Closing Bell - Closing Bell Overtime: Snap Earnings, Market "Reality Check" 4/21/22

Episode Date: April 21, 2022

Snap Inc. shares are volatile in after-hours trade after the company missed earnings expectations. Stephanie Link from Hightower gives her instant reaction and analysis to the report. Plus, Avery Sheffield from VantagePoint says that high-flying growth names are in for a "reality check." She takes a closer look at market valuations. And, is it time to get cautious? Chris Toomey from Morgan Stanley Private Wealth Management outlines his strategy.

Welcome to Overtime. I'm Scott Wapner. You just heard the bells. We right here at Post 9 are just getting started. Snap earnings breaking any moment. We'll have those numbers, the analysis, and of course the instant stock reaction. It's a key report given it's the first social media company to give its earnings this quarter. We're also going to speak today exclusively with Chris Toomey of Morgan Stanley Private Wealth on the state of the markets. We do begin, though, with our talk of the tape. And it is just that the state of stocks after the Netflix blow up, the jump in interest rates, whether Snap adds to that pain or bring some much needed relief, especially in growth and tech. Let's ask Hightower's Stephanie Link, who's right here at Post 9. I mean, this is a Powell rollover today.

Is that what happened late in the session? Yes. And it's also interest rates going up really, really far and fast, right? So we have the Fed, we have interest rates creeping higher, we have inflation, they're way behind. And at the same time, we have pretty good earnings. So it's very tricky right now, Scott. It's a very much of a stock picker's market. If you look at earnings, the economy, the market sensitive companies, the reopen names, the airlines. I mean, that's happening in real time and services is 70 percent of U.S. consumption. So that's a really big piece. And they're coming through for now. Right. Well, but then we also have what earnings are coming in at, and they are beating expectations. Only 20% have reported so far, but they're beating by 8.5%, 9%, and 75% of the companies are beating.

So there's this cross-current here, and that's why I say it's a stock picker's market. Find companies that have pricing power. As long as the 10-year is around 3% or looks like it's going in that direction, stocks have a problem or no? I think they do. I think certain ones do. I mean, you're seeing it in technology, right? You're seeing it in the high. You're seeing it everywhere today. You are seeing it everywhere today. And that's what's unusual about today.

Energy and commodities have actually really rolled over. And that's despite the fact that Dow had great numbers with great pricing power. Freeport-McMoran, Nucor. I mean, you had some really good numbers in the commodity space, and yet they couldn't hold the gains. But also what can't hold the gains is something like a Tesla. It was up as much as 10 percent today. It's given back some as well. It's all about the May meeting, I guess, right? You know, Powell, Sarah was speaking with the Fed chair in that roundtable today. And I want you to listen to what he said about the direction of interest rates from the conversation that Sarah

had today. Let's listen to Jay Powell. I also think there's something in the idea of front-end loading whatever accommodation one thinks is appropriate. So that points in the direction of 50 basis points being on the table. Certainly, we make these decisions at the meeting, and we'll make them meeting by meeting, but I would say that 50 basis points will be on the table for the May meeting. Didn't we know that? So why the market have an upset, right? I mean, they're trying to tell you whether, and it's not just

Jay Powell, the Fed chair, who's telling you. Yes. And then we still get upset when we hear it. What's up with that? I know. Well, I just think it's just the beginning, right? And the fact that all of a sudden they're coming to this understanding that, oh my gosh, we really are behind the curve. We have to do stuff and we have to do a lot more of it. And it's not just 50 in May. Now it's like, are they going to go 75 in June? I think the economy can handle it because- 75? If they go 75, you think the economy can handle it? 50 plus 75 in total, it's not that much in terms of where rates are going. So to me, the economy can handle it because, what did I just say, right? Services. The economy, there's a lot of momentum in the economy. I'm not saying that we're not going to slow down, Scott.

We are. Yeah, but we've got two different questions, though, okay? You may be very right that the economy can handle 75. You can't tell me the market's going to handle 75? Well, the market's not handling it right now, right? We're actually selling off ahead of time, and so maybe we see a relief rally. I don't know. There's a lot of unknowns.

What I'm hoping for is that they do raise 50. Maybe they go 50 again in June, maybe at 75. But then they assess what's happening in the economy. By the way, I do not think if they do those two moves, that changes inflation in any way, shape or form. And the one thing I've learned so far in earnings season, the supply chains are not getting easier. They're not getting fixed. And that's what's going to help on the inflation front. So I mentioned we're waiting on Snap earnings to cross the tape. And you'll see the stock, which can be volatile when they do report their earnings. Remember, it was up 58% last quarter when they reported their first profitable quarter.

It's a smaller market cap relative to a Netflix, obviously, although Netflix is now closer to what Snap is after the rollover. Is more riding, though, on these numbers, given what happened with Netflix and now real questions about the growth trade? Yes, because the stock trades at a crazy multiple. And this market doesn't want a crazy multiple, right, at this point. I mean, it's trading at 11 times price to sales. I mean, if you look at it, it's trading at 25 times EBITDA. I mean, Facebook Meta is trading at nine times EBITDA. 58 times forward PE. That's right. So the market doesn't want that. And if higher rates are not going to help those kinds of stocks. So I think they're going to have a pretty good number. I think their engagement base is much faster growing than something like a Facebook or a Meta, right? They've got the Gen Zs and they've got the millennials.

So I think the number might be pretty good. But they've got TikTok competition. They have European exposure. And we know Europe is slowing down pretty quickly. So there's going to be these puts and takes. The thing that they have done over the last year, invested in tools and invested in content. And so I think it will be a good number. It's whether or not the market rewards that. If it's good enough, right? Because now the bar has been raised, given some

of the Netflix fall and some of the other stocks that we've been talking about. I think we're about less than five minutes away, and we're going to get you those numbers as soon as they cross. You'll get the instant analysis, and of course, you'll see the stock move right here in overtime, in real time. Let's bring in Alex Kantrowicz. He's the big technology founder and a CNBC contributor. It's good to have you back. What are your expectations here for a stock that can be quite volatile and, as we learned last time, can certainly move a lot to the upside if they surprise? Yeah, first of all, great to be back. I think that snap as a volatile stock is spot on. You know, they crashed right after meta reported earnings and then they jumped when they beat their expectations last quarter. I think they could be in for a

similar situation this time. And, you know, the position Snap-In is in is really weird because they're actually getting all this revenue coming to the platform from people that used to be Facebook advertisers but want an alternative after Apple turned the screws on privacy. But then again, they're dealing with the same thing. So it's a very unpredictable stock right now, which the benefit and the pain is coming from the same place. And that's why I think we're seeing the vacillations in the stock price. I mean, you get to set the stage, if you will, for the sector, right, with Snap.

It's not like Snap has to follow Facebook this time and see a possible issue and then have to really wow everybody because of what Facebook delivered last time. You get the first report as a social stock. Does that take a little bit of the market pressure off this company or is it all just the same? Well, I think last quarter is really what took a lot of the pressure off. You know, last quarter we started to really start to see. Some of the impact that the Apple IOS changes of- had brought to Facebook and Snapchat. We've been through that already. You

know the market actually. After sending Snapchat stock up fifty eight percent like you mentioned day of earnings. I corrected a little bit and brought it down. You know a good chunk afterwards so it's sort of now on an even keel it

starts to understand. How to deal with these changes that Apple has brought to the market. And so I think that actually this quarter, I expect less volatility. And I think we're going to see a much more even reaction from Wall Street. I mean, there are haves and have nots when it comes to both streaming, as we've learned, and social. And we're going to get another good read on that in terms of the kinds of stocks.

And maybe you have to be much, much more selective than you had to be 6 to 12 months ago in those names. I think you absolutely have to. But by the way, on Snap, 38 sell-side analysts have buys on this thing. Only 7 holds. So it is loved. It is very much loved. Just like Amazon is loved. Just like Netflix was loved.

31 buys on Netflix. So there is a lot of support for these stocks. And the reality is you are going to have to be more stock specific. I think streaming, I think it's dead for a long time. I think across the board, I would not have exposure. I think it's just too volatile, too much competition. And the fixes in place are going to take a very long time. So even though Netflix is very attractive to me at 19 times forward, what are you getting for it? You're getting 10% revenue growth and some unknowns in terms of when they're going to be able

to fix some of their problems. A great company long-term, but I'm not a buyer, not here and across the board. Maybe it's not so much related to Netflix, Alex, a streaming in general issue. Maybe it's just one name that was wildly overvalued and now it has to come crashing back to earth. Absolutely. You know, the market looked at Netflix as a technology company,

like we spoke about right before earnings. And that was a completely terrible mistake because they put unreasonable expectations on the stock and it never was going to be a technology company. Unlike YouTube, it pays for every single piece of content that goes on this platform and yet investors are looking at it as if it's going to be able to make money appear out of thin air where the case is that it's a hits driven business it's going to be paying for content and it was absolutely the wrong way to look at it even through the pandemic and now it's going to be crushing down and you know when is it ever going to get back to where it was it's trading, you know, when is it ever going to get back to where it was? It's trading at 2018 levels right now. Is it ever going to get back to where it was during the pandemic?

Maybe, but it's going to take a long, long time to get there. Yeah, it's humbling, as you said, to see that stock come down, right? You tweeted last night about Ackman selling for a few hundred million dollar minimum loss. You know, very contrite with me today. 100% ready to admit when you got it wrong and 100% ready to admit when you got it wrong and 100% ready to admit when I got it wrong quickly. And he's not waiting around anymore, right? The old Ackman would have doubled down and told me all of the reasons why the market was getting it wrong. The new Ackman learned his lessons and said, you know what? I'm out. I don't have time

to wait for them to try and fix a story that you suggest is broken. It's a humbling business, right? And being a portfolio manager really is hard, very, very hard. And if things change, you do have to adjust and you do have to look for changes in the story. So hold your thought for one second. Forgive me for interrupting you, Julia Borsten with Snap. Yes, that's right. Snap earnings are out and the company's daily active users surpassed expectations, growing by 13 million rather than the 11 million that analysts expected, ending the quarter with a total of 332 million.

But earnings and revenue both missing expectations. An adjusted loss of two cents per share compared to the one cent per share gain analysts expected. Revenue of 1.06 billion, a hair less than the $1.07 billion estimated. The company explaining that they faced headwinds around those platform policy changes, those Apple limits to ad targeting, as well as an ad pullback on supply chain shortages, labor disruptions, rising inflation and geopolitical unrest, saying that revenue growth initially in the quarter exceeded expectations at 44 percent through February 23rd, but that after Russia invaded Ukraine, a large number of

advertisers paused their campaigns for a period of time. Now, the company's second quarter profitability guidance of break-even to $50 million looks very light. The company guiding to revenue growth of 20% to 25%. That compares to the 28% that analysts had been expecting. The company is saying in its prepared remarks that so far in the second quarter, their growth rate is 30%, which is just below the approximately 32% growth they saw in the first quarter following the invasion of Ukraine. But that 20% to 25 percent is clearly being cautious. We see Snap shares are down about 8 percent on this news. Guys, back over to you. Julie, I appreciate that. You'll jump back on when you have more. That's Julia Borsten there

with the breaking numbers. Now for the instant analysis. AK, what do you see here? Well, Evan Spiegel was on the air here on this network last quarter talking about the fact that Snap had better than expected rebounds from direct response advertisers, the advertisers that want to know immediately whether their dollars are leading to sales, you know, despite what was going on with Apple. I found that kind of curious, and I'll tell you why. Speaking with advertisers, I knew that advertisers were moving money from Facebook to places like Snapchat and TikTok. And so inside Snap headquarters, it probably was like, oh, our product is working much better than we thought. knew that advertisers were moving money from Facebook to places like Snapchat and TikTok. And so inside Snap headquarters, it probably was like, oh, our product is working much better than we thought, despite these changes. Advertisers are smart. They measure quickly, they adjust quickly, and it left Snap vulnerable to a place where they would say, okay, we're going to move

back to Facebook, or this isn't working exactly how we want it to, or our diversification efforts might go elsewhere. It might go back to television or websites or newsletters. And so Snap is like, all right, well, kind of left in the dark. So the fact that they grew users and took a revenue hit, like Julia mentioned, talking about that it's coming from platform headwinds makes a lot of sense to me. You know, you live with these platform changes, you die with these platform changes when you're an app. And just like it hit Facebook, it can hit Snap. And that looks to be exactly what happened here this quarter. This has all the feeling, though, of a turnaround stock. I mean, I hear you on the reason why the stock is down for issues that sound to me geopolitical, supply

change, supply chain that are not long lasting. DAUs, as we said, I mean, that's the money metric, right? That's what matters most of all. Three hundred thirty two million. That was ahead of expectations. And the stock is, you know, it's still down, but it's down by less than three percent. And maybe you're going to get more information coming out from the company. But that has to be the money metric that really matters most in the big picture, no? Look, if you're going to ask me, I would say the DAUs matter, but they only matter if you can make money off of them. And so I think Snap should be celebrated. I mean, look at all the other social media companies right now. Facebook seems to be stagnant in terms of growth in North America. Twitter, we know their story, right? They're in the middle of a hostile takeover event. Snapchat's

growing. You know, good on them. But they're going to have to find a way to circumvent the situation with Apple. I mean, it's clear right now in this quarter that it's hitting them. And so, you know, if you have more users, but you can monetize them in a less effective rate, you know, you're sort of at square one. So, yes, you need growth in order to be able to make more money, but you have to be able to make more money in order to grow the bottom line. And, you know, Snapchat's going to have to figure that out. Forgive me for interrupting you. How do we know if they are better managing the issues with the iOS through Apple, as you suggest?

I mean, you've got to speak to the advertisers, people spending the money. That's what I try to do and try to figure out if they're getting the return on the investment that they want. But someone pointed out to me today, I was speaking to people all day about Snapchat today, that, you know, their engineers aren't as good as Facebook engineers. Facebook's going to be able to pay for higher quality engineers. So probably has a better chance of figuring this out than Snap does, at least more quickly. I think all the platforms will come out with their own solution. Look, I don't think Snap's dead. I don't think this is like a sign that its stock should go down 25%, like we saw with a company like Facebook when the iOS impacts hit them right away.

But I really don't think we should discount what this could do to a company like Snap. It's an advertising business. The ads need to work. They need to be able to show return on investment to advertisers. And Apple's making that particularly difficult right now. Yeah. Higher profitable. I mean, higher valuation, barely profitable tech, make it hard to own.

Tough. I mean, across the whole space. Very, very tough. But that's why I think Facebook is more attractive, because the valuation has come down quite substantially. Which you own? I do. I own it. And it's been tough.

It's not been a good investment, certainly. This one I don't think is a disaster, though. To your point, DAUs, that's what it's all about. Well, you've got to monetize them, right? Revenue per user is the real money metric. They also said they were doing ahead of plan until the war, until Russia, right? So we have to see how that plays out. And by the way, they are totally going to fix, eventually they're going to fix Apple.

So will Facebook. So will many of these companies. They'll have new tools and new technologies. It's just going to take time. Yeah. And sometimes, speaking of taking time, sometimes it takes the market time and investors' time to actually figure out what the most important metrics are that they reported. Alex Kantrowicz, I appreciate it, as always. Thank you for being here. Stephanie Link,

it's so good to see you in person at Post 9. We'll see you back here soon. Let's get to our Twitter question of the day. We're asking you now, what is the best social stock to own right now? Is it Meta, the former Facebook? Is it Snap, which just reported? Twitter or other? You can head to at CNBC Overtime. Please cast your vote. We'll bring you those results at the end of our show today. Up next, Evaluation Reckoning. Our next guest says high-flying growth names are in for a big-time reality check. Why she thinks a regime change is underway in this market. And later, $12 billion worth of advice. Morgan Stanley's top ranked wealth manager, Chris Toomey, is here making the case for caution on stocks right now.

It's interesting, though, he has a take on one defensive area that you don't want. And he'll tell you what that is just in a bit in overtime. All right, we're back in the OT as Netflix's plunge showed the market has little patience for an earnings miss, especially when it comes to higher growth stocks that have been awarded premium valuations. Our next guest calls it a reality check. Avery Sheffield, co-founder, CIO and senior portfolio manager of Vantage Rock. Back at Postnight, it's good to see you again. Really a pleasure to be here. What is the reality check that you've got to really, really deliver or you're going to get your valuation really, really slammed? Absolutely. I mean, the market's in a very different place than it was even several months ago. And we're seeing it with Netflix, of course, being a key example. Snapchat today had a little bit better

results, so they aren't getting hit as much. But you really have to deliver if you have a high valuation. What does it mean for the overall growth trade? On a day where we had this big reversal, you've got rates, I said the 10-year, approaching 3% again. That make it especially difficult for that trade to work? I think the growth trade is going to be difficult for a long time, just given where rates are at, given inflation, but also, very importantly, the inflecting fundamentals of many of the very most successful growth stocks over the past 10 years. Slow growth in the economy. Don't I want to own tech in that environment? I mean,

I'm sure you want to own some. Or you just say blanket forget tech growth, period. Well, I mean, I would say you want to own really stable businesses at a very reasonable price because valuation really matters. And so where we've been looking are companies that have that stability, that have those sticky characteristics of many tech companies, maybe though are slower growth, but are priced for no growth at all. Like that's where we see real opportunity for asymmetry.

The market in general today, how does it feel to you? You said things have changed a lot in just a couple of months, right? You were last here, I don't know, a month ago. Are things that different today than they were then? I think the trends that we've seen are continuing, maybe accelerating a bit at the moment. I mean, you never know when we're going to see a bear market rally and people get excited about something. But I think that just this continual increase in focus on fundamentals is really going to matter.

And if you look at even what's happened today in the market, you know, one of the top performing stocks today outside of the airlines was AT&T. No one's talking about that. The stock was up 4%. It's up like 9% year to date with the S&P down. It's one of the most boring stocks in the world, but actually they have strong results and their competition is less. And that's where I think you can, the valuation is very low. That's the kind of place I think you can find opportunity. What about, you know, other so-called defensive trades, you know, things with yield, utility staples, because there's been a suggestion, too, that those have run so much that they're out of gas.

I would agree that any stock that's turning at a higher valuation is vulnerable. So as long as the fundamentals continue, I mean, we've seen that there's still enthusiasm out there, right, that's leading to these higher valuations. As long as the fundamentals continue to be strong, you could see those valuations continue to move up. But I think there's real vulnerability in any stock that's trading at a high valuation if it's not able to deliver. So the asymmetry, I think, has moved more to the downside for those types of names. What about cyclical stocks? And then there could be a number of different sectors that we talk about, industrials or, you know, semis have shown some signs of cracking. You know, Kramer had a really interesting tweet about lamb research, and that stock was down

today. Sort of the market ignoring that for most of the day, not so much anymore. Is that a warning sign we need to pay attention to? I think, I mean, the cyclical semis in particular tend to still be quite expensive. I think that's why they're more vulnerable and people are worried about the downside. Where I think there's potential for an upside, and I spoke about this last time, is in sectors that are already being priced for a significant recession, right? So you're seeing that in a lot of the consumer discretionary names. Those are areas that are interesting. You know, potentially some of the traditional auto manufacturers might end up surprising to the upside

because they're already being priced for significant recession. Wow. Because I just wonder, you know, people are wondering about, you know, autos topping, housing topping, you know, the consumer. Yes. Getting tapped out because of inflation. Yes. Well, so autos at the low end, I mean, used cars are clearly under pressure, as we saw, you know, with Carvana. And we've seen with the other used car dealers or even the traditional dealerships. We're still seeing a lot of strength in the new car side. It was certainly exemplified by Tesla's very strong results. And so companies, car companies that are at very low valuations might continue to surprise to the upside because of the supply, demand and balance.

Similarly, in the housing market, you could potentially see home builders do well. Now, you know, you had TriPoint report this morning, very solid results, stock down because people are concerned about rising rates, what's going to happen. But you'll get to a certain point where the valuations of these stocks are so low and the supply, demand and balance is still so significantly in their favor. There might be an upside opportunity there. Stick with me just a second before I say goodbye to you, because I have a news alert that I want to get to, and I think I want your reaction to it. We do have a news alert, guys, that we want to get to.

It's regarding Gap. Those shares are tumbling in OT. The company cutting first quarter guidance. It now expects net sales growth declines in the low to mid-teens year over year, and that is compared to previous guidance of mid-to-high single-digit year-over-year declines in the low to mid-teens year over year. And that is compared to previous guidance of mid to high single digit year over year declines. Gap also announcing old Navy president and CEO Nancy Green is leaving her post. So you see the stock in the OT is down nearly 6 percent. Why I wanted your reaction to was exactly what we're just talking about. So I think you have

to be selective. Gap in particular, and I have to hear their commentary, but they are experiencing massive out-of-stocks. So that company in particular I've been cautious on because they seem to have real supply chain issues. There are other companies that might be what's driving the results. Certainly, look, the consumer is weaker, but we are seeing other consumer discretionary names that are not promotional at all, that seem to be in stock, and I think that's where we could see potential to the upside. Fortuitous for us to have you here as that news crosses. You see the stock is now down double what it was when we started that conversation. It's down nearly 10 percent on that guidance change for Gap.

Avery Sheffield, it's good to see you. Thank you for being here. My pleasure. All right. We'll see you again soon. Up next, the biggest hypocrisy of our time. Those words today from billionaire investor Carl Icahn, who he is calling out in his big battle now against McDonald's, plus big money and big worries. A man with $12 billion under his belt says the risk is to the downside. Morgan Stanley's top ranked wealth manager, Chris Toomey, at post nine when overtime returns.

Hey, take a look in the overtime at shares of Snap. There is a reversal. That stock is now up 6 percent or. Well, there you go. I mean, it's volatile, obviously. But what was down by five to six percent has reversed. It was an earnings and a revenue miss. And that was an issue. Maybe the guidance was a little light issues with supply chain, geopolitical issues weighing on that company. But in what certainly is one of the most important metrics of what Snap did report, their daily active users number was ahead of the street estimate. So maybe that's factoring in a little bit.

We'll keep our eyes on it throughout the remainder of OT. Let's move. Carl Icahn blasting Wall Street firms for their, quote, hypocrisy when it comes to ESG investing. The billionaire investor urging BlackRock and other ESG-focused index funds to support his proxy fight against McDonald's and its treatment of pregnant pigs. Just last month, Mr. Icon, of course, joined us exclusively right here on Overtime. Told us why he's in this fight to begin with. I am not doing this to make any money for myself. And I don't want to even be seen as owning stock because I'm saying I am not here to say I'm going to make some money on McDonald's. I think McDonald's has a lot to answer to people that are fans of ESG.

All right, that was Mr. Icahn. McDonald's top three shareholders are the Vanguard Group, the asset management arm of State Street, and BlackRock. It's time for a CNBC News Update with Tyler Matheson. Hey, Ty. Hey, Scott. Thank you very much. the Vanguard Group, the asset management arm of State Street, and BlackRock. It's time for a CNBC News Update with Tyler Matheson. Hey, Ty. Hey, Scott. Thank you very much. From the news on CNBC, here's what's happening. Explosions rocking the eastern Ukrainian town of Rubensi as fighting rages on in the war-torn country. According to social media, Russian forces have taken over the region, along with a nearby village. This comes as Russian President Vladimir Putin claims success in the Ukrainian city of Mariupol. For more developments on the ongoing war in the Ukraine,

tune into the news right after Jim Cramer at 7 p.m. Eastern tonight. The CDC is issuing a nationwide alert for rare cases of liver damage in children. Eleven cases of severe hepatitis were already reported in Alabama and North Carolina, according to state health departments. This follows dozens of such cases being identified overseas across several European countries. The Biden administration seeking to expand access to drug treatment amid the ongoing opioid epidemic. The annual National Drug Control Strategy calls for greater access to drug test strips, syringe service programs and life-saving naloxone. And Queen Elizabeth celebrated her 96th birthday at her Sandringham estate today.

The queen has largely avoided the public spotlight and stepped back from most public duties this year over concerns about her health. Scott, back to you. All right, Ty. Appreciate that very much, Tyler Matheson. All right. Even though our next guest is cautious on the market, he's urging investors to avoid what's been a popular defensive trade. Chris Toomey is with Morgan Stanley Private Wealth, ranked number three on Barron's top private wealth management teams. He's here at Post 9. It's great to see you. Thanks for having me, Scott.

All right, so you're cautious, but you want me to avoid which part of the defensive trade? Well, I mean, look, I think when we last met, we were concerned about two things. We were concerned about inflation and we were concerned about interest rates. We saw that play out, right? So we got two hot prints last week. We've seen rates go up dramatically higher. Equities re-rated and the bond market had a bloodbath. It was the worst start to a year ever. And so what's happened is you've seen the defensives do very well,

whether it's looking at utilities or staples and what have you. My concern is we probably moved a little bit too far. And so my thinking is, is in an environment where you've got margin compression, higher rates, you've got concerns about the consumer and their ability to spend money. You want to be making a distinction with regards to where you want to be putting money in the equity market. So are some defensive areas okay still? You would just avoid staples to be absolutely specific? I think utilities are concerned, right? With the 10-year doing what it's doing right now, it actually looks fairly competitive versus utilities. If you look at PE ratios on utilities, they look expensive. And then they've done quite well. So I'd be concerned about utilities. I'd also be concerned a little bit about consumer staples. But in general, if you look at the market right now, we've got a price target on earnings for $2.45 for the year.

That's about a 17% growth rate. You apply an 18 times multiple on that, you're getting about $4,400. So right now, the market in general is pretty much at fair value. You get, where do you get 18 from? I mean, why did you choose 18? I think if you look at what's going on from an interest rate standpoint, and if you look at specifically how the market should be trading right now, 18 looks like fair value for us. You do think, though, fair value for the S&P isn't at around 4,000? Wasn't that the note? No, it's closer to 4,400. Closer to 44.

So we're right there right now. Okay. The fact of the matter is, is I think there's a lot of question marks that are putting pressure on the market. I think the last 24 hours has been a perfect representation of this new regime where earnings matter, but the Fed trumps, right? We had a situation where we had a lot of good earnings in the morning. The markets did quite well. And then when Powell started speaking, the markets tanked. And so I think that's really the narrative that's driving the market right now.

So then you don't think that we're in the cards for a bigger correction? No, I think we could. I think the thing I'm concerned about is the fact that we could see a broad-based correction within the market. So what we're doing is we've upgraded our portfolio. We've raised cash or we've allowed cash to build up. We're being more deliberate with regards to putting cash to work. But one of the things that we're also doing is we're looking at hedging out the portfolio. So cash is good in a portfolio because it doesn't go down, you know, taking inflation out of the equation. And you have it to deploy when you see great opportunities, but it doesn't go down, you know, taking inflation out of the equation. And you have it to deploy when you see great opportunities,

but it doesn't necessarily offset the losses within your equity portfolio. So we are looking to hedge out our equity exposure for clients. And when you are putting your money to work, you like the financials, which has not been a great trade. And you get maybe the offset of, you say, higher interest rates are good for the banks, but slowing economy is not necessarily good for the banks. That's right. So why that?

So look, I think the banks are in a good situation if we continue to see the yield curve steepen. We think they've cleaned up the balance sheet. The return on equity looks really well. And from a pricing standpoint, they look cheap. I think what's interesting within the financials that we particularly like is alternative managers. So we saw one of them report today. If you look at them, they're growing at about a 20% rate. They're trading less than the S&P 500.

Our view, we just wrote a report on this, is that there are about $7 trillion of assets in non-traditional asset managers. We think in the next three years it will almost double. What about the tech trade? We start the show today. We're coming off of a Netflix blow up. We're watching Snap, what the implications are with higher interest rates for that trade. Are you putting any money in that area of the market or no? Yeah, I think you have to, because I think if you look at the market right now, you want to own high quality companies, free cash flow, pricing power, clean balance sheets. A lot of those qualities are in

the tech market. And to your earlier point, if you look at consumer staples versus tech, in many cases, you've got some really good blue chip companies that are actually trading at a discount to staples and have better pricing power. So we wouldn't necessarily give up on the tech trade, but I think you do need to be selective with regards to what you're owning. You're looking at, you know, valuations of something like a Microsoft versus a valuation of, let's say, a Procter, for example, and then coming to the conclusion that in this kind of environment that Microsoft can still work, which, by the way, those stocks are considered as defensive as some of the staples are. Well, that's and I think that's kind of the point. It's interesting, though, but you're seeing some real differentiation within the market,

right? If you're in a situation where a FANG stock is down 60 percent for the year and the overall market is only down 6 percent, you're really seeing some differentiation between the higher quality companies and the lower quality companies that are going to struggle in this new regime. Yeah. And the FANGs, like you don't take any caution, let's say, from a Netflix on what that could mean for some of the other FAANG stocks. I almost feel like a Netflix shouldn't even be in that conversation anymore anyway, that the Apples, the Googles, the Metas,

the Microsofts are now their own category. And as long as they hold up, maybe your market prognostication of 4,400 is okay. If that rolls, not a problem. Right. No, and I think that's a good point. I don't necessarily think you're going to see kind of these broad-based trades as much as now these really focuses on individual companies and what they're doing. So I don't think you want to just look broadly based with regards to tech or financials. You really need to understand what they're doing. So I don't think you want to just look broadly based with regards to tech or financials. You really need to understand what you're owning and what the quality of the business is going forward. Quickly, health care, another area that you like.

We like health care. We like the defensive nature of health care. There's also some good growth characteristics in there. It's been beaten up. It's trading at a big discount to the S&P 500. I think that's definitely someplace to be looking to add exposure to. I appreciate you coming here. It's good to see you in person.

Thanks for having me. All right, that's Chris Toomey again to add exposure to. I appreciate you coming here. It's good to see you in person. Thanks for having me. All right, that's Chris Toomey again joining us from Morgan Stanley Private Wealth. Up next, ringing the register, one halftime committee member taking profits on Tesla following today's monster move. We're breaking down that action. You'll hear from that investment committee member straight ahead. But first, Christina Parts and Neveless is tracking some big movers in the OT as usual. Christina. Well, that's because we've got a lot to unpack from the new earnings report after the bell, like why Angry Orchard beer may not be as popular anymore

and whether robots will perform your elective surgeries. I'll have all those details and obviously much more right after this break. Back in OT, another check on shares of Snap. Look at that. The highs of OT up 10 percent. There is gap going in the opposite direction under pressure there after cutting their guidance. We'll have more on that certainly in the days ahead. Let's check on some other movers in the OT. Christina Partsenevelis is here with that part of the story. Hi, Christina. Hi. Well, I'm going to actually go to Boston Beer first because that's plunging in the OT. Christina Partsenevelis is here with that part of the story. Hi, Christina. Hi. Well, I'm going to actually go to Boston Beer first because that's plunging in the after hours or overtime. After posting Q1 revenues of $430 million, that's less than

estimates and a 21% drop compared to last year, the company did see a huge drop in shipment volume for brands like Twisted Tea, Angry Orchard Beer, and Truly Hard Seltzer, but they are launching Truly Vodka Seltzer, only 110 calories, which the company thinks will help them compete in the high-end seltzer category. Switching gears, the company that makes robots used in surgery, that would be Intuitive Surgical, are seeing their shares climb just about a percent lower in after-hours after posting Q1 earnings that beat on the top and bottom line. The company did warn that COVID will likely continue to impact surgeries. Why? Because a high number of cases means that it's overwhelming the health care system,

and that means a lot of people have to postpone their elective surgeries. And then lastly, in a statement provided to CNBC this afternoon, Goldman Sachs said they are getting closer and closer to providing checking accounts. They said they are now widening their testing for a no-fee interest-bearing account to over 20,000 U.S. employees. Shares right now, you could see in the after, are closed today at 2% lower, flat though in the OT. Back over to you, Scott. All right, Christina Partsenevelis, thanks so much. Up next, we have a late-day trade alert on Apple. One investment committee member hitting the buy button. We're going to tell you about it in a halftime overtime report. And later, Santoli's last word, why today is all about frustration. He explains when overtime

returns. We're back in today's halftime overtime. Tesla shares higher after the company posted strong sales growth and record margins. One halftime investment committee member using today's pop to take profits. MarketRebellion.com co-founder Pete Najarian joins us right now. Take the money and run, Pete. Absolutely, Scott. But it's not just about that. I think what we have to also understand is with options, we all know there's an expiration. They were obviously, when they bought these last Tuesday, obviously they were buying this because of the catalyst of earnings and they knew they needed to be within that timeframe. These options that I sold today

were gonna expire tomorrow anyway. So it was all about the earnings. The earnings delivered. The numbers were incredible. The margins, as you guys talked about earlier today, 33%. But you look at that year over year deliveries, global deliveries at 68%. That's pretty amazing. They've done everything right. The robotics puts them in front of everybody else.

And a lot of people who continue to call this a car company, I still say it's a tech company, Scott. And that's why I think you're seeing the kind of moves that you see each and every time we come to earnings. I'm going to put you on the spot with something else because I truly don't know the answer. I'm curious as to how you view Snap after earnings, if you're tempted at all to play the options market in Snap. I would only trade the option markets in Snap. Snap is an incredibly volatile, as you have witnessed just today. I mean, look at what started off as a stock that got slammed, then it was popping and all the movement it has got. I don't think that's a real quality name that you want to have in terms of stock. But to trade it, absolutely. Snap is a phenomenal trader

and I've traded it many times. I know you think Apple is a quality name and what did you do here? You bought new Apple calls. Is that right? I did. As a matter of fact, today, Scott, going in front of the earnings that are coming next week, I believe it's the 28th, 29th, they've got earnings. These are some very interesting options that we saw. 20,000 of the May 27th expiring 185 calls were purchased. Those were about a dollar. And then later on in the day, they bought next week's expiring of the April 177 and a half calls. They expire next Friday. So again, very similar to what we've seen in Tesla this week. We're seeing in Apple as well. They are looking for these stocks, this stock particularly now, to make a nice big move next week. Wow, 177.

That's going to be really interesting. All right, Pete, I appreciate it, man. Take care. We'll see you back either in OT or on halftime. Yep, that's Pete Najarian joining us there. Up next, frustration. That's Mike Santoli's last word. He'll tell you why next.

Time for Santoli's last word. Today we said it's frustration. It is. At what? At how this market has been such a churn and a grind and kind of trapped in this narrow bend. We traded at the current level, 4,400 or so in the S&P in July, August, September, October of last year. Every month this year, we were above it November, December, and we've crisscrossed it four times in April. Forget about that. Yeah. At the same level. Absolutely. So we've done this kind of, you know, eight month, let's say, consolidation, big overshoot to the upside in retrospect. And now where does it leave us? I think you've really frayed the nerves of enough people that expectations are low, but the Fed doesn't want investors to

grow comfortable with the environment. They're kind of willing to maybe crush housing, you know, and a lot of other things along the way. So I understand why we're in the spot we're in. I do lean back on the fact that sentiment is defensive enough. We actually bottomed in mid-March when we got the fact of the first rate hike. So, you know, arguably today, talk of 50 basis points in May should not have been that either surprising or worrisome. Of course not. But I think the point you're also making is there's more likelihood of breaking out of this range to the downside than up. You know, it's honestly a tough call because I think that, you know, you're 5% above the lows. I do think you have to forget about the highs at forty eight hundred for now.

It's just not about that. We're in a range within a range that's kind of between the highs and lows of this year. But I do think if there's going to be an overshoot, it might have to be on the deaths. I say that largely because the rotation has to be pretty, pretty elegant for you to keep supported here. If the big stuff's going to fail today, energy and commodity stocks were ugly. So you didn't get any of the benefit of those offsets. Positive headlines out of Russia, Ukraine, maybe a thing that could do it. I don't know. I think also if anything kind of dials down this, I think, inflated recession panic that we're having right now, that that could do it as well.

All right. That's Mike Santoli with his last word. We'll see you tomorrow. All right. We do have a news alert out of McDonald's. The company is firing back at Carl Icahn's calls for the company to end creating pregnant pigs for its pork products. McDonald's releasing a statement just moments ago saying what Mr. Icahn is demanding from McDonald's and other companies is completely unfeasible. Based on current estimates, McDonald's would require at least 300 to 400 times the animals housed today in crate-free systems to keep our supply chain running. All right, so you got the back and forth between Icon and McDonald's continuing. Up next, our two-minute drill. We're breaking down some of today's top ideas for your portfolio.

Overtime is back right after this. Welcome back to Overtime. Let's get the results of our Twitter question of the day. The best social stock to own right now, Meta, narrowly beating Twitter. That's interesting, with 40% of the vote. Snap only getting 8%, which just reported its earnings, of course, today. It's time for our two-minute drill now. Joining us is Chris Harvey, the head of equity strategy at Wells Fargo Securities.

Welcome, Chris. It's good to have you here in the OT. Great to be here. I'm looking at the picks that you like. You like banks, you like some reopening plays, capital goods, and you like some retailers. And you picked a bad day to have Gap on your list. But nonetheless, you do, which is why I'm asking you about that first. And if you want to change your mind right here and now in overtime. No, Scott, I don't want to change my mind. And when we talk about reopening, it's not just one stock. It's a ton of stocks. It's retailers, it's cruise lines, it's airlines,

it's even energy companies. What we want to do is we want to be tied to the consumer spend. We want to be tied to services. We want to be tied to people spending on what we say experience is not so much goods. And one of the things that we want to talk about with the consumer is the consumer is much stronger than many people think. The consumer has the ability to spend and they have the wherewithal. And I don't think the consumer is going to be denied. As we go forward in time, we're seeing this from the banks. We're seeing it from the credit card company. People are spending on travel. They are spending on leisure and they continue to move forward in time. People are done with COVID. And we think those reopening plays are the place to be. We think those COVID. Excuse me. No, I was

going to say you're not worried about sentiment falling. Inflation still high. None of that having an impact on on consumer sentiment. I hear you on the airlines because, you know, look, the CEOs of United and Delta have been about as bullish as you could possibly be. But the environment can change rather dramatically quickly. Scott, that's right. We are looking at it. If you go through earnings season, right, we looked at the credit card companies, looked at bank companies. What they're saying is exactly what you're saying. We're being vigilant. We're watching credit costs. We're watching the consumer. We're watching for a pullback. We're watching for that

trade down. We're not seeing it. Furthermore, what we are seeing is the ability, the capacity to spend more. And they're spending in a very healthy fashion. And we're seeing it across the board from the consumer. The only thing, only place we're really not seeing a ton of spending is on the T&E side. But we think that will come back rather shortly as well. I see you have some casinos as the ones you like from your equity strategy. We're not worried about, are we talking about casinos that have no exposure to Macau and China, given the shutdowns and the like there? That's right. The casinos we have on our list are U.S. They're domestic. They don't have exposure directly to Macau. They're really Las Angeles. They're Vegas-based

casinos. Right. I got you. And you also like financials, too, which are interesting. Obviously, the conversation I had earlier with Chris Toomey, given rates and the economy, what ends up happening there? I've got to say goodbye. We'll continue our conversation next time. That's Chris Harvey joining us again. He's the head of equity strategy at Wells Fargo Security in our two-minute drill. That does it for us. I will see you tomorrow.

Keep your eye on SnapShares, which have been all over the map post-earnings. They did miss. Their DAUs came in above expectations. Stocks up 5%.