Closing Bell - Closing Bell Overtime: Fundstrat’s Tom Lee Is Still Bullish; CAVA Shares Double On First Day Of Trading 6/15/23

Episode Date: June 15, 2023

Stocks were in rally mode the day after the Fed announced its pause. Fundstrat’s Tom Lee, a longtime bull, and Edward Jones’ Mona Mahajan break down the market action. Adobe shares have been on a tear; Q2 earnings from the tech company sending the stock even higher. Barclays analyst Saket Kalia makes his case for the stock. Evercore ISI Chairman Ed Hyman joins to talk the Fed’s path forward. AdvisorShares CEO Noah Hamman discusses CAVA’s strong first day of trading and what it would take for him to buy shares. Former Wells Fargo CEO Dick Kovacevich talks what’s going on in bank stocks and what he expects from the Fed. After CAVA shares nearly doubled on its first day of trading, NYSE President Lynn Martin talks the IPO pipeline and if the freeze on new offerings is over. 

Well, there's your scorecard on Wall Street, and it's a high score, but winners stay late. Welcome to Closing Bell Overtime. I am John Ford with Morgan Brennan. And coming up this hour, breaking earnings results from Adobe, the $225 billion software giant that has climbed 40% in the past month on AI optimism, among other reasons. We're going to bring you the numbers and expert analysis. Plus, we'll get the latest read on the Fed's balance sheet this hour following yesterday's rate decision. And we're awaiting Lyft's shareholder meeting as that stock has struggled all year long. Markets rallying broadly the day after the Fed pause. All sectors finishing in the green today. And joining us now, longtime market bull Tom Lee, Fundstrat Global Advisors co-founder, and Mona Mahajan, Edward Jones, senior investment strategist.

Guys, welcome. Tom, hey, people like to call you a perma bull. I made my joke about them replacing the Wall Street bull statue with a Tom Lee statue. But I asked the overtime team for receipts. February 22nd, you said investors should expect payback. We had one of the best Januaries. March 3rd, you said you see a strong rally in the next two months as softer inflation data hits. Then on the 7th of March, you said inflation could be easing much faster than expected. FANG is set to grow. You weren't just directionally right. You were pretty specifically

right. So, all right. I'll give you credit where credit's due. What do you say now? What's coming next? John, I think that investors should still view this year as full of opportunities. I think there is a lot of pessimism that exists and people feeling they missed the rally. But what I think is going to happen for the rest of the year is that we're going to see a real expansion of market breadth. And I think part of it comes from the Fed's message yesterday. I know that there's two hikes sort of baked into the dots and even in their views, but I think that the Fed is essentially greenlighting the ability for markets to go higher because with the Fed sort of saying that they have some breathing room, I think it allows CEOs to sort of start to move forward. Earnings growth estimates are actually

creeping up. And even Q2X energy earnings growth looks like it's going to turn positive. To me, that's a green light for cyclicals to rally. So I think this is like small caps, industrials, et cetera. Now, Mona, that doesn't mean that you should sit on your hands fixed income wise either. If we do get those just two hikes, probably quarter point over a series of months, that means we're near the end of that cycle. And so longer duration bonds, you say, might make sense to lock that in here. Yeah, absolutely. And look, we are with Tom. We see opportunities in equities and bond markets forming. In fact, the Fed told us yesterday, yes, they could have one to two more hikes left. But 2024, they're seeing 100 basis points of cuts. So when you

look out six to 12 months, which markets do, we're seeing a better inflationary environment. We're seeing a better yield environment overall and potentially a better earnings backdrop. Earnings are expected to grow double digits in 2024. Now, to your point on bonds, think about it. Right now, we could be at the peak of Treasury bond yields. Treasury bond yields historically have peaked one to two months ahead of Fed funds rate. If you're at a peak in Treasury bond yields, that means longer duration makes a lot more sense. You're locking in better yields, better price appreciation potentially if yields peak and roll over over time. So good opportunities in both sides of the market,

we think. Mona, how much of this does hinge on this soft landing narrative? And then given the fact that we have seen valuations expand the way we have in recent trading sessions, I mean, the S&P 4425, we're looking at what, 19 times forward earnings, maybe a little higher than that right now. I mean, are we long in the tooth? Yeah, you know, it's a great point. And look, we don't think a soft landing necessarily has to happen for this market to expand. In fact, if you look what the Fed told us yesterday, a 1% GDP growth, if you think about that, that implies a second half that is softening, potentially negative slightly. But I think the market is braced for now a mild recessionary environment or at least a slowdown to below potential growth for the second half of the year. So we think markets are priced for that. They can't ignore it completely.

We've had a great rally. Historically, one to two corrections are the norm in any given year. So we wouldn't expect that not to happen this year. And we would actually think it's a little healthy to get a little bit of consolidation after a really nice run. But that's your opportunity to position then for better returns ahead. Tom, what would you be staying away from right now? Well, I think some of the crowded trades are things like cash. And I just heard on the earlier show that money market funds are starting to see the first departure to cash and presumably into risk assets. But also, I think that means defensive sectors in the S&P. You know, it hasn't been a winning strategy to be defensive this year,

whether it's utilities or REITs or staples. These have, well, they've beaten cash, but they've underperformed the market pretty dramatically. So I think people need to be a little more risk on. So Mona, what about mega caps, specifically the ones that have had these AI-fueled rises? They're already sort of overrepresented in the S&P, in the NASDAQ 100, et cetera. Should investors be shifting more out of those as they see opportunity to put cash to work, or do you think they're going to continue to lead? You know, look, we think the AI story is a 10-year secular bull story. We're in the early innings of it. We need to have exposure to that space. But have we run pretty far, pretty fast? Yes, absolutely. Could we shift some of the profits we gained there into some of the laggards this year? And in fact, we've seen only three

sectors outperform the S&P. Eight have underperperformed and so we do expect a broadening in market participation we do expect a broadening in leadership especially as we're looking towards that recovery period in 2024 so we do think the mega caps will have room to run for a long-term investor but for now we think that market participation will get broader okay Adobe earnings are out right now. We're going through the numbers. We're going to bring you those results momentarily here. You can see the shares, well, they're up slightly right now in the after-hours trade as investors digest those results.

Tom, you know, you're starting to see analysts and economists try and wrap their arms around what AI, this AI revolution is going to mean in terms of impact and contribution to economic growth. How are you thinking about that as we do see these AI-focused or levered name stocks that have performed so, so strongly in recent weeks and since the start of the year? How are you thinking about how that contributes to this economic picture and this soft landing? Well, I think viewers have to appreciate the AI companies and what the problem they're solving, which is really either making workers more productive or replacing workers, is solving, I think, a huge structural shortage in the world of labor. I mean, there is now more people than working age people. So this gap is going to grow until 2035. So AI is truly solving a problem. I think that's why companies are going to be more

CapEx intensive, less labor intensive. I don't think they're that expensive yet, believe it or not, because if you're, you know, if you look at the mega caps now at around 29 times earnings, it's about the same PE as a 10-year bond. And, you know, if you look at the mega caps now at around 29 times earnings, it's about the same P.E. as a 10 year bond. And, you know, you're getting earnings growth out of FANG and AI. All right, Mona, I want to get your thoughts on international because we do have we had that weaker than expected data from China overnight. You have stimulus and the expectation of more stimulus coming out of there. Folks are focused on Japan with a rate decision there. ECB hiking this morning. A lot of debate about whether U.S. is still the, I guess, best neighborhood,

the best neighborhood to put your money to work versus some of these other places. How are you thinking about it? Yeah, you know, look, heading into this year, we actually saw a really nice outperformance in Europe. And that was because they avoided that recessionary environment back in 2022, when a lot of people thought they were exposed to this energy trade, the Russia-Ukraine geopolitical risk as well. But, you know, over the last few weeks, what we've really seen is the U.S. starting to outperform once again. And that's partly because Europe is very exposed to China as well, stronger trading partner there as well. And in fact, their inflationary pressures continue to surprise the upside, whereas in the U.S., we're starting to see better inflationary trends overall. So we'd say in the near term, over the next six to 12 months, probably continue to see U.S. outperformance.

But over time, as we talked about that recovery in 2024, as you kind of head out of an economic downturn towards a recovery, you start to see participation broaden, not only, you know, small caps, cyclicals, but international EM starts to do well as well. So I think in that backdrop, when you're thinking about broadening your portfolio, broadening participation and potential leadership, your recovery basket should include some EM and international exposure. That could take, you know, a few months to play out, but use any volatility again as opportunities to make sure you have that as we head into the back half of this year and into next year. All right. Mona, thank you. Thank you, guys. Tom, thank you as well. As we mentioned,

Adobe's numbers are out. That stock crossing 500 bucks a share after hours, maybe for the first time since early 2022. Steve Kovac has the numbers. Steve? John, yeah, shares up about 1.5% on this beat on the top and bottom lines for Q2. Here are the results. EPS coming in at $3.91 adjusted versus a $3.79 Street was looking for. Revenue a beat as well, just slightly, $4.82 billion versus $4.77 billion expected. And as for the Q3 guidance, revenue pretty much in line for between up to $4.87 billion. Street was looking for $4.86 billion. And also, I'd note the full year EPS guide and the Q3 EPS guide are above expectations as well. Shares up a little over 2%,

John. All right. Steve Kovach, thank you. And do not miss Jim Kramer's exclusive interview with Adobe CEO Shantanu Narayan coming up at 6 p.m. on Mad Money. Well, up next, a rare interview with Evercore ISI chairman Ed Hyman. He's going to tell us why he says that even though the SVB crisis is behind us, something else could be likely to break. And speaking of SVB, late breaking news this afternoon on Goldman Sachs receiving a DOJ subpoena for its role in the Silicon Valley bank collapse. We're going to bring you those details when Overtime comes right back. We have a news alert on Goldman Sachs. Leslie Picker has the details. Leslie. Hey, John,

Goldman Sachs disclosed in a regulatory filings a few weeks ago that various governmental bodies were in touch with the firm as part of a broader probe into the downfall of Silicon Valley Bank. The Wall Street Journal reporting a short while ago that the Fed and the SEC are investigating, and the Justice Department has subpoenaed Goldman as part of its investigation into SVB. The Journal cites people familiar with the matter in its reporting, and the crux of Goldman's involvement stems from an attempted capital raise that took place right before the bank failed. The Journal said regulators are looking into whether Goldman's investment banking side and trading division were communicating about

the portfolio sale. I haven't been able to confirm specific details about the investigation and which agencies are doing it. But a spokesman for Goldman Sachs said in a statement, quote, as we have publicly disclosed in our 10Q, Goldman Sachs is cooperating with and providing information to various governmental bodies in connection with their investigations and inquiries into SVB, including the firm's business with SVB in or around March 2023. The firm told SVB in writing that it would not act as an advisor on the sale and urged SVB to hire a third-party financial advisor. And Goldman said, of course, in that 10-Q that disclosed these probes that it was cooperating with these investigations. An SEC spokesperson said that they do not comment on the existence or none-existence

of a possible investigation. The DOJ and Fed declined to comment to our requests, guys. All right. We'll keep an eye on that one. Leslie Picker, thank you. The Fed decision to pause sending stocks rallying today, but our next guest says something could still break in the market due to the rapid pace of rate hikes. Joining us now is Ed Hyman, Evercore ISI chairman. Ed, so great to have you on the show. Thanks for being here. ED HYMAN, Evercore ISI Chairman, Evercore ISI Chairman, Evercore ISI Chairman, Evercore ISI Chairman, Evercore ISI Chairman, Evercore ISI Chairman, Evercore ISI Chairman, Evercore ISI Chairman, Evercore ISI Chairman, Evercore ISI Chairman, Evercore ISI Chairman, Evercore ISI Chairman, Evercore ISI Chairman, Evercore ISI Chairman, Evercore ISI Chairman, Evercore

ISI Chairman, Evercore ISI Chairman, Evercore ISI Chairman, Evercore ISI Chairman, Evercore ISI Chairman, Evercore ISI Chairman, Evercore ISI Chairman, Evercore ISI Chairman, Evercore ISI Chairman, Evercore ISI Chairman, Evercore ISI Chairman, Evercore ISI Chairman, Evercore ISI Chairman, Evercore ISI Chairman, Evercore ISI Chairman, Evercore ISI Chairman, Evercore ISI Chairman, Evercore ISI Chairman, Evercore ISI Chairman, Evercore ISI Chairman, Evercore ISI Chairman, Evercore ISI Chairman, Evercore ISI Chairman, Evercore optimists are doing a victory lap here too soon when we know that all of those rate increases that we saw ahead of yesterday have yet to fully be impacted or felt in the economy? Yeah. Well, I think it's not too soon necessarily. Let me explain, though. It takes a long time for monetary policy to work, like one in two years, which is virtually unbelievable. But the Fed paused in the summer of 2006. Let me take you through the time period. The recession started in 2008, 18 months later. So what I'm seeing

might take another 10 months to impact the economy. We've already had an inverted yield curve for about eight months. So it might take another 10 months to get enough time for it to impact. And the S&P rallied 20 percent during 16 months of the 18, and the economy in the fourth quarter of 2007, just before it was about to go into the Great Recession, GDP growth was 2.5 percent, and employment was pretty good. And so the market's basically doing a repeat of that. But it does assume that the Fed is going to pause. And if they do two more rate hikes, then that's probably too much. But if they can pause now and not do the July hike, that would probably fit. If they do a July hike, it's a little bit more touchy.

But I see it working out with the long lags involved. But I do think, I was listening to your program just now, I don't think the economy is going to reaccelerate for a long time because of the lags involved. It's like I don't see a pickup in, say, the first half of 2024. Okay. So when I hear you liken what we're seeing right now play out in the markets and the economy to 2007, 2008, it raises the question, do you think a soft landing is actually possible? No. You know, a lot of times I've said no and it turned out to be yes. But in this case,

the yield curve is one of my inputs to your question, significantly inverted. And the money supply is contracting for the first time or the most it's done since the 1930s, which that gets my attention. And then lastly, in addition to the aggressive rate increases, they have QT going on, which I don't have any history to study. But that's another third leg on the tightening side. So, Ed, the consumer is notoriously stretched right now. You know, lots of credit. So credit wise, then we got student loan repayment that's coming up in the fall. You know, the consumers paying a lot in rent or, you know, a lot in mortgage as a percentage of their total income.

So is this economy really hinged on a continued strength in employment? And if that weakens, is there the potential for some other dominoes to fall? Absolutely. So I think you hit the nail right on the head. The consumer, I think, John, is in pretty good shape, not really stretched too much. They've had a good situation with their house price, and now stocks are up. That leaves the lower-income people less advantaged position. But I think that employment is the key. And employment's been good, maybe getting a little bit weaker today. You saw unemployment claims move up.

So what's the risk? So is it the pullback? Is it a pullback in that revenge travel, perhaps, because services have been so strong relative to product? Where's the risk in employment most that you see? It's over the entire spectrum. It's not just services. Manufacturing is already probably in recession. But I'm not sure exactly what sector of employment is going to pull back. But I do think that is the linchpin. And in order to get a weaker economy, you have to get weaker employment. But I think that's going to come. And as I mentioned, unemployment claims, which is the best timely measure of lower markets, they've moved up already a fair amount to about 260,000 up from maybe 180,000. And 300,000 is the recession level. So you're moving in that direction, but not there yet. Well, we'll watch it. Ed, we appreciate it. Thank you.

All right. Ed Hyman. Shares of Mediterranean chain Kava getting a healthy boost today in its public debut, doubling from its $22 IPO price. And look at that. Yeah. I mean, that's a lot of hummus. A top investor breaks down the other restaurant stocks he's sinking his teeth into. We come right back. We have breaking news on Disney. Chief Financial Officer Christine McCarthy is stepping down. She's taking a family medical leave of absence. Kevin Lansbury, CFO of Disney Parks Experiences and Products, will serve as the company's interim CFO starting July 1st.

Yeah, and those shares are down about half a percent right now. We've got another mover to tell you about, too, because Virgin Galactic is moving higher right now. That's up almost seven and a half percent in after hours trading. The company announcing the start of commercial spaceflight service, saying that the first commercial spaceflight will take place between June 27th and June 30th. So about a week and a half from now, they're going to be doing a second flight, if that one goes well, in August as well. The company says monthly flights are expected after that. Shares getting a big jump on that news, now up almost 9%. And I would just note, we will be covering that.

Yours truly will be covering the start of that commercial service, which has been many years in the making for Richard Branson later this month. Explain the pop. What's the gravity of the news here? Wow. You just wanted to say gravity. I did. Listen, I know it's a suborbital move. No, listen, it's the fact that we have a date. The service is finally starting. And I think more importantly to this disclosure is the fact that there is another space flight already scheduled behind it as long as this one goes according to plan. So that is big news for this name. I'd also just note Virgin Galactic still trading at just a fraction of where it traded at its peak a couple of years ago. So one to watch. OK, it's time now for a CNBC News update with Bertha Coombs. Hi, Bertha.

Hey, Morgan. Here's what's happening. The U.S. government's cyber watchdog says several U.S. agencies were hacked. According to the Cybersecurity and Infrastructure Security Agency, a well-known ransomware group breached the agencies through a program designed to easily upload files. The watchdog did not make it clear whether the hackers succeeded in stealing sensitive files or disrupting government systems. German police have taken an American man into custody in the death of a U.S. tourist and the assault of another near a popular travel destination south of Munich. Police say the 30-year-old man met the two female tourists, aged 21 and 22, on a hiking path near Neuschwanstein. I apologize for the mispronunciation. It's a castle south of Munich,

Munich, and he lured them onto a trail. They say he attacked the women and pushed both of them into a ravine. Authorities have not identified the suspect. At least seven firefighters were hurt battling a massive four-alarm fire at a warehouse in Kansas City, Missouri. Crews were called in to the building shortly afternoon. Fire department says the building was filled with pallets that burned for a long time at high temperatures. Back over to you, John. Bertha, thank you. Kava doubling in its market debut, showing some signs of life for the sluggish IPO market. Joining us now for his take on the IPO, the broader reopening trade is advisor share CEO Noah Hammond. Noah, is this really about Kava? I mean, it's a really big move.

The IPO range had been rising over time. Or is this about just not a lot of inventory of IPO shares and, you know, restaurant ETFs having to own it. Yeah, I think it's more that, to be honest with you, cash on the sidelines, people looking for investment opportunities. I do think there's, you know, the story there with the reopening trade. It's a good restaurant. I think it's poised for good growth. Obviously, different kind of structure than, say, something like a Dutch Brothers. But you've got some of these up and coming brands with unique food offerings. Cabas is definitely one of them. I mean, I don't think they're going to be the, you know, sort of burger, Subway, taco, Chipotle, but I think, you know, more market demand than say something like Sweet Greens, which recently came out. So would you buy this name now

that it's publicly traded? You know, not today. Probably at the initial price range or within a few dollars of that price range, probably. It jumped up quite a bit. And so, you know, I think this might be something where depending on where you are as an investor, you might want to wait and see how the price action plays out a little bit, especially if this is, you know, one of many more to come. In other words, wait for this to cool off before you put it in your portfolio. It might get burned. Thanks, Noah. Up next, former Wells Fargo CEO Dick Kovacevic on the outlook for bank stocks after some mixed messaging from executives this week. Plus, Lyft's annual shareholder meeting is kicking off in just a few minutes. It will be a big test for new CEO David Reicher as the stock lags the market this year. We're going to bring you the headlines as they come over time.

Right back. Stock surging today as investors digest the Fed decision. Financials participating in the rally, but we've heard some mixed messaging from bank executives this week. Wells Fargo mentioning tailwinds in the second half at a conference Tuesday, while executives from Key Corp and U.S. Bank Corp were less optimistic. Joining us now, former Wells Fargo CEO Dick Kovacevic. Dick, starting on the decision itself, you say this pause was a mistake. Why? Is it because you think inflation is more likely to get entrenched at 3 percent or higher? And and if that happens, what happens next? Well, yeah, I just think the to understand how, from the same data,

you pause in June and then you project that there's going to be two more increases. I think the data showed, quite frankly, that they should have increased the interest rate by 25 basis points and perhaps only have one more to go before we get to the terminal rate. So I think this confusion has diminished the confidence of the public in the Federal Reserve, and it's confused the markets. But, Dick, did we spring a leak sort of back in March with SVB and other regional banks? Might they be concerned? Well, let's see how the financial system does with this level of pressure over a period of time. We'll just hike at half the rate. Yeah, I think that's what they decided to do because they

didn't expect that things would be the way they are today. And like I say, the inflation didn't come down as much as they thought. The core inflation is still very high at 5.3 percent. Their favorite inflation number, the PCE, actually went up. The employment was better. And bank stocks are up and have been for, you know, the last three weeks. So I think they got caught by anticipating results that didn't turn out to be their way. And instead of changing their mind, they went along with what they had proposed, or at least were warning people about that they were going to pause this time. Dick, are there any other factors at play here? And what I mean by that is you have, you know, you have a debt ceiling deal now.

And so the refill of the Treasury general account, which is expected to pull some liquidity out of the market now, as you see all this debt being issued by Treasury. And then, of course, we have we still have all of the stabilization that's afoot after all of this deposit flight tied to the banking turmoil we saw earlier in the year. I mean, both of these are scenarios that economists have said could add to tighter financial conditions and help do the Fed's job for it. Do you think that has factored into officials' discussions behind doors that we don't know yet? It could have, but it could also scare people, right? I'm going back to data dependency.

They said that they're going to be data dependent. And they didn't say they were going to worry about the things that you're mentioning. It's something that they could have. But, you know, those things have settled down. I mean, the regional banks now, the deposits are staying real steady. And if you see something like this, they say, oh, my God, the Fed is still worried about these things. It could actually happen. So I think you just got to do the right thing and have confidence and show confidence when the data supports you on what you should be doing.

I do want to get your thoughts on the state of the banking sector, the health of the banking sector, particularly the regionals. I've had conversations with various CEOs of regional banks this week. And one of the things they've mentioned is that, you know, listen, this was these were issues with the banks that we saw fail and collapse. These were issues around their business models and issues around those businesses specifically that it is wrong to paint a broad brush across the whole sector right now. I wonder how you see it, especially as we do see certain banks, even just this week at the Morgan Stanley Conference, saying, you know what, we're pulling back on loan origination for autos or commercial real estate in office space and other things. But there's no question. These are one-offs.

You know, even First Republic would not have failed if it wouldn't have been for SVP. First Republic was a good bank. And the good news is the deposits in the regional banks have stabilized. And I think what's happening in the market itself is the forecast that we're going to have a slowing economy and even a recession. So when that happens, banks become more cautious. There's just no question about it. And there's also no question that the office issue is real and there's going to be some

losses. These are from losses from, you know, terrific credit, the lack of credit losses, you know, for the last three or four years. So people, the banks are going to be a little more careful, but they are going to, I firmly believe they have the capital, they want to increase their profits, they will support those businesses and consumers who are financially viable. They need that. And I don't hear anything about

people, you know, about banks saying we're just going to close the doors, no matter whether they're good customers or bad customers. But they're going to be careful about those customers that are on the margin. But that's normal when you're possibly going into a recession. Dick Kovacevic, always great to get your thoughts. Thanks for joining us. Thank you. Well, CNBC hosting its annual Financial Advisors Summit today, where I spoke with Goldman Sachs Global Head of Strategic Advisory Solutions, Candace Say.

Say says the investment environment looks very different than the last decade, when low rates, low inflation, and rising profit margins spurred strong gains for U.S. equities, especially tech. Now moving forward in the next 10 years, it certainly looks different, because right now we're in an environment of lower GDP growth, higher inflation, higher interest rates, lower profit margins. So from here, we really think that investors need to rethink their portfolio construction. And instead of focusing just on beta, it's all about alpha now, because the cost of capital has gone higher and investors are no longer just paying for revenue. They want

to look for profitability. So there is an element of security selection that needs to be in this type of market in the next cycle. Talks a lot about diversification, maybe even looking overseas where equities are concerned and all the opportunities in fixed income. You can find much more investment advice from today's summit by visiting CNBC.com slash F.A. And now breaking news from the Fed, Leslie Picker. How's it, Leslie? Hey, John. Yes. New disclosures showing the Fed's balance sheet shrinks slightly over the last week through June 14th. This comes after last week's gains reversed 10 straight weeks of declines. We're watching to see kind of if the balance sheet dipped below that $8.305 trillion figure. That's the level where it was before Silicon Valley Bank collapsed.

But we're not quite there yet. The balance sheet as of yesterday stands around $8.352 trillion. Now, in terms of looking at kind of overall bank stress, we saw very, very slight increase in borrowing from the Fed discount window and about a week-over-week decline in bank lending facility borrowing. So those kind of negate each other there. We'll get fresh data on deposit levels, though, across the banking system tomorrow afternoon, guys. All right. We'll be looking for it. Leslie Picker, thank you. Well, let's talk about an appetizing IPO. Kava shares skyrocketing after making their Wall Street debut. Up next, New York Stock Exchange President Lynn Martin

on Kava's debut and whether the IPO market is showing signs of a comeback. Stay with us. Welcome back to Overtime. A big day at the New York Stock Exchange. Kava making its public debut, doubling in its first day of trade. So far this year, we've seen more than $7 billion in U.S. IPO proceeds, nearly matching all of last year. But keep in mind, this is significantly down from 2021, which saw more than one hundred forty billion dollars. That's according to Renaissance. Joining us now, NYSE President Lynn Martin. Lynn, great to have you on the show. I mean, 100 percent gain from where Kava priced its IPO after the bell last night.

We know it was heavily oversubscribed. Can we actually say there's a thawing now of the frozen IPO pipeline or is this a one off? Thanks for having me on, Morgan. And I think today really shows the green shoots that are existing in the IPO markets. Obviously, as you said, Kava priced above its range last night, 30 times oversubscribed, had an incredible debut when the stock opened, which continued throughout the day today. But let's not forget the strong debut of Kenview earlier this quarter in early May of this year, which raised $3.8 billion in capital as well. So we're seeing a lot of green shoots here in a thawing of the IPO markets. So in terms of what you're watching for, and I guess the company, the conversations you're having with private companies that might be finally looking to go public right now, what do those entail? Yeah, a lot of companies are looking for the signs that you're starting to see on the macro side. Clearly, yesterday's move by the Fed

has caused the market to be very encouraged around the pace of interest rate increases. You're also seeing the VIX well below 20 again, which is a sign that the volatility has come out of the market. So those companies who have been in our pipeline, some of which have been in our pipeline for more than 18 months, if not longer, they're starting to have conversations with us about, OK, is now the time to start to gear up and go? And clearly, the IPOs that we've seen at NYSE this quarter alone are encouraging signs, and they're really leading those conversations with private companies. But Lynn, I got to play on the other hand with you here. Copper had a pretty low float overall.

There aren't a lot of different IPO shares to choose from out there. And I was just talking to Ariel Cohen, the co-founder, CEO of Navon, formerly TripActions, and he said he doesn't feel like the market is ready to give software as a service companies the kind of valuations that they deserve quite yet. How long is it going to take for some of those types of names to get convinced that are going to perhaps have an even bigger impact on the market? Yeah, you know, that's a great point. And it does really speak to a sector by sector basis where you're starting to see the thought clearly energy, particularly anything around clean energy, the green energy transition that is having a very positive reception from investors at the moment. Consumer, the two IPOs I mentioned, Kava and Kenview are in that consumer category. That is where you're seeing the thawing as well. Tech still has a little bit of a ways to go, but we're really encouraged by the signs of demand

from the institutional investors to even welcome a large IPO to the market. And Lynn, are direct listings and SPACs just dead? Was that a moment in time that's passed? People just want the standard arrangement at this point? You know, direct listings are definitely not dead. Was that a moment in time that's passed? People just want the standard arrangement at this point? You know, direct listings are definitely not dead. We're having a lot of meaningful conversations with our prospects about the benefits of direct listing, particularly since we amended our rules to allow for a capital raise alongside a direct listing last December. SPACs, you know, we we still think that's a viable way for a company to go to market. But what I don't think you will see is the influx of SPACs that you saw in the

2020-2021 sort of time frame. You're not going to see the sheer number that you saw in that time frame hit the markets again. Remember, SPACs have been around for more than 20 years. So it was more the saturation of that type of coming to market. But we think SPACs are a very viable means for a company to go public in the future. I want to shift gears here a little bit because the Nasdaq earlier this week announced a deal to acquire fintech firm for $10.5 billion. We've seen this diversification happening for the exchanges in terms of finding newer, future, bigger revenue streams. How are you approaching it at the New York Stock Exchange and I guess at ICE, the umbrella company of NYSE more broadly? Yeah, at ICE, we are really an all-weather name. We have a strong group of exchanges. We got our start in the commodity

exchange business. Obviously, the acquisition by ICE at the New York Stock Exchange in 2013 was one of the benchmark acquisitions. But at ICE, we had pivoted to a diversification. ICE Data Services, which is the business that I came from, started in 2015. And more recently, we've made exciting moves in the mortgage technology sector, really diversifying our revenues to show that we are an all-weather name at the parent company. All right, Lynn Martin, thanks for joining us. Thanks so much for having me. Exciting day here. Up next, a top analyst tells us what he wants to hear on Adobe's earnings call, which kicks off in just a few minutes.

That stock now up a little better than 3 percent. Is that almost 4? In overtime. We'll be right back. Welcome back to Overtime. Let's get another check on Adobe. Stock popping now about 4 percent after beating estimates on the top and bottom lines. Third quarter earnings guidance strong as well. Joining us now is Barclays software analyst Saket Kalia. Now, you look at this name, there's the Figma acquisition that's been hanging over it and the legacy of in volatile economic times, marketing spend used to get hit pretty hard, but Adobe is a different type of company now. So where is the potential upside and how much of an overhang is Figma? Sure. Thanks for having me on, John. Well, I tell you, with the results that we saw this quarter, about $470 million in annually recurring revenue. That's really the main metric

that we look at. That is just well ahead of what expectations were. And so certainly there are macro fears out there, but it seems like a lot of the new products that Adobe has introduced are starting to make an impact here. So I think we do see a little bit of the macro impact on the digital experience or DX part of the business. The revenue guide there was trimmed just a little bit for the year, but just a blowout result in the creative cloud part of the business, which is really the biggest part of Adobe. You know, ahead of these earnings, we had a number of announcements, AI-related announcements from Adobe. Here's Shantanu Narayan joining us just a few weeks ago to talk about one of them. Take a listen. What you really need is a product like Photoshop, where you can integrate generative AI into what

you're trying to edit. And so when we showed what we have done with integration into Photoshop with Firefly, I mean, people's jaws just dropped. So we've seen the stock rally. It's up something like 40 percent before we saw earnings cross the tape over the past month. What do you need to hear from him regarding AI and the monetization of that generative AI for this stock to keep rallying? Sure. Well, I think that that Firefly could be a really revolutionary product here for Adobe. I think that just in the last few months, you've had almost a half a billion downloads here from the Adobe.com Firefly website. And so really one of the most successful beta releases here for Adobe. You know, I think that what investors want to hear more about is the monetization here. And remember, you know know firefly is is it can be a very helpful

creative co-pilot that's going to help add value to existing customers that's also going to help adobe earn more value also this is a very commercially safe product remember an enterprise like barclays you know this is this is the very early innings of generative ai who knows how intellectual property is going to work what i really really like about Fiverr... Sorry, go ahead, John. I just want to get this last one in. Was the effect of this launch to kill that buzz around, hey, Canva and Figma were going to eat Adobe's lunch because they were moving too slowly? The buzz seems to have shifted somewhat, right? A little bit. I think that's right, John. But let's remember that Adobe is not new to AI. They were one of the first companies to introduce Sensei back in 2016.

And so AI is definitely not a new thing. So I don't think this is catching up. I think this is really the result of almost 10 years of a lot of investment in AI technology for Adobe. All right. Zaket Kalia, thank you for joining us. Thanks for having me. We have a news alert on Lyft's shareholder meeting, and Deirdre Bosa has it. Hi, Dee. Morgan, I wish I had more for you, but it was quite stunning. Lyft shareholder meeting, it lasted less than 15 minutes. Only two questions were asked. The first one was, what are you going to do about the stock price? It is trading near record lows, as I mentioned before. It's down 85% from its IPO.

David Risher, the new CEO, said that it's a lagging indicator, so he still needs time. Remember, he's been in this position for just a few months. He says that they're building awareness, which I took to mean they're going to be spending more on marketing. I'm unclear how that translates to the bottom line, because because remember this is a company that is still losing money seems complacent to have the number two spot he said listen if we can just get people to have two ride sharing apps on their phone instead of one that's a good signal for the company um he had a lot to prove here guys he's been in this position yes for only a few months but he has yet to really lay out a clear strategy for how he's going to get lift to profitability, how it's going to take back market share. So it was quite surprising to see just two questions here. The second one sounded like it came from a driver.

It was a question on driver deactivation. Interesting. Well, shares are flat right now. Deirdre Bosa, thanks for bringing us the latest on that. Up next, why a record-setting former NASA astronaut says the future of space is commercial. And speaking of space, take a look at Virgin Galactic. It's like a rocket ship. Huge boost right now. It's up 58, 59 percent. The company just announcing the start of commercial spaceflight service. That's slated to begin later this month with another one

the following month. Stay with us. Welcome back. OK, scan this QR code. Trust me, don't miss tomorrow's On the Other Hand newsletter and segment on Squawk Box, where I will argue both sides of the topic. Is the stock market in an AI bubble? Sign up using that QR code on the screen or go to cnbc.com slash O-T-O-H. Is it? Is it a bubble? I'm running your report. Yes or no, Morgan. All right.

Well, meantime, Peggy Whitson is America's most experienced astronaut, having spent 675 days in space across four trips. She holds a number of records, including most spacewalks by women, 10. And now she's adding another, first female commander of a private space flight, thanks to the recently completed Axiom 2 mission. It's definitely very different for me doing this as a private astronaut. Of course, I'd love to go into space. It's like my second home. And so I wanted to go.

But being a part of this changing era of space is really exciting to me. And that's what made this flight special for me. And I like to think of it as we are changing the evolution of the idea that humanity belongs in space. And we have a purpose to be there. So that's, to me, that's changing a bit from where I have come from in the past, and I'm excited about that. Well, the 10-day AX-2 mission had a four-person crew, including the first Saudi woman in space, traveling to and from the International Space Station. Via SpaceX Dragon capsule, AX-2 conducted more than 20 research experiments the crew served as research subjects

themselves it was axiom's second human space flight as the startup uses data from these trips to help inform development of a commercial space station which is working with nasa to deploy before the iss is retired whitson is axiom's director of spaceflight, and on the latest episode of Manifest Space, we discuss the trip, commercialization of space, even her painstaking path to become an astronaut. The episode is available wherever you get your podcasts. Very interesting stuff. Also interesting, Adobe now up more than 5% after hours. When we talk about this rally and perhaps broadening participation, that would be a very interesting participant if this keeps up. after hours. When we talk about this rally and perhaps broadening participation,

that would be a very interesting participant if this keeps up. Yeah. And in terms of data, Japan decision, University of Michigan consumer sentiment survey tomorrow. That's going to be a key one to watch after resale sales today. That's going to do it for us here at Overtime. Fast Money starts now.