Closing Bell - Closing Bell Overtime: Stocks End Wild Week; elf Beauty CEO On Consumer 8/9/24

Episode Date: August 9, 2024

Stocks stage another comeback attempt to claw back Monday’s gains. HSBC’s Jose Rasco and Charles Schwab’s Kevin Gordon break down where things in the market. BofA’s Robert Ohmes previews next week’s retail reports after executives warned about a slowing consumer. Mark Mobius on international opportunities and global volatility. ELF Beauty CEO Tarang Amin on the latest quarter, growing market share and the strength of the consumer. Axon CEO Rick Smith on growing demand for drones in law enforcement.

Well, that's the end of regulation. Blueprint Investment Partners and Chesapeake Capital Corporation ringing the closing bell at the New York Stock Exchange. Summit Global Investments doing the honors at the Nasdaq. Stocks range bound to end a wild week. The Nasdaq 100 remarkably finishing in the green since Monday's open. And the major average is only logging minor losses. It looks like S&P is basically flat here, which is big news in of itself. When's the last time you heard that? That's the square car on Wall Street. But the action is just getting started.

Welcome to Closing Bell Overtime. I'm Morgan Brennan. John Ford is off today. Coming up this hour, Mark Mobius, the man some have called the Indiana Jones of emerging market investing, joins us to talk about the wild volatility in global markets and where he's putting money to work now. Plus, we will get a check on the pulse of the consumer when we are joined by the CEO of cosmetics company Elf Beauty, which is sinking today on the back of stronger than expected results, actually. And one of the big market winners of the week, the CEO of Tazer Maker Axon joins us.

With that stock up more than 20 since monday's open after it too reported earnings but let's begin with our market panel after this wild week of trading joining us now is kevin gordon of charles schwab and jose rasco of hsbc private banking and wealth management good afternoon to you both kevin i'm gonna start with you because we had the worst day for the S&P since 2022 this week. We had the best day for the S&P since 2022 this week. And it looks like we're finishing basically flat. We're actually up today about half a percent, 53-44. We've done a round trip.

Where do we go from here? It's remarkable. You know, I think that there was probably too much of an adverse or negative reaction to some of the payroll data last week. And then there was probably too much of a strong reaction, you could argue, to claims yesterday. But I think it's, you know, it's sort of nature of the beast when you get such a low volatile environment. You get this sort of coiled spring and a jump in volatility when you get such a strong event like we had on Sunday night. It's not surprising to see. I think that you have to sort of parse through and maybe separate what is an actual growth or recession fear

and what is sort of a response to maybe more of a deleveraging or sort of the unwinding of a popular trade, that being, you know, tech, at least in the case of the United States, tech that got, you know, so stretched in a really frothy environment versus something that looks a little bit more dangerous from a recession standpoint. I think the positive nature of what has happened over the past week is that when you look at some of the sector action and you look at even the economic data, whether it was ISM services or whether it was claims, there's not as much, I think, to speak to the fact that, you know, the market's telling you we're going into some sort of imminent recession.

You know, you look at some of the gainers this week and what's been doing well, financials, energy, industrials. That, to me, doesn't signal that the market is voting or saying that a recession is sort of imminent. It's kind of like you took the words right out of my mouth because I'm going to say it's amazing. Week to date, the top performers, industrials, energy, communication services and financials. And Jose, we've got a market now that is debating what the cut looks like come September, whether we get 25 basis points or 50 basis points, but it would seem everybody now expects a cut. Is there any reason not to? The only fly in the ointment could be inflation, right? I think we're clearly going to see weaker economic growth. But the question is, does inflation slow or could we

see an upside surprise in the next month or so? And we don't think so. If you look at the numbers we're getting next week, they look relatively benign. In fact, the core rate is expected to go down further. So that's good news. And the PCE deflator, remember, Morgan, 2% symmetric rate means 1.5% to 2% kind of range for the Fed. And we're already there on the PCE deflator. It's a 2.5%. So I think they have the ammunition they need to move. The question is, as was just mentioned, has the market overdone it in terms of eases? Is four or five eases really logical in an environment where we have an economy that's slowing, but not yet all that rapidly, right? So, but yeah, we think, and the other question I would say is, once the Fed does ease, is it already in the price? That is a key point. Kevin, you like cyclicals here? Those are the sectors you'd be investing in?

Yeah, I mean, I think with the caveat that, you know, it's not a thought on our end that you're going to go into this economic, you know, sort of broad expansion and reaccelerate from here. We still think that you're staring down the barrel of an economy that is softening. But when you take a bigger picture, look at what's happened over the past couple of years. We've gone through weakness already in certain parts of the economy. Clearly, manufacturing and housing and consumer goods and everything cyclical got hit first. Now that's starting to translate and transfer over into services and parts of the labor market, evidenced by the trend that we've seen, even in payrolls or the unemployment rate.

But our thinking is that there aren't these big imbalances or big pockets of leverage in the economy that are going to take you down, akin to what you had seen in prior recessions. So as long as you get this sort of continued roll through in the nature of the recession that has hit the economy already, we think that you can kind of get the roll back and sort of the reverse of that in a recovery sense. So if that sort of keeps intact and hangs in there and the Fed embarks on what we think of still as of now is going to be a relatively easier, relatively less aggressive cutting cycle. Historically, that tends to benefit

the cyclical parts of the market over the traditional defensives. OK, Jose, what do you like right now? And I ask that knowing that we haven't just seen volatility this week in equities. We've seen it in the bond market as well. So it's worth also raising the question, how much are stocks now going to take their cues from what we see in treasuries well i think you're going to continue to see that volatility and fixed income filter into the equity markets especially as the fed begins its easing cycle more importantly as treasury continues as janet yellen warned us about last year continues to issue more debt in a lumpy fashion and And we've seen twice already where that has

pushed the yield curve up and it has resulted in volatility in equities. Now, one very important factor, though, people keep forgetting is in 2021, we've refinanced like crazy. We set an annual record for corporate debt issuance in five months, Morgan. More importantly, about 10 percent of CFOs moved from zero to two percent in terms of their duration from five years and out. That is a very big deal because 10 percent of corporate America may miss the large part of this Fed tightening cycle that we've been through. Right. Because by 2026, five years after 2021, Fed funds will be right back where they were. We did a full circle and you could see a lot of companies coming to market at rates they were already at five years ago or very similar to.

Right. So they may have missed. That's a very positive for balance sheets, which I think helps the story that we were talking about earlier in terms of keeping the economy afloat. It's a key point. It's one we don't talk about very often on the network and is worth putting some light on. Jose Rasco and Kevin Gordon, thanks for joining me. Nice to see you. All right. Thank you. Have a great weekend.

You too. And as I mentioned before, the Nasdaq 100 did actually eke out a gain of four-tenths of one percent this week. The S&P basically flat here. The Dow finishing today higher, but lower on the week. The rest of 2000 really taking it on the chin. Turning now to retail ahead of a major week of big box earnings on the way. Wall Street is sounding the alarm on the health of the consumer as executives point to cracks that they're seeing

in different industries. Take a listen. We are seeing shorter booking lead times globally and some signs of slowing demand from U.S. gas. The U.S. consumer is a little bit soft. You've seen it from a whole variety of consumer companies. We have seen a more challenging macro environment and a slowdown in travel demand consistent with recent commentary from others. We're just watching the consumer and some of the softening there. We were a little bit somber talking about the consumer. Wholesale is relatively weak, both mainly driven by traffic and conservatism. You are seeing a little bit of the consumer struggle in some areas of the market. Persistent inflation over the last few years has led to belt tightening across wide portions of consumer discretionary spending. Well, next week brings more on the

consumer front when two retail giants, Walmart and Home Depot, report results. We also get retail sales next week. Joining us now is Robbie Ohms of B of A Securities. He has a buy rating on both of those names, Home Depot and Walmart. Robbie, we'll start with Home Depot because we know this tends to be a read on housing and we get this first. It really sets the stage. Yeah, so Home Depot reports next Tuesday. You know, we're not expecting big upside as some of the other people you just pointed out have been mentioning. It does sound like there's been a little bit of a slowdown, especially more recently in the month of July. But we do think while there's a little bit of risk to our comp forecast for Home Depot, we do think there are going to be other areas of the business that they're going to talk about that really highlight where their opportunities are,

especially on the pro side of the business. What are you looking for in Walmart, especially since we know Walmart has really been a little bit of pun intended here, the blue chip name when it comes to the big box retailers and that play on affordability? Yeah, I think Walmart's going to say that they're still gaining a lot of share at all income cohorts. I think they're going to highlight the success they're having with their grocery delivery business. And I think they're also going to highlight how strong their digital advertising business is and how well their third party marketplace is growing. And these are supporting gross margin with alternative profit streams. Okay. Robbie Holmes, we will be watching. Thank you for joining us and setting that up. Well, for now, a Friday surprise.

Senior markets commentator Mike Santoli joins us here on set. He's looking at where we stand in this pullback process. Mike, how are you? Good to see you. I think the Friday surprise that the market was nice and calm and firm and all the rest of it. But we we have plenty of them. Here's what it looks like on a one year basis, which I think is it's pretty good context for what this pullback has accomplished so far. Plunge below the 50 day average. That also happened back in the spring.

Important to note that. But this is kind of a hurdle right above that. Fifty four hundred is just call it somewhere around there. That would suggest that'd be an obvious area for people who bought the lows to see if they want to lighten up. But overall, I think you still have to say it's a pullback in an ongoing uptrend. It hasn't really violated anything along the way, even though you had huge exacerbating factors from all those macro places in the hedge fund liquidations we've been talking about all week. The volatility index reflects exactly that to a ridiculous extreme, frankly. This up here, that's around 38 38 the intraday was above 60. folks who studied this stuff say it really was a not quite a real number you couldn't really transact at that level it reflected some extreme stress in the in the market for volatility products but nonetheless

you have a massive relaxation there that's a huge spike and kind of knitting needle spike in the vix usually that means that the market can kind of knitting needle spike in the VIX. Usually that means that the market can kind of settle out a little bit. It's still elevated, though, at 20. So good that it's down for the week, but still probably has some work to do. And so it's always a little bit of hesitation after a volatility shock like that. Now, take a look at what the VIX futures curve is. This is what people are actually paying for future volatility here. And you see it's still up above 21, or it was this afternoon. And so you see this weird shape. Normally it slopes gently upward.

And so you see it's very much volatile in the near term. Maybe we'll get a break into September. And, of course, that's a spike into October. That's the pre-election trade. That's been there for a while. It's there almost every election year. So this is sort of telling you, putting you on alert that you probably shouldn't just, you know, relax and stop paying attention altogether. It was literally the question I was going to ask you is how much do we see this injection of volatility in an election year as you do get closer to that November voting day? It's it's sort of nuanced because on the one hand, it says, look, people, smart money in the market are willing to bet that there's going to be some unsettled action into it, at least the possibility of it.

That's what historical patterns would tell you, too. On the other hand, it's almost kind of a mechanism or a signal that says people have kind of preloaded their fear trade. And so there's a lot of room for pleasant surprise with the fact that maybe people have already hedged and don't need to do as much selling down the road. So you want to see this calm down and take a more normal shape. But for now, I think you still have to say these are agitated markets. All right, Mike, it's good to have you here in the house. We'll see you a little bit later. OK, well, after the break, global market investor Mark Mobius says the uncertainty in markets is not over and more stress could be coming. Similar to the yen carry trade on wine fueled the volatility earlier this week.

He's going to join us to explain. And later, we will talk to the CEO of Tazermaker Axon. This is the top performer in the S&P 500 this week after strong earnings and guidance about the company's move into public safety drones. This is also becoming somewhat of a stealth, maybe not so stealth anymore. AI play overtime is back in two. Welcome back. Stocks finishing essentially flat on the week, but the picture looked a lot different on Monday when the unwinding of the yen carry trade sparked a global market meltdown and added another level of uncertainty to an already jumpy market environment. So is the worst over? Well, joining us now is Mark Mobius,

chairman of Mobius Emerging Opportunities Fund. It's great to have you back on the show. And that's exactly I want to start with you, because we've been talking about the unwinding of this yen carry trade. And it's a tricky thing to fully get your arms around. Do you think the worst of this is over or do you expect more ripple effects? I think we're going to see more ripple effects going forward. It's just amazing to see what's happening in some of these markets around the world, particularly emerging countries where their currencies are actually getting stronger against the U.S. dollar, which is unusual. You know, usually these currencies are weak against the u.s dollar and you're seeing currencies like the malaysian ringgit going up by six percent against the u.s dollar

that's an incredible change and one after the other you go down the list to korea taiwan all these currencies are up one two or three percent against the dollar so this is a signal i believe that there is a waning confidence in the U.S. market. And of course, a lot of people are burned with the fact that Microsoft, Apple, these great companies are down by 10, 15, 20 percent. So I think we're going to see a lot more uncertainty going forward, particularly with the election coming up. No one is sure as to what will happen, whether Harris will come in or whether Trump will come in. And of course, they're entirely two different programs of those two parties, Democrats, higher taxes, real problems with companies in terms of those taxes. And then

of course, with Trump coming in, lots of restrictions on trade. So, lots of uncertainty out there, I would say. It sounds like you think political uncertainty is what is causing the dollar to weaken against so many of these currencies. It's not the anticipation that the Fed is finally going to start to cut rates here? I think the rates, just one factor. I mean, I think a lot of people put too much emphasis on the interest rates. What they really should be looking at is the money supply. You know, you saw money supply going up by 20 plus percent during COVID. Then it came down.

It actually started decreasing. Now it's come up by 1% or 2%. You have to keep an eye on that because a lot of this liquidity is squeezing the markets. And the lack of liquidity is squeezing the markets. A lot of people have spent all that money that was distributed during COVID. And now they're in trouble. They have problems. And that's the reason why you have this yen situation and other things happening around the world.

So I don't think the interest rates are going to be the real determining factor going forward. OK, the last time you were on with me, which is a couple of weeks ago, you said China's investable again. Here's why. I wonder what you think now that we got some data overnight from China that that's showing inflation beginning to perk up. I mean, the concern had been deflation. We're certainly hearing it in earnings from consumer companies and the like, that China seems to be weak. What is your sense of that market now? What's happening now in China is that they're on the mend. You know, as you mentioned,

a lot of people are concerned about deflation. Now you see inflation coming back, which is a good sign, a sign that the consumer is back. It's going to take time. But generally speaking, I think China is on the mend. And I think you'll see the Chinese market doing better as we go forward. It's not going to happen overnight, but I think it's probably a good time to stop looking at these Chinese stocks. We do have these flaring geopolitical tensions in the background. I think a lot of folks sitting on their hands wondering what happens next in the Middle East specifically. How much geopolitical risk premium is priced into the markets here? Or is this one of those situations where unless something really

incendiary happens, investors are sort of brushing it off? Well, you see, that's part of the equation. The uncertainty about what's happening in the political environment in America touches on Ukraine, touches on the Middle East, touches on China, because these two political parties will have a different stance. And the perception overseas now is that there's lots of uncertainty. What will the Democrats do? What will the Democrats do? What will the Republicans do? And generally speaking, the feeling is that the Democrats will be more aggressive in Ukraine against Russia and in China, whereas Trump may be more moderate.

But again, the uncertainty is very, very high. Mark Mobius, great to have you on. Thanks for being here. Thank you. After the break, do views on the consumer need a makeover? Elf Beauty is pulling back hard today after last night's results,

which largely beat expectations. The company's CEO will join us with his response to Wall Street's reaction. Welcome back to Overtime. Shares of Elf Beauty getting crushed today, down 14 percent. That's despite a huge beat on sales last night of 50 percent year over year. The company raised its fiscal year guidance, too, but that came up short of the Street's estimates. Joining us now in an exclusive interview is Elf Beauty CEO Tarang Amin.

Tarang, it's great to have you on Overtime. Thanks for being here. That's exactly where I want to start with you, because 50 percent growth for fiscal Q1, you did do this beat and raise. But as a number of analysts have pointed out, that raise in the current quarter signals a slower rate of growth than what we just saw in earnings. So walk me through it. Why are we seeing that? Sure. First of all, thank you for having me. It's a pleasure to be on. I'm really proud of our team. 50% net sales growth, 260 basis points of market share growth. This is our 22nd consecutive quarter of both sales and market share gains. And so I'm really proud of the results of the team.

What I tell you on short-term volatility, we don't pay that much attention to it. We've been focused on what really drives our stock over the long-term, which is net sales growth and adjusted EBITDA growth. And we have a terrific track record, as I said, 22 consecutive quarters of that. And so if we continue to execute, I'm not worried about any one-day reaction to this stock. I think we've had pretty good performance over the last five years, and I'm very confident in our team and what we're able to do. But do you expect to continue growing at the rate you've been growing in the current quarter and beyond? Well, we certainly, our approach on guidance, I should mention, is a pretty conservative approach. If you look back over five and a half years, we usually take a very balanced view one quarter at the time.

For example, last year, I think our initial guidance was something like 22 to 24 percent growth, and we delivered 71% growth. So there's a certain pattern each company has. Ours is really to take it one quarter at a time. I'm highly confident in terms of the white space we have. We feel we can double our market share in color cosmetics, just as we have over the last few years. We have two of the fastest growing brands in skincare.

We're very much in the early days of our international expansion. It's only 16% of our business, but been growing in this last quarter, 91%. So I'm highly confident of the growth prospects ahead of us. And you are taking market share as well, and you sell into Target, you sell into Walmart, a number of other places. How do you continue to grow and expand distribution? And given the fact that you are, I would say, a more affordable brand than some of the other beauty and cosmetics players out there, what does that mean in terms of what you're seeing with consumer behavior? Sure. So I think, you know, if you look at what the three main drivers of our growth have been, our value proposition, we make the best of beauty accessible

to every eyelid, face, and skin concern. concern our powerhouse innovation a unique ability to take inspiration from our community and the best products in prestige and bring them at extraordinary values and our disruptive marketing engine we know how to engage and entertain our community we're the number one brand amongst gen z gen alpha we're picking up more millennials and gen x so we have a winning formula when it comes to our retail partners. We've been able to continue to drive incredible market share growth within each of them and really help them grow their categories. And so that's the formula we're going to continue to follow. What's growing the fastest? Well, the great news for us is everything's growing. Our international business was probably the fastest growing aspect of our business, up 91 percent. But we have very strong growth across our national retailers, across our digital business, across color cosmetics,

skincare. So I think that's the great news about e.l.f. It's been a consistent growth story across every one of our channels. We're in an election year, some focus on what that could yield in terms of policies. Tariffs is certainly something that's been in focus. How are you planning for 2025? And if we were to see something like that come to fruition again, do you have room to take price? Well, our brand certainly has pricing power. There's only two times in our entire 20-year history we've taken pricing. One was in 2019 in response to 25 percent tariffs. The other was in 2022 in response to the inflationary pressures every company is facing. So we would use a similar approach going forward.

If there were big tariffs, we'd use a combination of pricing, FX help, supplier concessions, and further diversification. So I feel given the strength of our value proposition, we have been able to weather almost any external force, whether it be the pandemic, inflationary proposition, we have been able to weather almost any external force, whether it be the pandemic, inflationary pressures, you name it. We've been able to post consistent growth regardless of the environment. Okay. Bottom line, it sounds like consumers are still spending on beauty, at least on e.l.f. beauty products. That's right. We've read that consumers are being choosy, and I would say that choosing e.l.f., and you can clearly see that in

our market share growth as well as our strong top line. Okay. Tarang Amin of Elf Beauty, thanks for being with me. Thank you for having me. Well, it's time now for a CNBC News update with Pippa Stephens. Pippa. Hey, Morgan.

An airplane carrying 62 people on board crashed into a neighborhood on its way to Sao Paulo, Brazil, this afternoon. The flight operator said it did not have any information about what caused the crash or the condition of the people on board, but a state official just confirmed that the black box had been found. A California man who threatened to hang Democratic politicians during the January 6th riot at the Capitol was sentenced today to 20 years in prison. It's one of the longest sentences

among the hundreds of rioters prosecuted so far. David Dempsey was also accused of viciously attacking Capitol Police officers with makeshift weapons during the riot. And the co-founder of the Smartmatic voting machine company was charged with paying more than $1 million in bribes for Philippine contracts. The Justice Department said the co-founder and a colleague at the company funneled bribes for Philippine contracts. The Justice Department said the co-founder and a colleague at the company funneled bribes to the country's Electoral Commission chair through a slush fund. The fund was created by overcharging the costs for each voting machine that it supplied. Morgan, back to you.

All right, Pippa, thank you. Coming up, a chart the Fed might want to pay attention to. Mike Santoli looks at the massive jump in funding rates and why that could be a problem for economic growth in America. And later, forget self-driving cars. You may want to look to the skies for the next innovation in transportation. We've got those details on the big news surrounding the future of air taxis. That is ahead on Overtime. Welcome back. Mike Santoli joins with a look at prime rates at multi-decade highs

and what this could mean for the commercial economy. Mike. Yeah, Morgan, it's a good picture of how Fed policy is restrictive for those businesses that borrow at the prime rate. Of course, this is set by banks, but linked directly to the federal funds rate controlled by the Fed. And this is an inflation adjusted version of the prime from Michael Hartnett at Bank of America, basically discounting the current stated prime rate by the five year expected inflation number, showing it's basically as high as it's been since 2007, above six percent. So it's a reminder that even though public yields have stayed tame and of course, Treasury yields have gone down, those that kind of borrow in the more private markets would get relief from a Fed rate cut.

So that's why the Fed, one of the reasons they think that policy is restrictive and they have room to cut. Now, take a look at some parts of the public equity market that have already been sort of front running this anticipation of a Fed rate cut. And then also, of course, kind of taking some some power from the decline in Treasury yields. Financials as well as real estate are now on a six-month basis outperforming the S&P 500, which, of course, is something that's a switch from where we were in the first part of this year. The whole thing is really fascinating to me. I mean, ZipRecruiter reported earnings earlier this week, and one of the things that they called out was the reduced demand that they're seeing from small and medium- sized businesses as they do

have this gauge on the labor market. And so when I look at something like this, I mean, maybe big companies, they can weather the situation more easily. We were just having this conversation earlier in the hour, the amount of companies that that refinanced before we saw the Fed begin tightening, but maybe not so much for small and medium businesses, which we know are job creators, especially things like commercial real estate. If you want to refinance your building loan, you're going to be paying up much more than just, you know, looking at the public, you know, investment grade credit market and saying you can get at that cost. All right. Mike Santoli. All right. Thank you. All right. Well, Axon was the best performer in the S&P 500

this week. That was thanks to strong earnings and a surge in demand for its software and specifically its AI service, which is just rolled out. That helps draft police reports. Up next, the company's CEO tells us about those AI opportunities and its ever expanding move into drones. And check out shares of Insulet. This is the biggest loser in the benchmark index today. The insulin delivery device maker missing profit estimates because of fewer patients switching over from competitors. That stock finished down 9 percent. Stay with us. Welcome back to Overtime Shares of Archer Aviation under pressure after the electric vertical takeoff and landing startup Evital startup reported earnings and revealed its Southern California air taxi routes,

even though the company is still months away from certification. Phil LeBeau joins us with more. And Phil, they've got some momentum, but to that point, we still have a ways to go before we're seeing these flying in the air carrying people. Oh, they've got a lot of hurdles they've got to overcome, but they are outlining their network, Morgan, and they're going to start in Southern California, where the Los Angeles Rams play, and to other destinations like Burbank, Hollywood, places where they believe,

look, people in the past might have ordered a black car. Instead, they'll say, you know what? I want to take an EVTOL, cut the time it's going to take to get from one location to another. For Archer, the midnight EVTOL still needs to be certified. Let's be clear about this. They believe that they are close, much like their competitor, Joby, but it still has not received official certification. Nonetheless, Stellantis, which is investing in Archer,

announced another investment of $400 million as they start moving towards manufacturing of the Midnight eVTOL. If you take a look at shares of Archer, one reason why the share is under pressure today, this continues to be a non-revenue company. So to a certain extent, you're looking at the results, and it was another loss last quarter of 32 cents a share. One part of you could say, yeah, they're not in revenue yet, so we're not really too worried. The other part of you says, are we really going to see commercial service next year? Take a look at Archer and Joby. They both are planning on commercial service in 2025.

But again, Morgan, the big question is, when do they get certification? By the way, Joby believes it will probably get to the point of certification so it could start service in the Middle East before Los Angeles. But Southern California is where the both of them are are targeting urban air taxis. Yeah, it's fascinating to watch. Philip. Oh, thank you. And of course, there's this big push to do it before the Olympics as well. Seeing how other transportation networks to like Brightline West, the high speed rail project out there. Phil, have a great weekend. We've got a niche century old telecommunications technology that's getting a mass market makeover. And startup Cesium Astro is betting the future will rely on it.

Phased array communications. It allows you dynamically to put the signal where the demand is and then remove it and put it somewhere else where the demand is less. And it's really a dynamic way of managing spectrum and power and how you use it. And it's critical for the next generation of telecommunication. And that's about to come. So founder and CEO Shea Sabrapour is betting that phased arrays will be crucial for a variety of industries, from space-based home Internet services to drones and war fighting, air travel, autonomous driving, and even deployment of generative AI. Case in point, humanoid robots. When two people have a conversation, each uses roughly 100 watts of power. Currently for a robot that's not connected to anything, it requires several hundred times

more power. Now, this doesn't mean that humanoid robots won't happen. It means that a lot of the processing and learning and training that humanoid robots need will be done at data centers, in the neural nets of the data centers that also require a lot of power. But that information will have to be edge processed with the robot. And that's where telecommunication is important. So the need for connectivity. This was very much in focus with Lumen Technologies CEO Kate Johnson. She talked about this on Overtime just earlier this week as well, connectivity and the role that will play in this generative AI rollout. But Cesium Astro recently closed a Series B plus round of funding

and is already working on Series C. Investors include Truesdale Ventures, Development Bank of Japan, L3Harris Technologies, Jaguar Land Rover, and Airbus Ventures. Now, this doesn't mean that humanoid robots won't happen. It means that a lot of the processing and learning and training and that human robots need will be done at data centers in the neural nets of the data centers that also require a lot of power. But that information will have to be edge processed with the robot. And that's

where telecommunication is important. Okay, that was the wrong soundbite, but you get the picture. So for more on Cesium Astro, scan the QR code right here. Check out the full conversation on the Manifest Space podcast. We have a news alert on Starbucks. Pippa Stevens has the details. Pippa. Hey, Morgan. Well, activist investor Starboard Value has reportedly taken a stake in Starbucks, according to a report in The Wall Street Journal. Now, the size of that stake and the exact demands are not known, according to that report. Now, this does, of course, follow fellow activist investor Elliott Investment Management,

also taking a stake in Starbucks and proposing a settlement that would involve a board expansion, among other things. And this, of course, does follow some issues for Starbucks in the key U.S. and China markets. Those sales have slumped and prompted the coffee chain to cut its guidance twice already this year, with shares down about 20 percent so far this year. But now you see up here about three percent in extended trading. Morgan? It's like the hedge funds are having coffee talk. All right. Pippa Stevens, thank you. After the break, why taser maker Axon is making a big bet on AI and drones and when those investments could pay off for investors. Welcome back. Axon Enterprise finishing at the top of the S&P 500 this week after reporting robust earnings on Wednesday.

The company raising its revenue forecast on strong demand for its products, including Taser and software. It also has DraftOne, which uses AI to draft police reports from body, camera, audio, and video. And another potential growth area for Axon is drones as first responders. Axon announced it was acquiring D-Drone back in May. We covered that here on Overtime. And more recently, Axon announcing a partnership with Skydio to launch an end-to-end offering for drones in public safety. So joining us now, Axon founder and CEO Rick Smith, along with Skydio CEO and co-founder Adam Bry. It's great to have you both here.

Before I get into this partnership, Rick, I would be remiss if I didn't ask you about earnings and the strong performance we saw in the stock this week? Because yes, you've got Taser 10, but also software leading to that demand. And you haven't even fully rolled out this AI application yet either. Yeah, it's been a really great time to be at Axon. We've built this huge network of Tasers and body cameras and in-car cameras. And really what makes it valuable now is the dawn of AI becoming really practical and its capabilities growing so fast. Draft 1 is just the first of many AI capabilities that we think will be transformative for our customers.

What writing police reports is something officers hate to do, but it consumes about half of their day. So they sign up to be a cop, but they end up as a data entry clerk, and we're cutting that time about in half. And we're just getting started, but we've already got a bookings pipeline around $100 million right out of the gate. And we're just seeing a ton of strength

across the business. Yeah, I mean, Axon, I think about body cameras. I think about tasers. But software is a growing piece of the business. AI, it sounds like with this pipeline, it's going to continue to propel that. So how does this continue to transition the company? Well, you know, AI, we look for all the places where, okay, where's the next big value creation? And drones as first responder

is one of the fastest growing areas of policing. 10 times more agencies are doing DFR, drone as first responder this year than they were a year ago. And so we announced this really tight partnership now with Skydio, which is the world leader in autonomous drones using AI to fly drones. It's another great place where AI can, frankly, do a better job of flying a drone and detecting obstacles and just reducing the need to have human beings standing on rooftops flying drones. And so that's really the thing we're leaning into next. And Adam, we know drones are in demand. We're seeing them increasingly used on battlefields. We talk about defense tech and all the investor dollars that are rushing into

the sector more broadly. Look no further than Anduril raising one and a half billion bucks yesterday and announcing that news. So what is Skydio seeing in terms of demand and growth? And what does this partnership bring to the table? So drones have kind of been on this journey the last few years where people started using them for all kinds of important tasks and public safety and critical infrastructure inspection. And it's now matured to the point where I think they're transitioning from being useful to being essential. And we think of drones as really the ultimate sensor platform to make it possible to put sensors in dangerous situations ahead of people, get better information,

make better decisions and we're seeing tremendous impact in public safety where you might have a suspect who's potentially armed, you can send the drone in there officers can know exactly what they're walking into, it's safer for them, it's safer for the suspect, it's safer for the community and with DFR and this partnership with Axon, I think we're really poised to take this next step to true scale and scaling up the impact when we do that. Yeah. Rick, I mean, last time you and I spoke, it was because you were acquiring D-Drone, which is a company well known to CNBC. It's a CNBC Disruptor 50 company. So you're acquiring that. You're partnering with Skydio. How do you expect this drone offering to evolve?

And perhaps just importantly, what are you seeing in terms of demand signals? Because unfortunately, we have seen them from a law enforcement and first responder standpoint drawn into the spotlight just last month, even with former President Trump's failed assassination attempt on him. I would say, you know, we've done well when we focus on what are the biggest problems we can go focus on solving and what are the biggest opportunities to create value for our customer. If we do that, everything else takes care of itself. And so the bet here is a pretty simple one. Drones are going to matter even more in the future than they matter now.

And D-Drone allows you to see all the drones in a space. And then Skydio allows you to fly your own drones autonomously out into that space. So you're just pointing where you need it. And then the drone and the software and the AI that they're working on can take care of the details. So that frees officers to be doing their job. And then the drone becomes kind of like a flying canine with human operators certainly overseeing their use. But we think this is kind of a magical combination to be able to see and control the airspace, be able to see drones that might be a threat, and then be able to deploy your own drone.

So it's kind of like chocolate and peanut butter. You put these two together, and now you've got a powerful capability. And Adam, there's a lot of focus right now on production and particularly production of U.S. made drone systems and supply chain and what that looks like, especially as it increasingly does find its way to battlefields like, for example, Ukraine, where I know you're building out a team right now. How quickly can you stand up production? And what does this mean at a time where lawmakers are considering putting more restrictions on the imports of Chinese-made drones?

So I think the thing that's most clear is that it's just absolutely critical from a national security perspective for us to have U.S.-made drones with a secure supply chain. And this is something that, as the largest U.S. US manufacturer, we take very seriously. We've been building drones in the US going back almost a decade. We've invested massively in building up that capability and building up a supply chain amongst our allies. And I think we're still in the early innings of the space. And as AI takes hold, these things are going to become more ubiquitous, more powerful. And we can't accept a world where we're dependent on our adversaries for this technology. So we're most excited about the impact we're having with our customers, but the need for a strong U.S. industry is front and center for us as well. It's something that's super motivating for our work.

Okay. Adam Brey of Skydio and Rick Smith of Axon, thank you so much for joining me. Thank you so much for joining me. Thank you. Up next, the stars of tonight's talk, taking a stock special on next week's earnings and the two economic reports that could have a big impact on the Fed and your money. And boy, they are stars. They're here. Welcome back to overtime after a volatile week for stocks, we've got a big show for you tonight. That's going to be kicking off at 6 p.m. Eastern, Taking Stock. We're now joined by the two stars of that show, Mike Santoli and Josh Brown. This is like a Friday smorgasbord for me to have you both here on set.

I mean, I got to start with you, Josh. What do you think of the markets here? You just distracted me with smorgasbord. Seven o'clock, you can eat whatever you want. If you said to me on Monday morning that the week would end the way that it ended, I would have said every investor I talked to would take that as a huge win because it was not clear at all that we were going to be able to come back from some of the things that people were really worried about. And it's not that those worries have gone away. It's just that we've had this really rapid fire acclimation to some of the, let's call them new negatives. So this is, I think this is a win for investors. Technicals, seasonals, fundamentals,

valuations, speaking of fundamentals, I mean, it's all in play here. All in play. It's an ongoing adjustment is the way I would think about it. I mean, whether, you know, Monday's low is going to hold up or not. I think it was it's almost like the equal and opposite reaction to having an incredibly calm, low volatility rally led by a handful of stocks into the middle of July. You unwind some of that and underneath it, you find what the assumptions were that were propping this market up. And we're challenging some of them. I think that's that's kind of the key. The fact that we didn't have a lot more mechanical fritz and, you know, it didn't really cause any further real apparent stress in the trading markets, in the capital markets, in in this whole hedge fund liquidation, whatever it was. I think that is probably the most beneficial thing you could

say about the market. And then it seemed to make it safe for some dip buyers. What do you expect next week? I mean, we have some potential catalysts next week. You've got the claims date on Thursday, which is now taking on more attention, but you've also got CPI, PPI, retail sales, and we do get more retail earnings and some tech along the way. So the good news is I don't think that there is a CPI or PPI print that's going to alter the Fed's course for September. I don't even think it'll moderate whatever the Fed's rhetoric is going to be in Wyoming later this month. So I think it's going to be dovish. Yeah, I think it's a number that like will obviously pay attention to. But I think it'll be quickly digested, even if if it's a tenth of a point above what was expected.

I don't think that kills us. I think the bigger issue is we're in a no man's land. We don't have a Fed meeting until late September. There are no more really important earnings other than NVIDIA, which is like two and a half weeks away. Right. So the no man's land is not the best place to be, but it's also not the worst place to be. And I think that that's just kind of like where we are seasonally. And we've been here before. Yeah. We do this every year. All right.

Well, we're going to get even more context on all of this with these two tonight on Taking Stock. In the meantime, S&P finished the day higher. That's going to do it for us here at Overtime.