Closing Bell - Closing Bell Overtime: Strength Under the Surface? 12/8/22

Episode Date: December 8, 2022

Could the market actually be stronger than it seems? NewEdge’s Cameron Dawson gives her take on whether investors should bet on a new bounce? Plus, the FTC is taking aim at Microsoft and Activision Blizzard. We discuss what could be at stake for future mergers. And, Tesla tumbling recently – but one tech fund manager says now might be a good time to get in on that trade. EMJ’s Eric Jackson explains that take.

All right, Sarah, thank you very much. Welcome, everybody, to Overtime. I'm Scott Walker. You just heard the bells. We're just getting started from post-night here at the New York Stock Exchange today. We have important earnings about to hit as well, including Lululemon, Costco and Broadcom. Those three stocks to see on your screen will have the numbers the moment they hit, the stock moves that I know you want to see as well. Eric Jackson, he's going to be here with us today on whether you should buy or sell the Tesla slide, which continues. And the FTC taking aim at the Microsoft Activision deal. We've got the latest there on what some call the boldest move yet by the Biden administration on mergers. We begin, though, with our talk of the tape, why the market might be stronger under the surface than it seems and whether it's time to bet on that next bounce. Let's ask Cameron Dawson, New Edge Wealth Chief Investment Officer, right here with us at Post 9. It's good to see you. Welcome back. I mean, technically speaking, the market has held up pretty well. The breadth from the move from the mid-October low has been pretty decent, too. Is this market better under the

surface that we're giving it credit for right here and now? Well, certainly the average stock is much better under the surface. And if we look at the source of really all of the weakness from this S&P 500 basis, it's really coming from the top end of the market. Those big heavyweights in communications and tech and those areas that are really the most expensive. And so that's the process that we're still in is that the market still is top heavy. It still is expensive because of that top heaviness, but there's definitely signs of improvement under the surface. You got to respect the technicals, they say, right? And I mean, do you still feel like, forget about what you think is going to happen a couple of months down the road. Let's talk over the next 20, 30 days, literally. You feel like we have a rally in the cards based on where we are now and the seasonals and we've got the Fed and the CPI next week and all the data too? Well, one of the most important

things about seasonals is that December is usually a very strong month for the market. However, it's not nearly as strong if you went into December being weak. So that seasonality loses a little bit of oomph given the fact that we had such a weak market year to date. But then it's respect that 200-day moving average, respect the downtrend line that still remains very much in place. Right now, we're stuck in this period of congestion right around all of these moving averages. So the break one direction or another will set the tone really for the next couple of months. You've got two sides to the yield story, obviously.

Good that they're coming down or at least remaining where they are. Bad because that also sends a message about economic worries. Yeah. The most important thing to watch is the two-year yield. If the two-year yield is rolling over hard, which it hasn't yet, it's come down some, but if it rolls over hard, that means that the bond market is very afraid of economic growth. And so if we see a break in yields, you might think, oh, that's good for stocks because of valuations. But in reality, if the bond market's sending a message, be afraid of growth, then we have to listen to that because it means there's more

earnings cuts to come. I know you expect that the Fed's going to still remain aggressive, right? You've said as much. And most people, I think, assume at this point it's going to be higher for longer. That's the wording of the moment. Janet Yellen, though, Treasury Secretary, former Fed chair, out a little while ago and says new apartment rents have essentially peaked and are coming down with a lag. That's good news. It is good news. And it's good news on the inflation front. What it does is it takes some of the urgency off of the Fed from having them having to keep up at these 75 basis points hikes. That's why they're going to moderate to 50 basis points. But then what's priced into next year is a pivot to cuts. And it's in our view that even if you see inflation come down, as long as you

have better data, better growth, you have the employment market remaining very tight, the Fed cannot cut interest rates. They cannot cut interest rates into a full employment economy. So, yes, it's great that inflation is coming down, but that doesn't necessarily give them the ability to pivot towards accommodation. But isn't, forget about the actual cuts, which could be viewed in many corners as a negative anyway, because of what it would mean for perhaps where the economy is at that moment.

So the mere fact, if the inflation picture is improving and the Fed can at least pivot to a pause, right? Pivot to the end, like stop doing anything for the time being and just wait it out and see what happens. Is that enough to give stocks a lift? Well, we traded to nearly 18 and a half times earnings just last week on an earnings number that we assume would be flat for next year, which we think is a conservative estimate for last year. So 18 and a half times earnings, given the fact that even if the Fed isn't cutting rates, they would still be keeping them around 5%. That is a very high valuation, given how tight the Fed would be, how tight liquidity would be. And so we think that valuation acts as a ceiling on this

market, meaning that you can't get to that 22 times earnings to get you to $5,000 on the S&P simply because you need a Fed to be accommodative to get you to 22 times. Most of the projections that I see anyway as they roll out for 2023 are $4,200 is where you might be capped. Those were the numbers of the day from some of the notes that I saw out today. In terms of where you want to be in the market, large cap over small cap, value over growth, and you still like health care and energy? Yeah. And we actually just added a little bit of an overweight to materials recently on a tactical

basis. Stocks are looking a lot better on an absolute and relative basis. And you get the benefit if we see a continuation of a weaker dollar. Materials can get a boost as well as a China reopening. Exactly. I'm told Lululemon is out. I mentioned we did have a number of key earnings reports that were coming out after the bell today. Here in overtime, you've got Lulu and Costco, DocuSign and some of the others, along with Broadcom. You can see Lulu is getting quite a shocker here, down more than 10 percent, approaching an 11 percent decline. We're going to go through that. It's one of those stocks that has actually held up better year to date. It's done better in the retail complex than

some others because the nature of their consumer and their spending ability. But we're going to go through that and we'll hear from our reporters in just a moment on all of the earnings that are breaking right here. In the meantime, let's bring in our CNBC contributors, Jim Laventhal of Serity Partners, Greg Branch of Veritas Financial Group. I love that I have both of you guys on today because I truly cannot think of two people who are more opposite in terms of the sides of the ledger that they are on in this market. I'm going to let Jim give you first, Greg, the reasons why he is so optimistic on where we are. I'll give you a chance to rebut that on the other side, because I know that you will. But here's Jim Labenthal. Why do you maintain such a positive bias on where we are? Obviously, a complicated situation,

Scott, but really, let's simplify it and bring it down to inflation. If inflation is moderating more quickly than the market expects, then that takes the aggressiveness out of the Fed. I think this is what Cameron was referring to earlier. Now, right now, the market expects a peak Fed funds rate of 5%. But if you see PPI tomorrow and CPI next week come in better than expectations, that peak Fed funds rate comes down. And with it, the prospect of a soft landing goes up a soft landing meaning that you don't go into recession and inflation comes down on the back of what the fed's already done now okay so I've said that I think inflation may be moderating more quickly than people expect why

do I say that uh take a look at gasoline Futures which are now lower year over year it's as if the Ukraine war effect never happened look at at other commodity prices, food commodities are coming down, wheat, corn. Look at used car prices. Look at freight costs. And I know there are a lot of people out there who will say, yeah, but, you know, the Fed wants to kill jobs because it wants employment wage inflation to go down. No, it does not. OK, the Fed has two mandates, maximum employment and price stability. If they get price stability with full wage, full employment, they stability. If they get price stability with full wage or full employment, they're going to be very happy. And to those who would say that wages are driving inflation, nope, can't have it. Not with average of the hour earnings up about 5.4 percent.

That's below where inflation is with a seven handle. So it's not wages that are driving. All right, counselor, I let you, you made your your you made your point, Greg Branch. I mean, you do you agree or disagree with with everything that Jim said? You know, there's there's some degrees of differences and I'll take them one by one. As Powell himself has pointed out, it's not that wage inflation is the culprit for all inflation. It's that wage inflation is a primary driver of services inflation. And so while Jim pointed out several areas where we are seeing some meaningful retraction, particularly those that are most interest rate sensitive, right? So if the housing market is in turmoil, we know that the rent equivalence in terms of inflation followed by about 12 to 18

months. But that doesn't account for airlines, right, which we're seeing a rebound in and other things that are quite volatile in terms of gas prices. We know that was a political decision somewhat aided by the release from the reserves. But services inflation came in really strong. We just saw that ISM report where we had a PMI that rose to 56.5, two percentage points higher than the month before. And so we have decades of data that draw a correlation between wage inflation and services inflation. And that's what we're going to see drive the next CPI report. Look, I'll be wrong if the PPI and CPI come in meaningfully below where we've seen them previously. But I think my point here is that you my point here is that you think we're going back to the lows. You've said

as much that we're going to put in new lows. Jim thinks that's crazy talk. I do. Let me tell you why. I think that we'll see. I think that we'll have heard that all year. I think we will see 75 basis points in December. I think that for a few reasons. Number one, we had GDP revised up to 2.9 percent, which gives the Fed additional headway. Number two, the jobs report showed whether you want to call it hot or not is a personal choice, but it certainly showed that the economy contributes to aggressively create jobs at a time where we have 1.7 jobs for every available worker. Unemployment held steady at 3.7 percent. Remember, Scott, I told you this back in September, there's only really three things that Fed cares about. They will avert course when they

either see a meaningful GDP contraction, haven't seen that, a meaningful rise in unemployment, haven't seen that, or a meaningful easement in the current inflation levels. And I'd argue we haven't seen that yet. And so I'm thinking that the terminal rate will actually be closer to 6%. When we all agreed it was 4%, and I was saying it was probably 5% over the summer, I got lots of wows. You remember that, Scott. You just got another wow, because 6% would be a wow. I think it's closer to 6%. You know what?

Yeah, it would. And this is why I believe we haven't seen the lows. Let me do this. I got DocuSign out. Stock's moving a lot. Kate Rooney has the details for us. Kate, what do we see here? Hey, Scott, it's looking like a beat on the top and bottom line for DocuSign.

This is for the third quarter. Let's start with EPS. This is the adjusted number, 57 cents coming in better than expected. Street was looking for 42 cents on that adjusted number. Revenue was $645 million, also a strong beat. Revenue was up 18% year over year. It's also looking like guidance was a beat, so they put out Q4 revenue guidance. Stronger than expected there.

Also some strong billings growth here. That was up 17% year over year. You can see the street likes that. Stock was up 14%, about 12 percent here now after hours. Scott, back to you. Yeah. All right. Kate, thank you. I should remind you to let's throw up Lululemon again because it's such a popular name and it's getting hit pretty good. Down about 10 percent. I got a bid ask on a three thirty seven, three thirty eight. The stock closed at three seventy four and a half. So So that's the picture of why it's down 10 percent.

We're going through that. And again, you're going to hear from the reporter in just a moment. Cameron, are we ready on that? OK, Melissa Repko is actually ready for us right now. What do we see here? Hey, Scott. So Lululemon actually beat on the top and bottom line. But the reason the stock is moving is because of a disappointing Q4 forecast. So for EPS, it reported $2, which was three cents above what the street was expecting. And for revenue, it reported $1.86 billion, which again was higher, but the movement is really due to it's looking ahead to the holiday quarter. Yeah. All right, Melissa, thanks. We'll follow that story. Come back with us. We need to know anything else you hear out of that earnings release. But Cameron, I'm going to come back to you. Six percent terminal rate. That says that the Fed is not

even close to finished. The market might be finished if they get to six percent. Yeah. I mean, if we do see growth continue to come in better than expected, it means that this economy can tolerate much higher rates. The fact that we haven't seen this economy hit a wall yet, the labor market remaining tight, services, PMI remaining very high, this says that we haven't seen the impact of Fed tightening. And the question is, is it just a matter of time, meaning that this takes time to work its way through and we eventually will see the weakness, Or is this actually a more robust economy under the surface?

Now, if the second one is the case, it means that there's still room higher on interest rates to go, which means that there's still pressure down on valuations to happen. So maybe the worst case scenarios on the EPS front don't come to pass in 2023. But with valuations where they stand, then that's where you have the problem. All right. Well, talk about this other story that broke late today. Really interesting. Fidelity now asking for the OK to make bigger bets on some of the big stocks it owns in several of its popular growth funds. Their proposal going to shareholders would allow that firm to exceed the typical five percent limit on stakes in stocks like Apple and Microsoft.

Question is, is that good for investors? And what does it say about the markets right now? Should also note that T. Rowe Price made a similar move, a couple of its growth funds last year. But nonetheless, Jim, it's interesting, right? I'm wondering what you think it says, you know, are less diversified funds good? Is it okay to have these much larger positions in these big, big stocks like Apple and Microsoft? So a couple of thoughts here. One, I tend to run a concentrated portfolio,

around 25 names. So I respect this a lot. I respect this more than a mutual fund manager owning 50 stocks, which comes very close to closet indexing. That's not what you pay an active management fee for. Now, to your question, though, are these the right stocks? I don't know that large cap, mega cap tech is the place to be. You've heard me say for quite some time, I think some of these more average stocks, more in the cyclical space, some of the things that Cameron's talking about, that might be where you want to build a position. But either way, I like stock picking. And I also think that we've learned in the absence of a zero interest rate policy,

Scott, stock picking matters. This is no longer the participation trophy environment of the last 15 years. So you do have to pick stocks. And I applaud Fidelity for going down this route. So, you know, one of the names of one of those funds, Contra Fund, is super popular. So many of you are invested in that in one form or another. What's your thought on this? Whether as an investor, you think it's a good thing that you'd have an even larger percentage of your contra fund investment, for example, in an Apple, in a Microsoft, in some of the biggest stocks where you were capped before at 5%. Now the manager can go higher. And also what it says about the position of those

stocks right now. No surprise that they're trying to do it now. These stocks are down a lot. Maybe they want to take advantage of some of the downturn in those names. Yeah. And if you look at the growth index, which a lot of these funds will benchmark towards, Apple is 12% of the growth index. So if Apple's outperforming, but you are capped at 5%, it's really hard to keep pace. So in a way, though, it gives them optionality to get even closer to those indices. Now, the timing for us is a little bit odd because we're kind of doing the exact opposite within our positioning. Well, it's kind of like what Jim was talking about, too, like value over growth. Exactly. And what we're trying to do is de-emphasize the very top of the market. So this would not be the time for us that we would be wanting to chase those big heavyweights

and make them even larger portions of our portfolios. Unless you think, Greg, that it's just, you know, these stocks have come down a lot and they're going to remain the favorites, maybe not over the next three or four months, but they're going to come back into favor. They're not dead and buried just yet. What do you think about this move by Fidelity, which, you, which affects so many people who are watching right now who invest there? Well, I agree with Jim on this in spirit. In spirit, if you are paying to have your money managed, you're paying for the expertise. And hopefully those with the expertise are afforded

some flexibility. However, here's where I disagree a little bit. There are vehicles and there are institutions where you can go and you know that they'll take large concentrations on stocks. I'm not sure that that's what the Fidelity investors signed up for. So essentially, we're loosening the guardrails and it looks like they are pulling this with their investors. But the people who are really going to bear the increased risk of this, and we can't get around this, this is increased risk, is their clients. And so at the end of the day, I'd like to see a company with this, you know, that they have some type of clearance mechanism or some type of protocol that has to go through a committee when they want to

go beyond the benchmark that they've essentially set for themselves. And so that would make me feel a little bit more comfortable with this, because at the end of the day, like I said, these were self-imposed guidelines. And when you're changing the risk parameters on your existing clients, I think they need to be alerted to that. Yeah, you make a great point. And what I want to get into in just a moment, but Kate Rooney is good for us right now on Broadcom, an important stock in the chip space. Kate? Hey, Scott, that's right. It's looking like a beat here for Broadcom in the top and bottom line. Adjusted EPS, $10.45. That was a beat. Street was looking for $10.28. Revenue, also a beat by about $300 million. It came in at $8.93 billion for the fiscal fourth quarter. It also looks like Broadcom is resuming buybacks and raising its dividend by 12%. We did get some Q1 guidance. That's also

looking stronger than expected, $8.9 billion, which was above what the street was looking for. Revenue grew 21%. It looks like year over year, they say it's a record number there for revenue. Stock up slightly after hours, more than 2%. Scott, back to you. Good stuff. Kate Rooney, thank you very much for that.

Back to our conversation about Fidelity, Jim, and exactly where Greg left off, this idea that it's the individual investor, the client, who thus assumes more risk because of a more concentrated position, thus less diversified in some respects. He makes a very good point. However, I'd be surprised if Fidelity goes to say how I run a portfolio of 25 stocks in a mutual fund because as Greg points out that's not really what their bread and butter is I wonder and I suspect that what they're really trying to do here is Cameron brought up that Apple is 12% of the growth index it's 6% of the S&P 500 now if they've been

capped and it was higher than that so if they've been capped at 5% they've been trailing their their Apple exposure and it may just be as simple as they want to increase their Apple and Microsoft exposure, not that they want to go down to a 20-stock portfolio. In fact, I'd be really surprised if they move far away from a 50-60 stock portfolio. Part of my thinking is, would they, Cameron, be even thinking about this in a year where the Nasdaq wasn't down 30%? The stocks are down a lot. They see bargains, perhaps. Yeah, perhaps. I mean, I know that I think at the end of the day, they're trying to make it so that they don't keep getting outflows versus ETFs. And so if you own a growth ETF, you're going to own

10%, 12% ETF. Mutual funds fight back. Exactly. And so this allows them, if they want to, to upsize the positions if they have a bullish view on a name. And so I think that optionality probably is good for them so they don't lag in markets like we had over the last couple of years. But it's our view that the markets will have a different tenor over the next couple of years. Greg, last word to you on this. Yeah, about Fidelity, or should we go back to some of these stocks, or my disagreement with Jim? I'll pick the Jim thing.

Look, at the end of the day, I will be wrong. It's CPI and PPI coming meaningfully short. But we saw robust consumer spending in October. I think that that extrapolated into November. And so I think that we see a flat CPI. I think that that convinces the Fed they need another 75, particularly to root out the expectation of further inflation, because we just haven't seen it as meaningful in as many categories as we need to. And I do think that that causes a sell-off. Jim is demanding to jump in with the last word.

We agree on what matters, the CPI. So, you know, if the CPI comes in hotter than expected, then I've got to change my tune. Okay, see what happens. Thanks, everybody. Agreed. Cameron, thank you for being here. Jim, of course, and Greg joining us today.

And let's get to our Twitter question of the day. We want to know, with Tesla shares down more than 10% this week and 50% year-to-date, are you buying the pullback? Head to at CNBC Overtime on Twitter. Cast your vote. We're going to share those results a little bit later on in the hour. We're just getting started here in overtime, though. Up next, we're following late-breaking developments out of Washington.

The FTC taking aim at the Microsoft Activision Blizzard deal. Did the Biden administration just put every company that wants to make a deal on notice? We've got the latest next. All right, we're back. I'll show you Costco. Those earnings are out. One of the headline names, of course, a stock that's held up pretty well. They have obviously the recurring revenue of the membership fee there. You see, it's not moving all that much. We're going to go through that and bring you the very latest in just a couple of moments. We want to go back to that developing story, though, today. The FTC suing Microsoft to officially block its planned deal with Activision.

A former FTC chairman calling it the boldest step yet by the Biden administration against a planned merger. Raises all sorts of questions about the future of dealmaking. Let's bring in our Kayla Tausche with more on the administration angle here. Julia Boorstin on what CEOs might now be thinking twice about trying to make a merger happen. Ladies, it's good to have you with us. Kayla, you first. I guess I can't say this is much of a surprise given the makeup of the FTC these days and the fact that, you know that the administration has a reputation of fighting

deals. Yes, Scott, the top antitrust officials have not been, not left any question about whether or not they intended to pursue an aggressive approach on trying to challenge some of these deals. In recent congressional testimony in just the last few weeks, both the head of the FTC, Lena Kahn, and the top antitrust official of the DOJ, Jonathan Cantor, have essentially said a version of the same thing, which is if we don't at least try to challenge them, then there's not going to be any changes to antitrust enforcement. But in that statement or in that sentiment,

you know, there's a sense that, you know, they're essentially acknowledging that there's a chance that these challenges won't succeed. And certainly the track record would illustrate that. In just the last three months, there have been four notable setbacks for the Biden administration where federal judges sided with Illumina. They sided with UnitedHealthcare. They sided with Booz Allen Hamilton and U.S. Sugar, essentially saying that the arguments that the FTC and the DOJ were making to argue that each of those four mergers would be anti-competitive essentially had no merit. Now, the administration is appealing those, but certainly you can't say that it's not a setback. Which is why, Julia, to Kayla's very point, Activision CEO Bobby Kotick, who you know well, I believe, writing a letter to his employees today after the news saying, quote, I want to reinforce my confidence this deal will

close. Perhaps he has that confidence because of what Kayla just said. A lot of these deals, which were first blocked, a judge rejected the FTC's challenge. That's right. I mean, we are seeing the FTC and the DOJ certainly take more swings in this department. And it does seem like that's about trying to force more legislative change in the antitrust field. So one thing that's interesting, and I just have to flag, Scott, is it's not just the FTC taking aim at this massive Microsoft Activision Blizzard deal, but also right now the FTC is in the midst of these hearings about a preliminary injunction it wants against meta's acquisition of a 300 or 400 million dollar startup in the vr

space so of course meta the day after it changed its name from facebook to meta sort of stuck a claim and said look we're really committed to making gains in the vr space and they acquired or they made a deal to acquire this company called Within. But what's so interesting in seeing the fact that the FTC is challenging this deal is they're saying there is no dominant player in the VR space yet, but we believe in the future that that could be meta. And so they're really looking for some different arguments right now to block deals. And so this is a little bit more experimental in terms of making these arguments, Scott. But if the FTC wins this one, that could have wide-ranging implications, not just for whether or not MEDIC can acquire companies, which has been an essential

part of its strategy and a driver for its growth, but also for expectations across the industry, not just in tech, but also in media. And one thing I'm hearing a lot of is the importance and the need for scale for a lot of these players to compete in some speculation. Hey, should there be a pairing between some of the assets of, say, a paramount with the likes of some of these other media companies? Or would Apple be a good buyer for a Disney? Or who should Netflix be paired up with? All of the speculation about deals is really about the value and what it takes to compete right now. And the truth is,

is that none of those deals would be possible in this more strict regulatory environment. Last to you, Kayla, it certainly seems like the winds of Washington are blowing against CEOs these days. And I'm also thinking about that Kroger-Albertson's partnership, which is still hanging in there, which the FTC is taking a look at.

And who knows if it ends up in a similar place? Yeah. And certainly, Scott, I mean, I think the mantra of the Biden administration when it comes to antitrust is the old adage that you miss 100 percent of the shots that you don't take. And I don't think that they're phased by any of the recent losses in court, even though it's going to come down to actually the merits of the competitive arguments. And if the outcome is simply a chilling effect on mergers, I think they would consider that a success. It's also worth noting that there's a mantra that Senator Elizabeth Warren uses often that I've heard some members

of the Biden administration use privately, and that is personnel is policy. And the people that the administration nominates to some of these roles are just as important as the actual policies that are coming out because they are the ones who are setting the tone on how those winds are blowing. Yeah. All right. Taylor, thank you so much. Julia Borsten, you as well. Appreciate that conversation. We have more now on Costco. Melissa Repko back with that. The earnings out. You saw that stock was moving. What do we see? Scott, it's a miss on revenue for Costco. Costco had revenue of $54.44 billion. That was lower than the $54.64 billion that was expected. On EPS, it's not comparable at this point. There were a few charges included, like a shipping-related charge that makes it not comparable.

But it reported $3.10 adjusted for EPS. And again, a miss on revenue, which may explain some of that stock movement you're seeing. Back to you. All right, Melissa, thank you. Good to see you again. Melissa Repko joining us there once again with Costco. It's time for a CNBC News Update, now with Bertha Coombs. Hi, Bertha. Hi, Scott. Here's what's happening at this hour. President Biden has announced $36 billion in aid for a troubled union pension plan.

The move will prevent severe cuts to retirement income for some 350,000 people. The money comes from the American Rescue Plan signed into law last year. The Washington commanders are pushing back against a House committee report that said the team had a toxic work culture for decades and that the team owner, Dan Snyder, allowed it to happen. A commander spokesperson says the report was, quote, one sided and contained no new revelations. And the FDA has authorized updated covid boosters for children. Infants as young as six months can now get the new vaccines that target the Omicron variant. And on the island of Hawaii, lava from the world's largest volcano no longer threatening a critical road, at least for now.

Mauna Loa is still erupting for the first time in 38 years, but the lava flow has stopped less than two miles from the key highway that connects the east and west sides of the big island. That is just such a spectacular sight, Scott. Yeah. Yeah. Amazing video. Bertha, thank you. That's Bertha Coombs. Up next, the Tesla tumble. Shares of the EV maker falling more than 10 percent this week, been cut in half on the year. One tech investor, though, says might just be time to get in on that trade. Eric Jackson explains after this break. All right. Shares of Tesla selling off again today on news.

It will shorten shifts at its Shanghai factory soon as next week. Stocks taking a beating this week, down more than 10 percent, down more than 20 percent since Elon Musk's Twitter takeover, down 50 percent on the year. I could keep going. Our next guest, though, says the recent pullback could be a great time to get in. Let's bring in EMJ's Eric Jackson. I mean, right. It's been pretty tough story to listen to. 10 percent the week, 20 percent the month, 50 percent in the year. Why now? Why get in now? Well, I think you have to look back at when were the last few times when you saw a drop as steep as it has been over the last couple of months for Tesla, Scott. I mean, here's another number. It's down 44% since mid-September. Mid-September is not that long ago. There was a pullback at the beginning of this year, about the same magnitude, and then it bounced significantly.

There was a lesser decline in the first half of 2021. It dropped about 36 percent, then a big bounce. I think it's due for a bounce. It probably is not going to bounce until the general market bounces. But one interesting thing is that if you look at just the valuation of this company on an enterprise value to sales basis, it's about seven currently, 7x. The last time it traded that cheap was 2016, 2017. Of course, they were burning cash back then. This quarter, they're going to, even with all these worries in China and Twitter, they're going to do $3.2 billion in free cash flow.

So it's got to bounce sometime. I think it's due for a bounce now. I mean, the goalposts, though, have kind of moved, right? It's a little bit harder to kick the ball through them. You have, as you said, what's going on with China, Shanghai, you got the lockdowns, you got production. You do have margin questions now. You have demand issues with a slowing economy. You have more competition. The landscape is, you know, more littered with issues. I think there are a lot of stocks out there that, you know, forget about, you know, pre-pandemic. I mean, they are trading back at multiples way before the pandemic ever came around at this sort of lower edge of the bands that they've historically traded in.

And I think Tesla is one of them. And, you know, typically for many stocks, you know, when you see them just sort of dip down to those levels, yeah, they could go lower. But, you know, chances are that they are due for a bounce. And I think that's where we're at right now with a much more sophisticated, built out, developed company that Tesla is today compared to where they were in 2016, 17, when bankruptcy was certainly, you know, not off the table for them. Speaking of do for a bounce, what looks good to you right here? Are you buying anything? Yeah, I like Shopify here, Scott. I think that it's another one where it's back at its 2016, 2017 multiple levels. It's obviously had a horrific

2022. It's down something like 72% on the year. The good news, if you want to take it this way, about their decline this year is that most of it happened in the first four months of this year. And so actually, they are close to actually getting up above their 200-day moving average. They've also taken their medicine. They've laid off people at the company. You know, e-commerce isn't going anywhere soon for a lot of companies that have to compete with Amazon. And Shopify is their go-to partner. So that's one that I'm particularly positive on for 2023. All right. Good stuff, Eric. Appreciate it as always. See you soon. That's Eric Jackson, BMJ, joining us up next. The Salesforce slide, that stock feeling some serious pain as well this year. What is the best move now for investors? We will discuss that

with a shareholder next. All right. Today's halftime overtime, the Salesforce slump, those shares hitting their lowest level now since the start of the pandemic, pacing for their longest ever quarterly losing streak. That underperformance, coupled with the recently announced executive departures, has led Brenda Vangelo to consider getting out of her position. This also falls into the camp of another large cap technology company that's really more mature and is showing signs that it's not immune from a slowdown. So slowing trends. And that, again, kind of begs the argument

about what multiple is really fair here. And then on top of it, now we have disruptions on the executive side. This, in our view, may be a point where we move on and wait and see for more clarity. All right, Jim Labenthal, he also owns the stock, which is why he's stuck around and is back with us. Not only do you own it, you actually thought about buying more just ahead of earnings. Just after. Just after. No, it was just before. I've been thinking about it for a while. Before, and you didn't.

Yeah. Thankfully for you. Thankfully, I've got a about it for a while. It was just before, and you didn't. Yeah. Thankfully for you. Thankfully, I've got a team behind me who stepped in front of me. I'm not going to say they staged it. Trying to correct me about what you did. Well, I'm just grateful for my team, which I'm not going to say they staged an intervention, but they let it be known that this was not a good idea. What about now?

All right. If it wasn't a good idea then to add to your position, is now a good idea to sell it? It may well be. It may well be. And here's the thing. I've got to make an evaluation of how much of this type of stock do I want in my portfolio, one of these hyper growth technology stocks. On a day like last Thursday, the Powell billing speech, these stocks roared. This is the only one like this that I have. I mean, it's not a big part of what you do every now and again. You're willing to get into one of these names,

though. Every once in a while, but it's only for portfolio construction, the science of portfolio construction. Now, for the viewer who's wondering, should you get in this or not? I think there's two examples here that neither of which you want to follow. NVIDIA, a few months ago, had a bad guidance, bad quarter. It's been down. Now it's coming back, but it went down for a while. There's no immediacy to rush in if you think this is NVIDIA. And we can't rule out that it's something more like a Twilio, which is still down. I don't think it's a Twilio. I think this is much more like NVIDIA. It will come back, but there's no urgency to get into it. You unnerved by the executive departures

that we mentioned. And by the way, speaking of executives, you know, Jim Cramer spoke yet again with Mark Benioff today. And those those comments are going to be on Mad Money tonight. I don't want you to miss that. I bring it up because it's the second time in a week that he's been on. Remember, he was on after earnings. Then you had the departure of Brett Taylor, which was a shocker that evening. And then you had Stu Butterfield, Stuart Butterfield of Slack leave, too. I think the answer here is Mark Benioff. Certainly a visionary, certainly a unicorn of a human being. I imagine he's kind of tough to co-lead with. I just imagine that. Now, if at the end of the day, all you've got is Mark Benioff, I can go with that. I will

say that nobody likes drama in the C-suite. Nobody likes it. Is this a sign, though, that other stocks like this might have further downside to come to take the executive stuff out of it, just the fundamentals deteriorating in some respects for these kinds of businesses. So it's an interesting question. How do we define stocks like this? The hyper growth, high multiple stocks? Yes, they might have further to fall. The other part of this, though, you could define it as a corporate enterprise spending, tech enterprise spending stock. And if you look at things like Cisco or Sienna reported yesterday,

corporate CapEx on tech is hanging in there strong. So I wouldn't give up on that basis. All right. And by the way, last thing, the multiples come down quite a bit on this. Yeah, yeah, no doubt. No doubt. All right. We'll see what Benioff tells Kramer. Don't miss that mad money tonight, Scott.

Thank you for sticking around. Happy. That's farmer Jim Labenthal staying with us here. Coming up, we're tracking some big stock moves in overtime today. Kate Rooney standing by with that for us tonight. Hi, Kate. Hey there, Scott. We've got three retailers on the move, two on earnings, one on activist investor involvement. All the details are coming up next. We've got the biggest movers in the OT now. Kate Rooney is back with that. Hi, Kate. Hey, Scott. Shares of Bath and Body Works are higher in the OT after Dan Loeb's third point disclosed that it nearly doubled its stake in the personal care products

retailer to just over 6 percent. Third point in a filing questioning some of the governance practices of the company's board of directors. And Chewy's share is also rising after the online retailer for pet food and supplies reported revenue, gross margin and active customers were above analyst expectations. Chewy also raising its guidance for next year and rounding out this retail triple play. We've got RH on the move as well after the home furnishing company reported a beat on the top and bottom lines. RH also raising the low end of its revenue guidance. But management did warn that business trends could continue to deteriorate on housing weakness. Back to you, Scott. All right, Kate, appreciate that. Thank you. That's Kate Rooney still ahead.

Santoli's last word, what he is watching as we head into the final trading day of the week and coming up at the top of the hour, what to expect out of tomorrow's PPI data. Market forecaster Jim Bianco joining the Fast Money team, laying out he sees. Overtime is back right after this. We've got some overtime ugliness and shares of Lululemon and DocuSign. Well, no, DocuSign's good. What am I talking about? It's up near 13%. Lululemon. I took it a little too far. Lulu is sliding. Downward Dog, down 10%.

DocuSign is a top and a bottom line beat. Last call to weigh in on our Twitter question. We want to know if Tesla shares down more than 10% this week. Are you buying that pullback? Had to add CNBC Overtime. Vote. We'll bring you the results. Plus, Santoli's word is next. All right, welcome back to Overtime. Let's get the results of our Twitter question now. We asked, with Tesla shares down more than 10% this week, are you buying on the pullback? The majority of you saying nope. More downside ahead. Well, 60%, 61. Mike Santoli's here with his last word. I want to get through a few things with you. The conversation we had about fidelity, right, trying to go to shareholders, say we want to up the size of the stakes we're allowed to hold, typically 5 percent. They probably see the slide in growth stocks like everybody else. NASDAQ's down 30 percent and they see opportunity has to be part of it without a doubt. I mean, there's been a longer term trend of funds kind of trying to raise what's known as their active share to basically be more distinct from the benchmarks that they follow.

And a lot of advisors are funneling if they're going to go with an active manager, they want one that's really active and not really hugging the benchmark. But also with this type of market, if you're capped at five percent for each position at your max size, it means you're selling your winners. And there are fewer winners in a market like this. And so if you really wanted to be aggressive and concentrate your bets, be more discerning and try and essentially figure out where you have an edge, I can see them wanting to just maintain more flexibility and get that ability to do it. Now, I doubt that means they see every huge Nasdaq stock as a bargain. But sure, three, you know, three S&P 500 growth index positions are bigger than five percent. Right. Just awaiting in the index. The individual investor, thus, as a result of this, potentially assumes more risk.

Right. By the nature of positions being more concentrated and not as, you know, diverse of a mutual fund. And it's probably a slight issue in the sense that some of these Fidelity funds are in 401k plans and maybe they're a part of the limited menu of options. And so therefore, you might have to be cognizant of that. Although right now, you know, active management mutual fund structures are not in favor. So if you're choosing them, you should be choosing them for a reason, not just, hey, I just want a bucket of big stocks and just give me anything. Is this a way, I guess you're alluding to in part, fighting back against ETFs? Right. You have to distinguish yourself a little bit from ETFs, which by definition are indexes or fixed baskets for the most part, except for, you know, ARK or

something like that. So, yeah, I do think that's part of the effort as well. OK, let's talk about the market. We've got PPI tomorrow. We do. It's going to be the first lift we have to get over. A little bit. And I guess a little bit of a test, too, if we finally are kind of loosening the market sensitivity to every inflation break, because PPI historically has not been a huge mover, but we're so twitchy. I mean, there were people today saying that the market seemed to back off on this Atlanta Fed wage tracker number that showed people changing jobs actually had a boost in what they were managing to earn. I'm not saying that's a big reason for the market to sell off, but it seemed like it got the attention of people who were willing to sell on it. So the point is,

yes, we're a little bit twitchy with any of these inflation numbers. Yeah, we're likely to be there as well. I mean, bond yields have cooperated, if you want to use that word. It's allowed us to stay somewhat directionless. Right. And which you have suggested in the times that we've spoken is not necessarily a bad thing. It's not necessarily. I mean, obviously, it's sort of it's an in-between state. You're clearly kind of waiting to see if the seasonal strength kicks in in a couple of weeks. But also, I think that people are on edge. They're nervous. They're not greedy. They're a little more fearful today. The retail investor poll, the AI was like 24 percent bulls. You know, I mean, you're back to this level where people are much more worried than they are optimistic about 2023.

And that doesn't in itself get you where you need to be, but it's a good baseline. Speaking of the gentleman we're going to speak with tomorrow on the Halftime Report, Marco Kalanovic of J.P. Morgan, who, you know, had held out for as long as he possibly could to try and see the more bullish light. But even he has sort of taken down his own expectations, had an outlook today looking for, I think, 4,200 at the end of next year. That's certainly capped to where you otherwise might have thought he'd be given his earlier rhetoric. We were at 48 January 3rd of this year. So absolutely. And I get it, though. If you believe the recession probability is something too big to ignore, then am I going to tell clients to go buy stocks at 17, 18 times earnings? It's a tough call. I do think, though, a lot of consensus says down first, then up next

year. Yeah. Good stuff. I'll see you tomorrow. Yeah. All right. That's Mike Santoli here. Does for us. Fast money begins right now.