Closing Bell - Closing Bell Overtime: Stocks Soar To End Week; Under-The-Radar AI Play From JPMorgan 5/3/24

Episode Date: May 3, 2024

A strong session for stocks send the averages to a positive week; 3Fourteen Research’s Warren Pies and Unlimited Funds CIO Bob Elliott break down the wild week of earnings and what’s ahead for next week. Well-known JPMorgan analyst Stephen Tusa talks his bullishness on an under-the-radar AI play. Apollo Chief Economist Torsten Slok on the Fed’s next move. Plus, Bill Holdings CEO on earnings and the state of small business. 

A softer job print boosting hopes for a Fed rate cut and sending stocks sharply higher to end the week that is scorecard on Wall Street but winners stay late welcome to closing bell overtime I'm John Ford Morgan Brennan is off today and coming up this hour economist Torsten Slocke weighs in on today's jobs number and gives a bold prediction about when the Fed could cut and what's next for Apple after a massive buyback and a post-earnings pop? Well, we will talk to an analyst who says there's a lot more upside ahead for what he calls the Cupertino Colossus. We begin with the market and a strong day for the bulls, sparked by that soft jobs print. Today's action, pushing the S&P back into positive territory for the week, completing a round trip for the index after a big drop on Tuesday, followed by a Fed-fueled rally on Wednesday. You see it there? It's like literally ending the week with a W. That chart, it's like a W.

Joining us now is 314 Research co-founder Warren Pies and Unlimited CEO and CIO Bob Elliott. Guys, happy Friday. Bob, we had tough macro news that's keeping yields high and pressuring stocks and then decent earnings, boosting some stocks and now good macro news. So what do you say? What does it look like to you from here? I think a lot of the key themes from the macro perspective that have been in place for the last few months are still firmly in place.

I mean, the employment report still showed, you know, 175,000 jobs. It's pretty good. If you look at the last three months, that's 240,000 jobs. And that, you know, is about the same that we've seen over the last 18 months, which has averaged about 250,000 jobs. The unemployment rate was essentially flat month over month. You put that all together and you see something that continues the picture of pretty good growth coming out of the U.S. and that continuing at the same time that those inflationary pressures, they aren't yet resolved. And without resolving those inflationary pressures, it's going to be pretty tough for the Fed to give the type of easing that the equity market is looking for. Oh, and yet, and yet, Warren, you say that it's important to remember the Fed's motivated to cut even without these job numbers. So why do you say that?

Yeah, I mean, I think that it's an election year and I don't want to bury the lead. Ultimately, we came in this year pretty bullish and that was because we thought that people who are in power want to stay in power, and there is a motivation behind Fed policy and policymakers in general. So I think that's what's operating the background. You take Powell at the press conference this week, and I mean, it was a revealed preference that he really wants to cut. He had every opportunity to open the door to hikes. He was clear. He said, we're going to hold for a bit. But I think that if you read the tea leaves, and this is what the market's looking at, is that he's going to interpret any data he can in a dovish way, I think, and look for an excuse to cut. So to me, that's the big story,

is the Fed wants to cut. I don't think the data is going to allow them to, honestly. I don't think the data is going to, if they stick to their first quarter SEP of 2.6% per PCE by the end of the year, I don't really see a path there, given what's happening in housing. But the Fed wants to cut, makes it a tricky market. Well, let me not get, Bob, conspiracy theory-ish too much, but let's say the Fed were to cut and then it were to become clear that theyish too much. But let's say the Fed were to cut and then it were to become clear that they cut too soon. And then you head into a Trump presidency where at least the rumblings are

that he's got some designs on the Fed. I mean, it's not even just rumblings. When he was president, he pretty clearly jawboned the Fed. That wouldn't be good, Bob, either, would it? Well, I think the main place that that would show up is starting to affect term premiums as well as people's risk premium and financial assets. If it's uncertain what inflation is going to be, for instance, if it looks like the Fed is starting to abandon their 2 percent target and won't forcefully move towards that direction when necessary, then what that's going to cause is going to cause a lot of uncertainty in the bond market. We're going to see a steepening of

the yield curve. That's likely to hurt all financial assets as risk premiums expand. And so actually, I think it probably would lead to a pretty counterintuitive or counterproductive move if the Fed or the next administration started to pursue aggressively easy policy relative to what conditions would provide for. Warren, energy, the weakest S&P sector today, it was about flat, whereas technology led up 3%. In this economic environment that continues to be decently strong, where do you see energy going now? Yeah, I think that there's probably a 90 percent chance that crude oil is top for the year. So I really don't want to be involved in energy as anything other than a portfolio hedge, because as we've said before, with geopolitical pressures that we've seen, energy is kind of a hedge for your equity portfolio.

But on a standalone basis, it's not interesting to me. The other big factor, I think, in Q2 is if the Fed does find itself in a position unable to cut, I think we have other global central banks ready to cut. And that basically could pressure the dollar. That would be negative for risk assets, including energy and oil in general. And so to me, yeah, I think the top is in for crude oil unless we have some kind of geopolitical flare up. And it's always a losing bet to bet on that. And negative for risk assets, Bob, I guess would mean positive for gold. Odd. Gold, right? I mean, I think part of the story that there is a risk, there's a real risk that the Fed doesn't deliver the level of monetary tightness that's necessary to really bring

inflation down long term to that 2% target. And so that's why when you look at that diversified portfolio and you want to protect yourself against monetary policy that's too easy, you know, it's going to be tough to get that in bonds. Stocks may feel the effect. But we saw pretty directly gold respond to Fed, you know, to Chairman Powell's statements that looked a little dovish. And so it's an important component of the overall picture. I know it's rallied a fair amount, but it's still relatively cheap on a long-term basis, on a real basis, particularly if you consider the risk of overly aggressive monetary easing. All right. I always like to end on gold with you, Bob, Warren. Thanks to you both.

Let's turn now to Apple helping to propel the Dow's rally today after iPhone maker announced $110 billion share buyback and reportedly quarterly earnings that beat estimates. The bar was a bit low. Joining me now to discuss the Cupertino Colossus is Ben Reitz's from Elias Research. Ben, it's one thing to like Apple heading into the print, but you still like it from here, despite iPhone sales and presumably unit sales in most markets, if not China, trending lower. Why do you think AI is going to spark a refresh cycle? Well, first of all, John, great to be here. Good to see you. I think that this is the trough. You know, we just saw the lowest point for iPhone and it should get better. We think

China could even grow by the December quarter. And what we like about AI, John, is that they're going to release software that's going to compel you to get the iPhone with the best processor and the most storage and then buy more services. And we're really bullish about that. I think ASPs and Mix continues to even get better once they launch the iPhone 16 and then really get catalyzed with iPhone 17. This may be one of the best cycles for iPhones that we've had in its history. I want to spend some time there because I think this is something the market often gets wrong about. Apple is not paying enough attention to WWDC, paying too much attention

to the hardware announcements themselves. What do you think? When I think back on some Apple announcements that have really mattered, things like the video in the iPhone, being able to shoot video and transmit that over 3G, things like iMessage. What are you looking for in the iPhone, being able to shoot video and transmit that over 3G, things like iMessage. What are you looking for in the AI-related announcements that we would expect to get out of WWDC, both in apps and as they relate to developer tools, that'll convince you that this has legs? Well, that's a long answer. Let me try to summarize. I think that what we're looking for is an iOS assistant that allows you to summarize things in Safari, as well as your messages, add calendar appointments, and infuse generative AI into making the iOS better. But what I'm also excited about and I want to see is what they're going to do in imaging and video, because those are things that suck up storage, help iCloud, and help you need the most storage and the fastest processor in your phone. So I think what I want to see is

really good software, but then I want them to talk about how it's going to process with low latency out on the phone using a small or LLM. And we think that could be great because that would mean you need the fastest, best phone to enjoy the AI and have the best experience, which then creates the super cycle down the road. Tim Cook also starting to make the case, and I haven't heard much talk about this, that the work that the company's been doing over the past four years or so on silicon, which we've seen the impact in things like Adobe software, in video editing, and graphics work, that that same kind of work is going to benefit AI performance. Now, we've been talking to Cristiano Amon this

week over at Qualcomm, talking about their launch of chips. That's going to help with that as well. But do you see Apple's vertical integration benefiting them on these product launches this year as it relates to AI performance in particular? Absolutely, John. I think that they have a real advantage being vertically integrated. You know, Google does stuff and they don't control most of the people that make the phones, et cetera. And these guys, Apple, Cupertino, they control it all. And what they can do is they can turn the dial so that you have the best performance where stuff happens locally on your phone and privately and securely while you

interact with the cloud really when you need to. And that'll remove latency and make AI finally fun, finally lack the latency and the time it takes, seeing an hourglass almost. And I think they can do a really good job with that. And I'm excited to see what he has, but I think they lay the groundwork there. Also for the App Store, I wouldn't be surprised if they do stuff with either Gemini or with OpenAI. I'm excited to see how they partner to have access to other models should you want to use them. I think they're in the catbird seat where they can direct their model for a really good iOS experience and then give you access to other models and get paid for it. So I think that they'll continue to have opportunity to monetize their digital real

estate. Speaking of, when it comes to search, I think the number was 20 billion a year that they're getting from Google for placement on Safari. Should we think about the AI fee that they're going to be able to collect as being an expansion of that or is it in a whole separate category? Well, you know, of course, my guess would be is people are going to continue to want to search and Apple's going to continue to get paid for it. Frankly, you've seen some money flow out of Google today and into Apple, not only to make room for the investment, but I think some people are really figuring out that, hey, that was a Tim Cook that doesn't feel like he's about to lose 20 plus billion in services revenue. That was a man very confident that AI was going to be additive to his services business, create a chance to upsell his current

services install base. So I think Apple gets paid for that real estate. I think that they could provide, they could upgrade Safari and put AI features in there. And I think that they're currently potentially running an auction between OpenAI and others and Google to see who has access to AI-infused search. And I think they continue to get paid for it. The Apple I know for all these years gets paid. They don't pay anybody. Yeah, Tim Cook is good at that. Getting paid and not paying a lot. Both things have served that company quite well.

Ben Reitzis, good to see you. Thank you. Great to see you, John. Have a great weekend. You too. See you, everybody. Still ahead, Apollo Global Management Chief Economist Torsten Slocke on today's soft job sprint and whether it changes his prediction that the Fed's not

cutting anytime soon. But first, an under-the-radar way to pay the AI boom. And it's not in tech. JPMorgan Stephen Tusa is going to break down the part of the market that is poised for a major AI-driven boost. Overtime's back in two. Welcome back to Overtime. There's been a lot of hype about tech companies like NVIDIA and Supermicro benefiting from the AI boom, but could one of your best opportunities be outside of the tech sector? Our next guest says data centers could face the most ferocious investment inflection in decades. Says we're still in relatively early days. Steve Tusa of JP Morgan joins me now. Steve, welcome. So I'm looking at Vertiv Holdings here, which I think is a name that you like the most. And it was at like 15 a year ago, and now it's at 93. I mean, it's practically like an NVIDIA or Supermicro

itself at this point. Why do you think it's got more room to run? First of all, how's it going? Thanks for having me this afternoon. I think you use the term ferocious. We're kind of running out of superlatives when it comes to what we see in data center. A lot of these electrical equipment companies that I cover have already benefited from manufacturing, on-shoring, energy transition, you know, things like that. But the data center kicker that we're seeing now and the amount of electrical product that goes in to manage the power that these things are going to require is absolutely staggering. And frankly, we've really only been in this for a quarter as far as the orders these companies are seeing. As far as Vertiv is concerned, their orders were up 60 percent in the first quarter. This is a $7 billion company. It's not small. They've already been growing pretty strongly over the last couple of years. But I think it's important to keep in mind where this company came from.

They missed numbers pretty dramatically back about 18 months, two years ago when supply constraints came along. And so they were making literally no money for a quarter back then. The stock was at, you know, we upgraded at 14 and it went to eight. And that was, you know, a bit disturbing at that stage of the game. But keep in mind that, you know, people were thinking they weren't going to make much money at that stage. So here we are a couple of years later and the consensus prevailing number is, you know, just north of three dollars. So the stock back then was effectively trading at, you know, three times earnings. So we have to keep that in perspective when we think about where it's come from.

So I still think there's a lot of room to run given where these earnings are going. So this this reminds me, this setup reminds me of the chip manufacturing business, though, and it's boom bust cycles, because just talking to the CEO of AWS, Adam Solipsky, this week, and he was saying they're building out, investing in data center. Of course, Microsoft, Alphabet, Google doing the same thing, many others. I mean, at a certain point, won't there be so much supply that either people decide, okay, well, I can go with the hyperscalers and the hyperscalers will have their own economics. Sure, they use some of these data center providers, but they also have their own facilities. And then we get into a question of during a bus cycle, who can run their data centers most efficiently and survive and consolidate?

Sure. I mean, like we all die in the end. I mean, every cycle comes to a close. I'm a cyclical capital goods analyst, so I totally get that. But we're very early in this process. I mean, if you're telling me that six months from now, somebody's going to come back and say AI doesn't work, then I don't really think the data center industry is in trouble, but probably the market's in trouble if that's the case. I'm not smart enough to make that call. I just know that this is really the first quarter of strong demand on this front. And the pipelines these companies see and the fieldwork we've done to validate those pipelines, I mean, there are estimates that the data center capacity in this country is going to go from 20 gigawatts to 60 gigawatts over a four to five year time period, and that there are pipelines and money flowing in to support those pipelines that validate that case. We're not assuming that, and that's installed base. So keep in mind, these companies' revenues are driven by new additions, which are running, I don't know, three to four gigawatts a year. So just think about those numbers. And we're literally in the first quarter of this. So, I mean, you know, these cycles tend to be six, five, six years, not one quarter. So we'll worry about that when the time comes for sure. But I still think we're very early on. Just give me a couple more names in the space. And we've spent a lot of

time talking about just the one. But what are a couple of the other names that you like after Vertiv? Yeah, there are some kind of crafty laterals here that we can play this with. Eaton is definitely one of those. They not only benefit from the build-out directly in data centers, but also in the grid. They not only benefit from the build-out directly in data centers, but also in the grid. They're also benefiting from manufacturing reshoring here in the U.S. with semi and EV plants. And the other ways to do it would be on the HVAC side. These data centers require a ridiculous amount of cooling. Johnson Controls has about 8% to 9% of sales. Train Technologies is another one that has some really good exposure here. And then

Hubble, which is mostly grid. So you're talking about getting the power from the utilities to the data centers. All right. Good list. Steve Tusa, thank you. Have a great weekend. Thanks. You too. After the break, today's softer jobs number fueling hopes of

a Fed cut sooner than later. But is the market due for a reality check there? We will ask economist Torsten Slott next. And as we head to break, check out the biggest winners of the week in the S&P 500. And Overtime will be right back. The April jobs report coming in much lower than expected, at 175,000 jobs for the month versus the 240,000 expected. The unemployment rate ticked higher to 3.9%. The report's giving some on Wall Street hope that rate cuts could come later this year. And joining us now is Torsten Slock from Apollo Global Management.

Torsten, you had been saying not to expect any cuts this year. Did this report change your mind? No, it didn't. So there were two things going on in the report that are very important. But the first thing was that for the first quarter of this year, we have had government hiring of 52,000 on average for the last three months. Last month, meaning in April, we only got 52,000 on average for the last three months. Last month, meaning in April, we only got 6,000. So there was about 45,000 jobs that were probably underestimated in terms of what was actually going on. And the second thing is the seasonal adjustment always puts lower weight on

April, meaning that the report probably also underestimated what the actual true employment number is going to be when we get the revisions. So those two things combined argue for that. Maybe we're not too different from where we've been for the last several months. So if I combine that with what we got earlier this week, the employment cost index was higher than expected, meaning wages were higher than expected. ISM prices paid for manufacturing was higher than expected, meaning wages and now also prices in manufacturing higher. And also in services, you also had prices paid that came out today that was also higher than expected.

So our view still is that this economy is still hot and inflation is still a problem. And therefore, the Fed will not cut interest rates this year. I want to go back to summarize some of what you just said. It sounds to me like you're saying that this soft number on the points that matter really isn't as soft as it looks on jobs. That's exactly right, because one thing that's very critical is that the BLS and the BA, of course, do seasonal adjustment of data throughout the year, partly because of weather and for a number of other reasons. But it just happens to be the case that the seasonal adjustment for April has, for the last several decades, always given numbers that were lower in the initial print

that would end up being higher in the final estimate. So that's why the low print here has to be taken with some caution. That's also why rates markets reacted quite differently from equities. Rates markets first showed rates lower, but then rates started rebounding and we saw yields go up for the rest of the day, whereas equities were essentially, they also came down a bit, but were essentially saying immediately, oh, this is Goldilocks. So that was quite a different interpretation with rates investors and bond investors putting more weight on the seasonal adjustment argument and also this argument about government hiring being significantly weaker here in April relative to what it's been for the first three months of the year.

6K versus 45, I think you said. You think that's just a one-time blip, or is that just perhaps an overall change in the government trend? Yeah, this is very important because if you look at revenues from, meaning tax revenues, and the government collects money, of course, every month, you're still seeing a reasonably steady flow. So there is really no good reason why the government should be slowing hiring dramatically in April relative to the 52,000 that we had on average for the first three months of the year. So in that sense, if you still add it up, it doesn't get all the way back up to 240, which was the consensus expectation going into the number. But it still brings you much closer. And therefore, it begins to your first question, John, it begins to ask then the question, well, maybe this was not really a strong sign of a slowdown in the economy, in particular, not taken together with the other reports we got on ISM, in particular, ISM prices paid and also on ECI earlier this week.

So I would actually argue this is not a good week for the Fed when you think about their story that the economy is about to slow down. Torsten, if you're right about this, is there going to be other corroborating data in May that's going to suggest, eh, maybe the market shouldn't have read the jobs report that way and should have listened to Torsten and what he said both about the government and the seasonality? No, you're right.

I mean, so, of course, the data that's most important really here continues to be the consumer. A lot of the anecdotes in this earnings season are still showing the picture of a K-shaped recovery where the higher income groups continue to still do reasonably well, whereas lower income groups are still under some pressure. So taking that together and waiting here for retail sales coming up, then it does become quite important to your question to monitor, are there signs that the

consumer is beginning to slow down? For what it the red book same store retail sales data which is weekly is still showing significant strength in consumer spending so that means that even on that front we have not seen that consistent picture with a slowdown in the labor market and the story that in particular the equities are painting today so So if I just take the weekly data, hard data for consumption, and now coming up we'll get the monthly data, I still think, John, to your question that the consumer is still just fine. And broadly speaking, this earnings season has also given quite surprisingly to the upside strong earnings data. That also does not paint this picture that the Fed has inflation and the economy under control. So that's why the risks are still that the Fed will stay on hold for the rest of this year.

That's our baseline scenario. Okay. Maybe hold the confetti. Torsten Slock, thank you. Thank you. Well, time for a CNBC News Update now with Julia Boorstin. Julia. Hi, John. Well, the Trump hush money trial has wrapped up for the week following the testimony of Hope Hicks, who is a close advisor to Trump.

During cross-examination, Hicks testified that former Trump lawyer Michael Cohen went rogue and took actions that were not authorized. This as the defense argues that Cohen could have arranged the payments without the former president's direct orders. The judge also ruled today prosecutors can't ask Trump about gag order violations if he ends up testifying. The Justice Department indicted Texas Democrat Henry Cuellar and his wife Imelda today on bribery and conspiracy charges. The pair was

charged for accepting about $600,000 in bribes from an Azerbaijan energy company and a Mexican bank. The congressman says he and his wife are innocent. And Dave & Buster's plan to allow customers to bet on its arcade games is drawing scrutiny. An Illinois state lawmaker has filed a bill that would make the chain's plan illegal. Dave & Buster's announced earlier this week that its loyalty members would soon be able to bet on those games through its app. Back over to you, John. All right, Julia Borsten, thank you. And still to come, the CEO of financial software company Bill Holdings as that stock pulls back following last night's results.

We'll get his take on the quarter and how his small and medium-sized business clients are faring in this environment. And after the break, here's a rare opportunity, some pillow talk with Mike Santoli. What better place to talk about soft landings and valuation cushions than at the huge Squishmallow display here at the Berkshire Hathaway annual meeting in Omaha. I'm here in the Squishmallow truck. They have Warren Buffett, Charlie Munger pillows.

John, give me your order. I need to know how many you need by the time I get back to New York. Welcome back to Overtime. Apple's inching back toward where Microsoft is at that $3 trillion market cap after popping on yesterday's earnings beat. And one of the company's biggest shareholders, Berkshire Hathaway, is on its way to hitting $1 trillion in market cap. Berkshire's annual shareholder meeting kicks off tomorrow morning in Omaha, Nebraska, and our Mike Santoli is there already loading up on Dairy Queen and Squishmallows. Maybe you can just drive that whole truck back here.

Mike, what do you say? You know, John, that truck's going to need some work. This company's very frugal. I'm pretty sure that thing doesn't actually run, and it's very old. But the Dairy Queen booth is right over here. I tell you, John, the Apple investment, I always marvel at it, not just because it's up six or seven hundred percent since Buffett first bought his shares initially in the early part of 2016, but because the story seems to be playing out based on his general premise of, hey, it's a great branded consumer goods company,

priced products at a premium. It's steady. People don't want to get rid of the price. It's not about technology and AI and how much they invest in the future and innovation. So I actually think today's buyback announcement, coupled with the steady but not really stellar results from Apple, more or less sort of reinforced the idea that Buffett had when he first got into this. Now, I don't expect you to have done this calculation, Mike, but for most shareholders, even pretty sizable ones, when Apple hikes its dividend, it's, I imagine, nice, but not a huge deal. But Berkshire Hathaway has so much Apple that both the dividend and to some degree the buyback, I imagine, is just on a whole different scale.

905 million shares is how much Berkshire Hathaway owned at last report. It's a little under 6% of total outstanding shares of Apple. And what's interesting about the buyback is, for the most part, now Berkshire has trimmed its Apple a little bit along the way here and there, but for the most part, Apple's buying back those shares from everybody besides Berkshire has trimmed its apple a little bit along the way here and there. But for the most part, Apple's buying back those shares from everybody besides Berkshire. And so therefore, and this is part of the premise, too, he holds forever and everybody else sells the stock back to the company. He owns more of the business than he did initially. That's been the story with things like American Express over time as well.

So at 25 cents a share, that's $226 million that they get. That's a nice little dividend pay. You could buy a lot of squishmallows with that. You can. And, you know, well, he bought the whole company with a fraction of that, as a matter of fact. And it is always interesting that Warren Buffett is the one person who still gets away with the idea that he loves to collect dividends from Coca-Cola and Apple and everybody else and earn a lot of yield off of their fixed income investments, but not pay a dividend himself in Berkshire because he's made the plausible case, persuasive one, that that money is better invested by him at a higher return. And, you know, he's going to give all the stock away down the road. So he's trying to help society by not paying a higher return. And, you know, he's going to give all the stock away down the road. So he's trying to help society by not paying a dividend today. First meeting without Munger there, sadly. How's the mood different, if at all? It's not discernibly different, I don't think. But it's actually very, very busy relative to

past years, at least in the convention hall here. I do think that the fact that, you know, sort of the shareholders felt as if they've had Munger for so long and absorbed his message so deeply because, you know, he was very consistent in what he would say about investing in his principles for going about almost everything. He'd been up there for decades, you know, for hours at a time at this meeting. It feels as if while it's an absence, you know, it's also more or less been absorbed into the fabric of the company. He left very clear instructions. Mike Santoli, thank you. And by the way, don't miss Mike and Becky Quick tomorrow from Berkshire Hathaway's annual shareholder meeting in Omaha. It all begins at 930 a.m. Eastern, live on CNBC and streaming on CNBC.com.

Well, shares of Bill Holdings closing sharply lower, down 10 percent, despite an earnings beat. Up next, the CEO, Rene LaSerte, is going to break down those results in an exclusive interview. And Monday kicks off another massive week of earnings. All the big names you need to keep your eye on. We'll cover them later on Overtime. Welcome back to Overtime. Bill Holdings under pressure to say the least in today's session. Worst day in three months after reporting third quarter earnings last night. Transaction fees up 25% year over year. Total revenue up 19% versus last year. Earnings guidance for the current quarter perhaps coming in weaker than estimates. Joining us now, Rene Lassert,

founder and CEO of Bill Holdings. Rene, you know, beating a raise quarter and the stock initially popped on the results, then tanked. First, let's just take me through the quarter spending from SMBs, which you have a great read on. And why the beat? Yeah, well, thank you, John, for having me on the show. We did have a great quarter. We delivered across a number of initiatives. We enhanced our platform. We added to the ecosystem and we really continued to innovate across the platform.. We added to the ecosystem. And we really continued to innovate across the platform. That's what drove the results. The 19% year-over-year beat. Our non-GAAP operating income was a 68% year-over-year beat. And that's just significant when you think about we're growing the business at the same time we're growing profitability.

And it's because we have a long-term focus on building what's best for customers, what's best for investors, that you have to have that innovation platform at hand. And so what we saw across the ecosystem, across the data that we have moving 1% of GDP through Bill, was that businesses have stabilized their spend. There's still some lack of clarity about the future, but that stabilization is helping them get back to doing what they do best, which is building great companies. And so our focus every day is around doing that. That's where our obsession is and feel really good about the results that the team delivered this quarter and excited about what we're going to be able to do going forward because of the success this quarter. I did see some concern out there about your

partnerships with financial institutions. You've got six of the 10 largest banks as partners at this point, J.P. Morgan, B of A, Amex, Wells, PNC, etc. Are those relationships you think safe or are some of those institutions going to take some of what you do in-house and cut you out? I think one of the things that is super critical for us is that we want to meet SMBs where they're at. And so we have a multi-pronged strategy for acquiring customers. We go direct. We go to accountants that then bring us their customers. And then we go to partnerships and financial institutions. We've been in the market for 10 years.

What we've done there is that prior to us, businesses really had nothing. They were going for consumer online banking if they wanted something to help them automate their finances online. And now with us, we've developed the capabilities to not just do it for financial institutions, but to do it across an ecosystem of software partners. We announced during the quarter a partnership with Xero, which is one of the leading online accounting software platforms across the globe. We announced a partnership with them in the U.S. And our ability to be able to serve those customers with an embedded solution that's been built off of a decade north of a decade of partnering with other partners, that's super valuable. And so when we look at the overall ecosystem, we do not see it contracting. We see it expanding. We see it

expanding. We see the opportunity across both banks as well as software aggregators, the opportunity to serve more and more SMBs. So do you think that as a software company, you have a different visibility into the kinds of partnerships, platforms it's going to take to serve the small business needs overall? And where does artificial intelligence fit into the picture as small businesses are going to need and want better context to know how to make decisions? Yeah, so financial operations, which is at the core of what we do, is leveraging software to automate processes that were paper-based manual processes before. Having that core capability to automate operations every second of every day, that's different than building software. I know. I've

built software companies. I've built payment companies. I've built payroll companies. I've been doing this now for over 30 years trying to create solutions for SMBs that actually changes the way they do business. And we've been successful for millions of people across our network and hundreds of thousands of businesses every day. And what that means is that when you focus on the operations, and this is why companies are coming to us and saying, hey, can you help us with financial operations for our customers? It's because we actually understand all the parties involved in a transaction. When you sell software, you sell it directly to one company. When we sell our solution to a

customer, that customer then engages both their suppliers and their customers in a whole suite of activity. They engage their banks with the payments. They have reconciliation and all sorts of challenges that we get in the middle of. And that's what it means to automate financial operations. And it's because we've moved a trillion dollars since 2018. And we do it, you know, obviously safely, securely across an entire ecosystem of regulatory environments across the U.S. and the globe. That's why partners come to us. And that's why we have confidence that the ecosystem will continue to scale. Well, we'll keep tracking it and the around 460,000 small and medium businesses that you've got as clients. A great read on what's happening in that segment. Rene Lissert, CEO of Bill. Thank you. Thank you, John.

Walmart and Optum recently announcing they're getting out of the virtual healthcare business. Up next, the CEO of one company involved in telehealth on what those moves mean and don't mean for the rest of the industry and it wasn't all green on the Wall Street screen today Expedia by far the biggest loser in the S P 500 after cutting its full year sales Outlook because of weakness in its Verbo brand BMO Capitalets and Piper Sandler, both downgrading that stock to neutral on booking growth concerns. And because you love overtime and you want even more of it, scan the QR code on your screen. Follow us on LinkedIn. There we post exclusive content. And Overtime.

Telehealth, including doctor's appointments over video calls, was supposed to be the future after the pandemic accelerated adoption of technology for virtual appointments. So why are Walmart, UnitedHealth, Optum, and others scaling back their efforts? Well, to find out, I took time out this week with a CEO using software to make health care more efficient. Owen Tripp is CEO of Included Health, formed from businesses Grand Rounds and Doctor on Demand. The goal overall, he says, is to use technology to expand access to care. And from a young age, he could see how important that was. I was born in Massachusetts in the Boston area, and I am the son of a pediatrician.

Both of my parents were sort of heroes of mine. My mom was an educator. My dad was a pediatrician, and he was really a community doc. So he would get stopped in the church parking lot and people would, while I didn't ever see anybody undress in the church parking lot, I sort of worried that that was going to be the next step as people talked about a variety of ailments, lesions, whatever, headaches. And, you know, he took care of those people and he took his job incredibly seriously. The promise of virtual care, including visits over video calls, was that it would allow doctors to see more patients, even those that weren't physically nearby. But just as investors are seeing Peloton struggle as people return to gyms

post-pandemic, business models look shaky that were based on the idea that people would mostly interact with doctors through a screen. Most important investment for us is a connected experience. We want an integrated experience. You know, you and I have talked about this in the past. We're not exclusively virtual care. We believe in referring to patients to wonderful and quality in-person care. We're experimenting with that on our own. We believe in the continuity between primary and specialty care. So investing in that integration and not trying to treat these things like silos, that's the most important priority for us. Because if you ask anybody on the street what they want, that's what they would describe. They don't want to feel like they have to go into a new

healthcare experience and retrain and re-educate the provider every single time. That's where we're focused. We know that's the winning formula. It's also where our business is absolutely surging. So the timeout takeaway, hybrid health. Companies are finding they need a balanced menu of options for patients to interact with doctors and nurses. Telehealth alone also appears to be kind of like a self-checkout line or cashierless stores. Seems like a good idea at first, but customers don't love them and they come with downsides. Now, CNBC's Angelica Peebles joins me to talk about how MedTech is reconsidering some assumptions about the future of health. Great to have you. So there are all of these innovations coming over the last few years. They accelerated a bit during the pandemic.

What are we seeing now in some of the areas that you also cover, even when it comes to getting drugs into people's hands? Yeah, John. So in life sciences, we have seen this push to actually write prescriptions online. For better or worse, it's been easier to actually get a prescription written, whether it's for mental health like ADHD, or also we are seeing companies like Eli Lilly trying to go direct to consumers so that they can get their weight loss drugs, or now we're even hearing about migraine drugs. So that's been an interesting area to see evolve as we are going more online. But people both want a personal touch and it seems like companies encounter some downsides when they move too much to digital. Over-prescribing

in some cases or maybe even people taking advantage of prescriptions that shouldn't be. Exactly. And that was a big problem with the ADHD drugs is that we saw this big spike in prescribing and that actually did contribute to a shortage of these drugs. And also for the people, some people had some really bad experiences with this. And unfortunately, that does give the whole industry a bad look. But at the same time, like with Lilly this week saying that it's going to start offering its drugs directly to consumers, some of its drugs, the idea there is that it can be hard to find these drugs, and they want to go direct to consumer

and help make it a little bit easier to find them. And I guess technology can't do everything, which is an important thing to remember when we're getting promises of things like AI and all that it's going to do. Sometimes you need a human in there to sort of like monitor the line. Exactly. And, you know, you think about one of the problems here with any sort of virtual care is that so much of health care does need to be in person. You can describe symptoms over the phone or even show someone on the screen. But at the same time, you might need to go have someone actually look at it.

There are things that are great. You think about therapy. One thing that works really well, just talking to a person or checkups with your doctor where you don't need to be in person, but at the same time, you do need to have that physical touch for a lot of these things.

I'm glad you were here in person, Angelica. Thanks for- Great to be here in person. All right, joining us on Overtime and have a great weekend. The earnings parade shows no signs of slowing down next week, or at least not much. This was a very big week. Up next, a look at some big names that are set to report and the economic data that could move the market. And don't forget, you can catch us on the go by following the Closing Bell Overtime Podcast on your favorite podcast app.

I'll be right back. Welcome back. Another big week is ahead for Wall Street. Berkshire Hathaway releases its numbers tomorrow and then high-profile names next week include Disney, Uber and Arm Holdings, plus Palantir, Simon Property Group, EA, Reddit's first report, Instacart, Roblox and Warner Brothers Discovery, among many others. Lots of video games and media in there. EV maker Lucid reporting Q1 numbers after the bell on Monday. Stock is down about 16 percent in the last three months. Lucid CEO Peter Rawlinson is going to join us right here on Overtime Monday for an exclusive

interview before the conference call. Ending the week, I'm looking at this, and both Apple and Peloton were up 8 percent on the week. Interesting, given outperformance in China and elsewhere. That's going to do it for us on Overtime. Fast Money starts now.