Closing Bell - Closing Bell Overtime: Earnings onslaught, Big biotech movers, Payments CEOs share consumer insights 2/28/23

Episode Date: February 28, 2023

Stocks were mostly lower on the final day of February to close out a downbeat month. Aaron Dunn from Eaton Vance and Jack Ablin from Cresset Capital break down the action and give their outlooks for March. The CEOs of Shift4 Payments and Klarna discuss their read on the consumer and the credit markets. Two biotech movers – Novavax and Sarepta – saw big moves post-market on breaking headlines. Plus analysis of a slew of companies that reported results in the after-hours session, including Ross Stores, Urban Outfitters, First Solar, HP, Virgin Galactic, AMC and Rivian. 

That's the scorecard on Wall Street as we close out a downbeat month, but the action's just getting started. Welcome to Closing Bell Overtime. I'm Morgan Brennan with John Ford. Buckle up for a wild ride of earnings that's coming your way. We're getting ready to bring you numbers from Ross Stores, HP, First Solar, Virgin Galactic, Rivian, AMC, and more. Plus, we're going to get clues on the consumer from the heads of two payment companies that just reported results. Klarna's CEO and the head of Shift4Payments will both join us this hour. Klarna's private, but it still reported results. It did. And it's been a busy day in terms of payments and payments processing. And so this is going to give us a lot more context on the consumer. Let's get straight into our market panel, though. Joining us are Aaron Dunn from Eaton Vance and Jack Ablin from Crescent Capital. Good afternoon

to you both. We just finished the month of February. We finished the month down after the rally we saw in January. So let me find my notes here. Jack, I'll put the first question to you. Are we fading the rally here? Is the next move lower? A lot depends on the data. The fact is that, you know, most of the data that we've seen, obviously, is January data, much stronger than expected. It started with the jobs report and it just kept coming at us with inflation and then spending. I will say that, you know, if the data weakens and it looks like the Fed will finally, you know, tap on the brake a little bit or at least take their foot off the accelerator, that would be an indication to say, OK, dollar lower yields stable to perhaps lower

equities trend higher. Let me ask you, actually, Jack, I'm going to follow up because we don't talk enough about fixed income. And there's so much talk about murky guides here. I'm looking at interest rates. I'm looking at fixed income. I'm looking at tax equivalent yield for certain types of funds. And I'm thinking, boy, you can perhaps get the equivalent of close to 9% right now if you're looking at muni funds. How should investors think about what kinds of risk they need to take and then what kinds of yield they can get outside of that risk? Yeah, I mean, it's a great point, John. The fact is I'm an asset allocator. I allocate capital. And if you think about it,

bonds have really been fighting equities for the last 15 years with one arm tied behind its back. So now that rates are slowly gravitating toward fair value, I would agree that over time we should see a migration of capital away from equities. A lot of it was just forced out there because there really wasn't an alternative. And some of that is going to find its way back into fixed income and income oriented assets. Absolutely. Aaron, I want to bring you to this conversation. Now I've got my handy dandy notes here. And one of the things you talk about is recency bias. What do you mean by that? and how is that driving the narrative we've seen play out so far to start the year in markets? Yeah I think it's it's very important to consider

where we came from to start the year. The S&P was up 6% in January and we just gave back probably about half of that in February. If you go back to the tech bubble in early 2000, 2002, you saw very similar activity amongst sort of the prior leadership of the market. That's really what we saw in January. You saw really five stocks drive more than half of the returns in the overall indices in January. So this is a knee-jerk behavioral reaction of investors to look at what worked last cycle. So I'm going to go back to those winners. And in our view, the market's vastly different. A little bit of what Jack was talking about there

was there's different alternatives in the market. So I think what really investors need to pay attention to is that risk now has a price in the market, right? There's alternatives to equities, and I think investors got pushed into equities. So in our view, the market is very different today than it was in 21, 2020. That's because risk now has a price. It costs money to borrow money to buy stock on margin. So the environment's vastly different today and we would take a different approach to the market today than in the past. Okay, I want to dig into that further, but first we're starting to get some of the earnings parade. Ross Stores is out, and Pippa Stevens has those numbers for us. Hi, Pippa. Hey, Marnie. Well, the retailer beating top and bottom line estimates for the fourth quarter, earning $131 per share versus an expectations of $124 per share,

with revenue also topping expectations. The company also announced an 8% increase in its quarterly cash dividend, although the guidance did come up short of expectations on the full-year EPS front. CEO Barbara Rentler saying that the macroeconomic and geopolitical environments remain highly uncertain and that they have to remain conservative when planning their business. Back to you. Okay. Shares are down 2% right now. Pippa Stevens, thank you. Let's bring in our senior markets commentator, Mike Santoli. Mike, I want to get your thoughts on this, especially given what we heard from Target and Brian Cornell just on our air earlier today. I was going to say, and following Walmart last week, where it seems as if caution is the

rule when it comes to the retail CEOs, not really wanting to promise too much. They don't have any better kind of crystal balls than we do. Raw stores in particular generally kind of done well. Stock has held up better than a lot of retailers, though has underperformed TJX. And it trades at a pretty full valuation because it has been a great operator over time. So to me, it's just modestly kind of on the downside for the guidance is being reflected in the reflex move after hours. Not much more, but it is a part of retail that in theory should be pretty well positioned, a little more on the off-price side of things. Yeah, got to wait for the commentary on the call.

Of course, things bounce around. Mike, thanks. Aaron, back to you on this one. A line here on the outlook from Ross Stores. They say we are planning comparable store sales to be relatively flat versus a 4% decline, 13% gain in fiscal 22 and 21. They're concerned about elevated inflation impacting the low to moderate income consumer. As we look ahead to lows in the morning, to dollar tree in the morning. How important is this consumer spending versus

consumer strength theme that I'm trying to hammer on? There's a difference between a consumer who's spending and a consumer who's strong. Yeah, I think we're getting a very mixed picture today of the consumer. If you look at the ISM or the expectation that it sees from the conference board, you see expectations are actually really falling off a cliff economically and it's very similar to July of last year. The difference is in July of last year, gasoline prices were really high so consumer expectations were really impacted by that. If you look at it today, gasoline prices are half of what they were so there's obviously a consumer reticence to go spend a lot of money when their expectations for forward

economic activity may be lower. I also think we're getting dynamics around income shifts. You know, you've got a social security bump early in the year for income, for inflation adjustments. And there's a lot of savings that have been eaten through through the end of the year heading into this year. And I also think you're getting early tax returns. So you're getting a lot of refunds in. It's probably impacting that. I think that probably flows through negatively into March, actually, because the IRS is ahead of where they usually are on refunds. So I think we're getting what my view is a stronger consumer view than is realistic. I think back half of the year is very challenging. Hold tight there for a moment, Aaron.

First Solar earnings are out as well. Pippa Stevens has those numbers. Pippa. Hey, John. Shares are popping about 5% here after the company beat both top and bottom line estimates. During the fourth quarter, First Solar reported a smaller than expected loss of $0.07 per share, while analysts were expecting a $0. cent loss per share. Revenue came in at $1 billion versus an estimate of $989 million. But it really does seem to be this

positive guidance, lifting both their full-year revenue guidance and seeing their full-year EPS guide of between $7 and $8 versus forecasts of $4.75. The company said it ended the year with a record contracted backlog and a significant pipeline of bookings. Once again, those shares popping back to you. All right, Pippa, thank you. Mike Santoli, a strong guide here, a little bit, well, a big contrast, right? Entirely different business from Ross Storrs, but how should we digest that? A strong stock, strong guidance, obviously, as the very positive macro trends being tagged as a beneficiary of the of the Infrastructure Act.

So everything seems to be working. Also, the novelty factor of having a pretty solidly profitable solar play. Always been some questions about how much is going to be tied to overall, you know, commercial and residential building and all the rest of it. But so far, higher guy during this earnings season has definitely been capitalized upon by the market because it hasn't happened that often, at least relative to recent quarters. OK. Shares of first solar popping 4% right now in the after-hours trade. We got another name with earnings out as well. That is Virgin Galactic. Those results are out as well. I would note this is very much a pre-revenue company. So less than the EPS or net loss in this particular case,

which was 151 million for the quarter, less than those numbers of top line and bottom line. What's really in focus is cash position, which, according to the company, remains strong with cash and cash equivalents. Marketable securities of $980 million as of December 31st. So down ever so slightly from where we ended 2022. The big thing and the focus here, because it is pre-revenue, is the space tourism business. And when commercial service is actually going to launch, Michael Colglazier, the CEO of Virgin Galactic, saying in this release that they are still on track to launch commercial service in the second quarter of 2023 and that enhancements to both the mothership

VMS Eve, which did a second flight yesterday, and VSS Unity, the actual rocket ship, are complete. So they are continuing on that path towards commercial service. You can see those shares are unchanged right now. All right. Meantime, we got breaking news from the FDA. Meg Terrell has those details. Meg. Hey, John. Well, an outside panel of advisors to the FDA met all day today to discuss Pfizer's application for an RSV vaccine for adults ages 60 plus. Now, they just took two votes. The votes were positive in favor of both the safety and the effectiveness of this vaccine. The FDA has a decision date in May on this vaccine and also one from GlaxoSmithKline, and they'll be meeting tomorrow to discuss the same issues around GSK's vaccine candidate.

Interestingly, though, guys, the vote was seven to four with one abstention on both of the measures, safety and effectiveness, and it really was not a home run. There were a lot of questions that the panel had about this vaccine, the amount of information they have about the safety and the durability of the effect here. They pointed out we are not in COVID with RSV, and this is a permanent approval potentially of this vaccine, not an emergency use authorization. So a really interesting panel vote just now. It was positive, and we'll see the same tomorrow potentially for GlaxoSmithKline. Guys, back to you. Just a quick question, Meg, because I know there are a number of RSV vaccines that are going through these various approval processes right now. Is this specifically for older adults or are babies and infants and little kids going

to be in focus here for approval too? From one mom to another, Morgan, I am with you on this. Right now, this is for adults 60 plus, but ultimately Pfizer has a vaccine that they've tested in pregnant people. So that should protect babies when they're born. There's also a product out there that is an antibody drug that's designed to be protective for babies in the early years of life. So drug companies are focused on this, but it's the old people who are getting the vaccine potentially first. Understood. Meg Terrell, thank you. We've got Rivian earnings out as well. Phil LeBeau has the numbers. Hi, Phil. Hi, Morgan. Take a look at shares of Rivian down more than 7% after the company reported a smaller than expected loss for the fourth quarter of $1.73. The street was expecting a loss of $1.94. However, revenue did come in also lighter than expected. $663 million was the

revenue for the fourth quarter, the street expecting $742 million. But one reason why this stock is trending lower, it is the guidance for next year. And production is what people are focused on. Many people were expecting them to say the production next year will be at least 60,000 vehicles. Rivian says it expects to build 50,000 vehicles, so 10,000 fewer than many analysts were expecting. Conference call will be coming up in a little bit. Guys, I'll send it back to you. Phil, got a question for you on this. Given what we just heard from Lucid, right, and demand issues it looks like out of there, that they're able to make enough cars, but they can't move them, and then even some inventory issues that Tesla's been having, how should we read the impact issues it looks like out of there. They're able to make enough cars, but they can't move them. And then even some inventory issues that Tesla's been having. How should we read the impact on the entire space and then on these challenger players right now? The pure EV startups, and by that I

mean the three, Lucid, Rivian, and Fisker, all reported completely different approaches here. You heard the numbers yesterday from Fisker saying that they expect that they're going to see sales and the production ramp as expected this year. And now you have Rivian saying 50,000 vehicles will be produced lighter than expectations from the street. As for Lucid, we've talked about the issues that are there. We heard from them last week and the stock moved down lower after they gave guidance that was lackluster at best. So what you're looking at here, John, is a real divergence amongst these startups based on what their business model is. Remember, Fisker's business model, asset light. They are not responsible. The manufacturing is done by Magna in Graz, Austria. And the markets that they're

going into are completely different. For Rivian, the interesting thing will be on this conference call, what do they say about reservations? Do they give us an updated number? We know that the other automakers, and Lucid in particular, have said, look, we're not going to be giving you guidance in terms of reservations in the future, and increasingly automakers are moving away from talking about reservations. I will be

curious to see what RJ Skrinić says about what reservation erosion has happened, especially given the EV market being under more pressure. OK, Philip, thank you. You bet. Want to bring back to our panel, Jack, your thoughts, whether it's Rivian, whether it's the EV sector writ large or any of the other earnings we've gotten so far after the bell? Yeah, I mean, as a Tesla owner myself, I think it is a lifestyle change in many respects. You know, you have to consider, you know, I have a charger in my house. But if I'm in an apartment, you know, you have to really start to think about the logistics and so forth. And, you know, any time I drive more than a couple of hundred miles, I have to kind of plan ahead. So I do think that we'll get there. I think

the infrastructure has to catch up. And I think that the mindset has to change. So my guess is we'll get, you know, one car out of the two, perhaps, as electric, and then slowly we'll start to see some traction. But still early on, I think, in the electric vehicle space. We have more earnings. Urban Outfitters, that's now out. Pippa Stevens has those numbers. It is a myth for earnings for Urban Outfitters. The company earned 34 cents per share during the fourth quarter. That was four cents short of estimates. Revenue came in at one point three eight billion, which was essentially in line with the one point three seven billion the street was looking for. That stock down about three percent now. Morgan, back to you.

All right. HP earnings are out as well. It's a parade. Frank Holland has those numbers. Frank, you're still up. Hey there, John. Shares HP Inc. down fractionally right now. They were down about 2.5%. Revenue in a beat on EPS. The computer and hardware maker missed estimates for its personal system segment. That's computers for office and personal use. There was a beat on printing, however. I spoke with CEO Enrique Lórez. He told me the return to office gave that segment a big boost.

Lórez said the business transformation plan announced last quarter that includes job cuts of four to six thousand over the next three years helped in the area when it came to margin as well. Operating margin with a slight beat there. The midpoint of EPS guidance for the current quarter above estimates full year guidance was reaffirmed. Loris also added that hybrid work overall is a big tailwind for HP especially in the second half of the year. HP estimates only 10 percent of meeting rooms have video conferencing software. And, of course, he expects that to increase. Now, shares of HP up almost a percent. Back over to you.

Frank, thank you. Mike Santoli, I guess hybrid means people get to print at home and at work. That's right. Yeah, maybe no give up there. You know, just one of the steadier, which is to say lowest growth type names in in old tech priced accordingly by the market in terms of the, you know, inexpensiveness. It's a free cash flow play. It's basically a buyback and dividend play. And aside from that big bulge of demand that they got during work from home in the pandemic. Been pretty steady stock. So I think it's pretty much true to form. $14 billion run rate of revenues per quarter this quarter, next quarter, and for the full year. So pretty much, I guess, in good and bad ways, pretty much a static story.

Okay. Erin, I want to bring you back into the conversation here, whether it's HP or any of the other earnings we've gotten specifically in these last few moments. How does it speak to opportunities to put money to work right now? And what is a very volatile start to the year? Yeah, so we really focus on stock specific actions or stock specific stories. And when we invest, and we really call that opportunistic value looking from a bottom up approach. It'll be interesting to get the numbers from Dollar Tree. You know. That's a name we own. And that's one where you have a new management team in place. You have the prior

management team from Dollar General that's moved into Dollar Tree to hopefully clean up that family dollar acquisition. We think the undercurrent of sort of off-price retail or dollar concept is really positive for them. So that's an undercurrent to that. We think there's a lot of fixing they can do to that business and close that valuation gap to dollar general. So that's one I would point to. I want to watch that, see how they come out with numbers. I think they've already set the tone last quarter

with sort of blocking in some excess costs to reposition the business. So we hope to see good positive results coming out of there. Okay. So beyond that, Jack, say just on PCs, and there's a full range of them from HP, Dell, Apple, that business has been hammered lately. Is there value there? Should investors think about a space like this that's in a cyclical downturn as an opportunity or is this an opportunity to stay away? Yeah, we're we're tending to stay away. We saw certainly the Intel AMD and Microsoft results earlier in the quarter, and they were pretty pessimistic. As particularly companies are laying off, and tech in particular are laying off, they're certainly not reinvigorating the PC cycle anytime soon. Our view is, and unlike Aaron, we tend to take a top-down view. So what

we're looking at is we're still underweight equities in general, but we find international equities trading at roughly half the valuation of the U.S. and a dollar that's anywhere between 5 and 15 to 20 percent overvalued relative to our trading partners currencies. So once we get a sense, once investors get a sense that the Fed is finally, we have light at the end of the tightening tunnel, so to speak, that dollar is going to roll over and already has. It should continue downward. And that should be a tailwind for international investing relative to the U.S. So we're still underweight S&P. We just moved out of gold and into international. And we think there are some legs to that trade. Interesting. Mike, I'm just looking at the sector situation for the month of February. We've only got for the S&P. We've only got one sector

that actually ended in the green, albeit very modestly, and that was the tech sector. How does it speak to the cross currents we're seeing in the market, especially given the fact that we do have Treasury yields moving back up and pretty aggressively in recent days? They have. We got a break from the higher yields, at least in the last day or so, but they are up a ton since the early part of this month. In terms of the sector breakdown for the month, I think it is still instructive that the defensive parts of the market have not performed that well. And so if you look on a year to date or let's say going back to the third quarter of last year, what has led, what has lagged?

It has been the more cyclically geared type sectors that have done a little bit better. So it is the consumer cyclicals. It's things like, you know, industrial machinery, steel. And what's losing is really rate sensitive defensive sector. So if you wanted to draw a message out of the market from that, it's not necessarily a discouraging one in terms of what it means for the macro. But it's very noisy internally, even stock by stock. I think that also says where we are in the earnings cycle, because you can't just pencil in, you know, beat and raise from 70 percent of companies the way you could for a while in the past couple of years.

All right. We're going to leave the conversation there. Aaron Dunn, Jack Ablin and Mike, thanks for kicking off the hour. Coming up, we're going to get key insights on the consumer when we speak with the CEOs of Klarna and Shift for Payments, both out with results today. Plus, breaking news on two biotech stocks making big moves after hours. That's when Overtime returns in two. We've got some breaking news on two big after-hours movers in biotech. Let's get to Meg Terrell. Meg. Hey, John. Well, the first one to draw your attention to is Novavax. That stock is plunging in the after-hours, now down 25 percent, as this company is now warning about its potential ability to continue functioning. It says while its current cash flow forecast for the one year

going concern look forward period estimates it has sufficient capital available to fund operations. It says this forecast is subject to significant uncertainty, including as it relates to 2023 revenue funding from the U.S. government and pending arbitration. It says, quote, given these uncertainties, substantial doubt exists regarding our ability to continue as a going concern through one year from the date that these financial statements are issued. Guys, this is just remarkable to see because Novavax, of course, was one of the companies in Operation Warp Speed. They did ultimately get a COVID vaccine across the

finish line, but not soon enough to really participate in the major use of these vaccines that we saw from Pfizer and Moderna and the billions of dollars that flowed to them. This stock at one point was above $200 in the midst of the acute stage of the pandemic, now down there to $7 per share based on this warning happening right now. On the flip side, there is positive news for another biotech company out there, Sarepta. This company, of course, making drugs for Duchenne muscular dystrophy. That's a horrible, rare disease. Saying in their report this afternoon that they are working with the FDA and are not expecting an advisory committee meeting for their gene therapy for Duchenne muscular dystrophy,

which investors are taking as a potential positive signal for approval there. So you're seeing that stock up there almost 14%. Guys, back to you. Meg, give me the big picture perspective on what COVID did to these biotech companies that seemed poised to benefit from it, but find themselves now without the revenue from these vaccines that they seem to have relied upon. Is it similar to what we've seen happen in e-commerce, or is it even more dramatic than that? We're not seeing names that people know at home threaten to go out of business in e-commerce. Yeah, you know, it's kind of amazing. Novavax is sort of a unique story because it was in this bucket of companies that perhaps looked like they were sort of bubbly, right?

Like, could they really do it? They had never done it before. There were a number of other biotech companies at the beginning that we didn't know whether or not to take seriously. And it turned out none of the other companies made it across the finish line. Novavax did. They got a vaccine, you know, cleared and on the market for COVID, something that major vaccine makers like GlaxoSmithKline and Sanofi didn't manage to do. But they weren't in that initial crop of companies and there were missteps along the way. And so you're still seeing, even though they were technically successful, they weren't fast enough, even though this went so incredibly quickly.

And so now they are in this just crazy position to see a successful vaccine and even more in the pipeline, but still warning about their ability to continue functioning as a company. So it's just a sad and crazy story to watch. It is. It's definitely staggering. And it should be noted this was not an mRNA vaccine either. And it came out a little bit later than everything else, but it had been sort of seen as a possible alternative for folks that maybe are a little bit later than everything else, but it had been sort of seen as a possible alternative for folks that maybe are a little more hesitant about that other type of vaccine technology. Meg Terrell, thank you. AMC earnings are out. Julia Boorstin has those numbers. Hi, Julia. Hi, Morgan. Mixed results for AMC. The company missing estimates on the bottom line,

reporting a loss of 26 cents per share versus the 21 cent loss. Analysts had anticipated revenues beating estimates slightly coming in at 991 million versus 978 million estimated. The stock is up just half a percent. This is, of course, a very volatile stock typically. CEO Adam Aaron not giving any official guidance, but saying with more major movies coming out in 2023, we are highly confident that our multi-year recovery will continue to show considerable progress this year. He goes on to say that it's crucial for AMC to remain viable. It must continue to be agile and nimble in the continued raising of cash and decreasing of the debt load. And he's also warns that industry-wide box office will not return to pre-pandemic norms before 2024 or 2025 at the earliest. So keeping that in mind, the company's

been expanding into all sorts of things, such as selling popcorn. They just made an announcement that they're bringing their popcorn to Walmart stores today, guys. Interesting. Okay. Julia Borson, thank you. AMC up just about 1% right now. Shares of Shift 4 Payments getting a huge lift today as well after solid earnings and guidance. See, those shares ended the day up 13%. We're going to speak with the company's CEO and founder, Jared Isaacman, who also happens to be a billionaire astronaut, about those results, plus the latest on the commercial space race when Overtime returns. Welcome back to Overtime. Time for a CNBC News update with Christina Partsenevelis. Christina.

Thank you, John. Here's what's happening at this hour. The second-ranking House Republican is defending Speaker Kevin McCarthy's decision to give thousands of hours of tape from the January 6th insurrection to Tucker Carlson, the host of Fox News. House Majority Leader Steve Scalise said a lot of the video had already been released during last year's hearings. Scalise did not say if Capitol Police were consulted on the release to Carlson, but said the footage would be ultimately released to, quote, all media. The DOJ is seeking to compel a chemical manufacturing plant to curb its emissions in a region where the estimated cancer risk

is among the highest in the nation. The plant along the Mississippi River uses a chemical that has been identified as a likely carcinogen, and the Justice Department is working to do more to reduce hazardous emissions. And Democrats in Washington are calling on President Biden to appoint a new architect of the Capitol to enforce security protocols. In a letter, House Democrats say they want the new AOC to enforce rules preventing members of Congress from carrying firearms. Elected leaders and often the people they enter the Capitol with are not screened by security when they enter the Capitol complex.

Back with you guys. Christina Parts-Naveles, thank you. Thanks. Shift four ending sharply higher in a down market today. The payments company posting strong fourth quarter and fiscal year results while tapping the street's estimates on guidance as well. Shift4 also announcing a partnership with PayPal for its enterprise clients. Jared Isaacman, founder and CEO of Shift4, joins us now. Jared is also a billionaire and a spaceflight commander, partly from a spaceflight commander. Jared,

it's good to speak with you today and have you on the show. I do want to start with Shift 4, and specifically the fact that you did have this strong guide for the new year. Do you see the economy slowing right now, especially given the fact that you do have this read on hotels and casinos and restaurants and concerts and other things that are very discretionary in terms of spending? Yeah, good question, Morgan. Thanks for having me back on. I think our guide is much more about our confidence to continue to win share across all the verticals that we're in right now, which is restaurants, hotels, travel, leisure, not to mention we're expanding internationally.

In fact, I mean, at the low end of our guide, which still represents 40 percent year over year volume growth, we actually said that that takes into account a possible mild recession. Now, from all the data that we're seeing, things are still good. You know, consumers are still healthy. They're going out and spending. But we put out guidance that, you know, kind of covered a range of possibilities from mild recession to business as usual. Talk to me about this partnership with PayPal and how it speaks to the way you are expanding into the payments universe in an even bigger way and how that is driving growth. For sure. So throughout our, I mean, 24 year history, you would find shift foreign restaurants, hotels, stadiums, basically a lot of in-person experiences

where you actually don't see a lot of PayPal. You don't see a lot of alternative payment methods. But over the last year and a half, we've moved into travel and leisure, gaming, what we call sexy tech, supporting some really incredible e-commerce customers that are expanding all over the world. And when you move into the card not present arena, then you're going to want to partner up with some of the best in terms of alternative payments. PayPal is certainly one. But as we continue to move into new markets, whether it's Europe, Central and South America, Asia, Pacific, you're going to hear on all sorts of additional alternative payment methods that we're going to be making available to our customers.

You just mentioned Europe, international expansion, certainly a big focus for the company and for driving that growth moving forward. How much does the Finaro acquisition being approved and closing hinge on that story? Yeah, I mean, Finaro is one piece of the puzzle. You know, a lot of our success where we're at today, you know, delivering year over year growth for 24 years is being ahead of the game when it came to integrated payments, which was the convergence of commerce enabling software and payments. It's what made us a leader in so many different verticals we're in. Well, the next evolution of that is the 3.0 of integrated payments is being able to do it all over the world. And Europe is certainly part of that. Fonaro is a key platform capability that's allowing us to really serve every country in the EU, plus Israel, plus parts of Eastern Europe, plus Hong Kong.

This is just one piece of the puzzle. We're organically expanding into Canada, the Caribbean. We're looking at inorganic opportunities that will take us into other continents as well. So we're really focused on getting to critical mass, which is, you know, having rails that connect commerce pretty much all over the world. FNAR is just one really important part of that story. So, of course, I'm going to shift gears here and I'm going to ask you about space, especially since we got Virgin Galactic results just a few moments ago.

Your thoughts on this, for lack of a better term, commercial space race in this moment we're in, especially as Virgin Galactic, which is focused on suborbital space tourism, is looking to launch its service finally this year. Are we at a moment where this is finally becoming more mainstream? Well, look, as a space enthusiast, I want to see investments across the spectrum. I mean, you know, having been in orbit for a couple of days, I'm excited about the possibilities of what exists, you know, in low Earth orbit and beyond. It's pretty exciting. Maybe new forms of energy source. There will be a space economy. But I think you're also going to have this pretty big pendulum swing.

I mean, in 2021, you had a lot of space related companies that did SPAC transactions, a huge influx of capital during a zero interest rate environment where, you know, risk taking was encouraged. You know, that swung another way. You know, when you're, you know, when you've got Treasury at 5 percent, it's really it's really hard to make some like, you know, that's swung another way. You know, when you're, you know, when you've got Treasury at 5%, it's really, it's really hard to make some like, you know, truly moonshot bets on some of these. So I think there will be a little bit of a correction there. Hopefully, some of the technology that's developed by some of these companies can make their way into, you know, new and exciting companies. But the landscape is going to thin out. And frankly, I think it's going to come down to a couple launch providers that can put payloads, satellites and human beings into orbit.

I think that's really where the opportunity lives. Yeah, you're starting to see some of that shake out, certainly in the market with some of the publicly traded names. It still is, in many respects, SpaceX versus everybody else. You're partnered with SpaceX. You've got something called the Polaris program. You're actually getting ready to do three more orbital space flights with SpaceX. Are you still on track to do that first one, Polaris Dawn, as soon as next month? Well, we released a new date. I'd say it's early summer. So I think July will be the date that Polaris Dawn flies. And then, like you said, we've got a couple exciting missions thereafter. But it's interesting how you word it, you know,

like SpaceX versus everyone else. And keep in mind, not that long ago, they were the underdog. And it was the Lockheed and Boeings of the world that had all the business. And, you know, SpaceX had to fight really hard to win their share. And for, without question now, I mean, they're the dominant player in the space. And for great reason, for, you know, for great benefit for all the taxpayers and even our national security, they're delivering an awful lot of capabilities at a considerably lower price. It's like disruption at its finest. Jared Isaacman, always great to speak with you. Thanks for joining us today.

Thanks for having me, Morgan. Goldman Sachs at the bottom of the Dow today as the company hosts a rare investor day in the light of mounting criticism. But the company's long-term performance might not look as bad as the criticism would suggest. Mike Santoli is going to break down the charts next. Welcome back to Overtime. Goldman Sachs holding a rare investor day today as the company and its CEO face mounting criticism about the bank's consumer strategy.

The stock falling hard on the session, but the longer-term performance might not be as bad as the narrative would make it out to be. Mike Santoli back with a closer look at the charts. Mike, what do they show? Well, John, at least over the last year, Goldman Sachs shares have pretty much kept pace with Morgan Stanley, its most immediate rival. There's some modest differences, but also along with the broader sector, they've outperformed actually the broker-dealer sector. So I understand the shadow that Goldman is under strategically. There's been some stumbles on the consumer area.

And largely what it is is past year's decisions by Morgan Stanley to really expand on the wealth management and asset management front have made it a business more built for what investors want out of their financial services firms right now. We're not doing a lot of deals. They don't want to see a lot of risk taking and trading. And so they're giving a more generous valuation, as you can see here, to Morgan Stanley over Goldman Sachs. This is on a price to book value basis, pretty much how the investment banks usually keep track of their valuations. And over the last couple of years, actually, Morgan Stanley has opened up this pretty widely. You see, it was very much in lockstep up through 2019 or so. And here you have Morgan Stanley at close to 1.8 times book value versus under 1.2 for Goldman Sachs. Now, a lot of that is just the business mix.

Morgan Stanley has more than half of its revenue these days coming from wealth and asset management. It's a steadier business. It's higher margin control costs. And Goldman Sachs is under 40 percent. They wanted to spotlight that business today at their investor day. They're doing it. They're trying to build it, make it a bigger piece of the whole. The other funny part is if deals come back, if it's IPO season again, and if the markets get exuberant, people are going to love Goldman Sachs, even if they don't do anything from here on out strategically. Mike, so then is this a story of Morgan Stanley moving up market

and succeeding and Goldman Sachs trying to move down market and failing and now they're about even? The question is what they do from here? It's somewhat like that. I mean, certainly Goldman Sachs moving down market was the trend before and they're finding that that was not very fruitful. Now, in terms of Morgan Stanley, yes, it's wealth management, but it's much more kind of the middle to upper end of wealth management, not the super rich. You know, a lot of Morgan Stanley investment advisors right now started the world, started their careers at Dean Witter, which was acquired into it. Smith Barney, they bundled all that in. Also, E-Trade. Keep that in mind. That was an acquisition not too long ago. So Morgan Stanley's just gone for, well, just, you know, client assets, pull it in the door, we'll take a fee off of it,

that type of business, as opposed to more transaction-oriented at Goldman. All right. Mike Santoli, thank you. Klarna posting its largest annual loss ever. It's a private company, but it reports its numbers. Up next, the buy now, pay later Later names. CEO is going to break down those results. He's going to tell us whether he is seeing any cracks in consumer spending. Buy Now, Pay Later company Klarna just posting its largest annual loss ever, swelling 47% to a billion dollars. But the privately held Swedish fintech had a good Q4, aims for profits by summer. This comes after the company's valuation came down 85% last year. Cornish CEO

Sebastian Simakowski joins us now in a first on CNBC interview. Sebastian, good to see you. Give us your read on what's happening with the U.S. consumer, a market where you're looking to grow into it. Told us just a couple of days ago, lenders are looking to extend less credit to subprime and near prime borrowers. Are you making that distinction more strongly now too? Is that part of how you stem losses? Well, yeah, I mean, I think unfortunately we're seeing

kind of what we expected after COVID, right? So COVID gave people, people spend much less money. They increased their savings, credit card dropped to record low. And now we're seeing credit card on the rise again. And I think that what's interesting actually is when you take a closer look at that, in the worst economical scenario like we're facing right now, the whole credit card business model is so poor, right? Because the whole idea is they don't really make any money unless you revolve and so they try to do everything they can to maximize your

credit card debt to the max and then as the economical macro worsens what we're seeing as an increase in default increase in borrowing at very high interest rates right this is actually where the strengths of the buy now business business model is because it's paying for its installments there's no revolving there's no extra money made for us as a company from people delaying their payments so by setting up a very different set and not depending the whole model on revolving and building huge balances we have an average balance of a hundred dollars right right so people pay back very quickly we turn around average balance of $100, right? So people pay back very quickly. We turn around our balance sheet in only two months.

So it's a very, very different set. And that's also what we're seeing now suddenly. As we've changed our underwriting as a consequence of the economical change, we're seeing a huge improvement in loss rates in the U.S. Our growth last year was 77%. Our losses are down 37%. Another potential... The original model really has problems

yeah another potential advantage is that you in in buy now pay later and there's some others too are built as data businesses and so that helps feed this marketing business you've got that's up 131 percent uh in 2022 now 10 of your total global revenue. Are you able to effectively match merchants and buyers in a better way as you gain scale in the U.S.? And how do you expect that to be affected during this tough economic environment? Well, yeah, I mean, I think we set about 600 million leads now. And to your point, it's growing at 150%. It's the fastest growing revenue source at this point in time. And I think there's something unique that not a lot of people think about us as buy now, pay later.

I think that's what we're most famous for. But actually, we think about ourselves as a payments network. We do 45% of our total payments volume is debit where people pay the full amount. What really makes us different to Visa and MasterCard, though, is the fact that on every transaction Klarna processes, there's SKU level data. So we know not only that you bought for $50 at H&M, we know exactly what sweater, what color, what size, et cetera, right? And so that gives us a tremendous opportunity to leverage that data to the benefit of the customer.

When the customer logs into Klarna, they can the benefit of the customer when the customer logs into klana they can see images of the items they bought compare that to the not very well understood you know your fair card bill is quite hard to interpret in it as it is but it also gives you to your to your point the amazing opportunity to actually match consumers with new brands with new retailers which is now becoming quite sizable business for us. So it is an extremely exciting opportunity that we think has a lot of potential. And now, especially also as we're seeing this,

you know, conflict between Facebook and Apple and, you know, other advertising channels becoming more difficult for retailers. This idea of credit and being a control of credit, it's something that Max Levchin over at Affirm, one of your rivals, talked about on our air earlier today. And I'm looking at your commentary about cutting credit losses. How are you thinking about credit policy and how are you thinking about things like late fees, for example? Right. So we've actually in different markets, we have actually even tried in the UK, we tried to run the model without any late fees whatsoever. We now decided to introduce

a small late fee. We've learned, unfortunately, that if you have no consequences for not paying, it actually may cause consumer harm because consumers may spend more than they could have had if they don't if there's no consequences for not paying on time at the same point of time we as a company want to be very mindful because unfortunately there are all of lenders out there who you know over time make a late fee a you know a target in itself they try to optimize for it which obviously is is not at the best interest of the customer. So what we've set out for ourselves, we've done two things.

One, we've made sure that we have a very strict definition of what we find acceptable level of revenue from late fees. And then second to that, we've also actually now introduced in the UK as an example of fund where some of the late fee revenue is then used back to help customers who are in economical trouble to help pay off their debt, right? So it is a sensitive and important topic. But again,

I think that the key here is to find better ways, right? I mean, credit has been around for quite a long period of time, but unfortunately, a lot of the business models that we see banks apply here haven't been the best for the consumers. And it's really interesting to try to experiment to find better solutions for customers' best interest. Sebastian, thank you for joining us. Thank you for having me. Well, still to come, a pair of auto retailers moving in opposite directions today on earnings and giving some insight into the American consumer.

We're going to break down the message when overtime returns. What today's earnings from two big auto parts retailers say or don't say about the health of the auto industry and the consumer. We'll be right back. Welcome back. A pair of auto stocks heading in opposite directions today. Advanced auto parts higher after topping estimates, while auto zone lower despite also beating. Both companies posting positive same-store sales growth for the quarter. Advanced auto parts outgoing CEO saying we expect to see further improvements in inventory availability throughout 23,

which we view as the single most important driver to accelerate top-line growth. And another data point tomorrow when we get new vehicle sales. Morgan? It is good news for further goods disinflation potentially. That's going to do it for overtime. Fast Money starts now.