Closing Bell - Closing Bell Overtime: Meta Drops on Q3 Results 10/26/22

Episode Date: October 26, 2022

Meta’s stock fell in the after-hours – a panel of market experts give their instant reaction. Plus, shareholder King Lip gives his take on the results and what he will be listening for on the conference call. And, 5-star fund manager Kevin Simpson breaks down the key themes he will be watching when Apple reports tomorrow.

All right, Sarah, thank you very much, and welcome everybody to Overtime. I'm Scott Wapney. You just heard the bells. We are just getting started from Post 9 here at the New York Stock Exchange, and boy, do we have another big hour coming up. Meta reports in a matter of minutes. That's our obvious talk of the tape today, because perhaps no mega-cap company is under more pressure to produce than the former Facebook, given that its stock has gotten creamed and now its current direction has been called into question by a major shareholder. Our experts are standing by for those results. Everything you need to know. Let's bring in Ritholtz Wealth Management CEO Josh Brown and Stephanie Link of Hightower, both CNBC contributors, of course, and both are here with me on set. Stephanie Link does own Meta, so the stakes are high. I can't imagine that the expectations are, though, given what we've heard from Alphabet and given what I said was a terrible stock year to date. Yes, it's a terrible stock year to date.

It's down 61%. It trades at 11.5 times earnings, if you believe the earnings. I got all that. So on the positive side, I think engagement's going to be pretty good. 1.97 billion daily active users, almost 3 billion in monthly active users for the full year. Cost cuts are also going to be very important. We all are expecting 10% cost cuts. If they do more, then I think that would be well received, obviously. What they're spending on reality labs, do they cut that? They're not going to cut that. There's no way. And if they do,

then I think the stock goes much higher. Obviously, digital advertising is the big question. Expectations are put down 5%. So adding it all up, I mean, I think the expectations are low, but there are question marks. I get it. I just think it's overdone. Well, there are a lot of question marks, right, Josh? I mean, they're coming off their first ever revenue decline last quarter. You're looking at the potential of an even steeper drop this time around. Revenue is expected to decline about 5% year on year. It's going to be a real reality check on the state of the industry and where this company really is. I think the number one thing to keep in mind here is that whatever you think is wrong with Facebook, a lot of the problems are fixable. The issue with this stock is it's a governance nightmare.

You've got a boy wonder who deserves a lot of credit for everything he's accomplished up until now, but he's got all the votes. Nobody from the outside can really influence him mechanically. So you have to hope that this drumbeat that he's been hearing for the last six months to do something different. Stop talking about video games that don't actually exist. Stop focusing on projects with zero ROI expectations for 10 years and focus on writing the ship. And then you can indulge the metaverse fantasies and you can do Kung Fu with people in virtual space. So this is a company with amazing fundamentals, horrendous sentiment. And in my experience, you would rather it that way than the other way around. So I think that this can be fixed.

I'm rooting for Stephanie. This is now one of the cheapest stocks in its sector, dirt cheap. It's lost $722 billion in market cap. That's too invidious for perspective. Trades at 11 to 12 times earnings. That gives you the perspective, as Josh is saying, Steph, on how cheap this thing is, certainly relative to the group. It's the cheapest of the thing, right? But I mean, look, when YouTube decelerates seven percentage points sequentially and they come in at negative two percent, if Google is seeing that, Alphabet's seeing that, Facebook's going to see it. It's just to what extent and what is priced into the stock. Do you remember this summer with Netflix or for the last year, do an ad-supported version?

No. Do an ad-supported version. No, we're not doing that. Do it. No, we're not. Okay, we'll do it. Look at the reaction and the share price. Like, it's not rocket science.

You've got to change the story here. It was probably not wise to go all in on the metaverse with no revenue. All right. That's over. Now we have a real business with real revenue. Let's figure out how we can get expenses in line with the current economic situation, which is not great. And I do have a plan with reels. It's just going to take some. It's one tenth the amount of hours that tick tock. It's no it's not even in the same arena. It's not in the same arena, but that's the opportunity. It's not like they don't have anything that they're working on. That's the whole point. Right. And if they make any kind of progress on that front, in addition to get

expense management control, I think that that is actually the positive. I love the point that Josh made. And I want your take on it. The analogy to Netflix, when your stock is at 700, you can say talk to the hand to whatever suggestions come your way. When a Facebook is at 385, you can say, I know the right direction for this company. When you've got a stock at 129 with a stock that's down as much as it has, maybe the market dictates exactly what Josh says needs to happen. And then you pile that on with the elephant in the room is the letter from Gerstner at Altimeter of the shareholder unrest. Right. The frustration of well-known shareholders who speak out publicly. And I have to believe that he is not the only one. He is the one who went public on the behalf of a lot. Yes. I mean, look, I'm in his camp, too, right? I'm

equally as frustrated. But I do think there are things that they can do. The balance sheet is super strong. The margins, they are strong and they can go higher if they cut costs. And their cash flow is enormous. So they do have the flexibility. They can make changes. And I think when they change their name is when everything went south, quite frankly. Right. So I think, look, I'm sure they've heard the rhetoric. Let's see what they deliver here tonight. They went from 25,000 to 85,000 employees. Before you finish your thoughts, Josh, let me just let everybody know. Meta's out. Julia Borson's going through it. She'll be on with us in a second, presumably.

It's a good report because the stock's up 8% right off the bat. Now, she's going through it. She's going to pop on with us and let us know exactly the details that you need to know. Ford is also out. We didn't mention that, but Letter F is out too. And we're watching that and we'll hear from Phil LeBeau on why that stock is down some 1%. Well, we've got to hear from Julie in a second. Josh, finish your thought, please. I was just going to say, I think the most welcome news that you could possibly hear tonight on the call will be some acknowledgement that headcount has gotten out of control. And one of the best points that Gerstner made in his letter, and I told him this, is this idea that it's not as though you're going to do layoffs of engineers and these people aren't going to find work the next day. They might find work that night.

So this is really, I think, momentous that this stock can get some momentum and they can basically say, look, it's a great hiring environment. We're not letting people go for no reason, and they will be fine. Yeah. I mean, it looks to me the very superficial view, obviously, because Julia is the one who covers this company, that it was a revenue beat and an EPS miss. But she's going to give us more of those details. But maybe from a revenue standpoint, it wasn't quite as bad as feared.

Remember, I said they're coming off their first ever revenue decline for a quarter, staring at an even bigger one this time around. Julia, what's the story? What do we see here? Well, we saw an earnings miss here from Meta, the company reporting $1.64 in earnings per share versus estimates of $1.89 in earnings per share. But Meta revenues did beat estimates coming in at $27.71 billion versus $27.38 billion. So to put that in context, analysts were expecting Meta to lose about, to have its revenue declined by about 5.5% from the year-ago quarter. Instead, the revenues declined by about 4% from the year-ago quarter. So not quite as big of a decline as expected. Just going through

some of the key details here. Monthly active users on Facebook increased two percent year over year. Daily active users on Facebook actually increased faster, increased three percent year over year. That's slightly better than expected. Since there's a lot of attention over the price per ad, they say the number of ad impressions increased by 17 percent, while over the price per ad. They say the number of ad impressions increased by 17%, while the average price per ad decreased by 18% year over year. In terms of some of these other key factors here, I'm going to dig in to the commentary here, but they do guide to fourth quarter total revenue to be between $30 and $.5 billion dollars. So analysts had been looking for fourth quarter revenue of 32.3 billion. So that that range is slightly lower than the

consensus of analysts, but within the range. And they say they are assuming foreign currency will be approximately a 7 percent headwind. So they're talking about the budgets and they're going to hold a headcount flat between where they're going to hold headcount flat between where they are right now for headcount through the end of 2023. So, Scott, this is really essential here. We're talking about layoffs. We're talking about hiring. They're saying we will not add any people to the overall headcount between where they are now and the end of 2023. So I'm going to continue to dig in here. There's a lot more, but I want to let you guys digest this a little bit. Yeah, I appreciate that very much. And we'll look forward to hearing from you, Julia,

in a moment. So Stephanie Link, I want your review of this. So revenues declined 4%. User growth is slowing, I mean, and it has been. And headcount's going to remain flat. No talk of reducing headcount when you have, you know, altimeter again just to let everybody refresh their memories here. It was calling for a 20% reduction in headcount. This probably doesn't change the bulls or the bears, to be honest with you, right? Earnings were a disappointment. Revenues were a little bit better. DAUs were a little bit better, up 3%.

RevGuide Lite, though, were to the lower end of that range. And that's when the stock, I mean, we're talking about a 15% or 16% turn in the stock remember right off the bat up eight percent now we're talking down almost eight it's early the expense guide i'm looking it says uh 85 to 87 billion um for the year and that was a little bit better than expected 85 to 89 billion is what um people were kind of expecting so they're lowering that range a little bit we'll have to hear what they have to say on the call but i think that's actually a positive as well so look i you. We'll have to hear what they have to say on the call. But I think that's actually a positive as well. So look, you know, we'll have to hear what they have to say. But I'm shocked that the stock is down as much because it's already been hit so hard. Can we look at can we get a chart of snap up? Oh, this is not snap.

I'm sorry, but this is nowhere near snap. Hold on. I'm about to make a point that I think you're going to high five me on. We have a tendency when we do these earnings, like the next day, it's like, all right, what's next? Take a look at what Snap has done in the last two days. This stock was almost $6. It went back to close to $10 today. There have been stories like this where, okay, the news was bad, but it's too much, and you've had big snapbacks in the following two. Here's Snap, 9.5.

This was almost 6, like a couple of hours ago. So I would not look at a company that reports earnings, quote unquote, disappoints, has already been cut in half and just dismiss it like, all right, that's over for 90 days. There could definitely be a bounce. Hold your thought. We're going to come back to this, because as I said, Ford is out and Philobo has it for us, Bill. Scott, this is a beat on the top and the bottom line for the third quarter, but there's a lot of news in this Ford report. Ford reporting earnings of 30 cents a share, better than the estimate of 27 cents a share, but those estimates had been moving lower

with revenue coming in at $37.2 billion versus the expectation of $36.25 billion. Now the news from Ford in terms of what the company has decided to do, the actions it is taking. A $2.7 billion non-cash charge Ford will be taking because it is winding down its Argo AI autonomous vehicle division. That is a joint venture that it had with Volkswagen. They were plowing big money over the last couple of years into Argo AI with the hope of developing level four autonomous vehicle technology. Ford now says that's not going to happen anytime soon. Instead, it will wind down Argo AI. It will concentrate on autonomous vehicle technology level two and level three. What is that? That's advanced driver assistance technology. In other words, things that help in terms of lane change, hands-free driving,

but it's not complete autonomous driving. Ford essentially saying that ain't happen anytime soon, so we're not going to keep piling money into Argo AI. A couple of notes on Q3. The operating cash flow, 3.8 billion. Free cash flow, $3.6 billion. You're seeing strong pricing on the Ford trucks. That's coming through on the free cash flow. The full-year guidance for adjusted EBIT is now $11.5 billion, and it's also raising its full-year free cash flow about $3 billion higher to $9.5 to $10 billion. So that is what we have from Ford. Again, a beat on the top and the bottom line. But the real news here is that they're throwing in the towel when it comes to developing level four autonomous vehicle technology through Argo AI. Scott, back to you. Phil, before I let you run, I mean, we heard from General Motors just the other day,

which was helped by the delivery of previously unfinished vehicles, right, because of the parts shortages. Ford getting any similar benefit that General Motors has by actually delivering those vehicles now? No, because remember, they warned in September that because of parts shortages, they are not delivering between 40,000 and 45,000 vehicles in the third quarter that they expected to deliver. They plan to deliver those in the fourth quarter. They plan to have the part shortages rectified and then deliver those vehicles. So we would see that benefit when they report their Q4 results. All right. Phil, I appreciate it. Thank you. You let us know if

there's anything else our viewers need to know. That's Phil LeBeau on the case for Ford. Let's bring it back to Meta as we watch those shares continue to react uh quite a reversal at least in this early overtime trade shares were up eight percent right off the bat down about six percent or so make the case for me stephanie link that meta's best days are not behind it i don't think they're behind them i think think that they have size and scale. We talk about this all the time. They have 2 billion daily active users and 3 billion monthly active users. And I think this is a cyclical problem

in terms of digital advertising. It's not a secular problem. When the economy improves and digital advertising improves, so will Facebook. It doesn't necessarily have anything to do with daily or monthly active users, though to the degree they were before and that's why I ask you the question about the best days behind it because if you're

not growing your user base to anywhere near the degree you used to that's why maybe the transition is to the metaverse which they think is their big growth engine to the detriment of the core which is what some would suggest they have Instagram they have reels they're trying to monetize Reels. They're fixing that. That's going to take time. That's going to add to users. And I would just push back a little bit on, OK, even if their daily active users is flat, right, and monthly active users, and it's not. They're both growing a little bit. But what if they are? That's actually going to lead to better ROIs when digital advertising comes back, right? So they have a whole piece of their company, WhatsApp, that they could also work on as well.

And so I think you do still have some possibilities for growth. At the same time, they have opportunities for cutting costs. I don't care if they do the reality labs. If they want to do that, they're going to do that. But there's costs that they have in this company that they can reduce. I'm a little disappointed that they're not reducing headcount. Yes, well, but you said that you didn't expect them to do that. And at least from the initial reports from Julia going through the release, they suggest that they're not.

No, they're not. They're not. I think what I said was if they came in at $5 billion, said we're going to only invest five billion instead of 10 billion. Stock would be a buck fifty right now. Absolutely. I'll tell you what. I mean, I mentioned the you know, the Gershner altimeter note as being the elephant in the room. Perhaps better said is what Roger McNamee said. The real elephant in the room for Facebook is TikTok. And that's what has impacted Instagram to a degree that maybe they didn't expect would happen like it is. What makes you think that that's going to be reversed? By the way, stock now down 8%.

No, it's not going to be reversed. TikTok is a momentum machine. It's really where all the kids are at. You have kids. I'm sure they're on it. So does Josh. I do too. We know that. I can tell you they're on that versus Instagram. Dude, I'm on TikTok more and more. Like TikTok is crossing over. We keep saying the kids. It's way too many users to think it's just kids and brands. Forget that the kids, the brands want to be there. I'm not saying they don't want to be on Instagram, but it's definitely changing the dynamics of the market. So just backpedal for half of a second. Two days ago, when the market rallied, because we were all excited that the Fed is pivoting and it's seasonally the time that you want. Well, I know you and I are

we're set. We actually agree on that. We think that the market's in a choppy range. But two days ago, the stock was up six and a half percent on nothing. So it just tells you that we do get a rally into the end of the year. And if it is tech and I'm not saying it is tech, you know, I'm underweight tech, but it's not going to take much for this stock to actually recover a little bit. And to Josh's point on Snap, Snap did. You know why I think this stock was up in part? Because somebody like Altimeter had the guts to come out and suggest that we need major changes. And by the way, he's got Zuckerberg's ear, at least to some extent.

He said that he had spoken to him. But he knows the board. Maybe the market views somebody like that as capable of initiating the much-needed change that you and others suggest has to happen. But Meta underperformed off the low, and this is important. I know it's a short-term indicator, but when you're looking at stocks that have been demolished and you get a big, broad market rally, even in the NASDAQ, which we did. And you're looking at the average tech stock up 10%. Meta was only up 5% off its low. Meta went into tonight 33% below its 200-day moving average, which is extreme for any of the mega cap tech names. Very few look like that. So I think what that tells you is this is not even a great candidate for an overall market-wide bounce. And we had a little bit of a test case of that this week.

This really has two things working against it. Its own idiosyncratic issues and the broader digital advertising market, which Stephanie alluded to. One of those problems gets better in a market rally or in an environment where the Fed takes its boot off our neck. But one of them really does require the company having the humility to say, this strategy over the last year hasn't been so great. What should we do that Wall Street is suggesting? They may be a quarter away from that. They might be a year away from that. I just don't know.

The other thing is they're suggesting that the Reality Labs operating losses next year are going to be significantly higher. So it tells you that, right? They continue to invest a boatload while suggesting that the losses are going to be even higher. That's not a great equation for investors. They get away with it. The problem is the ROI is so far in the distance, it's not even worth talking about. They released a new set of the VRAR goggles. The price point is $1,500. Who the hell is buying that? How could a product like that possibly cross over? So they're still in the phase where they're trying to appeal to the bleeding edge

of virtual reality, of augmented reality. It's not a market. It's an experiment. I'm not saying they shouldn't do it. Stephanie's right. They should do it at a lower number and just make people feel like they are somewhat accountable to shareholders. Let's get, Steph, the last word to you. Well, I mean, there's not much more to say other than I have to listen to the conference call. I want to hear what they have to say about costs in general. I am actually pleased that they're lowering the expense line. I mean, that's important, but it's not enough, right? And we have to hear what the progress is on reels. I just don't think this company is worth where it is right now.

It's just discounting so much bad news. So, you know, look, I know it's a broken name. I think I'm going to stick with it. It's the only name that I own. I mean, I don't own any of these other ones, and I'm just going to stick with it. And I think based on what they say on the conference call, I'll figure out where I want to go. But, you know, you try to buy low, you try to sell high. I don't know. We'll see what happens. All right. You let us know. We appreciate you, Steph.

That's Stephanie Link sitting here with us at Post 9. Josh is going to come back in a little bit. Let's get to our Twitter question of the day. We want to know what is a better bet ahead of earnings tomorrow? You forgot about that, right? Amazon and Apple. Oh, yeah. Head to at CNBC Overtime on Twitter. Twitter question of the day. We want to know what is a better bet ahead of earnings tomorrow? You forgot about that, right? Amazon and Apple. Oh, yeah. Head to at CNBC Overtime on Twitter. Cast your vote. We'll share the results later on in the hour. We're just getting started, though, here in overtime. Up next, Naveen Saramalik is with us. We get her instant reaction to the earnings tonight. We're live from the New York Stock Exchange. OT is right back. All right, welcome back to Overtime. Show you another check on shares of Meta after those earnings are turning sharply lower.

Quite a reversal. That's near a 19, 20 percent turnaround since the results came out. Joining me now with reaction to this latest round of earnings, Nuveen CIO Sarah Malik. It's good to see you. Welcome back to Overtime. Thanks, Scott. Meta is but a small position for Nuveen. I get it. But what's your initial reaction to what you're witnessing here? I think there's an opportunity cost to a company like Meta. They're investing heavily into an advertising downturn. And on top of that, we have Apple privacy issues, TikTok competition. These challenges aren't going to go away quickly.

And I question what is the return on investment that an investor can get when they're investing $12 billion in the metaverse? And we don't know what we're getting for that. I would rather own something like ServiceNow, a more resilient software business, 99% renewal rate, Department of Health win recently, low M&A risk, all of that. And also vendor consolidation could benefit a company like that. So in tech, there are going to be winners. but I think Meta is going to be challenged going forward. Well, how timely you suggest ServiceNow, a stock that's up 10% in overtime on its own results, which is, you know, interesting just given questions about the cloud and enterprise spending and everything that goes along with that. How do you feel in general about technology as a group, given what you've heard

so far and, you know, carefully ahead of Apple and Amazon tomorrow? Technology is going to be challenged in a long duration environment when interest rates are going up. So that's going to be the issue. If you look at mega cap stocks until recently, most of them, except for Meta, had been outperforming the Nasdaq. So they're not exactly cheap. Apple versus Amazon, challenging, but I'll take Amazon over Apple. Amazon has already been investing heavily. I think over the long term, we will get returns from their logistical investments. Apple is still going through that normalization period post-COVID where they had superior volume growth, and that's going to have to normalize to the low to mid single digit level. That could be painful for investors

as we go through that. But all of these mega cap stocks, especially the ones that have an advertising business, are going to be challenged as there's a cyclical downturn, especially if they continue to keep investing heavily in their businesses. You heartened by the fact that earnings appear to be better than at least was feared, or are you not sold on that narrative, which has certainly been put forth since the beginning of this most recent earnings season. So this earnings season, we're seeing overall beats of about four to five percent. And that's good news. But we saw pretty significant estimate cuts coming into earnings. My concern, though, is 2023 earnings. Consensus still is looking for seven percent earnings growth. I think that's going to be very difficult to achieve. It's unrealistic

when we're going to be experiencing the repercussions of significant rate hikes and likely a recession. So that number coming down, I think, is why the S&P 500 valuations are likely too high where they are. Yeah. You know, all that said, I've kind of described this as a now and later market. You've got, you know, the now, maybe the economy is strong enough now and earnings are good enough now versus what is inevitably going to take place later. Does the now give you at least a little bit more steam in in a rally between now and the end of the year or not? I think it does give us some steam. And also we may get some euphoria when the Fed starts a moderate rate rate cut rate hikes. I don't think we'll see that next week. I'm expecting 75 basis points if they go down to 25 basis point rate hikes in December.

Markets could be positive on that. I think what we're missing, though, is there could be a long tail of moderate rate hikes going forward. The Fed's been pretty clear they want inflation to get down to their target. CPI is still near all time highs. I think inflation is pretty sticky. Good news is I am seeing some real-time data of inflation moderating, but I don't think that really flows through to a 2% or even 3% CPI number for a long time. So the market dealing with continued rate hikes in 2023 could be the story that keeps a lid on the S&P 500. All right, we'll leave it there. Sarah, appreciate the time as always. That's Sarah Malik of Nuveen joining us in overtime. We'll see you

again soon. Up next, we're breaking down Meta's results with another shareholder, what he wants to hear on that all important conference call, which is coming up. Overtime is back after this. All right, we're back in overtime. It's time for a CNBC News Update with Shepard Smith. Hey, Shep. Hey, Scott. From the news on CNBC, here's what's happening. Attorneys for the former President Donald Trump have accepted service of the subpoena from the January 6th committee. That's according to the reporting of NBC News. No comment yet from Mr. Trump. Senator Robert Menendez under federal investigation again. A spokesperson for the New Jersey Democrat confirms the probe, but says he does not know the scope of it.

The U.S. Attorney's Office for the Southern District of New York declining to comment. Robert Menendez faced federal corruption charges back in 2017. That case ended in a mistrial. And a Wisconsin man convicted today of killing six people and hurting dozens more when he plowed his SUV into a Christmas parade last year. The jury deliberated for a little more than three hours, finding Daryl Brooks, who represented himself, guilty of all 70 charges against him. He faces a mandatory life sentence. Tonight, the CEO of Redfin talks mortgages. We go hurricane hunting with sea drones. And a surprising new study about kids and video games on the news right after Jim Cramer. 7 Eastern CNBC. Scotty, back to you.

I appreciate it, Shep. Thank you. That's Shepard Smith. Let's get back to Julia Borson now just off the phone with that company's Meta's outgoing CFO. Julia, what did you hear? That's right. I spoke to Dave Wehner. He's met his outgoing CFO and he was overall optimistic. He said overall, the community growth was good. He stressed that there are more people using Facebook right now than ever have before and that engagement trends are strong. That's something that had been questioned. He did talk about headwinds. He said that currency is a much stronger headwind than anticipated and they are continuing to see macro headwinds. They do recognize they are

in a tough revenue environment, as he put it. He said they're factoring that into how they're figuring out their 2023 budget. I asked him about Reels. There's been a lot of questions about how Meta is going to generate revenue from Reels. And he said they're very pleased with the engagement they're having and success they're seeing, And they're making progress on monetization. He teased ahead, said they'll be talking about that more on the call. And he also said they're making progress on those Apple operating system changes, saying they're benefiting from the fact that they're now lapping a period where that iOS 14.5 had already rolled out. And so they're seeing less of an impact from that Apple operating system change. And the macro headwinds have offset that benefit. So we're going to be hearing more

from Meta on the call, which starts at the top of the hour. Back over to you, Scott. I can't wait for that call. Julia, thank you. That's Julia Borsten joining us once again. Joining us now is Meta shareholder King Lip of Baker Avenue Asset Management. It's good to see you. So what is your overall reaction? It's interesting that the CFO tells Julia that he's optimistic overall. Are you? Hi, Scott. Well, I think the quarter was honestly pretty mixed. I think the core business to us seems pretty strong. Daily impressions were strong. So the core business is still there. But then I do think that the stock is down because certainly the guidance for the for the

next quarter is weak. But also there remains a lot of uncertainty in regards to the metaverse investments. So the CFO also says that currency was stronger than anticipated. I mean, currency has been an issue for many, many months. So it's curious that that would be stronger than anticipated. I'm also curious to your view as a fellow shareholder to the altimeter letter and whether you agree with Brad Gerstner that this company needs to get more fit, it needs to get more fit, it needs to get more focused, and that's the only way that it is going to turn things around, a stock that's down more than 60 and now 70 percent year to date? Yeah. So on your first point about the stronger dollar, that's a macro headwind that we think should eventually start to dissipate. The reason why

we say that is because in our our view, that the inflationary concerns in terms of peak inflation may already be behind us. If that's the case, if rates start to moderate, you may start to see the dollar start to weaken. In fact, it's weakened already the last couple of days. So if that's the case, if the trend continues, those macro headwinds will start to dissipate. From Brad Gerstner's letter to Meta, I actually think there's a lot of really good points there. The first point being that the core business is still very strong, as shown by the quarter today. But investing in something that doesn't appear to have a lot of ROI, at least not immediately, is a losing proposition.

He highlighted free cash flow. From what we can gather from the report, free cash flow came down quite a bit. The fact that he highlighted this and the fact that free cash flow did go down quite a bit suggests that's why the shares are down as much as it is today. Do you think that Meta will take any of Gerstner's advice? Well, I actually think they're starting to do that already. They notice that from the from the headlines is that they're reducing head counts in some areas already.

So head count was one of the highlights of the letters. I think they employ too many people. So they're starting to make some headway there, perhaps not as much as Gerstner may hope for. But, you know, it seems that 2023 is still a year where they're going to be heavily invested into the metaverse business. So you're happy holding the stock? Well, you know, the way we see it is near term, you're still going to see a lot of headwinds. The reason why is because it's a stock where people are going to be selling it for tax loss harvesting this year, most likely than not. However, for longer term shareholders, we see that the stock still has a lot of value.

That stock is still very cheap. It trades at two to three standard deviations below historical averages. So we think this is a stock for 2023 than it is for 2022. All right. We'll leave it there. King, thank you. That's King Lip joining us from Baker Avenue Asset Management. Coming up, we're tracking some other big stock movers in overtime. Christina Partsenevelos is standing by with all of that for us. Christina. Scott, what tech problems? One software firm saw subscriptions grow and is extremely bullish on the near term. While a virtual health care provider also said that they have an upbeat outlook because the health care market is becoming more digital.

I'll have those names that are moving definitely in the OT right after this break. All right, we're tracking the biggest movers in overtime. Christina Partsenevel is back with that. Christina. Well, shares of Teladoc right now are surging up 8%, but coming off that initial bit right at 4 p.m. when the earnings came out. But the virtual care provider posted a Q3 revenue beat with a loss of 45 cents a share, which came in a little bit less than the street was expecting. The stock moving on the Q4 improved earnings, revenue and guidance. The CEO says the market is evolving to better integrate virtual and digital health care solutions. And sticking with health care, sort of.

Align Technology makes 3D digital scanners and Invisalign teeth aligners. There's a health care reference. Shares are getting crushed right now, down 18%. If you look at it on a week-to-date basis, still even lower than the $211 that we saw just earlier on Monday. The company, revenue fell short, massive miss on earnings per share. It came in at $1.36 versus the $2.16 the street wanted.

Management blaming weaker consumer confidence and, of course, like many other companies, unfavorable foreign exchange rates. And the last one that we have for you, and we're just going to, oh, that's it. I went through three companies already. So, Scott, I was excited to do more. Sorry. Yeah.

Time flies when you're having fun. We appreciate that, Christina. There is ServiceNow, if I can say it. Oh, yeah, there's ServiceNow. Oh, yeah, look at this. Sorry, I was just getting ahead of myself. ServiceNow, there you go, up almost 12%. The software firm seeing its shares jump after it beat on earnings and revenue and raised its guidance after subscriptions increased.

And there's a bullish commentary. Management was way more upbeat than other companies, saying they're, quote, maintaining investments and growth hires as the opportunities in front of them remain enormous. And now I can end. All right. We appreciate it. She's great. Oh, thanks, Josh. I can hear his voice. Big fan. Christina, thanks as always. Are you a fan of ServiceNow? You know what? In this environment to, you know, talk about their sub-revenue growth? Look, this is one of these companies where they really didn't do anything wrong. They were just a victim of share prices in general for SaaS stocks just going too high. They really have no way of controlling that. This is a company that said, OK, stock price is falling. Stock price for all of our peers are falling.

We're kind of in line. Salesforce looks terrible. The biggest of the SaaS names. So it continued to execute. I saw an analyst commenting on this just now talking about accounts that are $10 million plus are growing at 60%. When you have a SaaS business and your biggest customers are growing their footprint with you, you've got a winner. The only question is, when will investors sustainably want to come back to the theme of software as a service and pay what is still,

believe it or not, an elevated multiple, even with the stock being cut in half. It did not violate its pre-COVID lows like Teladoc, which we're also going to talk to. It hasn't been that bad. So I think this is a name that you should keep on your screen. I own too many other SaaS names, but I really like this company. It also just shows you that if you are executing in this environment, even as a tech stock, you're going to get rewarded. And you're just going to get punished, outsized if you miss. Yeah. So this name, I mean, this name has been thoroughly washed out. But again, it's 33, it went into tonight's numbers, 33 percent higher than where it was January of 2020.

So it's not as though they gave up all of the benefit of the acceleration in digital that took place during the pandemic. Shareholders were left with something. You want to comment on Teladoc? Well, that brings me to a company where it's the opposite. This name is 90%, 90, nine zero percent off its highs. This is one of the strangest situations that you can point to to illustrate how difficult it's been investing in the post-pandemic world. This is a stock that essentially is now worth less than where it was before the pandemic started, despite the fact that they have 10x or more their user base.

It really defies any kind of logic that you would apply in advance. What we know in hindsight is the multiple became ridiculous. The fundamentals didn't back it up. They ended up losing more money because more customers, more losses because of that business model. And they made a gigantic acquisition. They've had to write down $9 billion in goodwill, which is an unheard of figure for a small cap stock. But a lot of that's in the rear view now. So given what we've now gotten from Meta and Microsoft and Alphabet, you are in both Amazon and Apple. What are your expectations

heading into tomorrow? I don't think that you're going to get a great reaction to either because there's no incentive for either company to be aggressive about forward guidance. Why would they? Look at what's going on in this environment. They're going to get a pass. They're going to get a pass. So if I'm Tim Cook, basically what I want to do is come out and affirm what they've already said, which is that services are slowing somewhat. Perfectly normal. Nobody will fall out of their chair. I'm not quite sure what the right approach is here on Amazon. This is another company that's probably hired too many people. We know that there's a freeze, not just in fulfillment and shipping, but there's a freeze at

AWS, which I think may have caught some people off guard this week. But that stock is up nicely off its low. And I think they can just come back with what the guidance currently is. If you affirm that shareholders should be OK. All right. We're going to see what happens. I can't wait for that. Thanks so much for spending an extended amount of time with us today. That's Josh Brown joining us here coming up. We're counting down to those Apple earnings are breaking tomorrow, of course, in overtime. We've got the setup when we come back. We're back. We're gearing up for Apple earnings tomorrow here in overtime. Let's get you set up with five star money manager Kevin Simpson of Capital Wealth Planning, who is back with us. And it's good to see you. I mean, you have been playing this stock most recently a

couple of different times. So what are your expectations here? Well, Scott, we can't have meteoric expectations looking at the big techs and how they've disappointed so far. I think we have to look at Apple and have a moderate expectation. But if anybody's going to beat, I think they have a really good chance to do it. Here's my thesis. I've been watching the earnings estimates and they've been trending up a little bit as we're heading into tomorrow. And that's typically a good sign that analysts aren't running away from the stock. Right now, FactSet has Apple at $1.27 on $88.7 billion, which would translate into 2% growth on earnings and 6% growth on sales, which isn't amazing, but it's still growth. In fact, for the fourth quarter, they've got $2.11

on $126.6 billion, which would be a penny ahead on earnings and about a 2% growth on sales. That's also the holiday spending season. Apple doesn't give guidance anymore, Scott, so we'll have to glean what we can from tomorrow's report and then from the analyst call. And we're also learning pretty clearly, aren't we, that the beat doesn't matter. It's all about the guide, which we learned pretty squarely yesterday and over time with Microsoft and Alphabet and what they had to say and what we're hearing again from Meta today. Therein lies the danger, no? Yeah, I think Apple will rely a little bit less on ad revenue. Now, FX is a big deal. You know, what's the deal with supply chain? How is the strong dollar affecting that? We're going to be listening for iPhone sales. What is the projection there,

if any, that they can give us? Apple is a very unique stock. And Steve Weiss brought up a good point on half today. And it's one of the reasons we love the stock. Unlike most hardware manufacturers, the cost of the actual phone, much of it is absorbed by the carrier. So Verizon, AT&T, T-Mobile, they take a lot of risk as we head into a recession. So there's a lot to be said for Apple as we move forward. We like the dividend growth. We love the share buyback. We love the cash on cash. We've got tempered expectations for tomorrow.

We're in the process of rebuilding the position. So if it sells off, we'll use that as an opportunity to add. We're not in any rush at this point. I think we're by no means out of the woods as far as a bottom here. But we love the company long term. We're going to continue to be buyers on pullbacks. And don't be surprised if it gives us a little beat tomorrow. So we have something to celebrate.

All right. We're going to see what happens in overtime. Kev, thank you. That's Kevin Simpson, Capital Wealth Planning, joining us up next. Santoli is with me for his last word. Going to get back to Christina Partsenevelis now on ServiceNow. Christina. Scott, take another look at the stock.

Remember, I almost forgot to talk about it before, the stock climbing on a big earnings beat for the cloud player. Earlier, I said that was partly because it raised its full-year guidance, and that was incorrect. The company actually lowered its guidance both for Q4 and the full year. But stock up over 10% right now. I guess I got too excited and was ready to be done. Everyone makes mistakes, right? I apologize. That's all right. I think their subscription revenue look was was pretty good. All in all, obviously, investors seem to be liking

what they're seeing now. It's up 10 percent. Christina, thank you. Christina Parts and Nevela. So the results of our Twitter question now, we ask what is a better bet ahead of earnings tomorrow? Is it Amazon or Apple? The majority of you saying Apple. Big shock. We'll see what happens tomorrow. But there it is, 63-37. Santoli's here for his last word. You want to talk the metaverse?

You want to talk reality? Well, isn't it all the same thing? I mean, reality labs, that is. No, look, it's kind of amazing. I mean, can you ask the market two days in a row to shrug one of these off? I think that's one of the questions. Meta, with this decline after hours, is in danger of falling out of the top 20 in the S&P 500 in terms of index weight. That tells you plenty in terms of where it really sits in the way of sway over the market. Right. It's down 60 percent. So that may be the good news that you can be insulated from it. It's a fascinating strategic story, essentially intentionally decimating

current free cash flow, no matter what the street tells you, because you think perhaps that the core business is ultimately a wasting asset. I mean, that's the only inference you can really make. I mean, just look at the turn in the stock. It is stunning when you see you say, OK, earnings are out up 8 percent. And then here you go down, down 13 and a half. What would you say that it suggests, if anything, about the market itself from here? Market didn't completely fall out of bed. No, not at all. Tech actually was pretty decent, given Microsoft and Alphabet before a later day turn

in the NAS. It says that we didn't come into this reporting period with people really expecting to be wowed on the upside. Valuations have come down to sort of meet muted expectations. Beyond that, you can't say bad stuff's priced in. I think a macro driven decline in overall tech earnings still not going to be very well received. Meta is a bit of a one off. It's essentially spending its way out of its profitability on purpose because it thinks that it has strategic need to do that. So I think you can set that one aside and say, look, if treasury yields are contained and the dollar's rolling over, as we saw today, we have a window where you can perform okay.

Okay. Let's talk about the window, whether it's closing on mega caps or if it still is going to stay open for a while. And I guess we'll have a good grip on that tomorrow. Sure. When it really, you know, it really means something. I mean, Amazon and Apple in the same overtime session is going to be big. It will. Again, I think that they matter a lot for those companies. It matters a lot for that category of stock. It doesn't necessarily mean the market follows, because today it showed you you had a couple trillion dollars in market cap go down seven to nine percent in Alphabet and Microsoft. And the overall market was like flattish. So it can happen. And I think that's been the story of the entire year, that it's been the average stock over the old favorites.

Lower dollar helping the overall story. Big help. Looks like it's broken down a little bit. Yeah. As we inch towards a Fed meeting, which you can't believe is next week. One week from today. Yeah. The decision.

All right. We'll see you tomorrow. I'll look forward to that. I'll look forward to seeing all of you as well. Apple and Amazon. Fast monies now.