Tech Jumps on Apple Solid Outlook | Bloomberg Markets: The Close 5/02/2024

Tech Jumps on Apple Solid Outlook | Bloomberg Markets: The Close 5/02/2024

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A magnificent day for the Magnificent Seven as the last of big tech reports earnings tonight. Live from Studio two here at bloomberg headquarters in new york. I'm Romaine Bostick Alix Steel. Happy apple day. Happy apple day. Is it going to be a happy apple day? That's the question, alex. Steve, you get a nice $90 billion buyback.

It's a happy apple day. You can only dream. I don't know. Let's see. All right. The s&p is up by a full one percentage point. So you have a definite risk on feeling the equity market. When you look at the Russell or big tech or the broader S&P to point out big tech.

I want to take a look at the FANG stocks. Obviously, one of the biggest holdings in that is Apple, The FAANG stocks outperforming up by 1.6%. Other asset classes here is not just by stocks, it's also by bonds, particularly the front end. Continuing that bid after the Fed announcement yesterday yields down eight basis points to continue the theme of dollar yen head scratcher.

We're looking at what, $30,000,000,060 billion over this week potentially from being from intervention into the dollar yen. You're now 150 309i mean, from that perspective so far it's worked, quote unquote remain. All right. Well, before we get to the big day on big tech, we should really take a look at the complexion of this rally because it is a lot bigger than big tech. The biggest gainer in the S&P today is a trucking company, C.H.

Robinson, the biggest decliner in the S&P, a retailer, Etsy, both moving on the back of earnings. And we're going to spend a lot of time today on earnings with more than 10% of the Russell 1000 stocks reporting today alone. We've already had a few big disappointments from Signal from DoorDash, from Peloton, but that's really being balanced out by some pretty big beats from the likes of Qualcomm, from the likes of Zoetis and Carvana. Yeah, Carvana, the one struggling automotive retailer posting its first period of revenue growth after six straight quarters of contraction. A conversation on that turnaround in a few minutes with the CEO, Ernest Garcia. We're going to have a few other

conversations with CEOs today, including the CEO over at Novo Nordisk. We're going to ask him about his fight to keep up with the frenetic demand for his weight loss drug Wegovy and a combo as well with the CEO of Mondelez, the maker of Chips Ahoy, Oreos and Toblerone chocolate. He's saying he's not yet worried about weight loss drugs, but does have some concern about a loss of pricing power and that doubling in the price of cocoa this year alone. But of course, the star of the earnings

parade today will be what else? Apple, the world's second most valuable company, actually not looking so valuable as of late, down 11% so far this year. But analysts there sticking by the stock for now, saying that even with iPhone shipments likely down significantly, Apple is still a cash generating juggernaut and all things tech, Alex, are still going to dominate over everything else in the market. You're buying it? No, but, you know, I'm the kind of guy that has like soup cans and gold and like, gold under her bed. But the point is, these guys are throwing off a ton of cash.

And it was a great piece by Simon White. He's our macro strategist at Bloomberg that just talked about how magnificent the magnificent guys really are. So we took a look at the largest 50 S&P 500 firms. It's that blue line versus the smallest, which is the white line, and talked about just how much money these guys are throwing off. You're looking at almost $4 trillion here of cash and cash equivalents, etc.,

for those big companies. And Apple is most definitely one of them. Last quarter, their cash and cash equivalents was $172 million. Just compare that to about $100 billion

in debt. Now, what about this quarter? Expectations are for free cash flow to come in about $37 billion. And now we're all kind of waiting for what do they do with all this cash remain? It's not a very friendly environment for big tech to buy stuff, but what if they just bought back their own stock upwards of, I don't know, $90 billion or so? All right. Well, I could see your first comment of the day, and maybe we'll pose that question to our first guests of the day. Dan Morgan, senior portfolio manager over at Synovus Trust, joining us right now to help kick us off to the close. Synovus has about $20 billion in assets under management, give or take.

And Dan, I'll just take Alex's question there. When we talk about these tech stocks and particularly Apple, which we know has a huge cash cord, will continue to have a huge cash hoard, what should it be doing with that cash? Well, it's interesting remain because, you know, you mentioned the amount of cash on the balance sheet. They also generate about $107 billion in free cash flow. You gave the number on the upcoming expectations for the second quarter. And, you know, it's kind of interesting remain is I've been following Apple for probably about 30 years and this is very reminiscent to what happened back in 2014. The stock was really floundering. They're having trouble in China and they came out and they announced a seven for one stock split. They increased their dividend and they

bought shares back and everybody just was in love with Apple again. So, you know, like Alex was saying, if you're not growing your iPhone revenues, which are expected to fall 10% on this quarter, you've got issues in China. Your top line growth expected five, four, 5%. Why not go out, do some sort of increase in dividend by share buybacks, whatever, to generate interest back in the stock if you're not growing? So how else do you do it? It's very reminiscent we saw in 2000.

I hate to say this, Dan, but is this time different that the pressure in China is quite a different type of pressure than maybe what we saw back in 2015, 2016? Yeah. I mean, the Chinese issue is different. You're right, Alex, because we didn't have so much regulatory issues, right? You've got your way increasing market share. Then you've got bans on iPhones for people who work for the government. We never had that back in 2014. It was more just an issue in terms of competition and how they're meshing up. So I think you're right. I think the China issue is more of a

systemic issue. You know, this quarter, we're looking for about 20% of the revenues coming from China, about a 10% drop from we saw a year ago. And it seems like every quarter year over year growth is negative coming out of China.

And, you know, they've got to work away to try to get around all these regulations and so forth to try to turn things around. But yeah, good point, Alex. They didn't have the same governmental bans back in 2014. They have today is more competitive issue. I'm curious, Dan, when we start to talk about Apple not necessarily being the growth company that it was. And just to be fair, there are a lot of investors that basically have said for a while this this company stopped being a growth stock and much more of a value play. But this is still a company that I think

both investors and consumers alike want to see come out with new products, want to see that innovation. We've got a big event scheduled for next week. There's been a lot of speculation as to whether Apple will finally articulate a broader A.I. strategy. Do you have any hopes, any high hopes that we're going to learn something next week? Remain. I'm always optimistic about Apple. We put it on the buy list back in 2005, and our split adjusted basis is a dollar 26. And every time people have doubted the

stock, they have somehow found a way to grow. And, you know, you brought up the May conference. They're going to be coming out with supposedly a new tablet.

They also have the developers conference in June, which everybody's excited about, that they'll eventually, you know, unveil some sort of Gen AI roadmap. And then, of course, we move to September. You know, you've got the new iPhone 16, the IOC 18. So there's a lot of opportunities along the road. Remain in, Alex, for Apple to come out with an announcement that everybody gets really excited about and we get back invigorated with the stock again. And I'm an eternal optimistic about

Apple. I expect them to come up with something here in the next six months. So we'll just have to see how it plays out. Okay, Come up with something. What are they going to have to pay to do that in terms of CapEx, I mean, that's a met a put a number on it. Right.

And it gets punished. Amazon doesn't and they don't get punished. But you got to spend the money to do the I. Now. You're right, Alex. And up to this point, Apple really hasn't come out with any huge spread. You're right. They came out with a chip. They have something called Ajax.

It's going to be like an assisted. They signed the deal with Alphabet, turned to Gemini, which will now use their software on their phones and so forth. But there hasn't been that earth shattering idea of what they're doing forward and everything they've done to this point. If you've listen to their conference calls with Tim Cook, they've been very focused on integrating A.I.

into their existing product portfolios and not really reaching out and coming out with some new thing that no one's ever heard of. So maybe they have something up the sleeves that they'll be able to unveil here at these opportunities in these upcoming conferences that we talked about. But at this point, it's been kind of a benign strategy coming out of Apple. All right, Dan, always great to talk to

you. Dan Morgan, senior portfolio manager over at Synovus. A lot going on after the bell with those results out of Apple expected later tonight.

But a lot going on right now here in the gas session for Paramount. Those shares surging right now on the back of reports, including from Bloomberg, that Sony and Apollo have made a proposal to buy the company $26 billion on the table said to be on the table, Bloomberg Technology co-host Caroline Hyde. Joining us to talk a little bit more about this, if this is indeed true, Caroline, this will be a much richer deal than what Skydance had proposed. And this is why you're seeing the non-voting shares. Is Cosby shares super popping on the

back of this because they've been beaten up. The idea that originally it was going to be Shari Redstone, the controlling majority shareholder, and actually only about 10% of the free float overall getting a premium vis a vis the non-voting shares is what really irked a lot of investors in this name. Now they've been pushing for a more open bidding perspective because remember, David Ellison has got until Friday, we understand, to have these exclusive talks. We're being joined by Red Point as well to come in and basically buy out Shari Redstone and then offer some sort of premium sweetened sort of deal to the voting Class B shareholders, non-voting Cosby shareholders.

But now could that be a bigger offer on the table with a really strategic player, a Sony? That is what some shareholders are really loving the sound of. We've got to speak, of course, with John Rogers, whose over Ariel investors held this name since 2006. This is what he had to say prior to this news. Just take a listen. If this transaction is really is focused on Skydance, we think that that may possibly have a chance to work. But we really would much rather see the Apollo deal with Sony that's been so rumored to be out there to get certainty.

And the reports are that that would be from Sony and Apollo. Sony would take their majority stake here. It would seem Apollo in on that new venture.

But ultimately they would be paying they'd be taking the debt and paying a premium to all shareholders. That was a great interview that you guys did, by the way, and it was so nice to have a shareholder that believes in the company come out and be like, This is what I want. I've been in this situation before. This is not how it's done. Right? So do we expect more now offers from different players to come in once it's exclusive time is sort of check the box tomorrow. There were rumored to be other names involved, but ultimately the only one that we've really been guided towards is an Apollo and a Sony. Now, the only caveat to that sort of a

deal is regulatory concerns. Can you really have Sony so interested in the back catalog, the movie making the content? Really? Can they team together and be another really big bulky player in the space? John Rogers did say, look, he felt from a regulatory perspective, this is not a worry. But I do wonder the key for the nonvoting shareholders is that this is more open, that this is clearer, and they get the full appreciation of ultimately the assets he sees. Yeah, more money actually, and not a bet on generative. You're just talking generative A.I. that's the David Ellison offering and the Oracle expertise from his father is now you can inject I do more with content. Well that's going to be the big question here because this is more than just the financial story. This is also about the strategic

partnership going forward here. And who do you think is going to write that better, Sony and Apollo or David Ellison and his team over at Sky Dance, Caroline Hyde, co-host of Bloomberg Technology, a breakdown here of that rally that we're seeing in Paramount shares. Stick with us. A lot more coming up here on the close.

This is Bloomberg. The best performing stock in the S&P is actually a logistic company. And it's not just that company. It's also our XO, the freight and transportation company in the green today up by over 6%. First quarter revenue did miss analyst expectations. On the plus side, brokerage volume is up 11%.

That's a the juicy part of their business and it has the largest sales pipeline since 2020. The CEO, Dru Wilkinson, joins us now. Drew, basically you try and make it easier and better and clearer to help companies ship stuff when, where and how within the US, based on that window and that lens, how would you describe the US economy right now? Yeah. Right now, if you look at the overall macro economy is held up relatively well. Supply chain inventories are in a much better position than where they were last year. But you still have your overall freight demand and we're in a soft rate environment, has been down on a year over year basis for the second year in a row. So for us, we're extremely proud of the fact that we grew volumes by 11% because right now what we've seen is our customers are reducing the number of carriers that they're working with, and we've been the beneficiary of that.

We look at it on a revenue per load basis, though, and we adjust for say, how long the haul is your mix and changes in fuel prices and all of that that declined about the high single digits in the first quarter, as do you say, like we're still in a softer freight environment. What gets you back to positive? How long does that take? We talked on the call that that was going to get better again in the second quarter and we said that our truckload revenue per load was actually going to exit close to flat, if not flat for the second quarter. So you're starting to see that on our earnings call, we talked about the fact that right now we do believe that this market will turn at some point over the next year. And so we priced our business accordingly because we want to give customers rates that we can honor.

And we're we're going to accept the tenders from them because that's one of the most important things for customers. Are you going to get the service and are you going to get the tender acceptance out there? Is the issue right now, though, Drew. I mean, when we talk about the performance of your company as well as your peers, is the issue right now one of demand or is it still one of capacity or rather overcapacity in the trucking space? There is still way too much capacity in the overall trucking industry, but demand is down on a year over year basis is a it's a mixed bag between the two. I believe that there has to be a lot more capacity that comes out of the market before you start to see that influx. And so I think that you're right now is probably late 24 or early 25 before you see that we've seen quite a few companies go under, some a couple of big ones and obviously a couple of small ones, at least over the last six or seven months or so.

Is there some sort of threshold you're looking to where you think capacity will be more in line with demand? Well, if you look right now, carrier rates have hit a bottom and their carriers are actually operating at a rate below what their cost is. And so if you think of what happened back during COVID rates were at an all time high. You had PPE money coming in to small trucking companies. So they were able to build up a strong balance sheet and they've held on longer than I think most anticipated, including us at our zone. So we've got to see more capacity come out so that you've got an equal Librium or you can see more demand pick up in the macro to support the amount of capacity that's out there. Well, I am curious then, because when we talk about balance sheets, for example, just like our I think it was back in March, you had Moody's come out. You're taking a look, obviously at your

debt ratios two and a half times, basically saying that puts you at a threat of a downgrade if you can get that down to two. That puts you maybe in the realm of an upgrade. But in saying that, they were also pretty clear that they thought Moody's thought that the second half was going to start to see those freight volumes pick up significantly here. Are you in sync with the narrative that Moody put out a couple of months ago? I think that we still don't know yet remain. When you look at what's going on in the market, demand is still down. So, you know, if you look at what

consumers are still spending their money on right now, they're still spending their money on services. And, you know, for the freight market to start to recover, you want to see them start spending the money on goods again. And do you think that's going to happen? I mean, everyone keeps talking about, oh, consumer spending is coming down. Are you confident in that crystal ball on that? I think a lot of that's going to depend on what the Fed what happens with the Fed, what happens with the IT. And I think there are so many things that are going to impact what the consumer's going to do over the next six months.

I don't necessarily want to put out a prediction for where that land. All right. Fair enough. Drew, always appreciate talking to you. Drew Wilkerson, there is a CEO over at Drexel. A lot more coming up here on the big program. This is the close on Bloomberg. All right. It's time now for our top calls.

A look at the big movers on the back of analyst recommendations appearing to start today with Tesla. Cantor Fitzgerald starting coverage of the EV maker with an overweight recommendation and a 230 price target. The analysts excited. Yeah, excited about Tesla's full self-driving program after China approved deployment of the software.

The analyst also cites long term upside from that potential Robotaxi rollout and the introduction of lower priced models shares a modest bit on the day, up about 4/10 of a percent. Next up, let's take a look at metal, a rare sell rating for the company. Stephanie Lewinski over at BNP Paribas, Exane picking up coverage of the company and starting out with an underperform and a street low price target of $360. So Minsky hints that metres year of

efficiency that might actually be depleted and he doesn't see Mehta having new revenue streams to replenish those resources. And while generative, I can help with efficiency and cutting costs, the analyst says it's proving a bit too expensive, at least at the moment, for Mehta to execute. Nevertheless, the share is higher by about a percent on the day. And finally, let's take a look at Fresh Works. This is the Cloud software company, and

it got hit with a few downgrades this morning after cutting its annual revenue forecast and announcing a CEO transition. The folks over at Oppenheimer are saying challenges surrounding new leadership and execution won't allow fresh works to reinvigorate top line growth any time soon. Oppenheimer Downgrading to market perform. Investors bailing out of the stock, sending it down on its worst day since it went public about three years ago. Those are our top calls for the day. But we do want to stay in the sell side

space and take a look at, well, one of the biggest movers of the day also getting going through a change in leadership. Once again, we're talking about Peloton, the CEO, Barry McCarthy. Well, he's stepping down after just two years on the job. Peloton also cutting about 15% of its staff as part of the restructuring. And a lot of investors now really wondering what comes next. Bernie McTernan joining us right now, senior analyst at Needham.

He has a hold rating on the shares, a hold rating that I believe he downgraded last summer when we were dealing with a lot of turmoil in this company. And I thought A was supposed to be kind of the salvation here is this kind of I mean, I hate to put it this way, Bernie, but this is kind of the beginning of the end. Well, so that's the key question here. And I think Barry did a good job at right sizing the cost structure, considering the position they were in, the inventory levels they had. So they've done a good job for that. But the same point for the stock to

really work from here, you need revenue. One of two things, either revenue growth or really significantly cut costs here. And so I think that that's ultimately the toughest thing for the company. They were talking about some green

shoots that they're seeing in terms of the connected fitness market, potentially getting back to growth again. But we just haven't seen that in quite some time. And really the big learning over the past year and a half or two years is that the connected fitness market just isn't as big as we as we thought it could be. And we think that that could potentially

stop a strategic for mind to make an acquisition of the company. And then if you're going down the M&A angle, we think private equity is probably more likely here. Private. Okay. That's interesting.

I was on radio earlier and it was more like maybe one of the tech guys like, does an Apple want to come in and buy Peloton yet? Yeah. And so well, first off, I think going back to the point on TAM being smaller than we anticipated, they have bigger fish to fry right now. In general, they are even Amazon trying to conquer the grocery delivery market in the US here. So I think that's one piece. And then once you start talking about a Nike or a Lululemon, I think there's question marks too, in terms of what the, you know, with Lulu's failure with mirror, what we're adding in Kinect in this product can do for apparel sales. And that's why I see a company that's spending $700 million on fixed costs. Right now they're spending $600 million

on sales and marketing and their revenues not growing. So that cost structure doesn't match the growth with the company. And that's why the private equity angle intuitively just makes more sense to me than the strategic at this point. So if we do end up with kind of a take private situation here, it still raises the question about the business model, not just Peloton, but really for a lot of these fitness products that came out during the pandemic. Is there still life there? Excuse me? Yeah, I think it's a great product.

You know, I am a I'm a Peloton subscriber. I think that there is a valuable use case in terms of saving time, in terms of really, you know, comparing Peloton and taking Barry's Bootcamp or or another in-person class, it is a much cheaper option. So I think that there there's the potential. But again, we're seeing subscribers really haven't moved off this 3 million level. And so that's the real question is is

there growth here? And if there's not, then it's really in your right size, that cost structure. And I think that's the future of the company. And really with Barry's own costs, with Barry's own contract, he wasn't going to get materially paid unless the stock got back to $40. And so there had to be growth to be able

to drive that you couldn't just get through cost cutting. So I think there is a misalignment of incentives. Ultimately, when growth was stalling out before he made sense, when the stock was at, I don't know, 60, but now three bucks, I don't know. All right, Bernie, thanks a lot for McTernan over. Indeed, and we appreciate it. But the thing is remain is that people who are Peloton users, they like love it.

They're like addicted and will like go to the wall for it. But how do you grow that base or monetize that base more? You can I mean, that's just it. I mean, those people that get you so far, but at some point you've got to expand beyond that. And maybe that was what they did and that was all the expansion that was there. Anyone who wanted one got one. And now I know the world has moved on. Alex, you have a peloton. I do not. Do you ever have I know a New York

apartment man space for that. I'm sure some people do. I am not one of them. All right. Coming up, we're going to take a look at another company that shares are definitely moving Carvana cruising the session highs after better than expected first quarter report. Our conversation with Ernie Garcia. He's the founder and CEO coming up next on the close, This is Bloomberg.

And. Just about 3:30 p.m. here in New York. This is the countdown to the close. I'm Romaine Bostick and I'm Alix Steel. Welcome to Apple Day. We're like an hour away from apple lock to prove it feels for the market. Yeah, I mean, interesting, too.

I mean, obviously it's one of the biggest laggards, at least among the big cap tech, I mean sans Tesla here. So I don't know. I mean, maybe the bar is so low that no matter what they say, maybe we get a rally out of it. But which is very apple, by the way. Yeah. Under-promise, overdeliver kind of

system. So, yeah. So that would be quite interesting. Another stock that I feel like if we had thought this was going to happen, we would have been surprised a couple of days ago. Is carvana Yeah up a whopping multiple did it. This is an amazing turnaround.

I mean, remember, there are a lot of people that really had left this company for dead just about a year ago, and they've really bounced back both in terms of their revenue growth and I guess they're improving as well on the bottom line, too. So will be interesting to see whether they can continue that. Yeah, sales profit way above what the street was calling for. Apparently they saw about 16% rise in

cars sold, the profit beat at a $75 million gain on the value of warrants that Carvana holds in insurer routes. That was part of it. Joining us now. Is there any Garcia, founder and CEO of carvana. So many questions. Great to have you. Thanks for joining us. Great to be here. Thanks. What do I learn from your numbers? Is it a macro read on where the US economy is or is it an operational read on what you guys did at Carvana? I think it's it's the latter. I think our team has done an incredible

job last couple of years. As you said, we had, you know, 22 and 23 were pretty tough for us after an incredible run from 2013 through 2021. We are growing very fast and customers were migrating more and more to online purchasing of cars. When we went through that period, I think the team came together. We responded incredibly well and I think this quarter is is undoubtedly the best quarter we've had in our history.

It's a result of a ton of hard work. It's a result of the team coming together and doing an awesome job. So to all of you out there, thank you very much. Great job.

When we take a look at some of your profit margins, I mean, it looks like you're making like, what, 3000 plus for a car? This is so much more ahead of your competition. How do you do that and how do you keep growing that? And is that sustainable? Sure. Let me start with this. I think you know, what we're most proud of is when we set out to try to build Carvana, we wanted to give customers the best deal we possibly could, one, to give a better deal in the competition. We wanted to give them an experience that was simpler, a broader selection, and we wanted to build a business model that could ultimately have higher returns in the traditional business models you had had. And that's very difficult to do. The only way you can do all those things

it wants is to build a completely different business. And so, you know, we've built a transaction flow where customers can go through on their own, they can get approved for financing, they can select the car that can take seconds. They're in control of the entire thing. And then we built an entirely new supply chain underneath it with reconditioning centers and logistics that allows us to give customers access to a nationwide inventory and ship cars around the country. And the economics of it all is very different.

There were a lot of fixed costs in building that system, but the variable costs are much lower and then we're monetizing it more completely by being more vertically integrated. So it allows us to check all those boxes and hopefully we keep doing the same. There was a lot of discussion, I mean, prior to this year about the debt load. Ernie, I know that at least that

stabilized. Do you anticipate that we could see a reduction on the balance sheet this year, a significant reduction? Yeah. So I think, you know, we made savings yesterday in our earnings call that we plan to pay cash interest on our bonds over time. We do plan to deliver over time. And I think all that's enabled by the incredible progress we've made.

You know, we were extremely proud to report $235 million of EBITDA on Q1. You annualize that, you know, that's about $1,000,000,000 a year and we're 1% of the market. So, you know, we clearly are sitting in front of a huge, huge opportunity and it's our team's job to execute really well into that opportunity. I think we have pretty great things in front of us. If we do as part of that opportunity. Are you able to acquire cars at a more reasonable or I should say, a more favorable price than maybe in the year past? Sure. So I think, you know, part of our

business is buying cars from our customers so customers can go to our website, we'll give them a value online and in minutes, and we can pick up the car from them as soon as the same day or they can come drop it off to us. That's the way we get the majority of our cars. That's an experience that customers love. They get paid quickly. It's an experience that we're well positioned to provide because we have that underlying logistics network that allows us to buy cars from them and then ship them to wherever they're most valuable. There are there are oftentimes differences in car values around the country.

So we can, you know, buy them wherever they are and then sell them in the places where they're more valuable. And that works out great for our customers that are selling cars because they get a great value and also great for our customers that are buying cars because they have access to such supply. Is there any sort of trend line that you've seen in terms of the types of cars that people are gravitating to right now? I think it's first order. You know, the most interesting storyline there is is probably what's going on with EVs.

And I think, you know, the TV market generally looks a lot like the U.S market, but but it trails. And so, you know, last year EVs were around 1% of used car sales. They are around seven and a half

percent, give or take, of new car sales this year. They're starting to ramp up and they're they're heading in the direction of where new cars are. New cars are also growing as well. So we've seen more demand there. But I think in general, it's you know, customers have been looking to save money as car prices went up and as interest rates went up. So we've seen that as a as a multi-year trend, but nothing too notable Beyond that are the high borrowing costs for cars at all like our for for auto loans affecting at all what people are buying and what price point, etc.. Yeah. I mean, I think, you know, car payments in car payments are basically the sum of the street environment and the car price environment and car prices are higher than they were pre-pandemic. Interest rates are also higher.

And so car payments for customers are higher. Even on an inflation adjusted basis, they're probably between maybe five and 20% higher than they were pre-pandemic. So that has people trying to save money. And we've seen people trading down to cars that are a little bit older with a little higher mileage. But then over the last two years, as

we've seen depreciation, we've seen customers start to migrate back in the direction that they were prior. So our best guess is that probably continues. But I think, you know, people are trying to make find a car that fits their life. All right, Ernie. Well, this was certainly a phenomenal quarter. And as you know, all eyes really right now on this company and how you execute going forward. So a lot of expectations for you to keep

this up. And we'll definitely check in with you over the next few quarters. Ernie Garcia, the founder and CEO over at Carvana. And Alex, so sticking in the automotive space and I thought was interesting. He's talked about all these EVs coming

to market to the U.S market and what does he say? 7% of sales, which is a big change of those are Teslas. And it's kind of interesting. Tesla's grappling with its own issue of

trying to how to keep people buying its new cars. A lot of layoffs over there. We forget the lost finance. GS deal also, had you lost to supercharger team? Now apparently, Alex, if you had an internship lined up a Tesla this summer, you're out of luck. That's kind of rough, I have to say. Like so apparently they rescinded offers just weeks before internships were set to start. Like, okay, I never interned. I was always working. I had to make money during the summers.

But yeah, if you decided you were going to live somewhere during the summer, you rented an apartment, you did all the legwork and you weren't getting paid. That stinks. Yeah. I mean, also, they're free, right? They're super cheap. Well, well, I actually think Tesla paid their interns, so some of them are on sale. Some of them.

You know, Alex, a lot has changed since way back yonder. When you were. Yeah, I was. I was waitressing, man. Know, whatever this is Bloomberg We got to go and. We will gradually be expanding manufacturing throughout the year and also into coming years. So we are committed to bring our

innovation to more and more patients on a regular on a regular basis. Last year we got Jorgensen there, the CEO over at Novo Nordisk. I had a chance to catch up with him earlier.

He talked a lot here that right now what ails that company isn't demand. It's basically fulfilling that demand rack, ratcheting up capacity in order to pump out more of that. We'll go with more of Ozempic here. One thing I did not get to ask him, Alex and I really wanted to I wanted to ask him, like, is he getting a lot of calls from like snack makers and food companies and basically, like, just shivering in their boots that that will go by and ozempic is just going to ruin them all. So I asked him that actually last time he was here in studio and he was like, Yeah, yeah. Like some of them were actually calling and being genuinely freaked out by it. Speaking of Romaine, and I sat down with

the CEO of Mondelez after an earnings forecast, Miss. And here's what Dirk Vander Plaats said about the impact of these weight loss drugs. As you can imagine, we monitor this quite carefully. We have models we discuss with the drug maker makers. We follow very carefully the consumers that are on the drugs. How do their habits change?

And for us, knowing that the things that we know today and the curve that we see of adoption of the drug, everything is in line with our models. And those models predict that in ten years time it will have an effect of between 0.5 to 1% of our volume, which is basically a margin of error for us. So now things can change, but so far we've been monitoring this for the last year. We do it every quarter. Things have not been different than what we have been forecasting. We did see pretty decent revenue growth, particularly on the organic side.

You had decent growth in margins and of course decent growth on the bottom lines. Investors, though, are raising a lot of questions here about what the cost structure is going to look like for the quarters going forward and whether you can maintain that full year outlook. Yes, well, at this stage, the the costs that are really sort of causing us to pay very close attention is in the first place, of course, cocoa.

So a lot of discussion. There's also some sugar and some labor costs. But as it relates to the year, I would say on cocoa, we're fully hedged. Now

we have a pretty good idea of the sugar costs and labor is also pretty clear to us. So we feel that our forecast for the year staying in line with our financial algorithm is is going to be sustainable and that we will deliver a year as originally announced. On the point though, of cocoa prices, even though you may have locked in your prices for the year. If we do see prices remain elevated and most folks in the market seem to think that cocoa is going to kind of stay where it is right now for the next few months. When does that become an issue for you as you start to plan for 2025 and beyond? Well, it is it is already an issue. The big question, of course, is how to hedge for 2025.

We have a number of different techniques that we use. We monitor the market very carefully and then we will look we will lock in the right moment. It is expected that cocoa will come down eventually. That's probably going to be more around the September-October timeframe. Why?

Because that's when the main cocoa crop will be become clearer and people will have an idea of what it's going to look like. There is a meat crop. There's two crops of cocoa in Africa. The middle crop looks like it's pretty good, which we are having data around now. That's why you've seen cocoa come down a little bit in recent weeks or days. And so the big the big moment is

September, October. In the meantime, cocoa will go up and down. There's not a lot of trading taking place and there's a number of traders exiting.

So at those moments, we will take the necessary steps for next year. We know that you're ahead throughout the rest of this year. Yes, but not in 2025 already. Yeah, already a part of it. I can't go into our strategy, of course. But yes, we we have already taken some positions for next year based though, on the volatility. And I'm assuming it is very complicated

to hedge when prices are so whippy like this. Is that why you're increasing your non chocolate offerings? Like you need to put more money into that? Yeah, well, we will need to continue to support chocolate, as you can imagine, even if we hedge well and so on. Where our cocoa prices this year versus last year and where it will be next year versus this year, there will be an increase. So chocolate prices will continue to to increase, at least for the remainder of this year in 25.

And so we will have to advertise, we will have to promote we will have to support the chocolate business as Mondelez CEO Dirk Van put joining us earlier, that stock flat on the day. Much more ahead as we have a nice rally underway. Just 15 minutes to the close of trading. This is Bloomberg and. This is the countdown to the close. I'm Romaine Bostick alongside Alix

Steel. 10 minutes, Alex, until we get to those closing bells here. A little bit more of a bright spot today than where we were yesterday. Does that change in a few minutes? Right. And really around the highs of the session to you, the Russell, the S&P, you got the Nasdaq and NASDAQ 100 all really outperforming. But what I find so interesting, we

talked about this earlier, H. Robinson is one of the best performing stocks within the S&P. I think currently it's number four. That's a logistic trucking company. Yeah, right. I mean, that's not sexy. That's not I that's not tech. That's straight up real economy. It's not it's real economy. It's also, I think, a reflection of low expectations.

Right. I mean, and maybe that's what Apple has going for if it's so beaten down that even if they report something bad, then I guess maybe that'll be enough. I don't know. But they probably do use A.I. too. Maybe somewhere there. All right. We'll stick with us here. Apple earnings scheduled to come after the bell tonight. We'll have full coverage in just a few.

But before we get to those bells, let's get to Dan Suzuki, deputy CIO over at Richard Bernstein Advisors here to help count us down to those closing bells here and a little bit more optimism in the market over the last couple of days, I guess. I mean, I mean, you know, I mean, it's better than, I guess whatever April gave us. But what is that predicated on? I mean, is there a real catalyst here for this market? I mean, earnings season, we're kind of through it. The Fed is basically said what it said to say, and now we're just kind of at the mercy of what I of growth.

I think it's really earnings growth and fundamentals, kind of plain old boring stuff. And that's what's improving. That's what's got long momentum. And importantly, it's not that it's just improving, but it's broadening out. And so you're talking about small caps

participating. See, it's Robinson versus Bang. I think that's what's getting people excited. It's not just a narrow story of a handful of stocks. It's like a lot of stuff out there. And most of the big movers today, at

least to the upside, are kind of more real economy, if you like, rather than just, you know, the hope of a, you know, a high in tech. But I guess it brings it raises the question then, where do you look at the economy right now as an investor? I mean, is this the type of, I guess, economic growth where you look to it and you say, okay, now you get on the cyclical bandwagon? I think you do, but you have to be careful. I think what's the the part of the type of growth that we're getting here is nominal acceleration in growth. And that nominal is important because inflation is a big component of this. And so if you look at since the market peaked, you know, back in February, you know, what's performed the best. It's not just the some of the cyclical stuff, but the stuff that benefits from inflationary growth.

So whether it's commodities or the commodity producers of the combined producing countries, you're definitely seeing a theme there. And I think that's critical going forward. So what are kind of cyclicals or the growth stocks that you don't want versus the kind that you do that that can benefit an inflationary environment and that also are in a good are good value? Well, I think there's there's there's a couple of dynamics here, right. I think one, you know, there's there's some cyclicals where they've had their acceleration, but now they're on the other side of that and they're slowing. I mean, it doesn't matter whether it's defensive. You don't want the companies where their earnings are slowing. So those are the mega caps.

You know, they were a big driver of last year and now they've kind of peaked and they're still really good, but they're slowing. Other areas are just a little bit more mixed. Like financials is probably a little bit more more mixed, even though it's a traditional cyclical cyclical, you know, consumer discretionary tends to not do well late in the cycle when inflationary is picking up.

When you're worried about the Fed, you know, people stretch their budgets and that's sort of, you know, you have to be a little bit picky and choosy. Late cycle companies are industrials, materials, energy, partly because they benefit from the higher inflationary dynamic. Yeah, is interesting. Sort of the theme over the last couple of days with consumer stocks, which is like the low end is really struggling and there is like a value war that's kind of shaping up. It's going to do kind of no one any favors from that end.

Yeah. Where do you think we are in a late cycle part of these stocks? Listen, I don't think of late cycle to mean there's a countdown clock. And so we're like 2 hours away or one hour away.

I think. Really? You know what defines late cycles? The economy is now tight, and I think that's clear Everywhere you look, the economy is tight. And so when the economy gets tight, you know, better growth, the stronger that growth is, the more inflationary it is because you want to build another widget. Well, you got to hire workers and you can't compete because there's no you know, you got to pay those workers a lot more. You got to build a new factory because your factories are running. Three shifts are just a lot more inflationary nature. And I think that's where we are.

Late cycle. Well, I'm curious, though, what did you make, though, of what Jay Powell had to say yesterday here? I mean, I know it wasn't unexpected, but it still seem like a lot of people aren't necessarily comfortable with where the Fed stands right now. He didn't really say a whole lot. Right. I mean, basically said, you know, there's been a repricing of Fed expectations and that makes sense because the, you know, the macula disinflation story is going to be a lot harder than what they thought.

Inflation's a lot more sticky. That's basically all that he said, which is the market price. That's why, you know, you had like a lot of up and a lot of down and ultimately. The market ended where the market began

after the press release. So I think that's kind of where you need to shift to because, you know, before he starts to talk about hikes, if that's going to be the scenario we go down. Right. He has to take away those cuts and that's where he kind of is moved towards. So for equity investors then, I mean, are we at a stage now where bond yields and some of those ancillary sort of pockets of the market, do they matter less in terms of correlation? Well, you know, that's interesting because you are seeing the correlations pick up, you know, relative to those big parts of the market. I actually think those yields are going to matter more now. Right. Because I mean, we've actually had a bit

of a, you know, a rally in yields. But, you know, just in general, you know, you get close to that 5% point. I think the market gets a little bit more sensitive. Again, that tightness of the economy, that inflationary pressure, you know, that's where, you know, up until now it's been good news is good news. We just love the better growth now that

the good growth is pushing up and re accelerating inflation. I don't think the market is uniformly going to like that so much. So it's really about picking winners and losers, often smallcaps winner or loser. You know, it's funny because the narrative is loser. You sound like you want to say loser, but the narrative is loser.

But if you pull up on the you know, on the Bloomberg terminal, just look at changes in the ten year yield versus the relative performance of small caps versus large caps when yields are going up. Small caps are generally outperforming. We have a great chart. I'll share it with you later in the terminal, but it's a pretty consistent pattern. Do not want to share it with us now. I haven't I'm not even logged in. I got my fair share. All right. Putting Dan Suzuki on the spot.

Dan, always great to catch up with you. Dan Suzuki, deputy CIO over at Richard Bernstein Advisors. He's helping us count down to those closing BELL So just about 3 minutes away, Alex, And before we get to the broader market, which is now hitting fresh session highs, I just want to point out here a huge spike in Nordstrom shares just in the past few minutes, up about 10% now, up about six and a half percent. This on the back of a Reuters report that Sycamore has expressed interest in taking the company private. Of course, we know the Nordstrom brothers, the two surviving brothers there, have basically made a formal proposal to the board to take this company private.

Right. I was going to say, didn't did we know this? Like weren't there lots of kind of bids that were coming in? It seems like the worst kept secret is that this is going to go private. Some point to the matter of how and it's a matter of who and who, who, how, what price. Yeah. Yeah, absolutely.

So anyway, a little bit of a bit there as we head towards the close, of course, once we get to those closing bells, a big focus is going to be back on big tech. Alex and Apple. Do we still call it Apple Computer? Just Apple? No, but Paul Sweeney did that on radio and I was like, what do you 105 years old? I know. Like Apple Computer. I heard that that was that was like

pretty funny moment. Let me tell you that the most entertainment I get here is when I listen to radio, whenever I'm, you know, in the, you know, Bloomberg facilities. Cool, nowhere to go from there. But you're looking at the Nasdaq is up by about one and a half percent volume also super solid as we head into Apple up the closing bell.

All right. The S&P up about 8/10 of a percent. The Nasdaq up one and one half. Stick with us. We're about to take you to the bell and beyond Beyond the Bell Bloomberg's comprehensive cross-platform.

Coverage of the U.S. market. Close starts right now. And right now, we are 2 minutes away from the end of the trading day Romaine Bostick alongside Alix Steel.

We're counting down to the closing bell. And here to help take us Beyond the bell, it's a global simulcast. We're joined right now by Scarlet Fu, as well as Carol Massar and Tim Sandvik, as we welcome our audiences across all of our Bloomberg platforms, television, radio. That partnership, Carol, that still exists with you to here on a pretty good day in the markets as we wait await those earnings analysts are trying to short the market on the equity side. Just who would do that. People do that two sides to every trade. Having said that, you look at the S&P,

wow, I learn something new every day. I know markets 101. Welcome, everybody. All right. S&P 500, you've got more than 300 names to the upside right now. So you definitely feel like investors are willing to play in this market, especially when it comes to some of those big tech names. There were 30 seconds into this and nobody's talked about Apple earnings yet. Come in at 430. It's higher by more than 2% today. Is there going to be anything regarding

a buyback, additional buyback announced? What is China look like? Those are all big questions that investors certainly have, especially considering all the third party data that we've gotten over the last couple of weeks. Yeah, but the fact that the stock is down about ten, 11% so far this year and it's lost about seven and a half percent since the last earnings report, A is pretty much priced in at this point. So if you want to look ahead, let's look ahead to the jobs report tomorrow.

That's going to be ground zero again for the Fed in terms of what it does next. You're looking at the Russell, right? The Russell 2000 is up by 1.7%. So clearly, it's sort of the the smaller companies, it is the cyclicals.

They're really starting to outperform. Right. One of the top performing stocks I keep going back to it is a logistics company like the real economy stuff. Yeah, well, we should point out, I mean that the best performing the least of the major indices are the Dow transports here. And that is on the back of some of the move we're seeing in C.H. Robinson, some of the other truckers as well, but also the airlines, also the railroads, also a lot of the aggregate makers as well here. So maybe that is a cyclical trade, at least for this one day. As we await those earnings out of Apple,

the Dow is going to finish higher by about 300 points or about 9/10 of a percent. The S&P up by about 46 points or 9/10 of a percent. The Nasdaq composite higher by more than 200 points or 1.5%. And your outperformer on the day, Dow

transports up 2.5% here on the day and the Russell 2000 going to close out the day higher by 1.8%. All right, guys, to some of the individual gainers, number one gainer on the Nasdaq 100. Number three, gainer in the S&P 500. Drum roll, please, is Moderna, which is up about 12 and a half percent in today's session, reported a narrower first quarter loss than Wall Street expected. And the company also doing a lot of cost cutting.

So that helped offset a steep decline in its COVID business. But we've got some new earnings. Yeah, first quarter revenue for booking holdings, beating estimates, first quarter gross bookings, revenue coming in at $43.5 billion, beating estimates of $42.2 billion. Booking first quarter room nights sold coming in above estimates at 297 million versus estimates of $290.93 million, 93 million, I should say, booking first quarter revenue of 4.4 billion versus estimates of 4.25 billion.

So a beat there as well. And I know adjusted EBITDA also coming in above estimates, 898.8 million versus estimates of $718.6 million. All right. To Expedia, we go the stock is popping in the aftermarket. Just a few headlines here so far. First quarter adjusted EBITDA of 255 million.

The estimate was for 175.2 million. But you are seeing that stock really pop higher here in the aftermarket remain. It's up about 3.6%. We'll look for some more headlines on that one. WW earnings also also out as well here in the most recent quarter, the company reporting revenue that came in a bit above expectations $206.5 million. The street was looking for one 99.5 net subscription revenue also tracking

similar numbers. And as far as the actual number of subscribers there, it looks like pretty much in line with estimates about 4 million. The Street was looking for 4.01 here. Share is not really doing much here in after hours trading. Scarlett. All right. Let's talk about Amgen, the biotech company reporting first quarter adjusted EPS of $3.96, beating the consensus estimate by two pennies. In terms of the operating income, that was a $3.8 billion.

Analysts were looking for 3.12 billion. The outlook here, full year adjusted EPS anywhere from $19 to $20.20. That is a raise, a higher forecast because previously it had seen $18.90 to $20.30. So just a shift up in terms of its outlook. I want to go back to Expedia for a moment.

So it just looks like we're getting some more data out here. The free cash flow of the first quarter coming in at $2.7 billion. That looked a little bit lighter. The stock is still up a premarket, but its gross bookings for the first quarter also came in a little bit light at 30.16 billion expectations over 30 and a half billion.

I'm trying to piece together this and booking as well as MGM and the hotels and I'm trying to get a macro read on it. I'm not entirely clear as to what that is yet. A little commentary in context, they say, given the verbiage. Tracking the rate of acceleration B to C thus far. They are lowering we are lowering. The company says our full year guidance to range of mid-to-high single digit top line growth with margins relatively in line versus last year. Despite the slower than expected

acceleration. The underpinning of the work we have done in the platform, blah, blah blah, that they have every confidence in the team to continue to leverage their capabilities to drive stronger growth. So it sounds like a little bit of a tempering back pull back of expectations. Well, that's what I'm curious about.

I mean, what does this tell you about the state of travel right now? I mean, everybody's traveling. Yeah. I mean, we heard from the airlines directly. So I mean, they basically said, at least for right now, things are pretty good here. But for these third party booking

companies here, are they holding up just as well? What are they seeing that's different? What are they seeing that's different? I mean, a lot of it also comes down to how much people are willing to go through these third party websites versus going through the airlines directly or perhaps using their their miles, their credit card points to to cash in on that. Right. Because we know those are devaluing pretty quickly. Do you do that any more? I'm curious.

I mean, have you watched any more? What's going through the third party? Oh, no, not that I do that I do that. You go right to the airlines. I go right to the airlines. I go right to the airlines. Okay. Well, no, I don't do that. Speaking of third parties, let's go back to booking, because we're seeing shares move higher in the after hours. Glenn Fogel, the CEO over at booking, saying talking about the strong start to 2024, touting the year over first quarter, year over year growth in room nights of 9%, revenue of 17%, operating income of 76%, all of which were ahead of prior expectations.

They're looking at higher frequency and more of travelers moving into the upper genius loyalty tier. So some movement there. All right. Let's go to Coinbase right now. Coinbase, excuse me, recovering reporting, first quarter revenue of $1.64 billion, topping the average estimate of $1.32 billion. It sees a second quarter subscriptio

2024-05-06 21:54

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