Closing Bell - Closing Bell Overtime: Averages Close Lower After Fitch’s Downgrade; Aurora CEO On Commercial Launch Timeline For Its Self-Driving Trucking; RXO CEO On The Labor Environment 8/2/23

Episode Date: August 2, 2023

It was a down day for the major averages but a huge day of earnings in Overtime, including from Qualcomm, DoorDash, Etsy, Robinhood, Zillow, Shopify and PayPal. BD8 Capital’s Barbara Doran breaks down the market action. Bernstein analyst Stacy Rasgon on what investors need to know about Qualcomm’s quarter. RXO CEO Drew Wilkerson talks earnings, logistics and the current labor environment. Aurora CEO talks the latest quarter and the company’s commercial launch timeline. 

Now, rough day for Bulls as Fitch's downgrade hits sentiment. That's a scorecard on Wall Street, but winners stay late. Welcome to Closing Bell Overtime. I'm John Port with Morgan Brennan, and it is another blockbuster afternoon for earnings with reports on the way from Qualcomm, PayPal, DoorDash, Robinhood, Etsy, and many more. We will bring you all those numbers and expert analysis. Plus, two CEOs join us on the back of their results. We'll talk to the head of last mile freight company RxO, falling hard today, and the CEO of self-driving tech firm Aurora. Also lower, along with just about everything else in the NASDAQ and tech stock. As we await those earnings, though, let's bring in BD8 Capital Partner CIO Barbara Duran. Barbara, so what are the chances that this Fitch rating cut triggers a shift in sentiment here? I mean, AMD noticing was down what? I was looking at one point today,

it was down more than 6%, even though, you know, the response immediately after earnings last night was pretty good. Right. And you see names like Palo Alto down 7 percent. All the big tech names are down. I don't think this is going to spark a shift in sentiment. I think it's an excuse. Plus the ADP number, which is not. We've got so let's we'll get you to react to that. But Christina Parts Neveless has the numbers. Christina, what we're seeing is Qualcomm did post an earnings beat of $1.87 adjusted. That's six cents higher than what was anticipated on Q3 revenue of $8.45 billion. That was a slight miss driven by weakness in both the smartphone chip business, which is down 25%

year over year, as well as their licensing business. The company sees Q4 revenues a range of about $8.1 to to 8.9 billion. So that midpoint was 8.5. That's lower than what the street was anticipating. And then they see Q4 adjusted EPS that falls in line. There's one quick thing that I was just going through the earnings deck right now. It's a PowerPoint for the smartphone bottom that we wanted to hear about. Management still estimates 2023 handset units will be down at least, quote, a high single digit percentage due to weaker macro environments and a slower recovery in China. That's led, excuse me, to a higher customer inventory level.

So expect those drawdowns to be an issue for the rest of the year. Guys. All right. Christina, thank you, Barbara. So it's a miss on the top line from Qualcomm. The bottom line, EPS a bit better, but the guide is really a miss at the midpoint in revenue. And it's kind of in line, but slightly a miss on EPS as well at the midpoint of that guide. Continued China weakness, a theme that we've heard some others as part of this. What does it tell us? Well, it's such a lot of people had lowered their expectations, you know, except that for the last until today, the stock had been at a 7% move over about five days. So I think investors are saying, well,

the worst is over. Let's look ahead to next year. I mean, somewhere in here, the smartphone shipments are going to bottom. But what we're hearing is that smartphone shipments are not showing signs of a bottom. We're not seeing hints of recovery. And it could be another quarter or two. So it's been a bit premature to get involved in the stock. So I think that's why we've missed revenue. The shipments are down a little bit more than even they expected. So I think it's still a show me stock and you have another quarter or two before you can think about the worst is behind them. OK. Shares are down about 3 percent right now in after hours in that immediate reaction to the

print. Let's bring in Mike Santoli to this conversation. Mike, I mean, we saw the Nasdaq drop more than 2 percent today. It was the first 1 percent move in this particular case to the downside for the S&P since late May as well. And semi stocks really led the weakness here. In terms of immediate reaction to this report, any reason to think that that weakness wasn't justified now that we have these results? Not really. I do think a lot of the semi weakness was in some of the stocks that were a little more stretched perhaps than than Qualcomm. But this general sense that maybe the the market might have gotten ahead of itself in assuming that we were back on the upswing in a lot of these product categories

in terms of the inventory correction and rebound, that's probably reinforced to a small degree with Qualcomm, which, of course, is never on the outer fringe of high valuation within semis or anything like that. But, yeah, it's an inhospitable tape to be reporting a, you know, not dazzling guidance number into. All right. And meanwhile, Robinhood earnings are out. Kate Rooney has the numbers with that stock chopping around a bit. Hey, Johnny, so the big headline here for Robinhood company reporting a profit for the first time as a public company, Robinhood reaching gap profitability. EPS here of three cents. Wall Street was expecting

a loss of one cent revenue, also better than expected at $486 million. I spoke to CFO Jason Warnock briefly. He told me it took a lot of focus by the company on cost control in terms of that profit, also driving revenue and product development. He said that we're maintaining a discipline of being really lean and really scrappy, as he put it, a theme you're hearing out of a lot of these high growth companies and tech companies, especially higher revenue. They're driven by higher net interest revenues, partially offset guys by lower transaction based revenues. That's payment for order flow, trading revenue down 7 percent, cryptocurrency revenues especially weak. They're dropping 18 percent equities were down

about seven percent net interest income though was strong it jumped about 13 percent sequentially driven by some of the higher interest earning assets like securities lending for example monthly active users down about a million in the quarter sequentially to 10.8 million and then revenue per user did jump to 84 from 77 back in Q1 of 2023. But big headline there. Robinhood is profitable. Stock up here slightly after hours. Back to you.

All right. Thank you, Kate, Barbara. You know, they're got into some operating discipline here in the current quarter, maybe OPEX being a bit better, a bit lower than expected. But it's a small stock. But any reason to think that it returns to its former $70 share glory? No, it's just in the midst of a business strategy transition. I mean, the original strategy was to go after a lot of small traders. And of course, then we had last year happen. And they're not going to regain that. And I think by moving into services like retirement services, advisory, doing 24 hour

trading at least for five days of the week, they are really trying to go after a different type of customer, somebody who's a higher frequency trader, a higher income trader. And that's, you know what, we'll see if that's going to be successful. That's going to be a long haul. So they're very smart. They've got to tamp down the costs. And so the $0.03 surprise is a surprise because they've had huge losses in the past. So it's going to be a long road for them. But I do not see them returning to their former glory anytime soon. Too competitive out there.

Yeah. Mike, I want to get your thoughts on this, especially since we did see that user number decrease. But the amount of revenue the company is earning on those users did go up, maybe speaking to the stickiness of some of those increased services. Yes, some of that, some certainly options trading is a big source of actual customer revenue as well, in addition to the payment for order flow. It's an interesting situation. I mean, $90 billion in customer assets, not a huge number, but it's substantial. It's a real player in this industry. There's like $5-plus billion in cash that they're sitting on.

It's $11 billion market cap. So it's kind of not going anywhere, but it's just unclear what you pay for. You don't know how profitable their earnings model, their business model, is going to be able to become in the short term. All right. Well, we've got DoorDash earnings out as well. Deirdre Bosa has the numbers. Hi, Dee. Hey, Morgan. The stock has been bouncing around in after hours trade. It was up, then it was down, and it's currently up about 3.5%. Bit of a mixed quarter. It was a miss on earnings per share, but a beat on revenue. But the real story is probably this beat and raise on guidance. Let me give you the numbers first. A loss of 44 cents versus 41 expected. Revenue beat of 2.13 billion versus 2.06 it was expected. So we'll call that fairly in line.

But again, that third quarter guidance is better than expected on both the adjusted EBITDA guidance as well as gross order volume. And guys, I know we usually like to compare it to Uber's food delivery business. DoorDash is growing faster in terms of volume and revenue. Total order growth for DoorDash growing at about 25% year over year versus Uber delivery grows bookings growing about 12% revenue as well. We'll continue to look through these numbers and bring you it as we find it. Back to you. All right. Dee, thank you. Mike, might this signal that Tony Hsu is doing what Tony tends to do? He's got a lead over Uber here. He believes in his operating model and he's continuing to spend in growth markets to keep it. That's I think that's certainly the message that the company wants to convey.

It seems plausible. You know, I do think, again, it's the way to look at it. If you really want to widen out the frame is sort of two players in terms of the publicly traded options. The market's been willing to let them kind of grow into the valuations to some degree. But again, I think there's really big questions about long term is how much scale you have to have to be very, you know, get very attractive returns off this business. That stock now up about almost 7 percent after hours. We'll see where it goes. TripAdvisor earnings out as well. Seema Modi has the numbers. Seema. Hey, John, a 34 cents adjusted on its bottom line versus the estimate of 35. So a penny miss, but revenue did come in better than expected at $494 million. CEO Matt Goldberg touting the strength it's seeing and its experiences offering.

On that note, Viator, its tourist platform, seeing explosive growth of 59% year over year, especially as we see more Americans traveling outside the U.S. to Europe. Fork, its restaurant operator, also seeing double-digit percentage growth year over year. CEO also in the press release saying, we look to the second half

of this year. We will take an approach that balances financial discipline with executing our strategic properties. And the market likes what it hears with the stock up 3 percent. And after hours, the stock hasn't been faring too well so far this year, but getting a nice pop here with earnings, revenue specifically coming in better than expected. Morgan? Cost in focus. The VitaTor. Really jumping out to me, too, here. It's another example of this international travel, as you just mentioned, showing up in results. Sima Modi, thank you.

Zillow earnings are out. Diana Olick has those numbers. Hi, Diana. Hey, Morgan. Yes, strong revenue beat for Zillow in Q2 coming in at $506 million versus estimates of just under $473 million. EPS beat at $0.39 a share versus estimates of $0.18. CEO Rich Barton said in the release, Zillow outperformed the broader industry for the fourth consecutive quarter as we navigate a tough real estate market.

He noted progress on improving touring, financing, and renting. And rentals are the headline. Strong traffic and growth in multifamily properties. So not surprising that while rent residential and mortgage revenue decreased, rental revenue increased for Zillow. There was also talk about the super app, which is designed for a seamless experience from searches through closing. Now, revenue guidance is a little low for Q3, 458 million to 486 versus estimates $488. In the shareholder letter, though, they pointed to high mortgage rates causing would-be sellers to stay put and resulting in

low inventory, record low inventory, which we talk about all the time. And they said we continue to expect it will take time to normalize to higher sales levels. Back to you. All right. And shares are popping on this result. Diana Olick, thank you. Etsy earnings are out. Sima Modi has those numbers. Sima, double duty. Morgan, Etsy delivering a beat on its top and bottom line, 45 cents versus the estimate of 43. Revenue topping expectations at $629 million. The analyst estimate was 619. Q3 revenue a bit light, so that's perhaps why the stock is down nearly 5% here in extended trade. But the big number that investors look for here is gross merchandise, and you can see

GMC came in at 3.01 billion versus the estimate of 2.99. So a slight beat there. Stock has been a big loser so far this year, down about 20% and down another 4% here in extended trade. We'll wait for the earnings call for more details. But Josh Silverman, the CEO of Morgan, saying that the Etsy marketplace active buyer is reaching an all time high. Back to you. Interesting. And as you mentioned, shares are down about 5 percent right now. Barbara, I want to get your response to that one, since I know there had been some concern about further competition, further cooling on in terms of activity on Etsy. But that last stat certainly jumps out. Yeah, it does, because it's been about competition. And also, because they

have such high margin, highly differentiated product, it's a question of the discretionary spending. So we know the consumer is pulling back a little bit, but the fact that their numbers are higher indicates that is not happening. So it could be a bit of a competitive or it could be that they that buyers are buying lower priced items. So it's interesting that they missed on the sales. I mean, their sales were expected to be about half what they were the last quarter, which was about 10 percent. So we've got to see what that's about. And if it's just consumers are buying cheaper things or and it's hard to measure the competitive intensity because there are a number of competitors out there. Barbara, I wonder about Snap versus Roku.

Right. That effect. You've got these second tier players up against, you know, huge juggernauts and Snap case. It's up against Meta and Alphabet. Roku's case, it's up against Netflix. Roku did well this earnings season. Snap did not. And here you've got Etsy up against Amazon. It's kind of, it seems to be in the middle in how it's performing. So is this an environment where investors can look at those second tier players and make bets on them under certain circumstances, or are the large cap names just dominating? Well, you know, John, that's a good question about are there certain circumstances where you can, because I think your broader point, I totally agree with the second tier players. You don't have the money.

You don't have the resources. We see the amount of spending going on in AI just to get people to get their data in the cloud. And it is a huge investment and they just don't have the wherewithal. So you're going to be an also ran. And the question is, at some point, does the stock become cheap enough? Does it become a takeout plate? But, you know, it's a tough road to hoe. I mean, Snap, for instance, or even Pin Interest, you know, which theoretically has a great potential, just never can quite get there again, because it just takes such sophistication in the technology, you know, to do whether it's the ad targeting, you know, or finding your customers.

It's it's tough. So the big players are just getting, you know, gobbling up market share. Mike, want to get your thoughts on what we've seen so far, because particularly with the names that have any kind of consumer facing businesses, it does feel like this now repetitive theme of the shift in spending from goods to services. And you're seeing it show up right here on the tape with these results again today. Yeah, no doubt about it. So overall levels, if you bundled it all together, look pretty healthy. That's what the aggregate macro numbers are telling you. But there has been that big shift. The big question to me is how much the market has already kind of migrated to that view and punished the goods-dependent

parts of the economy at the, you know, to the benefit of the services sector. But it's still a consistent theme. What I find interesting now is people sort of wanting to anticipate a shift back in the other direction or at least a cooling off of services. Hard to see that in the in the numbers here today. Yeah, it's good. You know, it's sort of this idea of like, what's what's the new normal going to look like? MGM earnings are out. Contessa Brewer has those numbers. Hi, Contessa. Morgan MGM earnings with a beat on the top and bottom lines. Earnings come in at fifty nine cents a share adjusted against consensus of 54 cents on revenue of $3.94 billion. And wow, what a performance by Macau.

MGM China has surpassed its net revenues from 2019 by 5%. And on adjusted property EBITDA, that is the crucial earnings metric in the casino industry, it brought in $209 million. That is 21 percent more than the same quarter in 2019 pre-pandemic. Its market share went from 9.2 percent pre-pandemic to 14.6 percent. That's because they got a lot of extra tables in part. Meanwhile, Las Vegas Strip is meeting expectations on EBITDA. It misses with its regional casinos, where we are seeing some decline over last year. It was a banner quarter last year. And margins shrinking slightly, both in Las Vegas and regionals, blamed in part on payroll-related expenses.

As you can see, the share is down 4.5% right now. The call starts in about 45 minutes, John. Okay. From money out to money in, PayPal earnings are out. Kate Rooney has the numbers. Kate? Hey there, John. Okay. From money out to money in, PayPal earnings are out. Kate Rooney has the numbers. Kate? Hey there, John. PayPal's second quarter pretty much in line with expectations here. It looks like top line revenue, $7.3 billion, $7.29 billion. A slight beat there. Bottom line, adjusted EPS of $1.16. That was the number Street was expecting here, $1.16 right in line. Payment volume also better than expected at $376 billion. That was up 11%.

A slight miss, though, guys, on operating margins. Some pressure there. 21.4% margins PayPal had guided to 22% margins. This looks like it's from the credit portfolio on the merchant lending side, so they're increasing loss provisions on that side of the business. On guidance, Q3 looking like both EPS and revenue above forecast and PayPal's reiterating guidance on full year EPS. No number on full year guidance for revenue for the second half of the year. Should be pretty much in line with what they saw in the first half. You see the stock reacting down more than 4%., could be on that margin

number. I'll be catching up with PayPal CEO Dan Shulman here in a few minutes. We'll bring you those comments later in the hour. He is stepping down from the company. They have not named a successor, but we'll bring you any highlights from that conversation. Back to you. Kate, thanks. Mike, is this just not enough, perhaps, from PayPal on the guide, given what they just reported here? The stock has been in a difficult spot and this doesn't seem to be lifting them out of it. I would say not enough. I would say, you know, coming in on the estimate is a de facto miss in a quarter when everyone is coming in a few percentage points ahead of the consensus. So, yeah, it seems just like a little a little enough

messy factors in there, like the credit losses, that it's sort of keeping people away. There was a time you go back a couple of years where PayPal was just considered this one decision play on the electronification of money and payments. And you didn't really have to overthink it. Now it seems like there are too many nuances. It's certainly a cheap stock in the group. It's like less than 15 times projected earnings, but hard to see what gets it cranking anytime soon. Barb, your thoughts on this, especially since I know you used to be an investor in PayPal, but you sold earlier this year. Yeah, and I did. And the reason I sold was the growth had slowed dramatically. You looked at all the encroaching competition and Apple is a big one that people are worried about because they really

seem to be hitting their escape velocity in terms of usage there. So I think their numbers were probably good. They're in line with e-commerce activity, but I think they're losing share. And you've also got on their unbranded side, that is a much lower margin business, and that's probably part of what hit their margins. So it is hard to see this reaccelerating. And, for instance, if you look at Block, which is their closest competitor, Block is up 23 percent this year. PayPal, well, it's now probably flat on the year. And its P.E. has come down to 14 versus its average of 32 the last five years.

And there's a reason for that. Their growth is slowing, and it's hard to see how they're going to reaccelerate it. All right. Shares are down six and a half percent right now. Barbara Duran, thanks for going through earnings with us. And Mike Santoli, appreciate it as always. We'll see you in a little bit. Thanks, Morgan. Unity Software and Shopify earnings are out. Sima Modi has all of those numbers. Let's do it, Morgan. Let's start with Unity Software. Stock is down about 2% here, a 51 cent loss gap, which is not comparable, but it's revenue of $533 million. It's a strong beat for the quarter. Q2 adjusted EBITDA of $99 million is higher than expected, but the Q3 revenue estimate, slightly lower than expected, perhaps the theme that we've

been seeing this afternoon and why we're seeing shares under pressure after hours. Let's turn our attention to Shopify. The company reporting earnings of 14 cents adjusted. The estimate was for 5 cents adjusted. So a big beat on its bottom line. Revenue also coming in ahead of what Wall Street was anticipating at 1.69 billion. Revenue guidance also better, but shares are down just fractionally. And I'll just point you to what the CEO says in its press release.

Business momentum has led to another quarter of strong financial results. We're not just shipping products faster, but we are also expanding our global merchant base, all while improving our ability to generate greater free cash flow. Stock down 1% here. Morgan? All right, Seema Modi, thank you. Let's get back to Qualcomm, shall we? Just out with third quarter earnings minutes ago, reporting a revenue miss and guiding slightly lower than the

street expected for its Q4 revenue. You can see a negative reaction in that stock right now. It's down about three and a half percent. Joining us now is Stacey Rask on Bernstein Senior Analyst. Your thoughts on what you've seen so far? Yeah, so it's not great. We all know that the handset market sucks, and that's clear. They did miss a little bit on the top line. Margins are a little bit better, though, and so the EPSB, the guide was a little below the street.

It was dead in line with my numbers, though. I mean, I wasn't expecting any sort of material recovery at this point. We were flat sequentially. That's kind of where they are. Again, margins a little bit better than we had them. In the grand context of a smartphone market that is horrible and an inventory correction that is ongoing, I'll be honest, I didn't think these were that bad in that context,

although objectively, certainly they're not great results. When are we going to see a bottom or signs of a bottom in the handset? That's the question. I mean, they've been horrible. It's funny. I was sort of a closet smartphone bull for a while because i figured at least unlike pcs they didn't benefit during covid there was no pull forward so you'd figure that they ought to do better on the other side of it like boy was i wrong like they've just been really lousy like the whole way through i mean they they can't decline forever um the company is suggesting that they still see inventory correction continuing,

at least through the calendar year. So we may have another quarter or two to go. At some point, they've got to hit bottom. They're materially undershipping, by the way. They have to be. Their handset revenue is down 25% year-over-year. The smartphone market was down in terms of units, was down about 8% year-over-year in June quarter.

So they're materially undershipping. That can't happen forever. And at the same time, though, Stacey, IoT is down 24 percent. This is one of their growth areas. Automotive is up 13, but IoT down 24. I don't know if that reflects what's happening with headsets, VR, AR headsets that aren't from Apple. But what does that do to the growth narrative here? And what do we need to hear? Well, it's the same thing. You have to remember about a third of that IoT business in a normal environment was consumer related.

And just like handsets, anything consumer's going through an inventory correction. And so we are seeing that in IoT. It could be headsets, it could be lots of other stuff that's in there. I think it was up a bit sequentially. So at least on a sequential basis, hopefully maybe it's found some bottom,

but it's the same kind of dynamics that's impacting smartphones. We've got an inventory correction broadly across the consumer space, and it's impacting their IoT business now. Also similar to what we heard from other chip players, the kind of tepid, that might be generous, China recovery having an impact on them. AMD was down 7% in today's print. Talk for a bit about AMD, right? And about how important Q4 is for them and the expectations they have for this new product to really boost their revenue. You bet. So they held to their 50% half over half data center guide, but they missed their Q3 on data centers. They're shoving it all into Q4.

I'm not so worried about Q4 for them because most of that lift is actually not AI GPUs. It's GPUs, but it's not for AI. It's for the El Capitan supercomputer. They know what they're going to ship there. I bet it's more than half of the sequential lift on data centers in Q4. They can probably make it. I'm actually worried about Q1 because that's a one-time hit. It actually goes away in Q1, and I don't think the AI piece, which is still very small, I don't think that's going to make up the difference in Q1. I also think if you listen to them on the call, it was very clear that even the AI ramp that they have to the extent that there is one is going to be primarily second half loaded next year. I think the revenues in the

first half are going to be small because they've just sampled the part. It's only just beginning. And again, if you've got big numbers in your mind for how large that opportunity could be for them next year, if you've got to wait for the second half, it sort of limits what that number could potentially be. And I think people were coming to that realization today on top of just a general market today that was pretty bad for semis and lots of other things. Okay. Stacey Raskin, great to get your insights. You bet.

Up next, we'll talk to the CEO of Last Mile Logistics Company, RxO, about today's results. That sent that stock sharply lower. It finished the day down 10 percent. Plus, his take on Yellow's bankruptcy, UPS Teamsters battle. And later, we will ask a top analyst how Qualcomm's earnings inform his thinking about Apple's results as that company gears up to report tomorrow. We'll be right back. One more earnings report. Banting cleanup. Sima Modi back with Clorox earnings. And take a look at the stock of 6% on a strong beat on its top and bottom line.

Plus, guidance for the full year much higher than what Wall Street was expecting. CEO Linda Rendell talking about how we've been relentlessly focusing on the driving of top line growth while rebuilding margins in the midst of a challenging operating environment. The company also being helped by stronger pricing. Shares up 6 percent. Morgan. Sima Modi, thank you. Shares of RxO ending the day sharply lower after turning in a mixed quarter before the bell. Shares finished down 10 percent. But joining us now is Drew Wilkerson, CEO of RxO. Drew, welcome to the show. It's great to have you on. I do want to start with that move lower that we saw in the stock

because you did take market share this quarter. We saw a volume growth up meaningfully, 10% increase, but at least one analyst sort of pointing to revenues, yields, and margins that were below the peer yields, and margins that were below the peer group, saying that that implies the company's out there buying growth at the expense of margins. Is that the right take or is that the wrong take and why? You know, when you look at how we built the business, our DNA hasn't changed over the last decade. We've been taking market share and we've been doing it at best-in-class margins,

and we did that again in the second quarter. We were able to grow our volumes by 10 percent in an industry where the volumes were actually negative on a year over year basis. And we did it at 15 percent gross profit margins with our brokerage team. And that's some of what you're going to see is some of the best margins in the industry right now. OK, So how are you able to do that, given the fact that the freight market's been pretty tough? As a number of folks have said in recent weeks, the freight recession continues. We've got great relationships with our customers. Our largest customers have been with us for 14 years on average, and they come back to us time and time again. And they don't just come back to us. They come back to us and give us more freight because we have really good service. We pick up and deliver on time. We've got great communication throughout the life cycle of a load. We've got the best

technology in the industry, which helps us have that industry leading gross profit percentage that we're running at. And we've got good operators that know how to run the business really well. So you talked about the fact that maybe we're approaching the bottom of this freight cycle. Why do you feel confident saying that right now? And what is the role that retail and e-commerce is playing in that? Yeah, so we're looking at our own internal data, but we're also using market data to tell us that we're approaching the bottom of the cycle. When you look at carriers who are starting to exit the industry, that's been a trend that we've seen over the last six months, and it's been at a steady drip of carriers exiting the industry. Load-to-truck ratio rose on a quarter-over-quarter basis, meaning there were more loads out there than what there were trucks available. And then we also saw tender rejections

start to rise in the month of July. And that tells you that there's starting to be pushback on the prices that are out there. You mentioned retail and e-commerce. And for what we see is that inventory level is in a much better position than what it was last year. The consumer health has been resilient so far this year. And so there's the opportunity for a decent peak season if consumer demand is strong. OK, how has the yellow shutdown, the bankruptcy there impacted your business and the freight market dynamics overall? It was somewhat of a slow moving car crash. Pardon the pun. But one of the biggest LTL less than truckload carriers in the market and certainly reverberating. Anytime there's a disruption in the market, that's a good thing

for strong brokerages because what you see is customers are going to reach out to the people that they have the strongest relationships. And over the last several weeks, you've seen some disruption in the LTL industry. And so we've seen our LTL shipments pick up over the last several weeks you've seen some disruption in the LTL industry and so we've seen our LTL shipments pick up over the last few weeks by a little bit. One of the things that we're monitoring closely is sometimes when there's a disruption in the LTL industry you start to see that bleed over into the truckload industry and so you think of long awkward freight that doesn't fit well on a truck sometimes that goes on to a full truckload shipment. And when that happens, it helps create more spot loads, which would be a good thing for our business. All right, Drew Wilkerson, we appreciate you coming on. Thanks. Thank you for

having me. CEO of RXL. And time now for a CNBC News Update with Eamon Javers. Eamon. Hey, John, a scare on Capitol Hill this afternoon as calls came in about a possible active shooter. The Capitol Police evacuated some areas and also issued shelter-in-place orders. Both the Senate and the House are on a summer recess, but some staff members were in the building. A D.C. Metro Police spokesperson tells CNBC it appears to be a bad call and that no injuries were reported and no shooter located. The York Fire is burning through California's desert and southern Nevada, scorching tens of thousands of acres. The fire is spreading across California's Mojave National Preserve, burning through and threatening groves of Joshua trees.

The preserve is a hotspot for biodiversity and one of the only areas where those trees can grow. And the blue whale may lose its title as the largest animal in world history. Scientists found fossils of an early whale in Peru called a Perusiatius Colossus. The manatee-like creature lived around 40 million years ago and may be the heftiest animal on record, stretching 66 feet long and weighing up to 340 tons. That's good news because after all the eating and drinking I did on my recent vacation, John, I thought I was the heftiest animal on record. Good to know I'm not.

Becky. Well, once that bloating goes down, Eamon, thank you. Takes a while. We need to work on these naming traditions, though. After the break, Mike Santoli looks at the data behind Fitch's downgrade of the U.S. credit rating as Jamie Dimon says America should be the highest rated country in the world. And we're closing in on PayPal's earnings call that's coming up at the top of the hour. But ahead of that, we'll get comments from CEO Dan Shulman about the quarter. Stocks down 7.5% right now. We'll be right back.

Welcome back to Overtime. Stocks were weighed down by Fitch's downgrade of the U.S. to a to double a plus decision. Treasury Secretary Yellen called puzzling in light of U.S. economic strength. And earlier this afternoon, J.P. Morgan CEO Jamie Dimon called the downgrade, quote, ridiculous. Here's what he told our Leslie Picker. It doesn't really matter that much. You know, the markets decide. It's not the rain agencies make these big decisions. This is the most prosperous nation on the planet, North America. We have the Atlantic and the Pacific, the best military, the best economy the world's ever seen, the most innovation. The credit is sound. It should be the highest rate of credit in the world.

All right. Mike Santoli is here to put things into a long-term perspective, as you so often do. Hi, Mike. I try, Morgan. Yeah, this is a view of the U.S. debt, publicly held Treasury debt to GDP that goes back even longer than I do, 1966. So just for some context here, the ratio of debt to GDP was above one, was above 100 percent right after World War II. It was about 105. Went down rapidly as the economy grew much faster than the debt did. Keep in mind, we don't pay down the debt. You just hope that the economy grows faster. I want to point out a couple of moments on this chart, though. One is right here in the early 90s. You see how this ratio went way up through the 80s as we built up fiscal deficits, Reagan tax cuts, all that stuff. We had Ross Perot run for president in 1992 on the sole platform of we have too much

federal debt. That was right there. That's when we thought it was an unsustainable level, or at least a lot of people in the country did. Then we got to 2011. That's right here. That's after the global financial crisis. Obviously, the economy crashed. And what you had there was S&P downgrade to U.S. debt says we're at a threshold. It's unsustainable. We have to get on a better path. It proved not really to have that much of an impact. Treasury yield stayed very low. Massive market for U.S. debt issuance. Now we're up at this point here when, interestingly, debt to GDP has been on the downswing after the covid binge of debt and the fiscal stimulus.

So that's one of the reasons a lot of folks, including Treasury Secretary Yellen, perhaps say it's odd timing for Fitch's decision. Now, it's not to say there's not pressure. Take a look at this other chart, which is the interest expense on the federal debt relative to the size of the economy. Again, through the 80s, it actually got very high. This is above about 3 percent of GDP, also well above 10 percent of the federal budget. Right now, it's obviously on the upswing because rates came down. So therefore, it was easy to take on more debt. But that's changing. This is the end of 2022 number. The current level is pacing toward two and a half percent. So that's what's going to really ratchet up the heat on the fiscal authorities to figure out exactly how much more we can handle here in terms of further deficits, what it's going to cost in terms of interest expense. It gets

pretty tough, John. It's relative to the size of the economy, right? So growth is an important piece of this. If we don't get it, if eventually this recession that keeps getting talked about, eventually we'll have one. Who knows whether it will be soon. If the fiscal positioning hasn't changed, that could be a problem. Without a doubt. There's no doubt that longer term, given the obligations in terms of entitlements, that the path is tough to see how it's easy to sustain.

But you're right. It all does depend, too, on the performance of the economy. And also, importantly, nominal growth of the economy, which includes inflation. That's one of the reasons we've come down off those high levels is because nominally it becomes easy to pay down a given amount of debt if obviously inflation is higher and there's more dollars in the economy. All right. Mike Santoli, great perspective, as always. And now shares of autonomous trucking company Aurora Innovation moving higher after reporting its latest quarterly results, sort of. Up next, the company's CEO breaks down the future of the company ahead of the call. All right. And another look at PayPal here near the post-market

lows. We're going to talk much more about that name when overtime returns. Welcome back. Self-driving tech company Aurora Innovation reporting Q2 numbers sort of moments ago, saying it expects total liquidity to be enough to get to its planned commercial launch by the end of next year. Those shares moving higher, about 4% in the after-hours session. Joining the show is Chris Urmson, co-founder and CEO of Aurora. Chris, good to see you. So this is a market that today, at least, was kind of risk-off for companies that have growth, and in your case, you know, product and revenue in the future.

But you also just did this eight hundred fifty million dollar raise that I imagine puts you in a pretty good position. Analysts seem to think so. Tell us how things are progressing and what you expect to happen now in the end of next year. John, great to see you again. Thanks for having me on. No, you're right. In this market, given the risk of first nature that investors have, we see it as a huge endorsement that the folks were willing to come together with us, and we're excited to invest in what we're doing. Over the next year, we're going to be validating the work that we have with the Aurora driver,

get to the point where we're confident that it can drive by itself without people on board the trucks. And then next year, we intend to launch. And between now and then, we'll continue to grow the number of loads we pull for our customers out in Texas. Yeah, right now, two lanes in Texas. You're doing this. And part of the question is how how many lanes, how many different roadways are going to be open to you? How soon? What are some of the legal hurdles ahead for that? And talk about what your feedback is from the likes of PACCAR, Toyota, FedEx, Uber Freight, the folks that you're working with. Yeah. So the great news is that in the vast majority of the United States, if we were confident in the safety of our trucks today,

we could put them on the roads and have them operate without drivers. So there's very little in the way of legal headway in front of us. And for customers like the FedExes, ultimately Ubers, Uber Freights of the world, this is incredibly exciting. This is a technology that can both help their top line and drive down their bottom line in a hugely meaningful way. How has the conversation, if it has, shifted with the tightness in the labor market right now? I mean, UPS came pretty close to a strike. Not going to happen, but there's still tension out there. Yeah, we certainly see that happening. And I don't know the details of what's happening there. But what I do know is that, first, there's been a kind of a structural shortage of drivers in the

United States for going back decades, and it's going to just get worse in the future. And so, for our customers, that ability to tap into a sustainable, reliable source of driving to serve their businesses is huge. And the opportunity to improve the quality of life. While truck driving is a really important, noble job, it's also a really difficult job. And truck drivers are 10 times as likely to die on the job as the average American. And so we see the opportunity both through our customers and through society of this technology having a huge impact in the world. Yeah. Chris, it's Morgan. We got the news a couple of days ago that Waymo, Alphabet's autonomous vehicle unit, is pulling back from autonomous trucking.

It's going to focus more heavily on ride hail and passenger. Canaccord Genuity basically saying this is your market to lose, given the fact that we've seen other folks who are in autonomous trucking maybe run out of cash, file for bankruptcy, or just, you know, cut down their business operations dramatically. How are you able to do this? I guess break down the economics for me of how you're able to do this and crack this code when others have tried and failed. Yeah, and first, I think it's an incredibly time for automated vehicles across the market. It's amazing what companies like Cruise and Waymo are doing in moving people through the world.

In trucking, it's a bit of a different problem, and we've made some really important strategic bets that are paying off. Things like investing in a proprietary LIDAR technology. This is a way we can see the world that really unlocks range. This is a bet we can see the world that really unlocks range. This is a bet we made five years ago that we're really seeing come to fruition now.

Work we're doing in simulation, how we're able to test more rapidly than people were able to do in the past and how that helps drive innovation. And I think as we tell that story to investors, as our team, you know, kind of gets energized by it, it's just increasing our momentum. So we're, you know, it's, you say it's a really exciting time for us as a company with

the landscape clearing and the path in front of us becoming ever more clear. Well, excited to see what happens over the next 12 to 15 months. Chris, thanks. Thanks so much, John. Chris Rumson. Up next, find out what PayPal CEO just told our Kate Rooney following the company's earnings as that company falls sharply. Plus, do Qualcomm's results have any clues for Apple's earnings? We're going to ask an analyst. We get those Apple results tomorrow.

But over time, we'll be right back. Welcome back. PayPal shares getting pummeled after reporting earnings. The company's call is about to kick off, but our Kate Rooney just spoke with CEO Dan Shulman, and she joins us now with the highlights. Hi, Kate. Hey, Morgan. So we talked a lot about the pressure PayPal has seen on operating margins, losses under control. He says we've taken the provisions. Those will play out and you'll start to see acceleration in our operating margins as we exit the year. He said about 100 basis points or so of expansion in margins there. Also says the rest of the business is performing really strongly right now. He said every one of those metrics accelerated through the quarter and further in July. We got an update on this month. He says branded checkout jumped 6.5% in June to north of 8% in July.

He says that's the highest growth rate PayPal has seen since the end of the pandemic. Also talked about a rebound in e-commerce as inflation cools. He says discretionary spending is starting to pick up. It's evening out now between travel and services, which were really strong in the credit card companies, and a little bit more being spent on goods. He pointed to some spending on fashion and services, which were really strong in the credit card companies, and a little bit more being spent on goods. He pointed to some spending on fashion and retail, so a slight shift there from travel and services.

That tends to be good news for driving e-commerce growth. He thinks that'll strengthen through the end of the year. And finally, guys, Dan Schulman previously said that he was stepping down at the end of the year. In terms of being PayPal's CEO, he says the company is in the final stages of announcing his successor. We may hear a little bit more about that on the call coming up. Back to you. All right. We know you'll be listening. Kate Rooney, thank you. Shares are down 7.5% right now, but let's get some instant reaction. Joining us now is Moshe Khatri, Web Bush Managing Director of Equity Securities. Moshe, I mean, that commentary from Shulman sounds pretty upbeat. And I realize that their current quarter revenue

guide came in higher than the street, and yet the stock's down big. Is it warranted? Yeah. When you look at PayPal, there are many, many moving parts that you have to kind of dig into. And that's probably always the issue, right? So they did a bit better on transaction growth. Transaction margins were down. I think the bigger issue here is that this is a second consecutive quarter we've seen margin pressure. Last quarter was more about volumes, where they're coming from, branded versus non-branded. And there were a lot of concerns that the company's not going to be able to change that. They're working on it, but I think this is more of a work in progress. So I think at this point, it's more about skepticism related to the company's ability to kind of expand margins during the second half

more than anything else, because everything else, I think, looked pretty okay, I would say. All right. Moshe, thanks for joining us. Outperform rating, $85 price target on the stock. That call kicks off shortly. Thanks. All right. As you thought today was a big earnings day, and it was, just wait for tomorrow. Apple and Amazon headlining another jam-packed earnings day. We're going to break down the results for you here on Overtime. Our next guest is joining us with what he's expecting from Apple. Let's bring in Mellius Research Managing Director Ben Reitz. Ben, we just heard from Qualcomm, and it sounds like somebody who does licensing of technology from them but doesn't get chips, Apple, might have pulled in orders a bit.

Also, China week. China tends to be somewhat important for Apple. How much, if at all, does that matter based on what you expect? Well, it's hard to know, John, and it's good to see you, by the way. It's hard to know, John, and it's good to see you, by the way. It's hard to know until you hear the call because Qualcomm typically talks about their Android versus their modem-only customer. So last quarter, they said Apple, the modem-only, would be a headwind, and they said Android would be flat. And that was pretty aggressive, given what we saw in China, that Android would be flat. So what we got to listen to in the Qualcomm call is what they think of their modem-only customer for the fourth quarter, what's embedded in that guidance, a little squishy.

But I wouldn't be surprised if it's a continuation of the Android trends they're seeing. And actually, Apple may be a part of that. Apple is doing rather well in certain emerging markets, gaining share, India, rest of world. And the other thing is there's a robust secondhand Apple market, which could be impacting Android. So we'll be trying to navigate those. The minute we're done, I'm hopping on that call. Gotcha. So what's going to matter most then for Apple when it does report tomorrow? Is it going to be the iPhone and the color we get and the forecast for the September quarter? Is it going to be services? Is it going to be something else? I think it's kind of simple.

The street's looking for a modest revenue decline. And can they back year-over-year growth in the September quarter? That will imply the iPhones can go up sequentially. There's some concerns around production of the iPhone 15, which looks like a good upgrade, by the way. And if they're able to back year-over-year growth, I think we get the all-clear sign. Ben, is this a quarter when, and I'm partly leading you here, where services, those signs of loyalty, the strength of retail, showing that that's holding up perhaps matters more than the numbers themselves

because this isn't the big quarter for Apple. You really want to feel like Q4 perhaps is going to outperform and maybe like some of the luxury strength that you've seen in China, despite the overall economy being weaker, might accrue to Apple? Yeah, you want to see that, you know, there's some macro headwinds out there. And this company is, you know, the strongest brand in the world. Tim is executing really well. I think Luca probably bought back a bunch of stock and he's going to probably be committed to doing that. I think that Apple is stable based on our checks and into the fourth quarter, into the September quarter for them, you want to see that

they're upbeat about the iPhone, that there's an upgrade cycle that can begin. Remember, there was a huge COVID bump in demand in 2021. There's a lot of 12s out there that need to be upgraded. So we're going to want to hear about that, not only in emerging markets, which everybody's chattering about, but around the world. And I think that as long as it's okay, we're in a good place. In an earnings cycle where everybody's talking about AI, how much does that matter? Well, I think it matters a lot for Apple as potential upside. They keep things really close to the vest. I personally think that they're going to have a big say in AI. They have mobile real estate that's extremely valuable. And the recent chatter around them having their own chat GPT going internally

that they may offer for customers could be upside to their services business. Imagine if they had AI-enabled services that were secure interacting with your iPhone in the future, which I do think they can have their silicon innovations and their software point towards them being a player in AI. I just don't know if you'll hear it on the call, but their silicon and their software roadmaps show they will be. Okay. Ben Wright says thanks for joining us. Thanks, Morgan. There's a double A-plus joke here with Apple and Amazon tomorrow. There is.

You know, maybe there's another company with an A. We can get back to AAA, which is where the U.S. would like to be. AI going to be very important to Amazon's call tomorrow explicitly. But something tells me Apple's going to keep it within product. All right. All right. Before we go, cue the code. Sign up at the link, cnbc.com slash OTOH. Latest installment of my On the Other Hand newsletter. Doing this one tomorrow on Squawk Box. This week's debate, does the Fitch rating cut signal a market

top, Morgan? It's a couple different, and it's not just, there's some other things going on that could make one concerned. Yeah. And of course, we did see that jump in the VIX today. We saw the major averages all fall lower, S&P down 1.4%. That's going to do it for us here at Overtime. Fast Money starts now.