD BRAND. THEY CAN BUY IT AT A FAIR PRICE AND SHOUT FOR IT IN THE CHANNELS WHERE PEOPLE ARE SHOPPING BECAUSE OF OUR WIDE DISTRIBUTION. FOR ALL THOSE REASONS WE ARE
CLICKING WITH THE CONSUMER RIGHT NOW IN ADDITION TO THE FACT THAT WE HAVE DONE A NICE DOUBT FROM A MARKETING STANDPOINT WITH SOME OF OUR COLLABORATIONS THAT WE HAVE DONE AND SOME OF OUR ENTERTAINERS LIKE LAINEY WILSON AND CODY JOHNSON. WE ARE MAKING A LOT OF REALLY GOOD MOVES RIGHT NOW WITH THE BRANDS. ROMAINE: TALK MORE ABOUT THE MARKETING -- HOW MUCH OF THAT WAS OUT OF THE COMPANY OR WAS IT OPPORTUNISTIC? >> IT WAS ALSO A SHARP TURN LED TO HOW WE ARE MARKETING NOW. WE ARE LISTENING MORE TO OUR CONSUMER AND WE HAVE A MORE BROAD-BASED CONSUMER. ANY FEMALES LOOKING AT OUR BRANDS NOW WHEREAS BEFORE IT WAS MORE MALE-DOMINATED. THAT HAS PIVOTED AND WE ARE IN A GOOD SPACE.
THAT AND THE FACT THAT WE ARE KICKING OFF OUR FIRST NATIONAL BROADCAST MEDIA TV COMMERCIAL. WE HAVE NOT DONE ONE IN A FEW YEARS. WITH WRANGLER IN SEPTEMBER AND IT HAS TESTED WELL. IT WILL BE EXCITING.
WE ARE PIVOTING TO AN INTERESTING TIME IN OUR COMPANY. ROMAINE: I'M NOT FAMILIAR WITH THE COMMERCIAL PUSH -- WHERE WILL THAT AIR? NORMAL SHOWS OR IS IT AROUND A SPECIFIC EVENT? >> IT WILL BE ON BROADCAST TV, NORMAL SHOWS AND ALSO A FOCUS ON LIVE SUPPORT. ALIX: GOING TO SOME OF THE OTHER AREAS, I WANT TO ASK YOU ABOUT ASIA. YOU WERE NOT ALONE EXPERIENCING SOME HEADWINDS. CHINA IS A BIG PROBLEM ACROSS ALL SECTORS. CAN YOU TALK ABOUT DEMAND IN CHINA? >> WE HAD A LITTLE BIT OF LUMPY DEMAND OVER THE LAST FEW YEARS WITH THE RECOVERY. WE ARE STARTING TO SEE THAT GET
MORE EVEN AND THE CONSUMERS IS RESPONDING. WE HAVE CLEANED UP OUR DISTRIBUTION AND INVENTORY IN THE MARKETPLACE WHICH WAS CRITICAL FOR US. WE BELIEVE IT WILL REFLECT POSITIVE FOR THE SECOND HALF OF THE YEAR. WE FEEL BETTER ABOUT ASIA THAN WE HAVE IN A LONG TIME. ALIX: WHAT DO YOU FEEL IS THE DIFFERENCE? YOU GOT INVENTORY OUT OF THE WAY AND CHINA FEELS MORE STURDY OR IS THE CONSUMER CHANGING ITS TUNE? >> A LITTLE BIT OF BOTH BUT BOTH WERE IMPORTANT. THE FACT THAT THEY ARE NOW BOTH HAPPENING AT THE SINK TIME IS IMPORTANT. ROMAINE: I'M CURIOUS ABOUT HOW YOU SELL
TO FOLKS. THERE WAS A LOT OF TALK COMING OUT ABOUT THE LAST EARNINGS ABOUT THE DIRECT TO CONSUMER STRATEGY AND THE GROWTH IN THAT STRATEGY. HOW MUCH OF A PUSHER YOU MAKING DEEPER INTO THAT? >> ONE OF OUR FOCUS HAS BEEN IN E-COMMERCE. WE HAVE A GOOD TEAM IN PLACE. WE ARE PIVOTING BECAUSE WE HAVE MADE GOOD INROADS THERE WITH ALL OF OUR BRANDS AND WE ARE DOING MORE FROM A PHYSICAL STORE STANDPOINT. WE HAVE PHYSICAL STORES IN ASIA, ABOUT 150 IN A -- IN EUROPE AND ONLY ABOUT 40 IN THE UNITED STATES.
WE HAVE FOUND THAT THE CONSUMER LOVES TO SHOP FROM A PHYSICAL STANDPOINT AND ALSO HAVE THE OPTION FOR E-COMMERCE. ROMAINE: WITH THE EXPANSION ESPECIALLY IN THE U.S. WITH THE PHYSICAL STORES, DOES THAT COST WORK OUT FOR YOU? A LOT OF YOUR COMPETITORS HAVE SHIED AWAY FROM HAVING TOO MANY RETAIL LOCATIONS.
>> FOR US, WE ARE IN OUTLET MALLS RIGHT NOW AND IT WORKS REALLY WELL FOR US AND OUR CONSUMERS. AS LONG AS WE GET THE THROUGHPUT AND WE ARE GETTING GOT THROUGH STORES. WE ARE THOUGHTFUL ABOUT WHERE AND WHEN WE OPEN STORES. IT WORKS REALLY WELL FOR US. ROMAINE: WE REALLY APPRECIATE YOU TAKING TIME FOR US.
THE CEO OVER AT KONTOOR BRANDS. ONE OF THE FEW BRIGHT SPOTS IN A DAY WHERE WE HAVE SEEN BASICALLY EVERYTHING DOWN, WAS SOME OF THE WORST DECLINES THAT WE HAVE SEEN ALL YEAR LONG ON THE MAJOR INDICES. AND THE PHILADELPHIA SEMICONDUCTOR DOWN MORE THAN 8%. ALIX: QUALCOMM AND THE LIKE. THE RUSSELL DOWN 3.6 PERCENT. THE OUTPERFORMANCE PICTURE WE
TALKED ABOUT PAUSING. A SELLING MOST OF THE EQUITY MARKET IS HOW IT FEELS. ROMAINE: AND THE BIG DROP IN BENCHMARK YIELDS. A SELLOFF IN COMMODITIES AND A PUSH AHEAD AFTER THE BELL WHERE HOPEFULLY THIS MARKET WILL GET SOME RELIEF. AMAZON REPORTING AFTER THE BELL AND IT ASSURED TO BE A CRITICAL LOOK AT ARTIFICIAL INTELLIGENCE, CLOUD COMPUTING AND CONSUMER HEALTH. A PREVIEW IN OUR NEXT SEGMENT. THIS IS BLOOMBERG.
ROMAINE: LET'S GET A VIEW FROM THE SELL SIDE. THE BIG MOVERS ON THE BACK OF ANALYST EXPECTATIONS AND WE START WITH MGM RESORTS. CITI CUTTING HIS PRICE TARGET. AFTER THE CASINO OPERATOR HINTED OF SOFTER ROOM BOOKINGS AROUND THE FORMULA ONE RACE IN LAS VEGAS IN NOVEMBER. THE ANALYST THINGS F1 COULD BE
AN EARNINGS HEADWIND. AND HE IS ALSO WARNING INVESTORS THAT SERVICE MAY NEED MORE INVESTMENTS. THOSE SHARES DOWN ABOUT 14%. AND A SOFTWARE COMPANY UPGRADED TO BUY OVER AT BTIG. THIS COMES AFTER NEAR-TERM
CHECKS ON THE DEMAND ENVIRONMENT WITH ENTERPRISE PARTNERS WAS FOUND BY THE ENDLESS TO BE ENCOURAGING. ANALYST SAYS DATA DOG IS BEST POSITIONED TO WIN BUSINESS FOLLOWING ITS ACQUISITION BY CISCO. AND TAKE A LOOK AT READING. ANALYST EXPECTING THE SOCIAL MEDIA COMPANY TO BEAT ON USERS, REVENUE AND ADJUSTED EBITA. GOLD SAYS HE IS COMFORTABLE WITH THAT VALUE. READ IT CAUGHT UP IN THE DOWNDRAFT.
WE WANT TO STAY IN THE TECH SPACE AS WE GET APPLE AND AMAZON RESULTS AFTER THE BELL TONIGHT. INVESTORS HOPING TO GET PROMISING DATA OUT OF AMAZON TO LIFT THE NEGATIVE SENTIMENT BOGGING DOWN TECH STOCKS. JOINING US NOW IS THE WOLF RESEARCH DIRECTOR. SHE HAS AN OUTPERFORMANCE READING ON THE SHARES.
THIS IS STILL A JUGGERNAUT, CASH COW. I KNOW EXPECTATIONS ARE HIGH BUT GIVE US A SENSE AS TO WHETHER YOU THINK A WEB SERVICES SIDE OF THE BUSINESS WILL HOLD UP AND WHETHER THAT WILL PAIR WELL WITH WHAT WE ARE SEEING ON THE RETAIL SIDE. >> DEFINITELY. I HAVE THREE THINGS TO SAY.
ONE, I THINK THE DEMAND SIDE WILL LIKELY HOLD OUT. EXPECTATIONS ARE HIGH. HOWEVER, AFTER MICROCELL PRINTED THEY CAME IN SLIGHTLY LOWER BECAUSE THERE IS SOME CONCERN AROUND AZURE REVENUE GROWTH RATE THAT CAME IN A POINT OR TWO BELOW AND THAT RING SOME BELLS OF CAUTION. WHAT WE ARE GATHERING FROM THE TEXT WE HAVE DONE ON CLOUD, DEMAND IS HOLDING UP NICELY.
ONE DATA POINT WE LOOK AT IS GOOGLE, GOOGLE'S CLOUD BUSINESS ACCELERATED ABOUT 29%. THE SECOND IS THAT THE ENTERPRISE CUSTOMERS WE HAVE SPOKEN WITH CONTINUE TO SAY THAT THE DEMAND IS DOING REALLY NICELY. AND THIRD, THE COMPANY HAS PUBLICLY SAID I THINK ON BLOOMBERG THAT GROWTH IS ACCELERATING. SO WE HAVE REASON TO BELIEVE THAT THE CLOUD BUSINESS FOR THEM IS SET UP NICELY TO ACCELERATE. ROMAINE: LET'S STOP THERE. THEY DID SAY THAT ON BLOOMBERG. THE WEB SERVICE AS PART -- 47% AND 17% GROWTH RATE IS THE EXPECTATION COMING OUT OF THE COURTS ARE.
THERE HAS BEEN DISCUSSION ABOUT CAPEX AND THE TYPE OF INVESTMENTS THAT AMAZON AND OTHERS ARE MAKING WHEN IT COMES TO AI. AND NOT JUST AI, IT GOES BEYOND THAT. ARE YOU CAUSED ASHER ARE YOU COMFORTABLE WITH THE SPEND --ARE YOU COMFORTABLE WITH THE SPEND? >> WITH AMAZON, YES BECAUSE THE FACT THAT THEY ARE SPENDING IS A GOOD THING FOR THEM IN TERMS OF THE READINESS THEY HAVE PUTTING -- THEY HAVE BEEN PUTTING THEMSELVES INTO.
THEY ARE WORKING REALLY HARD AND HAVE ALREADY SHOWN A LOT OF EVIDENCE OF IT. THEY ARE SHOWING OPERATIONAL EFFICIENCY GAINS ACROSS THE RETAIL BUSINESS. THE ADVERTISING BUSINESS IS ALSO DOING WELL. ARGUABLY, AMAZON LIKELY WILL GET A BIGGER BLAST THAN A META- WOOD. WHAT I'M TRYING TO SAY IS THAT THEIR MARGINS CONTINUED TO DO WELL. THEY HAVE STRONG ADVERTISING BUSINESS AND CLOUD IS ON THE UP AND TO THE RIGHT. THEY HAD SOME OFFSETS FOR THE
DNA THAT WILL GO UP BECAUSE OF THE CAPEX SPEND AND THAT IS ARGUABLY A GOOD SIGN. ALIX: LET'S GET TO THE BORING STUFF, ONLINE AND RETAIL SALES. -- ONLINE RETAIL SALES. WHAT WILL BE SOME OF THE DRIVERS THAT WILL GIVE THEM MORE MARKET SHARE IN THE E-COMMERCE WORKPLACE NOW? >> THE EXPECTATION IS FOR LOW DOUBLE-DIGIT GROWTH RATE AT LEAST FOR THEIR NORTH AMERICAN BUSINESS. TWO THINGS ARE HAPPENING. WE ARE HEARING THAT CONSUMERS SPEND IS GETTING PRESSURED. THERE IS A SHIFT FROM
DISCRETIONARY SPEND TO NONDISCRETIONARY SPENT. AMAZON HAVING MORE THAN 40% OF THE E-COMMERCE MARKET IN THE U.S., THEY REPRESENT THE MARKET. THE FACT THAT THEY ALSO CARRY NONDISCRETIONARY ITEMS IS A PLUS FOR THEM AND FROM OUR CHECKS THEY SEEM TO BE CONSOLIDATING SHARER AND ARGUABLY GAINING SHARE FROM MORE DISCRETIONARY SKEWED RETAILERS. THE SECOND THING IS THAT THEY ARE INCREASINGLY EVOLVING FASTER AND FASTER DELIVERY SPEED. WHEN CONSUMERS GET FASTER DELIVERY SPEED, AND THEY ARE
EXPANDING INTO THE SUBURBS DELIVERING FASTER, YOU ARE MORE LIKELY TO ORDER FREQUENTLY WHETHER IT IS FOR GROCERIES OR SOMETHING ELSE. IT IS HABITUATING PEOPLE TO THE PLATFORM. ALIX: WE ARE LOOKING FORWARD TO IT. AMAZON DOWN. THANK YOU VERY MUCH FOR JOINING US. THE MANAGING DIRECTOR AT WOLF RESEARCH. LET'S GO BACK TO THE SIU'S -- THE C-SUITE. OUR CONVERSATION WITH THE
>> WHERE ABOUT A HALF-HOUR AWAY FROM THE CLOSING BELL. IT IS BRUTAL OUT THERE AND PARTICULARLY BRUTAL -- BRITTLE FOR ONE COMPANY, DOWN A WHOPPING 23%. AUTOMOTIVE SUPPLIER SLASHING ITS ANNUAL FORECAST AND A LARD THAT IS DUE TO PRIMARILY WEAKNESS IN CHINA. ROMAINE:
ALSO WEAKNESS IN THE WHOLE IDEA OF THE DRIVERLESS CAR REVOLUTION THAT WE WERE SUPPOSED TO GET, OR WHATEVER YOU WANT TO CALL IT, AUTONOMOUS. WE'VE SEEN IT IN EUROPE AND NOW WE ARE STARTING TO SEE THE DEMAND COMING OUT OF CHINA AS WELL. I DON'T KNOW IF IT'S BECAUSE THE CONSUMER OR MORE BECAUSE OF THE AUTOMAKERS THEMSELVES DESIGNED TO PUT THAT INVESTMENT SOMEWHERE ELSE. >> THEY SAID ONE CUSTOMER OUTSIDE OF CHINA DELAYED A LAUNCH OVERWRITE HIGH DRIVER DEMAND ASSISTANCE SYSTEM. WHO KNOWS WHAT THAT ENDS UP MEANING. ROMAINE:
A LOT OF THOSE OTHER COMPANIES NEVER REALLY GAINED THE TRACTION, THEY MAKE A LOT OF THE KEY SENSOR COMPONENTS AND A FEW OTHERS ARE ON THE HOOK. WHEN YOU SEE A 25% DROP IN THE STOCK, THAT'S THE WORST DAY SINCE THEY WENT PUBLIC. >> ALSO WEAKNESS ACROSS THE BOARD.
ONE COMPANY THAT BUCKED THE TREND IS CARVANA. REPORTING STRONGER THAN EXPECTED VEHICLE SALES AND HAD RECORD GROSS MARGINS. ARNIE GARCIA, THE FOUNDER AND CEO OF CARVANA, WHAT IS DRIVING THE GROWTH? WHAT KIND OF INCOME LEVEL, WHAT KIND OF CAR? >> SINCE INCEPTION WE'VE SO CARS ACROSS THE CREDIT, INCOME AND AGE SPECTRUM. WE SELL CARS TO AMERICAN CUSTOMERS BUYING ALL DIFFERENT TYPES OF CARS, THE TOP SELLER IS A TESLA MODEL 3. WERE ALSO SELLING ALL THE SMALL SUVS YOU WOULD EXPECT.
>> WE TRACK WHAT'S HAPPENING IN TERMS OF AUTO LOAN AND CREDIT CARD DELINQUENCIES. ARE YOU EXPERIENCING ANY IMPACT FROM AUTO LOAN DELINQUENCIES? >> AS PART OF OUR BUSINESS OF SELLING CARS TO CUSTOMERS, MANY CUSTOMERS ARE LOOKING FOR FINANCING AND WE PROVIDE THAT AS WELL. IN GENERAL, THERE'S NOTHING TOO NOTABLE TO REPORT THERE, THERE WAS INCREDIBLE PERFORMANCE FROM CREDIT PERSPECTIVE, POST-PANDEMIC IN LATE 2020 AND 2021. IN 2022 AND 2023 IT PROBABLY DRIFT A LITTLE BIT NEGATIVE, I THINK SO FAR PERFORMANCE LOOKS PRETTY GOOD SO NOTHING TOO CONCRETE TO DISCUSS THERE. ROMAINE:
WHEN IT COMES TO THE DEMAND-SIDE THERE IS A LOT TO LOOK FOR. ARE YOU SEEING ANY BENEFIT FROM CONSUMER WEAKNESS, THE IDEA THAT PEOPLE THAT MIGHT'VE BEEN IN THE MARKET FOR A PRESUMABLY HIGHER PRICED, NEWER CAR OR WILLING TO TRADE DOWN AND GO FOR A USED CAR INSTEAD? >> I THINK THERE'S PROBABLY A TON OF MACRO TRENDS GOING ON. AFFORDABILITY DRIVES BEHAVIOR, SO I THINK THAT IS TRUE.
WE'RE TRYING TO GIVE CUSTOMERS THE SIMPLEST EXPERIENCE WE CAN WHEN THEY ARE BUYING A CAR. WE DELIVER TO THEIR DOOR, THEY CAN GET FINANCING IN SECONDS AND SELL A TRADE INTO AS IN MINUTES. WE ARE OFFERING A REALLY DIFFERENT EXPERIENCE IN OUR FOCUS HAS BEEN ON GIVING CUSTOMERS THE BEST EXPERIENCE WE CAN AND GETTING MORE EFFICIENT IN DOING THAT. THAT DROVE INCREDIBLE RESULTS WE ARE REALLY PROUD OF OVER THE LAST TWO YEARS. THIS QUARTER WE WERE THE MOST PROFITABLE AUTOMOTIVE RETAILER. THOSE ARE BOXES WE ARE PROUD TO
CHECK. ROMAINE: LET'S TALK ABOUT FASTEST-GROWING. YOU GOT A LOT OF CRITICISM ABOUT THE PACE OF THAT EXPANSION. FOR CERTAIN TIME IT DECIMATED THE STOCK. NOW WERE LOOKING AT WHAT COULD BE ONE OF THE GREATEST COMEBACK STORIES WE'VE SEEN FOR A PUBLICLY TRADED STOCK IN DECADES. YOU STILL HAVE A LOT TO SORT
OUT. WHAT IS THE MESSAGE TO INVESTORS ABOUT MAKING SURE THIS REBOUND DOES CONTINUE? >> THERE'S A LOT IN THAT QUESTION. IF YOU LOOK BACK AT HISTORY AND ANY COMPANIES THAT TRY TO BUILD ANYTHING THAT WAS DIFFERENTIATED, IT'S RARELY A PERPENDICULAR PATH AND IT'S GENERALLY VERY HARD.
WE SPENT $10 BILLION TRYING TO BUILD A COMPLETELY DIFFERENT SUPPLY CHAIN. WE'VE UNDOUBTEDLY MADE SOME GREAT MOVES WE MADE SOME MOVES THAT IN RETROSPECT WERE NOT PERFECT, BUT WE'VE ALWAYS MOVE FORWARD. THE SOME OF THOSE MOVES GOT US TO THIS SPOT TODAY, WHERE THE FASTEST GROWING AND MOST PROFITABLE. I THINK THE POSITION WE ARE IN NOW IS INCREDIBLE. THE TEAM WE HAVE IS INCREDIBLE. I'M FOREVER GRATEFUL FOR THEM
FOR FIGHTING THROUGH THE LAST COUPLE OF YEARS THE WAY THAT HAVE. FROM HERE THE OPPORTUNITY IS REALLY LARGE. WE HAVE A TEAM THAT GOES -- NO SET AGO AT AN TACTILE HEART PROBLEMS AND WE WILL KEEP DOING THAT. >> YOUR TOTAL DEBT IS STILL $6.2 BILLION. WHAT IS YOUR PLAN TO REDUCE IT? >> WE WILL REDUCE THAT OVER TIME. THIS QUARTER WE HAVE 355 MILLION IN EBITDA IN A SINGLE QUARTER. IF WE KEEP HAVING THE GAINS WE
EXPECT TO HAVE, WE WILL KEEP ACCUMULATING CASH AND LOOKING MUCH BETTER FROM A LEVERAGE PERSPECTIVE >> AS WELL. I HEAR YOUR PITCH. YOU HAVE A LOT OF SKEPTICS OUT THERE. HOW DO YOU ASSUAGE THEM OF THE FEAR OF TOO MUCH DEBT AND PEOPLE ARE STILL WORRIED ABOUT THE FACT THAT THEY WILL WAIT BIG PURCHASES ONLINE. >> OUR JOB IS TO GO OUT THERE AND DO THE BEST JOB WE CAN. MANY ANALYSTS ARE PRETTY EXCITED RIGHT NOW.
MANY ARE STANDING BY WATCHING AND FIGURING OUT WHERE WE'LL ALL GO. OUR JOB IS TO MAKE AS MUCH PROGRESS AS WE POSSIBLY CAN AND WE'RE GOING TO STAY FOCUSED ON THAT. ROMAINE: WHEN IT COMES TO DEALING WITH THE DEBT LOAD AND OTHER OBLIGATIONS YOU HAVE HERE, ANY PLANS RIGHT NOW TO GO BACK TO FINANCIAL MARKETS, WHETHER IT'S EQUITY SALES OR DEBT SALES? >> I'LL TRY NOT TO RUN BACK THE WHOLE ANSWER GAVE YOU BEFORE BECAUSE YOU CALLED IT A PITCH. I THINK THE MOST IMPORTANT THING IS WE KEEP MAKING PROGRESS. THE TEAM HAS DONE AN INCREDIBLE JOB. WE ARE IN A VERY DIFFERENT SPOT THAN WE WERE A COUPLE OF YEARS AGO.
THAT STORY IS A FAIR ONE BUT IT IS A VERY DIFFERENT STORY TODAY THAN IT WAS BACK THEN. ROMAINE: WE APPRECIATE YOU TAKING TIME FOR US ON THE HEELS OF THOSE EARNINGS LAST NIGHT. THE STOCK RIGHT NOW UP SOMETHING LIKE 200% JUST THIS YEAR ALONE. THEN YOU GO BACK TO THE DEPTHS
OF WHERE THEY WERE, YOU'RE TALKING ABOUT ONE OF THE BIGGEST TURNAROUNDS SO FAR. THE QUESTION IS ARE THEY GOING TO KEEP THAT ON PACE. >> YOU LOOK AT OTHER CARMAKERS, IT'S BEEN BRUTAL. HERTZ ALSO HAD RESULTS OUT THAT DIDN'T GO SO WELL FOR THEM. YOU ALSO HAVE VOLKSWAGEN, BMW, THE THEME CONTINUES. ROMAINE: THERE WILL BE FEWER CARS SOLD MOST LIKELY IN 2024 THAN THERE WERE IN 2023, THE QUESTION IS? ? WHERE IS THE MIX IN THE QUESTION IS WHAT IS DRIVING IT, IS IT ABOUT AFFORDABILITY? IF YOU ARE PAYING CASH, CARS ARE STILL PRETTY PRICEY.
>> HE SAID A LOT OF PEOPLE ARE BUYING TESLA'S. AND THEY ARE HAVING A HARD TIME. BUT CLEARLY THERE IS A DEMAND. ROMAINE: I'VE GOT A CAR. WE ARE GOING TO MOVE ON AND
TALK ABOUT SOME OF THE OTHER BIG MOVERS OUT THERE. SHAKE SHACK, AN INCREDIBLE DAY FOR THE COMPANY HERE. SAYING IT'S NOT TRYING TO COMPETE ON PRICE IS, IS TRYING TO COMPETE ON SERVICE. IT'S TELLING US CASH IS KING. WE WILL BREAK IT DOWN, IT IS OUR STOCK OF THE HOUR. THIS IS BLOOMBERG. ROMAINE: TIME FOR OUR STOCK OF THE HOUR, SHAKE SHACK SHARES UP ALMOST 16%, SAYING ANY SPACE TO GENERATE POSITIVE FREE CASH FLOW ON HER ANNUAL BASIS.
ABIGAIL DOOLITTLE JOINING US FOR MORE. WAS LOST IN ALL THIS, NOT THOSE THAT SHAKE SHACK IS DOING WELL BUT ALL THESE OTHER FAST FOOD CHAINS SEEM TO BE STRUGGLING. WHY IS SHAKE SHACK BUCKING THE TREND? >> THE HAVE A NEW CEO AND ON THE CALL HE WAS SUPER IMPRESSIVE. THE PROBLEM IS MARKETING WHICH IS TRYING TO FIX, APPARENTLY THEY DIDN'T TALK TOO MUCH ABOUT IT BECAUSE THEY WANT TO KEEP IT SECRET, AND THEN APPARENTLY THEY HAVE A DRIVE-THRU PROBLEM. HE IS FIXING IT, SO WHEN THEY PUT THAT TOGETHER THEY CAME UP WITH A 4% THAT WAS ENCOURAGINGLY AGAINST THE BACKDROP. THE OTHER DAY WE WERE TALKING ABOUT TEXAS ROADHOUSE, ANOTHER ONE OF THESE COMPANIES IS DOING WELL. SO MANY OF THE OTHER FAST
CASUAL ARE REALLY STRUGGLING. IT SEEMS THE CONSUMER THAT TRENDS TOWARD THE SORT OF RESTAURANTS MAYBE HAS LITTLE BIT LESS CASH SO THERE'S LESS DEMAND. BUT SHAKE SHACK PULLING IN SOME LOYAL CUSTOMERS. >> YOU TALK TO ANY FAST FOOD ANALYST, THE FIRST THING THEY SAY IS WE ARE HEADED INTO A VALUE WAR. ABIGAIL: HE SAID YOU WANT TO MAKE SURE THE PRODUCT IS GREAT, THE OPERATION AND MARKETING FOCUS NOT ON COMPETING BUT ON WHAT YOU CAN DO BEST. IT SEEMS AS THOUGH IT'S A GOOD STRATEGY FOR
THEM. WENDY'S ALSO HAVE A NEW CEO. THE CALL WAS THE EXACT OPPOSITE, THAT THIS PERSON DID NOT IMPRESS IN THE WAY ROB LYNCH DID. ROMAINE: IT'S ALSO ABOUT DIFFERENTIATION. SHAKE SHACK AND WENDY'S BASICALLY SELL THAT SAME STUFF, SIMILAR WITH MCDONALD'S. MCDONALD'S CLEARLY GOING DOWN IN VALUE. WE WERE JOKING BEFORE BECAME ON-AIR THAT ONE OF OUR CAMERAMEN GOT LUNCH AT MCDONALD'S TODAY.
BURGER, FRIES, AND A DRINK, HOW MUCH DO YOU THINK IT COST? $16. >> HE MAY HAVE SUPERSIZED IT, BUT STILL. ROMAINE: THE QUESTION IS WHERE DOES SHAKE SHACK FIT IN TO THAT? ABIGAIL: I THINK PEOPLE WANT THE SHAKE SHACK PRODUCT. I'VE ONLY BEEN THERE ONCE, BUT
CLEARLY A HIGHER END BURGER, THE FRIES, THE SHAKE. RIGHT NOW THEY HAVE THIS BARBECUE BURGER THAT APPARENTLY IS REALLY HELPING THEM OUT. BUT THEY ARE NOT GOING DOWN THAT ROUTE IN TERMS OF COMPETING ON PRICE. WENDY'S MISSED SLIGHTLY, THERE, NOT EVEN UP 1%.
I GUESS THEY ARE APPARENTLY STILL FOCUSING ON BREAKFAST, WHICH MAYBE IS TAKEN AWAY FIREPOWER THAT THEY COULD PUT TOWARD THEIR OTHER PRODUCTS. I HAVEN'T BEEN TO WENDY'S AND PROBABLY A FEW DECADES, BUT THEY HAD GREAT BURGERS. ROMAINE: ALL THIS TALK, I REALLY WANT A FROSTY. I HAVEN'T HAD A FROSTY IN YEARS. I THINK I MUST HAVE GAINED ABOUT 30 POUNDS ON THAT JOB. >> THANKS A LOT, ABIGAIL DOOLITTLE. >> I HAD MY YOGURT. WE'RE 15 MINUTES AWAY FROM A
BRUTAL DAY IN THE MARKETS. WE ACCELERATE TO THE DOWNSIDE HERE. >> WE SEE A SECULAR GLOBAL INDUSTRIAL RENAISSANCE GOING ON, AND PEOPLE TALK ABOUT AI, BUT IT'S ALSO IN POWER, SUSTAINABLE ENERGY, THE AUTO SECTOR AS WELL.
WHEN YOU LOOK AT THE BREADTH OF CAPITAL NEEDED FROM THESE HIGH QUALITY COMPANIES, IT HARKENS BACK TO WHAT HAPPEN IN THE U.S. IN THE 1920'S AND 30'S WITH RAILROADS AND INDUSTRIAL AMERICA. ROMAINE: THE COPRESIDENT AT APOLLO ASSET MANAGEMENT SPEAKING EARLIER ON BLOOMBERG. 10 MINUTES UNTIL WE GET TO THE CLOSING BELL. >> IS PRETTY BRUTAL, THE NASDAQ UP ABOUT 2.2%. QUALCOMM DOING POORLY, THE STOCKS INDEX HAVING ITS HEAVIEST PRESSURE OF SELLING SINCE MARCH OF 2020.
IT'S REALLY BRUTAL. BAD NEWS IS BAD NEWS RIGHT NOW. ROMAINE: NOW ONLY DOWN 7% AS OPPOSED TO ALMOST 9% WAS DOWN EARLIER. HOW MUCH LIFE IS LEFT IN THAT TRADE AND HOW MUCH CONFIDENCE IS THERE IN THAT TRADE? LET'S TALK ABOUT THAT TRADE BECAUSE THAT HAS BASICALLY BEEN THE EQUITY MARKET FOR THE LAST YEAR OR SO. I DO WONDER IF THAT IS RUNNING OUT OF STEAM ARE FEW THINKING COULD BE A BIT OF A RESET AND AT SOME POINT WILL GET BACK TO IT.
>> IS NOT UNUSUAL TO HAVE A RESET GIVEN HOW MUCH THESE MARKETS HAVE RALLIED. HE SAW AMAZON GROWING RAPIDLY, SIMILAR TO NVIDIA ALTHOUGH IT A SMALLER PACE. AMAZON HAD DRAWDOWNS BETWEEN BETWEEN 5% AND 50% SEVEN TIMES, AND LOOK AT AMAZON NOW. I THINK THAT WITH THESE GROWTH THEMES, WITH THE SEAMS THAT LEAVE MUCH TO THE IMAGINATION, YOU'RE GOING TO GET A LOT OF EXCITEMENT AND A LOT OF FEAR.
ROMAINE: HE SEES THIS AS A POSITIVE, BUT I'M SURE YOU REMEMBER, AMAZON GOT WIDELY CRITICIZED FOR THE AMOUNT OF MONEY THAT WERE OVERSPENDING. IT WAS BASICALLY A MONEY LOSER. I FEEL LIKE THAT'S WHERE WE ARE NOW, ALL THE COMPANIES BEING CRITICIZED FOR THIS ARE NOW THE BEHEMOTHS OF THE WORLD. THEY'RE NOT SMALL COMPANIES WITH NO CASH FLOW, REVENUE, OR EARNINGS. >> BACK THEN YOU HAD A LOT OF YAHOOS, SOME OF THEM SURVIVED AND SOME DIDN'T. AMAZON WAS ABLE TO SURVIVE BECAUSE THEY RAISED A LOT OF CAPITAL TO BACK THEIR LONG-TERM PLAN RIGHT BEFORE THE MARKETS CLOSED.
THESE DAYS A LOT OF THESE COMPANIES ARE SELF-FUNDED, VERY CASH FLOW POSITIVE. THEY ARE NOT GOING ANYWHERE ANYTIME SOON. THEY MAY NOT BE THE BIGGEST WINNERS OF THE NEXT 10-20 YEARS, BUT THEY WILL BE MOST LIKELY SURVIVORS. AT RESEARCH AFFILIATES, WE ARE VALUE INVESTORS FOR THE LAST 25 YEARS. WE ALWAYS SAY THERE STILL IS
SOME INTRINSIC VALUE IN THESE COMPANIES. DON'T IGNORE THEM, YOU PROBABLY WANT TO OWN THEM BUT YOU DON'T WANT TO OWN THEM AT THE WEIGHT THEY ARE IN THE S&P. ALIX: WE ARE NOT SEEING SMALL CAPS OUTPERFORM TODAY.
IT HAS UNDERPERFORMED FOR SMALL CAPS. IS THE ROTATION TRADE DONE OR ARE READ PAUSING IT ALL TOGETHER RIGHT NOW? >> I THINK SMALL CAPS ARE SO HEAVILY DISCOUNTED RELATIVE TO THEIR LARGE-CAP BRETHREN. IF YOU LOOK AT THE NORMAL RELATIVE VALUATIONS AND WHAT THEY ARE TODAY, SMALL CAPS ARE SO HEAVILY DISCOUNTED THAT WE JUST HAD A REVERSION TO NORMAL VALUATION RELATIONSHIPS OVER THE NEXT FIVE OR SIX YEARS, YOU COULD SEE 7% PERFORMANCE ANNUALIZED DURING THAT TIME.
THAT GIVES YOU AN IDEA OF HOW CHEAP THEY ARE. THESE ARE NOT COMPANIES THAT ARE NECESSARILY ALL TERRIBLE. CERTAINLY IN SMALL CAP WE FAVOR AN ACTIVE APPROACH, SOMETHING THAT INCLUDES A QUALITY COMPONENT OR EVEN A MOMENTUM COMPONENT TO IT HELPS. ALIX: SOME OF THE EARNINGS HAVE BEEN
REALLY SOLID. THE PRICE ACTION TODAY, IS IT FUNDAMENTALLY DRIVEN? IS IT A CONTINUATION, THE SELLOFF FROM LAST WEEK? IS IT JUST FUN CLOSE? WHAT DO YOU ATTRIBUTE IT TO? >> I ATTRIBUTED TO A LITTLE OVERZEALOUSNESS. BOND TRADERS ARE PRICING IN THREE RATE CUTS FOR THE REST OF THE YEAR. IF YOU HAD THREE RATE CUTS THAT IS SCARY.
THAT WOULD PORTEND A MASSIVE ECONOMIC SLOWDOWN. THREE RATE CUTS, PEOPLE ARE FEELING LIKE THERE MIGHT BE SOME PROBLEMS OUT THERE. THE MARKET IS GETTING AHEAD OF ITSELF. WE CERTAINLY ARE SEEING NEGATIVE SURPRISES ON THE ECONOMIC FRONT MORE THAN WE SAW THIS YEAR. WE SAW THIS FOR IN 2019 AND
2016. THOSE WERE PRETTY GOOD TIMES. ROMAINE: I'M CURIOUS WHEN YOU SEE THE SELLOFF WE'VE HAD OVER THE LAST COUPLE OF WEEKS, IS THIS REALLY ABOUT THE CORPORATE FUNDAMENTALS? >> I THINK IT'S REALLY ABOUT EXPECTATIONS. IF YOU LOOK AT EARNINGS ANNOUNCEMENTS, YOU'RE GETTING PRETTY GOOD POSITIVE SURPRISES. OVER THREE QUARTERS OF ANNOUNCEMENTS HAVE BEEN POSITIVE SURPRISES ON EARNINGS.
YOU ARE NOT GETTING THE BONUS GUIDANCE, GUIDANCE ABOVE EXPECTATIONS. A LOT OF THIS IS JUST EXPECTATIONS WERE INFLATED. BUT GROWTH LOOKS LIKE IT IS ACTUALLY OK. ROMAINE: SO YOU DIDN'T GET TOO RATTLED BY SOME OF THE LATEST NUMBERS WE GOT THIS MORNING ON UNEMPLOYMENT AND MANUFACTURING, YOU DON'T DEAL WITH THAT SHORT-TERM STUFF. >> ONE THING I ALWAYS SAY ABOUT U.S.
EQUITIES IS THE BIGGEST MISTAKE ANYBODY MADE WAS ACTUALLY SELLING. ONCE YOU SELL IT, AT SOME POINT YOU HAVE TO GET BACK IN. OVER THE LONG-TERM TERM, EQUITIES PERFORM. ROMAINE: ALWAYS GREAT TO SEE YOU.
WE STARTED THE DISCUSSION OFF WITH AMAZON, SCHEDULED TO REPORT AFTER THE VEIL. IT'S THE FOURTH HIGHEST RATING IN THE S&P 500 AT THE HIGHEST IS APPLE, ALSO DOWN BY ABOUT 1.8% TODAY. ALIX: IPHONE SALES IN CHINA, IS THIS THE TIME OR IS IT THE LAST LEG IN THE SOFTEST QUARTER AND FROM HERE WE START TO BUILD TO THE SUPER CYCLE? ROMAINE: IT'S GOING TO BE ONE OF THE BUSIEST EARNING DAYS WE'VE HAD THIS CYCLE. INTEL AND MICROSTRATEGY AS WELL AS A SLEW OF SMALLER COMPANIES INCLUDING U.S. STEEL. WE'VE GOT A LOT TO GO THROUGH. YOU DON'T WANT TO GO ANYWHERE. IT RAISES THE QUESTION, DO
THOSE TWO BIG CAP NAMES, IS THAT GOING TO SAVE THE MARKET? ALIX: IS IT ACTUALLY SELLING INTO IT? NOT NECESSARILY A BAD THING. ROMAINE: OUR FULL MARKET COVERAGE OF ALL THOSE THINGS IS IMMINENT, AS THEY SAY, RIGHT HERE ON BLOOMBERG. ♪ >> THE CLOSING BELL STARTS RIGHT NOW. ROMAINE:
WE ARE TWO MINUTES AWAY FROM THE END OF THE TRADING DAY. ROMAINE BOSTICK ALONGSIDE ALIX STEEL TO TAKE YOU THROUGH THE CLOSING BELL. SCARLET FU JOINING US IN THE TELEVISION STUDIO, CAROL MASSAR AND TIM STENOVEC COMING FROM THE RADIO BOOTH. A MAJOR SELLOFF GOING ON ACROSS ALL THE MAJOR EQUITIES INCLUDING A 7% DROP IN THE STOCKS. CAROL: WE'RE JUST ROUNDING OFF THE WORST LEVELS OF THE SESSIONS WAS STILL -- DOWN ACROSS THE WORD. WERE UP 7% OF THE STOCKS YESTERDAY. TODAY DOWN 7% AS YOU JUST SAID.
TIM: APPLE COMING AT 4:30, WE WILL HAVE THOSE NUMBERS FOR YOU AS SOON AS THEY CROSS. CAROL: -- GARLIC: VINDMAN IS ELEVATED COMPARED TO THE 20 DAY AVERAGE. THE NASDAQ 100, WHICH INCLUDES TWO BIG COMPANIES REPORTING, IT'S 40% ABOVE THE 20 DAY AVERAGE. ALIX: IN GENERAL, THERE STILL A LOT OF EQUITY LONG IN THE SYSTEMIC FUN. IS THIS A CONTINUATION OF THE
SELLING THAT WAS TRIGGERED OVER THE LAST FEW WEEKS? ROMAINE: AND YOU'RE UP AGAINST SEASONALITY ISSUES AS WELL. A SIGNIFICANT DROP IN TREASURY YIELDS WITH THE 10-YEAR YIELD LOOKING LIKE IT'S GOING TO CLOSE OUT THE DAY BELOW 4%. ELEVATION AND THE VIX, AND ONE POINT TRADING ABOVE 19. LET'S WALK YOU THROUGH THE NUMBERS, DOW JONES INDUSTRIAL BY MORE THAN 1.3%. 76 POINTS LOWER ON THE S&P 500, A 1.4% DECLINE. THE NASDAQ DOWN ABOUT 2.3% ON THE DAY.
NASDAQ 100 DOWN ABOUT 2.4%. SMALL TO MID-CAPS, DOW TRANSPORTS DOWN 1.7, THE RUSSELL 2000 CLOSING THE DAY WITH A 3% LOSS. CAROL: MOST NAMES IN THE INDEX LOWER, 173 TO THE UPSIDE. SCARLET:
LOOK AT THE SECTOR BREAKDOWN AND MOST OF THE DECLINES ARE IN INFOTECH. THE BRIGHT RED SLICE OF THAT PIE IS SEMICONDUCTORS AND THEY ARE OFF ABOUT 7% AT THE MOMENT. ENERGY AND CONSUMER DISCRETIONARY EACH LOSING MORE THAN 2%. UTILITY AND CONSUMER STAPLES SAW LITTLE BIT OF THAT DEFENSIVE BUYING.
CAROL: META-RALLYING, BUT AMAZON IS OUT. SCARLET: IN TERMS OF NET SALES, THAT DOES MEET ANALYST ESTIMATES OVERALL. LET'S LOOK AT AMAZON WEB SERVICES, NET SALES 26.28
BILLION DOLLARS, HIGHER THAN ANALYSTS ANTICIPATED. THIS IS THE DRIVING FORCE OF AMAZON'S PROFIT, CERTAINLY THE CLOUD BUSINESS. NORTH AMERICAN NET SALES, 90.03 BILLION DOLLARS, ANALYSTS WERE LOOKING FOR 89.90 8 BILLION. WHEN IT COMES TO THE OUTLOOK, AMAZON SAYS NET SALES IN THE THIRD QUARTER WILL BE 154-150 8.5 BILLION. THIRD QUARTER OPERATING INCOME WILL BE 11.5 BILLION TO 15
BILLION IN RANGE. ANALYSTS WERE LOOKING FOR 15.60 6 BILLION. TIM: INTEL SHARES ARE CRATERING IN THE AFTER HOURS. A HUGE MISS, ESTIMATES WERE FOR $14.38 BILLION.
SHARES DOWN 9% IN THE AFTER HOURS. INTEL'S ADJUSTED GROSS MARGIN COMING IN AT 38.7%, ALSO A MISSED. ESTIMATES WERE FOR 45.5%, SHARES DOWN 10% IN THE AFTER HOURS. CAROL: COMPANY ANNOUNCING THAT COST
REDUCTION PLAN, IMPLEMENTING MORE THAN 15% HEADCOUNT REDUCTION. SPINNING THAT DIVIDEND STARTING IN THE FOURTH QUARTER OF 2024. NEXT YEAR THE COMPANY TARGETING GROSS CAPITAL EXPENDITURES BETWEEN 20 AND $23 BILLION. ROMAINE: YOU SUSPEND THAT DIVIDEND, YOU'RE REDUCING HEADCOUNT, IT BECOMES A COST STORY AND THIS WAS THE CONCERN WITH A LOT OF THESE COMPANIES ABOUT THE SPEND THERE WERE HAVING TO DO TO KEEP PACE WITH WHATEVER NEW ERA WERE GOING INTO. SOME COMPANIES WILL BE FORGIVEN WITH THAT BUT FOR INTEL, BASED ON THE INITIAL SHARE REACTION, NOT QUITE SO FORGIVING. ALIX: AMAZON THIRD QUARTER FORECAST IS RAISING EYEBROWS HERE.
NET SALES ESTIMATES ON THE HIGH END, IT'S QUITE A RANGE. THAT'S JUST IN LINE WITH WHAT THEY WERE EXPECTING BEFORE. OPERATING INCOME ABOUT $15 BILLION ON THE HIGH-END, THAT MISSES ESTIMATES AND SEEMS TO BE WEIGHING ON SHARES FOR THE QUARTER, DESPITE THE FACT THAT PHYSICAL ONLINE STORES DELIVERED VERY MUCH IN THE SECOND QUARTER. SCARLET: A GOOD QUESTION FOR AMAZON IS HOW MUCH I SAY ABOUT WHAT AI CONTRIBUTES TO AMAZON WEB SERVICES. MICROSOFT TALKING ABOUT THE CONTRIBUTION TO SALES BUT NOT ITEMIZING EXACTLY HOW MUCH IT IS. THAT WILL DRIVE THE NARRATIVE FOR AMAZON GOING FORWARD. TIM:
ANDY JASSY IS LOOKING AT THAT, ALSO LEVERAGING NEW GENAI OPPORTUNITIES. AWS CONTINUES TO BE CUSTOMERS TOP CHOICE WITH BROADER FUNCTIONALITY, SUPERIOR SECURITY AND OPERATIONAL PERFORMANCE. CAROL: SOME DISAPPOINTMENT, NO DOUBT ABOUT IT. AMAZON DOWN 5% IN THE AFTERMARKET. THE BIG HEADLINE SECOND-QUARTER AWS NET SALES, 26.28, THAT'S A BEAT. THIRD QUARTER OPERATING INCOME OUTLOOK AND STREET ESTIMATE IS ABOVE THAT, 15.60 $6 BILLION.
ROMAINE: MICROSTRATEGY, THE SOFTWARE COMPANY THAT'S EFFECTIVELY BEEN OPERATING AS A DIGITAL HEDGE FUND. IN THE MOST RECENT QUARTER ASSETS CONTINUE TO GROW. A LOSS OF FIVE DOLLARS 74 CENTS A SHARE, GREATER THAN WHAT IT WAS A YEAR AGO AND REVENUE ALSO, IN A LITTLE BIT LIGHT AT $111 MILLION. ALIX: A QUICK CHECK ON DOORDASH, COMING IN UP 20% YEAR ON YEAR, BETTER THAN ESTIMATED. REVENUE ALSO COMING IN STRONGER THAN ESTIMATED. GROSS MARGIN IN LINE WITH ESTIMATES.
LOOK AT THEIR THIRD QUARTER, THERE ARE ALSO SEEING ON THE HIGH END ABOUT $540 MILLION IN ADJUSTED EBITDA SO A SOLID QUARTER FOR DOORDASH. SCARLET: THE ONE THAT STANDS OUT IS INTEL BECAUSE OF THAT DROP, A SIZABLE 11% PLUNGE. WE KNEW THE COMPANY WAS IN TURNAROUND MODE AND GOING TO CUT A LOT OF JOBS TO REDUCE COST AND EVERYTHING BUT SUSPENDING THE DIVIDEND PUTS IT IN A DIFFERENT CATEGORY BECAUSE FOR A WHILE PEOPLE WERE LOOKING AT INTEL AS AN INCOME GENERATING STOCK. BUT THE REVENUE OUTCOME MISS RAISES QUESTIONS ABOUT HOW MUCH PROGRESS IT'S MAKING IN IMPROVING AND TRYING TO GET BACK TO WHAT IT WAS. CAROL: SUSPENDING THE DIVIDEND STARTING IN THE FOURTH QUARTER, RECOGNIZING THE IMPORTANCE OF PRIORITIZING LIQUIDITY TO SUPPORT THE INVESTMENTS NEEDED TO EXECUTE ITS STRATEGY.
I THINK IT'S AN INTERESTING NUANCE TO WHAT THEY'RE DOING. ROMAINE: LET'S NOT FORGET THEY CUT THE DIVIDEND IN HALF LAST YEAR. I'M NOT SURE WHAT MESSAGE IT SENDS FOR A COMPANY THAT IS MATURE. TIM: INCLUDE STRUCTURAL AND OPERATING REALIGNMENT, HEADCOUNT REDUCTIONS AND INVESTMENTS IN 2025 COMPARED TO PREVIOUS ESTIMATES. INTEL LOOKING TO ACHIEVE A CLEAR LINE OF SIGHT TOWARD A SUSTAINABLE BUSINESS MODEL WITH THE ONGOING FINANCIAL RESOURCES AND LIQUIDITY NEEDED TO SUPPORT THE COMPANY'S LONG-TERM STRATEGY , REDUCING COST OF SALES AND MAINTAINING CORE INVESTMENTS AND EXECUTING STRATEGY. SCARLET: WHAT IS IT SAY ABOUT HER TECH COMPANY WHEN THEY START USING WORDS LIKE LIQUIDITY? CAROL: WE HAVE TO PRESERVE WHATEVER CASH WE HAVE FOR WHAT WE REALLY NEED TO DO. ALIX: THE HEADLINE THAT SAYS IT ALL,
THEY SAY THE SECOND HALF IS NOW LOOKING WEAKER AND THERE'S INVENTORY BUILT UP. AS LONG AS INVENTORY DOESN'T CLEAR, IT'S VERY HARD TO FIND THAT RECOVERY. CAROL: AMAZON DOWN ABOUT 1.6% IN THE AFTERMARKET AND INTEL THE BIG DECLINER IN THE POST-MARKET TRADE, DOWN MORE THAN 11%. THAT'S A WRAP ON OUR CROSS-PLATFORM COVERAGE. SCARLET AND ROMAINE WILL CONTINUE AND WE WILL SEE YOU AT THE SAME TIME, SAME PLACE TOMORROW. ROMAINE:
WE CONTINUE OUR COVERAGE ON BLOOMBERG TELEVISION. A SLEW OF EARNINGS OUT INCLUDING THE FOURTH LARGEST COMPANY IN THE S&P, AMAZON. SHARES DOWN 2% IN AFTER-HOURS TRADING DESPITE 10% INDEX GROWTH IN SALES AT BEAT ON THE BOTTOM LINE. WHAT JUMPED OUT AT YOU FROM THIS PRESS RELEASE? DID HE GIVE YOU WHAT YOU THOUGHT WE WERE GOING TO GET? >> IT GAVE US REALLY STRONG RESULTS FOR THE SECOND QUARTER BUT WHAT SURPRISED ME IS THE OPERATING MARGIN GUIDANCE AT THAT GIVEN FOR THREE Q. HE CAME IN LESS THAN WE
EXPECTED BUT THE QUESTION IS WHY. WE THINK THE MARGINS WILL HOLD AT ABOVE 30%. SO IS THE ISSUE ON THE RETAIL SIDE, THAT'S WHAT WE ARE LOOKING TO HEAR ON THE CALL LATER TODAY. SCARLET: THIS INCLUDED PRIME DAY SO WE SHOULD HAVE SEEN BIG NUMBERS FOR THE NET SALES PART OF THE RETAIL BUSINESS. WERE EXPECTATIONS HIGHER AS A RESULT OF THAT, OR HAS THAT USUALLY BEEN PRICED IN BY THIS POINT? >> IT FALLS IN THE THIRD QUARTER, IN JULY. ESCORTED HAVE SMALL EVENT SALES. NONETHELESS THE QUARTER CAME IN
ABOUT IN LINE, IT WAS WITHIN THEIR GUIDANCE AT 11%. THAT WAS STILL RESPECTABLE. ROMAINE: TALK TO US ABOUT HOW THEY GET COSTS. TO AT LEAST GET THEIR CALL STRUCTURE AT A LEVEL INVESTORS WILL BE COMFORTABLE WITH AN ANALYST LIKE YOURSELF. WE WERE TALKING ABOUT THE PARALLELS OF WHAT WE SAW IN THE 90'S WITH AMAZON WHERE IT WAS SPENDING A TON OF MONEY, NOT MAKING A TON OF MONEY AND SOMEHOW INVESTORS GAVE THEM A PASS. NOW THEY ARE SPENDING A TON OF MONEY BUT STILL MAKING A TON OF MONEY.
WHAT MORE DO INVESTORS WANT? >> I THINK WE JUST WANT TO SEE THEM CONTINUE TO MAKE MORE MONEY. RETAIL MARGINS ARE MID SINGLE DIGITS. IF HE ASKED ME FIVE OR 10 YEARS AGO, I WOULD SAY NOT POSSIBLE, BUT IT'S POSSIBLE, THANKS ADVERTISING. THAT BUSINESS STILL GREW 20% IN THE QUARTER AND WE EXPECT THOSE GAINS TO CONTINUE. THAT'S WHERE THE PROFITABILITY IS GOING TO COME FROM. IN ADDITION TO THE CLOUD BUSINESS THAT HAD HIGHER MARGINS IN THE SECOND QUARTER. WE DO SEE IT GETTING TO 40%
OPERATING PROFIT MARGINS OVER TIME. SCARLET: WE APPRECIATE YOU JOINING US. ROMAINE: SNAP SHARES DOWN 14% IN THE AFTER HOURS.
TRADING A BIG MESS ALL AROUND. EPS COMING IN IN LINE WITH ESTIMATES AS IS REVENUE. THIRD QUARTER ADJUSTED EBITDA 70-1 HUNDRED MILLION. THE STREET WAS LOOKING FOR 110 ON AVERAGE. SCARLET: NO SURPRISE THAT SNAP SHARES ARE DROPPING 18% ON THAT MISSED VIEW FOR THIRD QUARTER ADJUSTED EBITDA. ANOTHER BIG DECLINER IS INTEL,
PLUNGING DOUBLE DIGIT PERCENTAGES. 11% LOWER IS A COMPANY MAKES WAS A DISAPPOINTING QUARTER. ED LUDLOW JOINS US, I KNOW YOU JUST SPOKE WITH THE CFO BUT IT'S NOTABLE THAT EVEN IN THE PRESS RELEASE, THE FIRST SENTENCE IS Q2 FINANCIAL PERFORMANCE WAS DISAPPOINTED. ED: IT WAS A DIFFICULT PHONE CALL FROM THERE. THE POINT WITH THE ADMISSION IS
THAT THEY WERE VERY SLOW TO ADJUSTER BUSINESS TO REALITY OF THE ENVIRONMENT THEY ARE IN AND THEIR OWN PLACE IN THE MARKETS IN WHICH THEY OPERATE. TIM WAS TALKING ABOUT THE LONG LIST OF WHAT COST-REDUCTION ACTUALLY MEANS. SO THE HEADCOUNT REDUCTION CONFIRMS THE BLOOMBERG REPORT. THE STOCK DOWN MORE THAN 11%. PART OF THAT IS RELIEF OF
CONFIRMATION. WHAT DAVE SAID BASICALLY IS IN THE MARKETS WHERE THEY STILL HAVE SOME STRENGTH, THEY ARE NOT RECOVERING AT THE PACE THEY THOUGHT. THEREFORE LOOK AT THE GUIDANCE FOR THE BOTTOM LINE, THEY'VE HAD TO PULL COST DOWN. THE BIGGEST ADMISSION CAME ON AI , WHERE WE'VE TALKED ABOUT WHERE THEY SIT IN THAT MARKET. SCARLET: THEY ARE LATE TO THE PARTY.
>> THEY ARE IN THE WRONG PRODUCT. ROMAINE: I THOUGHT THEY WERE TRYING TO ADDRESS THAT. ED: THE QUOTE HE GAVE ME IS THAT WE ARE OVEREXPOSED IN CPU AS OPPOSED TO VERSUS GPU. GPU IS WHERE ALL THE INVESTMENT
IS HAPPENING RIGHT NOW. ROMAINE: DID THAT SOUND LIKE A REVELATION? IF YOU HAD ASKED ME THAT QUESTION, I COULD'VE TOLD YOU THAT A YEAR AGO. ED: IT'S HE ONLY THING YOU AND I HAVE BEEN TALKING ABOUT FOR MONTHS. ROMAINE:
I THOUGHT THIS WAS WHAT PAT WAS SPECIFICALLY ADDRESSING WITH THESE BUILD OUTS. I'M CURIOUS AS TO HOW YOU GROW AND FILL THE GAP AND AT THE SAME TIME RETRENCHING IN TERMS OF HEADCOUNT AND COSTS. ED: IT'S AN EMPHASIS OF STRATEGY THING. AND EVERY DATA CENTER THERE PLENTY OF COMPONENTS. WHETHER YOU'RE BUILDING A NEW DATA CENTER ARE REFRESHING THE TECHNOLOGY IN AN EXISTING ONE, ALL THE CAPEX WE'VE BEEN TALKING ABOUT THIS WEEK IS NOT GOING TO CPU, IT'S GOING TO THE HIGH-PERFORMANCE GPU. THE ESTIMATE GOING IN WAS $500 MILLION OF SALES IN THE SECOND HALF OF THE YEAR. AMD SLIGHTLY BOOSTED THEIR
FORECAST FOR THE EQUIVALENT PRODUCT. THE QUESTION IS, WILL YOU SELL ANYTHING? YOU GIVEN US GUIDANCE IN REDUCE SALES OUTLOOK. TO HIS CREDIT, DAVE DID SAY THEY STILL EXPECT GROWTH IN THE MORE CYCLICAL AREAS OF THE BUSINESS, PC AND OTHER LEGACY AREAS TO RECOVER. SCARLET: YOU GOT STIFF COMPETITION, UNEVEN DEMAND AND THE WHIMS OF THE BROADER ENVIRONMENT OVERALL. INTEL HAS BEEN SEEN BY TRADERS AS KIND OF A U.S. PURE PLAY CHIPMAKER. IT'S GOTTEN MONEY FROM THE GOVERNMENT UNDER THE CHIPS ACT SO THAT'S KIND OF A FEATHER IN ITS CAP, I SUPPOSE.
WHAT ARE THEY DOING WITH THE MONEY THEY DOING WITH THE MONEY THEY'RE GETTING FROM THE GOVERNMENT? ED: SMART CAPITAL, YOU ACCEPT ALL THE MONEY YOU NEED TO BUILD THE INDUSTRY BACK IN AMERICA, YOU CAN'T DO IT ON YOUR OWN. IT'S ACCOMMODATION OF YOUR BALANCE SHEET, STRATEGIC INVESTING, AND WE'VE DONE STORIES ABOUT INTEL WITH SPECIALIST FINANCING FROM WALL STREET. THEN THERE'S THE GOVERNMENT COMPONENT.
WHAT IS INTERESTING IS THAT THEY MENTION BOTH OP ACCENT CAP ACTS BECAUSE -- CAPEX BECAUSE IT'S HARD TO UNDERSTAND, BUT YOU KNOW THEY'VE REALLOCATED TO THAT GROWTH AT THE FOUNDRY BUSINESS. I FIND IT HARD TO EXPLAIN. THEY LAUNCHED THEIR NEW AI PC PRODUCT BUT THEY DID IT FROM IRELAND. THEIR ORIGINAL PLAN WAS NOT TO DO THAT AT ALL.
HE'S TALKING ABOUT HOW THAT WAS A BIG IMPACT, IT'S KIND OF A MANAGEMENT STORY. I'VE NEVER SEEN THIS HAPPEN. ROMAINE: IT RAISES A LOT OF QUESTION, HE'S BEEN ON THE HOT SEAT FROM DAY ONE AND A LOT OF QUESTIONS FROM INVESTORS AS TO WHEN IS GOING TO SATISFY THEM. OUR THANKS TO ED LUDLOW -- BEFORE WE MOVE ON I WANT TO POINT OUT, I WAS LOOKING TO SEE HOW MUCH SUSPENSION OF THE DIVIDEND GIVES THEM. AS OF LAST YEAR THEY PAID OUT ABOUT $3 BILLION IN DIVIDENDS.
PRESUMABLY THAT'S $3 BILLION IN THEIR POCKET. SCARLET: IN THE PRESS RELEASE HE TALKS ABOUT MEANINGFULLY IMPROVE LIQUIDITY. THIS IS SUPPOSED TO BE A GROWTH COMPANY. THAT SIGNAL SOMETHING TO INVESTORS. ROMAINE: I CAME IN AND THOUGHT I REALLY WANT TO HEAR WHAT TIM COOK HAS TO SAY AND WHAT ANDY JASSY HAS TO SAY.
SCARLET: A PAINFUL ONE IF THE CONVERSATION ED HAD IS ANY INDICATION. LET'S TAKE A LOOK AT COINBASE. THAT COMPANY WILL BE REPORTING SOON. LET'S START FIRST WITH BLOCK, LET ME PULL THAT UP. ROMAINE:
COINBASE DID BE, THE STREET WAS LOOKING FOR $1.4 BILLION. TRANSACTION REVENUE ALSO CAME IN AS A BEAT. WE SHOULD POINT OUT THAT EPS, I'M NOT SEEN A COMPARISON BUT THEY DID POST EPS OF $.14 IN THE GUIDANCE GOING FORWARD. THE COMPANY SAYS THREE Q SUBSCRIPTION REVENUE SHOULD BE IN THE RANGE OF $600 BILLION. THE SHARE IS ONLY UP ABOUT 1%.
WE HAVE A CONVERSATION AHEAD WITH THE CEO OF COINBASE. SCARLET: THE COMPANY FORMALLY KNOWN AS SQUARE IS DOWN IN THE AFTER HOURS. ACTUALLY HAS TURNED AROUND, UP 1.3%. LET'S GET THE OUTLOOK FOR THE THIRD QUARTER.
BANG IN LINE WITH ANALYST ESTIMATES. ADJUSTED OPERATING INCOME IS $1.44 BILLION. IT'S AN UPGRADE IN TERMS OF ITS OUTLOOK FOR THE FULL YEAR. WE WILL HAVE MORE DETAILS AS WE GET THEM. THIS IS BLOOMBERG. SCARLET: WE ARE ALL OVER EARNINGS. DRAFTKINGS LOWER AFTER CAME OUT WITH A FORECAST THAT GOES A LOT OF DIFFERENT DIRECTION. FULL YOUR REVENUE IT SAYS WILL
BE FROM $5.05 BILLION TO FIVE POINT 25 BILLION, AN UPGRADE FROM WHAT IT PREVIOUSLY ANTICIPATED. WHEN YOU LOOK AT FULL-YEAR ADJUSTED EBITDA, PREVIOUSLY IT HAD SEEN 460 BILLION DOLLARS. THE STOCK BOUNCING AROUND RIGHT NOW BUT STILL OFF BY 5% IN THE AFTER-HOURS TRADE. ROMAINE:
THAT'S ONE OF THE BIG MOVERS TO THE DOWNSIDE. COINBASE SHARES UP ABOUT 2% IN AFTER-HOURS TRADING, EARNINGS JUST CROSSING THE WIRE. 1.5 BILLY DOLLARS IN REVENUE IN THE QUARTER, SLIGHTLY ABOVE CONSENSUS ESTIMATES ON THE STREET AND THE GUIDANCE GOING FORWARD SEEMS TO BE TICK OR TWO ABOVE WHAT THE STREET HAD MODELED. JOINING US IS THE CHIEF FINANCIAL OFFICER AT COINBASE. >> THANKS FOR JOINING US. YOU LOOK AT THESE NUMBERS, YOU BE ON REVENUE, TRANSACTION REVENUE AND SUBSCRIPTION SERVICES.
COMING IN AT ALMOST $600 MILLION, BRINGS THAT MORE THAN 42% OF THE TOTAL REVENUE NUMBER. IS THERE A POINT IN TIME THAT YOU CAN SEE IN THEN YOUR FUTURE THAT SUBSCRIPTION SERVICES REVENUE IS GOING TO ACTUALLY SURPASS THE TRANSACTION REVENUE? >> THANKS FOR HAVING ME TODAY. WE ARE REALLY PLEASED WITH THE GROWTH OF THESE SUBSCRIPTION SERVICES THIS QUARTER. WE GREW IN EVERY CATEGORY. A NEW ALL-TIME HIGH FOR US.
ONE OF OUR GOALS HAS BEEN REVENUE DIVERSIFICATION AND REPLACED TO SEE THAT MAKES PLAY OUT OVER TIME. WE LOOK AT GROWTH OF EACH OF OUR REVENUES, DIVERSIFICATION OF ALL OF OUR REVENUE STREAMS. OUR TRANSACTION NEW REVENUE DOES EBB AND FLOW. WERE PLEASED TO SEE CONTINUED GROWTH OF THE OTHER TRANSACTION REVENUE. THE BUILDING BLOCKS ARE JUST GETTING STARTED FOR LOWER-COST PAYMENTS, USDC ON BASE NOW IS LOOKING AT -- WE THINK THE BUILDING BLOCKS COME TOGETHER AND WE CAN SEE DIVERSIFICATION OF TRANSACTION REVENUE AS WELL BUT WE'RE REALLY PLEASED WITH OUR SUBSCRIPTION SERVICES PERFORMANCES QUARTER. >> HOW'S IT GOING TO START CONTRIBUTING TO GREATER SCALE AT THE BOTTOM LINE? WHAT ARE PEOPLE USING ON BASE THAT IS CREATING MORE OF A CASH FLOW STREAM FOR YOU? >> JUST TO REMIND EVERYBODY WHAT BASE IS, IT'S A LAYER TWO SOLUTION. IT SITS ON TOP OF ITS THEORY
HIM AND ITS ENABLING FASTER, CHEAPER TRANSACTIONS. THAT IS BEEN OUR GOAL, AS I SAID OVER THE LAST 90 DAYS WE SAW IT COME DOWN FOR EACH TRANSACTION. IT LED TO 300% TRANSACTION GROWTH QUARTER ON QUARTER. THIS IS ENABLING DEVELOPERS TO BUILD NEW APPLICATIONS ON TOP OF BASE THAT CAN BENEFIT FROM EMBEDDED PAYMENTS WITHIN THAT APPLICATION. WE ARE SEEING ALL SORTS OF CREATIVITY EMERGE IN THE SPACE. WE ARE SEEING PEOPLE BUILD NEW
SOCIAL NETWORKS, NEW TYPES OF GAMES, CREATIVITY IS BLOOMING ON THE BASE NETWORK. THAT'S WHAT OUR FOCUS IS RIGHT NOW, DRIVING THAT DEVELOPER ACTIVITY. DEVELOPERS WILL BRING USERS THAT WILL DRIVE TRANSACTIONS AND THOSE RETURNED TO FEES. ROMAINE: WHAT ARE YOU MODELING RIGHT NOW? >> IT IS EARLY DAYS.
WE HAVE BECOME THE NUMBER ONE LAYER TWO IN TERMS OF CONTRACTS POSTED. THE FOCUS ON DEVELOPER ACTIVITY IS WHERE OUR ENERGY IS RIGHT NOW. ROMAINE: THE REGULATORY FUTURE, YOU SPENT THE LAST COUPLE OF YEARS WRINGING OUR HANDS ABOUT WHAT WASHINGTON MIGHT BRING ON THE CRYPTO INDUSTRY. OBVIOUSLY THAT DIDN'T COME TO
FRUITION BUT IT IS NOW BECOME A CAMPAIGN ISSUE HERE IN THE UNITED STATES. I'M CURIOUS AS TO WHETHER YOU ARE ANTICIPATING YOU COULD SEE ADDITIONAL REGULATORY OVERSIGHT COME DOWN THE PIKE FOR CRYPTO. >> THIS HAS BEEN A QUARTER OF WOMAN TO HIM. WE ARE VERY GRATEFUL TO SENATOR STABENOW FOR THEIR EFFORTS TO BRING FORTH BIPARTISAN LEGISLATION.
WE SAW OVERWHELMING SUPPORT IN THE HOUSE AS IT PASSED WITH BIPARTISAN SUPPORT AND WE ARE REALLY OPTIMISTIC WE MIGHT SEE CONTINUED MOMENTUM INTO THE FALL ON THE SENATE SIDE. OUR ENERGY IS THERE. IT WOULD UNLOCK MASSIVE POTENTIAL FOR CRYPTO AS WELL AS COINBASE IF WE COULD BRING CLARITY TO THE UNITED STATES. >> ONE THING THAT STILL THE AIR IS THE IDEA OF STAKING REVENUE IS UP MEANINGFUL CONTRIBUTING FOR SUBSCRIPTION REVENUE. HOW UNCERTAIN IS THAT REV ACED ON THE CURRENT REGULATORY ENVIRONMENT? >> AS YOU KNOW, WHETHER OR NOT STAKING IS SECURE IS A MATTER OF OUR LAWSUIT WITH THE FCC. STAKING IS NOT A SECURITY.
WE ARE PLEASED TO SEE THAT DESPITE THE HEADWINDS OF THE REGULATORY UNCERTAINTY, WE BEEN ABLE TO GROW OUR BLOCKCHAIN REVENUE OVER THE LAST FEW QUARTERS. WE BELIEVE THIS IS AN AREA THAT WITH REGULATORY CLARITY IT WOULD UNLOCK CAPITAL AND INVESTMENT ACROSS THE BOARD. 90% OF INSTITUTIONAL INVESTORS BELIEVE THAT REGULATORY CLARITY WOULD UNLOCK CAPITAL AND THEIR ENGAGEMENT IN THE CRYPTO SPACE. THIS IS ANOTHER REASON WE CONTINUE TO DRIVE FORWARD THIS CLARITY THROUGH LEGISLATION, THERE ARE LAWSUIT AND OUR ADVOCACY WORK. >> WHEN YOU LOOK AT THE READTHROUGH FOR WHAT IT MEANS FOR COINBASE, INITIALLY A LOT OF PEOPLE OR WORRIED THAT IT WAS START TO IMPACT THE COINBASE BUSINESS MODEL NEGATIVELY, BUT YOU HAVE SERVED AS A CUSTODIAN FOR A LOT OF THESE LAUNCHES. WHAT HAS BEEN THE ULTIMATE IMPACT? >> IT'S -- WHAT THE ETF'S UNLOCKED IS WEEPING NAME CUSTODIAN ON EIGHT OF THE NINE ETF'S.
WHAT WE SEE IS WE SEEK INCREMENTAL TRADING FROM HER INSTITUTIONAL CLIENTS, WE'VE SEEN GROWTH IN OUR FINANCING BUSINESS. LOOK AT OUR Q2 RESULTS, WE'VE SEEN A HIGHER PERCENTAGE OF TRADING VOLUME COME FROM BITCOIN AND ETHEREUM ON OUR PLATFORM IN THE LAST TWO QUARTERS. WE'VE SEEN IT TO BE THE TIDE THAT LIFTS ALL BOATS AND BROADER ENGAGEMENT IN THE CRYPTO SPACE. ROMAINE: I'M CURIOUS, IT'S GOING TO SOUND LIKE A DUMB QUESTION SO FORGIVE ME. HAVE YOU HAD SERIOUS
DISCUSSIONS ABOUT EXPANDING THIS BUSINESS, MEANING EXPANDING BEYOND JUST CRYPTO? >> THERE'S SO MUCH TO DO IN CRYPTO AND THAT IS WHERE FOCUS IS. THAT'S WHERE OUR SKILLS LAY SO WE WILL BE BUILDING CRYPTO FRIENDLY SOLUTIONS. WE MAY EXPLORE GOING INTO ADJACENT MARKETS, BUT HER HEART IS IN CRYPTO AND THAT'S WHERE OUR FOCUS WILL REMAIN. >> WHEN YOU THINK ABOUT THE FUTURE, THE ABILITY FOR COINBASE TO GROW, IS BASED GOING TO BE THE BIGGEST DRIVER IN THE FUTURE OR IS THERE ANOTHER PLACE INVESTORS SHOULD BE LOOKING AT? >> WE BELIEVE WE WILL SEE GROWTH ACROSS OUR PRODUCT SUITE. OUR SMART WALLACE WILL BE A BIG PART OF THAT. THE KEY IS THAT WE ARE BUILDING THE BUILDING BLOCKS AND LEGO PIECES TO DRIVE FORWARD THE FUTURE OF CRYPTO AND WE WILL GOAL, WE WILL DRIVE USER ADOPTION ACROSS THE PORTFOLIO OF PRODUCTS WE HAVE. ROMAINE: GREAT TO HAVE YOU, THE CFO OF
COINBASE RIGHT ON THE HEELS OF THEIR EARNINGS. LET'S GET BACK TO IT, A LOT OF OTHER EARNINGS CROSSING THE WIRE, INCLUDING THE BIG ONES WE WERE JUST TALKING ABOUT. SCARLET: I WANT TO GO BACK TO INTEL BECAUSE IT IS REMARKABLE. A SECOND-QUARTER MISS ON ALL OF THE BIG METRICS AND A BIG MESS -- A BIG MISS ON THE THIRD QUARTER REVENUE AS WELL. IT IS NOT DELIVERING AND THE
LEGACY BUSINESS IS FAIRLY STRUGGLE -- IS FAIRLY SLUGGISH. PROFIT OUTLOOK MISSES, AI IS STILL A THEME. SNAP IS LOSING ON A JUMP IN PAYING SUBSCRIBERS BUT IT'S REVENUE WAS DEFINITELY A BIG MISS. YOU CAN SEE THAT DOWN ABOUT 18%. DOORDASH IS THE BRIGHT SPOT, UP 13% AT THE MOMENT. ROMAINE: SOME OTHER EARNINGS WE DIDN'T QUITE GET TO. ROKU SHARES ARE HIGHER,
PARTICULARLY ON THE REVENUE SIDE. THE COMPANY PROVIDED A GROSS PROFIT FORECAST IN LINE WITH FORECAST. AT LASSIE AND -- ATLASSIAN MOVING TO THE DOWNSIDE. WHEN YOU TALK ABOUT MICROSOFT, YOU HAVE TO TALK ABOUT THE SECOND-TIER COMPANIES. SOME CONCERNS HERE ABOUT WHAT COULD HAPPEN. APPLE EARNINGS CROSSING THE WIRE RIGHT NOW, LET'S GET RIGHT TO IT. THE COMPANY'S FISCAL THIRD-QUARTER NUMBERS ARE
LOOKING GOOD. $86 BILLION IN REVENUE GENERATED IN THE MOST RECENT QUARTER. THE STREET WAS LOOKING FOR -- GREATER CHINA FUND -- GREATER CHINA REVENUE, A MISS. LET'S GO TO THE BOTTOM LINES. $1.40 AND THE STREET WAS LOOKING FOR $1.35. SCARLET:
THAT MAKES UP TWO THIRDS OF THEIR PRODUCTS REVENUE AND OVERALL PRODUCT REVENUE IS SEEN AS STAYING FLAT FOR THE QUARTER. 61.5 BILLION DOLLARS, SLIGHTLY HIGHER THAN ANTICIPATED. NOT LOOKING AT A LOT OF GROWTH ON THAT SIDE.
THIS IS THE HIGH-MARGIN BUSINESS FOR APPLE, BUT IT IS THE SECONDARY BUSINESS OF APPLE, AT LEAST AT THE MOMENT. LET'S BRING IN EMILY CHANG. SHE IS HOST OF THE CIRCUIT AND SHE JUST GOT OFF THE PHONE WITH THE APPLE CFO.
WHAT DID THEY HAVE TO SAY? >> THEY SAID THIS IS A GOOD QUARTER, A REALLY GOOD QUARTER AND A BETTER QUARTER THAN EVEN WE EXPECTED. THE INSTALL BASE HIT RECORD HIGHS IN EVERY GEOGRAPHIC LOCATION. IT WAS A BEAT ACROSS ALL PRODUCT AREAS BUT DEFINITELY SOME POINTS OF WEAKNESS, THE MAIN ONE BEING CHINA WHERE WE SAW A BIGGER DECLINE IN REVENUE, BIGGER THAN WE EXPECTED. I ZEROED IN ON WHY IS THIS
HAPPENING. HE POINTED OUT THAT THIS IS ACTUALLY BETTER THAN THEIR PERFORMANCE IN CHINA. THEY ARE HAPPY WITH THAT. HE ALSO SAID THAT MORE THAN HALF THE DECLINE IS DUE TO CURRENCY ISSUES.
THAT IS THE REALITY OF A STRONG U.S. DOLLAR. UNDERLYING DEMAND OF THE PRODUCTS IN CHINA IS BETTER THAN IT WAS BEFORE. HE WANTED TO POINT OUT THE RELATIVE SITUATION OF WHAT IS GOING ON WITH THE BROADER CHINESE ECONOMY. THEY FEEL THAT THEY ARE DOING QUITE WELL IN THE BROADER CONTEXT. ROMAINE: DID YOU GET A CHANCE TO ASK ABOUT THAT WEARABLE SEGMENT? WE DID SEE THAT REVENUE WAS DOWN 2% YEAR-OVER-YEAR.
NO ONE IS TALKING ABOUT THE VISION PRO, NOT THE WAY THEY HAD ANTICIPATED. WHAT DID HE HAVE TO SAY? EMILY: THE VISION PRO HAD A HUGE SPLASH BUT HE SAID THEY ARE ROLLING OUT TO MORE COUNTRIES AND THEY ARE EXCITED ABOUT INTERNATIONAL DEMAND. YOUR RIGHT TO POINT OUT THAT THE WEARABLES CATEGORY IS ONE WHERE WE ARE SEEING THOSE SIGNS OF WEAKNESS.
HE SAID THERE IS A LOT MORE TO DO, SPECIFICALLY THEY ARE BRINGING MORE IMMERSIVE CONTENT, HAPPY TO BRING MORE FEATURES, AND THEY ARE ALSO HAPPY WITH THE ENGAGEMENT THEY ARE SEEING IN THE ENTERPRISE WORLD. HE IS HOPING THAT WILL BE A POTENTIALLY NEW AND VERY BIG UNLOCK. SCARLET: THE BIG QUESTION EVERYONE IS ASKING TIM COOK IS WHAT ABOUT THE AI INTEGRATION INTO THE IPHONE? THIS WAS NOT A STORY FOR THE QUARTER THAT JUST ENDED BUT IT IS GOING TO BE A QUARTER -- A STORY FOR THIS QUARTER AND THE YEAR AHEAD. EMILY: APPLE HAS ALREADY RELEASED THE UPCOMING VERSION OF IOS TO DEVELOPERS, SO THEY ARE TWEAKING THAT NOW. IT IS NOT GOING TO COME OUT TO THE PUBLIC UNTIL LATER THIS YEAR. I DID ASK THE CFO IF WE ARE
GOING TO SEE A SUPER CYCLE OR ALL OF THESE IPHONE CUSTOMERS SUPER EXCITED TO UPGRADE TO A NEW QUOTE, A IPHONE. HE WOULDN'T MAKE ANY FORWARD-LOOKING STATEMENTS OR TRY TO PREDICT THE FUTURE BUT HE DID PLAY UP THESE NEW APPLE INTELLIGENCE FEATURES WHERE THEY ARE FOCUSING ON A PRIVACY FIRST APPROACH. HE SAID THEY ARE EXCITED ABOUT THE FEATURES, THEY ARE PERSONAL AND RELEVANT AND HE THINKS PEOPLE WILL ENJOY THEM AND THAT APPLE INTELLIGENCE WILL BE ANOTHER REASON TO UPGRADE. ROMAINE: EMILY CHANG, HOST OF THE CIRCUIT. YOU CAN CATCH THAT EVERY DAY AT 6:00 P.M.
ON OUR BLOOMBERG PROPERTIES. APPLE SHARES CONTINUING TO MOVE HIGHER. A BEAT IN THE MOST RECENT QUARTER, A RECORD QUARTER IN TERMS OF REVENUE AND PROFITABILITY FOR THE COMPANY. IPAD REVENUE UP. A NOT SO SURPRISING DROP IN IPHONE REVENUE.
WEARABLES DOWN 2.3%. SENIOR SOFTWARE ANALYST AT DA DAVIDSON IS JOINING US NOW. I WANT TO START OFF WITH THE WEAK SPOTS, IPHONE AND WEARABLES. PARTLY A SYMPTOM OF THE CYCLE, WE ARE KIND OF IN THE MIDDLE OF THE APPLE IPHONE UPGRADE CYCLE. THE NEXT COUPLE OF MONTHS, WE WILL LEARN WHEN THE NEXT IPHONE COMES OUT, BUT DOES THAT DROP IN REVENUE GIVE YOU ANY TYPE OF CONCERN INTO THOSE UNITS? >> NOT AT ALL. UNTIL WE GET THE AI FEATURES INTEGRATED INTO THE IPHONE, UPGRADE CYCLE WON'T EVEN START.
THAT IS GOING TO HAPPEN TOWARD THE END OF THE FOURTH QUARTER BUT IT IS ABOUT NEXT YEAR. ONCE FOLKS START USING AI FEATURES, THEY ARE GOING TO GET EXCITED, THEY ARE GOING TO
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