Closing Bell - Closing Bell Overtime: Mark Cuban On Health Care Costs, AI & Tech Stocks; Stocks Tumble Into Close 3/4/24

Episode Date: March 4, 2024

Stocks fell into the close, ending at session lows. Janus Henderson’s Marc Pinto and UBS’ Jason Draho break down the market action ahead. After attending a White House roundtable on health care costs, Mark Cuban joins to talk his company Cost-Plus Drugs, regulating AI, if tech stocks are in a bubble and more. Wedbush analyst Matt Bryson breaks down SuperMicro’s move higher and what could be next for investors. Cyberark CEO Matt Cohen on the move in cyber stocks. JPMorgan analyst Chris Hovers previews the week ahead in retail earnings.

Stocks taking a little bit of a breather following last week's big rally. We touched new highs in the S&P but backed off. Small caps in the Russell are a little green at the close. Well, that's the scorecard on Wall Street. But when you're staying late, welcome to Closing Bell Overtime. I'm John Fort with Morgan Brennan. Well, communication services, consumer discretionary, and energy all weighed on the market today. Utilities, real estate materials. Those are the biggest outperformers coming up.

Billionaire investor Mark Cuban on whether he thinks the market is in a bubble, as well as his take on the huge rally in AI stocks and cryptocurrencies. Oh, and health care. We talk about health care. OK, looking forward to that. Speaking of AI stocks, Supermicro, it's flying again, nearly quadrupling this year alone, up above 1,000 a share. Again, we're going to get analyst reaction to that company getting set to join the S&P 500. But let's begin with who's joining us in our market panel. Mark Pinto of Janus Henderson Investors and UBS Global Wealth Management's Jason Draho. Guys, welcome. Mark, so we touched a new high for the H&P.

We're right around those record levels. Big tech names got us here. But you say to look elsewhere from here, and healthcare is one of those spots to look. So what filters are you using to pick those health care stocks? Yeah, so we think there are a lot of exciting things going on in health care right now. In particular, this is a golden age in terms of drug discovery and development. Last year alone, 73 new therapies were approved by the FDA, which I believe is a record number. And in this spirit of innovation, a lot of which, by the way, which I believe is a record number. And in this spirit of innovation, a lot of which, by the way, is being driven by artificial intelligence, we see some major

historically unmet medical needs being addressed. And the first I would point to is a category for the weight loss drugs, where Lilly in particular, which is a holding we like a lot, has really led the way in this in terms of their drug Manjaro, which is showing up to 20% loss in weight reduction and could potentially have very significant opportunities in terms of other classes of diseases that are addressed by addressing obesity. We also like Vertex Pharmaceuticals, which has basically come up with a cure or treatment for cystic fibrosis, as well as some interesting drugs in development, including a non-opioid painkiller that we think could be as much as a $15 billion a year market. And then finally, in Boston Scientific is another area where we see a lot of innovation in terms of treating cardiovascular conditions.

Nice. Okay, Jason, now zooming out, you point out that macro data has been mixed this year. And actually, right now, we're getting some data from Intuit's QuickBooks Small Business Index that shows employment in the smallest businesses, those with fewer than 10 employees, actually dropped slightly in February, particularly geographically in the West and Northwest, and industry-wise in logistics and information. I'm inclined to think that that might actually be a sign of healthy efficiency in smaller businesses. So expanding the lens out, how do you see smaller public companies, small caps, faring in this environment compared to the big ones? Small caps are one of our most preferred areas.

One of the things that's nice about small caps is that in some way they've underperformed and underperformed significantly. Their valuations relative to large is at a pretty significant discount relative to history. And they're also relatively economically sensitive. And then the thing that we don't think that small caps are properly discounted, what we ultimately think will continue to be a relatively benign macro environment in the US economy this year. With growth around trend, inflation, you know, moving lower, maybe in fits and starts, and ultimately the Fed cutting rates. If that plays out, that's a pretty conducive environment for small caps to kind of catch up. We've seen them outperform and underperform really over the past four or five months. I think some of that's really predicated on concerns that investors have about just the resiliency of growth. But even if the data has been mixed,

it's been mixed at a still relatively elevated level. I think the more investors get comfortable with this soft landing view, the cycles next in for a while, I think you'll see that rotation. And then in the rally that's kind of gone on for the past few months, kind of broadened out in small caps to get a tailwind as a result. Yeah. And of course, we did see the small caps and fractionally lower like the other major averages today, but not before hitting another 52 week high. Mark, we had Atlantis Bostic, who's a voting member of the FOMC this year. He said two rate cuts this year. He also warned of pent up exuberance, quote unquote. I mean, we look at some of the moves we've seen in some of the biggest stocks, whether it is NVIDIA, whether it is Supermicro, which we'll be talking

about a little bit later this hour, I mean, does it feel like there's pent-up exuberance in this market? Or are these still the places to be focusing at least some investment dollars? Well, look, I think there are two things going on. The first one is that I think the backdrop for equities is definitely is definitely improving as uh hopefully we've ended uh or we're near the end of the fed rate height cycle um and we actually um you know can see in our possibility of some rate cuts further this year so typically growth stocks do well in a falling rate environment um and we think that a soft landing is not out of the works is not out of uh is not out of the works, is not out of the question.

In terms of what you're talking about, obviously there's some very important themes, and AI is a very big one, and certainly a lot of the stocks in the quote-unquote magnificent seven have exposure to AI. And we think, look, we think the AI trend is just beginning. I mean, at Janus Henderson, we've already implemented AI in parts of our business in terms of how we interact with clients, how we aggregate research. And so

anybody in the AI supply chain is going to benefit. And certainly companies like NVIDIA, but also the companies that actually supply the tools that make AI possible. In other words, the people that supply the chip makers like NVIDIA. We think those trends are going to continue. And so AI is here to stay. It's just a question of where do you want to be in the AI supply chain? We personally think the semiconductor space is a great way to place it. But there are a lot of other opportunities and certainly super micro, today's news, maybe a little bit extreme version of that, but a lot of

unlooked opportunities to play that trend. Yeah. Jason, I'm going to ask you the same question here. Well, we still like large cap tech. I mean, these are the companies that are probably best positioned to capture multi-market share over the long term. They're still the ones that have the scale to kind of benefit. And if you think about their valuations, yes, they're extreme, but they're also growing incredibly fast. So as a sector, tech is still our most preferred. When I think about the markets right now, it is a story about macro, and that's where we like small caps, but also a story kind of a micro. And micro really is the AI theme, and tech is still the one that we think will benefit.

You mentioned the term, I think, pent-up exuberance from Bostick at Atlanta Fed. It does have echoes of 96 when Greenspan talked about irrational exuberance. I think that's kind of the right time frame. This is a market that's still more early, mid-90s, not late 90s. We don't see that exuberance yet, and I think some of these large tech companies are still going to benefit from this AI story, which we think has a multi-year horizon to it. That was five years of party left after that comment. So that would be a good thing for the bulls. Mark Pinto and Jason Dryhawk, thank you. Let's switch gears now to Apple. Shares fell on the back of the nearly $2 billion antitrust fine from the EU over music streaming that Apple picked up.

And in other Apple news, the company announced its new versions of the MacBook Air laptop. It's got the M3 chip, calling it the world's best consumer laptop for AI. And with that, time to bring in Senior Markets Commentator Mike Santoli for a look at Apple's recent stock performance. Mike. Yeah, John, in particular, Apple's performance relative to the S&P 500. And actually, you could dial it back 15 years. This basically encompasses most of the iPhone era, the big buyback capital return era for Apple. What I want to point out is, first of all, Apple has given up a couple of years or let's say four years worth of outperformance. So

basically, if you bought it four years ago, you kind of did no better than the S&P 500 from that point on. However, as you can see, it's more than, you know, it's about 700 percentage points better than the S&P over this whole span. But it's not always really a bellwether for the broad market. So this was 2012 into 2013. Over that span, when Apple was underperforming, the S&P was up like 10 percent. Apple was down 40 percent. Something similar happened here 2015 into 16. The market was down small. Apple down bigger.

2018 into 19 again. And this was late 2020 2020 into mid 2021. There's only a six month period, maybe eight month period. But the market as a whole was able to do OK over that period of time. You obviously don't want one of the two biggest stocks in the market to be a huge dead weight and to be rushing lower all the time. But I do think it's important to know that it goes on these huge streaks of outperformance and then tends to consolidate relative to the market for relatively extended periods of time, John. We've seen it several times, Mike. I think of it in terms of the Exxon period. Remember when it was neck and neck and market cap with Exxon? Will it ever surpass Exxon? Exactly. And then there was the Samsung period

when Android was going to, you know, trounce them. Now they're in the Microsoft period. So you got to separate that out, you're saying, from what's happening in the market overall. Who knows whether Apple will manage to battle back again? Exactly. And, you know, most likely it probably can find its footing and at least keep pace. The big thing, though, I think, is this sense out there, and it seems intuitive, that how can the overall market do OK when this stock worth 6% of the S&P 500 is actually weak? Well, it sometimes can. I mean, you can't have all these stocks fall apart at once. But Apple in itself has kind of gone more to its own drummer than than really the overall market beat.

All right. Mike Santoli, we'll see a little bit later this hour. We've got GitLab earnings. Those are out. Bertha Coombs has the numbers. Bertha. Hey, Morgan, beating on both the top and the bottom line, posting earnings of 15 cents a share adjusted versus an expectation of 8 cents on revenues of 164 million versus 158 million. But you can see the shares are dropping because the outlook is rather weak. Now looking at guiding to $0.04 to $0.05 adjusted loss versus an expectation of a $0.06 profit, even as they are raising the outlook for first-quarter revenues. And for the full year, they now see a profit of $0.19 to $0.23 a share versus a $0.35 estimate. Ironically, within the release, CFO Brian Robbins said they had 1,900 basis points of non-gap expansion in terms of EBITDA, but don't really give an indication as to why this

outlook is so weak. Back over to you. All right. Bertha Coombs, thank you. Up next, billionaire investor Mark Cuban, who sold his first company in 1999, on whether he thinks the market feels like the dot-com era you're not seeing you know ipos for crazy companies because they have a website so i don't i don't think we're at a point where we're at a bubble but you know you are seeing more and more people just dive into the the magic seven or whatever they're calling them now the top seven stocks so that creates a little bit of or whatever they're calling them now, the top seven stocks. So that creates a little bit of risk, but they're good companies. And so, you know, while I think there's risk in

the market being top heavy, I don't think we're anything like what we saw in 99 and 2000 and 2001. Don't miss his take on AI and cryptocurrency. Also, health care. That's all straight ahead. 1999, a great time to sell a company by the way plus can anything stop super micros super rally a top analyst weighs in as that stock gets set to join the s p 500 overtime's back in two welcome back to Overtime. We have more earnings to bring you. This time it's AeroVironment, the defense contractor.

Those results are out. And it looks like a beat on the top line. Revenue coming in of $186.6 million. That was up 39% year over year, beating the $170.6 million estimate from the streets. That was also a record for third quarter revenue for the company. Funded backlog, 462.8 million dollars. And it looks like adjusted EBITDA of 28.8 million. And in the release, companies saying that with increased global demand for their solutions, they're a drone maker, mostly strong backlog, growing pipeline.

AeroVironment remains well positioned for continued growth. And as such, they're raising and narrowing fiscal year revenue guidance for 2024 to between 700 and 710 million. They're going to continue to anticipate double digit revenue growth in fiscal year 2025. As you can see right there, shares are spiking up more than 13 percent on this beat for AeroVironment. Meantime, I spoke with billionaire investor Mark Cuban earlier today. His cost plus drug startup offers 2,500 generic medications in its online pharmacy. It works with companies, insurers and patients directly. Cuban participated in a White House roundtable focused on health care costs today.

His message, the big three pharmacy benefit managers, or PBMs, are driving drug prices higher. Some of the things that the big three PBMs do is they set formularies based off of rebates. So, for example, the number one prescribed drug is Humira. And they can charge $8,000 a month for Humira to self-insured employers and insurance companies. When there's biosimilars like Yosemite from Coheris that we charge on costplusdrugs.com $594 per month. We could save companies millions of dollars, cash pay patients millions of dollars, but they won't do that. There's other examples where they just are destroying

independent and community pharmacies where they'll reimburse. So let's just say Eloquist as an example. The community pharmacy might pay, I'm just picking a number, $500 per monthly delivery of Eloquist. And rather than reimbursing them for the full amount that they pay they'll reimburse them $400 or less and we see that even worse with Wagovi and some of the the semi-glutides and the list is just on and on of things that pharmaceutical benefit managers do for themselves at the expense of patients and self-insured companies and the craziest part is and the the message really that I wanted to get across, these big three pharmacy benefit managers, there's nothing unique about them. There is nothing that they do that so many of

the independent and small transaction-based rebate-free PBMs do that couldn't do the same thing, right? And so, you know, the message that I really wanted to send to self-insured employers in particular is stop using your big three pbm go to your employee benefits consultant and ask them why are you sending me to one of these big three companies and why are they paying you on the back end for you to send me there when I could be saving an untold amount of money for my employees and for the company itself. It's just insane the way the system works right now. And CostPlusDrugs.com is just pushing away to change it. Yeah. And along

those lines, I mean, you launched Cost Plus Drugs, what, two years ago? You've got thousands of generic drugs on the platform. How many patients do you have? How many insurance companies are you working with? How many hospitals? How many, I guess, regular companies too? We work with everybody and anybody. I mean, we've got millions of scripts that we've delivered, probably a couple million patients now. I mean, our numbers, we're sending records almost every single week. And so our biggest challenge is just keeping up with the volume. We're about to release, we're about to open up our manufacturing plant this week.

We'll be releasing sterile injectables for generics that are on short supply. So you hear all about the pediatric cancer drugs that kids can't get in hospitals. So we're going to start shipping those sterile injectables and then the pediatric cancer drugs in about two months. So we're trying to cover all the bases. Interesting. When I hear you talking about launching manufacturing, what is it taking to stand up that production line? And do you have plans to do others? Yeah, I mean, it costs a lot. And so our production line is robotically driven. So we can change from one injectable to the next every four hours. So we're able to meet the demand of shortages. And that's the mission of the factory. Now, we don't have unlimited capacity. So once we can get this up

and running, then we'll look at ways that we unlimited capacity, so once we can get this up and running, then we'll look at ways that we can expand it so that if we do this right over the next five years, there will no longer be any more shortages in sterile injectables. So as you do have thousands of generic drugs on the platform, do you have access to enough of them and enough of the products that you're looking to offer to consumers? Yeah, I mean, you never, we, the goal is to get every single drug we're legally allowed to sell. We have 2,500 generics, which is pretty much all of them. And we've got probably 10 different brand manufacturers that we're working with, but

it's hard to add the brands because those big three PBMs are telling the brands don't work with costplusdrugs.com. So that's our biggest challenge. Is Cost Plus Drugs making money yet? No, we're not making money yet, but that's okay. You know, we're changing an industry, we're saving patients. I mean, we're taking, Morgan, I can give you example after example. A drug like imatinib, where, you know, you might have to walk into a CVS

and they'll charge you $2,000 or $2,500, and depending on the strength, you can get for $21 from Cost Plus Drugs. A drug like droxodopa, same type of story, $10,000 for three months down to $30 a month from costplusdrugs.com. Just example after example after example. So I may not be making money yet. I will be, but this will be self-sustaining. But the impact we're having is just incredible. Yeah. I asked about whether you have enough drugs. Do you have enough workers? Oh yeah. I I mean, we've got I mean, our biggest challenge is just adding more brands. And as we add more brands, you know, we're going to continue just to change the industry more and more and more. How do you see this new AI era?

It's a beast. There's only two types of companies in this world, Morgan, those who are great at AI and everybody else. If you don't know AI, you are going to fail, period, end of story. Whether you are an employee, you're going to have to understand it, how it impacts your job or how you can use it to be better at your job. If you're a student, the same thing. And if you're a CEO, you can't just say, okay, I'm going to get my tech guys to understand it and educate me on it. You have to understand it because it will have significant impact on every single thing that you do. There's no avoiding it. Yeah. And of course, we're seeing that from a policy debate standpoint, too. If you were in charge of regulating, it would be the first thing

you'd do. You can't regulate it. You know, there's just it's it's brains driven. It's not policy driven. You know, the smartest people around the world are trying to come up with new ways to leverage AI to create everything from military all the way down to every application you can think of. And there's no way you're going to start somebody, you know, working in a garage again from being able to manipulate AI the way they want it. You just can't legislate that at all. What you can do is develop strong relationships with everybody in the industry and communicate with them because it is strategic for the United States of America.

We have to be able to win the battle. We also have, you know, going back to immigration, I'm not talking about policy. We have to be able to have the best and brightest around the world who know AI, want to come to the United States of America to contribute. Because if it gets into an adversary's hand, you know, bad things can happen. With Bitcoin testing a new all-time high right now, your thoughts on this crypto rally, and I guess just as importantly, since you've been outspoken

about it in the past, how much your portfolio is in cryptocurrency? I don't even know how much, but it's happy. You know, Bitcoin in particular and Ethernet, ETH to a smaller extent, Bitcoin is just driven by supply and demand. There's only going to be 21 million of them. The more people that buy and the fewer people that sell, that means the price is going to go up. That's just the nature of it. It's a great store of value. That's why I have an investment in it you know because i do feel that the demand is going to exceed the number of people selling eth we'll see what happens with um the etf and whether or not that gets approved but because of the way it works it's a little bit different and it's a little bit more driven by utility but there's more and more

applications coming for the utility the biggest the biggest disappointment of crypto so far has been there's not that one application where you go to your grandma and she says, I got to get this new crypto app because all my friends are using it. Kind of like we saw in the early days of apps with Instagram. We need that transitional application for crypto to be ubiquitous. But until then, just from an investment perspective, I'm investing in Bitcoin over gold all day, every day. And I've said that for years. Now, he also sold the majority stake in the NBA's team, the Mavericks. This is his last season on Shark Tank. And then, of course, he is focused on this health care situation. So I asked him, what's next? And he said, health care, health care, health care. I also asked because he has

said he would not run for president. He's been very outspoken, particularly on social media, if there's a situation that would change his mind around that. And he basically said no. But I would also just note, in terms of this event at the White House, it comes at a time where you have the administration really focusing on health care costs. There's an expectation that you're going to have a task force stood up around this and that it is going to play a role in what we hear from President Biden on Thursday in the State of the Union address as well. Can't help but notice White House has a forum on electric cars.

They don't invite Elon Musk. They have a forum on health care. They do invite Mark Cuban. Yeah, it for what that's worth. There you go. Because I know they've had a lot of back and forth on X and but yeah, I mean, this is the area right in health care. It's it's this idea of disruption and pharmacy is one of those key areas. We see it with Amazon as well and others. Yeah. All right. Great. Well, meanwhile, Supermicro shares soaring today after it was announced that that company is going to join the S&P 500.

Up next, a top analyst on whether he sees more upside in the stock. We'll be right back. Well, we had a super move in Supermicro today, closing, let's see, more than 18% higher, hitting a 52-week high after being selected to join the S&P 500. Safe to say some shorts got hurt. Joining us now is Matt Bryson from Wedbush. Matt, this company, this stock gets talked about a lot as being out of control. But to set the table a little bit, I talked to Charles Liang about six months ago about what his vision is, this idea that you vertically integrate in the data center. You pay attention to liquid cooling in the AI era when things are going to run so hot. Could it be that this is an iPhone versus Android, you know, Supermicro versus the traditional players situation? If they get liquid cooling right, it might be.

The problem is right now liquid cooling isn't really utilized. I don't think it's so much a 2024 technology as maybe a 2025 or 2026 technology. But that's the question. Can Supermicro figure out some sort of differentiator so they look like Apple iOS or they look like Microsoft Windows versus historically servers look more like PCs, right? You can buy a Dell, you can buy an HP. At the end of the day, you're buying a PC. And so that's when I go to the market cap question, right? So if you just look at the market cap, Supermicro is now around 50, 60 billion. You know, Dell's in the 80 billion range. What would it take for a company like this

to be worth 100 billion market cap? What kind of margins would they have to have or sales would they have to have in order for that to be reasonable? Yeah, I mean, I think that two things have to happen. One, they have to show that the gross margins are sustainable over time, right? They are currently where they've been historically. But certainly there's a question that with the much higher prices that are being paid for these AI servers, a lot of which is attributable to NVIDIA at this point, can you maintain the same margins that you've been getting on standard servers? And then it comes down to how big is the market? And obviously there are numbers all over the place out there. And can Supermicro control 60%? And I think a lot of that comes back to

with the 60% or 70% number, can they differentiate themselves again? And then with the growth number, there's no problem in Q1. There certainly doesn't look to be a problem in Q2. It's more getting back to like AMD suggesting there's a $400 billion TAM for AI accelerators. It's do we start to get to those numbers? So is there also a storage and networking further opportunity for Supermicro beyond compute? Do you have a sense of that? Yeah, I think that's harder for me to see. So historically, storage, there's a whole lot of investment in software and storage. With networking, again, there's a ton of investment,

particularly around the software for the networking side of things. And so when you look at companies like Cisco, like EMC historically, or NetApp, or Pure Storage, they spend a lot of their revenue on R&D, and Supermicro is just not structured that way. Certainly their R&D spend has gone up substantially, but still in the low single digits, which in my mind isn't enough to get them into those markets. All right, we'll see what they do strategically from here. Matt Bryson, thank you.

Well, it's time now for a CNBC News Update with Bertha Coombs. Bertha. Hey, Morgan. Senate Minority Whip John Thune said this afternoon that he will run to replace Senator Mitch McConnell as the Republican leader when McConnell steps down at the end of the year. Thune faces at least one other challenger, Senator John Cornyn of Texas, who announced his bid last week, while others, including Senator John Barrasso of Wyoming, are reportedly considering a run. Four former top Twitter executives have sued Elon Musk, saying he owes them more than $128 million in severance. The executives say in the lawsuit that Musk fired them for gross negligence and misconduct, which they deny. Attorneys for Musk have yet to respond. Amtrak will boost passenger service on its busiest route, the Northeast Regional, adding one million seats over the next year between Boston and Washington, D.C.

The announcement comes as the rail carrier promised to double its ridership by 2040. I will tell you, if you're on that northeast regional on a holiday weekend, on a Sunday coming home, sometimes it's standing remotely. It is a very busy route. Bertha Coombs, we're going to have to see how that one plays out. Thanks for bringing us that news update. Well, gold has been glittering lately, but commodities in general have been diverging sharply lower compared to stocks. Up next, Mike Santoli looks at whether there's any sign that that gap can narrow.

And check out Bitcoin rallying again today, creeping closer to its all time high going back to 2021. That move giving a big boost to shares of Coinbase and MicroStrategy, as you can see right there on this chart. MicroStrategy finishing the day up more than 23 percent. Stay with us. Welcome back to Overtime. Commodities were big movers today. Oil closing lower after OPEC Plus extended production cuts. Meanwhile, gold posted its highest settle ever, dating back to 1974.

But despite today's move, commodities have trended lower. Mike Santoli is back to break it all down for us. Mike. Yeah, Morgan. So we got the new high in gold. Even oil today, notwithstanding, has had a respectable move off the December lows. But of course, natural gas has been weak. Agricultural commodities in general, not strong. Natural gas been very tough.

So here's the broader commodity index over five years. And you see this pretty straight downtrend from those highs right around the the evasion of Ukraine back in 2022. And, of course, stocks have done extremely well. So financial assets vastly outperforming real assets, although it was kind of a push for a few years there point to point. So it's not that common to have a directional divergence this sharp from these two areas. And, in fact, if there's one thing I can remember is back to the late 90s, you actually did see this. You had oil crashing in the late 90s. You had a deflationary type move with the Asian financial crisis. And yet financial assets did really well. So the question is whether that we might see some kind of convergence here or if the economy continues to prove resilient globally.

If you can see a little firming up of commodities here, you have only the hints of it right there, at least in terms of the broad basket. Morgan, you just took us back to the 1990s. Mike, I am just kind of. But, yeah, I am just curious, though, about the intersection with other asset classes. Right. The dollar has remained strong. Interest rates have creeped back up since the starting of the year. So which of these commodities or equities, which is behaving unusually in that environment? You know, I would say commodities fit with that idea of a stronger dollar and a higher real interest rates. I mean, there's no doubt about it. And stocks have a less consistent relationship with those things. A lot more going on. You know, the market can get kind of captivated with things outside of just the cost of money and foreign exchange rates.

The stock market can. So I would say that's not that unusual to see stocks shaking those things off. And plus, they're still in there kind of in a range. If you look at the dollar, if you look at yields, they haven't yet quite broken higher in a way that seems like there's something huge happening in terms of an inflection point. All right. Lots of waiting for whatever normalization might mean happening in this market. Mike, thanks. Now, Palo Alto Network's recently warning of customer spending fatigue with multiple cyber options. But cybersecurity company CyberArk has seen some serious gains this year. That stocks up more than 20 percent just in 2024. Up next, we're going to hear from that company's CEO with what he's

seeing in the space. Overtime, we'll be right back. Welcome back to Overtime. Investors getting mixed messages on the state of cybersecurity customer spending. Palo Alto Network's recently warning on their earnings call about clients beginning to show signs of, quote, spending fatigue. But rival Zscaler's CEO told us here on Friday on overtime that they are not seeing spending fatigue. We'll get the latest read tomorrow when CrowdStrike reports earnings. But for more on the state of the industry, let's bring in Cyber Arch CEO Matt Cohen, who joins us here on set. It's so great to have you. Welcome. Thanks, Morgan. Great to be here. Spending fatigue. Are you seeing it?

I think the cash there maybe was a little bit taken out of context. I think what he's talking about is more overall fatigue with the number of cybersecurity tools that an organization or enterprise has to implement. And really, when he's talking about platformization, he's talking about how do you take that massive number of tools and bring them down to a smaller number of platforms. Overall, from our perspective, we see spending continue to increase. It's increased throughout the course of last fiscal year and into this year. And we see as this threat landscape continues to elevate that more and more companies out there, enterprises, even government organizations are having to double down their investment in cyber spend. They just want to do it with a vendor or a provider that they can trust.

We kind of call it a consolidation of trust that's happening out in the industry. All right. And so what does that mean for CyberArk? So for us, it means that there's more and more people looking for us to provide a universal platform for identity security. And so when you think about the various spectrums of identities within an organization, you can have IT identities, you can have developer identities, machine identities, or the entire workforce.

Each one of those identities comes with a certain risk profile, and our ability to provide a universal platform that secures each one of those identities, making sure that if somebody gets in, we can control what happens, is what our customers trust us for. And it's driving the overall growth for CyberArk that we've seen throughout the last couple of years. So Matt, how does the platform drive play out in Identity? Because Zscaler and CrowdStrike are

doing their platform thing writ large, and we're expecting some consolidation. In Identity, you know, Zscaler and CrowdStrike are doing their platform thing writ large, and we're expecting some consolidation. In identity, you've got Okta, which has had some stumbles, really, in the security arena, really embarrassing ones. But they've managed to recover, it seems. Are you able to take advantage of that? When do we see, you know, if you have an inflection and get past them, when is that? Yeah, sure. So I think what you see with Okta is they started really with this idea of managing identities really against the general workforce.

And they started with some of the lighter security controls like MFA, multi-factor authentication, or SSO, single sign-on. And that's really where their DNA was formed. From a CyberArk perspective, we were born in privileged access management, which was securing the IT identities within companies as they access the most critical assets. So what we've been able to do with our identity security platform is bring the notion, the concept of privileged controls from IT out to the larger enterprise. And I think that contrasts a little bit with Okta's approach,

which is really around managing identities, ease of use, operational efficiency. And you've seen them talk a little bit about a need to dedicate down to a really security-first mindset. We think that the identity security platform that wins in the market will be one that started with a security-first mindset to begin with. So at what point does your approach become a critical advantage though? Because we've seen sometimes that products that don't have the focus that technology thinks should win, they still end up winning. I think that in this threat environment, when you start to see that every major breach leads towards ultimately stealing an identity credential, and identity is what is really the target of the bad actors out

there, I think you start to see that the organizations want a identity security provider that they can trust to truly secure the true spectrum of identities. I think that's playing out in the market. It's playing out in our results. We grew 27 percent in revenue last year, 36 percent in ARR. And I think that it'll continue to play out as companies look for that provider that they can trust. So at a time where you have a geopolitically fraught landscape, and we'll say a big year for elections, including here in the U.S., you've got Gen AI applications moving into the market. On the one hand, that's good because that means you can start to apply some of those capabilities as a company looking to

address some of those threats. On the other, I would imagine it means the threat profile is constantly changing and in some ways becoming more commoditized. Is that the way to think about it? Yeah, I think you should think about the innovation that's happening amongst the hacker collectives of the bad actors out there is just elevating at an exponential rate. Everybody can hack. The cyber criminals can hack at the level of nation states. And that allows for everybody to be more vulnerable. And it requires us on the defensive side to up our game from an innovation perspective to be able to take care of it. Okay. Matt Cohen, CEO of CyberArk. Thanks for joining us here on set. Thanks. Good to have you. Great to be with both of you. Up next, we are breaking down the stocks, making the biggest moves in overtime.

Plus, the key retail names reporting results tomorrow that every investor needs to be watching. We're going to break those down with J.P. Morgan's top retail analyst ahead. Overtime will be right back. Welcome back. Check out Albemarle. Shares are down over 8% right now in overtime after the miner announced a $1.75 billion depository shares offering. That's after falling nearly 7% in regular trading hours. And we're also going to take another check on AeroVironment. That's off its overtime highs.

No, it's not. It is up even higher. It's still up 16% after a strong quarter, topping estimates on earnings, revenue, and posting strong guidance. As, John, not only the U.S., but our allies continue to rack up more and more demand for drones in, again, a dangerous world. So you're telling me mines are lower and drones are higher. Okay, well, still ahead, your retail rundown. Target and Ross stores among the big retailers reporting tomorrow before and after the market. We got you set up with J.P. Morgan's top retail analyst after this break when Overtime returns. Welcome back to Overtime.

Target headlining a big day for retail earnings tomorrow. It's also going to feature Nordstrom and Ross stores after the bell. Joining us now on what to expect from those is Chris Horvath of J.P. Morgan. Chris, starting with Target, it's been a rough go over the past 12 months. Target's lower than it was 12 months ago. You're neutral on it. What's it going to take for them to overcome this issue of reversion away from goods toward services, maybe get some of that Walmart energy?

Yeah, I think they face a number of issues. One, you still have that reversion away from goods toward services. They sell 20% apparel, 20% a home, 10% electronics, 5% toys. Those are categories that did great during COVID, but have not done well, obviously, recently. We're starting to see the bend. What's working against Target right now is really share loss. And the question is, are they losing share because the consumer is really value focused and shopping at Walmart because they want the best prices on food and then just picking up those goods at Walmart? Or is there something wrong on the merchandising side?

Our big question is, they're going to do great on the margins. They should have some very strong upside to earnings tomorrow, but are they over-earning? And is it just a lack of inventory and they're not getting that consumer? And as the consumer goes in for a great selection of toys around Christmas, they don't see those toys and it's going to hurt their next visit in the spring and around Easter when she's back in the store shopping for those discretionary goods. Okay. Meantime, we've got Ross stores, a discounter. Its chart actually looks similar to TJX, which has been doing quite well, but it's half the market cap. Is there

opportunity more in Ross or in TJX? What are you looking for in this Ross report? Yeah. So with the off-price retailers, they're doing really well. They're covered by my coworker, Matt Boss. You know, those categories are when the consumer is very value-oriented and they're looking for great deals, you get that treasure hunt in the off-price section. That's always been something that's been very strong at Target and at Costco as well. It just seems to be some of that share is also going to the off-price channel away from Target. All right. So when you see Walmart posting 4% same-store sales and you raise this question about merchandising at Target versus grocery and maybe that pulling

some consumers into the Walmarts of the world, how does that set up BJ's and Costco, which we're going to get earnings from later this week, too? Yeah, I mean, Costco is the mother of all share gainers. You know, I've been I've been covered in retail for 25 years and Costco gains share pretty much every day. They just turn the lights on. And what you're seeing is Costco putting up mid single digit comps. They're growing their food grocery business mid single digits. They're growing the general merchandise business, all that stuff that we love to go to Target for. They're growing that mid to highingle digits. They're growing the general merchandise business, all that stuff that we love to go to Target for. They're growing that mid to high single digits, while the trends at Target are actually down. On the other hand, you know, BJ's, I think BJ's suffers from a bit of a

lower income consumer exposure. So they look like they're losing share in grocery. They're not getting that general merchandise rebound that you're seeing at a Costco and at Walmart. So we expect BJ's to guide below on Thursday and have an underweight on the stock because we think that estimates need to come down. And as a result, we expect the valuation to compress. With a focus on margins and margin expansion, I mean, you could argue that perhaps we've seen the end of the price increases that we have seen at retailers. I'm wondering whether

you think that is in fact the case and are costs falling for all of these companies faster than those top line sales numbers are? You know, it's a great question. If you look about the start of the earnings season up until now, you've seen Home Depot beat on margins, gross margin, Lowe's, Walmart, Tractor Supply Company, a number of other companies, you're going to see Target beat on gross margin. Some of it's just the fact that freight costs have come down and you're lapping through some difficult comparisons on that side. But what we're seeing in certain channels is that, particularly in the grocery side, unit volumes remain negative and all the growth remains just lapping through earlier in the year price increases.

We're getting a sense there's a lot more tension between the likes of Walmart and Costco, who are massive in that grocery channel, versus the vendors and really trying to push the vendors to reinvest in price. Maybe they won't take down the list price, but what we're seeing is more promotional support from the vendors, and that's helping to improve the unit trends a little bit. Well, great. Chris Horvath from J.P. Morgan. Now we know what to look for. Appreciate it.

Thank you. Speaking of retail, don't miss an exclusive interview with Target CEO Brian Cornell. That's tomorrow, 7 a.m. on Squawk Box. And, Morgan, there's a lot going on this week data-wise. We're going to get economic optimism, Beige Book, consumer credit, and, of course, the jobs report at the end of the week. Yeah, and you get PAL two days on the hill. You also get U.S. services,

ISM, and of course more earnings, including here on Overtime tomorrow when we get CrowdStrike and others. That's going to do it for us here at Overtime. Fast Money starts now.