Closing Bell - Closing Bell Overtime: Stocks Tumble To End April; Amazon Earnings 4/30/24

Episode Date: April 30, 2024

Major averages snapped their 5-month winning streaks with a dreary April performance, plus Amazon reported earnings. DA Davidson’s Gil Luria and Maxim’s Tom Forte break down the numbers from every angle, while KeyBanc analyst John Vinh reacts to AMD’s quarterly results. Neuberger Berman’s Kevin McCarthy on what it would take to add Starbucks to his portfolio after its disappointing earnings. Plus, numbers from Caesars, Pinterest, SuperMicro, Mondelez, Clorox and Skyworks.

Well, it's an ugly finish to a downbeat month with the S&P 500 sinking today, falling 4% for the month of April, the Nasdaq losing 2% in the session. That is the scorecard on Wall Street, but winners stay late. Welcome to Closing Bell Overtime. I'm John Ford with Morgan Brennan. Well, will today's mega cap earnings help boost the sentiment on Wall Street? We are just moments away from results from Amazon, AMD, Supermicro, Starbucks, Pinterest, and many more. But as we await that flood of earnings, let's get straight to the market action. An ugly finish to the month.

Vital Knowledge founder Adam Crisafulli and CNBC's own senior markets commentator Mike Santoli. Guys, good to see you. Adam, the post-Microsoft earnings pop has faded Microsoft back at 390. Alphabet hasn't lost all of its post-earnings pop, but almost. I mean, is this market trying to find direction again? Yeah, I mean, I think we had a pretty powerful rally up to lows about two-thirds days ago, a week and a half ago, where we hit that low right after the Israeli strike in Iran. We bounced back, in large part thanks to very healthy earnings.

And now we're stalling a little bit. You know, you saw another, you know, toxic combination of economic data this morning. Yeah, I just want to mention Amazon results are out. We are going through them, Adam. Go ahead. No, so I'm just going to say you saw, you know, a toxic combination of economic data today with the hot inflation coupled with weak growth. And you saw the reaction in bonds and equities today in the downside. I think the low that we did hit a week and a half ago is sustainable. But we're going to chop around a little bit. Adam, we've got to get to Kate Rooney. She's got those numbers.

Kate? Hey, John. So for the first quarter, strong beat here for Amazon. We've got the top and bottom line numbers. EPS of 98 cents. That was a beat. Street was looking for 83 cents from Amazon. That was on revenue of 143 billion.

Better than expected. Wall Street consensus was 142 billion. We are still looking through the results, but that's the initial reaction. You can see stocks pretty much unchanged here, slightly higher after hours, John. But we will keep looking through these results here, especially for that AWS number. We'll come right back with some details. All right. Sometimes it's like baked goods, Mike Santoli. You've got to let it settle a little bit. It was down 4% initially, but then popped back up to even, and now it's up 3.5%.

We haven't even had the earnings call yet. Mike Santoli, I'll go to you on this one. There were big expectations out of Amazon from these results after what Microsoft and Alphabet turned in. For sure. And also, it's a very consensus long. People are optimistic on the story about what they can do with margins. Obviously, AWS kicking back in, reaccelerating in terms of growth rates. So all

that seems to be baked into what the street was expecting. You also had estimates up quite a bit over the past few months. So the past quarter, they definitely hurtled that. In terms of what revenue guidance looks like, I think that's where a lot of the focus might settle in from here. Yeah. Along those lines, Adam, North America's segment sales for Amazon up 12% year over year, 86.3 billion. International segment up 10%, increased 11% X foreign exchange rate impact. AWS, this is the big one, right? AWS segment sales increased 17% year over year to $25 billion. That looks like it's a little better than street expectations. It's interesting to see that after Alphabet beat with its cloud, Microsoft beat with Azure with its cloud business this quarter as well.

It really speaks to perhaps the impact that we're seeing of AI, all of these big investments, as these hyperscalers continue to take on more of that cloud-based market share. Yeah, no, that's a very solid AWS number. You know, that's one of two key numbers with the stock. The other really important one is the North American retail margin, which they have outperformed dramatically over the last several quarters. So it's really AWS and those retail margins that have been the driver of the story.

And so I haven't seen the retail margin number yet, but that AWS is pretty healthy. It's about 200 basis points plus above expectations. And like you said, echoes what we saw last week out of Google and Microsoft, still very, very robust trends in these hyperscalers. And that's the reason why they're pouring tens of billions of dollars into CapEx, continue to build it out. Microsoft last week said that they're still constrained on Azure with AI. And so, you know, they're still pouring a lot of money into CapEx. Yeah. Mike, it is interesting because we continue to have this push-pull between macro data and some of the mixed picture we're getting there.

The most recent, some of these signs perhaps of stagflation, or at least how investors are reading into it, is signs perhaps of stagflation as we do await that FOMC decision and Powell presser tomorrow. And then on the flip side, some of these secular growth stories that we talk about day in and day out, like AI. I mean, what drives the narrative here? Can the two exist peacefully together? Well, they're fighting it out, I guess, Morgan, is the way I would think about it on a day-to-day basis. And it really converges on treasury yields and earnings estimates, basically trying to find the equilibrium there. And I think that the earnings side is taking care of it as far as the bulls are concerned, mostly at this point in terms of beat rate and everything else. I mean, I don't think we're really talking about stagflation. What we're talking about is an

economy that might be slowing toward its long-term potential growth rate at a time when inflation has stopped going down as much as it was last year. So I think it's a long way from there to go to pure stagflation. But, yes, it's basically a halt in the incremental improvement along both fronts. And I think that's why the market has been stuck really for a couple of months here. Okay. We've got Kate Rooney back with more details from the Amazon report. Kate. Hey, Morgan. So AWS sales, this is key, up 17 percent year over year to 25 billion. That's a key number the street was looking for. The estimate consensus estimate was for 14.7 percent

growth. It looks like Q2 revenue guidance is a little bit light here. 144 billion to 149 billion is the range. The estimate is for 150 billion, so below that. And then operating income guidance, also at the midpoint, was slightly below estimates. But the AWS sales looking strong and maybe accounting for some of the stock rise here. But we'll keep digging through this, guys, and we'll bring you details as we get them. All right, Kate, thanks. That stock up a little better than 5% at the moment in overtime. Adam, Chris, and Fuli, it seems to me that they point out the 60 basis point foreign exchange impact on the guide here. That could account for some of the softness here, because very often these expectations don't take Forex into account. No, definitely. And I'm just looking at the report. So the North American retail operating

margin is 5.8 percent. It's very healthy. So that's above expectations too. The street was about closer to 5 percent. And that's down just 30 bps sequentially. So like I said, outperformance in FUS, outperformance on North American retail operating margins. Those are really the two key drivers of this story. And, yeah, there's some switching some of the guidance that could be effectuated. We'll probably get some more color on the call about various pieces of their business. But, you know, for Q1, at least, they're still performing very well. Mike, I mean, we look at the market, what happens here.

We had losses on the month for the major averages, a lot of selling here. You talked about the fact that Treasury yields climbed higher as well here. We're back to fall highs, higher highs, looking back to the fall, I guess I should say. How much do earnings matter here? How much can mega cap, I guess, kind of pull the story forward? And when you see some of the stuff that outperformed on a day like today, I guess, you know, the 3Ms, the Eli Lillies of the world, how does that speak to some of these cross currents? Well, it's interesting in terms of today's performance, aside from those that you mentioned, industrials in general, very strong,

and they continue to diverge from consumer cyclicals. It feels like industrials are in the right spot today. There's some of the earnings like Eaton and Train and a lot of those lever to big secular themes. That's working in general. As I said, earnings are doing their part. They're up like 4 percent on a 12 month forward basis in the last couple of months. But it was already a relatively fully valued market. And so you have to watch yields because treasury yields arguably are searching for the pain point for the economy. And they haven't really found that level yet where it seems to slow the economy in its tracks. So we've got more earnings coming out. We're going through those numbers right now.

You can see some of them on your screen with some of these moves here. Super micro looks like it's up about three and a half percent. Pinterest is spiking 22 percent. Starbucks is down almost seven percent right now. I will bring you those results as soon as they're. And we've got Pinterest right now. Julia Boorstin has the numbers. Julia. That's right. Pinterest shares are soaring up about 22 percent right now after the company beat expectations across the board. Adjusted earnings of 20 cents per share are seven cents ahead of expectations. Revenue growth accelerating in the quarter, a faster than expected 23% revenue growth to $740 million in revenue versus the $700 million that analysts had estimated. The company also adding 13 million more monthly active users than expected to end the quarter with 518 million monthly active users and second quarter guidance is well ahead of expectations. The

company guiding to a range between $835 million and $850 million in Q2 revenue rather than the $827 million estimate. I just spoke to CEO Bill Reddy, who told me that Pinterest's AI ad tools have been a huge tailwind for improving ad results and content recommendations, that the company's new ability to shop recommendations is yielding strong results, that the company's new ability to shop recommendations is yielding strong results, that the macro ad environment is more constructive, and that Pinterest is winning with the Gen Z demographic. Morgan and John, back over to you. All right. Thank you, Julia. Super micro earnings are out. Meantime, stock is higher. Christina Parts and Netlis has the numbers. Christina? Yeah, it's higher on the increase in guidance. Let's go through the Q3 results. EPS was a beat

at $6.65, adjusted with revenue fell short $3.85 billion. But what we're seeing for Q4 revenue guidance, a range of 5.1 to 5.83 billion. So that is a little bit, or I should say about around 5.1 billion. That's a little bit higher. But the company also saying they're raising their full year 2024 from a 14.5 range to 14.7 billion to 15.1 billion. So not only are they increasing their Q4 revenue guidance, the full year goes up with it. And they're saying they're seeing strong demand across the board, especially for their AI servers, which is what they assemble. So you can see the stock reacting to that guidance. Thank you. Yeah, it looks like we've just turned lower, actually, for Supermicro, down about 2%. Christina Parts-Nevelis, thank you. Starbucks, another one trading lower right now in overtime. Those earnings are out. Steve Kovac has the

numbers. Hey, Morgan. Yeah, insurers are down about 8% after missing on the top and bottom line. We got EPS coming at 68 cents. Street was looking for 79 cents. And revenues were $8.56 billion. Street was looking for $9.13 billion. And even some more bad news in this report. Same-store sales are down 4 percent and also a 6 percent drop in transactions. Guidance, nothing in the release on guidance. That's coming on the call a bit later, Morgan. Okay.

Steve Kovach, thank you. Ad, I'm going to go back to you. It's sort of like pick your poison here. I know the bar was very high for Supermicro going into this, maybe not so much for Pinterest, but the commentary there about AI and what that means for how users are interacting with that site and what it means for advertising, perhaps very promising, sort of in line with what we've heard from some of the other social media companies. And then there's Starbucks. We keep talking about it. Cracks in the consumer.

Yeah, we heard some data points this morning from McDonald's or even Molson Coors about how there is some softness in certain pockets of the consumer, and that's showing up at certain companies more than others. And so Starbucks obviously is getting hit pretty hard. There's also an issue with China with Starbucks, where they're facing enormous competition. And so, you know, I think in aggregate, if you listen to the visas and the MasterCards of the world, the consumer is still resilient. But certainly there are some changes that have to meet the surface. And that's been a big theme throughout this earnings season. You know, in Supermicro, it's a hard name to

really look at. There's definitely a meme element to that stock. And I think of all the really prominent AI stocks, the moat around this one is probably the most shallow versus Nvidia or Google or Microsoft, where you have Dell, you have HP, and a lot of other companies are moving really aggressively into this space. So that's the hardest one of all the real prominent AI stocks to get a read on after earnings.

Numbers are fine and estimates will go up. But expectations were so enormous with it. And Pinterest, you know, the tech conversation is always dominated by these mega cap names. And that allows kind of these more mid caps like you had Snap last week. Also, shockingly strong numbers in Pinterest, too, it looks like, where, you know, it's kind of just they're not being as focused on as these larger caps. And, you know, they're performing pretty well in the current environment. Yeah, Pinterest up 20 percent now in overtime. Now let's get Skyworks earnings. That stock sharply lower. Christina Parts of Neveless has those numbers. Christina. This is a company that makes communication chips. They did post EPS of $1.55, which was higher than

the street anticipated. Revenues came in relatively in line, $1.55, which was higher than the street anticipated. Revenues came in relatively in line, $1.05 billion. But it's the Q3 revenue guidance that falls short, $900 million, less than the billion the street was anticipating. Just one quick quote. During the March quarter, mobile business was below seasonal trends with lower than expected end marks. And I say that because a lot of Skyworks money does come from Apple. That's one of their biggest customers, contributing 70 percent of total revenue. So Apple down ever so slightly in after hours on this report. You can see Skyworks down on that lower guidance. All right. Perhaps some read through ahead of Thursday with Apple's earnings.

Christina, thank you. Caesar's earnings are out as well. We're just going to keep going here. Christina Contessa Brewer has the numbers. Morgan, the news here is that the House does not always win, and luck turned against Caesars this quarter in Las Vegas. Caesars Entertainment, a miss on earnings with a loss of 73 cents per share versus the 7 cent loss the street expected. Revenue is also coming in light at $2.7 billion versus consensus $2.8 billion. Look, the gamblers won. The 49ers lost in March. March Madness turned in betters favor. Adele had canceled. Bad weather hit the regional casinos. Here's the thing about luck. It could

turn next quarter in Caesars favor. In the meantime, you've got digital reporting positive EBITDA. Remember, that's the crucial earnings metric in gaming. And that was in spite of the expense of opening a new market in North Carolina. Investors on the call will want to hear details about how Caesars is doing with a new online casino app, that iGaming, where the potential profits are so much bigger. In the release, CEO Tom Rigg says he's optimistic about improving the operating performance this year. Right now, you can see Caesars, though, is off by almost 4%. Morgan?

All right. Luck be a lady named Contessa Brewer. Thank you. Mike Santoli, going to go back to you with this one for reaction. Caesars, Skyworks, how much we should read through to Apple with that stock trading lower. Tied to that in sympathy as well, some of these other names, Starbucks. Yeah, I mean, I think with the Starbucks numbers as they were, maybe to a lesser degree Caesars, you are going to be able to reinforce this emerging theme of consumers basically becoming more discerning or feeling like companies push price a little bit too much.

Within the consumer confidence data today, as a matter of fact, by far the leading response to where might you start to spend less was eating out of away from home. Now, they always say that, but I think maybe they might mean it this time. Aside from that, relatively messy responses. I still think things like Pinterest being up 20 percent, even though I get it, it's an upside surprise, a nice little story in terms of their earnings growth picture coming into view. It's just an erratic reaction to one of these reports. And it shows you this is a market that is suffering from kind of lower conviction

and basically prices have to move really far to find people with a confident take on these stocks. All right. Mike, we'll see you shortly. Adam Christofouli, thanks for joining us. It looks like AMD is crossing as well. We'll have that in just a moment. Oh, hold on, we've got it.

Christina Partsenevelis, how does AMD look? Well, we'll start with EPS. It was a beat, 62 cents, but a one cent beat. We're going to say that revenues are relatively in line with what the street was anticipating, 5.47 billion. Q2 revenue guidance, also in line, 5.7 billion. That's what the street was anticipating $5.47 billion. Q2 revenue guidance, also in line, $5.7 billion. That's what the street was looking for with this name. And if we were to break it down into categories, data center and client business actually did better than what the fact set numbers that we have.

But gaming and embedded, we know that those are two markets that the company AMD has warned about weakness, cyclical weakness. Both of those fell short of estimates for the quarter. So, again, Q2 revenue guidance fell in line with what the street was anticipating, $5.7 billion. You can see the shares are dropping over 3% on this. Indeed. Christina, thanks. Amazon off its best levels, but still higher right now in overtime. We're going to take a closer look at the quarter and what investors want to hear on the call with management when overtime comes right back in two. Amazon's higher a little less than two, about two percent after reporting a beat on the top

and bottom lines. They're well off the best levels here. Let's go back to Kate Rooney with more from the report. Kate? Hey, John. So there's some commentary here from CEO Andy Jassy, a little bit of a preview about what we'll probably hear on the call. Talking about AI and AWS talks about combination of companies renewing their infrastructure, modernization efforts, and the appeal of AWS's AI capabilities. He said that was re-accelerating AWS's growth rate, says AWS now at $100 billion annual revenue run rate. ARR talks about delivery speed and then the lower cost to serve.

Advertising, we haven't gotten to that number yet. That was up 24%, better than expected, a high-margin part of the business. Folks are watching. And then on profitability, free cash flow improved to an inflow of about 50 billion, 50.1 billion compared to an outflow of 3.3 billion a year ago. So that profitability picture improving. North American margins finally 5.8 percent. Those shrunk slightly from 6 percent sequentially,

but it was a massive expansion from what was about 1 percent a year ago. So better profitability picture here for Amazon, John and Morgan. Back over to you. Okay. Kate Rooney, thank you. Shares are up about 2.5% right now. For more on Amazon, let's bring in Gil Luria of DA Davidson and Maxim Group's Tom Forte. Great to have you both here. Gil, I'll start with you. Your initial reaction, especially when we saw so many of the key metrics come in better than expected, starting with perhaps AWS. That's by far the most important number here. Not only is that 17% a lot better than expected, starting with perhaps AWS? That's by far the most important number here. Not only is that 17% a lot better than expected, it's more acceleration than Azure and GCP had last week. I can't overemphasize that. They're accelerating faster than Google

and Microsoft, who are always in the AI debate. That makes it look like AWS is now catching up on AI and perhaps in a position to lead. Let's not forget their business is a lot bigger than Azure and GCP. Their foundation is from chips to the SageMaker foundation model to Bedrock facilitating other models, to Amazon Q, which they announced today, which does a lot of things for enterprise that every other software company is trying. And now Amazon is telling them, no, don't worry about it. We're going to do this for the enterprise. So that's a very important result. Everything else almost pales in comparison. Tom, what to make of the broader profitability picture?

And I ask that knowing we got those North American margins that came in stronger than expected. And as Adam Christofoli was telling us, that's such a key metric to look at. Free cash flow also improving, more than $50 billion there. And then the high margin advertising business coming in strong, too, at a time where we know Amazon and all of its peers in the mega cap space are pouring so much money into generative AI and these new AI applications. The fact that they are coming in with better profit numbers tells us what? It tells us that Andy Jassy's emphasis of services for Amazon is working. And when you couple that

with his very aggressive expense management, you're seeing these impressive margins. So in addition to Gil's comments on the strength of AWS, you saw the strength of advertising and you're seeing the benefits for North American retail of the aggressive cost cutting moves by Andy Jassy. So I think that that's what you're seeing across the board, an emphasis on higher margin services

and aggressive expense management resulting in very impressive margins and profitability for Amazon. Gil, do we have to revisit the narratives here? And I hate how stock price moves can sometimes end up equaling truth for people, at least for a period of time. But the narrative for a little more than a year has been Amazon's behind in AI because, in part, Microsoft partnered up with OpenAI, et cetera. Google was supposed to

be behind, too, but now people don't think that anymore because the stock went up. OK, Amazon seems to have intentionally released Q on the same day as earnings, perhaps driving home something about the cloud growth and the AI strategy behind it. So what should investors take away from that? That's exactly right, that they may not have been as ahead of the game as Microsoft was. Let's not forget, Microsoft was well ahead of the game. GitHub Copilot came out in July 2021. We didn't even know about chat GPT back then. Microsoft did an incredible job of capturing that value and continuing to run with a lead.

But Amazon stepped back last year and said, well, what do we wanna do? We wanna build a whole infrastructure for our enterprise customers. We're not going to be as worried about consumers and consumer applications. We're going to develop the whole infrastructure so our existing AWS customers can execute on what they want to do with generative AI. And that's what we're seeing today. And let's not forget another very important piece that we can now piece together between the three results. It's not just AI that's driving acceleration

for the hyperscalers. Both Microsoft, Google, and now Amazon have accelerating growth beyond the contribution of AI. For Microsoft, it was two points of acceleration excluding AI. For Google, it was two points of acceleration, excluding AI. For Google, it was the same. And I would imagine that a jump from 13% to 17% growth for AWS, which, again, is a $100 billion business, has to do with enterprise spending on cloud easing up. That's good news for Amazon. It's good news for the rest of the market as well. Tom Forte, I worry that investors might be paying attention to the wrong headlines because, you know, I know, Gil, you mentioned how the narrative has shifted.

Amazon's done some things, but these strategies don't change that much in a year. They've been planning their AI stuff for a while. So, Tom, as we get into more of these developer conferences that are coming starting in the summer, going through the fall. Is it more the developer announcements? Is it the kind of partner and industry verticals for AI and cloud that matter more? What's really going to move the needle for these companies in monetizing cloud and AI at this phase? Sure. So I still think when you think about artificial intelligence, it has a huge benefit to the chips providers. Think of NVIDIA. And now, as Gil pointed out, what we're seeing, a huge benefit to the hyperscale cloud companies and a lesser benefit kind of to everyone else. So it's good to see that you had the renewed growth

in AWS. You're seeing now that AI is, in fact, driving growth in AWS. Last year, you saw that cloud computing was more cyclical than secular. So I think that as we have more quarters here where we're seeing that AI is driving revenue for AWS, and then Amazon can also benefit at the retail level using AI, including at the expense management level. So I think all of these things are beneficial for the next 12 months for Amazon shares. All right. Delirio, Tom Forte,

thank you. Thank you. There's so much in this release. I mean, there's so much in this release. But something that I think is kind of interesting, we never talk about this with Amazon, is the fact that they're talking about important milestones on the path toward commercializing ZUSK, Amazon's self-driving robo-taxi. I feel like we're going to be talking more and more about robo-taxis. Well, there's some people out there, some very wealthy people who want to. All right, two more reports just out with a focus on the consumer. Mondelez and Clorox. Steve Kovach, how do the numbers look?

Hey, John, let's start with Mondelez. We got a beat on EPS 95 cents versus 89 cents expected and a small beat on revenues. That's 9.29 billion versus the 9.16 billion expected. And then moving over to Clorox here, we can't compare EPS here. It came in at $1.71 adjusted. Revenues, 1.81 billion.

A slight miss here from 1.87 billion expected. Guys, I'll send it back over to you. All right, Steve Kovach, thank you. Shares basically flat right now for Clorox. Up next, much more on AMD's report and the pullback in shares that we're seeing right now with an analyst whose price target is nearly $100 above where the stock closed today. Stay with us. Welcome back. Shares of AMD down about three and a half percent right now in overtime after reporting results moments ago, let's bring in key bank analyst John Venn. John, the results and the guide just about in line. People were hoping for a bit more, but is this enough? Not in the near term, but we certainly think that there are some encouraging signs in the results.

Both the PC as well as the data center segments are upsided in the quarter. And that was really what most investors are focused on. Obviously, shares are down 3 percent. I think that's because the implied EPS guidance is slightly below consensus. Looks like it's coming in at 66 cents and consensus around 70 cents. So is this a calming down, perhaps, of some of the excitement around how soon AI was going to deliver results? Supermicro, which packaged in the chips from NVIDIA and others, also down, but slightly on its results, down about one and a half percent at the moment in overtime. I don't think this is indicative of the broader AI market. I think you have to keep in perspective

that AMD is an emerging player in AI. Their market share last year was going from zero to, you know, we think a pretty significant number this year. So they're still ramping their MI300X AI GPU this year, and it's still very early days for AMD. How much do gross margins matter here? And I ask because it looks like they came in slightly better than expected for the quarter. They're guiding for slightly better in the next quarter. And this is certainly a key part of the story for an AMD as well, especially with the stock up as much as it is this year. Gross margins matter a lot. You know, I think a couple of things

are benefiting them in the near term. We think obviously they're starting to shift their AIGPUs and that's accretive to their gross margins on the quarter and the guide. I think there's a much more meaningful upside on gross margins as you go into the second half of the year, because you're going to see AIGPUs become a much more meaningful percentage of their mix. And then you should start to see some of that embedded cyclical business start to come back in the second half. And those are probably some of the highest gross margins in the business right now. Okay. John Vinn, thanks for joining us. Thanks for having me. Shares of AMD under pressure. Well, Eli Lilly bucking the downtrend today, finishing near the top of the S&P 500 on strong results driven by its GLP-1 drugs.

Up next, a look at how the weight loss craze mirrors another red hot trend on Wall Street. And we'll talk more about the big after hours drop for Starbucks as earnings, revenue and same store sales all missed estimates. Be right back. Welcome back to Overtime. Eli Lilly getting a big boost on a down day for the market after posting an earnings beat and hiking guidance. Shares finished up 6%. Mike Santoli is back with a look at how the stock has benefited from the weight loss drug mania and how it mirrors AI hype. Mike. Yeah, well, the price action gets you there, Morgan.

It means massively disruptive technologies, huge total addressable markets, of course. And industry keeps finding new applications. So it applies both to the weight loss drugs as well as AI, especially the infrastructure buildup for AI. I like the comparison with Broadcom in particular because both Lilly and Broadcom before this phase were kind of slower growth, modestly valued companies, and they caught this tailwind. So it hasn't kept pace quite with NVIDIA, but definitely looks matched up pretty well with Broadcom.

Take a look at the enterprise value of both these companies, too, because they are similarly sized at this point as well. They're at the bottom end of the top 10 of the S&P 500 in market cap and enterprise value essentially in line. And that includes Broadcom's debt, which is somewhat significant at this point. So you see how it's just soared basically towards 700 billion for both of these companies. You know, not sure exactly how long the linkage is going to remain, but so far it's been pretty tight. All right, Mike, thank you. Up next, the top portfolio manager reacts to Starbucks results

and what they might say about the state of the consumer. We'll come right back. Welcome back to Overtime. Starbucks falling, now down 11% after missing on the top and bottom lines, reporting a surprise decline in global same-store sales. Joining us now is Kevin McCarthy, Portfolio Manager at Neuberger Berman. Kevin, it's great to have you on. You don't actually hold shares of Starbucks, but I am curious to get your thoughts on this,

because on a day where we heard more commentary about cracks in the consumer, specifically the low-income consumer, with McDonald's this morning, with Coca-Cola this morning, just the latest to comment on that. The higher-end consumer has held in pretty well. And Starbucks historically has been more in the Chipotle camp than the McDonald's camp. So the fact that we saw same-store sales fall in North America, but also globally, including other key markets like China, what's the read-through? No, I think, Morgan, thank you. The read through is that we are seeing pressure across

the complex geographically and by demographic income cohorts. I think McDonald's even recognized this morning or noted that they are seeing that similar pressure across the board. The miss, though, however, for Starbucks is quite significant. You know, I think at this point, a guidance reset is certainly in play. You know, we're looking for 15 to 20 percent growth. Coming into this print, I was thinking a 10 percent, lowered it to a 10 percent EPS would be sufficient. To be honest now, I don't even know if a plus mid single digit, which would put the stock at, the EPS at around 370 for fiscal 24 is sufficient

because that in itself would assume or underwrite expectations for double digit EPS growth in the second half. And you'd need to have positive comps and positive margins. So, you know, as it relates to the consumer, I think, you know, one of the messages that we're hearing and the takeaway from the first quarter is that we all knew that pricing was going to be rolling off coming into the year, that it was going to be a challenge to get traffic, and that the kind of the digital pinpointing and trying to target consumers on this

with their digital apps was a hope. And now I think we're seeing that that hope is not coming through and that more likely than not we're going to see more aggressive value wars over the summer across the restaurant complex. Yeah, we've already started to see it within the consumer staples space, the pushback from consumers on all of the price hikes and price increases. I mean, when you talk about a $6 or $7 fancy coffee, are we starting to see it here now as well? For sure. I mean, they highlighted last quarter that one of their weaker periods or one of their weaker day parts was the afternoon, which is you're less frequent. It's more of a discretionary purchase. And so that is a challenge for them. But beyond that, I think the challenge, and I can kind of compare McDonald's and Starbucks

because they both had a similar setup. They're both tracking from a traffic perspective below average and below their long-term algo. But it's easier to diagnose McDonald's. McDonald's, they can put out national value, and you think that's going to be, price is going to cut it. For Starbucks, the challenges are you don't really know how to model because you're not sure if the, is it a social issue? Is it a cannibalization issue? Is it a cold beverage mix, which they've now got a lot of? Or is it competition? Well, here's what I wonder about, Kevin. I'm looking at comparable transactions in North America and U.S. down 7%, but average ticket actually up 4%.

So it makes me wonder, are they a victim of trade down, where maybe a certain segment of the population, maybe a higher end, is still going to them and spending, but then the whole cohort has just kind of said, oh, well, I'm going to save on coffee and not do that and maybe make it at home. That absolutely could be the case. And I mean, we're seeing some consumer balking in the afternoon day part, probably on what you're alluding to. But, you know, if you look at some of the international regions, internationally, not only do they have, in the U.S., the price is positive and traffic is negative.

But if you look at it internationally, they're both negative. So, I think, you know, for investors trying to pencil out how to model the second half of this year, you know, you really don't have a lot of certainty that even if you do cut prices, which is obviously going to take a hit on the top line and on margins, that that's going to drive traffic and that's going to be a source of upside for you in that case. And we haven't even gotten to China, which is another piece in and of itself, which I think the underlying story there is just that the possibility of that being an upside driver is probably pretty limited given what you've seen from a competitive dynamic there. Looks that way. Starbucks down 10.5% so far in overtime.

Kevin McCarthy, thank you. Thank you. Well, IPO ahoy. We're going to bring you the full details of Vikings IPO pricing as soon as it's announced. And a new development in the Norfolk Southern activist fight. Proxy advisory firm ISS endorsing five of the seven board candidates

from activist investor Ancora, though supporting the reelection of current CEO Alan Shaw. Yesterday, Glass-Lewis supported six of seven Ancora candidates and withheld support for Shaw. We also sat down with Shaw. You can check that interview on CNBC.com. We'll be right back. Here's a look at how we finished up the day and the month on Wall Street. A lot of red. Stocks pulling back hard today as wage data fanned inflation fears ahead of tomorrow's Fed decision.

The Dow falling 570 points. The Nasdaq down 2%. We basically closed at lows of the day. For the month, the major averages snapped a month win streak, a five-month win streak. The Russell 2000 was the biggest decliner, falling 7% in April. The Dow pulling back 5%. The Nasdaq and S&P 500 both falling more than 4%. It was the worst month for the Dow since September. The worst, I mean, the worst month for the S&P since September. The worst month for the Dow since September of 2022. Yeah, Amazon is higher in overtime, about 3%. Let's get back to Kate Rooney

for more on the results. Kate. Hey, John. So I just hopped off the media call with CFO Brian Olsofsky. A lot of talk about demand for AWS and generative AI. This is a key quote, though. He said they are starting to see the impact of cost optimizations diminish. If you remember in prior quarters, they had talked about cost optimization attenuating. So now it's diminishing. He does say that he thinks the majority of the recent cycle is behind us. We are closer, likely closer to a steady state of these optimization efforts. So that speaks to the cloud demand. He's saying those prior cycles, that prior slowdown, that's behind them. And he is saying as well that they do anticipate overall capital investments, CapEx, to increase meaningfully year over year, primarily driven by

higher infrastructure CapEx to support AWS. That does include generative AI. And he says GenAI is a billion dollar revenue run rate business. Again, AWS is now $100 billion in ARR, but talks about that demand says, you know, it is generating revenue in the billion dollar range. And then also talks about how consumers want choice, but name of the game here, strong demand for Gen AI. And those are the recent comments, but we'll bring in any more as we get them, John, we're still on the call here, but that's the latest. Back over to you. Yeah, sounds good. With that stock higher, as people realize, okay, they are getting some revenue from AI after all. Meantime, there's about to be a new public company on the high seas. Cruise operator Viking is planning to list tomorrow. Could price the IPO at any moment.

Seema Modi joins us with more. Seema? John, we're expecting the pricing to come in soon, but Viking upsized its IPO offering as existing shareholders decided to sell more shares. And I'm told by one source this was due to strong demand from mutual funds. This is the luxury cruise line now eyeing a $10.5 billion valuation, which would make it the third largest cruise line, right behind Royal and Carnival, slightly larger than Norwegian. Key questions for investors. Viking's ability to gain market share in the luxury cruise market as the big three continue to develop and build new ships. And can it scale its business by appealing to just baby boomers? CEO Torsten Hagen joins us tomorrow, first on CNBC interview on Squawk on the Street.

Looking forward to that, especially since we know travel has remained pretty strong among consumers. Can that continue? Simamodi, thank you. All right, from the seas to the skies. News out today that Europe-based SES is acquiring U.S.-based Intelsat for $3.1 billion. This is a space deal. It combines two major communications satellite operators in a market-facing increased competition from SpaceX with Starlink and eventually Amazon with Kuiper. SES CEO Adel Al-Saleh says the timing was right as Intelsat focuses on growth post-bankruptcy and as SES

positions itself as a one-stop multi-orbit network. We're quite confident we're going to get it through the regulators. It just requires time. The market itself is highly dynamic, which will be in our favor. We have a lot of competitors. We have one very large one, SpaceX, and what they do with Starlink and Kuiper is coming into the equation. So there's plenty of players in this market to create competitive environments that the regulators should be very comfortable with. Expected to close in the second half of 2025, the new company will tout more than 100 geostationary Earth orbit satellites, 26 more in medium Earth orbit. That compares to SpaceX with about 5,800 satellites for Starlink in low Earth

orbit. While the move to gain scale is being welcomed by analysts, the plan to take on some debt to partially finance this helps send shares of Paris-listed SES lower. Al-Saleh noting, the acquisition is highly accretive that free cash flow will more than double in the first two years post-close. Consolidation has been the industry trend. Businesses, consumers and industries want continuous connectivity. My vision of this industry is going to be a fast evolving industry. Many new applications that will emerge as the technology improves,

especially with this software defined satellites where they become much more flexible, much more adjustable based on the requirement. And I think there'll be a big integration between the terrestrial and non-terrestrial networks across all orbits. And you'll have connectivity that goes across the globe where you're connected all the time with whatever network you're using. It doesn't matter. It's going to be whatever is available to you wherever you are. All right. The full interview with SES's CEO is on Manifest Space. You can scan the QR code on your screen right now. You can listen wherever you get your podcasts. All right. Higher for longer, good for launching satellites, but not so much for the debt to buy them. Up next, all the overtime earnings movers that need to be on your radar and the names set to report results tomorrow.

We'll be right back. Welcome back to an earnings-packed hour on overtime. Insurance company Lemonade is jumping up 7%. The company's revenue is shrinking less than expected. Full-year revenue guidance also coming in above expectations. Diamondback Energy, ticker F-A-N-G, higher as well, posting a revenue beat. And its Q2 CapEx guidance coming in about at the midpoint of what Wall Street expected. And another check on Amazon here.

It is up about 2.5% after beating on both lines, Morgan. Yeah, AI, a billion-dollar business so far. Be interesting to hear what they say on the conference call. Let's get you set for tomorrow, though, because it's not going to let up. It's a busy day as well. We're going to get a read on mobile phone sales as well as AI demand when Qualcomm reports earnings after the bell. Plus, is the American consumer still spending?

What are they spending on? Earnings from DoorDash, eBay, Etsy, right here on Overtime. Should give us some more clues. We're also going to hear more on DoorDash when their CFO joins us in a first on CNBC interview. But before those reports, of course, we have the Fed decision. We're about 20 hours away from that. Our latest CNBC Fed survey has found respondents turning hawkish, expecting only about one cut this year. John, we talked about it, the hotter ECI data today and also the fact that you had Chicago PMI, the lowest since November of 2022.

You had a softer consumer confidence reading, but also home prices hitting an all-time high, according to Case Schiller. It's a data picture that's definitely got investors skittish. Case in point, yields on the move higher today and stocks moving lower today. Makes it hard to justify a cut with, you know, home prices doing that. Homes actually moving somewhat. Going to be interesting to get those numbers from Qualcomm and others. All right. Well, that's going to do it for us here at Overtime.

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