Closing Bell - Closing Bell Overtime: Rising Cost of Housing, Klarna CEO on IPO Timeline & Ebay Earnings 2/27/24

Episode Date: February 27, 2024

From the open to the close, “Closing Bell” and “Closing Bell: Overtime” have you covered. From what’s driving market moves to how investors are reacting, Scott Wapner, Jon Fortt, Morgan Brennan and Michael Santoli guide listeners through each trading session and bring to you some of the biggest names in business.

Well, the Dow is falling for a second straight day, but the other major indices are higher, especially the Russell. Look at little Russell up about one and a third percent. Investors, meanwhile, await key inflation data later this week. That's a score caught on Wall Street, but winners stay late. Welcome to Closing Bell Overtime. I'm John Fort with Morgan Brennan. Energy, the biggest drag on the market, while utilities and communication services were the best performing sectors. Now get ready for another wave of earnings. eBay, Urban Outfitters, Splunk, Klaviyo, First Solar, Devon Energy, Rocket Lab, and Boston Beer, just to name a few.

Instant analysis of all the results coming up. Plus, CEO of Klarna on the state of consumer spending, his company's new AI assistant, and that IPO might be in the offing. But first, let's get to today's action with our first guest. Joining us now is Drew Pettit, City Director of U.S. Equity Strategy. Great to have you here on set. So, in the context of today's okay moves, we're kind of at some highs you're saying it would take a full correction in the S&P I believe like a 10% pullback to 4,500 to make you feel like doing

anything more aggressive than buying occasional pullbacks yeah look I just don't think you chase at this point look a lot of news is getting priced a lot of good news is getting priced in we are actually trading up, even though reporting season really hasn't been great. We really haven't had a lot of broad beats and broad raises. So we have a lot of people just kind of adjusting estimates on the fringes and so on. So kind of through that, you know, enjoy the ride in equities right now. Just wait for a better time if you want to be more aggressive. Now, you say there are some themes for 2024 that you're looking for in equities, AI, digital leisure, experiential commerce, fintech among them. Which of these themes is the least stretched valuation wise already?

Probably experiential commerce, to be honest with you, because I know we've had some better retail numbers. People feel better about the consumer in the U.S. But there really isn't a lot of expectations built in there. It's not this big growthy trade. Again, it's more of a value trade. So I think that one, and also infrastructure and fossil fuels. We do think we're underinvested there. There's some tailwinds.

But again, it's the value, it's the cyclical side of the trade. We think there's a lot more leverage there in those plays as the market rally kind of broadens out. Interesting. I just want to go back to what you had to say about the market and stocks in general trading up. Why do you think that's been the case, even though earnings maybe hasn't been that fabulous? And given the fact that you have a market that's pricing in just under 80 basis points of easing now for 2024, which is half of what was expected to start the year? Yeah, so it's the beats. So I understand we don't really have the raises to go with it like we've seen in some other quarters. But with rates a little bit higher, the cure-all for now has been to really pull forward some cash flows.

Maybe pull forward is not really the way to explain this properly, but it's just improving the near-term cash flows. So if we're thinking about just the old DCF math that we all did in school, you know, time value and money is a pain when rates go up, except if your cash flows go up too. Okay. So when you talk about some of these cyclical trades, what does it say about where we are in this economic cycle as well? And I asked that on a day where we've had some pretty sloppy numbers, durable goods not looking so great. I realized maybe some noise from Boeing, weak Boeing orders there. But in general, it's been a little bit of a mixed picture, at least for January, maybe in the midst of weather. Yeah. So here's where the micro comes in. So I get there's macro headwinds, but we're thinking about the S&P

500 companies, like the big cyclicals of the world, the market leaders. We are talking a lot about AI and how it helps businesses and all these advancements and how it's really going to help you manage. But there's other tech improvements and other just general business improvements that are making cyclicals less cyclical. So even if we have a bit of a slowdown from here, I just don't think we appreciate the story and how much better corporate America has gotten through really good up cycles and some slowdowns and softness too. So back to your experiential commerce comment. We've got eBay coming out, which is not, I guess, experiential, at least not. It hasn't

been having a good experience as a stock anyway. Where do you draw the lines in that? How much of that crosses into what we see Walmart trying to do, right, with what they're doing in digital Invisio? Yeah, so actually it's funny. Something like e-commerce does fall into our experiential commerce. Maybe it's kind of the lack of experience when I just want to buy something now rather than, you know, wade through a store, chase my kids around, all that fun stuff. But honestly, I think experiential commerce outside of e-commerce, taking share and continuing to take share and then buying experiences over things. This is where the cruises play in. So we highlight something like CCL on our recommended list. I think if we do have consumer softness, people are going to narrow into what they like to do and how they like to shop. So when we're thinking about playing the consumer, when we're playing that side of cyclicals, I think you play the structural trends there.

Okay. That sort of speaks to what we saw with Norwegian Cruise Lines today, reporting earnings and just a huge double-digit gain in that stock, to your point. Because I am looking at your list, you do name names. What are some of the other, I guess, stocks that look compelling right now at these levels? Yeah. So it's funny, I get beat up on this one a little bit because when we're thinking about AI, we do like the idea of playing it via Meta, Amazon, Google, but not really the rest of the big seven, which might be the more obvious place. I think these are the types of businesses that have other lines that have so much operating leverage. So they can kind of fund the product improvements over time. They're

spitting out so much cash. And really, when you think about the growth expectations that are priced in there, those valuations aren't as unreasonable as people want to make them think. I've got to mention eBay, First Solar and Agilent are all out and we are going through them. So Morgan, since I'm going through Agilent, I'm going to toss it back to you here. It does look like a beat on the top line, but to say more than that, I got to look closer. Okay, so we'll let you dig through those results right now. We'll keep going with this. I'm going to circle back on Uber because we did just see that enter the Dow transports.

Amazon just entered the Dow industrials. How does it speak to where this economy is going? And to pick up on what you just said earlier, the role that tech is playing across so many industries, across so many sectors, AI or not? Yeah, I think it's honestly, it's operating leverage. I think where the economy more broadly and where investors are going is what companies can actually turn sales into a cashflow that I can really discount. You know, we're not trading these stocks on sales multiples anymore. So like Uber, great business, good platform, got a really big sales and following. Hell, it even became a verb at this point. And now it's actually turning that into EBITDA and EPS that's growing faster in the top line.

Okay. What would you be staying away from right now? What do you see as the greatest risks? So honestly, our favorite trade idea on that side is anything but defensives. So a lot of those companies really don't have a structural trend behind them to make those businesses much better. So staples becomes an area that's a bit of a risk. Like if you're under margin pressure as a consumer goods, like non-cyclical goods company, what are you going to do? Yeah, there's some stuff on the margin here and there you can do to kind of help out, but

you're just, you're along for the ride depending on inflation differentials. Okay. Well, we've got those eBay earnings out. Courtney Reagan has the results. Court. Hi there, Morgan. Yeah. So the quarter looking here pretty strong for eBay. The company reporting earnings per share adjusted of $1.07. That's better than what the street was looking for at $1.03 adjusted here. Also, guidance looks pretty good here for the first quarter. Guidance giving a range of $1.19 to $1.23. The street was looking for $1.13 adjusted, so that's above first quarter revenue guidance. About what the street was expecting,

they're giving a range of $2.5 billion to $2.54 billion. The street looking for $2.53 billion. So somewhat bracketing here. The company also is saying they're increasing their dividend by two cents and doing a $2 billion buyback. That gross merchandise volume that we talk about also up 2 percent to 18.6 billion dollars. You can see here the stock is reacting up more than 3 percent here in the early going for eBay's fourth quarter results. Back over to you, Morgan and John. All right. Courtney Reagan, thank you. We've got Splunk earnings out as well. Christina Parts Nevelis has the numbers. Hi, Christina. Splunk is a cybersecurity firm as well as Data Observability, and they posted revenues of $1.486 billion, which is a beat for Q4. We don't want to be EPS.

We're not going to compare. For the full-year revenue guidance that came in, $4.21 billion, which was slightly less than the street was anticipating, at $4.48. I'd like to reiterate they are not providing an outlook or having earnings call. Why? Because Cisco plans to buy them for $28 billion. That deal was started in place in September. It still needs to go through regulatory hurdles, which we should find out by March 13th, according to the EU. That was recently set a deadline. So again, Splunk beat for Q4 revenues. Guidance or full year revenue guidance was a

little bit light, but stock not really reacting because there's not much in this report. All right, Christina, thanks. Agilent earnings are out. That stock is reacting with the Revenue guidance was a little bit light, but stock not really reacting because there's not much in this report. All right, Christina, thanks. Agilent earnings are out. That stock is reacting with the shares higher by about 6% in overtime. Interesting story here, though. So let me first give you the fiscal Q1 numbers. Revenue came in at $1.66 billion versus $1.588 expected. That's a beat.

EPS also a beat at $1.29 versus $1.22 adjusted expected. Now Q2 revenue and EPS both a miss, but in a way that was expected because Agilent had been saying first half of the year is going to be rough. 20% of their business is in China, and that has been a drag. They said the second half is going to be better, and a better second half is reflected in their full-year guide now, and I think that's why the stock is high.

But first, Q2 revenue guide is to $1.56 to $1.59 billion range. The street was looking for $1.617, so that is a miss. Also, the Q2 EPS guide is a range of $1.17 to $1.20 a share. The street was expected $1.27 adjusted, so that's a miss. Also, the Q2 EPS guide is a range of $1.17 to $1.20 a share. The street was expected $1.27 adjusted, so that's a miss. But on the full year revenue guide, they're saying to expect $6.71 to $6.81 billion of revenue versus $6.74 expected, and the EPS guide is to $5.49 and a half cents at the middle of the range versus 5.49 adjusted expected. So the strong full year revenue guide, the street was already expecting a weaker first half from Agilent, but they're still confident in the second half. And that's got the stock higher by a little more than 5%. All right. Drew, want to get your action? I mean, it's sort of like cafeteria style. Pick your name,

if you will. But I guess if I just start with eBay, just the fact that they're increasing the dividend, they have a $2 billion buyback in the works. We saw Zoom, by the way, initiate a buyback last night. There's been a lot of that type of activity, and arguably more than we've seen in the past amid higher interest rates as it's been cheaper for companies to do that to reward shareholders. Your thoughts? Look, just thinking about not so much the stock specifically here, but thinking about the e-commerce names and these internet driven business models. Look, there's a lot of high growth expectations. And when the companies can hit them, they're getting rewarded. This is actually a space right now that has tons of dispersion after earnings. So good example,

when you can beat top line, when you can beat bottom line and give some people a reason to raise their estimates for the full year, shares have been rewarded. On the flip side, when you see some of these companies like Wayfair on our list, Mea Culpa here, that you did not see the forward raise, that stock got punished on earnings. How are you thinking about international exposure? And I'll say China exposure specifically now because Agilent had it. That affected, it seems, their fiscal second quarter guide,

but their full year is looking strong. It reminds me of Medtronic, you know, another player in the health medical equipment space. So Agilent is more test and measurement. They've got China exposure. It seems like they've been able to work through some of that because they also had a stronger report. How should investors weigh that kind of exposure? That was a problem maybe in 2023. Some companies seem to be able to get beyond it so far yeah it creates easy compares that that's the kicker so you started pricing in and talking about this a lot last year like we did a lot of china work like six months ago so when investors

come back to that it's you know let's just dust off the old playbook here so they have a a sense of how to handle this um i think the lower compares are helping some of these companies because there is actually a lot of pressure for earnings outside. I think the lower compares are helping some of these companies because there is actually a lot of pressure for earnings outside of, you know, the mag seven to really improve in the back half of the year. So lap the easy compares easy, you know, easier path to growth in the back half of the year. You know, you probably price a lot of that in right now. Okay. We're keeping court busy. Urban Outfitters earnings are out and Courtney Reagan has those for us too. Hi, here you go, Morgan. So for Urban

Outfitters for the holiday quarter, earnings per share coming in at 69 cents. That's below the 74 cents analysts had expected. Revenue is about in line here at $1.49 billion. When we like to look at sort of the different breakouts of the brands, because there are several to see what really drove the quarter. Comparable sales increased 4.9 percent overall. So they did see high single digit positive growth in the digital channel and low single digit, but positive growth in the stores themselves. And then really the strongest name, again, free people, those comparable sales up by 18.9 percent, a 12 percent increase in comp sales at Anthropologie, a decrease again in Urban Outfitters comparable sales at 13.6 percent. I also do think it's interesting that they're giving us some information about Newly,

which is their rental business. They're seeing a 56 percent increase in average in their subscribers versus the same quarter last year. And while they don't give us guidance, the CEO quote does say that there's a positive customer response to early spring offerings, which bodes well for continued sales growth in the first quarter. You can see, though, investors are a little disappointed. Even still, that quote, not quite enough to get them excited about what's to come here with shares down of Urban Outfitters 11% in the after hours. Morgan and John, back over to you. All right.

Courtney Reagan, thank you. First Solar earnings are out. Pippa Stevens has those for us. Pippa. Hey, Morgan. It is a mixed quarter here for First Solar. EPS coming in at $3.25 per share. That was 12 cents ahead of analyst estimates.

Although revenue at $1.16 billion, short of the $1.32 billion that was expected, the company issued full-year EPS and revenue guidance that was largely in line with expectations and also said that it produced and shipped a record volume of modules during the latest year, and their backlog now extends into 2027, though shares up 4%. Morgan? All right. Pippa Stevens, thank you. And Drew, our thanks to you for being here on set and going through earnings with us. Thanks for having me. Good to see you. All right. Well, it's time now to bring senior markets commentator Mike Santoli in with a look at the strong dollar and the appetite for U.S. stocks. Mike? Yeah, Morgan, you know, over the

one or two year basis, the U.S. dollar index was kind of range bound. But longer term, you can just see how strong the U.S. currency is relative to its history here. You barely see that pullback. So what's going on here? Obviously, better U.S. growth versus the rest of the world. An abundance of relatively safe yield to capture in U.S. bonds. And the Fed has not cut rates just yet, even though there's that expectation. So all that feeding in here. And it has also contributed to this idea or benefited from this idea that the rest of the world wants to own

pieces of corporate America. So if you take a look over a very long period of time since World War Two, the foreign ownership of corporate equities and mutual funds in equities, and you see it's just taking this another leg higher to close to 25 percent foreign ownership. Part of this is the rest of the world getting richer and having more money to put into the U.S. But clearly there's demand for it because of the profitability of our corporate sector. And by the way, the weaker yen, for example, has both fueled the rise in the Nikkei. But also, if you are a yen based investor and you bought the S&P 500 a year ago, you're up 40 percent. So therefore, foreign investors feel like they have a little bit of a kicker because of that strong dollar. Yeah, big tech, the hottest stocks, they are

American. Mike Santoli, thank you. Up next, the top analyst reacts to eBay's earnings and what she wants to hear from executives on the call at the top of the hour. Plus, Klarna's CEO joins us exclusively to discuss a new report that the buy now, pay later giant is exploring an IPO here in the U.S. That and so much more. Overtime is back in two. Welcome back to Overtime. Devin, energy earnings are out. Pippa Stevens has numbers. Pippa? Hey, John. Devin reporting EPS of $1.41 per share, excluding items during the fourth quarter. That was in line with analyst estimates. Revenue at $4.15 billion. That was ahead of the $3.87 billion expected. Production for the quarter averaged 662,000 barrels of oil equivalent per day. Now, for 2024, they see that number a little

bit lower, forecasting 650,000 barrels of oil equivalent per day. Part of that is thanks to some production outages in January due to severe weather. Devin also said it repurchased 5.2 million shares during the fourth quarter, those shares down about 1 percent here. Morgan? All right. Pippa Stevens, thank you. Let's get another check on eBay. Those shares are popping after reporting a beat on earnings and revenue. It is also hiking its dividend share buyback there too. Joining us now is Suturita Kodali from Forrester Research. Suturita, it's great to have you on. Want to get your response to what we are seeing from eBay and how it speaks to both the company and also the broader e-commerce landscape.

Right. So eBay has been growing pretty strongly through the past year, and certainly these numbers are just a reflection of that holiday positivity. We also saw similar results with Amazon. So I think that it points to the fact that the shopper is purchasing at marketplaces. They are purchasing a variety of different categories. And e-commerce has been a pretty strong bread beneficiary of the shopper's worries. We're seeing a divergence between what people think and what they're actually buying. And they're certainly buying in e-commerce, even though they may have a little bit of disappointment about the state of the economy overall. Which is really fascinating, too, because we keep talking about, and certainly we've seen it evidenced to a certain extent, even in earnings season, that consumers are much more willing to spend more money on services than goods.

But then you see that there is some resilience in terms of the e-commerce picture. Perhaps it speaks to that as well. I just wonder what the very fast, very aggressive emerging of some of these Chinese inexpensive e-tailers and e-commerce players like Shein, like Taimou mean for the Ebays and Amazons of the world? Well, it's absolutely competition. And that is something that all of these players in the United States need to grapple with. They are growing incredibly rapidly. They're taking share. When you look at overall, marketplaces are growing, e-commerce is growing, but eBay's numbers have actually been flat with respect to market share in the United States. So this absolutely points to the fact that

these Chinese sellers are taking share. They are capturing a significant part of consumer interest and they're very savvy in social media and growing their audiences and in attracting new consumers as well. So that's absolutely something to watch for. But at the same time, eBay and Amazon can take advantage of some of the sellers on these sites like Timu and Shein. So it'll be interesting to see how some of those top sellers actually manifest themselves in some of these American marketplaces. So, Charita, how much hope is there that eBay can really get some momentum again and be a grower? Because, you know, Walmart's been going strong. If you look back at eBay's chart, it's about even with where it was six years ago in early 2018. And meanwhile, things like Omnichannel, like Unified Checkout, and Buy Now, Pay Later, through the likes of Klarna

and Affirm are really getting popular. And eBay doesn't have all of those pieces. Is that OK? Well, right. Remember, they divested PayPal. And, you know, I mean, they've had a history of lots of interesting acquisitions. They've been in the ticketing space. They own Skype at one point. So there is a lot of their fits and starts with eBay. And their more recent strategy seems to be to really double down in e-commerce, in resale, everything from the goods that people know them for, like electronics, to a lot of the hot goods in the secondary market, whether it is streetwear or watches. So it'll be interesting to see if they are able to share any data on some of those sectors. They really leaned into a lot of local sellers and small regional sellers like American

small businesses during the pandemic. And that was really an attempt to attract the shopper that wants to support those local businesses. So there are some interesting places where they're absolutely investing. There's opportunity there for sure, but that market share number needs to go up. They're not outpacing the growth of e-commerce overall. OK, so, Charita, thanks for joining us with an instant analysis of those eBay results and everything else we're seeing across that ecosystem. We have more earnings to bring you. Rocket Lab results are out as well. And it looks like loss per share of 10 cents per share, which is in line with estimates. Revenue is coming in a bit light, $59.9 million. In terms of the first

quarter of 2024 outlook, revenue of $92 to $98 million also looks like that's a bit lighter than the $98.6 million street estimates right now. Space systems revenue for the current quarter expected to be between $60 and $65 services, between 32 and 33 million with gap gross margins between 24 and 26 percent. Peter Beck, the CEO and founder of Rocket Lab, saying in this report that they had another strong year pointing to the return to flight for the Electron rocket, that revenue grew 16 percent year on year while they expanded their gap and non-gap gross margins. Just taking a look, there was also a simultaneous release for Rocket Lab in which it has unveiled a family of advanced spacecraft. So basically, this is part of their space systems business. They're introducing

spacecraft buses. So these are key to making satellites, for example, and consolidating the custom designs that they've made for different customers and missions over the year. And so this has been four years apparently in development. You can take a look at shares of Rocket Lab right now. They're down about 7 percent as investors digest the results and this announcement as well. I would also just shift gears to another name that is well known on overtime in the space industry. That's Virgin Galactic. That stock is much smaller these days. But if you look at Virgin Galactic, the loss there was 26 cents per share,

better than estimates. Revenues missed slightly, but updates on their next Delta-class spaceship and the factory that is rolling out to develop it. Also, it looks like spaceflight in Q2. So shares of that name are lower as well. All right. Well, much closer to Earth and the things that grow out of it.

Beyond meat, earnings are out. Kate Rogers has those numbers. Boy, that stock is way up, Kate. John, that stock is absolutely flying. It was up by as much as 40 percent here on its Q4 earnings. The company reporting a gap loss of two dollars and 40 cents. We are not comparing that number. Revenue is coming in better than expected for the quarter. Seventy three point seven million versus estimates of sixty six point seven million. The company giving some guidance

here. And I believe that's why the stock is up by about 35 percent. It sees gross margin to be in the mid to high teens range rather for the full year. Twenty twenty four. That is better than that metric has been in some time. It also is giving guidance here. Full year revenues of between three hundred fifteen to three hundred and forty five million. That is somewhere within the range of estimates of three hundred and forty four million. Remember, the company announced last week it was retooling the ingredients for its beyond retail burger that's sold in supermarkets. We spoke with CEO Ethan Brown.

He was very optimistic on this new product and what it might mean for the category. So we will see what they say on the earnings call. Back over to you. All right. Big move there. Thanks, Kate Rogers. Boston Beer earnings are out. Bertha Coombs has those numbers.

Bertha. Boston Beer missing on both the top and the bottom line. Morgan reporting a loss of $1.49 per share. The street had been looking for a loss of 25 cents. Revenues $394 million. The street had been looking for nearly $414 million. The company did say that shipments were down 12.12 percent. That's three and a half percent more year over year, while gross margins did go up by 60 basis points to 37.6 percent thanks to price increases. They continue to have problems with their seltzer contract where they're not producing as much, not selling as much. And for the full year, the company is also giving guidance of seven to 11 cents a share for earnings per share.

The street had been looking for above eleven dollars per share. As you can see, stock there down about five point four percent. Back over to you. All right. Bertha Coombs, thank you. Klarna unveiling a new AI assistant that it says can do the job of 700 full time human agents. Up next, the company's CEO on whether that could lead to layoffs. Welcome back to Overtime. Buy now, pay later firm Klarna today unveiling their AI assistant was developed in partnership with OpenAI.

Since launching globally last month, the AI assistant has handled two-thirds of Klarna's customer service chats, is doing the equivalent work of hundreds of customer service agents. Joining us now is Klarna's CEO, Sebastian Simitkowski. Sebastian, good to see you. Before we get to AI, got to talk about, you know, a possible IPO and some board drama. We're looking at you as being one of the big potential, you know, maybe even $20 billion IPOs as soon as this year. Is everything stable with the board now? Sequoia tried to oust your longtime advisor, Michael Moritz, but he's staying. And now you got a new board member from Sequoia?

That's correct. Everything stable now? Everything's great. I mean, I'm really happy to have Andrew Reid coming in from Sequoia, fantastic partner, and I'm also very happy to have Michael, who, you know, has always seen to the long-term opportunity of Klana, whether we were going through the build-up of Germany Germany, UK or US, and always stay committed to the long-term view and the interest of all shareholders. So super happy about the development in that case. Think you'll IPO this year? We'll see. I hope. I mean, it's not impossible. We'll see a little bit. We still have a few steps and work ahead of ourselves, but we're very, you know, we're keen on becoming a public company. There's reports today that it could be as soon as Q3. In terms of an IPO, what would you want

to see not only for the company specifically, but also for market conditions to feel good about doing that? Wow, that's a great question. I don't know. I mean, for the company, it's been very clear to me, at least. It's always been like, I think the Google IPO to me is like the dream IPO in the sense that you have this amazing company who had created a fantastic product of great value to its customers, was profitable, but at the same time had huge growth opportunity ahead of ourselves, as we now know, looking back. And I think that's very similar to where we are. I mean, we have 0.6% of the total payments market or something like that. We're growing very rapidly and we have a fantastic product for consumers and merchants alike. So I think, and finally now also profitable in the U.S. and U.S. being our largest market by revenue. So like all of those boxes are ticked,

at least from my perspective. Okay. So let's talk about the news of the day then. You're AI assistant. You've developed this in partnership with OpenAI. You put out some interesting stats, very compelling stats about this AI assistant. 2.3 million conversations, two-thirds of Klarna's customer service chats, and that it's doing the equivalent work of 700 full-time agents. Walk me through this and what it means for productivity for the company and for profitability for the company. Sure. I mean, first and foremost, it's important to stress here, this is not a co-pilot.

This is actually, it's having on itself the conversations and helping customers resolve their errands. It matches humans on customer satisfaction. It is actually slightly more accurate in resolving those errands, which means that we have a 25% reduction in repeat inquiries. And it's able to solve people's errands much faster,

which obviously customers are very happy with. So in normal conversation now, instead of taking 11 minutes to solve an error, it takes only two minutes with the AI. So those things are quite impressive in my perspective. And as much as we see a lot about AI and there's a lot of hype right now, I seldom feel that I see something that has had this practical implication. It's not only a prototype. It's not a demo. It's actually live. It's covering 23 markets. It's conversations happening in 35 languages.

So we're very proud about the effects. And obviously, it will have a massive impact. I think it's about a $40 million profit improvement for the company this year. Sebastian, we talk about you as a buy now, pay later company, but a big portion of your business is on unified checkout. It's on streamlining the ability for merchants to be able to understand exactly what customers want and which customers might be attractive to them. How do you see that playing out as we've just had eBay results come out?

It is up after hours, but how is the retail landscape changing as data takes a more prominent role? Well, I think it is. I think that this exactly what you're pointing out is very critical. I mean, from our perspective, first of all, I'm very happy that eBay is actually a partner of ours in some markets. So hopefully we can expand that partnership. We're very proud to work with you. But I think with that said, look, from my perspective, when we set the direction and vision of Klana already in 15, it was that at the future, you will wake up in the morning and your financial system will tell you, hey, I've analyzed your purchases, I've analyzed your mortgages. I could save you time. I can save you money. I can make you feel more in control of your finances. It's really what the bank was supposed to be for you. But it really hasn't been or the industry hasn't been able to provide our value for their customers and maybe more seen to their own profits than anything else.

So I think that that's the future. And the more data customers have decided to share with us as a company, the better, obviously, our recommendations and the service we can provide to them is. So this is why it's been very critical to find ways to allow customers to share data so that the services we provide become more meaningful and value add to them. So data is very much at the core of that. Okay. Sebastian Simiakowski, thanks for joining us. CEO of Klarna. Thanks for having me.

Did you see that Beyond Meats now up more than 50% in overtime? Wow. It's beyond. It's also a small cap, so perhaps not surprising to see it having the move it's having in that sense.

Up next, Mike Santoli looks at the rally and some popular retail investor stocks and whether they're starting to look a bit, well, speaking of, frothy. Welcome back to Overtime. Mike Santoli is back with a look at what retail investors have been

up to. Mike? Yeah, John. Well, they've been getting busy. You can see it in a lot of pockets of the market. Some of the more aggressive plays are really flying. Biotech up 5% today. Small cap biotech up more than that. Crowded shorts have been flying. Call options among retail traders also seeing some heavy volume. So this is a return to the high animal spirits days a little bit of a few years ago. And I just picked out a few of the more established plays. This is one of the bigger Bitcoin ETFs on a one month basis. Elf Beauty and Wingstop. These are, you know, substantial companies, but really massive momentum moves up close to 30 percent in a month. The S&P is up like 5 percent over that period. So it shows you people are willing to get aggressive

here. However, if you look at the retail favorites, those kinds of stocks that have been the play things, the preferred vehicles of a lot of small traders and look at it over time, it's not necessarily back anywhere close to those highs in the early part of 2021 where the meme stocks were really all the rage. So this is a really big move. This is relative to the S&P, a 20 percent outperformance in several weeks. But it still does not get to that level of what we saw back then. So if you think that, you know, that there's potential to get there, maybe there's more fun to be had here. I also think it's just kind of a bull market acting like a bull market. Well, yeah, Mike, I mean, I got to ask about Beyond Meat just because it's now up 58 percent in overtime. Is this an I don't know to what this doesn't seem like a name that's particularly institutionally owned, but it might be shorted.

I mean, a 58 percent move in overtime is is significant, right? Is that along the lines? The hunt is on for exactly those types of stocks, which is to say they had a massive boom based on kind of flimsy fundamentals. They had a huge bust, a long period where people forgot about them. They probably still have a decent amount of short interest. And you get the hair trigger buying on on the lamest, the slimmest excuse, let's say. And that's what happens here. And so you're seeing a lot of this throughout the market. All right. Mike Santoli, thank you. We're going to keep our eye on that one. We have a news alert on applied materials. Meantime, Christina Parts Nevelis has the details. Christina. Yeah, this is a semiconductor

equipment maker and they are under U.S. criminal investigation for potentially evading export restrictions on China's top chipmaker, SMIC. So today we're also learning from Applied Materials 10Q that was posted today that it also received a subpoena from not only the SEC, but also the U.S. Attorney's Office for the District of Massachusetts, which that office is specifically requesting information related to certain federal award applications. These previous subpoenas from 2021, 2023 as well, were news about maybe a month ago. So I reached out to Applied Materials and they told me that they were cooperating with the government, but they wouldn't be commenting.

So the newest thing now is that they also received one in February. Guys? All right. Christina, thank you. Up next, find out how the CEO of cloud-based education software maker PowerSchool is trying to personalize AI for individual students. We'll be right back. Welcome back to Overtime. Cloud software provider PowerSchool closed about 4% lower after Q4 revenue fell, shy of expectations,

but the guide for revenue and EPS came in stronger. I spoke with CEO Hardeep Gulati about the artificial intelligence initiatives within PowerSchool that he believes are going to fuel growth from here. We have great respect for Khan Academy and what they're doing with Khanmigo, and we are partnered actually with Microsoft for OpenAI as well. But one of the things we see is that when you look at the general AI, you know, generative AI tools, as well as supplemental, they don't have the context of what's happening in the classroom. They don't know what the homework is. They don't know what the grade level for the child is as to exactly where they're struggling in the classroom. A lot of times these kids don't even want to go to a supplemental because they're already overwhelmed with the homework. So the way we are approaching

this is actually within the context of the actual district for providing generative I to everyone, make it secure, make it personalized, make it within the context of the district, as well as make it easy because it's embedded in the tools they're already using daily. So now we can even personalize the homework for a child. PowerSchool went public right around the same time as Duolingo in mid-2021. So fun fact, Apple owned it from 2001 to 2006, then Pearson, which sold it to Vista Equity. Vista still has a major stake, and Vista CEO Robert Smith has told us here on Overtime what a game changer he thinks AI is, Morgan. All right. Another one for us to watch. We have a news alert on Starbucks. Kate Rogers has the details. Kate. Morgan, Starbucks and the union have agreed to begin discussions on a foundational

framework to achieve collective bargaining agreements for stores and partners. The two adding in a statement, quote, as a sign of good faith, Starbucks has agreed to provide workers represented by Workers United with credit card tipping and benefits announced by the company in May of 2022. While there is plenty of work ahead, coming together to develop this framework is a significant step forward and a clear demonstration of a shared commitment to working collaboratively and with mutual respect. Reminder for viewers, it's been over two years since this began. Nearly 400 stores have organized and there is not yet a contract in place between those two parties. Guys, back over to you. 400 stores. Wow.

Kate Rogers, thank you. Plunging housing affordability is forcing roughly 50 percent of homebuyers to purchase private mortgage insurance because they have to put down less than 20 percent in a down payment. Up next, the CEO of Mortgage Insurer Enact tells us how that's impacting his business and the housing market. Welcome back to Overtime. New data out on housing today. Home prices hitting an all-time high in December, according to Case-Shiller, up 6.1% year-over-year in 20 major metro markets. That's despite the rising cost of mortgage financing.

And with housing affordability near an all-time low, approximately 40% to 50% of Americans who take out mortgages need to purchase mortgage insurance. That occurs when you put down less than 20% in the down payment when purchasing a home. Joining us now, Rohit Gupta. He is the CEO of Enact, one of the leading mortgage insurance companies with a front-row seat to what's happening in real time in the housing market. It's great to have you on the show. And that's exactly where I want to start with you, because, yes, mortgage rates are so much higher

than they were two years ago. It's stymied sales and yet we're at record highs in major markets across the country for home prices. How would you assess the housing market and where this goes from here in 2024? Sure, Morgan. Thank you for having me. I would say the view you captured in terms of affordability is what we are seeing in the market. Affordability was at an all-time high, I would say, in the middle of 2020 when interest rates were low and also home prices had not increased. But since that time, we have actually seen mortgage rates more than double right now, close to 7% for a 30-year fixed mortgage. And at the same time, we saw significant home price appreciation in 2020 and 2021. So housing affordability index, which is something National Association of Realtor uses, is actually down almost to half the level where it used to be in mid-middle of

2020. But on the other hand, you see what you saw this morning, both from Case-Shiller and Federal Housing Finance Agency in terms of home price increases of 5% to 6%, because we have a low supply, low inventory of single-family homes in the market. It's sitting at about three months and our normal is four to five months. And at the same time, we actually have suppressed demand. So while the demand is low because of affordability taking a hit, we actually are seeing a balance between that supply and demand that is giving home price increase of five to six percent annually. All right. As we as we await rate cuts from the Fed at some point, perhaps later this year, we know first time homebuyers have really been pushed out of

this market because of the affordability dynamics here. 60 percent of first time homebuyers that use mortgages don't pull the full 20 percent down. What do you see in terms of that piece of the market? What is it going to take to unlock it? Yeah, Morgan, you're absolutely right. And as a leading private mortgage insurance company, that's our mission. We help homeowners get into homes when they do not have 20% down payment. And we have been doing that for the last 40 years. And as you said, right, when we were kicking off this segment, that 40 to 50% of consumers who use a mortgage to buy a home during good times or during difficult times actually do not bring 20% down payment. So it's a pretty big segment of the market. We basically see first-time homebuyers still being very interested in buying

homes. And think about first-time homebuyers. While they think of mortgage rates, the most important thing that they focus on is their monthly payment. So they're very interested in buying a home, but they're waiting for that rate drop. So just to give you a magnitude, a rough estimate, if mortgage rates were to drop by a point right now, it would improve affordability by 10%. To get the same benefit from home price reduction or wage increase, we would need to... I'm sorry to interrupt you. We are pushing up against the end of the show and we got to wrap it there,

but we'll have you back to continue this conversation. Rohit Gupta. All right. Thank you. Up next, we're going to run through some of the overtime movers that should be on your radar as we count down to the earnings calls from eBay and several others. We'll be right back. Welcome back. Take a look at some overtime movers.

Urban Outfitters, it's down about 6% right now. That stock missing on both earnings and revenue. And look at TKO Group Holdings, also under pressure. This is the newly combined UFC and WWE. For the fourth quarter, both WWE and UFC missed revenue estimates. Guidance for TKO, that's coming in light for the full year as well. and UFC missed revenue estimates guidance for TKO. That's coming in light for the full year as well. Those shares are down about 9%. We have to take one last look at the short squeeze of the hour.

Beyond Meat now up about 84, 85%. It was up, it doubled in overtime a little bit early. About 38% of these shares held short. Yeah, it's a wild move, but it's also a small cap. We should note that. So spring-loaded, I guess, for this with a short squeeze. The Dow finished lower. The S&P and Nasdaq higher. That's going to do it for us here at Overtime. Fast money starts now.