Closing Bell - Closing Bell Overtime: Is Apple Dead Money?; Ares Credit Group Head On Best Opportunities 4/17/24

Episode Date: April 17, 2024

Charles Schwab Chief Investment Strategist Liz Ann Sonders talks the recent pullback as stocks finished mostly lower to extend April’s slide. Earnings from CSX, Las Vegas Sands, Alcoa. Maxim analyst Tom Forte on his new note: “Is Apple Dead Money?” Head of Ares Credit Group Kipp DeVeer on where the credit giant is seeing opportunity. Plus, what’s next for TikTok as Congress aims to bring a bill to the floor. 

As we were just mentioning, we've got some familiar faces from CNBC ringing the closing bell at the New York Stock Exchange, including CNBC's president, Casey Sullivan, a number of our colleagues celebrating the network's 35th birthday. Happy birthday! USA are marking 100 days until the start of the 2024 Paris Olympics. That's over at the NASDAQ. And, of course, broadcasting this summer on NBC and Peacock. Now, welcome to Closing Bell Overtime. I'm John Morgan Brennan, and here we are. Here we are. It is another busy afternoon of earnings with stocks failing to rally, though they tried earlier today.

We're just minutes away from numbers from CSX, Las Vegas Sands, Alcoa, Discover Financial, and more as investors look for clues on the health of corporate America. Plus, is Apple dead money? Well, that's a question one firm is asking. And a not-so-bullish initiation on the stock today. The analyst behind that call is going to join us with the red flags that might need to be on your radar. And now as we await earnings, let's break down today's action with our first guest, Charles Schwab, Chief Investment Strategist, Lizanne Saunders. Welcome, Lizanne. So some semis and riskier names were lower. Tech sector was down a lot compared to the next lowest

industrials here. You like materials and financials. Set the table for us. Why materials and financials over some of the other options? And energy, by the way, too. Yeah. So those have we relaunched what we call Schwab sector views earlier this year after a two year hiatus for a whole variety of reasons. It's not worth going into detail, but we relaunched them. It's factor based analysis that drives the outperform or underperform ratings. And really, since we relaunched, there was that cyclical bias, some of those classic cyclicals of energy, financials, and materials. And we look at a number of different categories of factors like value and growth, but also

stability and sentiment. And those are the ones that screen quite well, particularly in some of the value categories, given their lack of participation in a year like last year that was so dominated by what I think of as the growth trio of tech consumer discretionary and communication services. So that's just where the research suggested the opportunity was in a year where you've had a resilient economy. And that really goes to the benefit of many of those traditional cyclicals. Yeah, global economy, pretty strong. When I look at energy, I wonder how much geopolitics is putting a floor under where it is right now and how long that's sustainable. But you think that it has legs even from here?

Yeah, I mean, obviously, you're at the mercy of shorter term moves up and down in oil prices. It will drive what the sector does. And as it relates to things like geopolitics, I have no clearer crystal ball than anybody else as to what those machinations will be. But you also have an improving earnings profile as well on the out years. So that gives you that better value on a forward earnings basis. But you're absolutely right. You will likely have volatility driven by oil prices. In the meantime, though, momentum as a factor continues to be fairly strong. And that's where momentum has to be. You have to remember that momentum is considered a factor, but it's almost more of a concept. It means that the types of stocks that are working continue to work. It doesn't specifically mean sectors like technology. I often hear from investors when they hear momentum, they think, oh, that's tech stocks

or communication services stocks. No, it's just a way to describe what is working in the market and the repetition there. And that is clearly there's been a way to describe what is working in the market and the repetition there. And that is clearly there's been a lot of momentum and energy. OK, we have our first earnings report out. CSX, the Eastern Freight Railroad posting a beat on both the top and bottom lines. EPS coming in at forty six cents per share. That was a penny better than expectations. Revenue of three point six eight billion, also slightly better than expectations. Revenue of $3.68 billion, also slightly better than expectations. Total volumes up 3% year over year. So that was better than the street had been anticipating. Intermodal volumes up 7%. Coal up 2%. Merchandise, it looks like,

was flat in the earnings release. CEO Joe Henricks saying, we are pleased to see our consistent customer service performance lead to volume growth. They remain focused on improving the reliability and fluidity of the network and that looking ahead, favorable trends across many of the markets they serve. They're eager to build on that momentum for the rest of the year and beyond. You can see shares are popping more than 1% right now. I will actually talk to CEO Joe Hendricks tomorrow in an exclusive interview that kicks off at 10 a.m. Eastern on Squawk on the Street. But in the meantime, Lizanne, just to go back to you here for a moment, in terms of what we are seeing in certain, I'd argue, leading indicators of the economy, like freight, for example. I mean, I just look at the J.B. Hunt numbers yesterday after the ballot or Knight Swift. In general, it's been pretty soft. And I just wonder how much we

can read into something like transports or semis, which have have sold off a little bit here recently, or some of these other economic what are seen as economic indicators to sort of understand how much the economy is slowing or if it's slowing at all? Well, we're not seeing much slowing on the consumer side of the equation, and that's so dominant at 68 percent of GDP. But you have seen signs of softening, particularly recently in areas like housing, industrial production. So I think we continue to be in this very funky economic backdrop where you have these sort of rolling contractions. Then you have some rolling recoveries, but a heightened level of sensitivity to things like moves up and down and yields.

We had seen that pick up in a lot of housing activity. Yields move up and you start to see some compression happen very quickly. You see bigger swings in a shorter period of times and things like capital spending intentions. And that's in part due to uncertainty with regard to Fed policy. So I think it is it is not a rising tide is either lifting or pressuring all boats. You've got a much more dynamic and nuanced cycle really since the beginning of the pandemic. And we do have this growing wall of worry for stock investors, hawkish central bank outlook, at least here in the U.S. You got the geopolitical uncertainty. You have the jump in energy prices,

though those have been taking a little bit of a breather here in the last couple of days. The volatility spike, stretched positioning. We've had dampened buyback support because many companies are in blackout periods right now because we are in earnings season. As we climb this wall of worry, I mean, what are the bright spots? And as this pullback has been so far pretty orderly, is there any signs that that could change or reverse course and do so quickly? The pullback has been orderly and mild at the index level. So take an index like the NASDAQ. You've had at this point close to a 5 percent drawdown from a year to date high. But the average member within the NASDAQ has had more than a 30 percent drawdown just from year to date high. So there's massive churn and rotation going on under the surface, which isn't necessarily a

bad thing as you ease some of the pressures that became really acute last year with regard to the concentration problem and you allow for new areas of leadership without the bottom falling out all at once. I think probably anybody out there would pick a rotational correction of excesses versus, you know, the overall NASDAQ being down 30 percent on a year to date basis. I think that type of environment is probably going to persist. And that's the way you see that reflection of uncertainty with regard to things like inflation and related to that Fed policy and geopolitics. You just have to you have to peel at least a layer of the onion back to see what's going on under the surface. If you just look at the index level,

you'd say, yeah, it seems like there's the market should be more worried about fill in the blank. But that hasn't been the case below the index level. It absolutely has been the case. Lizanne, how concerned are you about how stretched the consumer is and how long the consumer can continue spending, given the debt levels that they're experiencing and given the fact that inflation has been sticky? I think there are two keys to maintaining relatively healthy consumption. It's the labor market and to some degree the market So, the labor market, we know, works its way both through the actual channels of people have jobs and they have confidence in maintaining their jobs, but also through the psychological channels. And that ties into

things like the well-known stat of the unemployment rate. So, I think, you know, maintaining a decent labor market is important, but also the net worth part of this. And this clearly gets a bit more biased up the income spectrum. But there's been about $12 trillion of net worth created since the equity market bottomed, had the near-term bottom last October when we saw the peak in yields and yields started to come down. That initially also gave support on the fixed income side of things. That $12 or $13 trillion of net worth creation, to put that in the context of the consumer, since that was your question, John, there was $19 trillion of consumer spending in calendar year 2023, and you've had that $12 or so trillion of additional net worth.

I think that's been both an actual and psychological support under consumption. So some combination of a crack in one or both of those, I think that could manifest itself into some weakness in the consumer more quickly than what you might have seen in things like the savings rate having come down, which has already been the case. Makes sense. Lizanne, thanks. Lizanne Saunders. Good to see you. Happy anniversary. Thank you. Las Vegas Sands earnings are out. Contessa Brewer has those numbers. Contessa. Hey, John, we're seeing a beat here on both top and bottom lines for Las Vegas Sands. Revenue coming in at $2.96 billion. Consensus expectations were $2.94 billion. Earnings come in at $0.75 a share adjusted versus the estimates of 62 cents.

Credit for the beat goes to Marina Bay Sands in Singapore, setting new records again. A single property pulling in revenue of $1.2 billion and adjusted property EBITDA. Remember, that's the crucial earnings metric in the casino business. $597 million there in Singapore when the street was expecting $430 million. That was almost as much as all five LVS properties in Macau. In fact, all of the Sands businesses in Macau pulled in $610 million. The expectations were $100 million higher. Sands is taking advantage now of the lackluster share price, which doesn't reflect any of this growth, buying back about $450 million worth of stock. You can see the shares are off by a percent and a half in the aftermarket. Morgan.

All right, Contessa Brewer, thank you. Let's get to senior markets commentator Mike Santoli for a look under the hood at the recent downturn and how certain parts of the market are performing. We started to dig into this a little bit with Lizanne Saunders, Mike, but you've got some other charts to show us. Yeah, we're taking a look at how the pullback is playing out in these sort of linked pair or trios of sectors and stocks. And here's the equal weighted semis index, which was certainly a big weak point today relative to industrials, both equal weighted semis. You have to do that. Otherwise, you got the NVIDIA effect kind of overwhelms it all. And so this is over the last two years. You see, there have been these times where the line in blue, that's the semis,

have kind of overshot to the downside relative to industrials. I think, if anything, the surprising part is how synchronous they've been in terms of point to point percent gains. It shows you so much of the industrial kind of capex economy is feeding off of some of the same dynamics as semis. And here you start to see the makings of another overshoot. So maybe we do have something forming here that would look like at least a short term opportunity for a trading low in these cyclical areas. Did also want to take a look at Berkshire Hathaway. A lot of attention on how many days it's been down in a row. It was one of the biggest momentum names in financials. And you see it here relative to what's that? That's the insurance sector overall. So you see Berkshire Hathaway really has traded

over the last year very close to the insurance sector. Obviously, it's its biggest operating business. Then you have Apple there has diverged entirely. So, of course, Apple's the biggest public shareholding of Berkshire Hathaway. It's a pretty big chunk of the overall market cap of Berkshire, but now less so, as you can see right here. So that seems to be what's happening here is that a very strong part of financials, which has been property and casualty insurance, is hitting both Berkshire and insurance, but still in an uptrend. It's interesting, though, to see that because you could argue, I mean, there's so much to Berkshire. Yes. But obviously their underlying business is insurance.

That is the you know, what provides the cash flow that enables the company to invest in and buy everything else and continue to generate all of those revenues in other ways. When you have when you have a day like today where Travelers was down something like seven percent in part on higher catastrophe losses, is the assumption here that maybe that's perhaps part of what's pricing into Berkshire stock, too? Yes. I definitely think cumulatively that's definitely what's been happening. Also, just the sense out there that this industry has really realized a tremendous amount of pricing power in a short period of time, and it's kind of unclear whether that's going to persist from now. Of course, everybody watching the official inflation numbers wants to see things like auto insurance rates come down. It seems like it's a

matter of time. Well, obviously, Geico, single biggest operating business here within Berkshire, Progressive is the publicly traded version, and that has also come off the boil. All right. Mike Santoli, we'll see a little later this hour. Alcoa earnings are out. Meantime, Seema Modi has the numbers. Hi, Seema. Hey, Morgan. For the first quarter, Alcoa reporting a larger-than-expected earnings loss of 81 cents adjusted versus the estimate of a 55-cent adjusted loss. However, sales did top street expectations at $2.6 billion. Of course, this earnings report does coincide with this massive move we've seen in aluminum prices at a multi-year high, already up 20% year to date. The executives in the press release talk about raw material prices

and the market in general improving, Morgan. And also, if you break out the alumina segment, they point out that third-party shipments of alumina have increased 6% sequentially, primarily due to an increase in trading. We are looking at the stock up about 2% in overtime. All right, Seema Modi, thank you. I'll be speaking with Alcoa's CEO, Bill Oplinger, about that quarter. And a first on CNBC interview tonight kicks off 7 p.m. Eastern on Last Call. All right, looking forward to that. And when we come back here, Apple is one of the most widely held stocks in America, but it's underperformed in a big way this year.

One firm's questioning if it's now dead money. The analyst behind that call joins us to make his case next. Overtime's back in two. Welcome back to Overtime. Is Apple dead money? That's the question posed by Maxim Group in a new note initiating the stock at hold. Apple's down 4% so far this week. It's sharply lagging the Dow this year. Joining us now is the analyst behind that note, Tom Forte. Tom, it's good to have you on. And we're going to start right there. Why do you think Apple's dead money or why do you think, I should say, it continues to be dead money?

So when you look at Apple, it has three real challenges that could result in the shares being dead money. Number one, they're significantly overweight to China. About 20 percent of the revenue comes from China. Their supply chain is still heavily dependent on China. Number two, they're overweight essentially one product, the smartphone. More than 50% of their revenue came from iPhones. Number three, if you look ahead, you're looking at about flat revenue growth for a stock with a 25 PE. So if flat revenue growth is flat earnings growth, your peg ratio is like 25 to 1.

So how are you going to maintain that kind of multiple on flat growth? And then how do you overcome the overweight to China when the Chinese economy is weak? And then how do you overcome an over reliance on a product? They first released the iPhone in 2007. So we're 17 years in the product cycle. So I think those factors really could contribute to potentially a period of Apple being dead money for a prolonged period of time. Okay. How are you gauging the Worldwide Developers Conference, though? We know that's coming up here in a couple of months. Apple's

really sort of the last big mega cap name that hasn't outlined some sort of AI strategy. And there is this growing expectation that maybe you get more of that there. Okay. So on a near-term basis, I think AI can be wonderful if you're selling chips like NVIDIA or if you're a hyperscale cloud company like Microsoft or Google or Amazon. But for other companies, including Apple, I don't know if you're going to see an immediate lift to sales and profits from artificial intelligence. Now, we know they're not going forward with electronic vehicles, which would have self-driving features that would leverage AI. There's speculation they're going to go with robots. But I don't know if robots are going to move the needle for Apple from a revenue and profitability standpoint. And I don't know that they're going to do that for a long time. So, yes, we're looking forward

to whatever they have to say, especially about generative AI at the developers conference. But I don't think it's going to save shares of Apple over the next 12 months. Tom, let me play Apple's advocate here, since you've laid out your case so thoroughly. Yeah, Apple is overweight iPhone, but it happens to be overweight, the most dominant consumer product of our lifetime. They've managed to maintain very impressive margins despite competition from some of the biggest companies in the industry over that period of time. And right now, not only are they at a point where the China headlines are arguably at their worst, but they're being underestimated in AI. What do you say to that?

OK, so I would say that if you wanted to be more optimistic than I am on smartphones, you would look at the device behind me being the television and say that the product lifecycle for televisions has been multiple decades. So I do think that what could save shares of Apple is if 10 years from now we're still talking about smartphones as the dominant way that consumers interact with the Internet. But I think it's unclear at this point in time. And do you want to pay 25 times earnings for a company when the best days are clearly behind it for its most important product? Well, people have been arguing that Apple's best days are behind it for about 15 years now. And yet for most of that time, the stock has continued going up. I would also push back on you saying that so many companies right now are moving toward vertical integration. You've got your hyperscalers trying to do chips, et cetera, when that's been Apple's playbook for a long time

and they already have homegrown chip design heading into the AI era? So doesn't that potentially lead to some performance advantages for them? The disconnect for Apple today is this. So if you look at the March quarter, you're projecting the hardware, we're projecting the hardware to decline at a double digit rate. So what's driven Apple shares over the last cycle is the emergence of higher margin services revenue. But if you have a declining hardware base of double digits, can you overcome that with higher margin services revenue

to drive or maintain the premium multiple? Yes, there's a lot of advantages for Apple. Yes, historically, they've found that next big thing. We know the next big thing is not electronic vehicles. It isn't clear to me what it is, but it isn't clear to me that 25 times P.E. is the right amount to pay for the stock today. All right. Well, we did our own little on the other hand here. So I guess that means I can't do it tomorrow. Tom Forte, thank you. I was just going to say Forte versus Forte here. And Discover earnings are out. Kate Rooney has those numbers. Kate.

Hey, John, we've got the numbers. We are not going to compare these to estimates, but Discover reporting a dollar ten cents on EPS for the first quarter, and that's on revenues of two point one billion dollars. There is some lumpiness here. So, again, we're not going to compare the 30 day delinquency rate, though. This is key to watch for the card companies. At least on credit card loans, that was 3.83 percent up, about 100 basis points, or 1 percent year over year, down slightly from the prior quarter. Total loans up 12 percent year over year, and then personal loans up 21 percent year over year as well. Net interest income also up 11%. They say that was driven by higher average receivables, partially offset by net interest margin compression. A quote here from the interim CEO, of course,

discovers being bought by Capital One, that $35 billion deal is expected to close later this year or early next year pending regulatory approval. But he says quarterly results showed some good loan growth. He said, while expenses were elevated due to our action to advance the resolution of our card misclassification issue, which Discover has dealt with in the past, they've talked about this, but does appear there were some elevated expenses around that. He said the results underscore the continued strength. But the big headline here to watch around Discover is that Capital One deal. So

watch for any commentary on the call when it comes to that, John and Morgan. All right. Kate Rooney, thank you. Up next, we'll get the read on credit in this potentially higher for longer rate environment when we're joined by the head of credit at Aries with more than $250 billion under management. And check out shares of Snap jumping mid-session after a report said a bill to divest or ban TikTok could be fast-tracked in Congress. We will talk about what that means for other social media stocks when Overtime. Investors getting used to, once again, higher for longer rates. As Fed Chair Powell signals a lack of progress on inflation, at least for now,

what does that mean for the credit markets? Our next guest manages nearly $270 billion in private credit. Joining us now in an exclusive interview is Kip DeVere, partner at Aries Management and the head of Aries Credit Group. Joining us here on set, it's great to have you. Welcome. Thanks for having me. I guess I should say welcome back. We just lapped a year on the collapse of SVB and all the fallout we saw within the regional bank sector tied to that and what we saw with higher rates.

A year out, I wonder what you're seeing now when it comes to private credit, especially as we are getting a very busy week full of bank earnings. And for better or worse, right or wrong, there has been this narrative, at least publicly, that has been banks versus private non-bank lenders like yourself in terms of activity. Sure. We don't quite see it that way. We see the banks as great partners. There was a little bit of a challenging year, you know, for the banks last year, obviously with an inventory of leveraged finance hangover from 22 and then some of the SVB related, you know, blips perhaps last year. But I think the banks are very much back in a risk taking mode.

They're probably reevaluating some of the businesses that they're in and where they want to focus. But, yeah, the narrative of private credit versus banks, we really just don't subscribe to that. I mean, most of the large banks are significant partners of ours. We have our business. They have our business. They're complementary. And then, yeah, we sort of dismiss that narrative for the most part. Yeah, your partners in a variety of ways.

And I wonder how that partnership continues to grow and evolve now. Yeah, I mean, look, we've done a couple of transactions with banks as they reevaluate their balance sheets. So I think they're looking at their capital and saying there are certain things we used to do that perhaps we don't want to do on a go forward basis. So there's a reasonably public deal that we did last year with a bank where we bought a portfolio and I think helped them from a liquidity perspective. But generally going forward, it's partnering on new deal flow, thinking about transactions that we can collaborate on. They're obviously very significant lenders to us. When we raise equity for funds, the banks are all our largest lenders. So we've got a great partnership with most of the large money setter banks. I'm particularly curious about real estate, which I know is part of your real assets group. It's a big chunk. And what you expect to happen in office and industrial,

I keep hearing about office conversions, right? Because everything that's not class A is maybe a little less popular than it was. And the idea that a lot of industrial needs to be invested in in order to get it efficient, even for environmental reasons. What are you seeing? How do you expect that to play out as rates remain high and capital remains at a premium over the next three or five years? I think, I mean, real estate, you really, I think, have to kind of rifle shot instead of shotgun shoot.

Commercial office is very different than multifamily, than industrial office, etc. So, you know, we have a real estate lending business as well as a real estate equity business where we buy properties and we develop. The good news for us is coming into this period where office, I think, has some secular long-term challenges is we're underexposed both to retail, to hospitality, and office. It's less than 10% of the aggregate assets. So our focus has actually been on industrial and multifamily where we continue to see strength. I think if we had our industrial partners here buying real estate these days, they would tell you it's a fabulous opportunity for

them on the new investment front, as good as they've seen in a long period of time, regardless if it requires new investment, development, et cetera. I mean, you've talked a bit about three big secular growth areas, decarbonization, mobilization, and digitization. How are you investing for that world where those trends continue? And how does something like the AI revolution play into it? Yeah, I mean, I think our real assets business is increasingly diversifying itself away from just real estate, where we're more focused on infrastructure assets that obviously includes digital. It plays into your question on technology and AI. So for us, it's

just broadening the fairway in terms of what we're investing in from where we started. As we talk about this idea of higher for longer, we've seen a more hawkish tilt, if you will, by Fed Chair Powell and others at the Fed as we've seen inflation data stickier. Your outlook for rates and whether we get cuts? Yeah, I mean, not being an economist, I'm actually in the Fed probably doesn't have any real argument to cut rates at all this year is where I live individually. I think people at the firm might view it a little bit differently. I guess the consensus is three rate cuts before year end. I think you see pretty good economic growth.

You see companies and consumers adapting to higher rates and an expectation that they'll stay higher for longer. And it doesn't seem to be disrupting that much. I think the consumer is still spending. I wish corporate deal activity would pick up a little bit. So I think the higher for longer moment is perhaps continuing to put a pause on M&A and transaction activity, which we hope will break at some point. But our forecast, if we had to go over or under the three hikes, I think would be an under. Okay. Kip DeVere of Aries, thanks for joining us here on set. Thanks so much. Thanks for having me.

Now we've got two more overtime movers for you with earnings from Equifax and SL Green Realty. Seema Modi has details. Seema? Hey, John, let's start with Equifax. Earnings of $1.50 adjusted. That is six cents above estimates. Revenue in line. However, the outlook, the outlook for the second quarter and the full year, slightly lower than anticipated. That's why you're seeing shares down about 5% in overtime. But let's turn our attention to the real estate investment trust, SL Green. This is Manhattan's largest office landlord. Earnings came in at 20 cents a share for the quarter on revenue of $188 million. It did complete a 2.1 debt refinancing deal. The company also sharing that it signed 60 Manhattan office leases covering over 600,000

square feet in the first quarter. Shares up about 1.7 percent in the OT. Back to you. All right. Thank you, Seema. And now time for a CNBC News update with Kate Rogers. Kate. Hey there, John. The impeachment trial of Homeland Security Secretary Alejandro Mayorkas is over. The Democratic-led Senate just dismissed both impeachment charges against him, effectively ending the House GOP effort to have him removed from our office. Mayorkas is only the second cabinet secretary in history to face an impeachment trial. He'll be back on Capitol Hill tomorrow to present his department's budget to the Senate. For the second time in two weeks, Arizona Republicans blocked an

attempt to repeal the state's 1864 abortion ban. The state Supreme Court upheld it last week. The move to block came despite pressure from prominent Republicans, including former President Trump. The state Senate could still vote to advance the bill to repeal that ban. And Caitlin Clark is not done breaking records just yet. Retailer Fanatic said the initial batch of her number 22 Indiana Fever jersey already sold out, becoming the top selling jersey ever for a draft pick. It comes after ESPN said its coverage of the WNBA draft shattered a ratings record with 2.4 million viewers. Back over to you.

Good for Indiana basketball. Yeah. Thank you. Well, when we come back, Mike Santoli is going to look at why earnings day stock moves have been getting more dramatic in recent years and whether that trend is likely to continue. And speaking of earnings, we are less than 24 hours away from Netflix results. That stock has been a standout so far this year.

We've got a full rundown of what you need to look out for in tomorrow's report. Welcome back to Overtime. Let's bring back Mike Santoli with a look at the drama around earnings. Mike. Yeah, John, it's not your imagination. A lot of times the stock reactions to an earnings report is kind of outsized relative to how that stock normally behaves. This is from Goldman Sachs. It shows you the average move in a stock after reporting earnings relative to that stock's own tendency to move a lot. So this is a multiple of the average daily move. And you see over time there's been

a slant higher. I would argue that back here in the 90s, this goes back 26 years, before regulation fair disclosure, a lot of the handicapping of what the company was going to earn was kind of getting out into the market. There was a little bit less suspense. And now you have the earnings reports that are the main source of up-to-date financial performance. The other piece of it is, as you're coming out of earnings recessions, there's probably a little more question as to whether those are going to be winners versus losers and exactly what the trend is. And that's what we've been in right now. And of course, you have all these preloaded strategies ready to build, ready built, automated to react to whatever number is coded into those headlines. And the machines read it and they move. And and there you have, I guess, some reasons why you do have these swings on reports.

All right. Mike Santoli, thank you. Some good analysis there, especially for an hour where we do see a lot of these swings. Well, snap shares popping this afternoon on reports that China's bite dance could be forced to divest TikTok sooner than many people may have thought. We've got those details next. As you see, shares a snap up almost 5 percent. Stocks getting a lift today after a Reuters report said the U.S. plans to restore tariffs on a solar panel technology from China. So first solar and sun run, both seeing a nice pop. We'll be right back. Welcome back to Overtime. Snap shares closing up more than four and a half percent after reports that China's bite dance could be forced to divest TikTok sooner than previously expected, if it happens at all. Well, joining us now to discuss Rohit

Kulkarni of Roth MKM and Paul Gallant of TD Securities. Rohit, I'm particularly curious whether you think this near-term news is going to have any long-term impact on TikTok's competitors? Because won't it take a while for this to play out, even if things don't go their way? Hey, thanks for having me, John. Near-term, I see less of a tailwind for a company like Snap. This is still in early exploratory phase. Many things can go TikTok's way. Many things cannot go TikTok's way over the next few months. So I feel from a fundamental standpoint, from an engagement standpoint, it feels kind of the move today was a little bit premature. But again, longer term, if this were to happen, then Snap shares are not up just 6%, but probably a lot more than 6%.

Okay. Now, Paul, I want to ask you about something else, this de minimis exception that has to do with how much tax gets paid, how much tariff on goods. I think it's under 800 bucks that come into the country. A lot of people thinking about the impact on Timu and Sheehan after the House Ways and Means Committee voted to change that exception in certain ways. But won't it also potentially affect Amazon third party sellers? I'm not sure, John, but I think the answer is probably not. What the House committee did today is try to come up with a very surgical approach to only hit China based importers that have been benefiting from this sort of exemption from the 25 percent tariff for imports.

And that's one of the reasons that Democrats objected in the committee today, is they want to go bigger. They just want to hit everything coming in from China and sort of get rid of this de minimis exemption for all of those incoming Chinese products. But the Republicans today said, look, let's try to limit this to just Chinese companies. So I think Amazon and I think the other U.S. companies are OK under this bill. Well, I do think there's a lot from China coming in and flowing through Amazon is what I was saying. Yeah, I think what I would add is also there is a $800 minimum that some of these companies like Shein and Timu are shipping items below that threshold. So there is that loophole that they're taking advantage of. So probably this idea is to close that loophole. Amazon sellers are shipping a lot more product in one fell swoop. So

probably less of an impact on Amazon sellers, although probably 30 percent of goods are coming from China for Amazon. It is pretty amazing, though, what a handful of years, what a difference that has made in terms of how everybody is approaching trade policy where China is concerned. Paul, I do want to go back to the fact that this tick tock bill has been tucked into the national security spending bills that that we know are making their way back through Congress right now after being stalled for so many weeks on the heels of the strike that we saw by Iran, the attacks we saw by Iran on Israel over the weekend. How likely is it, as it has been attached to this, that it actually makes its way across the finish line? And just as importantly, how likely is it that this defense spending makes its way across the finish lining? Yeah, it's a really fascinating development, Morgan, that the Speaker of the House decided to package all of these bills together just today.

A bit of a gamble. He's getting into some more resistance from his far right members of his caucus for doing this. But it looks like he's going to charge ahead and call the Speaker to force the Senate to accept a bill that has some stuff in there that they don't like in order to get some stuff that they do like. And I think if I had to guess, I think the driver of this is the Iranian missile attacks on Israel last week that has created new momentum, a new interest in Congress and making sure Israel has the money to defend itself. And one of the beneficiaries of that momentum might be MetaSnap Google because of this TikTok bill being part of it. Rohit, assuming that we actually see this bill cross the finish line or this TikTok divestment piece of the legislation actually make it into law here, how likely is it that ByteDance would actually take those steps? And just as importantly, if it were to do that, and I realize it's probably a pretty big long shot, who would actually be in the market to buy it?

Yeah, I think too many ifs in there. In my opinion, if this bill were to pass, probably clearly very positive for companies on that list meta snap to some extent google as well and to some lower extent maybe pinterest so those four companies benefit i think when it comes to actually divesting in my opinion tiktok is is the crown jewel in bite dance's kind of overall portfolio of things it's it's it feels very hard that they would actually let go TikTok on a regulatory stance. They would probably fight to the last tooth and nail, in my opinion, and it won't be an easy divestiture. I would rather expect them to fold it back into the Chinese kind of core ownership itself rather than divesting it off to U.S. ownership is what,

based on some of the conversations I've had, feels like the path that Chinese Biden's owners would take in the next three, four months if forced to divest. Okay. We'll have to see how all this shakes out with votes over the weekend here. Raheet Kulkarni and Paul Gallant, thanks for joining us. Regulators reportedly looking to break up a major merger in the world of fashion. We've got those details straight ahead. Plus, we will round up all the earnings movers that should be on your radar when Overtime comes right back.

Welcome back. Another antitrust move could be in the works. The FTC is reportedly preparing to sue to block the $8.5 billion deal between coaches owner Tapestry and Michael Kors' parent company, Capri Holdings, according to The New York Times. The commissioners are expected to meet next week to discuss. This comes as regulators have been ramping up enforcement lately on a number of high-profile tie-ups. Notable deals that have been challenged include Lockheed Martin and Aerojet Rocketdyne, Illumina and Grail, Penguin Random Houses, buyout of Simon & Schuster, Spirit and JetBlue,

and the grocery mega-deal between Kroger and Albertsons, not to mention some of the stuff we've seen on the tech side, too, with Adobe. Indeed. Well, will streams come true for Netflix investors when the company reports earnings after the bell? Up next, the key numbers to watch for. And because you love Overtime and you want even more, scan that QR code. It's right there on your screen. You can follow us on LinkedIn where we post exclusive content.

We'll be right back. Welcome back. Let's get a check on the after hours earnings movers. CSX higher after beating on both lines. Total volumes rose 3% year over year. I'll be sitting down with CSX CEO Joe Henricks tomorrow in an exclusive interview at 10 a.m. Eastern time. Las Vegas Sands is lower despite topping estimates, though. Companies saying it's positioned for growth as travel and tourism spending in Asia expand. Those shares are down about 3%. Alcoa missed on earnings but beat on revenue.

Management's saying raw materials prices and markets are improving in those stocks. That stock is up 3%. I'll be speaking with Alcoa's CEO Bill Oplinger about the quarter and a first on CNBC interview tonight at 7 p.m. Eastern on Last Call. And what a year it has been for Netflix so far. That stock up more than 20% making it a top performer in the S&P 500. But can it keep surging after it reports earnings tomorrow? Well, Julia Borsten joins at least with some numbers to watch. You can't tell us what it's going to do. I don't have a crystal ball, but I can tell you that expectations are high for Netflix. The stock has gained 26% since its last earnings report back in January.

And a key number to watch tomorrow is revenue growth. Analysts project 13.6% revenue growth in the first quarter. That would be up from 12.5% growth in the fourth quarter. Another key number to watch, as always, subscriber additions. The street is expecting 4.59 million new subs. That is a drop from the more than 13 million subs added last quarter, but it is more than double the year than 13 million subs added last quarter, but it is more than double the year ago additions in the year ago quarter. So the hope is that the continued

crackdown on password sharing will continue to be a tailwind for subscriber additions. Subscriber gains could also be driven by Netflix's lower cost ad tier. In January, it reported 23 million advertising monthly users, it's different than subscribers, and said that 30% of new signups are for this ad tier. Citi's saying, quote, we would not be subscribed if Netflix pointed to an acceleration in ad tier subs, as the firm likely benefited from its partnership with T-Mobile. Now, that T-Mobile partnership gives customers the Netflix ad tier for free as part of their T-Mobile. Now, that T-Mobile partnership gives customers the Netflix ad tier for free as part of their T-Mobile bill. One other thing, we're going to be looking out for whether

Netflix is changing its mind on sports rights after it announced the creation of various live sports events, but it still hasn't bid any existing sporting events. So, Julia, are these subscriber ads roughly equal, whether they're ad tier based or just general in the eyes of analysts at this point? Or is one more profitable? Well, I would say down the road, the ad tier subscribers could be more profitable. It's going to be easier to hold on to them from a churn perspective. You don't have to worry about them dropping the service as much because they're paying less per month. And over the long term, as Netflix continues to build out their ad business, they could actually be much more profitable over the long term. But the ad

business is still in its earlier days. Okay. We'll be watching closely. We know you will too. Although you will also be at our Changemakers event. I will. The first one. Congratulations. CNBC's Changemakers inaugural event tomorrow. I'm very excited. Thank you so much. We're excited too. We'll be watching from afar. Thank you. All right. Julia Borsten, based on your book, I should mention, right? Yes. Inspired by my book, When Women Lead. When Women Lead. Thank you, John. Take the lead, Morgan. Take the lead. We've got more earnings and we've got railroads with CSX tomorrow and I'll be paying attention to Alcoa tonight and a whole bunch of other stuff. Yeah. And that's very different, of course, from Netflix, which we were just talking about.

But I can't help but think there are a lot of people wondering whether some of these bigger tech stocks that drove so much of the market and have sort of been falling off one by one, we were talking about Apple a little earlier, whether Netflix gets to keep the crown. Yeah, we'll have to watch and see. And I thought it was very interesting when Lizanne

Saunders talked about how much we're going to talk about tomorrow. That does it for us here at Overtime. Fast money starts now.