Closing Bell - Closing Bell Overtime 7/20/22

Episode Date: July 20, 2022

A fast-paced look at the after-hours moves and late-breaking news live from the New York Stock Exchange. Closing Bell Overtime drills down into stocks and sectors, interviews some of the world’s most influential investors and gets you ready for the next day’s action.

Sarah, thank you very much. Welcome, everybody, to Overtime. I'm Scott Wapney. You just heard the bells. We're just getting started right here at Post 9 at the New York Stock Exchange, and it is another big earnings evening with Tesla, United Airlines, and Las Vegas Sands all reporting. We do expect those results any moment now. We will have the stock moves, the analysis, and, of course, everything you need to know up to the minute. Josh Brown will also join me shortly with a big portfolio move of his. You do not want to miss that one. We begin, though, with our talk of the tape.

And it really is the talk of every investor right now. Can you believe, and maybe even more importantly, can you buy into this rally? Let's ask Trivariate's Adam Parker. He's with me again here at Post 9. So we're waiting on these earnings, which are important, especially now. What about this rally? Can it be trusted for anything more than a tradable bounce, a bear bounce? What do you think?

Honestly, I think it's probably just a short-term rally, relief rally. I don't know if we, you know, you ask the question sometimes, do we already see the bottom? I don't know. I don't think so, Scott. I don't think so. Why? You know, it's tough to call, but I just think we're in this challenge where we know the earnings estimates are way too high. Now, you could say everyone knows that, Adam. Everyone knows the numbers are way too high, so it's all in the price. But is it really all in the price before we started to see the negative earnings revisions?

I mean, the bottom-up numbers for 2023 are about $249. That's the current bottom-up estimates. The S&P is at 39.59. So let's call it low 16 and change times forward earnings. I think the real numbers are probably 215 to 220, not 249. So, you know, are we going to act well when we get a 15% aggregate downward revision the next year? Maybe. I don't think so. I don't know. Banks weren't all that bad. I mean, Netflix wasn't as bad as feared. Maybe the sky is falling.

Crowd needs to chill out. Yeah, you know I'm not the sky is falling crowd. I just think if you look at it reasonably, you know, 10% growth this year and another nine next year in the consensus numbers, I think what's probably more realistic is six or seven this year, maybe flattish at least in the first half or negative next year and then expanding after that again depending on you know what happens to inflation. So I sense that you know we will get some tradable rallies in and out but we're not off to the races train left the station. I don't buy

that when we know we're going to have downward revisions again in October and likely again in January. So I think it's you're in and out kind of choppy market. You're not, hey, I feel good. The bottom's behind us. At least that's right. Of course, I hear you. But I like you playing the positive vibe on an up day, which isn't what we normally do. I will play devil's advocate to anybody at any time.

Now, Allie McCartney, who was with Sarah in the last hour, sort of made the point you're making now. You've got this, what she characterized as a synchronized global transition that's underway. I don't care how positive you want to get on whatever metric you want to hang your hat on. That rules the day more than anything else. Yeah, look, we know quantitative tightening is different than quantitative easing. We know CPI is going to stay much higher for longer than people think because of rents. What we don't know is how the Fed's going to deal with it. We know that they were buying tons of MBS when the housing market was on fire everywhere, so we know that we can't exactly read what they're going to do. And so I think that's a challenge.

So when we look at corporate earnings, I don't think the sky is falling. I agree with that. There's not a ton of management excess in terms of hubris, hiring too many people and tons of inventory and crazy new fancy corporate headquarters. But we do think revenue is going to miss. And so what comes when revenue slowly misses is you get the drop-off in profits. So gross margins probably come down 300, 400, 500 pips. That's how I get from the 249 numbers to the real, what I think the real 215, 220 are for next year. There are certain reports that carry a little more weight than others. And Tesla is one of those names that's in the lights every quarter, right? Especially given the narrative and the environment that we're currently in. Currently, the banks do because they started off. Netflix did because of what happened with that bombshell last time in the stock,

cratered by 30 plus percent. The importance of Tesla right now in this market, given retail sentiment around that name, the NASDAQ, what do you think? You know, I personally think that it's just a barometer for how people think about what we call hyper growth stocks. Do they feel like taking risks? Do they want to buy things where a lot of the value is way in the future but not today? There's no question that Tesla isn't worth what today's fundamentals show.

It might be worth what they show 5 or 10, 15 years from now. So I think if people get confident that things are okay, maybe you get a tradable bounce. But I don't think we're going to sit back two or three weeks from now and say, oh, you want to go crazy buying hyper-growth stocks that are somewhat low quality. But maybe, okay, I'll give you, maybe it's going to be choppy. The summer is going to be a little volatile. It could be choppy here and there. But what if I do say, look, maybe people got too negative. And the move that we've had has been pretty broad based. A lot of the areas that you thought were among the most vulnerable have done well of late. I think the most vulnerable are industrials, machinery and capital goods.

And they modestly underperform the market. And I think they should strongly underperform the market. So there is a disconnect. Machinery and capital goods and estimates generally have come down a tiny bit year-to-date. They're for 30% plus earnings growth this year and another 18% next year. Yet we know all of the things are going wrong. Activities rolled over, commodities are higher, currency doesn't help, wages are... I mean we can we can make the list. So I think that's the place where relative estimate cheap abilities are worse. And as we've talked about before, everyone gets back from vacation in August, sharpens the pencils in

September and says, whoa, my 23 numbers need a serious haircut. And that's kind of, I still think the base case. Yeah. I mean, nothing that's happened positively does anything to chase the Fed away, right? And earning, you can say that better than expected earnings are not necessarily great, case. Yeah. I mean, nothing that's happened positively does anything to chase the Fed away. Right. And earning you can say that better than expected earnings are not necessarily great for the Fed because they're just going to keep their pedal to the floor. Now, let me stop you for a second, because we do see that. Obviously, you see the move with all with all of us as Tesla's earnings are now out. We are going through the numbers. Our expert, Philip Bo, is doing that just now, presumably from the move you're seeing, Phil LeBeau, is doing that just now.

Presumably from the move you're seeing, at least initially, Wall Street seems to like the move. It all comes down to the guidance, for real, for the rest of the year. We already kind of know what the quarterly numbers were for deliveries. Those were at 255,000. It's really the full year guide of Phil LeBeau that matters most to Wall Street, given these closures we've seen in the Chinese factories and some of the other issues that Tesla has had, right? You're right, Scott. And when you look at the numbers, and here they are for the second quarter, it is a beat on the bottom line, but a miss in terms of revenue. The bottom line coming in with earnings of $2.27 a share. The street was expecting earnings of $1.81 a share.

Revenue coming in just shy of expectations at $16.93 billion. The street expecting a little over $17 billion. Operating cash flow of $621 million. And the Gigafactory in Berlin now at capacity, or at production, I should say, of 1,000 vehicles per week. But here's the metric that a lot of people are going to be focused on. The automotive gross margins coming in at 27.9 percent, just a smidge below analyst expectations of 28.2 percent. Scott, we talked earlier today about why this is so important.

Last quarter, those automotive gross margins were 30 percent, better than expected. And the company said, look, they're going to be compressed as you fire up production in Texas and in Germany. And that's what we're seeing here. The automotive gross margins coming in at 27.9%. We're going to dig back into the release, see if we have a little bit more for you in terms of guidance. And don't forget, obviously, the conference call coming up at 5.30. Scott, back to you. Yeah. So we're waiting on that full year delivery number, which Wall Street is really hanging on. But this gross margin number, as you said, Phil, I had it at 33 in the first quarter. And here you go now down, you know, let's call it 28, 27.9.

So Phil's listening. He's going through this. There is the obvious question of what ability Tesla has to raise prices in the current environment. You've been thinking, Adam Parker, a lot about where the consumer stands. Phil, I was mentioning to you 33% was the gross margin number last quarter, so let's call it 28 this time. Everything plays into Tesla's ability to raise prices in the current environment, where the economy stands, what their raw material costs

are, et cetera, et cetera. And Scott, my producer, Megan Reeder, going through the release right now says the actual number X zero emission vehicle credits, which is important here, is 26.2 percent. So even further compression than what we initially thought here. So you're right, Scott. This is about a company that as it has these margins, those margins are really, that's the difference maker between Tesla and the rest of the auto industry. And when they were 30% or 31%, that's what a lot of people, especially the bulls,

were hanging their hat on. They were saying, look, you're never going to see margins like this out of GM and Ford or Volkswagen. They're down closer to 12% to 15%. But now they have been compressed. They're coming in at 26.2 percent for the second quarter. And again, we knew they would be compressed and that's where they're at. Scott. You know, Phil, it's interesting. I mean, it's sort of the conundrum that, if you will, if you want to use that word that Musk puts you in

sometimes as an investor, you want to be optimistic about where this company is heading if you're a bull. But then you go back to a statement which he made just a few months ago where he was, quote, super bad. He had a super bad feeling about the economy. You don't even know whether he's going to be on the call this evening to expand on how he sees the environment today relative to what he was thinking not that long ago. Yep. Right. And remember what else he said about the two gigafactories that they've just started, both in Texas and in Germany. He called them furnaces burning money.

And that was one of the first times that you saw Tesla investors say, whoa, hold on a second. What can we expect for the rest of 2022? Now, the expectation, I should point out, is that they are going to be increasing their production in the second half of this year. In fact, the delivery estimate on Wall Street remains at over 1.4 million vehicles. That's quite an increase from where they are in the first half, where they only, I think they delivered 559,000. So they're going to have to deliver close to 900,000 vehicles if they are going to make that estimate for the second half of this year.

Scott? Got you. Phil, I expect that we'll see you again in a short period of time once you get more of those details out of that earnings report. So I'll see you in just a moment. I'll let you run, get back on the phone, do whatever reporting you need to do. Wrap it up for me here. Just the importance of a report like this, the move in the stock, minimal, but at least it's green if you're bullish. Listen, we'll have to see what the guidance is for a company like this, but I can tell you, you know, we do a lot of work at TriVarid on revenue beats and misses and earnings beats and misses.

You know what you don't want, typically? You don't want beating on revenue and missing on margins. The market usually punishes that. They missed on revs. Well, you don't want that. And so this quick reaction you get, who knows if it's like an algorithm on the earnings and we'll see what happens in the guidance. But normally, for large baskets of stocks, this is the worst combination. They're missed on margins, right?

They're missed on gross margins. Usually, you don't like that for hyper-gross stocks. So we'll have to see what happens. Unless you chalk that up to it's a moment in time miss, given some extraneous factors that all companies have been dealing with, supply chain and everything, wages. But you study like three days past earnings reports and you go through a large basket over time, the worst cocktail is this.

So we'll see what happens, but I would guess this fades. Love having you here as always, Adam Parker. Good to see you. Thank you. I'll see you again soon. LVS, Las Vegas Sands, earnings are out too. For a stock contester that was moving up into the number on some Macau headlines earlier in the day, what do you see here? Well, so we have Sands earnings missing, coming in at a loss of 34 cents per share versus the expected loss, Scott, of 29 cents. But revenues beat, coming in at 1.05 million.

Consensus was less than 985 million. And what we saw was these revenues driven by a surge of business at Marina Bay Sands in Singapore the second quarter. Revenues way more than double consensus. The all-important earnings metric for casinos, adjusted property EBITDA at $319 million. That's 45% higher than consensus expectations. Macau's COVID restrictions are still a big challenge here and not reflected in the second quarter results. The closure of the casinos and the non-essential businesses there right now, reportedly those casinos will be allowed to reopen Saturday. The call starts shortly. As you can see, the stock

now up almost 3% on this news. And we do expect to get more color about the rebound in business in Singapore on that call. Scott? Yeah. And of course, just to remind our viewers, Contessa, you had a nice move into the number. So we'll have to see what happens on the call you're talking about. If I need to hear from you again, please pop on. Look forward to that. That's Contessa Brewer with the latest on Las Vegas Sands. Let's bring in our overtime panel now. Joining us now is Morgan Stanley's Katerina Simonetti and CIC Wealth's Malcolm Etheridge. It's great to have you both with us.

Malcolm, to you first. We've had some pretty important results thus far in earnings season. What do you think about them and this rally? Yeah, Scott. So I'm actually happy to see this because I went on the record probably a month ago on your show saying that I expected that we'd probably stay in this trading range of somewhere between $3,800 and $4,000 on the S&P until we got all the way through earnings season and actually got a little bit of a direction from the market. And with earnings reports so far being pretty mixed, maybe a little bit downbeat, I think it does perfectly bode well for where we currently sit.

I think maybe the reason we've seen a little bit of a rally in the last couple of trading days, I guess since Friday, is because maybe we're getting to a point of peak bad news where investors are feeling like, all right, at this point, at least in the short term, I know all of the bad news that's out there and is done what direction the market ultimately goes. But I suspect that we've with mixed earnings like we've been having we're going to hang out in this trading range for a little bit. Katarina have you seen enough here to suggest it that stocks can have a little

more traction here than maybe we otherwise thought. Scott without a doubt we will take any rally we can get. But is this something for us to get excited about? Are we telling investors that this is the bottom and they should be buying in on this type of dips? Not yet. Investors have a lot to be concerned about. We're dealing with a recession possibility and the debates on whether this is something that might happen.

We're dealing with the inflation that is at historic highs. And of course, the biggest issue of them all are the earnings revisions as they continue to come through the end of the year. So we're expecting a lot of volatility. And this is a challenging time. This is definitely a chopping market. And as nice as these bear market rallies are, we caution investors to stay away from growth and focus on defensive plays, focus on areas that have done really well in this inflationary environment. The spaces like healthcare, like utilities, like REITs, consumer stables, defensive sectors have done well and will continue to do relatively well,

relatively to growth and continue to deliver value and deliver income, which is extremely important here. So we are. Malcolm, you referenced you referenced one of your prior appearances with me here, one in which I do recall you calling out Tom Lee to his face the last time you were on, suggesting he was too bullish. And I want to bring it to you and say maybe you're too bearish. I've got a kickoff to earnings season that frankly doesn't look as nearly as bad as some thought. Maybe the consumer's holding up better than a lot of people thought. Maybe the story needs a few more positives within it. That is fair criticism criticism and I will take that one. The thing that I would point to, though, as far as making the decision through the remainder of this year

of what direction we expect the market to go, we're going to live and die by CPI, I would assume. Right. And CPI is a third of it is driven by housing. And so since rents continue to increase and also mortgage rates have increased significantly since the I think it was the March lows, the earlier the lows earlier this year. I just don't expect that CPI is going to come down in a meaningful way, especially with homebuilder sentiment. We're getting reports now that homebuilder sentiment is at its all time lows since they started recording it. And so that doesn't really bode well for folks who want to purchase but are currently renting being able to get out of rentals, which ultimately would bring down those rent numbers and also help CPI in a meaningful way. And so until we fix that problem, the housing supply problem, I just don't really see where I can be wildly optimistic or

wildly bullish about, you know, even the intermediate term outlook for the market as far as getting out of this place where the Fed is having to intervene and raise rates to kind of cool things off for us. In other words, and lastly, Katerina, Malcolm doesn't think the risk reward has gotten any better. Do you? Scott, I agree with Malcolm. Risk reward is not really any better. There is a lot of risk that still remains in this market there is a lot of volatility that investors will have to deal with. Now they

look longer term three to five years of course. You know there there there is going to be a recovery eventually in this market but federal reserve right now is. Focused on curbing the inflation raising rates inflation is still high

it's a concern but earnings is definitely something that that you need to watch and once we see this positive earnings inflation, raising rates. Inflation is still high. It's a concern. But earnings is definitely something that we need to watch. And once we see this positive earnings, once we see that momentum that is all across the sectors, then we can positively say that we are finally getting through this bear market. But not yet. At this point, we still have a lot of volatility ahead of us. All right. We will leave it there. I'll talk to both of you soon. Katarina and Malcolm, thank you so much. We will move on up next. We'll have more reaction to that report from Tesla. Star analyst Dan Ives is here. We'll get his grade for the quarter. Plus, he wants to hear on that always important earnings call. And later, we have a

trade alert from Josh Brown. He just sold half of his position in a very important stock. He's going to join us with those details when Overtime returns. Back at Overtime now, Tesla is trading higher in OT after reporting its Q2 results. Let's bring in Wedbush's Dan Ives, the star analyst who covers this thing. What's your instant reaction to what you got? Well, I think the big focus is really the reiteration of 50 percent unit growth, because everyone knew April and May, a disaster for Tesla given the zero COVID shutdowns. Will they reiterate 50 percent? That's showing bullishness second half, 900,000 plus. And I would just call it less bad than feared. And that's why you're

seeing the reaction. Well, that seems to be the case in a lot of stocks that are reporting earnings. Gross margins, though, from 33 percent in Q1 to 26.2 after some stuff is is figured out there. You're not concerned at all about a gross margin number that's declining? Yeah, it's concerning if it continues. If you go into 3Q and 4Q and you see that trend line, then it becomes a concern. Because of 2Q, I'll say they got a little bit of a pass because of what you're seeing

on the zero COVID situation in China, as well as some of the build-outs of Giga Berlin and some of the other areas, of course, Austin. And I think that's why investors are sort of looking through this. What's the second half telling us? think that's why investors are sort of looking through this. What's the second half telling us? But that's why this will be probably one of the more important conference calls for Musk in years. And what if he's not on it? What does that say? Because there are suggestions from Phil that he doesn't know if he's going to be on it or not.

What if he isn't? Look, I think Musk not on it would be a negative, just given where we are in terms of the cycle, in terms of what we're seeing in China, still a lot of skepticism in terms of what Tesla is seeing. So I think this is probably, if there was a call for him to be on, it's tonight in terms of especially everything we're seeing on EVs. And also, do you believe the second half? Because it comes down to that's going to be the foot. That's what the street's going to be focused on, bulls and bears. How much visibility, though, could they possibly have into a second half where the cash burn on these new factories is going to continue? It's not like supply chains or

inflation are going to go away overnight that are going to help material costs. And by the way, what the stock is doing right now is hardly a resounding let's get the you know the pom-poms out and start the cheers i mean okay two and a half percent move on a stock that's gotten hit pretty well it's still it's an everest like climb from here to get to where we need to get to for second half so they really need to prove that and it's not just the demand story it's production because if you look at china that's the hearts and lungs of the tasso story so it comes down to the elephant in the room, the fears. What happens if April and May, the shutdown, happens again? Hold your thought for a second.

Phil LeBeau has more for me, I'm told. Phil? Scott, one of the things that's getting a lot of attention after hours is that Tesla reaping the benefits of selling some of its Bitcoin position. In fact, it sold 75 percent of its Bitcoin purchases. $936 million is what that brought the company. Those sales, that sale of Bitcoin for the company brought in $936 million. They have converted that into other currencies. So that is one reason why you're seeing some movement in the stock after hours, as Tesla realizing it had to reduce that position substantially.

So selling 75% of its Bitcoin purchases, bringing in $936 million, which it then converted into holdings of other currencies. Scott? Yeah, watching the move. And I know you can't see it in real time, Phil, in Bitcoin, too. Taking a pretty good tumble here, perhaps on this news. Phil, thank you. See you again soon. You have any comment on this Bitcoin sale? I think it was a head scratcher from the beginning, must thrown in the towel.

You know, you start to think about the overhangs on the Tesla story. This obviously was one in terms of, you know, potentially what the write down would be. And I think just given everything else you're seeing in terms of the challenges, it's one less you could ultimately check the box. And clearly now second half, it's all about unit production and growth rather than Bitcoin, which has really been a sideshow that we've seen to the Tesla story.

Last one before I got to move on from the Tesla story. You've got what, a thousand dollar price target? So let me ask you this. You've talked a lot about the overhang from Twitter. You've used the word embarrassment, sideshow, you know, all that all these negative comments about Musk's episode here with with Twitter. What happens if there's an unfavorable ruling in the court where he can walk, but he's not going to pay a billion dollars? What if he's going to pay $5 billion or $10 billion? And in order to come up with that money, he needs to sell more Tesla stock. Is there any risk there at all? I think, of course, there's risk. And I think you've started

to see now factor into Twitter stock that he's probably going to have to pay the minimum $5 or $10 billion. Or ultimately, he could ultimately buy the whole company in terms of what happens in Delaware. And that will continue to be an overhang in terms of must-sell in stock, as that's really been over the last few years. Constant sort of needle in terms of the bulls, as you've seen that play out. I mean, maybe more acute today than it has been in the past, before you've sort of never known when he was going to sell. Now you're going to have to game it out again after he sold the last time

and wonder as an investor, is that going to happen again? And that continues to be what I've used in almost non-fundamental overhang in the stock, because you look at numbers, but ultimately the fear on the street continues to be that Twitter fiasco soap opera that now we've seen round one, Twitter won resoundingly. Appreciate you being here. Thanks for being Dan Ives of Wedbush joining us here at Post 9. Let's do our Twitter. Speaking of question of the day, we want to know, will Tesla return to a thousand dollars a share by the end of this year? That's the price target of the man to my left, Dan Ives of Wedbush. Go to at CNBC overtime to cast your vote. We will share those results later on in the show. We do have a market flash now on Carnival. Our Christina Partsanovalos has those details for us. Christina. Scott,

we're hearing right now that Carnival will be issuing $1 billion worth of common stock. Goldman Sachs will be the sole underwriter of these new shares. The stock is plunging right now in the OT. You can see down over 6.5% at the moment. According to the filing, the company plans to use the proceeds towards general business or corporate purposes, including 2023 debt. And I'd like to point out the stock has been up this past month, but still down 18 percent year to date. You can see the shares are moving lower after they said that they were going to be issuing one billion dollars worth of common stock. Back with you. Yeah. Fears of dilution there. All right, Christina, thank you. I'll see you in a little

bit of time in our show. Still ahead, we are still awaiting earnings from United Airlines. We have those results any moment now. We'll bring you them as soon as they cross the tape as well. Plus, a big trade update from Josh Brown. He just sold half of his position in a key name. He's going to tell us all about it when Overtime returns. We're back in Overtime. It's time for a CNBC News Update with Shepard Smith. Hey, Shep. Hi, Scott. From the news on CNBC, here's what's happening. As President Biden's climate agenda stalls in Congress, he unveiled a series of executive actions today. One provides more than $2 billion in funding to help communities prepare for natural disasters. Another sends money to help low-income families cover heat and air conditioning costs. The president's also redirecting or

directing the Department of the Interior to find new areas for wind production in the Gulf and along the Atlantic coast. Uvalde's school superintendent scheduling a special meeting for Saturday to consider firing the police chief there, Pete Arredondo. He was put on administrative leave after the massacre at the school there. Families and state officials slammed him for waiting more than an hour to confront the shooter. And members of the Trump family arriving this afternoon in Manhattan for Ivana Trump's funeral. She and former President Trump had three children together, Ivanka, Don Jr., and Eric.

All three were expected to give eulogies. Ivana Trump died last week at her home in New York City. Police ruled her death an accident, likely the result of a fall downstairs. She was 73. Tonight, what the new housing numbers mean for buyers, sellers, and renters. 50,000 wounded combat vets lose out on a key benefit, and the Webb Space Telescope gets hit by a meteor on the news. Right after Jim Cramer, 7 Eastern, CNBC. Scott, back to you. All right, good stuff, Shep. Thank you. I appreciate that, Shepard Smith. United Airlines

earnings are out. Phil LeBeau, to you again. Scott, the stock is moving lower as United is reporting a loss for the second or a lower than expected earnings. I should be clarifying here for the second quarter, earning a buck forty three a share. The street was expecting earnings of a buck ninety five. By the way, this is United's first profitable quarter without payroll support since before the pandemic. Revenue, $12.112 billion coming in just shy of expectations. By the way, what we're noticing with United is what we noticed with Delta, and I think we'll see with all of the airlines, some real challenges on the cost side of the equation. The margin coming in, operating margin at 8.2%.

Previous guidance was for operating margin at 10%. The capacity down 15%. The previous guidance was for operating margin at 10 percent. The capacity down 15 percent. The previous guidance was for capacity to be down 14 percent. Total revenue per seat mile up 24 percent compared to the same quarter of 2019. So there you see the demand that is out there, the pricing that is out there. That was roughly in line with the expectation. But cost per seat mile excluding fuel fuel, is up 17%. It's the guidance, however. That's what's putting pressure on the stock right now.

For the third quarter, the company is going to be cutting its capacity by 11%. The street was expecting a cut of maybe 4.3%. In the fourth quarter, now the outlook is very strong in terms of demand and pricing, at least in the third quarter. Operating margin of 10%, a little better than what the street was expecting. Total revenue per seat mile, listen to this, Scott, up 24 to 26 percent in the third quarter. I've never heard of that for a third quarter for an airline. The street was expecting, by the way, an increase of maybe 12 percent. So there is some good news out there on the demand side. But in the fourth quarter,

cutting capacity by down 10 percent. So they continue to bring it down. So they don't want to have these operational challenges. And then in 23, this is significant, reducing its plan to grow capacity, reducing the plan by 60 percent. It'll be up only 8 percent in terms of growth in 2023, not the previously planned 20 percent growth in capacity. The reason why? Two of them. One, the lack of new airplanes from Boeing. They're expecting or had been planning to get 737 MAX 10s, which they're not going to get. That plane hasn't even been certified. And 787 Dreamliners. And remember, Boeing hasn't delivered those in over a year. They are also going to be cutting their capacity next year to reflect a smaller schedule on the regional airplane side. That's because of the

pilot shortage that's out there. And remember, that's where we see the pilot shortage really hitting the airlines. So let's remember that we're going to be talking with Scott Kirby coming up next hour exclusively on fast money. We're going to be focusing on the outlook that they are presenting today. And again, they have swung to a profit for the first time without payroll support in two years. That's the good news. The demand is the good news. The bad news, jet fuel and the operational challenges. They continue to weigh on the airline industry. Scott, back to you. Yeah. Highest second quarter revenue in the company's history. But those challenges you cite, Phil, I wonder if you have any feel or if some are saying this might be as good as it gets for a while for the airlines, just given the challenges that they are facing,

even as their revenues are surging for obvious reasons, as people are traveling like gangbusters this summer. Well, there's no cool off in terms of demand that's out there, and that's reflected in the pricing for the tickets that we're paying. And I know a lot of people complain about airfares, but the fact of the matter, the airlines are in the business of making money, and there's so much demand out there that that's reflected in what we're seeing with airfares. This question of whether or not this is as good as it gets for the foreseeable future, I don't know if I would go that far,

because there are a number of areas where perhaps they could increase capacity more than what their guidance is right now. Let's say the operational challenges start to ease in terms of airport staffing or in other areas, or if they're able to get more pilots through the training queue and then into aircraft, because that's really where we're noticing the biggest challenge for the airlines. It's the training required to move pilots up to a different gauge of aircraft. And if they can do that, well, then maybe this guidance could be revised in the future. So I wouldn't go as far as to say this is as good as it gets. I got you a little more than a half an hour away from you and Scott Kirby. Look forward to that, Phil. Thank you, as always, Phil LeBeau. We do have stocks, as you know, pushing higher

again today, building on that rally of yesterday. Tech at standout, the Nasdaq gaining nearly 2 percent for its fourth up day in the past five. Joining us now, Ritholtz Wealth Management CEO and co-founder Josh Brown. Also, of course, CNBC contributor. It's good to see you as always, Josh. The headline for you today. I'm going to get into the rally. You sold half your Netflix position. I just want to get to the elephant in the room right away. Half of the position after earnings. Talk to me. Yeah, so the earnings report was slightly better than expected. I think they had some good stuff to say, color on the content. And obviously, the subscriber loss being not as bad as feared was the main thing. The stock has had a really big bounce, and I just took what the market's given me.

The next big catalyst is really a long way off. We're talking about probably late Q4, before there were a lot of details on the advertising-supported tier, and then a rollout, hopefully, sometime in Q1. That's like nine months from now. A lot of stuff can happen between now and then. So I'm still in Netflix. I think I'll have a better opportunity maybe to own some later in the year. In the meantime, it just remains a very tough business. Not a lot of momentum on the subscriber front. They think they'll add a million subs net next quarter,

which is not so hot. So that's where I am with it. That's where I am with it. I still think it'll be a good investment, but I wanted to loosen up a little bit and get some more dry powder. Yeah, but it doesn't sound to me like you'd be ready to buy it back any real time soon, given what you just said about this runway before you start to see some real results on what they're trying to do. Well, look, a lot of the negatives are priced in, but they've been priced in. And this was the last two quarters they reported were these horrendous gap down opens. And this time it wasn't. So it was it was a nice upside surprise. Sometimes in a given market environment, you just take what you're given.

So I don't think that there's any danger of Netflix running back up to the old highs. I still think this is going to be a challenged company in a very, very tough industry, in a very tough market, frankly. So that's what's up. Well, what does that say then about your overall view of whether this is still, in your mind, a sell-the-rip kind of market rather than a buy into the dips? Well, I mean, every time I'm on the air, that's basically what I'm telling you I'm doing. Like, I sold the rip in FedEx. I sold the rip in Zoom. I just cut my position in Simon Property Group by more than half. I trimmed some Apple.

The market's been rallying over the last couple of days. So I think that gives you an opportunity if you recognize that we're still in a bear market, but there have been some nice moves off the low to move some stuff around. So it's at the margins. It's at the edges. I don't like I don't I don't feel extraordinarily confident in the direction of the market one way or the other. But we are still in a defined statistical downtrend. The S&P 500 is still materially below its 200 day. And not only that, the 200 day is negatively sloping. And so I think rallies are still guilty until proven innocent. I mean, like even looking at the reaction in Tesla, which, by the way, I'm glad you bring it up. This is reverse negative already.

Yeah, I'm glad you bring it up. Reverse negative. Just continue your thought because I was going to go there next anyway, but talk to me about the message in all of that. And I mean, let's be frank. There were some significant metrics that missed. So the street is continuing to get its arms around it and it needs to get on the conference call too, I think at 5.30 or so, but take it away. I probably have an alternate take

from most of whatever's going on on Twitter. Twitter fixates over the Bitcoin stuff and I understand that. And I see Bitcoin is selling off on news that Papa Elon is not as bullish as he once was. I heard Phil LeBeau said they took the opportunity to sell some Bitcoin with you a few minutes ago. Is it an opportunity, though? Because the last reporting I saw, Tesla bought most of its Bitcoin at like $30,000. So if they had sold it last quarter, I don't know that

it was like an opportunity. But if you're a Tesla shareholder and you see Elon Musk out there virtually guaranteeing a recession, then maybe you should be happy that he's doing that because if that's how he really feels, and by the way, it's clear that Tesla has been impacted by higher costs just like everyone else in the automotive industry. So if that's how he really feels. And by the way, it's clear that Tesla has been impacted by higher costs, just like everyone else in the automotive industry. So if that's how he really feels, then maybe it's not necessary to have a billion dollars worth of Bitcoin on the balance sheet. Like maybe that's not the smartest thing to do right now. So if you're a Tesla shareholder, I think you should be like happy that he's doing that. And he really if he's believes there's a recession is is

uh is guaranteed or definite or whatever he said today or yesterday that's probably the right move to make so um but look tesla's operating like so many other companies they're operating in like an impossible environment you don't even know what you're rooting for anymore the same with united let just just so people understand how difficult this is, they have never had more demand, never, than they have right now. And ticket prices reflect that, obviously. This stock at $41 or $39 in the aftermarket is selling below where it was in January 2007. That's 15 years of banging your head against the wall. What is even the point? Warren Buffett had a joke about how he could have saved capitalists a fortune if he had gone back in time and whacked Orville and Wilbur Wright before they got off the ground.

But it just illustrates, where is the bull market right now in the summer of 22? It's travel. I don't know anyone who's not in a mafia right now, like, honestly. And that's not even enough to help because of how hard the cost and the labor equation is. So it's a tough environment. And I think what I'm saying about Tesla, United, it applies so broadly to so many companies right now. It is difficult. I'll leave it there. I got a lot of planes in the air still. I'll have to look after. I'll let you go. I'll see you soon. That's Josh Brown. Up next, we have our two-minute drill where one money manager sees big opportunity in the mining industry. We'll do it next.

It's time now for our two-minute drill joining us now a barbara ann bernard a wincrest capital ceo and cio it's nice to see you i apologize in advance this might very well be the one minute drill today we're a little heavy it's all good uh freeport mac moran that's your first long talk to me why hi scott great to have you on board um so i think this market, a lot of things have sold off indiscriminately. And one, if you have a longer term view and can stomach some volatility, would be copper. Copper has colossal demand from the energy transition and in fact will be in deficit by 2025. However, on the back of recessionary fears, copper and copper miners have sold off significantly. And so in mining, there's a saying that the cure for low prices is low prices. And so if you look at the marginal cost of production for copper,

we estimate it's about $3 a pound. That's our downside scenario. And when you look at these miners, particularly the junior miners, the share price is implying $2.15 a pound, which is 35% below the current spot rate for copper. So if you have a longer term view, I think it's a phenomenal buying opportunity for great companies like Freemont. Because copper is cratered, right? I mean, and it's all about those slowdown and or recession fears. Correct. So you're short, Knight Swift. Is that right? The trucking company, KNX. Can you tell me why? Yeah, it's a tricky industry, right? Even though it's one of the largest players in the U.S., they only have 2 percent market share. The industry's capital intensive. They're low barriers to entry. When I look at the headwinds they have in terms

of freight rates coming down and if the Fed succeeds with demand destruction, you're going to see lower volumes to couple that with higher input costs, i.e. fuel and labor, and we see deteriorating margins. So this is a stock where the street is implying 15% operating margins versus the normalized margin for this business, which is 10%. So if I take next year sales estimates and apply a normalized margin, I get a $3.15 share estimate. And on nine times earnings, that gives you $28 price target, which is 40% downside from here. So not a company that I would want to be long, certainly more headwinds than tailwinds at this point. Got you. Barbara Ann, I appreciate your time. Thanks for your understanding as well. Barbara Ann Bernard, Windcrest Capital. We are tracking some big stock movers in the OT.

Christina Partsinevola standing by. Christina. And we've got earnings galore. Rail shipment volume is up and that's helping CSX and one software company falling in the OT on an earnings miss. I'll tell you which one next. We're tracking the biggest movers in overtime now. Christina Partsinevola is doing that for us. Christina? Let's start with shares of railroad operator CSX. They are trending lower in the OT after the company beat revenue estimates by almost $200 million. The company did, I should say, higher, 3.7% higher. The company did take an $18 million hit for the acquisition of Pan Am

Railways, which was more than offset by a gain from its Virginia real estate transactions. It's maintaining its full-year CapEx target as well of $2 billion and plans, this is something we haven't heard a lot of lately, increase its headcount to capture increasing rail volume. Maker of aluminum Alcoa is seeing shares climb higher after their posting better, a beat on earnings and revenue. The company said there was better availability of rail cars, maybe helped by CSX, and vessels in Q2, which also helped them transport their products. Total aluminum shipment forecast remains unchanged. Shares are up almost 6% right now. And lastly, shares of software firm Qualtrics are down. The company was expected to break even on

an adjusted basis, but reported a loss of $0.04 a share. Q3 guidance basically in line with estimates. Qualtrics, you may recall, was spun off from SAP back in 2020. Shares down 3.5% right now in the OT. Scott? All right, Christina, thank you very much. Christina Partsenevelos. It's the last call now to vote in our Twitter question of the day. Do you think Tesla will return to $1,000 a share by the end of the year?

Go to Twitter, at CNBC Overtime, cast your vote. I'm going to give you the results after this quick break. Still have Santoli's last word coming up, too. All right, we're back. Santoli, his last word. And what is it now? Well, we built up this cushion, right? I mean, it's hard to look at the action in the market and say that there's really been anything that disproves the idea at the moment that the market's acting the way you'd like to see if the June lows are going to hold. The problem is everything that came before, which is the market was down 25 percent in six months. No new highs, really. It's still kind of all in that mode of every chart looks like a downtrend with a little hook

on the end of it. So I think, you know, it's obviously plenty to prove, but you can't argue with the last few days, to be honest. Earnings are going to matter coming up more than they have maybe. I don't know. Look, earnings haven't been great. They haven't been horrific. Yeah. And that was the big fear coming in. Now, snap tomorrow in overtime. Good read on digital advertising. That's critically important ahead of a Facebook and Alphabet next week. And then you do look to next week when you get the real rubber meet in the road. Starts to get real. And I think, you know, one of the things that

becomes hard to be real bullish is how long we have until anything's going to be proven or disproven. Right. No recession. Is that your call? Going to take months and months to actually prove the negative. Same thing with what the Fed might or might not do. Well, you know what? Months and months until we can prove a recession. OK, maybe that's better than what the narrative started to become was like weeks and weeks, if not already here. And so we we definitely kind of overextended ourselves in that direction. And you took some of that back. Yeah. Say that at least. All right. We'll see. I mean, earnings matter. We'll follow Tesla, of course, for the next couple of days to see what happens. Forty six percent of people thinking it's going up 30 percent in the rest of the year is probably too many. Yeah. Fifty four saying no, it's not going to reach a thousand.

I appreciate it as always. That's Mike Santoli with his last word. I'll see you right back on the desk tomorrow. More earnings piling in. Fast money begins now.