Closing Bell - Closing Bell Overtime: Snowflake CEO On Regaining Momentum; Bessemer’s Byron Deeter On What’s Next For Software 11/21/24

Episode Date: November 21, 2024

Snowflake shares had their best day after reporting strong earnings. CEO Sridhar Ramaswamy on how the company is winning in the current environment. Bessemer Venture’s Byron Deeter weighs in on the resumption of the software trade and what’s next for Nvidia. Plus, Intuit CEO Sasan Goodarzi on the latest quarter and what the Department of Government Efficiency means for the company’s business.

The Hecla Mining Company ringing the closing bell at the New York Stock Exchange and Mawson Infrastructure Group doing the honors at the Nasdaq. A whoosh higher for the Dow and small caps and Bitcoin while the Nasdaq lags dragged by a big drop in the alphabet. That is the scorecard on Wall Street for the action is just getting started. Welcome to Closing Bell Overtime. I'm Morgan Brennan with John Ford. And coming up this hour, earnings results from Gap, Ross Stores, Intuit, NetApp, and Elastic. I think Intuit's already out. We're going through those, plus an exclusive interview with the CEO of Intuit

before he talks to analysts on the conference call. And accumulating gains shares of Snowflake exploding higher today by more than 30%. It finished up almost 33%. After the earnings results, we brought you right here on Overtime, we will hear from the company's CEO about what drove this standout quarter. But let's begin with the market in a largely positive session with only two sectors finishing in the red for the S&P. Joining us now, Dan Skelly of Morgan Stanley Wealth Management

and Dan Ai of Fort Pitt Capital Group. We've got double Dans here today. Welcome to you both. And we did have a higher day, a higher close for all the major averages. So Dan Skelly, I will start with you here, because what's interesting to me is that despite some of the negativity and mega cap tech, most notably in Alphabet, the fact that the markets did end the day higher and the equal weight S&P and the Russell 2000 in particular were strong. Tells us what? Well, it's great to be back with you first, Morgan. Thanks for having

me. What it tells us is that there's a risk on sentiment in the market where people are buying other industries, other sectors. And really, that's been the trend prior to the election and then gaining steam after the election. So it's all of those value oriented sectors like banks, like industrials. And then even, as you mentioned, going down the cap curve, we're seeing a lot of demand there as cash comes off the sidelines into what is, as you know, usually a very seasonally positive period. All right. So, Dan, I want to get your thoughts on this market here, especially given the fact that we do have, I will call it, more hawkishly tilting Fed speak in recent days. We've had a little more mixed data today, but in general, economy continues to be resilient. A lot of talk still about animal spirits looking to 2025.

And yet, on the flip side of that, rates have been higher and we do have lofty valuations when you look at stocks. Yeah, well, good afternoon. Thanks. Thanks for having me. I would agree. You know, I think we've been pleasantly surprised with how well the overall economy is holding up. We continue to grow at above trend growth rates. We are expecting a supportive environment for corporate earnings next year. And we expect that to be more broad-based growth across market sectors. And we think that that explains a lot of the rotation that we've really seen over the last three or four months. And I don't think it gets enough attention, but a massive amount of liquidity on the sidelines with

something like $7 trillion in money market funds. We think that supports kind of the dip buying mentality from investors. But we are, just like everybody else, concerned with the straight up move that we've seen in interest rates since the Fed started cutting in September. We think it's the bond market sending a pretty clear message that they may be moving a bit too aggressively. Well, hold on just a moment. Intuit earnings are out. You can see the stock lower by just over 6 percent. Intuit reporting results a beat on the top and bottom lines. I guide those slightly below the street. I got some color from the CEO on that. Intuit reporting revenue of $3.3 billion. That's higher than 3.14 expected.

And let's see, earnings per share of $2.50, I believe, higher than the $2.36. Let me check that in here. Yes, $2.50 versus $2.35. Now, for Q3, Intuit guiding to $3.829 billion of revenue at the midpoint. That's versus expectations of 3.88. Intuit also guiding to earnings per share range of $2.55 to $2.61. The street was expecting more like $3.25. I did have a chance to speak with Intuit CEO Sasan Ghadarzi. He maintains

the full year guidance. He did say about this coming quarter there's some promotional activity in retail around TurboTax for consumers. That's just going to push some revenue into Q3. Overall, doesn't affect the year's guidance, but does affect Q2 and said it isn't that he's excited about the full year, but he doesn't like to, Intuit does not like to raise the full year guide after the first quarter. We'll hear more from him in just a bit. When coming up, he discusses the quarter before he speaks with analysts on the call. Now, meantime, NetApp earnings are out as well, and Seema Modi has those. Seema.

John, a nice set of numbers from NetApp for the second quarter with a nine-set beat on its bottom line, revenue coming ahead of consensus at $1.66 billion. And if you look at first-party marketplace cloud storage services, revenue growing there by 43% year-over-year. That is higher than what Wall Street was anticipating. And comments from CEO George Kurian, who says a data-driven future has enabled the company to outgrow and

market and take share from competitors. Now, this is one of the companies that does sell its data infrastructure to the federal government. So one topic of conversation on the earnings call will be how the change in administration affects potential future business. We're looking at shares up over 8.5% on a better than expected earnings result. John and Morgan. All right. Thank you, Seema Modi. We're going to discuss those results with NetApp CEO tomorrow right here on Overtime in an exclusive interview. Dan Scully, I want to get to you on earnings in general.

These in particular, if you want to weigh in, really, but earnings in general, are they enough to support the relative optimism that we're seeing in the market up to this point? This post-election Trump trade. Look, I think Dan, our fellow Dan said it best in terms of the backdrop. Earnings are growing and you're seeing broadening out in terms of leadership beyond MAG7. That's key, along with a fundamentally positive economic backdrop and liquidity backdrop. These are all good. So, John, earnings is not the issue, in my opinion. We're going to print something like 8% earnings growth year over year in the third quarter. If I X out energy, it would be closer to 10. I think the key issue as we go into next year is what is the sequence of policy?

Because as we all know, there's a couple of really positive levers out there in terms of tax extension, in terms of deregulation. However, there's some unknowns in terms of tariff. So I do think policy sequencing is the next key catalyst for this market to move higher. All right. Well, we've got more earnings. Ross stores results are out. And Courtney Reagan has those numbers for us. Hi, Court. Hi, Morgan. So I'm going to call this a mixed quarter, but mostly disappointing. So Ross stores coming in with earnings per share of $1.48. That's eight cents better than expected. But revenues were light, $5.07 billion. The street was looking for $5.15 billion.

Comparable sales, too, also light, up just 1%. Street was looking for up 2.5%. And then looking forward, there's a light fourth quarter guidance. Operating margin was higher than expected. The CEO, Barbara Rentler, noting actually the business slowed from the beginning of the year, calling out low to moderate income consumers continuing to face persistently high costs on necessities, which is pressuring their discretionary spending. But they still believe they should have executed better than they were able to. Calling out also seasonably warm weather and also the hurricanes for some negative impacts on the quarter. But nonetheless, shares of Ross are higher by almost 6 percent.

John, back over to you. All right. Courtney, thanks. I believe we got, yes, we do. Elastic results out as well at the moment. We're going to those. OK, elastic earnings beat on the top and the bottom lines. Revenue came in at three hundred sixty five million versus three hundred fifty seven expected. EPS came in at 59 cents versus 38 expected.

And then the guide was strong here as well. That's why you see that stock up, wow, 23% right now in overtime. Got into revenue of $368 million for fiscal Q3 versus slightly less than that, around $366, $367 expected. Also guiding to strong earnings per share, midpoint of the range, 47 cents versus 41 expected. Also, as you might expect, raising a full year revenue guide to $1.454 billion and the EPS to $1.70 at the midpoint of a range. The previous high end of the EPS range that analysts had been expecting was $1.56. Strong margins here across the board for Elastic as well. And we're going to hear exclusively from Elastic's CEO right here on Overtime this hour before the analyst call starts at the top of the hour.

Yeah, we are loaded with CEOs on their earnings. So, Dan, I want to get your response to what was just a parade of earnings results and the fact that we are seeing all of these stocks make big moves in both directions here in overtime. I know you in particular are pretty focused on on names like Intuit. I am, and I think that it looked like the quarter was was fine, well above expectations. I do think that the EPS guide for the for the second quarter, you know, well above expectations. I do think that the EPS guide for the second quarter, you know, significantly below expectations, but I think it's important for investors to understand, you know, this is a very seasonal, lumpy business.

Revenue can easily shift from different quarters. So I think it's really important to focus on the full year guidance. And it looks like that was maintained. But, you know, we're really excited about Intuit's, you know, focus on really moving upstream to higher value customers within QuickBooks and within their TurboTax Live offering, which, you know, they're focused on connecting tax filers to experts and accountants and making a lot of traction and inroads in that space. OK, well, Dan, I and Dan Skelly, thank you both for kicking off the hour with us with all the

major averages finishing higher, even the Nasdaq, which eked out the tiniest of gains, but the Dow finishing up one percent. Let's turn now to senior markets commentator Mike Santoli for a look at how money is running through this market right now. Yeah, Morgan, some pockets of kind of aggressive action. It's a somewhat split market in a bunch of different ways. The big cap indexes mostly have been kind of consolidating sideways. But here you have on a one month basis, IWC is the micro cap ETF. So even smaller companies that are in like the Russell 2000, although some of those are micro caps and that's up 4 percent. You see it's kind of diverged from XLG is the 50 largest stocks in the market. So for most of this year, as we know, at least the first half, it was dominated

by mega caps. And it's not just that, oh, smaller, more cyclical companies are working. A lot more speculative, lower quality, more leveraged type names are coming as well. Some of that's crypto related. Some of that's been meme-ified. Some of it is just, you know, kind of riding along with the rally in capital markets activity. Now, take a look here at ETF flows, equity ETF inflows. This is basically like a three month trailing average. You see, we got to pretty close to a multi-year peak here. This is from early 2021. This is from Todd Stone over at Strategas. What it means is there's

reasons for optimism and you have public optimism. But on a short-term basis, it can sometimes meet a little bit of a sugar rush effect. You have to have that worked off and metabolized, maybe a short-term pause. Although for the end of the year, often that stuff doesn't come into play in terms of the market having a pullback until the new year. I'll also make a final point. This is all in dollars. So the market cap of the S&P 500 was way lower in early 2021. I think we're up like 50 percent since then. So this amount of money is not as dramatic as it was a few years ago. We always love the context and the fact that you pull these charts out over the course of years instead of weeks or days or months. I got to go

back to something we were talking about yesterday, and that is Bitcoin and what we're seeing there as that moves to another record high, closer to 100,000, because we do know that is playing out in the equity market in names like MicroStrategy right now as well. You got Gary Gensler at the SEC saying he's going to step down early next year. You've got headlines about companies, including Trump's media company, looking to potentially make a purchase in the cryptocurrency space. Mania? Or are there fundamentals that actually support all of this?

Well, as far as I could tell, the main fundamentals among the bull case in Bitcoin is that more people are going to buy it. And so it's really a much more of a supply demand snapshot as opposed to a fundamentals in terms of what it can earn or how it can grow or how it can be used. That's all well and good. I am very alert to the fact, though, that it's becoming, you know, a very much a high momentum trade. The derivative places you mentioned, MicroStrategy, had big downside reversals today. A lot more attention on whether the equities have gotten overdone related to Bitcoin. Hundred thousand seems like a kind of mission accomplished level if we do get there. And you do have this huge clustering of really positive headlines

feeding into all this. It just leaves the question of like, what do you do for an encore, at least in the short term? Indeed, it does. Mike Santoli, see you again in just a bit. Speaking of encore, still ahead, access you only get here on overtime. The heads of Elastic and Intuit weigh in on their results before their earnings calls. And Snowflake's CEO will be with us to talk about the quarterly report that sent the stock higher by more than 30 percent in the regular session. Plus, noted venture capital investor Byron Dieter joins us to talk about the opportunities he sees right now in AI, the cloud and the broader tech space. We have a big show. Stay with us. Overtime is back in two. Welcome back. Gap earnings are out. Courtney Reagan has those numbers. Hi, Court. Hi there, Morgan. Yes. So for the third quarter, gaps, earnings beating consensus coming in at 72 cents a share.

Excuse me. The street was looking for 58 revenues about in line, maybe slightly light, 3.8 billion compared to 3.81 billion expected. Comparable sales total for the whole company up 1%. The street have been looking for that to be a little bit higher. Gap, it looks like the Gap namesake stores were the strongest of the bunch, up 3%. Old Navy Flat, Banana Republic, negative, but only slightly so at 1%. That was about in line. Gross margins coming slightly higher than expected to at 42.7%. The company is also raising their full year outlook for net sales, gross margin, operating income, and they're calling out the reason being due to these third quarter results. So it'll be interesting to hear what they have to say about the expectations for this big key holiday quarter here to come. Shares of Gap right now in reaction are up about 5%. This is a big one. It's a big

retailer and it has kind of undergoing a bit of a turnaround. Again, John, back over to you. All right, Court, thank you. Well, Snowflake posting its best day ever, the stock up 33%. I spoke with CEO Sridhar Ramaswamy after the earnings call last night. He emphasized the way Snowflake is opening up access to data as a productivity driver inside the enterprise and allowing more employees to benefit from AI and from the Snowpark DevOps environment. We also released something called Dynamic Tables, which you can think of as a fast, easy way to create data transformation pipelines without even writing code. And the rough thumb rule for you is that while a few million developers, like call it four or five million developers can write code,

there are four to five million analysts that are not so proficient with writing code, but absolutely can do things like write SQL, which is a little bit easier to learn. Snowflake's overall journey is that we empower all of these people to become data engineers, to be able to create these amazing data pipelines that can transform data, but then on the other side, using AI, make this data available directly to business users. puzzle of Snowflake really becoming the end-to-end data platform of choice. And this is where our acquisition of DataVolo, which lets us bring more data into Snowflake, also plays in here. It's all part of our plan to be the one-stop shop for our customers when it comes to getting value

from their data. He said Snowflake's approach to driving efficiency has led to enterprise customers feeling confident enough to buy when budgets are tight because of the results. I'll give you a simple example. Let's say you had a table with notes written by a clinician about patients that they saw. You know, just two years ago, if you wanted to write a program to analyze all of this and say extract all of the symptoms that patients had or the potential diseases, that would be a project. It would take somebody, a group of five, six people, five, six months in order to get it done.

It would take a lot of time to maintain. In Snowflake, that is one single SQL query. So what used to be a project before, all of a sudden is easily accessible. That's the magic we see AI bring to business intelligence tools as well. Right now, as you know, if you want data, you've got to ask somebody who's got to talk to an analyst who's going to write some SQL, and then they will go change some BI tool. And maybe next week you're going to get data about some question that you had. With AI, we are creating products where a business user, like my CFO, for example, can ask a question, will immediately be told,

is the question answerable? And if the question is answerable, they'll get a table with the structured data, autograph, if they want that. Ramaswamy is also using AI himself from a lot of different providers in some amusing ways. You know, I'm almost ashamed to admit this. I have subscriptions to Gemini,

to Cloud, as well as ChatGPT. I love playing with them. My coworkers are subjected to random cartoons that I make with ChatGPT about every topic under the sun. Little programming jobs that previously I used to write bits and pieces of Python or Perl for. Language models can solve out of the box. I'm not about writing poetry with these models, looking for word choices. I think the value that

you can get out of this is pretty amazing. Morgan, I also talked to him about Anthropic and the partnership that they had there. It's interesting. He described Anthropic as being one of these apex models alongside OpenAI. A few months ago, a lot of people thought that Mistral and some others would be able to deliver models of that heft. And he says not so much. It's clear that those two are ahead. So that partnership is going to allow them to deliver much better tools, he says, to customers, getting developers to want to stay in that snow park environment.

And then that helps drive more business, more margin for Snowflake. Given the fact that he's been experimenting with all of this, he would know, I suppose. Indeed. All right. Well, for more on Snowflake and the rest of the cloud and AI space, let's bring in Byron Dieter from Bessemer Venture Partners. Byron, it's great to have you back on. And let's start the conversation right there.

Those comments about this partnership between Snowflake and Anthropic. You're an investor in Anthropic. So I imagine you have some thoughts about the comments that John just relayed. Indeed. Well, great to be back. Thanks for having me on. And it's fun to see Snowflake back on offense. This partnership is one that I think we'll see replicated across many of the incumbents as they try to leverage their platform and data assets to be a first mover in this AI wave. And we're proud investors at Anthropic. They're one of these foundation models that helps with the unlock. And so you combine that with Snowflake's acquisition, with their strong print, and you're seeing investors excited about this roadmap ahead as the battle with Databricks

intensifies. You know, all eyes battle with Databricks intensifies. You know, all eyes are on Databricks in the private markets as they're now valued, you know, plus or minus in the same ballpark as Snowflake and growing a little bit faster. And so that arms race is escalating very publicly and very much around this AI battleground. So as that arms race escalates, are we entering that chapter of generative AI deployment that is the application layer? Are we starting to see the winners and losers being minted when it comes to enterprise software? We very much are. It's starting to move up stack. This trend started with the foundation models. It started with the infrastructure players. Frankly, there were very few trades available in the public markets other than the hardware players like NVIDIA and the hyperscalers

themselves. It's now starting to become embedded within the leading app providers. And so we're seeing the reacceleration in the app layer. We're seeing things like the Emerging Cloud Index start to benefit from that. And we expect the IPO pipeline for next year and beyond to reflect the leverage from these LLMs and the IPO pipeline for next year and beyond to reflect the leverage from these LLMs and the leverage from these AI foundation models to really start leading the business benefits at the app layer that will drop to bottom line results. Byron, I'm a little concerned that some investors might be missing the forest for the trees in a way. We talk about the AI trade and how overheated that's gotten

in some cases. But I think a lot of times we're talking about the mega caps here in this earnings season. I'm going to call out Elastic because that just came out. I don't know if we can throw that chart up. We've seen some names that are focused on enterprise data that have been a bit beaten down names that aren't mega caps, particularly those with consumption models, kind of having a nice go of it. That would include C3 AI, though we're not talking about its earnings. It hasn't reported yet. It's had a nice bump since that Microsoft partnership announcement earlier this week. Yeah, it's really been a mag seven rally and the app providers have largely been left out of it to date, especially the mid cap app players. And so the question is, how's this disconnect going to reconcile? Either there's

been irrational spending and NVIDIA has been a disproportionate beneficiary and there isn't going to be an ROI from that, or in a delayed fashion, we're going to see that roll through into the app layer. I'm a big believer in the latter. I think that we're going to see these benefits roll through. I think these are economically rational actors and that the software providers are now starting to instantiate the AI products and application benefits into their top layer and user-facing capabilities. Those will lead to higher prices, higher growth rates, and we'll start to see this reacceleration over the coming quarters. We're early in that, but that's the opportunity ahead. And I think that's one of the trades that will start to be possible in the public markets that's really only been possible in the private

markets for these smaller pure play AI app companies today. Byron, in my conversation with Sridhar Ramaswamy from Snowflake, one of the things that he drove home to me in a way that I had never really thought about before was the way he expects AI to transform business process and business analytics. He says giving every enterprise potentially the same kind of superpowers that Google has had for a long time. Of course, he was a top executive there. If that is the case, I think that's an angle on AI and its usability and the possible demand for it that we're not hearing a lot about. I mean, if you really need

this to understand the basic mechanics of your business and what the data is telling you, then that means a lot, doesn't it? It does. And I think it goes directly to market size. And this is where I think people may be off. They're looking at traditional software markets and they're thinking of incremental improvements. You know, if this AI efficiency drops to a bottom line in a workflow market, maybe they can sell for 20 percent higher and that'll grow TAM proportionally. What they're missing is exactly what you were hitting on, which is we go into the services portion of this as well. We are supercharging business workers. We are supercharging paralegals and lawyers and nurses and accountants. These fields are going to be revolutionized. And the total addressable market by AI software will not only be the historical software markets, but will also include the labor portion that we're supercharging. And these TAMs

are going to go up dramatically. And that's where this big debate of are we overheated in AI? I come out on the side saying absolutely not. We're in the early days. There's going to be a lot of volatility to get there. But these TAMs are unprecedented. And the percentage that goes to software capture over time is going to be proportionally much greater in line with capturing some of that labor percentage as well. All right. Byron Dieter from Bessemer, thank you. When we come back, the CEO of nearly $200 billion software giant Intuit joins us with his first comments on today's earnings results as that stock pulls back in overtime.

And later, we will get an analyst's first take on GAAP earnings and what they signal about the health of the consumer, with those shares now up 13%. Overtime, we'll be right back. Welcome back to Overtime. It's time now for a CNBC News update with Leslie Picker. Hi, Leslie. Hey, Morgan.

Brazil's federal police today accused the country's former president, Jair Bolsonaro, and 36 others of plotting a coup after losing the 2022 election. The police also accused the group of being a criminal organization and that some of the conspirators had planned to assassinate current president Lula da Silva. Brazil's prosecutor general will now decide whether to press charges against Bolsonaro and the others. Bolsonaro says he will review the allegations with his lawyers. A senior North Korean general was injured in a recent Ukrainian strike in the Kursk region.

That's according to the Wall Street Journal, which says Western officials didn't share how the officer was wounded, but confirmed it was the first time a high ranking North Korean military officer has become a casualty in the conflict. The U.S. U.S. officials say more than 10,000 North Korean troops are Russia are in Russia's Kursk region. And a controversial piece of art featuring a banana stuck to a wall with a duct tape fetched $6.2 million at auction this week. The work, called Comedian, was purchased by crypto entrepreneur and Tron founder Justin Sun. He says he plans to eat the banana as a, quote, unique artistic experience. A unique, artistic, and expensive experience.

I hope it tastes good. I'm sure it's going to taste like a $6 million banana. I wouldn't know. I've never tried. Steve Picker, thank you. And we thought $1 million was going to be expensive for this piece of art. Or really for the piece of paper for this piece of art. Mean bananas. We have a news alert on OpenAI. Steve Kovac has the story. Steve.

Hey there, Morgan. Yeah, OpenAI is considering making a web browser. This is, according to report, just out in the information. This is just part of a cascading series of products that we've been seeing from OpenAI. They announced their search product just a couple weeks ago. That's starting to roll out. Obviously obviously going head-to-head here with Google on that front. And by the way, this is coming just 24 hours or less than 24 hours, rather, that the Department of Justice recommended that Google has to spin off of its Chrome browser in order to satisfy remedies for the antitrust case it lost. And also that could be, of course, a threat to its search business as well.

We see Google shares down about a percent here after hours, John. Interesting development, Steve Kovac. Thank you. Well, back to earnings. I spoke with Intuit CEO Sasan Ghadarzi about the quarter. Beats on the top and bottom. But as you can see here with the stock down

about four and a half percent, but off the lows, a guide short of the street on the top and bottom of the guide. Our business platform grew 20 percent. This is our online ecosystem. Credit Karma grew 29 percent. So those are really the big drivers behind our performance in Q1. And we're quite excited about the year, which is why we reiterated our guidance for the year. I would use two words. I am very bullish and we are bullish about the year. I think the second word I would use is prudent.

We generally don't touch our guidance for the year after the first quarter. So we love our progress. We love the momentum. But listen, if you use sports analogies, we want to win the game and we got three quarters left and we're not going to declare victory, although we're very bullish about the year, given how the quarter has started. He further explained the reason for the Q2 guide that's short of expectations, including retail promotions for TurboTax. For the second quarter, our consumer group, TurboTax, will deliver a single-digit decline. And it's really because we changed some promotional activities for TurboTax desktop in retail. So, you know, imagine the Costcos and the Walmarts of the world. And the promotional activity is good for consumers, but the timing of when we're doing it just shifts revenue from Q2 to Q3.

It doesn't impact the year at all. So it's just a shift between quarters. Ghidarsi also told me about the state of the consumer with the credit karma business rebounding. He said things are stable with the consumer overall, but from a difficult place? I would say, one, things are stable. But two, you have to remember it's in context of, you know, credit scores are down like 20 points in the last couple of years. Balances, credit card balances are up, you know, 55 to 65 percent, depending on the cohort of consumer that you're talking about compared to two years ago. Finally, we talked about the Department of Government Efficiency,

President-elect Trump's initiative led by Elon Musk and Vivek Ramaswamy. A few days ago, word surfaced that they would push free tax filing and Intuit and H&R Block stocks reacted. Ghidazi said he doesn't expect problems from Doge. First of all, I'm personally engaging with new leaders and the new administration coming in. And if I first sort of articulate a few priorities that they have, one is they're really focused on budget cuts and really driving efficiencies. Two, really reforming the regulatory environment because less regulation, less bureaucracy is really good for consumers and businesses. And third, sort of the area of fraud, both identity theft that leads to tax fraud and also just small business loans and the fraud that

comes with that. That's an area where there's a huge opportunity for efficiencies. And then last but not least, an opportunity potentially to just simplify the tax code, which is good for businesses and good for consumers. I'm excited. And as a company, these are areas where we can help because our mission is to power prosperity for consumers and businesses and a simplified tax code, less regulation, and just more streamlined operations is an area we can help with all of the data and AI capabilities that we have. So one, eager to partner on that front to power prosperity for

those that we serve. I think the other thing, John, I would just say to your question is I believe that the last thing the new leaders and administration want to do is add to the bureaucracy and add costs in an area where offerings already exist. And so, as you know, free tax offer mobile app is already available to all Americans. And not just from Intuit, Morgan, I thought it was interesting. He's already engaged with folks from the Trump camp, the incoming president. And also we talked about the mid-market business that an analyst earlier was talking to us about and how that's strongly developing as well into its small business enterprise approach, moving up market a bit. It's interesting. Those comments make me think about some of the more recent government contracting we have seen where the government becomes one of many customers.

It's these public private type partnerships you see. And maybe there is an opportunity based on what he's saying, the fact that he's interacting with the administration to see that type of model brought to something like the IRS and accounting. Government software does not have a great track record at this point. No, but private sector does. So it'll be interesting to see what happens here. All right. Up next, much more on Alphabet's big pullback today and how its valuation now sacks up to the other mega cap tech giants. And later, the CEO of software company Elastic gives us his first comments on earnings as that stock bounces double digits up 15 percent so far in overtime. We'll be right back. Welcome back to overtime. Shares of Alphabet closed out their worst day since January after the Justice Department suggested in a court filing that the company should sell its Chrome browser.

Mike Santoli is back with a look at the stock's underperformance. Mike. Yeah, John, been a story really for this entire year. Here it is compared to Meta over the last three years. You see how Meta really just took flight relative to Alphabet. And yeah, obviously on multiple fronts, there's the regulatory side of it. And then also just Alphabet and Google seen as net losers in the AI world, potentially, whereas Meta has a very clean AI exploitation case. Take a look at the valuation as a result of this. Really, Alphabet's never been cheaper compared to the overall market as it is right now. And this has been moving this P.E. with the Nasdaq 100, of which it's a very large component, until recently. As you can see, we're back, you know, not far from the highs in the Nasdaq 100. And here you are with the alphabet is that,

you know, under 19 times earnings. The S&P itself is around 22. So clearly the market's expressing doubt about the durability of that earnings stream. Finally, analyst consensus price target is way above the price per stock price right now by about 25%. That's an unusually large spread. Sometimes what you want to see is analysts actually either downgrading it or bringing that target down as a sign of maybe some capitulation, maybe the market sort of leading sentiment in this way. But that is pretty stark.

I look back multiple years before this. You can't really find too many instances of the shortfall in the price versus the analyst target. John. I'll take it. years before this, you can't really find too many instances of the shortfall in the price versus the analyst target. John. I'll take it. Mike Santoli, thank you. Up next, all of the overtime earnings movers that need to be on your radar as Gap's conference call gets set to kick off in just a few minutes. And Bitcoin's record rally rolls on. The cryptocurrency topping 98K for the first time ever, now up more than 40% since the presidential election earlier this month. We'll be right back. Welcome back to Overtime. Let's check on some movers this hour. Raw stores, that's higher

after reporting a mixed quarter where earnings beat, revenue missed, and operating margin came in above expectations. Shares are up about 6.5%. Net app is also higher after beating on earnings and revenue and giving solid third quarter earnings guidance. Those shares are up 3%. SL Green, this is moving lower after the Real Estate Investment Trust announced a $400 million stock offering. Those shares are down about 1.5%. Also, gap shares surging after an earnings beat. Up next, the top retail analysts on what he wants to hear from management on the call. It starts in just a few minutes. And cue the QR code. Yeah, there it is.

The latest installment of my On the Other Hand newsletter. This one's close to home. This week's debate is, is the move by CNBC parent Comcast to spin off its cable networks into a separate company, the Deathnell, for cable? Well, you can scan that code on your screen to join the conversation. We'll be right back. Welcome back. Gap shares are soaring in overtime after beating on the top and bottom lines. Let's bring in Corey Tarlow of Jefferies.

Shares are about 13% right now, Corey. It was a beat and raise quarter for Gap. And this really is a turnaround story for the company. So where would you say we are in in that process? I'd say we're probably in the early to middle innings here. This is the first quarter now in quite some time where the company's actually pointed to market share gains across all of their brands. So that's Gap, that's Old Navy, which accounts for most of the sales and profits, Banana Republic, which has been struggling for quite a while, and Athleto, which just recently comped positively.

So I think you're still in the earlier stages of this transformation. You have a new CEO who's focused on reinvigorating these brands. His name is Richard Dixon. He was appointed just about a year ago, a year and a half ago. And he's done a really nice job of driving some brand buzz and reinvigorating momentum in each of these brands while also driving better margins. And that's been a really big focus for us as analysts and investors

on a lot of conference calls that I've been on. And it's nice to see that in the quarter that they reported today that they've seen some really, really significant flow through on the sales beat in the operating margin today. Okay. So they've got a ways to go to get to 52-week highs, which would be near 30 bucks a share. How much more do they have got a ways to go to get to 52-week highs, which would be near 30 bucks a share. How much more do they have to show you for you to get off your hold rating? I think our focus going forward is really on two key aspects of this business. It's on market share and it's on margins. So we've seen the market share gains thus far, but I think we need to see a

little bit more of it to really convince us that what we're seeing is sustainable. There's been a lot of noise in retail over the last month or two. We've had hurricanes. We had October, which was one of the driest months on record, at least in the Northeast. And we've also seen a lot of excess inventory in retail. And combine that with the fact that now, in this holiday season, we have five less selling days between Thanksgiving and Christmas. So we think that in an environment where people are prioritizing what they need over what they want, i.e. shifting more into food and consumables versus discretionary and general merchandise, you really have to have the right product at the right price. And in an environment where, again, going into the holiday, which is a shortened time frame versus the prior

year, it's going to get promotional. So you really have to be careful in terms of straddling the line of driving sales at the expense of margin. And this holiday season is going to be really telling for that, we think. Okay. So in light of that, we did get results from Ross Stores as well, the Zara, which you cover. Those shares are up higher, even though it was a more mixed print, presumably in part because margins were better than expected. How is Ross Stores positioned for that environment that you just laid out? So Ross Stores has done a very, very nice job over a multi-decade time horizon of continuing to grow stores, gaining more and more customers. It's just that recently what we've seen and with their strategy is that they've decided to embark on a strategy where they're acquiring more branded

merchandise. And along with that, when you acquire more branded merchandise, which is mostly opportunistic and in closeout markets, so these are brands like Nike, it's their excess inventory that Ross is looking to acquire, this comes at lower margins. And so this is a strategy that they're embarking on where we think while it will potentially help drive sales, it does come at the expense of profits. OK. Over time. We'll see where it goes and we'll leave it there for now. Corey, thank you. Corey Tarlow. Up next, Elastic CEO on the software makers earnings before he runs through those numbers with analysts. Don't forget, you can catch us on the go by following the Closing Bell Overtime Podcast on your favorite podcast app. We will be right back.

Welcome back. Let's get back to Elastic ahead of that earnings call with shares just slightly off overtime highs now up about 18 percent. Well, for several quarters now, I've been hearing data focused enterprise software CEOs pumping the brakes on questions about how much AI was driving upside in their quarterly results. That's changing. I spoke with Elastic CEO Ash Kulkarni about this report. Elastic software enables real-time enterprise search of unstructured data, which is a key piece of the process of tapping into AI. And that's the area that's the sweet spot for us. So when it's anything to do with unstructured information in real time,

and you just think about all the business processes within any organization that rely on that kind of data being processed today by individuals, by human beings, often manual processes, generative AI is presenting an opportunity to automate many of them to really provide better experiences both for employees and customers than wherever possible. And that's what we are seeing our customers do. They're building these gen AI retrieval augmented generation style applications that are just amazing. And that's driving the demand for our technology. Morgan, Elastic shares were at about 70 bucks a share in early September. Right now, in overtime,

it's trading at 111. And I think this is part of the point, as we're talking about with Byron Dieter. It's not alone. Look at build.com. Look at Snowflake right after today's move. Some of these other, not exactly small, but smaller than mega cap software names. There's something happening. There's something happening and the moves are very dramatic to your point. We're starting to see it show up in the earnings and it's a very different story starting to materialize from just a couple of months ago when everybody was ringing the death knell saying software is dead. But the question of how much does AI transform business intelligence, there's some

chatter out there about questions on the ceiling on these large language models. I'm starting to wonder if that misses the point about if this becomes part of the circulatory system of the enterprise and therefore necessary for NVIDIA chips and some of these best of breed software solutions to be a part of everything. That's going to drive M&A, and that's going to drive some value. And, of course, we've been talking about that, right? The opening up of M&A and IPOs and everything else as part of this broader market story looking to 2025. So we'll see how it plays out.

That does it for us here at Overtime.