Closing Bell - Closing Bell Overtime: Instant Reaction To A Major Shakeup In The Sports Streaming World; Interviews with Chegg, Freshworks CEOs 2/6/24

Episode Date: February 6, 2024

Another earnings bonanza with Snap, Ford, Chipotle, Gilead and VF Corp reporting numbers. Vital Knowledge’s Adam Crisfulli reacts to it all. Plus, instant reaction to breaking news that ESPN, WBD and Fox are close to a deal to start a sports streaming service together from MoffettNathanson analyst Michael Nathanson. Interviews with Chegg CEO Dan Rosensweig and Freshworks CEO Girish Mathrubootham.

Looks like we're closing at the highs of the session. It was a seesaw day for the S&P 500, but the Dow closing firmly higher. The Nasdaq basically at the flat line, even as tech takes a timeout. That is the scorecard on Wall Street, but the action is just getting started. We have a lot of action today. Welcome to Closing Bell Overtime. I'm Morgan Brennan with John Ford. Well, today, materials and real estate, the big winners, while tech and comm services were the only sectors in the red. And now investors waiting for earnings from Ford, Chipotle, Snap, Gilead, VF Corp, several others are going to break down all those results as soon as they're released. Plus, we will speak exclusively with Ford's CFO before he dials into the call with analysts. As we await those earnings, though, let's bring in our market panel. Joining us now is Vital Knowledge founder Adam Christofoli and CNBC senior markets commentator Mike Santoli. Adam, I will start with you because we did see in the run up to today, we did see yields move higher. The dollar strengthened a pretty aggressive repricing within the Fed funds futures market, given all the Fed speak, including Powell over the weekend. Today, a little bit of a breather there. And actually, it looks like everything that's not tech had a

particularly better day. How does this signal the trajectory here for the market? Yes. So we've had a few really hot January economic numbers, including the jobs report, both ISMs. We had the Fed last Wednesday and then Powell on 60 minutes over the weekend, pushing back against expectations of a March cut. You know, I think this is a temporary disruption, but it doesn't really alter the broader trajectory of policy, which is that we are going to get rate cuts this year. We're most likely going to get them before the second half of the year. So if not March, then May. And in addition to that, you're also going to get the quantitative tightening process slowing down. And that we're likely to hear a lot more about at

the March meeting. So, you know, if we were to see a real meaningful reacceleration of inflation, that would that would be a game changer. But you're just not seeing that in the data. So, you know, we had a big disinflation rally in November, December. You know, it's paused a little bit. We've had a little bit of a setback on certain inflation readings. But I think the broader trajectory is still one of disinflation, one of a pretty aggressive dovish pivot in monetary policy globally, everywhere except for Japan. And you've had a resilient earnings season that showed corporate America to be resilient as far as their earnings power. So, you know, until we see a real material shift in any of those three,

any of those three factors, you know, I think markets are going to stay with a healthy bid beneath them. Okay. Well, we've got Gilead earnings. Those are out. Kate Rooney has the numbers. Kate. Hey, Morgan. So it's a mixed quarter here for Gilead. We're going to start with EPS here. This was $1.72. This is the adjusted number. Street was looking for $1.76. Four cent missed there. Revenue was beat $7.12 billion. Better than expected there. Q4 revenue, they're saying, was down 4% year over year thanks to lower COVID and HIV drug sales. So that's accounting for the lower revenue, down 4% year over year. Guidance looking like it's in for the lower revenue, down 4% year-over-year. Guidance,

looking like it's in line here. Guys, full-year guidance, they're looking for at least adjusted EPS, a range of 685 to 725. The street was looking for 721. So it looks like that is on the mark there in terms of full-year guidance. But again, a mixed quarter. You can see the stock pretty much flat here after hours. Back over to you. Okay. Kate Rooney, thank you. Mike Santola, I'm going to go to you because some of the biggest movers we saw in the market today were actually health care names. Lilly, which actually ended up closing the day basically flat, slightly down. But GE Health Care up almost 12 percent today. Tells us what, especially as we did just get Gilead, about this sector, which we know in 2023 was so beaten down. Yeah, this has been, I think,

one of the breakout groups of the year or the last few months, let's say, really a neglected area of the market the last year. In fact, all pockets of health care, whether it was big pharma, biotech, medical devices, and all almost have kind of rebounded in concert. So I do think it's sort of the combination of growth at a reasonable price and value. You've got big pharma that's sort of emerging out of this real malaise period where they had these huge charges post-pandemic and everything else. And so a lot of it is working. If you look at the 52-week high list, I was looking at it yesterday. It's a ton of health care related things like Danaher, things like other medical devices, Merck.

And yes, you mentioned GE Healthcare also with a big day today. So it's at least an inkling that investors are looking outside the obvious growth areas of the market. There is some catch up going on here and it's, you know, some room to go in terms of some valuation expansion. Obviously, it depends where within healthcare you're specifically looking. But so far, that's been one of the areas that I know a lot of the chart readers are loving right now. Adam, what's your read on the market's reaction to earnings numbers so far, where revenues have continued to be weaker than the EPS, whether you're looking at what's being delivered, certainly what's being guided to. Do we go higher without the top line cooperating, or do we stay here as long as the bottom line cooperates? That's a great point because a lot of companies, some of the big upside standouts, it's been all about really aggressive cost cutting.

And that's not really sustainable. And if you do it for several quarters, you can actually compromise your top line. So, you know, I think if this were to continue for another quarter, perhaps markets would react favorably or they would tolerate it. But, you know, a market that's driven entirely by cost cutting and then you see a really poor top line trend across industries, you know, that's not one that's going to trade well. So I think for now, markets are welcoming the cost cutting. You are seeing some pretty healthy margin expansions at certain companies.

You know, but again, if this were to continue for multiple quarters and revenue really performs poorly, then I think the broader market would care. OK, we're going to get to Phil LeBeau now with Ford earnings. Phil. John, this is a beat on the top of the bottom line by Ford in the fourth quarter and beat by a pretty wide margin. Earnings per share, 29 cents a share. The estimate was 14 cents a share. Revenue coming in much better than expected, 43.2 billion. The street was expecting just over 40 billion dollars. And then there's each of the divisions. Remember, they break it down between EVs, ICE and hybrid, as well as the commercial business, Ford Pro. The EV unit did lose money again, $1.5 billion. By the way, for the year, it lost $4.7 billion. But the ICE and hybrid unit, internal combustion engine and hybrid, that division made $813 million. And the commercial vehicle unit, what they call Ford Pro, making $1.81 billion. Ford's electric vehicle division, it lost $4.7 billion for the year, as I mentioned. The guidance, this is important here. They're expecting to earn

between $10 and $12 billion in 2024 with free cash flow, adjusted guidance of $6 to $7 billion, adjusted free cash flow. And then the guidance for adjusted capital expenditures, eight to nine and a half billion dollars. Oh, and by the way, if you are a Ford shareholder, good news, you got a couple of dividends coming your way. Q1 dividend of 15 cents and a special dividend of 18 cents that will be awarded in the first quarter. Guys, back to you. Phil, that union contract doesn't seem to be hurting that much. Oh, it's hurting in terms of costs. They're adjusting. And we already heard about the changes they were making in terms of deferring some of the capital expenditures that they originally planned for EVs. By the way, we're going to be talking with CFO John Lawler in just a little bit. You can ask him about that,

about how much this impact of the new UAW contract will be weighing on their results in 2024. All right, Phil, we're looking forward to that in just a minute. Mike Santoli. So we're just talking with Adam Christofoli about this revenue versus EPS dynamic. So is it a question of which runs out first, company's ability to cut costs or, you know, the Fed's hesitation to cut rates? Honestly, I think it's not that unusual to go through these periods where essentially earnings leverage shows up, which means you go more on the bottom line than on the top line. They manage for the bottom line. Also, I'm not as concerned about sales growth running out, per se,

when we have like a 6% nominal growth economy right now, nominal GDP. So it seems to me we're definitely in a bit of a pause or, you know, the average company struggling to grow sales. A lot of them lost some pricing power. But I didn't need some kind of go for a while here. And profit margins don't revert back to the long-term mean as quickly as a lot of folks would think. So that's not one of the things that I would necessarily say is a real wet blanket necessarily on growth here. OK, we got more earnings. VF Corp earnings are out.

Courtney Reagan has the numbers. Hey, Court. Yeah, Morgan, these are this is this is the reason why the stock is down here after hours. So earnings per share, 57 cents adjusted. The street was looking for 77 cents for VF Corp's third quarter. Revenue is also a big miss at two2.96 billion. The street was expecting $3.24 billion. The only guidance the company is giving is reaffirming its free cash flow for the remaining quarter because this was the third quarter. Wholesale down 26 percent. Direct

to consumer down 8 percent. You know, Vans has been the brand or the banner that has really struggled here. The VF Corp is working to reinvent. It was down 28 percent for the quarter. The North Face down 10 percent. The Americas region down 24 percent. And the international business down 5 percent. The company also in announcing a strategic review and sort of saying, look, we're going to continue to go through this reinvent strategy, look through areas to streamline the business. Shares down, actually bouncing back now, down about 4 percent. continue to go through this reinvent strategy, look through areas to streamline the business.

Shares down, actually bouncing back now, down about 4%, but we're down 6% or so in immediate reaction. Back over to you. All right. Courtney Reagan, thank you. Adam, I want to get back to you, whether it's VF Corp, which definitely a turnaround story to be had here, but also potentially some read-through in terms of that retail weakness during the key holiday quarter to, for example, the department stores when you hear wholesale numbers down like that. Your thoughts on that and I guess also your thoughts on Ford, because either way, either way you cut it here, we're talking about how consumers are voting with their wallets. No, so definitely I think on VF4, you know, this is this is a turnaround situation. Like you mentioned, they have a new CEO in place. There's been a lot of activist noise around the stock. Adam, I'm going to interrupt you because

we got snap earnings too now. So hold that thought. Julia Boorstin has snap numbers for us. Hi, Julia. Hi. Well, we have a beat on the bottom line. Earnings per share beats $0.08 adjusted versus the $0.06 estimated. But revenues miss at $1.36 billion versus versus $1.38 billion estimated. We see the stock is plummeting right now. Now it's down about 20%. Some interesting mix of numbers here because adjusted EBITDA for the quarter coming in at $159 million. That's well above the $111 million estimated and way above the company's guidance of $65 to million and daily active users of 414 million or 2 million ahead of expectations. But it's guidance here that seems to be weighing on the stock. Revenue guidance is in a range pretty much in line with expectations. DAU guidance is just ahead of

expectations. But it's the earnings guidance where things get messy here. The company sees a first quarter EBITDA loss in a range of $55 million to $95 million. Now, the consensus was for a loss of just $22 million. The company did announce some progress for Snapchat Plus, which hit 7 million subscribers. They say it finished the year with an annualized revenue run rate of $249 million. That is the first time we've gotten any revenue numbers on this subscription service. Evan Spiegel in his letter to shareholders pointing to progress with small and medium-sized advertisers as well as the ad platform. But he said, quote, we estimate that the onset of the conflict in the Middle East was a headwind to year-over-year growth of approximately

two percentage points in Q4. We see the stock is now down over 22%. We'll be talking about all this and more specifically that guidance. I've got a lot of questions there when we talk to Evan Spiegel in an exclusive interview that's tomorrow morning in Money Movers in the 11 a.m. hour. Back over to you, John. All right, Julia, thank you. In case you like your overtime moves, like your salsa, green. We've got Chipotle earnings out as well the stock is higher uh kate rogers has the numbers how do you do it john love that this is a big quarter for chipotle topping estimates on all metrics here for q4 eps coming in at 10 and 36 cents adjusted higher than the 975 projected revenues 2.52 billion above the 2.49 billion projected by analysts. Same store sales climbing 8.4 percent.

That is better than the 7.1 percent the street was looking for thanks to mostly higher transactions that traffic and to a lesser extent higher prices. The company said food costs increased due to a higher mix of beef as well as inflation across the menu. Most notably higher costs for beef, produce and queso. These increases partially offset by the benefit of menu price hikes the company took in the fall. Restaurant-level operating margin in the fourth quarter was at 25.4% compared to 24% a year prior for 2024 full year. Chipotle is guiding full-year comparable restaurant sales growth in the mid-single-digit range and 285 to 215 new restaurant openings. Now, in a statement, Chipotle CEO Brian Nichols said, quote,

2023 was an outstanding year where we delivered strong transaction growth driven by throughput and menu innovation, opened a record number of new restaurants, surpassed 3 million in AUVs, and formed our first international partnership. And the stock was higher last I looked on these results. Yes, up by more than 1%, guys. Back over to you. It looks like those efficiency efforts that you talked to Nickel about continue to work. Kate, thank you. That's right. Thanks. Speaking of, don't miss Jim Cramer's exclusive interview with Chipotle CEO tonight, 6 p.m.

on Mad Money. All right, Adam, I'm going to go back to you because we're going to pick up the thread that we just had here, and that is read through to consumer, whether it's Chipotle, whether it's VF Corp, whether it's Ford, or some of the other names we got. Sure. So just kind of quickly running through them all. On VF Corp, I think it's partly company-specific. You have some tired brands that haven't been managed very well. You have a new management team in place. They're also still tied to a lot of channels that haven't been performing well, department stores, et cetera. So, you know, I think investors will give the company a pass for now.

There's been a lot of activist chatter around the name, so that will probably pick up pace, you know, given the disappointing quarter. On Ford, you know, the legacy OEMs have been performing very well on Q4. You had Toyota overnight hit all-time highs after beating and raising guidance. GM last week also was very strong. You know, there's definitely been a pivot in demand away from EVs back to hybrids and then just traditional ICE vehicles, and that's benefiting legacy vendors a lot, you know, in contrast to Tesla, which had a more underwhelming quarter. You know, and then Chipotle, you know, they continue to perform very well on the execution

front. They still have a lot of pricing power. You know, I think the contrast between them and McDonald's, McDonald's was really hurt by its international business for a variety of reasons, whereas Chipotle's footprint is mostly in the U.S. And I think that helped them and sheltered them a little bit versus McDonald's. So I think the consumer overall, you know, it's a very mixed bag. You know, the lowest end consumer is performing poorly.

That's something McDonald's called out. But the mid-range and the higher end, you know, is holding up pretty well and it's relatively resilient. And eating burritos. Adam Christofoli, thank you. A lot of red and green salsa on the screen right now. Yes, indeed. The red is deep, though. One that's not showing red at all, though, thank you. A lot of red and green salsa on the screen right now. Yes, indeed. The red is deep, though. One that's not showing red at all, though, is Ford.

Those shares are jumping after beating on the top and bottom lines. And joining us now, Ford CFO John Lawler and our very own Phil LeBeau. Phil. John Lawler, thanks for joining us. We talked about Ford beating the street on the top of the bottom line in the fourth quarter. But I want to talk about your guidance for this year. Strong guidance. Ten to twelve billion dollars adjusted EBIT expectation.

Free cash flow expected to be six to seven billion dollars. You know what the sentiment was out amongst the average investors that the legacy automakers would struggle with these new UAW contracts and that business, while it would continue, would not be as strong as we've seen over the last couple of years. What's your outlook when you look at the year? I think you're seeing the broader picture of Ford, the strength we have. We have an incredible commercial business, which was up 20% this year. We expect it to grow again in 2024. Our ice business, Ford Blue, is doing very well. It grew the last two years. Profits were up. And, you know, we at Ford have an incredible position because we can offer our consumers choice across all powertrains, ICE, HEVs, and electric vehicles. So we cover the broad spectrum of what consumers want.

You know, last year, our EV sales were close to 300,000 units, up 20%. So, you know, we're really in a good position to take advantage of the marketplace. Let's talk about your EV expectations because you're cutting down your full pure electric vehicle production outside of Detroit, your plant outside of Detroit, cutting it down starting April 1st as the market, the growth there has just not been as strong as many expected it to be. Do you think that's going to change even more once we get into the second quarter and the third quarter? Well, we're adjusting based on where the consumer's at. What we're finding is that you move past the early adopters into the early majority. They're

just accepting the vehicles at a slower pace. And that's why the flexibility we have and the choice we have is key. But it's not the same around the country, Phil. When you look at the West Coast, Washington, California, Oregon, EV mix is 30% of our F-Series sales. EV and HEV mix is 50% of our sales. So the adoption is going to be different around the country at different paces. And with our flexibility, we can meet the consumer where they're at. John, thanks for being here with us on Overtime. Toyota, your competitor, said today it's going to invest $1.3 billion at its Kentucky facility focused on electrification. How are you thinking about the amount of electric investment you're going to continue to make from here, even as demand, as you just mentioned, continues to be regional and less

than some had expected? Well, we're going to adjust as appropriate based on the demand. But make no mistake, EVs are coming and EVs are part of the future. So we like where we're at. We've been out with our first generation of vehicles for a couple of years now. We've learned a ton. We're working on our second generation of vehicles. We're putting in a good footprint, although it's smaller than what we had planned, appropriately so, given the demand. You know, we're in a good position, especially with the fact that we're moving into our second generation vehicles in the near future where they'll be profitable, and we expect that they'll be game changers because it's not just the EV technology, but it's the connected technology

and the software and services that will come with those vehicles. John, it's Morgan. It's great to have you on the show. The fact that you did have this big beat, 29 cents adjusted, so much better than the street had expected. I mean, the expectations coming into this report and given some of the disclosures you'd had ahead of time around the cost of labor with this UAW contract coming into effect. Walk me through how you came to this beat and what it means in terms of 2024 with that cost of labor distribution. Right. So we've been very focused on efficiencies and driving cost reductions through our entire system. When you look at 2024, we have $2 billion of cost efficiencies, cost saves that we plan to bring down to the bottom line this year, basically offsetting the impact of the UAW in 2024, as well as offsetting the

cost increases on the new products we're launching for new features and emissions requirements, et cetera. So we're really starting to see traction on that front and the cost efficiencies that we need to bring to the bottom line. And that's what you're seeing show up in the fourth quarter and what you're seeing us guide to next year. Hey, John, one last question. Pricing, as you look at 2024, everybody expects it to cool off just a little bit from some of the record levels we saw last year. What's your expectation in terms of when someone goes into a dealership? what type of pricing changes might we see over, let's say, the next six months? Yeah, so that's really important for us. What we're seeing is that prices will probably come down from planning purposes. We're saying two to three percent. The most important thing

is affordability. We think affordability in 2024 is going to go back to pre-pandemic levels, and that is percent of disposable income to buy a vehicle per month. We think that's going to revert back to the pre-pandemic level. So Fordability is going to improve this year. All right. John Lawler, Ford CFO, thanks for joining us ahead of the conference call and after the earnings and our thank you to Phil LeBeau as well, with shares up 6.5% right now. Sonos earnings are out and the stock is surging. Pippa Stevens has those numbers. Pippa. Hey, Morgan. Well, Sonos beating top and bottom line estimates during Q1. Adjusted EPS coming in at 64 cents. That was 24 cents ahead of estimates. Revenue at 613 million. The company

also reaffirmed its full year guidance and said that it expects gross margin recovery due to lower component costs and a more favorable product mix among other things that stock up 15 percent morgan all right peppa stevens thank you chipotle's earnings call is about to kick off up next an analyst with a buy rating on the stock tells us what he wants to hear from management plus shares of customer relationship management software maker freshworks down a little more than 3.5% at the moment, despite an earnings beat and a solid guide. Coming up, the company's CEO is going to join us exclusively before the call to discuss the results. Overtime's back in two.

Welcome back to Overtime. Shares of Chipotle are popping in after hours thanks to a top and bottom line beat in its fourth quarter results. Joining us now is Chipotle analyst Joshua Long from Stevens. It's great to have you on. Shares are higher, as I just mentioned. Comps 8.4%, better than expectations. It looks like for the full year 24, a strong outlook as well. I guess walk me through the numbers and walk me through what it is about Chipotle that even though you have elevated costs for things like beef, they're

able to realize higher prices even in an uncertain consumer environment. Great. Thanks so much for having me on today. You're right. This is the top pick for us this year. We think that Chipotle really dials in the convenience, the value, the affordability that the consumer is looking for. It puts it into a very accessible package. You saw that this quarter with top line, margins upside, and then also bottom line beat. I think there's more of that where that came from. When you think about the overall pricing environment for the year, those are going to be key themes. And that's really where we think the consumer is going to be voting with their feet and their dollars in terms of visiting Chipotle more and more often. OK. It's interesting because beef prices we know are high. They're elevated.

We also know that consumers, and we heard this from Tyson's CEO yesterday, have been turning to less expensive proteins. I think about McDonald's with those results, the fact that you're starting to see grocery prices fall, and so lower-end consumers may be perhaps eating more at home than we've seen in the past. Is it the fact that Chipotle is a demographic, tends to be deeper-pocketed, speak to the stickiness, or is there something else afoot here with this name specifically as well? Well, I think that's certainly part of it. But if we think about just where the consumer is overall,

wanting that convenience, the ability to engage with the restaurant industry, Chipotle does that in a very approachable way. So you think about obviously the price inflation that you mentioned that's affecting everybody. But across the vast majority of the nation, the entry-level price point for a chicken burrito is still sub-$10. That's amazing value. And with a variety of options in terms of proteins, the customizability that consumers really want, it gives you an option to really either lean in, eat healthy, or manage the overall price and spend. So I think you have a lot of options within a pretty convenient backdrop, despite some of that price inflation that you mentioned.

So, Joshua, McDonald's right now is just three times bigger than Chipotle in market cap. Do you think we get to the point where it's only twice as big? What does Chipotle have to do to keep gaining ground? Well, I think a big piece of that is going to be the development, John. So you look at those numbers coming in ahead of expectation, perhaps some green shoots. We've done some proprietary work ahead of the quarter suggesting that the company was able to pull forward some of that development, and we might be moving past some of the permitting issues. So you think about just the long-term opportunity for domestic development, that's pretty exciting, but then also just the key elements of this brand translate internationally as well. And so unlike McDonald's, which is global right now,

Chipotle's footprint is primarily domestic. So we would expect to see that be an opportunity to tap into over the coming years. Yeah. And they plan to keep opening stores, as we just heard, in that 300 range. Joshua Long, thank you. Thank you. And of course, automation playing a role in that, too. Huge one. Yeah. Time for a CNBC News update with Leslie Picker. Leslie. Hi, John. The House has advanced a resolution impeaching Homeland Security Secretary Alejandro Mayorkas, and House members are expected to hold a final vote on it at 530 tonight. If it passes, Mayorkas would be only the second cabinet secretary ever to be impeached. President Biden urged Congress earlier to pass the border security package that would be tougher

on asylum restrictions and border security. But Senate Republicans who helped craft the measures are backing away. This prompted the president to blame Trump for calling on GOP members to oppose the legislation. But House Republican leaders have already said the bill is dead on arrival. Taylor Swift has sent a cease and desist letter to a Florida college student tracking her private jet. In the letter, the pop star said that she lives in a state of constant fear for her safety. The student who runs the tracker gained popularity for using social media accounts to track movements of jets linked to famous individuals, notably Russian oligarchs. I'll send it back over to you. We've seen this before.

It makes me think about Elon Musk's jet as well. Okay. Leslie Becker, thank you. We have some breaking news. David Faber joins us now. David. Hey, Morgan. Yeah, we've got some news from the world of streaming and sports that's bringing together some important names to introduce a new streaming service that

they hope at least is going to meet a lot of sports fans needs. ESPN, Fox and Warner Brothers Discovery all partnering on a new streaming sports platform that will offer all of their current sports programming available to cable subscribers on this new yet to be named, yet to be priced app. But they are saying, in fact, according to sources, it will be available as soon as the fall of this year. It does not, as I said, have a name or a price. And in fact, as well, my understanding is there has not yet been a definitive agreement reached by the three parties. That said, planned announcement very shortly. Press release may even, in fact, be out by now. ESPN, Fox and Warner all forming this JV to launch this streaming service in the U.S.

This would be in addition, as I said, to their existing Fox Sports, TNT, all the different properties under the Warner Brothers Discovery overall company and ESPN as well as ESPN Plus. So those still would obviously be in existence and there might as well be and will continue to be a development by ESPN, as my understanding of its own, perhaps direct to consumer programming. That said, this could be, you know, an important category killer, not including our parent company, Comcast and NBC Sports, and not including Paramount CBS, but bringing together a lot of sports programming. We're talking about football, basketball, baseball, hockey, a lot of college sports, the ACC, the Big Ten, the Big 12, the Big East, the SEC, and on from there, NCAA championships, golf, Grand Slam tennis, cycling, soccer, even combat sports, Morgan, such as the UFC top rank.

So a lot there conceivably for sports fans and obviously geared towards those who no longer have or perhaps never had a cable subscription. We don't like those people, but we do have to talk about them occasionally. I have so many questions, David, but I guess the first I'm going to ask is why come together and do this if it's potentially going to cannibalize the businesses they've already been building at a time where all of these companies are trying desperately to get streaming to a place of profitability? Well, you know, obviously you've got the direct-to-consumer offerings from all,

well, from Warner Brothers Discovery under the Max brand and from Disney under the Disney Plus brand. Those are entertainment products, although they do include sports, certainly in the case of Max to a certain extent and growing extent. But I think there is an effort here to say, well, this is the one place you could go as an app. Again, yet to be named, yet to announce the management team, a third, a third, a third ownership, if I didn't mention that already, is my understanding. And yet to be priced. But all that said, I believe the hope is that instead of cannibalizing, it will bring in so many of those who are interested in sports but don't want to have a cable subscription.

And obviously would not impact the entertainment-focused offerings on streaming from the likes of Warner Brothers Discovery or Disney under the Disney Plus and also the Hulu brand for now. Yeah, it's a reasonable question. And by the way, this does not necessarily mitigate against the other effort being made by Disney, which is to bring in a potential partner for ESPN overall, which could involve even perhaps equity of some kind. The NFL has been in those talks with ESPN where they would contribute a couple of their cable assets at some determined price.

And then ESPN, obviously, you have to figure out what the price is they sort of ascribe to to that service to get that deal done. But those talks continue is my understanding as well. So, David, this reminds me of a Hulu for sports, I guess, which in a way confuses me because that's all getting untangled finally now, it seems, finally between Disney and our parent company Comcast. Does this help these traditional media players at all when it comes to bidding for sports against these tech companies that have really, really deep pockets? Or is this mainly just about distribution of what they will have already bid on individually? You know, you're asking great questions, John, as usual.

And I wonder myself and don't have the answer to you specific to the economics. In other words, my understanding is each of these companies will still bid on various sports rights separately. Will they, though, benefit perhaps from additional revenue coming from this that will enable them to secure certain sports rights in their perhaps more heated competition with the likes of Amazon or Apple? I would assume that may be the case, but you're asking a good question. I don't and expect to try to get some answers. We did want to bring the news quickly because it did seem to be breaking on a number of other services. All right. David Faber with breaking news on sports

and media. Good to see you on the hour. All right. Disney CEO Bob Iger will join us tomorrow. Speaking of on overtime in an exclusive interview after those earnings are announced. All right. Let's bring in Michael Nathanson of Moffitt Nathanson. I'm going to start here with this news, Michael, and that is the fact that you do see these media companies teaming up. A lot more questions than answers right now. But how does it speak to the current media landscape and how much deal making in many different forms you could potentially see this year? You know, we've been waiting forever for someone to do this because half the media world are keeping their rights of sports in the bundle. And two companies, Paramount and Comcast, your parent company, are taking their rights and leaking it over the top. So, we've been saying forever that the bundle is really about sports. And the more people who take their rights and leak it over the top,

the weaker the bundle gets. So, to me, this is a natural outcome. It's smart for the three companies that have not been cheating the system to create a more sports-driven package for sports fans. And again, it's been a long time. We've been thinking about this for a long time. This makes perfect sense. The devil will be in the details, but this is what has to happen in order for a new bundle to be formed. And I just want to note, maybe we can put up a chart of FuboTV. That stock is down a little more than 6% after ours was the first name focused on this area that I thought about. I don't know, Michael, if you have any thoughts about the impact

on some of those smaller players trying to distribute sports content through streaming. Yeah, we don't cover FUBO, but here's our view. What sports fans want is one place to get all their content. If Disney, Warner's, and Turner gets it, Disney, Warner's, and Fox get together, there's enough content there. And then you can go a la carte with Peacock or Paramount and create a much cheaper bundle of all the sports. So I think it brings deflation to the pay TV world. And again, sports drives the bundle. And I think what these three companies are doing is saying, look, we've had enough of all these rights leaking. Consumers, if you want to basically find a place for sports, we can serve you. And then you can add on different channels and packages a la carte. And again, we want Hulu Live to do the same thing and even

YouTube TV to start looking at their bundles and really, you know, slimming them down to focus on exclusive sports inside the bundle. OK, I got two more questions to get to get to with you. So let's see how quickly we can do this. When I look at this chart of these names that are involved in this news today, there's only one that is lower on this news, and that's Disney. We get those earnings tomorrow. Obviously, activists and investor pressure coming. We get those earnings tomorrow. Obviously, activist and investor pressure coming from all sides for the name. The fact that it's trading lower tells us what.

And what does it say, I guess, specifically about the leverage and the future of ESPN at a time where there is this outside pressure on the company? Yeah, it had a good day today. So it was up probably the most of those names today. It's given a little bit back. We've been saying forever and tomorrow when Bob Acker's on the air, ESPN is nice. It's a nice issue to solve. But the bigger question is streaming profitability. And this definitely helps the linear business to path forward. But the profit margins on Disney Plus and Hulu to us are the real driver of future value.

So I'm not reading too much into what happens after the market. They had a good day. But tomorrow, the focus is going to be on long-term profitability for streaming. That's what we're focused on. Okay. So I've got to ask you about Snap. Huge move after hours. Down double digits right now. Stronger than expected results, except for guidance around EBITDA and profitability, which seems to be the real

pressure point here. Are you surprised to see a move like this? What's your takeaway in terms of these results for this name? Well, one takeaway is that, like a broken record, Snap always drops. Snap trades up after earnings and then drops when people see the next set of earnings. That's always been the case. But to us, the problem with Snap is, are people ever going to make any money? True gap profitability because they have massive stock-based compensation. So, I think the market's moving on to real cash flow and real earnings. And as you saw with Meta last week and all the other big tech stocks, they generate a ton of free cash flow. These guys are barely scraping by. So, I think it's about long-term profitability. profitability and evaluation is just insane.

We have an eight dollar price target and we know stock just keeps running after earnings. But like at some point to come back to reality. All right. Julia Borsten's got Evan Spiegel and Bob Iger tomorrow. She's got a busy day. Michael, you'll have a busy day watching CNBC. Thanks for being with us in overtime. Thanks. Chegg shares, meanwhile, under pressure after issuing weak sales guidance with competition coming from chat GPT and other AI programs. Up next, the company's CEO on when investors can expect a return to revenue and margin growth as Chegg races to integrate AI into its learning platform. We'll be right back. Over time, shares of Chegg down 6% today after guidance for Q1 came in lighter than expected in an earnings report. Joining us now to discuss the results is the CEO of Chegg, Dan Rosenzweig.

Dan, good to see you. So I want to start on ChatGPT in the call last night. I'll quote you. You said ChatGPT, quote, is less of a competitor than we were concerned with. And that's really good news. And that is because they give an illusion of accuracy, but it's not accurate and students cannot afford to have inaccurate, incorrect information. So is the challenge and growth here demographic more than it's outside AI? Yeah, there's a lot of variables that you have to take into consideration when you look at growth. Probably the biggest one

is the fact that before COVID in 2019, we were growing quite nicely. And then peak COVID, we grew almost double. And so now we're coming down from that peak, but where we came down to is substantially higher than where it was in 2019. So we had to start a new base. And so we have to come down. We have to fill the hole with new subscribers. And so it's not a demographic issue because there are still millions and millions and millions of students that we can reach. In fact, we have over 10 million that have registered for Chegg that have not yet converted. So we think the growth opportunity is ahead of us and we think it will start to reveal itself over the course of

this year because the metrics that we're seeing now are helping us dig out of that post-COVID hole. What's the international growth story different from the U.S. story? Why do you see the opportunity as being so significant there? Yeah, look, there's just a lot more people and a lot more students. So, you know, the United States has about 20 some odd million students, but 50 percent of the world's population is below the age of 30. All of them have to learn. Not all of them will, unfortunately. But those that are learning are turning to online. They're turning to online help and support. And the fact that we focus on STEMB allows them to learn what they need to learn and get the support they need from CHECK.

So we're seeing a return to actually growth. We already saw, starting at the end of last year and so far through the beginning of this quarter, year-over-year growth in international, which is the first time in two years. So the product is getting incredible response. And, of course, what AI does is give us some tremendous advantages. One of them will be outside the U.S. when we can do instant translation, which we'll start really working on at the end of this year and going into 25. So then all questions asked all over the world can be instantly translated. So AI has gone from a potential headwind to a very likely tailwind. So that's good news for us. But outside the U.S. already

has returned to growth. So outside the U.S.'s return to growth, what is it going to take? And I guess what is the timeline you're targeting in terms of more broadly the company returning to growth then? The opportunities to return to growth should start to reveal themselves this year. So we can't exactly pick the date. You know, there's still a lot of variables. So we, you know, we have the new product rolling out, which has got incredible response. Automated answers through AI, which we do through our own large language models, which means they're better and they're much less expensive, has already started to reinvigorate the flywheel. And what is the flywheel? More students that subscribe, they ask more new questions. Those questions get

indexed in search. And now on TikTok, more students find them and they come in. That's increased traffic. That will increase new customers. So the flywheel's already started. We still have to dig out of the hole, though, on a net customer basis. We started the year with about 9% fewer customers than we started the year before. So we're digging out of that hole. And what you should see over the course of this year is every quarter, you should begin to see that hole being filled. And we report out on those numbers. So it'll be able, it'll be something investors can track. And we expect to show that over the course of this year. So it's actually getting exciting again. All right. And as you just saw in the chart in about three months, the year over year situation gets a whole lot

different. Dan Rosenzweig, appreciate you joining us on Overtime, CEO of Chegg. Thanks, guys. Appreciate it. Now, Freshworks shares are under pressure despite an earnings beat. Up next, CEO is going to break down those results before the call when Overtime. Freshworks shares now just fractionally lower. Some strong Q4 numbers. Topping analyst estimates on the top and bottom lines, giving strong guidance for the first quarter and full year. Joining us now, Freshworks CEO Girish Mathur-Bhutham.

Gee, good to see you. So I want to start on enterprise. 229 new customers paying 50,000 plus annual recurring revenue, up 30% year on year. Is that the story really, is the bigger customers and the growth there? So hi, John. Thanks for having me on the show. I think, yes, we had a very strong finish to Q4 and primarily driven by our significant wins in mid-market enterprise deals. We had a record quarter of greater than 100K deals and greater than 30K deals in the history of the company. So, I think we are seeing a lot of momentum going

up market and that is setting us up nicely for an exciting 2024. Tell me about deal flow because the versus expectations, the EPS beat stronger than the revenue beat for you. Yes. So I think we, from an efficiency standpoint, we outperformed all our estimates in terms of coming in higher on revenue on last year, 2023 was the first full year of a non-GAAP operating profit. And I'm super proud of the work that the teams have done to deliver $78 million of free cash flow that was generated. And so, and I think our guidance for EPS is also quite high compared to estimates, I would say. And we are well on this path to becoming a rule of 40 company, and I can't be more excited than that. Some investors might remember,

some might not, that a significant portion of your workforce is in India. The company was built that way. You've grown that way. With all this attention to costs right now, what does that do to or for your cost structure in 2024? So Freshworks has always had this strategic advantage because we have access to this world-class talent in India. And one of the core proof points beyond cost, of course, obviously there's a cost advantage, but more important than cost is the speed and velocity of our product innovation, which we all saw last year when Chad GPT happened, like our product teams

went into full action mode. Within a few months, we actually launched our Freddie AI, Freddie Self Service, Freddie Co-Pilot and Freddie Insights, put it in the hands of our customers. So the real advantage of our India-based talent pool is the speed that it brings to our product velocity and how soon we can get newer technologies and our innovation to the hands of our customers. And that is a great strategic asset for Freshworks. All right. I'll let you get to the earnings call. Appreciate you joining us on Overtime Ahead of Time.

G. Mathur-Brutham, founder and CEO of Freshworks. Up next, Mike Santoli looks at whether the extreme surge in momentum tech stocks could be a red flag for the market. Stay with us. Welcome back to Overtime. Senior markets commentator Mike Santoli joins us now with a look at the extreme surge happening in tech. Mike. Yes, Morgan, the momentum ETF. This is basically the 125 S&P 500 funds displaying the greatest upside momentum recently has kind of gone vertical, as you can see. This is a five-year chart. I also have the 200-day moving average in here.

So you can see this gap. Now, these are the usual suspects. This is basically NVIDIA, Microsoft, Meta, Lilly, all the rest. I want to point out a few other periods when we were sort of similarly stretched above the trend here. And this was, you know, right before COVID, everyone piling into tech. This was Labor Day 2020. That was the peak of the trend here. And this was, you know, right before COVID, everyone piling into tech. This was Labor Day 2020. That was the peak of the pandemic trade. Only once was there a broad market peak associated with this. That was November 2021. Usually you get a reset lower in the hot momentum stocks. The rest of the market maybe can pick itself up. You have a correction, but nothing terribly worse than that. Now, a lot of talk about whether we're currently in something approximating the bubble conditions that culminated in the year 2000,

with the Nasdaq was just barreling higher, very, very detached from fundamentals. Well, this is the forward price earnings multiple of the Nasdaq 100, along with Microsoft, which was there then and was, in fact, the biggest stock in the S&P in December of 1999. Well, there you can see what the forward PEs looked like there. Kind of nosebleed. There really weren't a lot of earnings in the Nasdaq 100. Long, long malaise, got very cheap. And now we're definitely at somewhere around 20-year highs, but we're talking about just above 30 for Microsoft, 25 for the Nasdaq 100.

We were at, you know, 30, let's say, two years ago. So the point is not that these things can't go down and that we don't need a reset or rotation into a broader set of stocks. The point is, let's stop talking about the 2000 bubble as something that's here and now, Morgan. See, I always love that you're going to bring us the context here, because strategists at Bank of America and J.P. Morgan both have been drawing similarities between those current price levels and the bubble of the dot-com era, to your point. Citigroup, though, did say that investor positioning in U.S. tech stocks is so bullish that any sell-off could trigger a wider route. And I wonder if that is a risk. I definitely think that's a risk.

That's a tactical risk. There's no doubt about it. And nothing says that, you know, these are going to be the leaders to come. Also, growth over value and NASDAQ over small caps, those ratios, the relative relationships, they do look somewhat similar to the year 2000. But to me, that's just about where within the market is kind of overloved and underloved. It's not saying we're at some kind of very dangerous precipice in general in the market the way we were back then. All right. Mike Santoli, thank you. Of course, we've got more earnings in this

hour tomorrow, as well as Disney's CEO Bob Iger. So that's going to be much watch TV. But even tomorrow morning, John, Alibaba reporting. And of course, we did see a huge day for Chinese stocks today on Beijing action with a K-Web up almost 7 percent. Yeah. But before we get to tomorrow, there's still more today. Kindrel, that's the IBM spin-off, reported earnings. It was a beat on the top and bottom, especially on the bottom, though. Earnings per share came in at a 5 cent loss versus 26 cents expected. The company telling me that this has a lot to do with fixing low margin, no margin contracts from the IBM era, and their higher margin Kindle Consult business is growing double digits. So we'll listen for more on that from the call. All right. It also looks like Yum

China, which we got results for, is up almost 17 percent as well. The fun's going to continue, though. It's going to do it for us here at Overtime. Fast Money starts now.