Closing Bell - Closing Bell Overtime: Countdown to CPI 8/9/22

Episode Date: August 9, 2022

Stocks treaded water again today as investors anxiously awaiting tomorrow’s critical CPI report. Virtus Investment Partners’ Joe Terranova gives his forecast. Plus, Alphabet shares took a hit late in the trading day on some reports surrounding the DOJ potentially suing Google. Bill Nygren of Oakmark Funds – an Alphabet shareholder – gives his instant reaction. Plus, Disney is set to report results in Overtime tomorrow. Julia Boorstin gives a rundown of all the key metrics and themes every investor needs to watch.

Welcome to Overtime. I'm Mike Santoli, in for Scott Wofford. You just heard the bells, and we are just getting started right here. You just hear the, in moments, we're going to get quarterly results from Coinbase, Roblox, and when our team of reporters standing by to break in as soon as those numbers hit. Also ahead, we'll speak exclusively with noted value investor Bill Nygren, where he's finding opportunity in the market right now. But we start with our talk of the tape. The great pause, stocks treading water again today as investors anxiously await tomorrow's critical CPI report.

So will it be able to make or break a moment for this recent rebound? Let's ask CNBC contributor Joe Terranova, chief market strategist at Virtus Investment Partners. Joe, good to see you. Good to see you, Mike. You know, you can pull a couple of threads out of the market today, or at least really in the last few days. One is, look, semiconductors down 4%. People still have anxiety about the inverted yield curve. We're waiting for a crucial CPI number, and the market's kind of held together, just barely kind of digesting the gains.

On the other hand, this market looks like it maybe rolled exactly where you'd expect a bear market rebound to roll. So what are you really discerning from that? It's interesting. From a technical perspective, this is a classic bull flagging pattern. The problem is we're now sitting in place for the last eight days. Well, Mike, we did the same thing in early June. And guess what? We rolled over and went right down. So I think what's going to be interesting as an indicator is to follow where Treasury yields go. Because let's remember, Treasury yields topped out on June 14th, 10-year, a little bit below 3.5%. And the equity market took its lead from that move. Yields continued lower. And guess what?

Yields bottomed out around 250 on August 2nd. Well, what did the market do? The market kind of went in this sideways pattern. So I really think it's going to be Treasury yields that are going to tell us where we're going to break. Are we going to break above the 200-day moving average at 43.36? Are we going to go back and test the 50-day at 39 and a quarter? But right now, we're in this pattern between 40-76 and 41-86. What is the sensitivity right now of Treasury yields to what we're going to hear in the morning from CPI? Because you can sort of spin it either way. A hot number all of a sudden means longer-term yields maybe don't go up that much because it is, again, this trade that the Fed's going to have to choke off growth and inflation.

And maybe it's just the short-term yields that go up. But it's hard to handicap. I think you have to put 75 basis points back in the center of the target for us to see Treasury yields move significantly. But I also think positioning is important. And I think you would agree with this. I think positioning in the treasury market right now, where we are in the early part of August, is much different from where it was over the last six to eight weeks. So we had a lot of people that were short treasuries. That's kind of been unwound a little bit. What does that allow for? That allows for the rebuilding of that trade to actually occur. We've also had a revival in the big growth names.

They flatter the S&P 500. We've seen that push higher. Last couple of days, they've reset lower. I mean, just been the semis. It's been a little bit of the give back in the NASDAQ 100. Would you be looking to say that that's just going to unwind further? Or is that where the engine is going to have to be for next stage higher? Without question, I think that's the engine. Look, it's always been the engine. It's over 40 percent of the S&P 500.

And when growth comes back into play, that's when you see risk on again. So I have a difficult time believing that the market pushes towards the 200 day moving average without growth leading us there. On the downside, look, I mean, what have we not priced in negatively so far in 2022? We know all the negatives so far. So I think the price damage has been done. I do think you'll see strong support at that 50-day moving average on the downside. But if you're going to tell me growth isn't going to lead us, well, we're going to go quickly back to that 50-day moving average and challenge it. Yeah. By the way, Wynn Resorts results are out.

We're going to dig through those and bring them to you in a second here. That's one of the three that we're waiting for, Wynn, Coinbase and Roblox. Joe, you mentioned 75 basis points from the Fed as the next move in September has to be back at the center. So that, do you think, is that already priced, or do you feel like we have to just sort of digest that possibility? I think in the last 10 days we've kind of moved a little bit towards 50 basis points based on the belief that maybe we've got the economic contraction. I know what the jobs report on Friday suggested to everyone,

so now there's excitement that maybe you get to 75 again. But, Mike, we're spinning all over the place you're trying to uh... telegraph exactly what the federal reserve is going to do we we were hearing that there would be this pivot which i don't think is the reason you buy stocks okay you don't buy stocks believe in the fed is ultimately gonna pivot but but now we're actually thinking about well maybe the economy is a little bit stronger so they have to remain

more committed more judicious but actually raising rates more than expected. So I don't know. I think trying to invest surrounding what the Fed's going to do here in September, that's difficult. Look at what the earnings were, which were good, right? Revenue growth a little less than 15 percent, EPS growth around eight and a half percent. I would kind of focus on that in trying to identify opportunities based on what you saw in earnings. Has anything surfaced as an opportunity either buy or sell based on all the movements of the last six weeks, let's say? We did see this low quality stock rally, big short covering wave that washed through the market over the last few weeks. Either that's kind of a

chance to get out, or does that mean we're back in, you know, a little bit more of a risk-seeking market? Let me tell you exactly what I'm doing. I'm taking this little barbell approach where I'm saying on the value side, what's the one sector that I still think has fundamental challenges, and that's energy. We all know as winter approaches the shenanigans in Europe are going to occur with Russia's what they're going to do with with gas supplies. So I have increased my exposure to energy. Price declines have given me a what I think is a good entry point here. I'm carrying it overweight personally and in my Jyoti ETF which is double energy relative to the S&P. But then also on the tech side, it was carrying that as underweight. And I actually stepped a little bit into some

technology names. Datadog is a name that I bought recently. That's been working out well. I do have NVIDIA, which I'm holding on to. I actually bought some Uber last week. So kind of a barbell approach between a little bit of a hyper growth and staying with the value. Some software in there, too. OK, let's get to those wind resorts earnings. Contessa Brewer has those numbers for us. Hi, Contessa. Well, listen, this is a really strange turnabouts of events. We're seeing a huge revenue miss here coming in at nine hundred nine million dollars, where consensus was nine eighty point nine. On the other hand, we're seeing a beat on the loss per share coming in at a loss of 82 cents when $1.02 was the consensus. The big drag is, of course, Macau. It missed the expectations here in terms of adjusted property EBITDA. That's the key earnings

metric for these casino companies. But it beat on the same metric both at Encore Boston Harbor and in Las Vegas, running full steam ahead. We're seeing the adjusted property EBITDA in Las Vegas coming in at $226.7 million versus the $187 million that was anticipated here. We are now in a situation where for Wynn, which before the pandemic saw 75% of its profits coming from Macau, a real turnabout. And it's really Las Vegas that is supporting this company right now. As you can see, the stock down just almost a percent on this news. The call starts in about 45 minutes. Mike? Yeah, relatively muted drop given the given the miss. But Contessa, we'll see how it goes from here with the call. By the way, Roblox earnings also are now out.

Let's get to Steve Kovac with those. Hey, Steve. Hey, Mike. Yeah, shares falling about 10 percent now after hours after a big loss here on the top and bottom lines. Let's see. 30 cents loss versus 21 cents expected. A big miss there. Revenue also a miss. 640 million versus 644 million expected. Revenue growth. Now that's up 21% year over year, but growth there is still slowing. Mike, this is going to hurt some things here. Daily active users, 52.2 million. Now that's up 21% from a year ago, but again, slowing growth rates, it's really hard pandemic comps keep hurting the company here. Growth there is about a million short there on users from what

the street was looking for. But users are down versus last quarter. That's a sign. Kids going out in the real world and not exactly in the metaverse. By the way, I spoke with Chief Business Officer Craig Donato on these results. He's telling me they're working through these tough comparisons from COVID, adding, quote, as we move forward, we're not just simply retaining those users. We grew on top of that. That was a fairly substantial number to actually have go to 26% year over year in July. So look, here they're trying to point to growth now in the current quarter as they're coming out of these tough pandemic costs, Mike. By the way, call tomorrow morning at 8.30 a.m. One thing you should be listening for is hints from CEO Dave Bazzucchi on their advertising plans. That's going to be a big initiative for them through the end of the

year, Mike. All right, Steve, thanks. Yeah, Roblox seemingly not immune to this sort of video gaming malaise we've seen wash through the industry. Let's bring in CNBC contributor Brynne Talkington of Requisite Capital Management. She owns Roblox, as well as Keith Lerner of Truist Advisory Services. Bryn, good to have you on to weigh in here with the Roblox story. Stock already down by two-thirds, been a volatile one, also doubled off the lows. Earnings in general, better than feared, but it looks like we have some bumps in the latest little run the last couple of days. What's your read early on Roblo well, I think, first of all, today's probably not the best day

as small caps definitely are turning over, the NASDAQ's turning over. And I think sentiment for these high growth companies that have revenues, you know, have some free cashflow, but no earnings, you know, they're going to be tough comps, especially a tough day, especially on today. I do think what investors should look at is,

as I'm reading the report as well, is that, you know, that average booking per daily average user, you know, year over year, it was 1225 per user. That's down 21% year over year, but still growing long term. And so I do think, as you guys just previously said, these comps year over year are really tough because everybody's out and out about in the summer. So I think summer tops or summer comps are really tough. But once again, the stock is one of the very few stocks that's up well over 100 percent off its lows. So if it can actually open tomorrow, you know, after the call tomorrow morning and only be off five or 10 percent, I still think that's a win for Roblox shareholders because it has had really an amazing run since that June 16th low.

Yeah. And not to mention how aggressively it opened on its debut publicly. It had a lot of high expectations set when that came out. Keith, talk just in general about your approach right here to the recent rebound we've seen, whether it can really amount to an all clear for the market do you think June was the low- how would investors be- kind of reallocating. According to what the market's given us here. Yeah sure thing Mike and great

to see you great to be with you. You know our point of view as it has actually shifted it around the June- lows we were saying that this market was extremely oversold on many metrics. And more recently we've been saying to our investors that we think this is a more opportune time to at least trim

back on equities. Because at this point, with this rally, we think the upside's probably capped 42 to 4,300. We look at a confluence of technical and valuation levels. And the risk-reward, in our view, is just not that favorable favorable because you look back before the pandemic, this market for the last 20 years had a hard time sustaining an 18 multiple. We're at 17 and a half today. So we don't think there's a lot of upside there. And we do think there's some earning risk. Even if you don't think there's earning risk, you're still pretty fully valued. And the other thing, Mike, that I think is really important that I keep staring out is we have the most central bank tightening globally we've seen in about 30 years. That's going to impact the market and the economy. And again, from our point of view at this time, we're a bit more cautious short term. In what way that an investor should be immediately worried about, Keith, is that

lagged effect of central bank tightening going to hit this market in excess of what it already might have priced in near the lows. I guess that's the big question. Is it you in the camp that says, you know, earnings estimates have to be chopped down for next year or just the risk premium is going to go up? How should we think about that? You know, it's a good point because at the lows, we're down 24 percent. That's one of the reasons why we were telling folks not to be selling because 24% decline is consistent with the median decline we've seen around recessions. I think, Mike, the way to think about it, instead of just trying to think about tops and bottoms, this risk-reward, I don't know that we have to go back and break the lows, but we're towards the top end of the range.

So we just think more short-term, there's more downside relative to upside here. And from our vantage point, that means taking a little bit, you know, risk off the table, being a little bit more defensive. We still like, you know, areas like health care, staples, energy is the one cyclical area that we like and be more tactical this year. That's been our approach. You know, if we get a deeper pullback, then, you know, use that to go back risk on. But at this point, you know, I just I don't see the catalyst to see a lot of upside. We talked about tech earlier. The whole entire move up since June has been all evaluation expansion and the same thing with tech. And now we're seeing semiconductors, a lead part of

technology, start to show some weakness here in the short term. I mean, Joe, on the point of overall market valuation, you know, it is true. At the lows, it wasn't as if the market was screening out as being dirt cheap, right? It got down toward 15 times earnings. Again, the very large growth stocks might be inflating that a little bit. Maybe we should consider ourselves relatively fortunate if you're an investor in the S&P, and that's as much as you had to accept in terms of damage. But where does that leave you in terms of potential future returns,

where we've gotten to with valuations, or is it just like, as long as the market feels like the earnings are coming through, maybe it's okay? Well, I think you're also staring at the U.S. dollar and seeing how much of a headwind that's going to be in future quarters.

Listen, tonight, you know, Roblox, Coinbase, and Wynn, it kind of feels like we're figuring out who's going to come in third place in the National League Central, the Cubs, Pirates, or Reds. But focus on what you said, and there has been the resiliency and earnings. But I think as we look forward, understanding what the terminal rate on cost of capital is going to be is very important, right? Understanding what the debt burden is going to be for corporations, and then looking at the value of the U.S. dollar. Value of

the U.S. dollar is really going to be an integral part of the earnings story as we move forward towards the end of the year. Bryn, in general, how would you characterize your kind of risk posture right now in your strategy? I mean, is it about trying to kind of reload on some equity exposure on some of the faster moving parts of the market where you could make up some ground, or is it still time to play more defense? Well, a little bit of both. I mean, for new clients, we've actually been dollar cost averaging all year, taking advantage of the volatility in the downturn. So, you know, bear markets are the best way to, you know, build a portfolio. From the portfolio as a whole, we really, our biggest position is actually covered calls. And so I think we're wanting to sell volatility and take advantage of that so clients can own a diversified basket of stocks, but take advantage of that and sell that

high call premium, which, you know, you've had in whether it's a Coinbase or a Roblox, but you also have that in a lot of the energy names. And I will say it's really important in terms of my thesis here, is I don't think, and I'm sure Twitterverse will correct me, that the Fed has ever stopped a tightening cycle when CPI was above Fed funds. So we are still, you could drive a truck through that. And so maybe this time is different, but I still do think that delta between Fed funds and cpi is going to continue to cause some frustration for the market investors yeah it obviously cpi would have to come down pretty hard to uh to meet where fed funds is is heading to anytime soon uh let's

get to kate rooney though coinbase earnings are out kate has the numbers hey there mike coinbase with a wider than expected loss for the second quarter and a miss here on revenue. The loss per share, $4.98. That was compared to $2.65 Wall Street was expecting. Total revenue coming in at $808 million. That was also a miss. It was down 31% compared to the prior quarter. Total revenue down more than 64% from a year ago. It also talks here about transaction-based revenue. That was down significantly, as well as trading volume, about 53 percent from a year ago. $217 billion when it comes to that trading volume. And the majority of that came from the institutional side. Here we talk a lot about the mix.

$46 million of that was from retail trading. Also talking here about operating expenses, up about 8 percent. a net loss for the quarter of one point one billion. They say that was heavily impacted by an impairment charge, essentially an accounting charge for the loss they took on the price of Bitcoin. It's we've seen it with Tesla and some of the other companies that hold Bitcoin in their balance sheet. They say that added about four hundred and fifty million dollars to that total loss number. Monthly transacting users also down about 2% from the prior quarter. We did get some July numbers, though. They don't give full guidance. But the July numbers, they say MTUs dropped to about

$8 million from $9 million in the prior quarter. They talk about the soft crypto market conditions continuing. That is reflected in the Q3 outlook here that we're still looking through. They admit this was a tough quarter, and they say the decline in crypto asset prices significantly impacted results. They say that was consistent with some of the outlook they provided back in May. They point to the volatility in this business in general, very much tied to crypto markets. They also point to risk management, though. They say they were not exposed to some of the liquidity issues we've seen on the lending side. Shares down slightly here after hours. Mike, back to you. Kate, thank you very much. Bryn, the first reflex,

actually, the stock was up on the news. Maybe a lot of what is in these numbers was relatively known in terms of what's happened to crypto prices as well as their transaction volumes. But at this point, how do you get a handle on what the run rate of business is here and what the growth opportunities? This company was very profitable on its IPO, was supposed to, you know, several months ago, still be in the green right now. And here you have them still suffering with losses and some struggles on the user side. Right. Well, I mean, I was just looking at one of the analyst estimates from November of 2021 for 2022. And they were looking, you know, prospectively for adjusted EBITDA over $2 billion. And now,

best case scenario for the year, maybe $300 million loss. I think what you want to pay attention to right now is defense. This is the time to save the cash they have. And Brian said earlier this year, the max loss they were looking for 2022 would be an adjusted EBITDA of a loss of 500 million. So I need to dig into the numbers and see if that's actually tracking. I think that would put pressure on the stock longer in the short term if people are thinking those expenses and those losses are going to be closer to that 500 million or greater. But once again, like as an investor, this is a stock where if you're looking to get into it, you can sell calls

on this and really have high income. And so you can take advantage of that volatility. So I do think if you're in this long term, looking at a call strategy makes a lot of sense, especially as this crypto bear market, I think, continues for the short term. Joe, you know, with Coinbase, with Roblox, with, I mean, Allbirds yesterday, I mean, the class of 2020 and 2021 for IPOs and public listings has not been really, you know, shining here. No, it is not. And I don't know how you could find any evidence to suggest that any of these companies are going to reestablish some of the glory that we witnessed just 20 months ago. So, you know, this this report for Coinbase, when you look at it, you think about the relationship with BlackRock. OK, what does that give you?

It just gives institutional investors of BlackRock exposure, opportunity to trade Bitcoin. Doesn't mean that they're actually going to do that. So I think there has to be a bullish momentum that once again presents itself for Ethereum, for Bitcoin and the entirety of crypto to get excited about going back as an investor in Coinbase. Excitement follows prices. Volume follows the excitement. That's pretty much been the formula. Joe, Bryn, Keith, thanks very much. Appreciate it. Let's now get to our Twitter question of the day. We want to know, what are you expecting from tomorrow's CPI report? Higher than expected, lower than expected, or in line with expectations? Head to at CNBC Overtime on Twitter. Cast your vote. We'll bring you the results at the end of

the show. Up next, fresh opportunities where Oakmark's Bill Nygren is finding value in the market right now. He joins us exclusively next. And later, much more on the Coinbase quarter. Instant reaction from a top analyst as we await the earnings call. We are live from the New York Stock Exchange. Overtime is back in overtime and we're following a developing story on Alphabet, the stock taking a hit late in the trading session on a report that the Justice Department is close to filing suit against Google over its dominance in the ad market.

Let's get instant reaction from an Alphabet shareholder joining us now, Bill Nygren, Oakmark Fund's partner and CIO of U.S. Equities. Bill, great to catch up with you. Obviously, you're a pretty long-term shareholder here in Alphabet. There's been this potential hypothetical regulatory overhang on the company for a while. How would you think about the potential for some kind of legal action here directed toward their ad business? First, thanks for having me, Mike. We've been very long-term investors in Google. Our basic thesis on Alphabet, basic thesis is if you subtract out the values for their cash,

for the investment spending that they're making and other bets, that you're paying less than a market multiple for search. And as part of that, we've never been too concerned about the potential regulatory effect that you could get at Alphabet or frankly Meta as well, that might result in having to split up parts of the company and perhaps have those trade separately. The advertising business, obviously that's an important business to Alphabet, but if that piece traded separately, we think it would force investors to recognize a higher value. That's in a kind of breakup scenario. I do wonder if around the edges, if there are some kind of limits around whether it's, you know, Alphabet sort of privileging its own its own sites, its own products in search results and things like that.

I think parts of the world have some restrictions on this. Are those things that you think move the needle at all for the growth rate of the ad business? No, we basically don't think that that's changing the profitability of Alphabet significantly. So that type of regulatory action wouldn't concern us. Now, just more broadly, Bill, I mean, I wonder what you're finding in terms of either fresh values or things you have more or less conviction in in this market.

You've had a pretty good reset lower to the overall indexes. Average stocks underperformed that. Earnings have more or less come through. That would suggest that more values are surfacing. Is that what you're finding? Yeah, we think there's a lot of opportunity today for an investor. Of course, that's our general position at Oakmark, is that long-term investors should be in the equity market for most of their assets.

And today, despite the market selling at a mid or upper teens multiple, we think there are a lot of opportunities at very low P.E. multiples. The financial sector of the market, the banks, Ally Financial is one of our largest holdings, a large car lender sells at five times earnings, Capital One, the large credit card company is about six times earnings, Citibank in the midst of a turnaround is about seven times earnings, and all three of those companies are generating a lot of cash flow today that they can't profitably reinvest in the business. So that capital is all coming back to shareholders in the form of repurchases and dividends. We think that's a sector of the market that's just too cheap today. And just obviously, you know, maybe one of the cautionary thoughts there is simply that, you know, relatively

cyclical stocks, financials, when they trade at cheap multiples of current or future earnings, it means, you know, there's concern about what the economy is going to do when those earnings are at peak. Clearly, you don't really think that a recession is going to, you know, wipe out the earnings outlook. Well, we've had two quarters of down GDP. In the past, that's always been called a recession. But what's different this time is the employment outlook is so much stronger, especially for the bottom quartile of earners. They've seen real wage increases and no shortage of job opportunities at all. And credit card spenders don't default on their bills, or auto borrowers don't default on their bills unless they lose

their jobs. And we think the prospects for maintaining their jobs throughout this economic soft period are quite strong. I think the typical investor is going back to the past two recessions, the pandemic and also the great recession that the housing market caused in 08. And the kind of following the playbook of which companies performed the worst in those two recessions, those were not typical recessions at all. Most of my career, it's been a recession like what we're in now, where there's a debate during the recession of are we in one or are we not in one? And by the time there's general agreement that we're in a recession, we're on the way out of it. So we think the financials are well positioned this time

to stay strong throughout a downturn. And Bill, before we let you go, just love your quick take on Disney, which you own, which we're expecting earnings from. Really kind of a contrarian call here. Went from being a favorite during the pandemic to actually being really neglected or cast aside by investors here. Right. As you know, Mike, the stock fell more than 50 percent. It's recovered a little bit. But at today's price, if you assume that they would earn the cyclically low operating margin that Netflix has on their streaming business, Disney would be selling at 15 times earnings. And everybody's paying attention to streaming. But the theme

parks are half the operating income, even if we normalize streaming to a normal multiple. And the theme parks are about as good a business as you can imagine. So we don't own Disney for the earnings report this week. We own it because we think it's a great business and the market isn't making you pay a lot for it. Bill, thanks very much for the time. Appreciate your thoughts today. All right, time now for a CNBC News update with Shepard Smith. Hi, Shep.

Hi, Mike. From the news on CNBC, here's what's happening. A break in the case of four Muslim men murdered in New Mexico by someone authorities warned could be a serial killer. Albuquerque police say they found a car believed to be tied to those murders and that they've detained the driver, who they now say is the primary suspect. We're expecting more from authorities at a news conference scheduled for 5.30 Eastern time. A grand jury in Mississippi has declined to indict the white woman whose accusation led to the lynching of limit to Emmett Till nearly 70 years ago. There were new revelations about an unserved arrest warrant and an unpublished

memoir from Carolyn Bryant Donham that investigators said they hoped would be enough to lead to charges against her. But the panel heard seven hours of testimony and returned no indictment. Emmett Till's cousin and the last living witness to his lynching says it's likely now that Donham, who's in her 80s, will never face charges. And the White House says President Biden was not briefed and was not aware of the search warrant executed yesterday at Donald Trump's Mar-a-Lago resort. The latest reporting on the investigation and legal analysis tonight on the news, right after Jim Cramer, 7 Eastern, CNBC. Mike, back to you. Chef, thank you.

Up next, we're digging in on Coinbase, that stock on the move after reporting just a few minutes ago. Instant expert analysis from an analyst after the break. Over time, we'll be right back. Don't forget about our Twitter question of the day. We want to know, what are you expecting from tomorrow's CPI report? Higher than expected, lower than expected, or in line with expectations? Head to at CNBC Overtime on Twitter. Cast your vote.

We'll bring you the results at the end of today's show. Up next, today's most valuable pick, the bull case for one major retailer reporting earnings next week. We'll bring you that name. Plus, more reaction to the Coinbase quarter. Over time, we'll be right back. Check our chairs of Target, the stock recouping all of its losses from early June when it warned profitability would take a hit due to high inventory levels. Target reports earnings next week and our next guest says this stock is a buy heading into that print. Joining us now is EBS retail analyst Michael Lasser. He just reiterated his buy rating on the stock with a $205 price target. Michael good to see you. Good to see you Mike. So where does this opportunity come from? I mean it doesn't look as if to me is trading super cheap just yet, even though it's well off its highs in share price terms.

But obviously you think that the numbers are going to be coming through in terms of comp sales into next year? I think that this year is going to prove to be transitory, Mike. I have to borrow a very popular word from the last year and a half or so. And a lot of the inventory challenges that Target has experienced will prove to be temporary next year. Its earnings are going to be much higher than it is this year, as it doesn't have to incur a lot of the costs associated with disposing that inventory. And why we like this stock into this print is because it's going to show progress working through some of these inventory challenges. At the same time, it's going to show that it still resonates with the consumer,

which will be very important during this uncertain economic period. Well, you mentioned it's an uncertain economic period. I mean, to what degree is the stock somewhat captive to what people think about the overall trajectory of the economy, how consumers are going to weather this period at this point? That's one of the compelling features of the investment case on Target right now, Mike, is its margin reconstruction story that should materialize in the next year should be idiosyncratic, independent of what happens in the macro environment. A lot of what happened this year is it had to incur costs associated with canceling orders, writing down inventory, clearing out excess inventory. The very likely case is that

next year its inventory is going to be in better balance with sales, even if sales are under pressure because the consumer is a bit weaker. Also, keep in mind that Target's a great place for consumers to consolidate trips, especially as it wants to avoid the mall. And so it has a real potential to gain market share in an uncertain economic environment. And will it, on that basis, outperform something like a Walmart or Costco? Or I guess, is there enough to go around in this recovery for all? There is. Those are three excellent retailers, and there's enough to go around for each of them. There's a compelling case to buy all three of those retailers. In the case of Target, it has the most upside.

It trades at the lowest multiple and it's got the best margin recovery story into next year. Michael, appreciate you laying it out for us. Thanks, Mike. Michael Lasser on Target. Up next, we're tracking the biggest stock movers in overtime. Christina Parts-Nevelis is all over that action. Christina, what do you have? And I have more job cuts to announce. This time, it's salad bar chain Sweetgreen. And what's slowdown in advertising spending habits? One company says that isn't the case. The details next.

We're tracking the biggest movers in overtime. Christina Partsenevelis is here with all that. Hey, Christina. Hi, Mike. Well, shares of Sweetgreen are wilting 20 percent. Guy Adami wanted me to say that, by the way, after the company lowered its 2022 guidance. And it also announced it would be laying off roughly 5% of its staff and plans to downsize to a smaller office building and that's to lower expenses. Management says they began to see softness in revenue just around Memorial Day. The company though did announce today that it's planning to expand in Michigan. Tax company H&R Block beat estimates with its Q4 results and this is a quarter that is the main quarter for them because it encompasses tax season. H&R also said their new mobile banking platform, which is called Spruce, helped increase customer activity. The company does plan to increase its dividend by

7% and also announced a new $1.25 billion buyback program, which is why the stock is climbing 4% higher. And last but not least, shares of Trade Desk right now are soaring 17% on stronger-than-expected sales and guidance. Customer retention was over 95% in the second quarter. The stock, though, had been under pressure for quite some while, and that's after companies like Meta and Roku warned of a slowdown in online advertising spending. But Trade Desk's results are squashing those doubts. That's why the stock is up. Mike? Yeah, one of the great growth stories of the past few years.

Having a little revival there, Christina. Thank you very much. Sticking with earnings now, take another look at shares of Coinbase. Lower in overtime after the company reported a miss on the top and bottom lines, and a greater than 50 percent year over year drop in trading volume during the second quarter. Now joining us for instant reaction to the quarter is Mizzou host, senior analyst Dan Dolev. Dan, what are your first impressions? I mean, it didn't seem like expectations were particularly high going in, but there was that rally in the stock connected to the recent BlackRock partnership agreement. So where does that leave you after these results? Right. And the rally happened a day before the news, which was also peculiar, but

it started before the news. But I think my quick reaction on this one is the most important metric to look at is the take rate on the retail side. And some people might actually get excited. And I think that's why this stock traded up slightly, you know, in the beginning. They might get excited about the three basis point uptake in that from 130 to 130, 130, 130, 130, 130, 130, 130, 130, 130, 130, 130, 130, 130, 130, 130, 130, 130, 130, 130, 130, 130, 130, 130, 130, 130, 130, 130, 130, 130, 130, 130, 130, 130, 130, 130, 130, 130, 130, 130, 130, 130, 130, 130, 130, 130, 130, 130, 130, 130, 130, 130, 130, 130, 130, 130, 130, 130, 130, 130, 130, 130, 130, 130, 130, 130, 130, 130, 130, 130, 130, 130, 130, 130, 130, 130, 130, 130, 130, 130, 130, 130, 130, 130, 130, 130, 130, 130, 130, 130, 130, 130, 130, 130, 130,

130, 130, 130, 130, 130, 130, 130, 130, 130, 130, 130, 130, 130, 130, 130, 130, 130, 130, 130, 130, 130, 130, 130, 130, 130, 130, 130, 130, 130, 130, 130, 130, 130, 130, 130, 130, 130, 130, 130, 130, 130, 130, 130, 130, 130, 130, 130, 130, 130, 130, 130, 130, 130, 130, 130, 130, 130, 130, 130, 130, 130, 130, 130, 130, 130, 130, 13, 13, 13, 13, 14, 14, 14, 15, 15, 16, 16, 16, 17, 17, 18, 18, 19, side. So like the real big traders. And because of that, there's a mix shift towards the long end of the retail trades. And that's what's taking up the retail take rate. So I think it's actually getting excited over it is actually getting excited about a bad thing, not a good thing. Yeah, it would seem like, I guess, a lower quality customer base is a bigger part of the mix,

if that's the case, Dan. I mean, where does that leave you big picture with regard to this company? If, in fact, they're losing share, it's kind of unclear exactly what this industry is going to look like in terms of how many of these large trading platforms that'll be sustained longer term. So with a $20 billion market cap or so, less than that now with Coinbase, how would you think about it from an investment perspective? I think from an investment perspective, look, we have a $42 price target in that area. I think from an investment perspective, it's a no go because what we haven't seen yet, Mike, is the retail trading fees come down. And with all the competition, right, what we talked about, FTX, Sam Bankman Freed is killing, you know, is killing them on the prosumer side. Crypto.com is getting

share. We've seen all of that stuff. Eventually, the next leg to the story is price contraction on that retail take rate, kind of offering freebies to get customers in the door. Remember, they're guiding down the year from 5 to 15 MTUs to 7 to 9. So at the midpoints, they're guiding it down by 2 million monthly users. So I think over time, you're going to see this is going to go the same route as like the Schwab's of the world and the TD to free trading. They're still charging way too much money on the consumers. And that's going to be the next down leg in the stock, in my view. Is there any way out of that trap, I guess, of being pulled down toward lower and lower transaction revenue?

I wish. But I mean, the only other way is maybe some of those subscription and services. They were actually surprisingly more resilient than I would have thought. They ticked down, but just a little less. They were just a little down versus 1Q. So maybe if that one gets, becomes a bigger price, you know, bigger part of the mix fast enough to more than offset the decline in trading fees, that might be sort of the silver lining here. But I think it's very, very hard to outrun. This is why they keep hiring and why they're still spending more than $4 billion. They understand this and they know they have to outrun the degradation in fees.

And that's kind of the job that they have right now. Yeah, all right, well, $42 price target, that implies getting cut in half from these levels right here. Dan, we'll see how it goes. Thanks a lot for the time. Thanks, Mike. All right, up next, our two-minute drill.

One money manager is bringing the REIT, how he's playing rising rates. Overtime. We'll be right back. It is time for our two minute drill. Joining us now is Jeremy Bryan, portfolio manager with Gradient Investments. Jeremy, good to see you talking about some some REITs here. It would seem like there might be some treacherous footing potentially in parts of real estate when it comes to things like office, people worried about a consumer slowdown. Where does that take you in terms of fresh ideas in this area? Yeah.

You know, what's nice about REITs is that there's a lot of diversification in the business model. So we tend to think differentiated. Yeah, we're staying away from office and retail, but where we are going is either price improvement or secular growth in the REIT space. And so that leads us to storage REITs, data centers, and tower stocks. I mean, those are all either in secular growth mode where the cyclical component is there, but there's a secular trend involved, or with regard to especially public storage, PSA, they just have good pricing power. It tends to be a really sticky revenue base.

And so over time, they can pass that pricing on. And it's really kind of a defensive model, even if we think about if we're going to have a slowing perspective, they tend to hold up a little better. Yeah, I mean, storage has been an incredible sector for quite a long time for those reasons. I do wonder if there's any real leverage to housing turnover or things like that. What drives this business aside from, you know, just people generally have too much stuff? People generally have too much stuff. I mean, really, yeah, housing does have an effect here and there. But generally, people don't think, you know, if they're putting in and taking out, they don't generally necessarily eliminate that right away. So it just tends to be kind of that continual progression.

Sure, the cyclical component can have some impact, but it's generally less impactful than other areas, right? Hotels, those kinds of things that are highly cyclical in the REIT space. This just tends to be more steady-eddy, which is where we like to be involved. And you did mention towers, which means Crown Castle, as well as data center Equinix. Unfortunately, we got to leave it there. Jeremy, I appreciate the time today. Thank you very much. Appreciate it. All right. We have more news on Alphabet. Let's get to Deirdre Boza with the details. Hey, Dave. Hey, Mike, we did get a response from Google regarding the report that the Department of

Justice is getting ready to sue the company as early as next month. A spokesperson telling us, quote, our advertising technologies help websites and apps fund their content, enable small businesses to reach customers around the world. The enormous competition in online advertising has made online ads more relevant, reduced ad tech fees, and expanded options for publishers and advertisers. We've heard this kind of language from Google in the past. Remember, this is the second or would be the second complaint that the DOJ is bringing against Google centered around its advertising technology. Back to you. Yeah, a little glimpse of the company's likely defense then if we do get a case, Dee. Thank you very much.

Up next, Disney earnings on deck. We're breaking down the key things every investor needs to watch when those numbers hit the tape tomorrow. Over time, we'll be right back. Let's get the results of our Twitter question. We asked you, what are you expecting from tomorrow's CPI report? The majority of you said lower than expected. 73% of the vote looking for a missed downside surprise on CPI. We'll see if we get that. Disney earnings meantime on deck tomorrow in overtime. Julia Boorstin here with what to look for. Hey, Julia.

Well, analysts expect Disney to keep up its revenue growth and accelerate its streaming growth despite so many macroeconomic pressures. And with analysts projecting 23 percent revenue growth and 21 percent growth in earnings per share, I think there are three key areas for investors to focus on. First, the theme park division is expected to show meaningful growth on pent up demand. The question is how much inflation is impacting consumer spending and forward bookings. Second, we're also looking for commentary on a downturn in the ad market. And third, streaming. Analysts expect the company to add 12.5 million total subscribers to streaming businesses for 217.5 million total and for Disney Plus to add about 10 million subs for nearly 148 million. Going into earnings, Disney shares are down 30% year to date and 72% of

analysts have a buy or overweight rating on the stock. 28% have a hold and there are no sell ratings. Today, the stock was down just less than 1%. But Mike, it's going to be really interesting to see whether these results are different than the decline Netflix saw in streaming or if they're in line. Yeah, absolutely. You would think it might reset expectations some degree lower for the streaming business. But interesting to cite, though, the theme park business, when you do have these concerns about where we are in the economic cycle, I can remember in 08, it was a huge overhang on Disney, but yet the theme parks so far have been pretty much running full out. Yeah, absolutely. I mean, look, I think one issue with the theme

parks is there was so much pent up demand. So many families that didn't go to Disneyland or Disney World delayed those trips to this summer. and now they're saying we're all vaccinated, we're going. The question is whether there is a crush of attendance now, and then maybe next year things are lighter. Huge question, especially different parts of the world. We'll see how that shakes out. Julia, thank you very much. We'll talk to you tomorrow.

That does it for Overtime. Fast Money begins right now.