Closing Bell - Closing Bell Overtime: Countdown to the Fed, Bullish Case for Banks 5/3/22

Episode Date: May 3, 2022

Are investors headed for a “head fake” rally in May? Greg Branch from Veritas Financial lays out his prediction ahead of the Fed’s pivotal meeting on Wednesday. Plus, Mike Mayo from Wells Fargo Securities outlines three reasons why he’s bullish on banks. And, Michael Santoli is “birdwatching” for his “Last Word.”

Welcome to Overtime. I'm Scott Watney. You just heard the bells. We, of course, here at Post 9, just getting started. In just a few minutes, we'll get the very first look at PIMCO's new playbook from Star Portfolio Manager Aaron Brown. Can't wait for that. First, though, we begin with our talk of the tape. Less than 24 hours before the Fed decision on interest rates, a decision that comes just as some are suggesting the market could be ready to rip higher. Yet others, including some big names, are urging caution. Let's find out where Gregory Branch stands. He's the founder and managing partner at Veritas, a CNBC contributor as well. He's with us live. It's good to see you again. You've been pretty negative. Are you still? Long term, I am still. Nothing's changed my long term view, Scott. But I do think that we have the potential after this rate hike into the middle of this month to have a surprising route.

I think that the inflation number we get for this month will be the first time that we're actually lapping something with a four-handle in front of it. As you remember, March of 2021 was 2.6%, but April 2021 was 4.2%. So we have to start talking about that base effect again. And this time it's working the other way. And so the headline number should come in less than that 8%. It doesn't mean that we're in a more benign inflationary environment, but that won't stop folks who have been talking about peak inflation and talking about the transitory nature last year from taking the victory lap. and it probably won't stop the Fed from taking the victory lap. And I think that that could put some tailwind into the market mid-month. You do hear more people talking about

peak inflation and what that could mean, including Brad Gerstner of Altimeter, who was on with me on the Halftime Report today. I want you to listen to what Brad said about that issue, and we can discuss on the other side. I think inflation is already rolled over. I want you to listen to what Brad said about that issue and we can discuss on the other side. I think inflation is already rolled over. I think there's already a tremendous amount of demand destruction occurring in the world. The Fed and what the Fed does in terms of rates over the course of the next six months will determine the path of multiples. I think it's at least even odds that that direction will be up from here because so much has come out of the market from a growth multiple perspective. All right. So that's Brad Gerstner today. Greg, he also said, by the way, risk is, quote,

more asymmetric to the upside, that you have to find opportunities to buy Howard Marks on with Sarah within the last hour. I do think that the worst of the excesses have been corrected. The groups that did the best in 20 and 21 have been hit the hardest. What do you make? Yeah, I think that's partially true. I do think that, like I said, as you noted, I'm towards the low end on what we're going to see in terms of growth this year. You know, I'm at mid-single digits,

and I do think that expectations for growth have to come in. But I'm not going to make an argument on multiples. I think we'd largely agree there that we're not going to get a lot of multiple expansion here, but we can get performance in the back half with companies that are going to grow their earnings double digits. Yeah. What about the idea of the tremendous amount of uncertainty that is in the market? There are a lot of big names, Marks and Gerstner are just two among them out in Los Angeles, who are talking about this very issue.

Ken Griffin calls it the most uncertainty he's seen in the market since the global financial crisis. You heard Paul Tudor Jones, I hope, this morning on our network, who was talking about the scenario being very, very difficult for Jay Powell. How does that factor into your overall view? And is that principally why you can't be more positive on a longer term perspective? You know, I'm going to put some fingers here, I guess, Scott. You know, some of this is Jerome Powell's doing. And so, you know, there are many of us who encouraged him to come out of Jackson Hole last year and announce a plan to raise rates and tighten the balance sheet and

taper. But they decided to pass on that. And I think it would have been an opportune time in the midst of what was a very strong third quarter earnings season to do that. And he finds himself behind the curve. He has very little option. At this point, I think that it's pretty much dictated in stone what he has to do throughout the course of this year. Whether we see the economy over responding to that or not, I'm probably in that camp of saying we've added to the uncertainty that we had to face this year by not responding to it sooner. And so I would agree with all those luminaries. Yeah, yeah, yeah. I mean, you've got a tale of two markets almost. I remember going back to, you know, the very early days of our program here in overtime,

and maybe it was on the very first day or so when Scott Minard was talking about this runway lasting, you know, it's like a two-year runway. The market can do very well for maybe a year, maybe a little less now until it really has to come to grips with what the Fed is going to do and multiple interest rate increases that are maybe going to change the game down the road. It's also one of the reasons why I think you've got people like Eric Johnston from Cantor Fitzgerald, who sat with me right here on set yesterday and said this about the stock market. And the data that we've run suggests that over the next three to four weeks, we are going to see a fairly sharp rally.

I see everything that you just said is probably right, but that doesn't mean that stocks can't rally in the interim once you get this Fed meeting out of the way. What do you think? I don't disagree. Like I said, I think that the inflation number, the CPI number, lapping a 4.2 percent, coming in somewhere around that 6 percent territory will give everyone a sigh of relief, will give a market that has been looking for some good news, even though on its face, again, it doesn't mean that we're in a more benign environment. But I think that that could be the spark that would have us see a late May rally. But I also agree with some of those luminaries

that there are risks that we haven't even talked about, Scott. We're going to have some really serious distressed debt issues. We haven't talked about that. I don't know if we've fully digested what shutdowns in China are going to mean for the supply chain for this year. So there's some other risk factors. Forgive me for interrupting you. And I do apologize. I've got earnings out. Airbnb and Lyft. Dee Bosa with both. Dee? Hey, Scott, both of those shares are higher in the after hours. Let me run through Airbnb's results first. It's a beat on every metric that I'm seeing. Revenue is better than the street expected. A loss of $0.03 per share versus a loss of $0.29 a share that was expected. By the way, the street is expecting a net profit from Airbnb for the year.

So that goes beyond that positive adjusted EBITDA number. Despite expectations for strong demand to continue and surpass pre-COVID levels this year, the company expects the average daily rate, the ADR in Q2, to be flat on a year-over-year basis. It was only up 5% in the last quarter. So that is a major deceleration from the last year. But do keep in mind, it rose a lot over 2021, partly the effects of inflation, as well as the mix of bookings they were seeing.

Also just want to mention, bookings topped $100 million for the first time. So that exceeds pre-pandemic levels. Moving on to Lyft, shares are up by 3.5% in the after hours, beating on the top and bottom line here. An unexpected profit, adjusted EPS of $0.07 versus a loss of $0.07 per share expected. Ride volumes are at a COVID high, seeing strong demand here. Active riders, however, slightly below the street's estimate. If you recall last quarter, that sort of sunk the shares in the wake of those results. Guidance will be important, but we do not get that until the analyst's call, which kicks

off shortly, Scott. So I'll bring you more news as I see it. And as you can see, Lyft already pairing some of those gains, perhaps on that active rider number. Yeah, appreciate that. All right, Dee, thank you so much. I mean, Lyft shares have been cut in half this year. So it's been one of those areas, Greg Branch. I get back to you and please forgive me again for having to interrupt you, but that's the way we go in overtime when things are happening fast and furious like that.

Give me your read here. We could take Airbnb. You know, you almost take them together. And I look at this. The stocks that have been punished the most are those high valuation growth stocks that don't earn any money. So Airbnb reports a loss. It's not as bad as the street was expecting. And Lyft reports a surprise profit. So maybe no wonder why air is up. And we're still trying to figure

out which direction Lyft is going to go in overtime. Yeah, I think you can take them together, Scott. And this is the tailwind we're seeing in that travel, entertainment, experience segment. Remember when we saw the credit cards report, they reported record spending in those areas, more so than they even saw in 2019. And I think that these two companies are somewhat the beneficiary of that. With Lyft, what's going to be important is not only that guidance, but I haven't looked at the number yet. I suspect that they handily beat that $5 to $15 million guide that they were putting up for first quarter EBITDA. And it'll be interesting to see what they say for second quarter. But like you said, they're trading below pre-vaccine levels at two times sales.

So there's just not a lot of further room for downside here, provided that they handle the commentary around those driver supply issues and around some of the other issues where we might see some softness going forward. Airbnb trading at where they opened an IPO despite, say, multiple 15 times price of sales, despite growing total sales 77% since then. Again, not a lot of downside in that valuation. Yeah. Let's see if it holds, too, right? One of the themes of earnings season has been good numbers, bad stocks. So let's see how we digest all of this. And that's been one of the principal issues that even positive earnings have not resulted in the performance from the share prices. And you can go down the list and come up with many different ticker symbols that have suffered that same fate. They beat top and bottom line, and yet the stock sells off. Let's expand the conversation. Bring in PIMCO

portfolio manager Erin Brown. She just co-authored a new report updating the firm's asset allocation outlook. It's nice to see you. Thanks for being here with us in overtime. Thanks for having me, Scott. You know, I look through this new playbook from you and it comes across as pretty cautious. Is that fair? Yeah, I think that as we move into this late cycle environment, the ability for, you know, double digit stock returns are going to become increasingly difficult. And so we're really looking at RV trades and relative value positioning in order to be able to generate, you know, real returns in this environment. And I think there's a real clear bifurcation that

has developed in the market and will continue to unfold as the, you know, as the months and quarters progress. Yeah. I mean, are you in the Griffin and Tudor Jones camp? Ken Griffin can't think of a worse financial environment since the word that perhaps the highest period of uncertainty since the great financial crisis is what he said. Tudor Jones, you don't want to own bonds or stocks. It's going to be a very negative situation for either one of those. You can't think of a worse macro environment than where we are now. Now, look, they're luminaries. It doesn't mean they're always right or going to be right this time. But nonetheless, that seems to be a prevailing view from big money. I don't think that the market and I don't think investors should

be that dire in terms of their market outlook. You know, still we're in an environment where growth is probably going to remain above trend. I don't think that we're going into a recession over the next 12 months. But when you're coming off double digit returns every single year, you're in and you're out. And we're, you know, 60, 40 funds were delivering 10 percent on an annualized basis. And, you know, now the outlook is maybe low single digit returns. That's, you know, a pretty big deceleration. And so, yeah, certainly the outlook is much more uncertain than it has been, you know, in a long time. That said, there's real

pockets of opportunity still within stocks. And when you look across the stock market, they're still beating, first of all, you know, in the first quarter by about 4% on average. They're still delivering, you know, really solid results across the board. Now, there are certainly names that we've seen, you know, real big misses and their stocks have gotten punished. But you look at reopening names, you look at some of the reflation trades in the market. There's, you know, I think real opportunity for outperformance, you know, continue from names like reporting today. Like you mentioned, like Airbnb and Expedia and the other travel, you know, names, which, you know, today obviously got hit and came under pressure. But I think as we go forward over the next couple of weeks, you're going to continue to see really strong bookings numbers, really strong reopening trends and stocks like that continue to work. At the same time, though, you know,

you're picking things like health care and pharmaceuticals, maybe with a little more defensive bent and favoring less cyclical exposure. Now, I obviously know why the travel names are going to work. That's no big shock. As you said, we're reopening the economy fully and people want to get out there this summer and do that. But you definitely do have a more defensive tone. Yes, absolutely. And I think as you move into that late cycle environment, the tipping point for recession gets closer and closer. And so you do want to be broadly defensively positioned in your portfolio. We're not looking at, you know, broad cycles to outperform from here outside a couple of, you know, key sectors and names,

nor are we looking for value to outperform. We're really looking for quality and looking for stocks that can do well in lower, you know, lower earnings visibility environments and overall have lower earnings volatility and more of the defensive sectors, particularly healthcare, which is, I think, quite attractively valued, really looks, I think, quite good right now. I also think the tech sector, which has gotten punished this year, large cap tech, not the tech that is not profitable, but large cap tech that has good free cash flow generation, high cash sitting on their balance sheet also can perform well as a defensive in this market environment. And the valuation here looks really attractive. Yeah. So, Greg, you can grade the playbook, if you will.

It's health care. It's pharmaceuticals, it's commodities, select currencies, duration, right? Bonds now may be a good alternative to stocks for the first time in gosh knows how long, and even cash. Yeah, and I think, you know, for my philosophy, what you were saying about tech kind of typifies exactly how I look at companies. Even in the large-cap tech space, there's a difference between an Apple that's going to grow at 6% and a Google that's going to grow at 30% plus at a cheaper multiple. So what I'm looking for are companies that can give me that double-digit earnings growth, that can give me that double-digit top line. And as we've discussed, we can get some of that in companies with historically low multiples at this point.

Those are companies that I'm going to keep an eye on because even where we don't have multiple expansions, we can get performance from that consistent double-digit earnings growth. All right. Greg Branch, I appreciate it. Aaron Brown, my thanks to you as well for sharing your playbook first with us. We'll talk to you again soon. That's Aaron Brown from PIMCO, of course. We do have a big interview coming your way tomorrow. Double Lines' Jeffrey

Gundlach is joining me live right here in the OT. Instant reaction to the Fed decision, his look ahead for what lies ahead. That's tomorrow, 4 o'clock Eastern, right here in overtime. To our Twitter question of the day now, and it's right in the Fed wheelhouse, we want to know how many times do you think the Fed will hike 50 or more basis points at their meetings this year? Two times, three times, four times or more. You can head to at CNBC overtime. Please cast your vote. We'll bring you those results and the winner at the end of our show. AMD earnings, they are out. Christina Partsenevelos has those numbers for us. Christina. AMD beat earnings every quarter out of the past five years and this quarter, no different. The company posting revenue that grew 71% year over year. Adjusted earnings

per share came in at $1.13 on revenues of $5.98 billion for the first quarter. Keep in mind, though, AMD closed its acquisition of Xilinx in February, so it's actually the first quarter to reflect Xilinx numbers. The CEO stating, quote, each of our businesses grew by a significant double-digit percentage year-over-year growth led specifically by server processor revenue. And I'd like to point out, too, guidance for revenue came in at $6.5 billion, which is above estimates. And lastly, Lisa Su, you can see the stock price up 4.5% right now. Lisa Su, the CEO, will be on CNBC tomorrow at 9 a.m. And, Scott, there you have it.

I'll dig in to see more about the PC sales and all that because that was a big concern. Thanks. Yeah, just quickly, though, you were looking for, I heard you leading up to this in the last hour, you were looking for the guidance, most especially, given what we've heard from some of the other chip players and principally how this stock has performed. Exactly. Intel, just last week, their guidance was lowered for the month of June because of concerns over decreased PC sales.

And then you've got to factor in supply chain issues, closures in China because of COVID. That's still having an effect on or trickle effect, I should say, on the market. So nonetheless, their guidance, 6.5 billion came in higher. All right. You go look through that and we'll hear from you again. I hope that's Christina Partsenevela. Starbucks earnings. They're out. Kate Rogers with that. Hi, Kate. Hey, Scott. A mixed second quarter here. EPS coming in at fifty nine cents adjusted. That's in line with estimates for the quarter revenues. A beat here. Seven point six four billion over seven point six zero billion estimated by the street.

Global same store sales up seven percent. That's in line. The Americas up 12 percent. That's also a beat compared to estimates of up 9%. International markets, though, continue to struggle. Same-store sales fell by 8%. That is worse than expected. And in the all-important market of China, same-store sales fell 23% due to ongoing COVID restrictions. Now, this is the first conference call we'll hear from interim CEO Howard Schultz. We're all curious to hear what he has to say about the company and, in particular, the ongoing union push. Full year 2022 guidance will be discussed on that call at 5 p.m. per this release. Remember, Starbucks did lower its full year guidance for EPS.

Also said margins would take a 2 percent hit for the full year last quarter due in part to inflation. That stock is down more than 30 percent in the last six months. Right now it's up just slightly in the after hours. Scott, back over to you. I was going to ask you if Mr. Schultz was going to be on the call. You already answered my question. Howard Schultz, back, interim CEO and back on the call. All right. We'll look forward to that. Kate Rogers, thank you so much. We are just getting started right here in the OT. Up next, we'll have much more on AMD's big quarter. The stock is popping right now. We have a shareholder on deck with their instant

reaction to those numbers and later betting on the banks. Wall Street's top ranked banking analyst is here laying out three reasons why he is bullish on the financials and you should be too. Overtime is back after this. Welcome back to Overtime. Shares of AMD. Check them out right there. Three and a quarter percent popping in the OT on the back of that big earnings beat. It's bringing Larry Cordisco. He's the CIO, the co-CIO of Osterweiss Core Equity Strategy. He owns shares of that stock in his fund. It's good to see you.

Your instant reaction is what? They're great. You hit on it in the prior segment that people were really nervous about the PC sales, about the graphics cards. That segment looks really strong. The guide for the next segment looks really strong. The guide for the next quarter looks really strong. And gross margins, we're pretty much where we expect them to be. So when you think about the three things that people are really focused on for this quarter, I'd say it's a pretty good report. Yeah. Why has the stock been down so much?

Well, it's dealing with the same problems that's endemic to the market, which is you had pretty high valuations in a rising interest rate environment. And then you have decelerations in the economy. And so when you think about, you know, valuations coming in and uncertainty about earnings growth, you know, what will be the E and the P ratio? Semiconductors trade with those concerns on steroids. So, you know, it's you could say that AMD and a lot of other semiconductors maybe went a little too far, a little too fast. But at these levels, if the economy holds and if these trends in data center growth and computing growth hold, you know, these stocks are pretty reasonably valued here. AMD specifically is pretty reasonably valued here.

Yeah, I'm thinking of, you know P. C. market I know what on the surface looks pretty good we stop to listen to Lisa Sue talk about that. Clearly- it is an environment that doesn't look all that great. It did but it's hard to say there are nuances Scott because- a lot of

the weakness we've seen been on the low end it's been in Chromebooks- is not been in the in the in the higher end- It's been in Chromebooks. It has not been in the higher end part of the segment where AMD plays more. And one other thing that I think investors should consider, and it's a big part of our investment thesis, is even if the PC market weakens, AMD is poised to get so much share in the data center from Intel in higher margin products that there's a really good chance you get an

offset. So, I mean, maybe they don't beat them, raise every single quarter to the degree to which they have been because it's been really spectacular. But there's a really big offset, a positive offset in AMD's business that could really power them through a weaker PC cycle. That's what happens, though, when you're Lisa Su and you knock the cover off the ball and your stock is one of the best performers and you're taking share from Intel and others, the bar just goes whoop, whoop, whoop. It keeps going higher and higher. I mean, at some point in an environment, you're going to disappoint the most optimistic expectations. Totally. But now that we're about 20 times next year's earnings, a lot of that disappointment has been priced in or a lot of that concern has been priced in. On a risk-reward basis, we like

the bet with AMD here. We think the data center continues to grow. There's no signs of slowdown from Microsoft or Google or obviously Amazon. AMD's going to be getting share for the next three or four years. So, you know, it's a pretty good story. Yeah. What's your top chip stock right now? Is it AMD or is it something else?

AMD is our largest chip position right now. That's correct. How about more broadly in technology? How do you see the space, which has gotten beaten up pretty bad? I don't know if you heard Howard Marks last hour with Sarah, suggesting that at least the most, which has gotten beaten up pretty bad? I don't know if you heard Howard Marks last hour with Sarah suggesting that at least the most the areas with the most excess have gotten beaten up pretty good. Yeah, exactly. Those low earnings, no earnings sort of companies, the ones that are trading, were trading, were trading on 20, 30, 40 times price to sales.

Multiples have absolutely gotten wrecked. And of course, it's pulled down everything, right? Microsoft doesn't quite have the multiple today that it did six months ago. Neither does Google. But you look at some of these names, and I think it was last week we were talking about Google and Microsoft are two largest positions, especially Google. 20 times earnings for Google. I'm willing to bet that Google can grow earnings 15% a year for the next five years or some average like that. And 20 times multiple, this is a pretty good price. So, you know, it depends. You have to parse valuation depending on the company, right? Some companies are still really expensive. Some companies, the moderation,

the great normalization that the economy is going through it's been priced in and this is what active investors have to do is sort through you know all this noise and find those names where you can find solid returns going forward so you know you feel better all the same i'm sorry i'm sorry i'm sorry to to jump on your toes there uh lar. Are you feeling better about mega caps now that you've had a chance to digest all those earnings or have you brought your own expectations down even albeit slightly just given there was slowing revenue growth almost across the board, not for everybody, but it sure was a prevailing theme.

Yeah. I mean, I feel better because prices have come down. I mean, nobody likes to, you know, sit on a price decline in their portfolio. That's not fun. But you have to look at, you know, would I buy this stock today? How do I look at the next year or two or five? And I definitely feel better about Google, about Microsoft. Amazon's gotten pretty messy. But if you think of the long arc of Amazon and their, you know, their record of

return on invested capital, I think that's going to be fine, too. So, you know, I don't I don't want to sound Pollyannaish, right, because we don't know where the economy is going and maybe things decelerate more. But on a relative basis, some of these mega cap companies that are trading at market multiples, that's a this might be the place to be. We'll make that the last word. Lurico Disco, I appreciate your time so very much reacting to these earnings as they cross the tape. We'll see you again soon. Up next, the big question, is it time to bet on the big banks?

Top analyst Mike Mayo makes the case for the financials, the three reasons why he is feeling so bullish right now. We'll do that next in the OT. We're back in overtime. It's time for a CNBC News update with Shepard Smith live in Washington, D.C. for us today. Shep. Hi, Scott. Live from outside the Supreme Court, here's what's happening on CNBC. The fallout from last night's leak of that draft opinion striking down Roe v. Wade on full display here, while so many people on opposite sides of the abortion rights movement gather around the Supreme Court. The Capitol police here have announced that they're increasing security as they brace for protests. Police put a security barrier around the court building just last night

as people rushed here after the judge's auto draft decision leaked. The reaction on Capitol Hill has largely been split along party lines, as you might imagine. Senate Majority Leader Chuck Schumer vowing to put forward a bill in Congress that would protect abortion rights. Senator Schumer says he'll call for a vote next week so that every senator is on the record. The minority leader, Mitch McConnell, and several other GOP senators largely not commenting on the decision just yet,

but blasting the leak as an attack on the high court's independence. Calling it an egregious breach of trust, the Chief Justice, John Roberts, ordering an investigation into whomever leaked that draft, the release virtually unheard of in the court's modern history. In his statement, the chief justice confirmed that the leaked opinion is authentic,

but he noted the court's decision is not yet final. Tonight, comprehensive coverage of this story live from here at the Supreme Court and beyond. In addition, Ukrainians evacuating Mariupol and the manhunt for the escaped inmate and apparently his girlfriend, the guard from Alabama, all tonight on the news right after Jim Cramer, 7 Eastern CNBC. Scott, back to you. All right, Jeff Smith, I appreciate that very much. Thank you.

We'll see you then. The financial sector has been one of the big laggards over the past year. Mike Mayo, though, from Wells Fargo Securities is out with a new note, making yet another bullish case for the banks. Mr. Mayo, joining us now at Post 9. It's good to see you. Thanks for being here. I say yet another because you keep making a bullish case for the banks and you keep being wrong. I'm sorry to say because the stocks don't do what you say they're going to do. I've never been there, right? It's true. I've never been more right on a theme and so wrong on the

stocks. But I'll tell you, Scott, the stock market's wrong. I think I'm going to be right. And I think you're going to see the best Main Street banking growth in four decades. And the first catalyst here starts tomorrow with the Fed rate hikes. Well, what's the disconnect? I mean, why do you keep making this case that you say is so right from a fundamental standpoint and the stocks don't do anything? Look at the 52-week highs. I mean, we know where the S&P is 13% off of its high. Bank of America is down 25%. If you go down the list, almost every big bank is down close to that, if not more. Year-to-date is the same story. Where is the disconnect? Well, yeah, these are dollar bills sitting on the ground, you know, waiting to be picked up. You have higher interest rates.

You have accelerating loan growth. You have traditional banking revenues growing. You have good credit quality. You have the tech revolution of banks allowing for better profit margins. You have higher earnings estimates. And you have, like, Bank of America, our top pick, trading at less than nine times earnings next year or half the market PE this is crazy from my standpoint but the concern on everybody's mind is recession recession recession recession and you know what somebody deservedly so well we'll see what happens we we know the history of Fed rate hikes not good and

they have that but if we have simply a mild recession, a lot of these bank stocks, like Bank of America, is already pricing in a mild recession. And newsflash, this is not the global financial crisis. This is not 2002. This is not 1992. Banks do not have concentrations of problem loans. They reduce their construction loans. They reduce subprime loans. They reduce the riskiest assets, and they get no credit for it. of problem loans. They reduced their construction loans. They reduced subprime loans. They reduced

the riskiest assets, and they get no credit for it. But since earnings have been reported, especially since Bank of America reported earnings, bank stocks have outperformed, albeit in a down market. So while the Bank Index and Bank of America hit a 52-week low yesterday, they did start outperforming the last two weeks, and we think they will continue to outperform. And this is a gift, a gift. I'm pinching myself. I'm so amazed at how well this theme of Main Street banking is playing out better than I thought at the start of the year, yet the stocks are down. That is an opportunity. And I'll repeat it again. The stock market is the one that's wrong. Okay. So I'm thinking about the environment,

which is increasingly more uncertain. You suggest in your note that the risk of a moderate recession is not priced into the bank stocks. You used mild. You used the word mild earlier, not moderate. You suggested mild recession might be priced in, but moderate is not. And I'm also thinking about the quality of earnings going down the road, loan loss reserves going up as banks get a little more cautious on the environment. Isn't that something I need to be concerned about? Well, first, I mean, banks are sitting on record dry powder, record cash and cash equivalent assets. So they finally get to put that to work and get credit to monetize all those deposits that they've gathered.

And there's certainly risk, but we estimate a reward to risk ratio of like three to four to one. There could be a sky in a moderate recession downside of one third. But under a base case, we have up one third. And if you go back to historical valuations, you're up two thirds. If you probability weight this, it's a good time to be owning bank stocks. I was told you were bringing what you always like to bring, a prop. And I was told you have a medal, right?

To show the power lifting mindset. These are your words, not mine. To push through the pain of the underperformance of these bank stocks. Did you not bring it? I forgot my medal, Scott, but I participated in my power lifting meet on Saturday and I'm channeling the but I participated in my powerlifting meet on Saturday,

and I'm channeling the energy I need in powerlifting. You grind through. You don't think you're going to make it. You push through the pain, and eventually you lift the weight. And the same analogy applies to the bank stocks. You push through the pain of this underperformance, and you're going to see these bank stock prices lifted over the next couple quarters. Best name you've got in the group is what? Is it BAC, Bank of America? I know I've said Bank of America before, but it's unbelievable that they trade at half the market P.E. If you're pricing in a recession, a mild

recession for Bank of America, why is the rest of the stock market staying where it is? That's a disconnect. I think Bank of America is the one that corrects more highly. All right. Appreciate you being here. Congrats on your medal. Thank you. All right. Appreciate you being here. Thanks for having me. Congrats on your medal. Thank you. All right. That's Mike Mayo joining us. Up next, we have some big headlines just crossing about Elon Musk and his future plans for Twitter. We've got those details for you next. News alert on Twitter in overtime.

Sources are telling The Wall Street Journal that Elon Musk plans to take Twitter public again after taking it private in his $44 billion takeover. The journal is reporting that Musk has told potential investors he could stage a Twitter IPO within the next few years. Interesting story. We'll keep our eyes there. You see Twitter shares right there, not doing too much, up one quarter of one percent today. Moving on, Starbucks, AMD, Lyft, Airbnb, all on the move in the OT on their earnings. Instant reaction coming right now to those big reports from halftime committee member, co-founder of MarketRebellion.com, Pete Najarian. Pete, let's go to AMD first, okay? You bought calls right ahead of the print. They go above $5 billion in the quarter in revenue for the first

time ever. Your take? Well, you know, all you've got to do is look back to last quarter as well, Scott. And, you know, the amazing thing is this stock, when you look at where the stock was, call it over a 120. I know it got all the way up to 160, but call it 120, 130, all the way back down to where it is right now or was. And now we've got a nice move to the upside. They beat in every single category you could want. They gave you a great outlook. They gave you everything that you could want in an earnings report. It outlook. They gave you everything that you could want in an earnings report. It'll be interesting to see

how well that's received tomorrow as well, because a lot of the time we can see these stocks move to the upside, and then the next day you just never know. But right now, somewhere between 94 and 95, that looks pretty good. And by the way, this is a company whose P.E. has now gotten very, very tolerable

for even more people, Scott. For a while there, it was in the 50s, 60s. Now we're talking about a PE closer into the low 20s. That says a lot about where this stock has fallen from and the strength in which she has been able to navigate through these markets in an absolutely amazing way and do things that other companies were not able to do. I think it's just an incredible quarter. Yeah. She being Lisa Sue, Dr. Lisa Sue. She's the CEO, of course, and she's going to be on. That's OK. She's going to be on in the morning at 9 a.m. with the gang, as she usually is after earning. So we'll look forward to that interview there. Do you think this is a relief rally, Pete, given what has just taken place in the chip space recently? You know, Intel reporting last

week, people wondering what was going to happen here. Maybe there's a little bit of that playing into the story too. It certainly could be a little bit of that, Scott. I mean, when you look at a lot of the different numbers, they've been very powerful, especially what we're looking at tonight. I mean, this is the kind of quarter that you need to have. They did deliver. They delivered the last quarter as well, but it's impressive. You know, when you start to look at some of these record numbers and every category being in double digits moved to the upside. I mean, there's just a lot of things to unpack here on how well they are doing right now, as others might be giving us all sorts of complaints about supply chain and this and that.

They're not doing any of that. They're just delivering. Looking at Starbucks, too, you have calls there, obviously. What's your take here? You happy you have that position in that stock? Because it's been a dog. I mean, it's gotten beaten up badly. They got issues. You know, obviously, Howard Schultz is back. China's an issue they need to contend with. Yeah, they've got labor issues all over the place, whether or not you want to talk about here in the United States or the fact that they don't even have to have labor because they're shut down in China. And China is a pretty decent chunk of what we're looking at when we look at the Starbucks and we look for those revenue numbers. They actually did okay here, Scott, in the U.S.

I thought those numbers were decent, but they've got to deal with so many different things right now. You know, they're like what we look at each and every day within the markets. There are so many different things right now. You know, they're like what we look at each and every day within the markets. There's so many different issues. Starbucks right now finds themselves in that same sort of a spot when you look at this company, because obviously the CEO gone. Now you bring back Howard Schultz. A lot of people frustrated even with Howard Schultz right now. Not only that, but then you've got labor issues here, whether it's unionization or just costs alone. There's a lot of different things that they're facing right now, so there's a lot of understandable on why Starbucks is really, really struggling.

We'll see, Scott. I think it's finally got a P.E. that makes sense. A lot of people loved this stock when it was $120. They don't seem to love it here. I think this is the time to start showing a little bit of love. Well, I think people are worried that it's a falling knife. I mean, it was at $126 and change, and now it's sitting a buck higher than its 52-week low. You can understand why there's a little bit of caution, Pete, as I look at it. I mean, the value is price to sales is not even three. Price to

sales is under three. It's 20 PE. Right. And that's why I think you've got to look at this, because do they turn around? Do we start to open up in China? Do they actually get some deals made with the labor side of things, unionization, all the rest of that in a way that actually Starbucks really likes, at least at the corporate level? I think if they can do those kind of things, I don't think that's so tough. And obviously we got to look at China. That is a big, that's the point I always used to call to you and say, they are growing in China. They are building. You've got over 5,000 stores there. That is a big chunk of what Starbucks is. And right now, that's just an element that's not working for them.

All right, my man, Pete Najarian. Appreciate it. Instant reaction. We'll talk to you soon. That's Pete Najarian joining us at MarketRebellion.com, of course. Up next, we're breaking down some other big movers in the OT. Christina Partsenevelos is tracking that for us. What is on deck?

Thank you, Scott. Well, we've got some changes. Change is on deck? Thank you, Scott. Well, we've got some changes. Change of the guards at an online dating company, inflationary headwinds that aren't as bad as we thought for one semiconductor company, and a cloud computing firm that missed estimates. All movers in the OT. I'll have those names right after this break.

The CNBC Fantasy Stock Draft Challenge is on and you can play along. You can scan the code right there or you can go to CNBC.com backslash stock draft challenge for more details. Please do that. Be fun to play along with us. All right. We're tracking some big stock moves in the OT. Let's get back to Christina Parts and Novelos has the details for us. Hi, Christina. Hello.

Let's start with the shares of online dating firm Match Group falling right now 4% in the overtime. Earnings and revenues beat estimates for the quarter, but the company sees the second quarter revenues between $800 and $810 million versus the $835 million estimate. So clearly a miss there. Other big news, a change of guards. The Match current CEO will resign at the end of May and the president of mobile gaming company Zynga, Bernard Kim, Kim, I should say, will step in to become the new CEO. And we have shares of Supermicro jumping right now, jumping over 7% after raising its full-year guidance for earnings per share and sales. Gross margins increased quarter over quarter despite inflationary headwinds. And then you have cybersecurity and cloud firm Akamai also moving in the overtime right now down big time, over 9 percent after a profit decrease. Earnings

per share of $1.39 versus estimates of $1.42. So a miss. Revenues came in in line with the expectation, but you can see the stock taking a major hit right now. And lastly, Yum China missed on earnings, but revenues came in slightly higher, the stock up about 1%. The company's saying, quote, unless the COVID-19 situation improves significantly in May and June, we expect to incur an operating loss in the second quarter, Scott. Yeah, tough environment there, for sure. Christina, thank you. That's Christina Partsinovelos with those stocks that are moving in the OT. Up next, Mike Santoli is breaking out his binoculars.

He'll explain why in his last word. It's all about birdwatching. Overtime's right back. Got a big leg lower for shares of Lyft in the OT after reporting those earnings. DeBose flagging those for us and that move. Deirdre, what do we see now? Yes, our shares are down nearly 15 percent, and this all has to do with guidance. The CFO on the Lyft call just told analysts that they're expecting adjusted EBITDA for the second quarter of between 10 and 20 million dollars. The street was looking for nearly 84 million dollars. Now, the reason for this is that they have to continue to invest in driver supply. We know that this has

been a problem, but a lot of folks thought this was maybe behind them. This will certainly raise the stakes for Uber. They report tomorrow. What are they doing on this front? Also, revenue. This was lighter than expected. Lyft is expecting revenue of between $950 million to $1 billion. The street was looking for slightly over $1 billion. Remember, this was supposed to be the recovery year for ride sharing, but it doesn't look quite so simple. This guidance really weighing on share, Scott. Yeah. Do you appreciate that? That's Deirdre Bosa. Mike Santoli is here for his last word, but a comment here. I mean, there's just no appetite for guidance that doesn't live up to any sort of expectations. And when you report a loss, I mean, there just is no appetite. Well, for a company too, that has not yet really persuaded anybody that they have the long-term

business model figured out. That's been the case from the day of the IPO for Uber and Lyft. Obviously, you know, they are indispensable to the economy and to consumers, but not to investors. Yeah, look at that stock. It's down by better than 15 percent in the OT. Your last word is? I'm going to say birdwatching. It's what we do every six or seven weeks when the Fed makes a decision tomorrow. We know that there's going to say birdwatching. It's what we do every six or seven weeks when the Fed makes a decision tomorrow. We know that there's going to be a hawkish headline. Right. But is it priced in? That's always the question. I think it's been plausible to say into every meeting of the last couple that the market has already kind of run to the spot where the Fed was going to be throwing the ball and you could easily catch it. However, Powell has kind of passed up any opportunity to soften the message.

And so I do think you shouldn't expect any intent for him to try to soothe the market. But maybe if he doesn't really endorse a three quarter percent. Oh, that's exactly what I was thinking as you were saying that. Yeah. So that's the argument. How are we defining hawkishness and dovishness right now? If he says a half point is probably OK from here on out in June and maybe beyond that. Who knows? Maybe the market can say we've already gotten there.

We figured this out. We don't think that they're going to try to be strident. But, you know, another case is until they get to what they consider neutral, there's no incentive to really ease back on the rhetoric. Exactly what I was thinking. I mean, if he makes it clear, lets the market know 50, 50, 50. Yeah. Market's probably good with that. 75. lets the market know 50, 50, 50. Market's probably good with that. By the way, next week's inflation number probably ends up being more important because you really want to solidify the idea of the peak having been seen.

All right, good stuff, Mike. Thank you. That's Mike Santoli with the 2-Minute Drill. 2-Minute Drill's next. One big promo. Jeffrey Gundlach tomorrow, double-line CEO, 4 o'clock exclusive, reacting immediately to what the Fed says, what the Fed does, what they may do in the meetings ahead.

I can't wait for that interview. I hope you'll watch that. Speaking of the Fed, let's get to the results of our Twitter question of the day. Most of you expecting the central bank to raise the benchmark interest rate by 50 or more basis points three times this year. Well, that's interesting. I think the market thinks it's going to be more than that. So maybe you'll be right.

There is our poll three times 43 percent. Appreciate it. Time for the two minute drill. Joining us now is Gradient Investments President Michael Binger. It's good to see you. Let's do some stock picking before we get out of here in overtime. Meta Platforms, number one. Why? Yeah, I think it's safe to get back into the Facebook game again here. The last quarter was better than feared. They beat EPS. They came in line. I think most thought they had missed. You know, what I liked actually was their average user base actually increased versus decline, which caused that big drop. Reels is getting traction and it trades at 14 times earnings next year. So it's safe to invest again here. You think all of the issues that were around the prior quarter are gone now with this quarter? Not all the issues, but I think the main

issues that cause investors to sell or stay away. I think there's going to be more buyers and sellers now that it trades at this valuation, which we haven't seen this valuation on Facebook in a long, long time. Number two, is it AZEK? A-Z-E-K? Yes. This is a small cap name tied to the U.S. housing market. They are the second largest manufacturer of composite decking, not wood, but composite. Trex is the largest. I think there's a large tailwind behind this business. It's in the early innings of the wood to composite conversion. Their revenue is growing mid-teens. It trades at 16 times P.E. And it's really not dependent on the new housing market. 70 percent is repair and remodel. So I like this name here. Yeah. You know, I'm looking at your last pick, Target, which is interesting because of just what's taken place with consumer discretionary,

the current environment that we're in and everything that rides ahead with the Fed. I'm going to have to leave it there. I will talk to you soon. Mike Binger, thank you so much. It does it for us.