Closing Bell - Closing Bell Overtime: Globalstar CEO on Apple Integration Reports; RH, Broadcom, and Costco Earnings 12/12/24

Episode Date: December 12, 2024

Today's coverage kicks off with a market panel featuring Barbara Doran of BD8 Capital Partners and Phil Camporeale of J.P. Morgan Asset Management. Earnings highlights include RH, Broadcom, and Costco, with expert analysis from Bernstein’s Stacy Rasgon on Broadcom and DA Davidson’s Michael Baker on Costco. Globalstar CEO Paul Jacobs discusses investor day developments and reports of Apple Watch integration. Our Angelica Peebles reports on Vertex Pharmaceuticals’ non-opioid pain medication and its potential market impact.

That bell marks the end of regulation. Invesco ringing the closing bell at the New York Stock Exchange. Brand new IPO service titan, which spiked today in its first day of trading, doing the honors at the NASDAQ. And the major averages all pulling back today. Biggest losses for the small caps with the Russell down about a percent and a third. We also saw it tick higher for yields as new inflation data raises concerns. That is the scorecard on Wall Street.

But winners stay late. Welcome to Closing Ball Overtime. I'm John Fort with Morgan Brenner. We've got key reads on tech and the consumer that are coming this hour when we get breaking earnings from Broadcom, Costco, and RH. We'll bring you all of those numbers and instant analysis as soon as they cross. Plus, Adobe is selling off in a big way on the back of last night's results here in overtime. We're going to look at how it now stacks up to its software peers.

And shares of satellite communications company GlobalStar pulling back as the company hosts its investor day, giving up gains from earlier in the week on reports of a deeper integration with Apple. But GlobalStar's CEO will join us exclusively to discuss those headlines and more. Let's get now to our market action with BD8 Capital Partners CEO Barbara Duran and JPMorgan Asset Management Portfolio Manager Phil Camporelli. Phil, we got a dozen trading days left roughly in another amazing year for stocks. S&P up 27 plus percent. You are leaning into risk right now. Overweight stocks, particularly U.S. and mid-caps. How much does your positioning depend on rates continuing

to steadily come down even after December? Yeah, so three things that make us excited, and you hit on the first one. So I don't necessarily believe that rates should be lower. I think the 10-year note should be between four and four and a half based on where growth is. John, I think what we're more focused on is rate volatility. So just like the VIX does it for equity, there's an index for interest rate volatility. And we're about to breach kind of the levels that we have not seen since before the March of 2022 Fed tightening cycle. So that's one reason to be excited. Second reason, small businesses, 99.9% of businesses in this company have less than 500 people, which are small businesses.

And they told us this week that they're about as excited as they've ever been. The biggest one-month jump in the 39-year history of the index on economic optimism and reasons to hire and lower uncertainty. That's another reason to be optimistic. And then the third piece has to go back to growth.

I mean, Atlanta Fed GDP now, so what the fourth quarter is looking at right now, about 3.3%. We have inflation about 2.5% to 3%. John, that's close to 6% nominal growth that we think is going to drive earnings next year between 11% at a base case, 15 at a bull case, which goes back to the low recession probability of only 15%. So, John, I can go on forever with reasons why we're optimistic. That's a lot of reasons to be optimistic, Barb.

But a lot of this has been riding with tech. Oracle and Adobe both had some rough post-earnings stock reactions. Those are two big software names. So for the broader market, does this report from Broadcom, perhaps, which has now a sizable software business, put more pressure on? No, I don't think it does, John. I mean, I think Broadcom, people are wondering what's going to happen with their earnings because we have some near-term headwinds. You know, the chip that they're doing with Google probably has a quarter delay before it ramps up. There's some seasonality in there, but their long-term run rate in terms of AI and how that's

ramping up and even their enterprise software with the VMware acquisition is very positive. So it's really, in a way, operating independently of the broader economy. It's really tied into the AI play. They're really number two behind NVIDIA in terms of actually making revenues off of this AI. So I don't think we can read that much into the Broadcom print. And I think the investors will probably look through any short-term shortfall. It's going to be key about the guidance going into next year. Okay. Phil, you just mentioned NFIB. Part of the reason we saw such a jump in optimism was the outcome of the presidential election. Big day today down at the floor of the New York Stock Exchange this morning. You have President-elect Trump and his entourage,

a number of his cabinet nominees all lined up. Time magazine behind him. Time magazine ringing the opening bell and actually talking to CNBC from the floor of the Stock Exchange, Jim Cramer. So have a listen to this. We're going to do things I think that haven't been really done before. We're going to be cutting taxes still further. You know, we got it down to 21 percent. We're going to bring it down even below that. You pay 21 if you don't build here and meaning your product or whatever it is you're building. And if you do, we're going to try getting it down to 15 percent. But you have to build your product, make your product in the USA.

So he's talking about corporate taxes. As we know, tax reform is very much front and center as he comes into office here. So what is going to matter more here, especially as you did just rattle off this list of things that are making you optimistic about stocks for 2025? Is it going to be fiscal policy or monetary policy? I think monetary policy is going to fade into the background finally after a couple of years, and it's going to go back to the policy from the administration, particularly around deregulation. You know, John mentioned we like mid-cap. I think the financials exposure within mid-cap is really going to take advantage

of the deregulation. As one CEO said, bankers are going to be dancing in the street. Barbara, I want to get your thoughts on this too, fiscal versus monetary policy, especially as breadth's been negative for the S&P for the last eight trading days or so. But there are very strong expectations that we're going to continue to see SPX power higher in 2025. And I think it probably can. I mean, I think we're due for a pullback, and that may happen before year end, or it may happen at the beginning of the year in terms of valuation. The big runs we've had, as we know, things don't go straight up. But I think monetary policy is still going to be in play. I think expectations are getting temperate. I think the Fed probably will raise rates or excuse me, or cut rates next week.

Twenty five bips. But when they do again, it's going to be a question. It's not as important right now because we've seen the economy seems to be thriving, even with the high level of interest rates that seem restrictive. On the fiscal side, President-elect Trump talked this morning about cutting corporate tax rates from the 21 percent to 15 percent. Under his administration, they went from 35 percent. I'm not sure this is all going to be congressional action. There's enough of a majority to cut them even further. I think when you talk about extension of them, they'll be cherry picking. There'll be a lot of compromise back and forth. So the market's excited about the potential for tax cuts, but I think it's more about

taxes probably will not be raised. Because you also have looming the question of tariffs. A lot of people think it's just jawboning, but there's some calculations for every 1% that you raise tariffs, that's a 10th increase in inflation. Plus, we have the immigration issue. I mean, you have industries like construction, which is already short about half a million workers. 21%, 22% are illegal immigrants. So there's lots of considerations here, and we don't know yet. There's a lot of talk. We don't know the policies. We know who's being appointed,

and there's a lot of pro-tariff people and anti-immigration people who want to do that. So I still think the jury's out. We're not going to know how much fiscal stimulus. We're going to find out pretty soon. Barbara Duran, Phil Camparelli, thanks to you both for joining us. I want to mention RH results are out. We're going through those. Stock is spiking, so hold your hats there. Adobe, meanwhile, closing out the day as the worst stock in the S&P 500 as it reacts to last night's earnings report, specifically the guide.

Now Mike Santoli is taking a look at that move and the broader software space. Mike. Yeah, John. Adobe down like 25% from its highest. Severe laggard this year. I did think it makes sense to look at it in a much longer-term perspective compared to some other software bellwethers. Obviously, differences in the businesses here, but subscription-based software services, generally speaking. It's basically kind of pulled back at

the same time that Salesforce has surged. And so now on a 10-year basis, they're pretty much almost even. And then, of course, Oracle, which had been really dead money for a long time, just kind of a cash cow, slow-moving company, gets the AI bump and now has made a run at catching up a little bit on this measure. Now, on a valuation basis, they've actually become very clustered here. Salesforce, for most of its history, very, very expensive stock. Similarly, Adobe, as recently as a couple of years ago, is like a 40 times earnings. Salesforce, you see down there, it's now actually back to having a higher valuation than Adobe. And even Oracle, while it's close, is also a slightly higher

forward price earnings multiple than Adobe. So that's a little bit of a switch, obviously going to be based on whether the forward earnings for Adobe come through as now projected and whether the street can be more persuaded that they have that kind of a durable advantage in the in the world. But did think it was interesting. You had this kind of convergence in general and that kind of stripped away some of the exceptionalism that was priced into a couple of these stocks. Now, I can't believe I'm going to say this, but in a way, these companies are all contemporaries. I mean, even though Adobe and Oracle are older companies, but when it comes to applications, software applications,

and I guess whether they're cheap or expensive here relative to each other depends on how you think each, maybe particularly in their application space, will fare with AI. Totally true. And I also would throw the general disclaimer out there that valuation based investing in tech in particular is tricky. You have a lot of stocks that have looked cheap for a very long period of time in tech, and it just ended up being value traps. But I do think that's exactly correct. You have to have a pretty strong view on just which way things break from here in terms of whose advantage can be pressed in the new world. Not the person to actually tell you how it is, but it is fascinating to me that essentially we've all kind of settled these together as if the market is saying, OK, you know, bets on the table now on pretty even odds. OK, Mike Santelli, we'll see you later this hour.

We've got those R.H. earnings ready to go. Julia Borson has the numbers for us. Julia. R.H. revenues right in line with expectations at eight hundred and twelve million dollars. While earnings were a miss, the company reported adjusted earnings of two2.48 per share versus estimates of $2.65. But you see that shares are skyrocketing, and that is on guidance. The company is saying it's adjusted. A couple of things here. It's raising its fourth quarter guidance, forecasting fourth quarter revenue growth of 18% to 20%. That compares to analysts' estimates of 7% growth in the fourth quarter. And also just a couple other key things here about tariffs. They say they do not expect a negative impact to margins as a result of the recent communications about tariffs,

increased tariffs in 2025, saying they've been moving sourcing away from China with the expectation of fully exiting the country by the end of the second quarter and also saying they're transitioning products manufactured in Mexico and they think they can reposition their sourcing with no disruption to the supply chain. Shares up 18.5%. John? All right. Nice guidance reaction, Julia. Thank you. That's interesting, too, because they had built out that footprint in China really just a couple of years ago. All right. Well, RH buildeth and RH taketh away. We've got a lot more earnings action on the way, including results from Broadcom and Costco and instant reaction from top analysts. And up next, the CEO of satellite communications company Globalstar,

which pulled back sharply today, but joins us on the back of the company's investor day with his message for shareholders. We're going to talk connectivity. So stay connected with us. We're back in two. Welcome back to Overtime Telecommunications Company. Global Star holding its investor day today, unveiling its outlook for 2025 and beyond. The stock closing sharply lower on the day. But this comes after Global Star spiked earlier in the week on a report saying the company would bring satellite connectivity to the Apple Watch next year. Joining us on set for an exclusive interview is Global Star CEO

Paul Jacobs. He is also the former CEO of Qualcomm. And it's great to have you back here. So welcome. Thanks for having me again. So let's start with this. I want to just get it out of the way right now because the stock moved so aggressively on it earlier in the week. But this report, you do have this relationship, Apple. Apple's an investor. You do provide the connectivity for these satellite services that we all get in our iPhones. Is it coming to the next iteration of the watch? So I was as surprised as everybody else to see that report because obviously our customers don't share their product plans with us and for obviously good reason because they want to make a big impact on the world. So I can't tell you the answer to that question. Okay. But what we are seeing in terms of space infrastructure,

the opportunity around connectivity and the role that Global Star plays in that, where do you see the biggest opportunities? I mean, you talked about industrial IoT. Obviously, there are the iPhones and the Apple partnership. And we are hearing increasingly more about the possibilities to be connected in more remote and rural ways and more competitors coming online, including Starlink and AST Space Mobile to do it. Right. Well, I mean, there's a lot of hype right now about broadband everywhere, even outside of cellular coverage. What we think is that that's an unproven market right now, especially since connectivity is available now in your smartphone when you're outside of coverage or if there's a natural disaster or something like that. And there have been studies saying that consumers don't really

want to pay a lot more for this connectivity. So what's the business model for some of those competitors? We know what our business model is. When you put a new feature into a phone, then you might get people to buy a new phone sooner, or you might change some market share. That actually is real dollars to a handset manufacturer. And so that actually can pay for the features. This idea that these massive investments may be paid for by something which is somewhat of a field of dreams. We do not know yet whether consumers will come. And in fact, decades ago, Iridium and Qualcomm both went bankrupt trying to sell cellular services outside of cellular coverage areas.

So this is still speculative at this point on that. But what we're doing is known and there is a business model for it. I want to note that Broadcom and Costco earnings, those results are both out. Both stocks, it looks like, are initially headed higher. We'll get those to you as soon as they're ready. Paul, what's the Starlink effect? I'm seeing a lot of people trying it out, picking these up, talking about how easy it is to connect. There's the demand side, and then there's actually the logistics of you get that signal down, you've got terrestrial networks you've got to deal with to actually make it useful for customers. But is there a positive effect to the buzz around Starlink? Yeah, for us, I think that people see that satellite connectivity is so much more interesting.

Obviously, the podium that we have to talk from is not the same as Starlink. Starlink gets a lot of press, a lot of discussion about it. But we're actually providing a commercial service today. During the hurricanes, during the natural disasters, people's lives were saved. Back in Maui the when the cell towers burned down people's lives were saved that is real that's commercial today if you look going forward for somebody that's trying to get spectrum from a mobile network operator to run a service even if they can clear out an area for the satellite connectivity those beams are still big and they may interfere with terrestrial networks as well.

So it's really a question, can a mobile network operator afford to clear out the spectrum? And those spectrum pieces, they've cost a lot to get the spectrum and they've cost a lot to put the terrestrial network out in that area. So the opportunity cost of clearing spectrum is quite large for a mobile network operator. In contrast, we have our spectrum assigned. We have more spectrum than people have been talking about for Starlink. We have it globally and it's the same spectrum. So that's a huge advantage for us. So is the spectrum itself the differentiating opportunity or is there a big new market that we should expect that you're going to be able to uniquely capture that the existing broadband providers can't?

So we go for ubiquity. We can provide connectivity everywhere around the world. And so we've had things like tracking various kinds of devices, tracking animals, tracking things that need a low-cost solution but need to be connected in some way, tracked in some way. And we have low-cost devices, low-cost service. Our Constellation is basically paid for by our wholesale business. So we really have a different price point that we can bring to the market. And, of course, now you're forging more partnerships with the likes of Parsons

and getting into the military connectivity market in a bigger way too. A lot going on. 2025 will be busy. We appreciate you coming here to see us up for it. All right. Thanks for having me. Global star. We've got Broadcom earnings out. Seema Modi has the numbers for us. Hi, Seema. Morgan, a good set of numbers. Fourth quarter earnings of $1.42 adjusted for Broadcom. That is above the estimate of $1.38. Revenue, a slight miss, so you could call it in line, $14.05 billion. The street was looking for $14.08. Some bullish comments from CEO Hoctan that I want to bring you, John and Morgan. He says that semiconductor revenue for 2024, a record of $30.1 billion driven by AI revenue, which they break out at $12.2 billion. He says AI revenue, which grew 220% year over year, was driven by our

leading AI XPUs and Ethernet networking portfolios. So raising expectations on what to expect going into next year, always an important gauge, especially for the hyperscalers that are working on their own in-house chips, guys. We're looking at shares of Broadcom up over 4%. Conference call begins at 5 p.m. Eastern. We'll be looking for more clarity on capital spending going into 2025. Guys? All right. Positive report for sure. Seema, thanks. Well, after the break, Bernstein's Stacey Rasgun is going to join us

with his first reaction to Broadcom's results and the read-through for other chip names. And later, pains and gains. One pharma company is on the cusp of approval for a non-opioid painkiller. This is a move that could significantly impact its stock and the market. We're going to tell you about the potential opportunity that's ahead on overtime. Welcome back. Costco earnings are out.

Melissa Repko has those. Melissa. Hey, John. So Costco stock is just down slightly despite beating on the top and bottom line. It reported earnings per share of $4.04, higher than the $3.79 that were expected. Revenue was $62.15 billion compared to $62.08 billion expected. Membership fees were also on the higher side than expected, totaling $1.17 billion compared to the $1.16 billion analysts expected.

And remember, Costco recently hiked its membership fees for the first time in about seven years. That took effect back in early September, John. All right, Melissa, thanks. Thanks. Now look at Broadcom. Again, those shares are higher by about 4% still. Revenue outlook coming in above analyst estimates. CEO giving some bullish comments in the press release. Joining us now is Stacey Raskin. He is a senior analyst at Bernstein, has an outperform rating on the stock. And Stacey, it continues to outperform AI revenue, 12.2 billion, up quite a bit here. Is that what folks are excited about? I think it's two things. One is the quarterly revenues, the semis beat.

It looks like it was AI. If they said 12.2 for the year, it means roughly 3.7 for the quarter. The guide was like 3.5-ish. So the AI performance in the quarter beat. I also think on the guide, even though the revenue outlook for fiscal Q1 is roughly in line, investors were expecting them to miss. They're worried about things like wireless seasonality into Q1 and maybe some potential lumpiness on AI. And so we'll get a little more color on the segments on the call. But as of right now, an in-line-ish revenue,

I think, is actually above where investor expectations were as we headed into the quarter. And I think that's where the stock's at. So we were talking earlier with Mike Santoli about how expensive or not some software names are exposed to AI. How are the chips, how are the semiconductors looking given this very exciting but somewhat volatile year? Yeah, so semi-valuations are relatively high. They've been high. It's two things. I think it's the AI names.

I think it's also a number of names where just numbers in general have been going down, especially in the analog space. And yet the stock prices haven't really gone down very much. So if the stock price doesn't go down and the numbers do, by definition, it means the multiple goes up. And so semiconductor multiples in general have been fairly rich. It's interesting. Some of the AI names are not that expensive. Broadcom is probably high 20 you know high 20s maybe 30 times even Nvidia is you know 30 times give or give or take right they're actually not some of these are not

actually the more the most expensive with their other names that that are more expensive within the airspace but the AI winners it's funny if you look at them they're probably of like among the cheaper of like the basket of AI stocks right now. So it's been an interesting dynamic this year. Frankly, if it wasn't for AI, I think in general, the space would not be having such a great time. AI has been very strong. Most of the other markets broadly in the industry so far this year have not been great.

It's really been a single factor driving things on mostly as we went through as we end up the year. We'll see what 2025 brings. Stacey, I'm going to ask you what may be a contrarian question. And it seems like it's coming out of left field. But I was speaking with the founder of a tech company that is absolutely foundational to the generative AI era, if you will. And thus an early indicator of what's happening in the market. And this person said to me that they think that we are much closer to being oversaturated and oversupplied in NVIDIA chips than anybody realizes. Your thoughts? Well, it doesn't seem that way right now. I mean, some of their older generation parts, like the Hopper part, supply has gotten a lot better as we've gone through the year. The Blackwell parts that they're getting ready to launch now seem absolutely constrained. Now, there is a lot of capacity that is coming online as we go through the year.

And this is why people get positive about NVIDIA, because if the demand is there to meet that supply as it comes online, it still suggests a good amount of upside relative to where I think expectations and numbers are. about Nvidia because if the demand is there to meet that supply as it comes online, it's, it's still suggests a good amount of upside relative to where I think expectations and numbers are. So that will be the debate again, as we go through 2025, as that supply comes online, is the demand there to meet it or not? I would say as we stand right now, the demand still looks off the charts. At least at this point, all these guys are going to be selling everything that they can make. Okay. States Raskon, Bernstein, thanks for joining us.

Shares of Broadcom up almost 5% right now. Well, it's time for a CNBC News Update with Kate Rooney. Kate. Hey there, Morgan. A new report from the Justice Department's inspector general says the FBI failed to take the, quote, basic step of canvassing its field offices for intelligence ahead of the January 6th Capitol riot. It also says no undercover FBI employees were there that day, knocking down a conspiracy theory advanced by some Republican lawmakers and others that the FBI played a role in investigating those events that day.

The Federal Trade Commission, meanwhile, suing the nation's largest alcohol distributor, Southern Glaciers, for what they call unfair pricing. The agency accuses the distributor of favoring large chain buyers, including Costco and Kroger, over smaller mom-and-pop stores, violating a 1936 price discrimination law that hasn't been enforced in more than 20 years. Southern Glaciers has yet to comment. And finally, a South American tour group is turning the site of the Jonestown massacre in Guyana into a tourist destination for $650 a person. The tour operator said the

first group of visitors is scheduled for an overnight visit in January for what they say will give a deeper understanding of one of the most notorious events in modern history. Guys, back over to you. Okay. Kate Rooney, thank you. After the break, why the five at the end of 2025 could portend a good year ahead for your portfolio. And check out some of the S&P 500 names that hit record intraday highs today, including Booking Holdings, Tesla, Kroger, MasterCard and F5 networks. We'll be right back. Welcome back to Overtime. Mike Santoli is back to tell us why the five in 2025 could be a lucky number for the market. Mike. Yeah, Morgan, you know, history suggests maybe this is the case. We can find our omens where, you know, wherever we like.

This is from Ned Davis Research and they compile a call it a seasonal composite or a cycle composite for each year. So 2025, this combines now the annual seasonal tendency of what the S&P 500 does, right? That's all the things about selling May and all the rest of it. And then the election year cycle. Now, post-election years, which is 2025, are actually not the best historically for performance. But years that end in five, there's this 10 year cycle as well, have rarely been so bad. Very few pullbacks. You see here, this would be the ultimate textbook path of the S&P 500 if all of those cyclical forces were in

place. Really no appreciable setbacks along the way. Really not a full correction. You see that the return would be somewhere in the area of 10%, but it's mostly about the cadence. Now, the five part of it is the reason it's as strong as it is, because if you go back over the decades, you've had very few really bad years that ended in five. I do want to point out, though, the last year that we had ending in five, 2015, was a pretty volatile, choppy, unrewarding year. And so this chart from going from 2013 through 2016 shows you this year is basically 2015. You had a big sell off in the summer. You made it back. Then it went back down in the fall. And so essentially, you didn't really make any net progress. So obviously, there's going to be exceptions to any rule. That was the exception to this one. Final note, years that end in four were supposed to be, based on history, pretty middling in terms of returns. And here we are up 27 percent this year on the S&P.

So it raises the question, I mean, could we potentially be seeing pull forward this year then? Or is 2015 really just going back to the decades a very stark anomaly? I think it's a definite anomaly. I also would always point out with these things, there just haven't been that many decades in the modern stock market. So it's not as if there's a massive sample size of these things. In general, the idea of a pull forward doesn't tend to hold up. Strength usually feeds into strength. So I wouldn't say that's necessarily what's going on here. But we are in sort of in many ways a typical economic cycle right now. And these things, of course, are just sort of the background rhythms of the market and not what's really

dictating the day to day activity. I think next year will be unique. Mike, I got five on it. There you go. We're all unique at some level, yeah. A top retail analyst on what he wants to hear from Costco's management when that earnings call begins at the top of the hour. And another check here on RH. It's the big overtime winner after the company raised its Q4 guidance pretty aggressively, too. Management also saying it does not expect a negative impact to margins due to potential increased tariffs. Seems to be shifting its supply chain over time. Way back into an R.H. is up 18 percent. Welcome back. Costco shares are slightly higher right now, basically flat and over time after beating on the top and bottom lines just moments ago.

But let's bring in D.A. Davidson senior analyst Michael Baker. Michael, it's great to have you on and just want to get your initial takeaway from these results from Costco as we are in the midst of the holiday season. Yeah, results mixed, I would say. So sales were already pretty much known because, remember, they report monthly comps. So we pretty much knew the sales. They did beat our earnings, but almost all that beat was was on a lower tax, a tax benefit, such that the real earnings beat was a couple pennies. That's fine. Gross margins were strong. That's certainly a positive.

The membership fee increase missed slightly and didn't really accelerate from the previous quarter, which is interesting given the fee increase went in place on September 1st. So, you know, putting all those together, kind of mixed. Okay. Were you surprised to see that the membership fee didn't have a bigger impact? I feel like it had been years, years of us talking about when is Costco going to boost that fee? And then they finally did it. We finally get the first quarter and it doesn't seem to be terribly meaningful. Yeah. Well, the way the accounting works is it really plays out over twenty four months, believe it or not. And all sort of like a bell curve because the economy, the accrual is you spread the increase over the twelve months of the membership. And then the membership base renews, you know, pro rata over twelve months.

So you can sort of graph out. So we wouldn't expect it to have that much of an impact uh in the first quarter uh that they do it but the the 7.8 growth versus 7.9 growth last quarter uh when you adjust for the extra week really shows no impact so in that sense yeah i am a little bit surprised i will hear of course more on the call about renewal rates and those types of things i don't think they get a lot of churn when they increase the fee, but we'll see. Michael, Costco historically hasn't paid a lot of attention to e-commerce, but it is up 13% here.

Is that shifting? Is that changing at all? Yeah, they're starting to focus a little bit more. Now, they still, in terms of the growth, underperform Walmart, Target, even BJ's, but they are getting better. They're starting to take it a little bit more seriously. Right now, it's mostly focused on hard goods and big and bulky items. All the grocery is still outsourced through Instacart. And by the way, they don't count that as an e-commerce sale. So the growth is a little bit understated in that sense, but it is an area where they're starting to focus

a little bit more on, yeah. Yeah, I mean, Instacart for Costco is huge, but I also wonder, like, there's so much omni-channel in e-commerce where people are getting the incentive to buy digitally, but actually going to store to do it. How are investors gonna be able to tell how well Costco is really optimizing around that, getting better with the emails, getting better with AI and actually targeting the right

members and getting them into the store to buy higher value items? Yeah, right. Especially in an area, you're right, they haven't really focused on in the past. In fact, they're one of the few retailers that does not do curbside pickup. They tried it maybe a year, year and a half ago, tested it in some clubs, and didn't really go forward with it, which is interesting. Now, they do have byline pickup in-store where you have to get out of your car

and go into the store, but they don't have the curbside. But the way we'll see if these new initiatives and this increased focus on e-commerce is paying off really is just to watch that monthly e-commerce number that they report. They do report e-commerce growth every month. It was actually really low last month, but that was a function of the shift in Cyber Monday. So we suspect that we'll catch up when they report the

December sales. But again, they report it monthly, so we'll keep watching that number. I would have loved to see curbside pickup of gold bars or platinum bars. So I'm going to ask you two for here because that is obviously a big part of the Costco story. And it's been so successful with gold that they have rolled into other precious metals. But also just looking at your coverage universe, I know you don't cover RH, but we did get commentary from that company about not expecting an impact on margins from tariffs if they shift their supply chain. What are you expecting across your coverage universe, whether it's Costco, whether it's others,

where those are concerned? Yeah, well, so first of all, relative to the first time we heard about tariffs under President Trump, what was it now, five or six years ago, every company has worked very hard to move a lot of their sourcing outside of China. So that helps minimize the impact. And then we think of the burden of tariffs shared between customer, retailer, importer, manufacturer, and the bigger companies that push a bigger pencil, restoration hardware being big in furniture, Costco being big in mass merchandise and general merchandise. We think they can push a lot of that back on the supplier. Some will flow through to customers, but we don't think a lot of that back on the supplier. Some will flow through to customers, but we don't think a lot.

If you look back at 2018 and 19, inflation didn't really pick up that much around the tariffs. Now, of course, in 2020, it spiked with COVID, but didn't really see that big of an impact on inflation. So I think a lot of it gets pushed back, some absorbed by the retailer, but again, the bigger retailers, I think, can offset that and push it back more than others. Okay. Michael Baker, thanks for joining us. Happy to do it. Thank you. We'll shift gears here. 2024 was a pivotal year for United Launch Alliance. The rocket maker, which is jointly owned by Lockheed Martin and Boeing,

flew its new powerful Vulcan Centaur for the first time in January, then again in October, with military certification coming any day now. ULA's CEO, Tory Bruno, who joined me from the Reagan National Defense Forum, expects the launch market, which is utterly dominated by SpaceX, to find better balance next year as Vulcan launches more and other rockets like Blue Origin's New Glenn and Rocket Lab's Neutron come online. It's a really dynamic time in the industry. The bottlenecks are in the supply chain,

but I think very soon we'll start to see crowding at the ranges as well. We've actually been building rockets ahead and stockpiling them for this launch rate, which is something that never happens in the space launch industry, just to be able to get in front of all of that. And, of course, ULA counts Amazon among its customers. But Bruno is also making the case for more protection of space infrastructure, which he says Vulcan can help to carry out. From a space perspective, China is developing and fielding anti-satellite weapons,

or you could think of them as satellite killers, into orbit right now. And for us, space is essentially an undefended domain. So we are going to have to contend with that. Policy has been all around resiliency, which is to say having a space architecture that can take a few attacks and keep operating. That's essential because we don't think really any longer that a terrestrial conflict could extend into space. I think we now know that a terrestrial conflict starts in space

first. So those assets will be attacked. What we need to add to the portfolio now is the ability to fight back and defend ourselves. And of course, we also know that it's not just military assets in space that get targeted, but also commercial satellites and commercial ones as well. So for more on my discussion with ULA's Tori Bruno, check out Manifest Space. Scan the QR code that's right there on your screen or download wherever you get your podcasts. Trio top tech executives say the AI revolution is going to impact their workforce and which skills will be needed to succeed in this new world. And a behemoth of an IPO for Service Titan shares of that company, which makes software for contractors like plumbers, electricians closing at one hundred one bucks a share after,

you know, pricing at seventy one last night. Be right back. AI is beginning to change the way work gets done. So it's also changing the way technology leaders think about the skills the workforce needs, which I explored today with members of CNBC's Technology Executive Council. Sri Ram T. Agarajan, he's Chief Technology Officer at Ancestry, said the first step in upskilling was encouraging workers to get their hands dirty with large language models within some specific AI governance guidelines. And that helped our employees come up to speed or at least an initial understanding of what are these LLMs about?

What is hallucination? How can we do prompt engineering, et cetera? Different technical aspects of that. And while doing so, also figuring out, you know, is this technology useful for this particular type of problem that we're trying to solve for our consumers? And I think that was a huge part of it, is enabling that as part of their day-to-day work life. Upskilling is a pressing issue. Danielle Conklin, Chief Information Officer at Quility Insurance, said the half-life of relevant skills is less than five years for

today's workers. If you're in a technology-related field, it's probably more like two and a half. So it really needs to start almost at the top with, you know, creating that culture of lifelong learning. So besides measuring AI benefits, which I'll talk about in a second, it's measuring the benefits of, you know, is this upskilling really having an impact on our workforce? And is it kind of treated as a one-time exercise? Or is it, like I said, that creating that culture of lifelong learning? At medical device maker Zimmer Biomet, Chief Security Officer Jody Blanchard wants workers to use AI to enhance digital defenses. How do you allow for the industry to be protected in a way that the human cannot do? So you have to look at how are the human AI processes enabling to give you better

predictive analytics? Are you using chatbots? Are you integrating different security technologies that allow for auto containment processes to reduce threats throughout the globe? Or are you still doing manual processes that are inefficient, slow and reactive in nature. Thanks to Sriram, Danielle and Jody. Well, CNBC's Technology Executive Council is a membership organization for C-level technology executives from any industry. I've started a series of tech talks to pick their brains about how they're tackling various challenges. If you'd like to apply for membership, head over to cnbccouncils.com slash TEC. Up next, how an experimental non-opioid pain medication could be a game changer for the

pharmaceutical industry and for people suffering from chronic pain. And don't forget, you can catch us on the go by following the Closing Bell Overtime podcast on your favorite podcast app. We'll be right back. Welcome back. Vertex Pharmaceuticals has been one of the top performing health care stocks this year, easily outperforming the sector and a potential new catalyst for the name could be on the horizon in the form of a new non-opioid pain drug. Angelica Peebles is here. She's on set with us. She has the details. Yeah, that's right, Morgan. Vertex is closing in on introducing a pain drug that would be the first new mechanism in more than 20 years.

In the next two weeks, we should see how well the drug works for sciatica, and Vertex estimates that painful nerve condition affecting more than 4 million people in the U.S. Now, that's a big market, and that's one reason why Guggenheim expects the stock could move more than 10 percent in either direction on those phase two results. Now, these data could also give investors a window into a larger phase three trial. Vertex is running in another type of nerve pain. So Guggenheim sees this as an especially important readout. And then in January, we're expecting the FDA to approve the drug for acute pain.

So think about after you break a bone or you get surgery. And Vertex says that 80 million people take medicine for this type of pain every year in the U.S. And the debate, though, is that if Vertex can get insurers to pay for this drug when generics are available. And Vertex is very confident, telling me that there's a lot of interest in a drug that makes people feel better without the side effects and addictive potential of an opioid. So it'll be a really interesting one to watch. I have a twofer for you. And the first is, why did it take so long to get here? And how does it work?

And I ask that knowing that with the opioids, it's not that they necessarily take the pain away. They just make you not care about it. Exactly. And pain is really difficult. Vertex and just them, they've been working on pain since 1996. And when I talked to them, they said this was supposed to be the easy one of the diseases they were going after. But how this works, this drug, so say I get a paper cut right now, and a pain signal goes from my finger up to my brain through these nerves through the sodium channel. And so Vertex's drug blocks that channel and blocks the signal telling your brain that you're in pain. And so that's why this is different versus

the opioid receptors where they work in your brain where addiction is controlled. Interesting. So any sense of how big the market is for people who want to avoid the opioid piece of it? I mean, I hear my relatives talking about it all the time. I don't want to stay on any pain meds or even get on them for any amount of time. Yeah. Well, so just for acute pain, Vertex says that about 40 million people a year, they get prescribed an opioid. So that could be a market. But again, there's that 80 million people who get any sort of pain prescription, pain medication prescription. So that's a big market. And then also with the chronic pain, I mean, just think about how many people suffer from chronic pain. So this could be a really big market. And, you know, analysts say

that even if Vertex can capture a little piece of it it could be a multi-billion dollar drug okay angelic peoples thanks for breaking it all down for us thank you appreciate it it was another down day for the markets breath is negative again eight straight trading days where we're seeing that so definitely taking a pause here but while the market might be taking a pause we have another piece of breaking news and that is the fact that it is John Ford's birthday December 12th taking a pause here. But while the market might be taking a pause, we have another piece of breaking news, and that is the fact that it is John Ford's birthday. December 12th is a very special day. I want to say happy, happy birthday. Thank you. Yeah, it's also Ed Koch's birthday. He's former

mayor of New York. I lived in New York when I was when I was born. You're kind of dating yourself. I was going to say it was your 30th birthday, but now I can't even say that. You just dated yourself. No, I'm not even trying anymore. Plus, we got Mike Santoli around to do the Gen X thing with me. But no, thank you very much. That's great. I also want to harken back, though, to the overtime session we just had. Broadcom still higher off the very highs, though. It's up by about 2% now, bucking that software trend, Adobe and Oracle said. It's like they knew it was your birthday and they wanted to give you some green on the screen. Happy birthday, John. My partner in crime here at Overtime. That's going to do it for us here at Overtime.