Closing Bell - Closing Bell Overtime: Tesla Earnings, Time to Sell Big Tech? 4/20/22

Episode Date: April 20, 2022

Tesla shares rally in after-hours trade following a big earnings beat. Dan Ives from Wedbush Securities calls them “almost Cinderella-type numbers.” But, Eric Johnston from Cantor Fitzgerald says mega cap tech names will underperform the market going forward. Plus, is TikTok to blame for waning interest in Netflix? Michael Santoli takes a closer look in his “Last Word.”

Welcome to Overtime. I'm Scott Wabney. You just heard the bells. We, of course, here at Post 9 are just getting started. I'll speak exclusively today with former Twitter executive Ryan Sarver on Elon Musk's bid to buy that company. Remember, today is 420. We're going to be on the air at 420, and we're going to see if anything happens. And, by the way, speaking of Mr. Musk, we do begin with our talk of the tape. Tesla earnings due out any moment after what was another big day for the Dow, up more than 700 points in just the past two days. Few earnings as highly anticipated as these. We'll have the numbers as they cross. We'll have the analysis from the experts.

We'll talk to those who own the stock as well. Let's welcome in for now Wedbush analyst Dan Ives. He has a $1,400 price target on the stock. We are waiting for the numbers to cross. Dan Ives, what are you thinking coming into this print? I don't think Dan can hear me at the moment. We'll figure all that out in the moment. Let me bring in Eric Johnson. He's with me from Cantor Fitzgerald. He's the head of equity derivatives here. Bryn Talkington is with me as well. I know it's not like you own Tesla or you can talk about Tesla directly,

but how much is riding on this given what just happened with Netflix? Higher valuation, high growth stocks, which this thing absolutely was destroyed. I think there's a lot of weight on it. I mean, if you look at what's gone on with Netflix and Facebook, and essentially the FANG MT stocks have really been Teflon to the market. And the market has essentially assigned multiples to them that, in our view, is not actually sustainable.

And so if you look at market multiples for Apple, for Microsoft, for Google, they haven't gotten hit as much as the rest of the market, and we think that's about to come. there was a lot of pull forward effect that Netflix saw, that Facebook, they had other issues that we think is also going to happen to the rest of FANG MT, including Apple and Microsoft. And so I think this Tesla will really be important to see whether this trend continues and how investors react. I think, Dan Ives, can you hear me now? Yeah, I can hear you. Can we hear you?

That's more important. How are you feeling going into the print, which I said is going to happen any moment? Okay, man, I feel it's really all about the numbers in terms of deliveries coming out of China. I mean, that's probably a 50 to 60,000 headwind for 2Q. I think numbers in terms of the quarter actually take a backseat. It's all about deliveries for 2Q. I think numbers in terms of the quarter actually take a back seat. It's all about deliveries for 2Q. I think auto gross margins, as Phil talked about, that's key. I mean, call it 29, 30 percent being the bogey. And I think going in, there's a lot of fear in terms of these numbers, given especially what we're seeing coming out of China. You know, I noticed right away the street estimates are 226 a share your estimates are

significantly below that you're at a dollar 86 why so if your price target is at 1400 where's the disconnect yeah i mean look in terms of the quarters guy i think there's significant expenses here related to supply chain especially, especially coming out of China. The street's not factoring it in. We've been a bit more cautious in terms on the EPS side, although, again, I continue to focus on the auto gross margins. But that's really the crux of it. I mean, I believe there could be some significant incremental expenses, could be one time, but because of what we're seeing coming out of the supply chain. Well, that's what I wanted to know. Is it longer than a one quarter impact for the reason why you

have a, I don't want to say a negative view, because anybody who has an outperform rating and a lofty target like $1,400 can't be negative. But in terms of a more conservative view, are you worried that it becomes more than a one quarter thing? Look at me, obviously, bullish view on Tesla is significant going into the second half and, of course, into the next few years. I think it's a one-Q, two-Q issue because of what we're seeing coming out of China. And it's something I think the bulls in the street will kind of one-time it. They'll say it's not sustainable. You focus on the longer-term story.

But I think this is something that will drag into 2Q. And I think in terms of, you know, Zach and his must talk, I think the big focus is going to be what the expense profile looks like for 2Q, but especially deliveries. You know, can we be looking at a sequentially flat deliveries from 1Q to 2Q. That's really going to be the focus. Because like I said, I think we're already in the hole for about 50 to 60K because of three weeks that have been offline. Interesting. We're watching shares right now in overtime, right at $1,000 as we continue to wait for the numbers to cross. And you can see maybe a little bit of volume picking up. What's interesting to note too, Dan, is that this stock, even on a beat, generally doesn't move to the upside as much as it moves lower on a miss. So maybe that tempers some of the expectations from investors, even if this is a good number. Yeah, look, I would say

going into the print, probably I'd say the most negative or fearful probably in the last five to six quarters, just in terms of sentiment from buy side, because of what we're seeing coming out of China. Because, look, the hearts and lungs of Tesla is giga Shanghai. So not even from a free cash flow perspective, but also from a margin perspective. And, of course, what we're seeing coming out of there, that's really the fear in terms of the headline number will come out. You'll see a knee-jerk reaction. The big focus is, do they change their delivery guidance for the year, given what we're seeing in China? And then ultimately, how do they change the expense structures going into 2Q and 3Q?

That's really what's going to determine what the stock does over the next 24 hours. What about supply chain issues, the increased cost of nickel? EQ. That's really what's going to determine what the stock does over the next 24 hours. What about supply chain issues, the increased cost of nickel and the impact that it's having on batteries? What do you expect to hear on that front? I think they're going to continue to pass it through. I think the big focus is, you know, the price increases have already started. I still think overall demand is for over 2 million vehicles this year that in let's call it they'll do it you know if you look at production 1.5 1.6 1.7 so demand continues to outstrip supply but they will pass those price increases as you're talking about with nickel and so on I think they'll be

another thousand dollar price increase at the lab because they have no choice they're not gonna ultimately absorb that and that's something that i think will be a focus in the call and of course you talk about netflix and others that have increased prices and obviously churns increased tesla we haven't seen it so far and i believe the demand continued to outstrip supply since you you mentioned um netflix um there any read through here here on how critical the street is going to be of results for a company like this? And in some respects, this company has been on an island, right? It hasn't been as susceptible as some of the other issues you might otherwise think. But is this now different?

Look, I think it's a have and have not, right? If you're on the other side like we see with netflix i mean that's a catch a falling knife situation i think those multiples will continue to compress i i do think you know it does speak to what we see with just a general risk off and you know any sort of major stumble is going to be significantly amplified now for tesla there's not a question about demand so that's just an important thing to understand is that the demand story continues to be robust. When you talk about what could they say on the call that could really cause the stock to crater, it's really the delivery guidance and what we see about 2Q.

Forgive me for cutting you off, Dan. I've got to get to Phil LeBeau because these numbers are out. And, Phil, they look pretty good. They're better than expected, Scott. That's why the stock is up more than 4%. It is a beat on the top and the bottom line. Tesla earning $3.22 a share in the first quarter. The estimate was for earnings of $2.26, so well above expectations. And then you've got the revenue coming in at $18.76 billion. The street was expecting $17.8 billion in revenue. And the all-important automotive gross margins, excluding zero-emission vehicle credits,

it was expected to come in, the estimate was for 28.9%, came in 30.0. Much better than expected. And that's the reason the stock is higher. We're going to go through the investor deck and get ready for the conference call, which is coming up at 530. Scott, back to you. Do we get any handle on deliveries before the call or not? Well, they'll give an exact one for the first quarter. I think, though, what Dan was talking about is you want to know what they say regarding the second quarter. I have not had a chance yet to see if they give any specific guidance regarding the second quarter,

because that obviously gets to the main question. What's happening in China? How much has production been hurt? Is it still down? How much has it come back? That's really what's going to be driving the stock. Watching gross margins at 29.1%. Dan Ives, how does that read to you, 29.1% margin?

I mean, Scott, those are ridiculous numbers relative to everything I talked about in terms of the expenses that we thought could have been 40 cents and anything she was expecting. Those auto gross margins above 30. I mean, that's the magic threshold. And that billion dollar beat on top lines, what that shows is that the price increases, they're not having an impact and what's starting to happen is now higher margin sort of sales that we're starting to see are taking hold even in europe you put that together and we'll see what they say on the call in terms of deliveries i mean relative to back against the wall in a quarter i mean these are almost cinderella type

numbers relative to some of the fears going in wow ph, Phil. I'm assuming I still have Phil LeBeau with me. The ability of Tesla to pass on these costs, to maintain these amazing margins, as Dan Ives has characterized them at. You know, when you're paying more, the supply chain issues, obviously. You're having issues with the battery supplies, nickel and the like. And you're still able, Phil, to pass on the cost to maintain margins that are extraordinary. Look at the average sales price. I haven't figured out what it is for the first quarter. The expectation was that it was for $52,400 for an average sales price in the first quarter. I think it's going to be well above that. And don't discount the impact

that full self-driving subscription revenue, something that doesn't get as much attention as it probably should. You start to see more people who are saying, I know I don't have a full self-driving car right now, but I want it when it comes along because I think it will come along at some point. Therefore, I'm going to buy into it. That's the kind of thing that is really helping them as they push the margins higher. But, Phil, also, you mentioned the call. What's it, 530 Eastern Time? You mentioned earlier today But Phil, also, you mentioned the call. What's it,

530 Eastern Time. You mentioned earlier today that Musk is going to be on the call. It's never a given. It's never a given. Does that give you any sort of insight into the importance of this particular quarter, the fact that you do expect him on the call? No, only because, Scott, you never know what Elon's thinking. Look, he never does something without a plan in mind. He knows that people are going to ask about Twitter, and yet he's going to be on the call, which means one of two things. One, I can put up with it for a while and I can focus on answering questions about Tesla. Or two, yeah, give me the platform because I want to hammer my message when it comes to Twitter. He knows he'll get that question. He's not just going to get one or two.

He's going to get a lot of them because one of those questions is going to be, how much are you willing to collateralize your holdings in Tesla in order to fund a purchase of Twitter? So I think that that doesn't mean him being on the call, Scott, to answer your question, doesn't make this quarter any more important than others. I think it does speak to the mindset of Elon Musk, which is, you know, people are going to be listening. You want the megaphone in terms of saying what your plan is in terms of the future, likely with Twitter. That's the time to talk. Yeah. Thousand fifteen dollars. It's pretty much at the highs of the OT. That's a near forty dollar gain.

I've got Degas Wright with me as well joining because he is a shareholder. You have to be pleased with what you're witnessing right now, Degas. I'm definitely pleased. As we look at Tesla, we see Tesla as about a C, and so we're forecasting a market perform, but we like the numbers and we expected a beat on these numbers based off the increasing earnings expectations at the beginning of the quarter is it was about a dollar sixty and we see now that it blew out the earnings expectations they're up over 30% where the expectations were at

the beginning of the quarter. Same way with revenues. Revenues started out at the beginning of the quarter about $16 billion. The expectation was only $17 billion, as Dan indicated, and that was a beat of over $1 billion. So this is in line with what we had anticipated. And as Dan pointed out, is that the real question here is the Shanghai Gigafactories. They closed down for about three weeks in April. So it's going to be a question, how will this impact Q2 earnings going forward? Yeah, you beat by basically a buck on earnings on the bottom line.

You beat by basically a billion on top line sales. So it's an extraordinary quarter. Bryn Talkington, as I mentioned, is with us as well. Look, you own things like the ARK, right? The Innovation Fund, Tesla's front and center in that, even though you don't own Tesla specifically, you had a lot riding on this, Bryn. Yeah, we also own, you know, the Global X lithium strategy, which is lithium battery, of which Tesla is in there. And we also own the Qs. So, you know, it's always an important company within our portfolio, especially because of the LIT lithium in the Qs. I think what's interesting is that if you look at this year, energy cost will cause the average driver around $450 extra per year for a regular gas-powered

engine. If you look at nickel, lithium, and cobalt prices, battery prices are going to average, from what I'm hearing, around $6,000 more per batteries this year because of the high prices. I think what's incredible, he's clearly been able to push those through. I will be interested to see what happens with the other companies like the GMs and the Fords, especially GM, who still is just delivering in the hundreds of EVs, if those other companies are able to push through those really high battery costs. Because so far, I mean, a $55,000 to Phil's point is the average entry cost of a Tesla. That is not something the average person is going to be able to afford. Hey, Dan, is there any Twitter risk in Tesla shares? Right. We don't have any specifics from this bid, if you want to call it that, from from Musk. I think we've sort of decided that he's not going to sell any Tesla stock to fund it,

but we really don't know. So is there any risk involved there? Look, I think at first there was a perception that they didn't have to sell stock as we've talked about he'll collateralize tesla stock as well as spacex i think the phil's point i think was important for him to be on this call because you don't want to give the perception that you know he's juggling too many balls in terms of twitter and not be on the call look i think the biggest risk and the perception is more the balancing act. I mean, if he ultimately is successful on the Twitter bid, would that take away from Tesla in terms of his sort of mindshare, which is so important, especially at this point? But I think it's really about the stock. Does that mean we have another sale of stock coming?

I do not believe it. It's about a collateralized piece. And that might be something that comes up on the call. I just don't think it will come up necessarily because I think you'll have to outline that in some sort of detailed prezo that will probably send out the shareholders and the board. Yeah. Phil, lastly to you before I let you run, because I know you've got more to look through here, getting some idea at least of the constraints of supply chain and the factory issues that we were witnessing. Tesla's saying that factories are running below capacity for several quarters as supply chain became main limiting factor and is likely to continue through 2022.

So it's going to last for a while. Yes. And look, Elon Musk has said this is going to be an issue for the rest of 22. He said that when they were opening up the Austin plant. And he's also made those comments when he was over in Germany. Everybody in the auto industry knows this, Scott. The chip crisis is not going away. It's here through the rest of this year. Gets a little bit better, but it's still going to be a lingering impact.

And it's also the supply chain overall. It is stretched. It is stressed. And as a result, Tesla does not have a demand problem. It has a production problem, if you want to call it that. It could build a lot more than it currently will or will this year. But unfortunately for them and for other automakers, they just do not have the supply chain to the level of bringing out the product that they would like it to be. I got you. All right, Phil, you do your thing. I'm sure we'll see you again.

Phil LeBow, my thanks to you. Degas, my thanks to you. Bryn as well. Dan Ives, Eric, we'll have you back. I look forward to doing that. Breaking news is what it is. It's Eric Johnson joining us here. Let's get to our Twitter question of the day now. We're asking, what is Tesla's biggest competition? Is it Rivian, General Motors, Ford or other? You can head to at CNBC overtime to weigh in. We'll bring you those results at the end of the show. Up next, the drama inside Twitter. A former executive speaking out about Elon Musk's 43 billion dollar offer. What he says needs to happen to really fix that company. Ryan Sarver is with us exclusively next. Welcome back to Overtime. Now to that other apple of Elon Musk's eye, Twitter, which given that it is 420 on 420,

we're watching for any headlines that might move the ball forward on that story. So is our next guest. Ryan Sarver used to be Twitter's head of platform before leaving in 2013. He's with us now live in a CNBC exclusive. Welcome. It's good to see you. Welcome to Overtime. Thanks, Scott, for having me. Appreciate it. I mentioned it literally is 420 on 420, so I'm watching the wires because you never know what is going to happen. I don't think we're going to get interrupted in any second here.

Yeah. Look, interesting when this story broke. You tweeted something interesting that I want to ask you about. You said, quote, I love the idea of Elon Musk buying Twitter, but I fear he spent about as much time thinking through the really complex challenges of how to fix it as most people do their fantasy football lineup. So do you think his interest and intent is legit and real? I do. And, you know, the guy's landed rockets in the middle of the ocean, so I shouldn't think that any challenge would be too hard for him to take on. But I do think a lot of people undercount how hard and how complex

both free speech, abuse, management of a platform like that is. And I think it's easy to think about taking it over relative to the actual complexities of managing it, for sure. But I do think he's serious. Are you in favor of him buying it yeah i mean in generally yes i think you know twitter has become one of the most valuable platforms in the world for dialogue i think he believes a lot in free speech and the value of that and he sees it he uses it every day and i think talks about the value he sees um but I think he's frustrated by the drama and dysfunction

on the board. A lot of us see from the board to the execs to employees that there's been drama throughout the history of the company, unfortunately. Kind of surprised to hear you say yes, only because it seems to be the narrative is that, you know, Twitter wants to give him the Heisman, right, that they don't want any part of him, that employees don't want Elon to end up buying the company. It's interesting to me as a former executive who knows this company better than most anybody says it would be in better hands with him. Yeah, I don't want to downplay how hard, again, these things are. And I think the team there has good intentions. But I think the company is, you know, in the eight years or ever since I've left,

the company has gone through a lot of turmoil. It's still not any more valuable than it was as a company back then, around $40 a share, even though it's become one of the most valuable platforms in the world. And I think it's ready for a shakeup. There needs to be some bold changes made. And that's not going to happen at the scrutiny of the public market. Someone needs to take it private. And I think he can be the right person to do it. So you think that's the best strategy, regardless of whether it's Elon or somebody else, that Twitter should be a private company rather than public? I think so. I think there's major overhauls that need to happen there. And I think,

unfortunately, trying to do that in the public market and with the quarterly drumbeat, it's just really, really hard to make some bold decisions. What do you do to fix it, right? Why are we in this predicament? Why is Twitter in this predicament? What's it a result of? Is it, it can't be all about drama. Is there lack of execution, lack of ideas, lack of something, some spark to grow users? What's the problem? It's definitely a lack of ideas, lack of something, some spark to grow users. What's the problem? It's definitely a lack of ideas. I mean, a lot of the stuff they're rolling out today have been

talked about and bandied around the company for 10 plus years. So it's not that the ideas aren't there. There's a lot of really smart, hardworking people that are there as well. I think Prague is the fifth CEO in the history of the company and not a very long history of the company. And I think you need consistency of leadership and a kind of moral compass and a leadership compass to be able to, in fact, move some of these changes into place around censorship and content moderation. It's very hard to do. And when people are switching around at the CEO level, which then means executives and employees below that are also switching out, it becomes really hard to make any of those changes happen. And so I think that drama, while seeming maybe to be a small thing, is actually really, really important in what's been holding the company back. And again, I think it goes from the board all the way down to individual employees. We have a board there that very few of them even use the product beyond Jack.

And so how are they the ones helping be the stewards of the company? So what do you make then, speaking of the board, of Jack Dorsey's criticism of it, right? He sits on it. Theoretically, you could make the argument because of the board's tenure that this is his board, right? He was CEO while this board was in place. What do you make of the criticism that he's had on Twitter of that board? It's confounding to me, and I feel like, unfortunately, that's one of those questions you'd have to just ask Jack. I don't know, and I don't know the complexities of exactly how each of those people got at it and when and why.

But I understand his frustration. I do think some of the dysfunction of the company comes from that level. You know, it's interesting when you were speaking to our producer on the issue of what happens if Musk doesn't get it. You said if Apollo or Toma Bravo get it or bought it, I think it would be a disaster. Why do you think that? You know, I think in the order of likelihood of succeeding, you have someone like an Elon, you have the existing team, and then way down below you have a PE buyout of a Toma or an Apollo. I just think someone like that's going to come in and try and do kind of a typical PE move on it. And that's not what the company needs. The company needs someone who really understands things like free speech and abuse.

And there are really, really complex issues that take either the existing team there today or someone like Elon to try and do it. But I don't think any of those groups will be helpful in trying to move this to be and get the value of the platform out of it that I think it can be. Would you be more or less optimistic if Jack was still running the company as CEO? Then the current CEO, right? I mean, then Parag. If Jack was still there, would you be more optimistic that some changes could actually happen? Or does he deserve some of the blame for the fact that the company has stagnated the way it has, that the stock price is the same as it was years ago, that the product hasn't really innovated from where it was years ago. What sort of blame does he take on his own shoulders, do you think? Good question. I don't know if I have a great answer for it. I do feel like you need some

moral authority from a founder like a Jack who's there. And I think him leaving says a lot about his frustration with what he feels like is the infrastructure around him, whether that's his fault or not for building up that infrastructure, that I don't know. But I do think it says a lot that he has stepped away given that it's his child. He invented this and he has put his heart and soul into it. And I do think he,

better than almost any other platform out there, has done a better job of managing free speech and moderation than any of the other groups. So I was sad to see him step down. I worked with Farag a little bit, but we didn't know each other at all, so I can't comment on him. We didn't really cross over in any meaningful way.

But I do think Jack generally was a good steward of it and had the right intentions. I do think people underestimate how complex and how hard these platforms are to try and manage the way that everyone wants to. Without, you know, getting inside Jack's head, and obviously he's not here for the benefit of me asking him directly, but do you think he'll be, let's use the word, content?

Will he be content if Musk gets it? I would think so. Again, it's hard to predict on him, and a lot of things have happened since I've left there. But I think Jack respects Elon, and, you know, there's a lot of things have happened since I've left there. But I think Jack respects Elon. And, you know, there's a lot of complexity probably happening right now. But I think he respects him enough and feels like it's another person with a strong point of view on where the platform should go. And I think they have a lot of the same first principles and ideals of what free speech

means and what kind of democracy of speech means. So I think from that level, I think they'd feel, I would hope that Jack feels good about someone like Elon. So finally, give me your best to guess here, your gut. What does it tell you about how this whole thing plays out? Yeah, if I was a gambling man, I would have lost this a long time ago. Unfortunately, with all the drama that's happened there over the years, I think I've gotten really bad at predicting where it's going to head. Unfortunately, I don't think Elon's going to be able to take it over. I think the board's going to fight it too much.

They put the poison pill in place and they don't want to turn it over. And so I think it's going to be maybe an elongated battle, whether it's him or other potential suitors. But it will probably stay status quo for where it is. Well, OK, we'll leave it there. Ryan, I appreciate your time. That's Ryan Sarver, the former Twitter head of platform joining us there. Up next, the bull case for stocks. BMO is Brian Belsky laying out the case for more upside. Plus, the earnings keep rolling in. We're awaiting results from United Airlines. We're going to bring them to you as soon as they cross as well. Overtime's back in two minutes. Welcome back to Overtime. Time for a CNBC News update with

Shepard Smith. Hi, Shep. Hi, Scott. From the news on CNBC, here's what's happening. As Russian forces continue to hammer away at targets across Ukraine, another show of force today from Vladimir Putin, Russia announced it successfully tested a new missile. The Kremlin says it can deploy nukes at hypersonic speeds and avoid missile defense systems. President Putin says the test was meant to show adversaries that they need to think twice before threatening Russia. The Pentagon says the test was actually routine and not a surprise at all. The former Ohio doctor charged with killing 14 critically ill patients

with large doses of fentanyl learned his fate today. We, the jury in this case, being duly impaneled, sworn, finally defended, not guilty as to count 14 of the indictment for murder. And Nadia Musil found not guilty on all 14 counts of murder. Prosecutors argued he intentionally killed the sick patients, but his attorneys argued he was giving comfort care to people who were already dying. Tonight, Johnny Depp on the stand on a wild day in his defamation trial against his ex-wife Amber Heard. Ms. Heard,

in her frustration and in her rage and her anger, she would strike out. The explosive testimony on the news right after Jim Cramer, 7 Eastern, CNBC. Scott, back to you. All right, Shep, thanks. We'll be there. Shep Smith. United earnings are out. Phil LeBeau has those numbers for us. Phil? Scott, this is a slight miss on the top and the bottom line, but that's not what we're going to see impacting the stock. You know why the stock is moving higher? It is the company's guidance with regard to the second quarter and the rest of this year. With regard to Q1, a slight miss of $4.24. That was the loss for the first quarter.

Slightly worse than expectations. Revenue $7.57 billion, a little below expectations. But the guidance for the second quarter and full year, United expects to be profitable not only this quarter, but the third quarter, the fourth quarter, for the full year. Analysts were expecting them to post a loss for the full year. Revenue per seat mile in the second quarter is expected to grow 17%. Let me say that again, 17%. That's the kind of growth you see in revenue rarely at an airline. Capacity will be down 13%. Cost per seat mile up 16%. All in all, Scott, you're looking at numbers here that,

forget about first quarter. We know what that was for the industry. It's the second, Scott, you're looking at numbers here that forget about first quarter. We know what that was for the industry. It's the second, third, and fourth quarter. We are seeing demand that we just have not seen in a while. And in talking with United executives, they expect that demand to last for several quarters. It's not going away after this summer. We are going to be talking with United CEO Scott Kirby first on CNBC. That's coming up in about 45 minutes.

Scott, I'm going to hop in a car, head over to the United headquarters. We'll see you at 5.15 with Scott Kirby and a very, very bullish outlook for the summer and the rest of this year. I know that traffic can be bad in Chicago, Phil, so I hope you make it on time. We'll see you there with Scott Kirby,

the United CEO after United delivers its results. Post-pandemic travel boom. What else can you say? A mixed day on Wall Street. The Dow posting back-to-back gains. The Nasdaq, though, closing down more than 1%. Let's bring in BMO Capital Markets Chief Investment Strategist Brian Belsky. Eric Johnston from Cantor Fitzgerald is back with us on set.

Brian, it's good to see you. The gentleman to my left, Mr. Johnston, is negative on stocks. You're anything but what's he missing well thanks for having us and it's a pleasure to be on uh with eric that's what makes the market uh i think it's excessively consensus uh to be negative uh and bearish and i'm sure there's lots of eloquent reasons to do so but listen i still think that u.s equities and canadian equities for that matter are the best asset in the world. You can't sell everything. You can't be in bonds, I don't think, right now. You can't be in a lot of credit right now. And I still think from a bottoms-up basis, the numbers are improving. We just actually published a piece 20 minutes ago

that looks at the next four quarters of earnings. And as you and I have talked about on the show before, earnings have actually gone up. And people are not looking at the market in totality. They're not doing the work from all the 500 stocks, the S&P 500. The earnings numbers and projections for the next four quarters since the end of the year have gone up. That's number one. Number two, we're still seeing double digit, low double digit earnings growth, which we have seen in the last 75 years the S&P 500 has averaged a 14% return when we've had an earnings peak and then when we've troughed out at this low double-digit earnings growth so I still think that's the main part. Now I think what's going on here today obviously with the Netflix effect it's 40 basis points of the S&P 500. Obviously,

Netflix was an over-owned stock during the direct-to-consumer days of the lockdown, and it's starting to kind of feel the pain from that unwind, Scott. But longer term, we still think that is a secular growth stock that is now a growth at a reasonable price stock and probably needs a period of consolidation here. But we would be a long term owner of Netflix at these levels. Wow. OK. A defender of Netflix. Didn't even ask you about that. He just offered that up. A defender of the market. I mean, he says earnings are going to save the day. That's the bottom line. You've got all this fear in the market and no one's looking at the real story. And that's earnings aren't going to be as bad as people think. In fact, they're going to be way better than people think.

So earnings have been great. And, you know, if you look at operating margins over the last year post-pandemic, there was this massive pull forward effect. There was insatiable demand for really for goods. And so operating margins for the S&P 500 jumped from 13.5% where they've been for seven or eight years straight, all the way up to 16%. That 16% is not sustainable. Not everyone has the pricing power of a Tesla. And so what we're going to see throughout the year going forward is that operating margins are absolutely at risk, especially as demand comes off and some of the pull forward effect post-COVID goes away. And so the second thing I would say is that if you look at the Fed balance sheet, people I don't think are appreciating the magnitude of when the Fed reduces the balance

sheet, how that's going to hit multiples. The last 12 years, the Fed balance sheet has gone either sideways or up 11 of the 12 years. It was only down one year, and that was in 2018 when the market sold off about 20%. And we've looked back, and the correlation between the balance sheet direction and valuations is extremely high. So when the Fed goes and reduces the balance sheet by a trillion dollars a year, to think that that won't impact multiples, to think that that won't impact the speculation that is embedded in these markets, I just don't think it's feasible. It's the treasuries, too. It's the mortgage backed securities. I don't necessarily think people have appreciated what happens when

you start to unload those off of the balance sheet. Your points were taken. And I have to continue it another time, Eric, because I do have more earnings coming in. Brian Belsky, you know, you'll be back as well. We do have a news alert on Starbucks. Let's get to Kate Rogers with that story. Kate. Hi, Scott. Starbucks has filed two unfair labor practices charges against Workers United as the union fight continues on. The company says labor organizers are intimidating and bullying partners who don't align with union goals, breaking federal law. Now, one charge against the store in Denver, Colorado. The second is in Phoenix, Arizona.

In a letter to its partners today, Rossanne Williams, the EVP of Starbucks North America, said the specific behaviors were calling out in the filing include blocking entrances and exits, making threats, yelling profanities and surrounding a store and pounding on the windows to physically intimidate and bully partners inside in retaliation for not supporting Workers United's organizing drive. Now, the union has so far filed about 80 of these charges of its own against Starbucks. But this is Starbucks escalating the fight on its side for the first time. And a reminder, so far, 26 stores have voted to unionize. Twenty four have sided with the union and more than 200 have petitioned the NLRB to actually hold these elections. Scott, back over to you. All right. That's Kate Rogers with us there. Thank you. We're all over Tesla's move in the

OT, a beat on the top and the bottom line when they reported just a few moments ago that stock was moving higher and it's basically holding for about 4 percent higher in the OT. We've got instant reaction from a halftime committee member coming up next. But first, Christina Partsenevelos is tracking some other big movers in the OT. What's on deck? Oh, Scott, I think a big is an understatement because we are seeing some massive swings. One stock is actually down 20% right now on weak earnings results. I'll have the companies and the numbers right after this break. All right, welcome back. Let's get to some of the bigger movers in the OT. Christina Partsanovalos tracking the action at the Nasdaq. Christina? Let's start with Carvana, the e-commerce platform that sells and buys and sells used cars. Shares are plunging 21% right now after its Q1 report showed an earnings per share loss of $2.89, which was way worse than what the street was expecting. On revenue of $3.5 billion, the CEO saying, quote,

high used vehicle prices, rapid changes in interest rates and other macro factors impacted Carvana and the used vehicle industry as a whole. Switching gears, shares of freight rail operator CSX was trending higher, and this was after their first quarter results showed higher profit with earnings per share of $0.39 and a revenue beat of $3.41 billion. Total shipment volume fell 2%, which sounds bad, but revenue per unit was up 24%. There was a huge jump in coal revenue per unit, and that was despite coal volume actually dropping. And so that's why we're seeing CSX shares up 2.4%.

Shares of semiconductor equipment maker Lamb down after posting its third quarter results. Revenue of $4.06 billion, which kind of fell short of the street's expectations, with earnings per share of $7.4. And that's also weaker. Revenue guidance for the fourth quarter did come in lighter. And so that's why we are seeing shares of LAM down right now, almost 2% lower. And then last but not least, the maker of bedding accessories and beds, Sleep Number. Shares are plunging down over 8% after the reported first quarter earnings of $0.09 a share, much lower than the $0.33 the street was expecting. Revenues also came in lighter. The company warned of excessive backlog. They said, or they blamed, I should say, Omicron, Ukraine, and the semiconductor

shortage. Why? Because there are semiconductors in beds, especially if you have those high-tech ones. You learn new things every day. Scott? That you do. Christina, thank you. Christina Parts and Neveless up next. More on tonight's earnings headliner, what you should do with Tesla on the back of those results. The stock is up 4% in the OT, now above $1,000 a share. Plus, we've got your setup into Snap tomorrow after the bell. All right, we're back in overtime. Take another look at shares of Tesla in the OT on the back of earnings.

That stock's up 4%. Conference call kicks off 5.30 p.m. Eastern time, so in about 40-plus minutes from now. Let's get to today's other halftime overtime and bring in another Tesla shareholder, MarketRebellion.com. Co-founder John Najarian, you own Tesla Calls, right? So do you still? Yes, I do, Scott, happily. And as you just said, it has virtually recovered all of today's $40 billion loss, or not $40 billion, I'm sorry, I was thinking Netflix. It's recovered all of today's loss, which was about 50 points like that in the post market. You have Netflix on your mind because you made a late day trade there, I'm told.

What was it? Yeah, I jumped into Netflix. I heard Josh say that he jumped in at the opening. I know Pete was adding to a position in calls. I bought the actual stock here, Scott, at about 219 today, traded down to 212. I still thought that was a good trade. It finished at 226 or so. So I know there's no just one day event, so I could take a little pain tomorrow. But picking it up on the cheap here, I thought was the right thing to do. Volatility is high. I'll be able to

sell some big fat calls against this, hopefully in the very near future. I appreciate you updating us on that, Doc. And I know I'll see you on the halftime show soon. That's John Najarian here in overtime with us up next. Santoli's last word. And tonight, it's a snap. Get it? And don't forget about today's Twitter question on the back of Tesla's results. We're asking, what is Tesla's biggest competitor, Rivian, General Motors, Ford or other? You can head to at CNBC overtime to weigh in. We'll have the results coming up. Michael Santoli is here for his last word.

And today it is. It's tick tock, actually, because it's shadowing not just what happened with Netflix today. Underreported, maybe a part of this story, but also, of course, Meta with its big disappointment. And tomorrow we get Snap results. The time spent on TikTok is this thing that's basically hovering over the whole sector. An hour a day for the average user, more time than YouTube. It's really largely value and attention that's outside of the market cap of the market. And here you see Snap's setup is interesting because it's really behaved very much over the last year, like Meta and Netflix. So it's downward in 60% from its high.

It did have a nasty downside surprise in January, just like Meta did. So maybe you can say, you know, you've priced in some downbeat expectations. Would point to still 76% of the street has a buy on it. And also the upside to the consensus price target is 75 percent right now. So it seems as if maybe the street could could have its eyes too big for it, even if the stock is built in some bad news. When are we going to learn our lesson, so to speak? And that's like from Facebook and to Snap, as you say, and now Netflix. I mean, what's it going to is this the one that finally gets you

to stand up and say, you know what, these's it going to is this the one that finally gets you to stand up and say, you know what, these high valuation stocks that did great during the pandemic, a lot of them, that story's over in at least those chapters. The hope and the loyalty dies in stages. I don't think it's just one recognition moment. Look, maybe, as I said, snaps down a lot. If you look at it, sort of price to sales ratio, which you kind of have to look at, it's closer to the lower end of its range than the upper end. So it's not as if people think things are great there. Maybe they're going to be able to have some nice things to say about being through the Apple privacy issues

that they've been blaming for a while. But it's worth flagging, though, that you just never know when something is done pricing in a tough environment. Yeah, until it smacks you in the face like Netflix did today. Mike, thank you. That's Mike Santoli. All right, up next, an energy double play, our two-minute drill when overtime returns. Welcome back to Overtime, another check on shares of Tesla. And they've pretty much been holding steady, up 4% after that big earnings beat, both on the top and the bottom lines. That leads us to

today's Twitter question. We asked, what is Tesla's biggest competition? Is it Rivian, General Motors, Ford, or other? And it was a close call between Ford and other. Some of you wrote in Fisker as Tesla's biggest competition. Oh, that's interesting. All right. That's how you voted. We appreciate you weighing in. It's time for the two-minute drill. That's how you voted. We appreciate you weighing in. It's time for the two minute drill. Let's bring in Schultz asset management CEO George Schultz. It's good to see you. Welcome to overtime. We have a few picks to get through here and they're all related to energy. Why are you so bullish on the space beginning with Chesapeake? Well, we're seeing inflation now, multidecade highs, and really the Fed has a

tough task of raising rates enough to combat this. So we're going to see higher oil prices. We're going to see higher commodity prices. We like Chesapeake. It's a ticker CHK, here at Schultz Asset Management. It's a natural gas producer, trades at about $92 a share. We think it's worth about $125 or maybe higher. This company was reorganized in 2021, eliminated $8 billion in debt, and now it has significant free cash flow, which keeps the balance sheet clean, and it allows it to make acquisitions as well as some dividends and buybacks. You know, I noticed the stock hits an all-time high this week, as did another one of your choices, Alpha Metallurgical, AMR is the ticker there. Three

billion dollar market cap, so a little bit smaller than perhaps what we normally talk about. But nonetheless, a stock that's done quite well. Yeah, that's the largest and most diverse met coal producer in the United States, trading at about 157 a share. We think that one's worth about 220. This company eliminated almost $5 billion in debt through their prior restructuring. And met coal, of course, is used to make steel. It's not burned to make electricity. So this is an important commodity that's needed in this economy in the United States. It will benefit from the big infrastructure spend that we will have here in the United States going forward. So we're excited about Alpha Met, Chesapeake Energy,

and another one, Whiting Petroleum, looks very interesting to us as well. Tell me about that. I've got less than 30 seconds. Yeah, so Whiting, it's an independent oil and gas company, ticker WLL, trades at about $83 a share. We think that one's worth about $130. Like the other two, it was reorganized a couple years ago.

This one eliminated about $3 billion in debt, so it has a clean balance sheet to initially trade it down the mid teens. And now it's above 80. It's merging now with Oasis and the combined company is going to return about 60 percent of its free cash flow to shareholders. Got it. It's good to talk to you today, George Schulte. I appreciate you being on with me. It's all about Tesla in fast money because the conference call begins at the bottom of the hour. They'll, of course, have that. I'll see you tomorrow.