Closing Bell - Closing Bell: Apple Ripe for More Gains? 5/3/24

Episode Date: May 3, 2024

Is this the week that Apple finally found its footing? Top analyst Erik Woodring from Morgan Stanley gives his forecast for that name. Plus, Cameron Dawson and Josh Brown discuss what they’re looking for from stocks in the week ahead. And, it was a tale of two travel stocks today with Expedia and Booking Holdings moving in opposite directions post-earnings. We tell you what’s behind those moves and what it might mean about the broader travel space. 

Welcome to Closing Bell. I'm Scott Wobner, live from Post 9 here at the New York Stock Exchange on this Friday. And this make or break hour begins with the rally in stocks and whether the bulls got just what they needed this week. A less hawkish than feared Fed and a better than expected Apple. No doubt two key catalysts behind this late week surge. We'll ask our experts over this final stretch where we go from here. In the meantime, take a look at the scorecard with 60 minutes to go in regulation. Stocks getting an immediate boost today from that employment report. Fewer jobs added, plus a bump in the unemployment rate, sending yields down. The major average is higher, and that is where they have remained. There's your rate picture today, 450 on the 10-year.

Well, Apple, I said, obviously helping, too. That stock having its best week since December of 2021. Results less bad than feared. And the announcement of a massive buyback, the main catalyst there. It takes us to our talk of the tape. Is this the week that Apple finally found its footing? Let's ask Eric Woodring. He is Morgan Stanley's Apple analyst. He is with us at Post 9 for his first TV reaction to that report.

Good to see you. Good to see you. Welcome back. So I'll look at your notes today. You say, quote, it's hard to not be more bullish on Apple here. Why so? Sure. So I think the risk ultimately coming into earnings was a fear of a guy down. We actually got a guy up. So we move past the June quarter guide now and we look at the developer conference upcoming, the iPhone launch coming later in September. This is historically when Apple

outperforms, yet we've seen the stock start the year as one of the biggest underperformance years in the last decade. So there's a bit of a catch-up trade. The risk is behind us. Estimates seem de-risked, and there's a reason to be excited about the future. Wow. The revenue decline, okay, the fifth time in six quarters that we've seen that. What reverses it, and why doesn't that trouble you more? Sure. So there's the good and the bad. Let's take the good first, which is services, right? Services growth outperformed 14%, very consistent all-time record revenue, and record gross margins.

On the other side, the product business is still relatively weak. iPhone declining 10% year over year, the total product business down 8%. There's still work to do in what I'd call an uneven consumer environment, but what Mr. Market cares about is what's ahead of us, not what's behind us. Ultimately, it still does come down primarily to the iPhone. That's where the AI narrative really becomes weaved into,

and obviously I assume we'll get into this, but that's where we are more bullish as we look forward. Because of the AI narrative and the AI playing into an iPhone refresh cycle, which has been stalled? Right, exactly. The opportunity to refresh an aged install base at a time when there's concerns that Apple has gone X growth, introducing this new technology for the first time, again, that is ultimately can be a catalyst in our mind to drive that refresh cycle,

re-accelerate growth. Why do you think the refresh cycle has been as disappointing as it's been? Sure. So again, over the last, let's call it decades since the iPhone was launched in 2017, I think the innovation curve has looked very different. It's flattened over time. The early days of the smartphone market saw very significant upgrades. What we see now are maybe more subtle upgrades, maybe some of them even in the guts of the phone, right? Apple's silicon is a big powerhouse recently. So, ultimately, what Apple needs to do is, one, introduce new innovation. AI can be that catalyst. But, two, ultimately, we are still in a very uneven demand environment. Concerns about rates, concerns about the economy, concerns about where jobs might be going. If there's something to look forward to in the future in terms of rate cuts, there could be more confidence from the consumer to say, hey, maybe I'm willing to spend a little bit more in the future.

I'm glad you mentioned innovation because the critics today and there are a few. Yeah, of course. And the snark is about innovation and the lack thereof in those folks' mind and say the most innovating thing, the innovative thing that they're doing now is the massive buyback. Right. And that this is a financial engineering story, not an innovation story, and that nothing material has changed. Right. Now, you've probably heard the same criticism today around the way. How do you respond to that? Well, listen, let's take both of them separately.

Apple announced the incremental $110 billion buyback authorization, biggest in company history. They are effectively generating... It's funny that we call that incremental. I know, I know. But they are generating too much cash, a good problem to have, and they're going to return more of that to shareholders via buybacks. That doesn't mean that they aren't investing. Look at their R&D. They're going to spend about $31 billion in R&D this year. How much does Microsoft spend? $31 billion. How much does

Google spend? $35 billion. To say that they aren't innovating, I just think is not necessarily seeing the forest through the trees. They have a different business model than many of their other mega cap tech peers. And I just think that sometimes maybe that gets lost in conversation. Apple doesn't need to invest in a massive cloud business that is more profitable at scale. What they need to do is leverage their existing device base, provide new features to their consumers, and just drive that catalyst engine, again, record install base across geos and categories entering the June quarter, all of this becomes very important when it comes to R&D. And ultimately, I do think that they're ultimately spending.

They are innovating. It just looks different than it once did. This is the best evidence, I suppose, that when it comes to the inevitable question that I always ask you and others always think about some other way of using their cash deal or otherwise. This is the best way they're going to use their cash through CapEx and giving money back to shareholders, either through an increased dividend, which they did, or the massive buyback, which they announced. And they will still they will still acquire companies. But Apple's M.O. is to look towards smaller companies, under-discovered engineering, technical companies, buy talent, integrate them into the Apple culture and ecosystem, and build out that way, right?

We've seen Apple build up a number of businesses organically through that means. I see no reason why that won't continue. How do I view what's happening in China? Better than feared. I get it. We declined 8.1%. That was better than feared. But 8.1% decline is nothing to sneeze at. I mean, we still have an Apple-China problem in a market that once was 20% of their growth. Now, that number's come down a bit because increased

competition and declining market share. Reconcile all of that for my viewers. Sure. So I would say that there's a difference between a cyclical challenge and a secular challenge. I think coming into earnings, the concern was Apple has a secular challenge. There's competition in the China smartphone market. Apple is losing its flavor amongst consumers in that market. That spells doom and gloom for multiple years. What we learned was actually that iPhones grew in mainland China in the March quarter, far beyond most expectations. Now, that doesn't mean that Apple doesn't have some challenges when it comes to competition.

Huawei has come back. Xiaomi does have competitive products. But to say that Apple, again, has lost its flavor with the Chinese consumer would be misleading, again, when we see that Apple is growing in mainland China. So everything isn't perfect, of course. I completely admit that. But there isn't a secular problem. There's an issue of competition. Well, if Apple can innovate,

come out with new generative AI features and a new phone, that spells a very interesting dynamic for China as we look out over the next 12 months. So you're confident, I guess, that a decline of 8.1%, just to use the word incremental again, just continues to incrementally get better. Well, again, I would actually clarify next quarter in the June quarter, Apple faces an 11 point more difficult compare. And so optically, you might actually get an acceleration of the year over year declines in China in June. That's not a function of demand worsening.

That's just a function of last year's June quarter being very good. So again, optically, that might look bad. But to me, we're not necessarily seeing demand fall off a cliff. That is just purely a nature of numbers and comparing year-over-year. That's great perspective. That's why we like having you. Let me ask you about AI. Sure. Okay, because we expect it at WWDC, as everybody's talking about, next month. Sure. In your mind, what is it going to do? What's it going to look like? How meaningful is it going to be? And is it really going to be that thing that the iPhone needs to spur that next cycle? Sure. So I do think it is the thing that the iPhone needs to spur that next cycle. What I'm looking for are two different aspects when we get to the developer conference.

First is, what are the features that Apple can introduce that the average consumer can look at and say, wow, I want that, right? Historically, software is not usually a driver of upgrade cycles. It's changes in form factor, new hardware. The other dynamic, again, that you need to pair together with hardware is how backwards compatible can they make this software? Meaning, if it is powered by on-device Apple Silicon, the latest Apple Silicon, and you need that silicon to power your on-device AI inferencing, then there's the potential that some of your older models just don't have the capability of giving you the user experience you need to run some of these workloads.

So if Apple comes out, introduces a new Siri, basically makes the phone kind of a voice-driven intermediary between you, the consumer, and the world of applications and websites, and doesn't make that fully backwards compatible, what I hear is force upgrade cycle. That is what becomes very exciting for me. That's what I'm listening for at the developer conference. It's great to get your insights, and it's great to get them first on this program. I appreciate it very much.

Thank you so much. That's Eric Woodring of Morgan Stanley joining us today. His first reaction, as we said on TV, to that Apple quarter. Let's bring in now Cameron Dawson of New Edge Wealth and Josh Brown of Ritholtz Wealth Management. Josh is CNBC contributor. I'll go to you first, Josh, just to expand on Apple. As a shareholder, obviously, this is a great day for you and many others. It is. And I was definitely concerned going into the number, not because the expectations were high.

In fact, they were very low, especially the stuff around China and iPhone sales. But I really wasn't fully convinced that they would be able to tell a story on the services side that warranted continued belief in that being the metric. But they were. They blew it out, actually. So, yes, there's still a hardware issue. What is the thing that's going to make my wife, my kids, myself want to go and get the next iPhone? I'm on a 13 Pro Max right now. and I am usually somebody that has the newest model. So, like, what is the thing? I agree with what Eric had to say.

I would also point out Apple has no problem doing things that are not backwards compatible. Think about the way that they just randomly decide they're going to change the charger port. Everybody has to get the new charger. End of story. So I actually do see that as being a catalyst. The other thing that I would say on the technicals here, which Eric didn't address, but that's what I'm looking at. Apple has just broken through its 50-day moving average. It tested that level on the 29th but failed.

Now we're well through. Prior to the 29th, Apple had spent 62 straight trading days below its 50 day, which does not happen often. That was the longest streak. You have to go back to October of 2015 to find a period of time where Apple sat around wallowing in its own bear market for that length. So I think something has materially changed to unsentiment. I think services are the reason why. We will need follow-through in June at the Developers Conference.

And then, of course, that follow-through is going to have to take the shape of AI Siri. So then, Josh, when I asked the question at the very top of the program, is this the week that Apple stock found its footing again, you offer up what sounds like a resounding yes. Yes, but talk to me in June because we're not breaking out into a new trading range.

I think if look, look at how this company is making their earnings every quarter. It's buybacks. This is this is flat to down revenue quarter after quarter after quarter. Sure. But earnings growth. How are they doing that? Buybacks. We're okay with that for now. I don't think that'll keep this stock with a 20-something handle on the multiple for much longer. So I think the second half is going to be really important, and not just on how much stock they can buy back, but what they can do on the product side so that we're not looking at 50 percent of revenues on the on the iPhone side and say, OK, what what's next? We can't be saying that next spring.

Yeah. Cameron, I mean, buybacks are a big reason why people continue to look at these mega cap tech stocks as attractive in this kind of market, because they're all doing it and all of the numbers are big. They just don't look quite as huge next to Apple's, which so stands out from the crowd. Yeah, and it speaks to the quality of the earnings of the mega cap tech stocks and the fact that they are sitting on such huge cash piles that are generating a lot of yield because yields are so high. They don't have a lot of debt as well. And so that capital return is good. The thing with Apple that we have to watch is do we see an inflection

in the core underlying fundamentals? It's great to return capital to us, but if you continue to have low single-digit growth, it raises the question, what do you pay for that? At 26 times, that is a fulsome multiple for that degree of growth. Let's talk about where we are from a market standpoint. I think coming into this week, I think the bulls, you know, maybe felt as though the goalposts were narrowing. Right. And I just wonder if that's now changed and if you think it has by virtue of what's happened this week. As I said at the very top, a less hawkish than feared Fed share. And then data today, if you want to take the jobs number and some of the components of it and say it's about as good as you can get for the bulls and for the Fed. Yeah, it threads that Goldilocks needle of just right because it's soft enough to take further rate hikes off the table.

But it's not weak enough to cause us to cut growth forecasts for GDP or EPS estimates. And that's why markets can rally under this. Now, when we think about it from a technical perspective, yes, we're seeing a rally, but we're still right below our 50-day moving average, which just tells us that we may not be quite out of the woods for the digestion, even with this week's data. Does it open the door, though, the data today to a rate cut earlier than perhaps once again we thought? If you look at the projections from, you know, not everybody on the street, but you have several who suggest that July will be the first cut. You could still get four. Maybe you get three. Some say two. And then, of course, maybe the consensus is one. Yeah, we think one to two is the right

number still, given the backdrop of the data. We don't think that given where inflation is, given how tight the labor market still remains, even with today's data, that the Fed can move to ease unless we see much weaker employment data or a more substantial deceleration in inflation, which just means that we think it is firmly in the back half of the year. November, December is when we would get the first cut. That, of course, would change if we were to see a sharp weakening in labor data. So, Josh, why don't you address that, too, sort of from the Monday to Friday change? You send us into the weekend thinking about how the narrative for the bulls may have changed back for the better. Well, I think the main thing to focus on, I guess,

is where the odds of the rate cuts have landed as a result. So September is the first month where the futures have a higher odds of a rate cut versus no cut. 32% chance of no cut, but a 49% chance of a 25 basis point cut. That could move around a lot, of course. But I feel as though that satisfies all of the conditions that have been on everyone's mind, where it can't be too close to the election, but obviously it should take place sooner rather than later if the data continue to cool off, et cetera, et cetera, et cetera. I think about it if I were sitting in Jay Powell's seat. And I think when he saw that reading this morning,

I'm sure he had the data earlier, but he probably looked at that and he probably went, yes. And so I think the market reflects that. And I think even when you look at the mix shift of which stocks are up the most today, it's tech, it's the companies that want the lowest rates the most. And none of that is surprising to me.

So, look, I think we're now in a situation where we're still going to have noisy prints, but maybe we've seen the worst of the, quote-unquote, re-acceleration fears. Is mega cap tech Josh back, so to speak? I put it in quotes because, you know, it never really left. But there were some who were thinking it was getting off the bull train. But if you look at this week, you know, Apple's leading the way, as we said, it's having the best week in a long time, up eight and a half percent for the week. Amazon seven and a half, Nvidia six and a half, Alphabet five, and then Meta and

Microsoft two and a half and two respectively. Is this trade now something we can count on firmly again? I think what's funny is that we talk about market rotations all the time. We actually have rotations inside of the Magnificent Seven. And some of these companies are big enough to be their own asset class. We talk about Bitcoin as an asset class. It's like a trillion bucks. You know, we were talking about three trillion dollar companies when we're talking about Apple and Microsoft. I mean, some of these are bigger than the whole Russell 2000.

So if you think of it that way, Judge, it's tough to say that we've had a correction or that large cap tech was ever off the table because Amazon and Alphabet have been making new highs while the market's been selling off. So in a very peculiar way, they are still using these companies as a flight to quality when the VIX spikes, just not all of them at once.

So over the last month or so, it's been Alphabet's turn in the limelight to the upside. Maybe that'll shift now, it'll be Apple. But investors still reach for these names when they're in doubt about the economic situation or the pace of the weight cutting cycle. I don't see that changing. It's like a learned behavior. And the reason why it gets learned is because it's worked. What about the broadening story from here, Cameron? I mean, should we be back talking about it? I mean, you know, look, energy is not acting well.

It's the worst in the week, worst in the month. Now, rates are down. The Russell's getting a bump. How would you assess how we should think about this trade? The equal weight S&P 500 hit a new relative low versus the cap weighted S&P 500 today. You're not seeing the broadening trade. And I think part of that is because of earnings revisions, where the most earnings revisions upward are still in these largest names, in these largest tech and mega cap names. It's where all the growth is. If you look at the growth for this earnings season, it's entirely, almost entirely from those names. You know, it's no wonder why the money is going where it is. And that story changes as we get into the back half of 24 and into 25. And I

think that's when we'd have to ask the question, does the star of mega caps start to fade? Because that's when you see their earnings decelerate materially into the last quarter, 24 and 25. The market now has priced a big shift where the rest of the 493 really take the mantle for earnings growth. That does remain to be seen because we're not seeing big upward revisions for those names. So we're not as concerned about mega cap leadership today, but it's more of a second half concern as you see that earnings growth decelerate. Michelle C., great weekend to you. Thanks for being here. It's Cameron Dawson. Josh, you'll stick around. We're going to take a break, come back and talk some Berkshire Hathaway

ahead of the meeting this weekend, which is really now underway. In the meantime, we send it to Christina Partsenevelos for the look at the biggest stocks moving into the close. Christina. Thanks, Scott. Well, cloud flair is sharply lower today, even after topping Wall Street expectations for the first quarter. The cloud management firm's full year outlook really left a lot to be desired. That's why Bank of America reiterated its underperformed rating for the stock, with another analyst pointing to deceleration in the second half of this year. And that's why they're concerned shares are off by 17 percent at this moment. And then you also have cyber company for another cyber company from painting a similar picture to Cloudflare. That would be Fortinet surpassed the street's first quarter expectations yesterday. Sure, great, but disappointed on its second quarter billings forecast.

Investors clearly reacting with shares down almost 10% right now. Scott. Christine, appreciate that. We're just getting started. Up next, I said Berkshire Hathaway's annual meeting is underway. People are there now. The stock nears a trillion dollars in market cap. Josh Brown has owned that name for a while, has great insight on Berkshire Hathaway, and so does Mike Santoli, having great insight. He is out in Omaha at the

meeting. We discuss all of it next. We're live with the New York Stock Exchange closing bell coming right back. All right, welcome back. Berkshire Hathaway's annual shareholder meeting underway in Omaha. CNBC carrying live coverage of that event starting 930 a.m. tomorrow morning. The so-called Woodstock of capitalism drawing a big crowd as always. Let's bring back Josh Brown. He owns the stock. Mike Santoli owns great views on this firm. It's great to have you. Mike, I'll go to you first because you're there. Just give us a scene setter, if you will,

and what you think the overall mood is going to be out there this weekend. Yeah, mood should be good, just I think based on how the markets have done, how Berkshire Hathaway has done as well. It seems like actually a little bit of a heavier crowd here in the exhibit hall than the past couple of years. We were just saying that. I know they're expecting more people. I think the idea is now Berkshire Hathaway, of course, is this kind of unique animal.

It's like the biggest non-tech stock in the market, broadly defined. It's many, many dozens of companies inside of it. But ultimately, what it is, is a very broad claim on the U.S. economy with a massive financial cushion in the middle of it and a way to recycle capital in a pretty efficient fashion. It's outperformed the S&P over the last two, five, 10, 20 years on a price basis. Over the last year, it's more or less kept pace with it. So I feel as if there's a lot of relevance in terms of what the insurance business looks like and what that might mean for inflation. Obviously, bonds are a massive buyer of treasuries.

What does Warren Buffett think about the prospect for yields from here? And then, of course, just the overall economy, whether it's, you know, the railroads or the the energy businesses. Josh, I think you've always, you know, given such thoughtful commentary around Mr. Buffett and Berkshire. You've been a shareholder for a long time. Just what what that firm has meant to you as a shareholder, I think, has a special place in how you formulated many of your ideas around how to be an investor in stocks. I really appreciate hearing that from you, Scott, because we've been talking about the markets, you and I, for like 12 years now. So I'm glad that you've observed that for me.

And I absolutely agree. I think of some of Buffett's most well-known ideas, such as my favorite holding period is forever. And then I think about how I try to apply that with what I'm doing. If somebody had invested $1,000 in the S&P 500 in 1965, they'd have $300,000 today. That's an incredible return. If they had put that same $1,000 in Berkshire Hathaway on the same date, they would have $42.5 million. That's the difference.

So this is now, to Michael Santoli's point, this is now a business that basically is so big that it's impossible for it to be materially divorced from the fundamentals of the U.S. economy. So we accept that. It's also impossible for them to replicate the performance that I just laid out, and they're not trying to do so. They have $163 billion in cash. That cash is earning money faster than they can dole it out at current bank interest rates. It's just in this incredible position. The Apple position

has been extremely important to the Berkshire story over the last couple of years. And the negatives, they seem really cyclical. So in the Buffett letter that had gone out a couple of weeks ago, that's what he focused on. He talked about the railroad having fallen shipping volumes. OK, that's a U.S. economy story. That's cyclical. And he talked he talked a little bit about some of those other types of things. The other negative is real estate. They had a two hundred and fifty million dollar settlement they had to pay. That stuff comes and goes. The important thing, Scott, is that the businesses that Berkshire both fully owns or invests in the equity of are amazing businesses. And when they're not, they sell. And when they are, they don't sell.

And that's why you get the performance that you've gotten over two years, five years, 10 years, 60 years. It's very simple to me. Michael, it's hard to think of this event, and that's really what it is. It's an event without Charlie Munger, who passed, obviously, recently. And it just enables us, I think, to think about what the Berkshire of the future is going to look like, the kinds of investments that they may make in the future, the void of Mr. Munger and what that means for Warren Buffett himself as he thinks about what the next great thing is going to be. Yeah, there's an interesting kind of dual message that you'll pick up, which is one that Charlie Munger himself and his voice is going to be missed tremendously tomorrow. It's like kind of the showcase of Buffett and Munger's kind of discourse

on display at all times. And that'll definitely be somewhat of a void. But on the other hand, he's been involved in a partner of Buffett's for so long that it feels as if all the lessons which he constantly delivered are somewhat ingrained in the company. And of course, what you mainly would look at is what Warren Buffett himself said about Munger, which is he taught him how to get out of just that kind of old-fashioned, deep-value, statistical approach to cheapness and buy higher-quality businesses at fair prices. That's the key single insight that allows you to buy something like Coca-Cola, American Express, and all those other longtime holdings at a price maybe they weren't bargain basement, but the insight was the world will see that these

brands are worth more over time than just what they earned last year. And I think that's something that will probably carry through, even if it's really hard to move the needle on the portfolio or on the size of this company in general because of its financial heft. So it is much more different. It's got to, by definition, be slower moving, make more incremental bets, perhaps, although it was only, you know, early 2016 when the Apple position was initiated. And, you know, it's been a pretty good eight years from there in terms of the game. How would you, Josh, lastly address that same question, just how you as a shareholder think about the Berkshire of the future and what might be the next great investment this firm makes? So I think one thing you'll never hear Warren Buffett talk about is what's the next great thing.

There's a really great anecdote in my friend Morgan Housel's book. It's a book about the things that never change. And it opens up with Warren Buffett driving in during the financial crisis in a car with an investor and the investors carrying on. Did you see this happen? That happened, etc. He said, what was the best selling candy bar in 1963? It's Snickers. What's the best selling candy bar today? It's Snickers. There's something to the Berkshire story about investing in things where basic human needs and behavior is probably not going to change.

So are people going to be using an American Express card in 10 years, drinking a Coke, et cetera? Probably. Will they need the use of railroads and utilities and banks? Probably. That's the Berkshire story. So the next great thing is probably not going to come up. I would like to see Todd Combs and Ted Wexler out front a little bit more, especially considering the fact that outside of Apple, the stock portfolio itself really hasn't been so hot. Maybe that would be an interesting thing for shareholders to get to ask questions about if we get bored with asking Agit Jane about insurance.

So that's maybe something to think about we might get. I appreciate both of your insights. Josh, thanks for sticking around. Mike, we'll see you again in the zone. with asking Ajit Jain about insurance. So that's maybe something to think about we might get. I appreciate both of your insights. Josh, thanks for sticking around. Mike, we'll see you again in the zone. That's Mike Santoli down in Omaha. Another reminder, don't miss our coverage of Berkshire Hathaway's annual shareholder meeting, 9.30 a.m. tomorrow, right here on CNBC.

Coming up next, class back in session with big tech earnings now in the rear view. The dean of valuation, Aswad Damodaran of NYU. He reveals where he sees the market heading next and why he says this month will be what determines how returns look for the rest of the entire year. Closing bells back after this. We are back on the bell. Stocks jumping today on heels of that softer than expected jobs report and earnings beat from Apple. Question now, with big tech earnings out of the way, are those names overvalued or not? Let's ask the dean of valuations, Aswath Damodaran. He is

the professor of finance at NYU's Stern School of Business. Professor, welcome back. Thank you for having me. I'm going to get to that in a second, but I want to zero in on how we first teased the segment here and why you told our production staff that May is going to be the month that determines how returns for the year will look. Why so? I think the first quarter was all wine and roses. Everything was great. Everything looked like it was coming together. The economy was staying strong. Inflation looked like it was coming down. And I think in April, you saw the dark side of inflation, that it stayed stubborn. And you start to see the first pieces of evidence

of maybe not a recession, but a slowing down of the economy. And I think that that's why I think the market's at a tough time last month. The question is what happens going into May, because it's not just the facts on the ground. It's the mood and momentum that's driving the market. And I think, you know, you have a good day today. I think that's a good way to start the month. But I think that I think there'll be more tests coming down this month. And if we don't have a good month, then I think we're heading into September from a position of weakness. And we know the politics are going to take over that election. You're going to have things happening. And I think you're going to have a lot more stresses in the market. Better to do it when

you're in a position of strength. I'm truly interested to know, you know, if I would have interviewed you on Tuesday. Yeah. Your answer to where your market view might be could theoretically be different than it is today, given what happened with Chair Powell and how he wasn't as hawkish as feared. And now that we finished mega cap check, is that a fair assessment? Do you have a different outlook based on what happened this week, both through the Fed meeting and the data? I think we're resetting expectations again. I mean, we've been doing this for two years and we're constantly trying to figure out,

hey, what is the future going to deliver? And I think it's amazing. And you're right, over a period of a week, how expectations get reset. And it's almost like the expectations are getting reset to, you know what, we're going to have slower economic growth. The Fed's going to be OK with it. Because I think there was a point last week or so where people were talking about the Fed potentially being able to raise rates, not lower rates, because inflation is back, you know, that the economy might be harder than expected. So I think that expectations get reset. And but today we have a good day. So but who knows what the next week will bring in

terms of expectations getting reset. But has it also in turn reset your view on where valuations are? I mean, at five percent on a 10-year, perhaps valuations of the S&P 500 look stretched. Maybe not so much, maybe not at 4%. And I don't think it's debatable. I mean, we've been stretching valuations and that band is getting tighter and tighter. I mean, I was quite open about the fact that I own all seven of the MAG7 stocks. None of them is undervalued now. The that I own all seven of the Mag 7 stocks. None of them is undervalued now. The reason I own them is I bought them at convenient prices.

And I don't think they're overvalued enough to dump them. But I would be buying any of the seven today, perhaps with the exception of Tesla, which, at least based on my valuation, is pretty close to fair value. The rest are, you know, are stretched and getting more stretched by the moment. Alphabet and NVIDIA in particular keep pushing the upper limits of what I think value can bring. But as trades, it still might be great trades for the rest of the year. Wow. I'm surprised to hear you say that about the group as a whole. I think some would look at, let's just use Alphabet as an example. And you can throw Meta in there, too, as having valuations that are certainly much more reasonable, they would suggest, than being anywhere close to overvalued. I mean, I think, you know, if you put in 12, 14, 15 percent growth rates, you can get to the value. But I think the most interesting aspect of what's happened in the last couple of, was both Alphabet and Facebook and Meta announcing

they were going to start paying dividends. And that, to me, is an indication that within the companies, there's a recognition that they're more middle-aged than young companies. And I think the rest of the market might still think of them as these amazing growth companies that can keep double-digit growth going. But I think there's more realism in both companies as to what they can actually deliver in terms of growth. Lastly, how do buybacks factor into the way you

assess stocks and their valuation? I don't use the dividend discount model. I don't look at dividends. I look at cash flows companies can potentially pay out. You take the mag seven, at least six of them are cash machines. They throw off so much cash that they have trouble getting the cash out of the door. And you see that in the cash balance is growing by the day. So when I see buybacks from these companies, they're basically a reflection of the fact that these companies don't want to become big dividend machines. That's not the kind of investor base. They might start dividends, but I think even met an alphabet, even with the dividends, the bulk of their cash is going to come in the form of buybacks. So when Apple announces $110 billion buyback,

I mean, they have, you know what, they can announce a buyback and the cash balance will still go up. And that's what I think is so stunning at these companies is they can return hundreds of billions of cash and have the cash balance go up while they're doing it. Which is suppose, I guess, I mean, I'm making the assumption one of the big reasons why you own all the Meg seven stocks. I mean, from a fundamental perspective, these are the intrinsic value stocks of the 21st century. The Coca-Cola's in the Washington Post, which are franchises that deliver cash flows. These are now the franchises that deliver the cash flows rather than the old consumer product

companies. Professor, I always appreciate the conversation. Thanks so much. Good weekend to you. We'll see you soon. Thank you. Take care. All right. Up next, tracking the biggest movers as we head into the close. Christina's back with that. Christina. Grande consumer headwinds for one retailer, even as they spend those consumers' big bucks on concerts. Two stocks moving in different directions on conflicting consumer trends. I'll explain next. 15 to go before the closing bell. Back to Christina now for the stocks she's watching. So what do you see now? What's on your radar?

We've got to talk about Starbucks because it was a rough week for this name. Shares are down over 16% on the week, down 2.5% today. Disappointing earnings drop in same-store sales, which actually led to 18 price target downgrades just this week alone. As Deutsche Bank puts it in their note, there are grande headwinds because of competition and what Starbucks' CEO is calling a cautious consumer. They don't want to spend as much on these expensive coffees. HSBC, the latest company to cut their price target for Starbucks

to $84 a share. They originally had a price target of $107. Switching gears, we're still talking about the consumer Live Nation, one of the top S&P 500 performers today after surpassing Wall Street revenue estimates, with management promising that concert attendance, even if Taylor Swift doesn't have a show next year, will continue to grow in 2025. Morgan Stanley says shares can rally to $120. They're trading at $95 right now over the next year because of incredibly strong demand for live concerts.

So we're not willing to spend on Starbucks coffee, but we're willing to dish out the dough for concerts. Priorities. Yes, priorities. Have a good weekend. I drink coffee every day, so I know my priority. You and me both. Christina Partsenevelos, thank you.

Thanks. Still ahead, Amgen shares. They're soaring today thanks to its crucial obesity drug trial. We'll discuss what that could mean for the stock and for the other GLP-1 competitors. Back right after this. We are now in the closing bell market zone. CNBC senior markets commentator Mike Santoli in Omaha to break down these crucial moments of the trading day. Plus, Amgen's leading the Dow today. Angelica Peebles on what's behind that move. Sima Modi on the tale of two very different travel stocks

today. Mike, but I'll go to you first. So great take away for this week and the S. and P. at fifty one thirty means what. I meet the pressure was relieved on a few fronts you had both the ten the two year yield down about a quarter of a percentage point from their highs that's essentially the

market's way of rebuilding the possibility for a Fed rate cut down the road because patients might be rewarded on inflation. You had Amazon and Apple earnings plus all the rest that have built toward a conclusion that earnings estimates seem fine and what happens after earnings season you roll ahead another three months and the forward twelve month estimate becomes kind of your baseline

for your valuation assumption so everything's working along the way that you perhaps want to see it to keep this a routine pullback within a bull market. We're five weeks into it. We had a 5 percent pullback. We're about half of that back. You know, still a lot to prove in terms of the index level. But I do think it's been relatively constructive, even though we have to see if enough momentum was rebuilt in the fundamental story to keep us in this zone where the soft landing seems very plausible. Angelica Peebles, tell us about Amgen today. Big news, a big stock move too. Yeah, Scott. Amgen shares are having their best day in almost 15 years, and that's because Amgen is moving its experimental obesity drug into phase three trials.

This is a monthly injection that could rival Novonoros-Bagovi and Eli Lilly-Zephound. Right now, those two drugs dominate what could become a $100 billion market by 2030. Jeffries today saying that Amgen could have a $5 to $10 billion opportunity in the future here. But at this point, we don't know how this drug stacks up to the competition. Amgen not disclosing the phase two results at this point, only saying they're very pleased with what they've seen from the ongoing trial. And they're not seeing people dropping out because of side effects. Still, shares of Novo and Lilly both down today. And Amgen did scrap an experimental pill,

but investors still excited about the injectable drug. Scott. All right. Angelica, I appreciate it very much. Angelica Peebles. Mike, I mean, this just underscores, really highlights the fact that in this space, it's GLP-1 and kind of everything else. 100 percent. And Amgen, a pretty cheap stock, a pretty sleepy story for a long time. And you get a little bit of this hope in the stock that it might be a player in this area. And you see the result. I mean, we've made the comparison before, but it's kind of like when boring old Broadcom became an AI play. And all of a sudden there was room for valuation expansion as long as that story, in fact, seems credible. Yeah. All right, Seema, you sat here on Post 9 and told us what to look out for from both of these reports yesterday. Now they've delivered stocks in opposite directions. Why? Well, there's two reasons behind this outperformance that Booking is seeing, Scott.

First, its aggressive spend on marketing at a time when Expedia pulled back really allowed it to gain market share in the home rental category, where Expedia is experiencing a slower than expected recovery. Booking also pivoted into international at the right time. They're seeing China, Japan, Europe sales increase. This is a region, country specifically, where Expedia has less of a presence. This is the last quarter for Peter Kern, who has led Expedia since 2020. Incoming CEO Ariane Gorin on the call said she's ready to hit the ground running, drive traffic, expand margins.

Yet, you know, still a number of price target cuts on the stock this morning, Scott. So we really want to see how this company turns around and when this technology migration will start to pay off. I will point out BTIG did reiterate its buy rating, citing valuation on Expedia. All right, Seema, thanks to you. Seema Modi, have a good weekend. Mike, I'll send it back to you out in Omaha.

And I guess one of the questions on the shareholders' minds this weekend and certainly the journalists' minds this weekend, and certainly the journalists' minds too, is what, if anything, and when is Berkshire going to do with that mountain of cash? And I don't know if we'll get any clues, but that is an outstanding question, shall we say. No, for sure. And it's a lot about how the hunting is in terms of well-valued investments. We do keep in mind, get Berkshire Hathaway's earnings first thing tomorrow morning as well. So you're going to see how the company performed, exactly how much cash there still is in there.

And of course, in the course of hours of Q&A, Warren Buffett will no doubt weigh in on whether he sees things as being more or less attractive. They've always been satisfied to have a massive amount of idle cash sitting around. And now, of course, you're earning a pretty decent yield off of that. So that'll be among the things I think we're all going to watch for, as well as his views, again, on all the big macro issues like yields and really like value investing. You know, you've talked to David Einar, who thinks value investing is dead. In the three months since he said that, actually, value's shown a little bit of light.

Most importantly, did Bill Murray give you your shoe back? Yes. He never did secure my shoe, so I do have it. All right. Good stuff. You enjoy yourself. You enjoy yourself out in Omaha. Don't forget to watch it tomorrow on CNBC at 9.30 in the morning, too. That does it for us. Everybody have a great weekend. See you on the other side in the O.C. with John Ford.