Closing Bell - Closing Bell: Stocks mixed after wild session, AMC CEO talks retail traders 5/10/22

Episode Date: May 10, 2022

The major averages finished mixed after another wild session on Wall Street, which saw the Dow swing by more than 800 points. Tony Dwyer from Canaccord explains why it may be safe to start dipping your toe back into the market. Joshua Friedman from Canyon Partners breaks down the trade in the credit markets. And AMC CEO Adam Aron talks about retail traders, and if they’re still enthusiastic about the stock following last year’s meme mania.

It is another roller coaster session on Wall Street. The Dow had been up more than 500 points before turning sharply lower, then recovering, now struggling for direction as we head toward the close. The most important hour of trading starts now. Welcome, everyone, to Closing Bell. I'm Sarah Eisen. Here's where we stand in the markets. As you can see, the Dow is higher by 29 points. Again, high of the session was up 500. Low of the session was down 357. S&P 500, up a nice three quarters of 1%. The strength today is actually in the hardest hit part of the market lately. Technology, communication services, some of those battered names like Netflix and Alphabet working today.

NASDAQ composite up 1.85%. It is leading for a change. Small caps up about four tenths of 1%. What's not working? The more defensive plays that have fared better in the sell-off. Real estate, utilities, and consumer staples. Check out some of the most actively traded names right now, right here at the New York Stock Exchange. Palantir giving more back after 20% decline off earnings yesterday.

NIO and Ford continue to be among the most active. AMC down about 4%. It's reversed its gains off of earnings. Coming up on today's show, we will talk to Canyon Partners co-founder Josh Friedman about his outlook for the market after this brutal bout of volatility. Huge credit fund. Plus, AMC CEO Adam Aaron will join us for an exclusive interview. After last night's earnings, stock is down more than 50% so far this year. It's falling again, as we just showed you, after last year's frenzy among retail traders.

Let's get straight to the wild action. Our next guest says it might be time to dip your toe back in ahead of a summer rally. Joining us now is Canaccord Genuity's Tony Dwyer. Tony, I know you've been looking for a bounce. I don't know. Today feels a little tenuous. What do you see? Hey, Sarah.

Thanks for having me. The whole period little tenuous. What do you see? Hey, Sarah, thanks for having me. The whole period is tenuous. And when you get these intermediate to mobile sold indicators, we tend to look for the low tick. And I'm horrible at that, as you know. What you want to try and do is identify an environment where if you think even if it goes down further, you'll make that back up quickly on a reflex rally. And i think that's the case now our call is that we're in a similar environment both on credit i can't wait to hear you talk to the credit investor um we're similar in credit to how we were in the first half of 1994. so i think that playbook may look pretty good here so in that scenario would you be buying technology because

it's been hardest hit for summer bounce? Well, if you're going to get a bounce, it's going to be in those games that got hit the most. Today's your clue on that, right? It's getting all the stocks that are down the most are seeing that kind of bounce back because it's not fundamentally driven. What happened in 1994, Sarah, is, you know, credit took a hit because the Fed was a lot more aggressive than anybody thought they were going to be. As the year began to progress, you got into 50 basis point moves and then ultimately a 75 basis point move. But what happened when it made its low in June, and I think we're kind of surrounding that now, what happened is people started to say that the Fed, that the market had discounted what the Fed was going to do. And there wasn't enough of a lag time to have the higher rates impact the economic data. So what happened is the market rate rise stalled and looked a

little bit better. You got a rally in the two year, five year and 10 year, kind of like you're getting now. And that lifted the indices. The average stock still struggled. It was just an oversold bounce. And then we called it, you got that summer rally. And then as we talked about the last time I was on, we got that fall, fall, when the economic reality of what happens, the impact of interest rates. I'm a little bit blown away, Sarah, on something that I heard on CNBC yesterday, or maybe it was this morning. Neil Kashkari came on. He talked about how the accommodation withdrawal by the market has been faster than the accommodation they instituted in 2020. So think about that. You put trillions of dollars of stimulus into the economy and they've taken it back faster. So there's going to be an economic impact.

And that's where we have to deal with that once we get this summer rally. Which is why we always have to listen to you carefully here and read the note carefully, Tony, because it's so short term, you're looking for a bounce, say, what, for a few months? And then longer term, I read your note and you actually sound pretty bearish about what the Fed has to do about some of these forces that are weighing on us. China slowdown, global growth, all of the issues that have been plaguing investors. It's exactly right. Like how does when you have the kind of moving credits, Sarah, that we've had and I know that the spreads aren't

as historically wide as they've been, but the absolute level in yields has really put a crimp on, as we talked about last time, the mortgage market. So where are you getting your money? So you get your money from a bank. You can borrow it from your equity account, your brokerage account, or you can earn it. So we're at peak employment. You make it a little bit better in the next month. That's the box that the Fed is in. But then the banks are tightening their lending standards. And if you want it, you can't get it out of your house if 90 of the mortgages according to my friend ivy zelman um 90 of mortgages are below the current mortgage rate so who's going to take equity out of their house to increase their interest payment by 200 basis points so what that does is that's the financial

condition tightening that neil kashkari was talking about. And I don't I think that that comes into play on a lag. So that's probably fourth quarter. So my question is what what you should be doing about this view, Tony, because you mentioned that the beaten down names are going to rebound the fastest. We're seeing that in technology today. But, you know, we hear in a rising interest rate environment, you hear strategists after wealth advisor that comes on this network and is telling their clients, you want to be in quality, you want to be in cash flow positive companies that are profitable. Well, guess what? Those have already worked really well. So are you saying transition into unprofitable tech companies, more speculative names right now? It depends on what you're doing. Like if you're trading for a bounce, which I, listen, you know, I've talked all year about like how my dad sat in the basement, looked at me and my brother and said, don't just sit there, do something. All year we've talked about don't just do something, sit there. You're in a tumultuous environment. It's going to stay tumultuous. If you are a trader and you're looking to play a bounce, we we talked about dipping our toe in. That's not like an all-in call. That's for a summer rally. If it goes up 5% to 7% in the next week, that could be a lot of it,

right? That should be in those stocks that are moving along the most, you know? Well, Tony, thank you for joining us with the short and long-term view. Tony Dwyer. After the break, a pulse check on the retail trader. Shares of meme favorite AMC have lost half their value this year, falling again today on the back of earnings. We'll ask CEO Adam Aaron whether he thinks retail traders have lost interest or if something else is driving the sell-off in the stock. You're watching Closing Bell on CNBC, DAZP 122. We'll be right back. Let's check out today's stealth mover. It's Bausch Health. Shares of the pharmaceutical company plunging after missing Wall Street's earnings and revenue estimates and issuing

week-full-year sales guidance. It's down 27 percent. Look at shares of AMC, initially positive after reporting earnings last night, but reversing course, now down about 4 percent or so. The movie theater chain beating on revenue, reporting its strongest first quarter in two years, but investors remain cautious. CEO and chairman Adam Aaron joins us now in an exclusive interview. Adam, nice to see you. Welcome. Sarah, always good to be with you. So clearly some progress on the revenue side of things and attendance in the movie theaters, but you're still burning cash and not profitable yet. Why? Well, let's talk about the progress first. There was something called COVID-19, you may recall, that shut all movie theaters two years ago and basically stopped the flow of movies

to theaters from Hollywood studios. We've been marshalling a glide path to recovery ever since. And as you said, we just reported the best first quarter in two years. We saw progress, considerable progress in 2021. And then, you know, just this weekend, we had the biggest movie of 2022 opening in Doctor Strange. When we look at the movies that are coming, including Top Gun Maverick just a couple of weeks from now and Jurassic World Dominion right behind that. And what we think will be hit after hit after hit, we're actually quite optimistic that the box office is coming back, that theaters are coming back. And that's the news of AMC that we reported in the last 24 hours.

So I guess another way of asking is, what level of attendance, Adam, do you need to see to not be burning cash? Oh, I suppose if we were get to a point where we're 10 the fourth quarter of 2021 uh we got within 25 of pre-pandemic levels uh and uh from an operating cash standpoint we were breakeven even in the fourth quarter but of course we're not trying to get to operating cash break even we want to be robustly profitable again and as i, I think we need to see attendance levels rise to, oh, 10 to 15 percent of pre-pandemic norms. But I do think that's a doable thing in our future sometime in 2022 or 2023. Adam, on the call, you addressed,

as you often do, the retail shareholder base in your stock and actually said, I thought this was interesting, that some of the feedback that you've been getting specifically on social media may be well intended, but some may be hurled at us with an intent of actually harming me or the company. And it was the first time I really heard you speak out against some of the enthusiasm or mania around your stock. So explain what what you're experiencing and how concerned you are Well, a Twitter is an anonymous medium. You should read my about Twitter feeds, but look on balance the Enthusiasm the passion for AMC amongst our retail shareholders has been stunning to us

It's so much so so much more on the side of being constructive. I don't want you to read too much into the that commentary. I'm very fortunate to work for this shareholder base. They love our company. They're rooting for our company and we appreciate their support. Even with the stock down 80 percent from the highs. Well, it depends where you want to look, right? Fifteen months ago, we were trading at $1.91 a share. And it is true that if you look at calendar year 2022, our stock has fallen. It's also true that the market has fallen.

These are very uncertain times. And there are a lot of other companies, really wonderful companies. Your own Comcast, which owns NBCUniversal, is off 20 percent. Disney's off 30 percent. Netflix is off 70 percent. Amazon just bought MGM Studios, and it's a streamer. It's down a third this year. It is a tough market in 2022. That shouldn't be a surprise to anybody who watches. No, but I think the meme trades in particular have reversed. And that was obviously a point that a lot of people thought, OK, the speculation in this market has gone wild. And now the Fed is raising interest rates. And a lot of that is the froth is coming out of the markets. And they look at stocks like AMC and

it looks particularly vulnerable. So I guess I'm wondering, are you worried about losing that lifeline that you've had of retail traders? Well, no, I'm not worried about losing the retail traders. I think there's a lot of passion and enthusiasm for AMC. But when you're doing the parade of horribles that colors the market, like why don't you throw in a war in Ukraine, the first major ground war in Europe in 75 years, if you include what happened in the Balkans back in the 90s. Look, these are messy times with inflation and interest rate hikes. But still, you know, it's more your job to comment on share price.

It's more my job to run the company. And when you look at what we reported yesterday, we reported a five-fold increase in our revenues year over year, a narrowing of our EBITDA loss by 80 percent, a huge opening in Doctor Strange this weekend, Top Gun Maverick coming, Jurassic World coming, Thor, Minions. There's a biopic about Elvis starring Tom Hanks, all the way to the sequel to Avatar. Look, I'm very optimistic about our future. And that is what we're focused on, bringing AMC back to a position of strength as we befit the number one here in our industry on a global basis. COVID certainly dealt a tough hand two years ago, but I think we've done a very nice job in guiding the company back to recovery. Well, you've also been focused on

deals, Adam, and I think you said on the call that you were going to look for more strategic deals. You know, the gold miner that you invested in, Highcroft Mining, that share price is lower than it was when you announced your stake, as well as your own stock. And I just wonder, there's still a lot of skepticism and people scratching their heads about you investing in a gold miner and whether that was a really good use of shareholder capital. When you have still billions of dollars of debt, you could be paying off. Well, there's only one problem in your premise, and that is if you look at our share price, our share price at AMC and the stock that

we acquired was $1.07. And Highcroft is in the money. So it's not accurate that we have lost money or even that I think that we will lose money on Highcroft. We are in the money now. We're positive. We had a very strong return in a very short period of time. Our strike price on Highcroft Mining is $1.07 on their shares. And, yes, we are going to look for more opportunistic ways to smartly diversify the company because we think there are opportunities out there to grow shareholder value for AMC. Now, and with respect to Highcroft, remember, we only invested $28 million when we had a cash hoard of $1.8 billion as of the end of the fourth quarter of 2021. So it's not like we bet the farm. And if we did have to bet the farm, I don't mind betting

the farm on a company that has $45 billion of proven gold and silver reserves in the ground. High croft mining. Yep. 126. Adam, thank you for taking the time and the questions. We appreciate it. Adam Aaron, CEO of AMC. Give you a check on where we are in the markets right now. We have been all over the place today. The Dow is still higher, but it's lost about half the gains just in the first 20 minutes here of this final hour of trade, up 46 points right now. S&P holding on to a gain of eight tenths of a percent. Most sectors are higher today, so definitely a different field. Technology and communication services lead.

Real estate and utilities lag. The Nasdaq up 1.8 percent, still down for the week, which just shows you how brutal it's been. But the Nasdaq 100 is up a nice 2.25 percent. Tech getting a bid today, as we mentioned, but it's been a brutal year for all the FANG stocks, all down double digits so far in 2022. Mike Santoli is going to look at the damage done to the valuations in this space for his dashboard next. And a quick programming note, don't miss an exclusive interview with Omega Family Office founder Lee Cooperman coming up at 4 p.m. on Closing Bell Overtime. We'll be right back here on Closing Bell. The tech-heavy Nasdaq getting some love today after massive underperformance lately.

Nasdaq currently trading about 27% below its all-time highs. Mike Santoli here with a look at big tech valuations after this recent sell-off for the dashboard. Are they value stocks at this point? I wouldn't say they're yet value stocks, but it has been a very rapid, pretty wrenching adjustment in a short period of time. Sarah, take a look at some of the heavyweights, Microsoft, Apple, Alphabet and the S&P 500. I mean, Microsoft was the absolute premium valuation on a legacy tech stock. Everyone loved the predictability at 35 times forward earnings. We're down to 25. The key to me is how far back do you go in time if you consider 25 to be the norm? OK, it traded around there for parts of 2018, 2019. Not cheap, but at least maybe normalized on some level, assuming the earnings hold up. Then you have Apple, which

really did get this huge revaluation during the pandemic. It was always cheap. Now it's not. It's still holding that 25 level. That's not back to pre-pandemic levels. Alphabet does look inexpensive relative to its history. It's right 19 times earnings. And it gets you actually back to below where it was at the bottom of the market in 2018. Now, overall S&P still around 17 times earnings. What I find interesting, Sarah, the equal weighted S&P is below 15 times earnings, meaning it's the very largest stocks that are still skewing the overall S&P multiple higher and still carrying, still meaning that we're not really back to historical norms necessarily in overall S&P valuation, but you're kind of getting in that zone. 17 was a level that

we reached in early 2018 and part to 2019 as well. It's interesting to see how much better Apple is actually doing. Yeah, it's been the one kind of harbor people have been flocking to. All right, Mike, thank you. We'll see in the market zone. Canyon Partners co-founder Josh Friedman thinks investors will see high double digit returns in some areas of this volatile market. He'll be here to reveal those opportunities when Closing Bell comes right back. It has been another volatile session today. Stocks mixed as we near the close, but still down sharply over the past week and, of course, for the year. So where can investors find opportunities amid all the volatility and how can they protect themselves? Joining us is Josh Friedman, Canyon Partners co-founder and co-CEO.

Josh, it's great to have you. Thank you very much, Sarah. Thank you for having me. So I know you're sort of known as a distressed investor, so maybe you're licking your chops, but I'm just curious where you think we are in this whole process of completely revaluing equities and bonds and crypto and everything else as the Fed raises interest rates and we deal with this war in Ukraine and the shutdowns in China. How much longer do you think this kind of this volatility lasts?

I think we had a pretty big sea change in the environment generally in the market. We went from a market that I would call a negative and negative optionality market to a positive optionality market. And what I mean by that is if you bought a bond prior to a few weeks ago, there had been so much pressure from the Fed and the Treasury stimulating the market on top of the demand that was naturally recovering from COVID that rates were so low and demand was so high that everything was pouring into equities. And on the debt side, yields were so low. So if you bought a standard bond, you were negative optionality. In other words, if rates went up, you lost money. If credit spreads went up, you lost money.

If the credit deteriorated, you lost money. We have seen a sea change in that psychology over the last two weeks. Is it healthy to you as someone who did warn about the excessive risk taking that we saw during that period? Absolutely. I think we're starting to see a return to things like actual financial covenants. We're seeing bonds that we and others passed on that were trading at par or were purchased by brokers at par a few months ago that are now trading at 90, 88, 86. There's been a little bit of liquidity withdrawn from the market, but I don't think

the banks are in such poor shape that we're likely to see the kind of liquidity crisis that will drop prices really dramatically. And you also have quite a lot of private capital running around chasing credit securities. But you have seen drops, and it is much, much more balanced in terms of the type of return per unit of risk for an investor in the credit area. So what do you do, Josh, because it's been painful to be in stocks and bonds this year? Well, the types of strategies you pursue in a negative optionality environment are quite different from what you do in a positive optionality environment. So prior to this change, the focus is more on short duration,

event driven situations, private situations where you could you could negotiate extraordinarily strong covenants because an issuer needed capital quickly and it couldn't be addressed by the public markets because it was either confidential or competitive situations that were more arbitrage and event driven, things that really weren't likely to move with the market. All that changes when you get into this type of an environment and you start looking at all of the things that maybe passed over your desk and weren't interesting six months ago, but where maybe you start with the strongest credits, the highest quality things that were just priced too tight. And now maybe a

broker has to unload some inventory he has, or there's a buyer who's leveraged who has to sell. And those are the first things that drop in price and become attractive. We're still a little bit away. You mentioned distressed. I think we're still a little bit away from seeing things that are at that lower level of the capitalization as to be distressed and to be interesting. We'll be waiting a little while for those. But are you guys actively buying bonds here?

Yes, we are. But we're nibbling. So I wouldn't say that we're in with both feet. Five million here, 25 million there, 15 there. Things that we already know where we can react quickly before a lot of attention is drawn to those particular securities. But yes, we've seen things down, as I said, 10 to 15 points from where they were. And at these levels, they start offering returns that look more like mid-teens to high-teens as opposed to single digits with a lot of ways to lose money. I guess, Josh, a part of it is, you know, everything is so Fed-driven right now.

Do you have a view on whether the Fed can achieve a soft landing or whether we're going to see a mistake? Well, I think the Fed made a mistake with the Treasury of oversteering into the recovery. So coming out of COVIDering into the recovery. So coming out of COVID into the demand recovery. And they oversteered and caused a lot of excessive exumcans, to coin an old phrase. And I think it's not unlikely that we might see a little oversteering on the other side. And that could be a little bit, cause a little bit of panic, cause the types of downdrafts we saw last week and cause a little bit of panic, cause the types of downdrafts we saw last week, and cause a little bit of fear to dominate. Because not only do institutions overreact, but human emotion tends to overreact. And that's where you get the interesting buying opportunity.

On the other hand, what I would say is consumer balance sheets are generally in relatively good shape. And you've already started to see a little bit of retrenchment as a result of gas prices being high, et etc. But balance sheets aren't in bad shape and labor costs are high. So consumers are not in a bad place. Corporations have done an awful lot of borrowing. When you encourage people to borrow by having low interest rates and no covenants, they borrow. But a lot of the cash proceeds from that borrowing is sitting on the balance sheet of companies. And if they start to see their debt traded big discounts, they may well use some of that cash to pay it back. So they're not sitting on the edge of prices, although there are a lot of triple C companies that may not be able to endure

higher interest rates of the sort that we're about to see. And the third part of that equation after consumers and companies is, of course, banks. When you see the really bad pricing is when the liquidity vaporizes in the banking community and you get illiquidity and panic selling with no intermediary. That doesn't seem to be in the picture at all this time. So I'm not as pessimistic as some are about the levels at which things might trade in the near future. So you're not positioning for recession? Are you positioning for stagflation? Where do you think the growth and inflation equation goes? I think the inflation is going to stick with us a little while because

of what you said at the beginning, which is the supply shock from China and the supply shock from the Ukraine are not really things that are directly addressed by the Fed raising interest rates. It takes a very large demand adjustment to correct for those supply shocks. But those will work their way through the system. So I don't necessarily invest based, we don't necessarily invest based on a pure macroeconomic viewpoint. We try to protect against a variety of situations. But I would say our bias is that we'll have a slowdown, that we'll have some restraint in spending, that corporations will start to show some restraint, that these higher Fed rates will start to kick in and cause some demand restraint, but probably not drive us to the kind of depths of recession or the kind of overshoot that some players are expecting right now. Really good to talk to you, Josh, especially as we've seen credit risk rise this year.

Josh Friedman from Canyon. Appreciate it. Here's where we stand right now in the markets. The Dow has gone negative. We're down now 100 points. Again, we've been negative twice before today. We've been positive twice. We'll see where it shakes out. But down now 116, lost a bit of momentum there. The S&P is still positive, but it's also lost a good chunk of its gains. It's up a third of 1%. Technology, communication services, energy and health healthcare, all still positive. Everybody else has gone negative. The NASDAQ 100 only up 1.5%.

So it just took a spill in the last few moments. Microsoft, Salesforce, Apple still leading the Dow. The fallout in fintech stocks ramping up today as that group continues to underperform the broader market. Coming up, we will discuss whether some of these names are starting to look attractive at these levels. Look at what's happening with Upstart down almost 60 percent off earnings. We'll be right back. Welcome back. Check out some of today's top search tickers on CNBC.com. Some new names on the list today. Tenure yield obviously still on top, and there's actually buying of treasuries with yields moving south. The 10-year note yield is below 3%. Peloton crushed on earnings. Upstart crushed even more on earnings, down 58%, taking

all the fintechs lower. Amazon and Tesla, which is seeing a little bit of a pop. Biotech's a big winner today after Pfizer's acquisition of Biohaven Pharmaceuticals. Find out whether that deal could spark a wider biotech M&A boom. That story plus the fintechs flopping and a countdown to Coinbase results when we take you inside the Market Zone next. Welcome, everyone. We are now in the closing bell Market Zone. CNBC Senior Markets Commentator Mike Santoli here to break down these crucial moments of the trading day. Plus, LightShed's Brandon Ross counts us down to Roblox's earnings. Mizzou host Dan Dolef on the fallout for fintech stocks. It

is ugly today. We'll kick it off at the broader market, though. Mixed picture for the major averages here into the close. The Nasdaq is leading the charge. It is still higher, more than 1%. The Dow has gone negative. It's down more than 100 points. It was up more than 500 at session highs. Mike, the S&P also losing a bulk of its gains. What's happening here? Not a very convincing comeback. No, I would say just kind of sloppy and indecisive, but within a range that actually seems fairly narrow compared to where we've been. Over the last five trading days, S&P 500 has been in a 350 point range from high to low and back again. And I would say that, you know, today's plus or minus 50 points doesn't

really tell you much, except the market has been able to decompress because it hasn't really had very wide swings today. The market went back down to yesterday's lows in the S&P, didn't really find a lot of pile on selling right there. So that's a modest net positive. And as I said, decompressing before we got this big CPI number tomorrow. Banks are still weak. That's not necessarily great in terms of psychology. But for now, the overall market is at least kind of treading water, I would say. No, let's talk about that. Because if you look at the new 52-week low list today, it's all the banks. Bank of America, Citigroup, Goldman Sachs, JP Morgan, all trading at lows.

Basically, we haven't seen since early 2021. I guess you can make the case that they're buying bonds today, putting pressure on yields. That hurts banks, except for the rising yields have hurt banks lately as well. Yes, I think we've kind of gone beyond just the pure nominal yield discussion and much more about is credit getting better or worse? Are we more or less worried about the consumer's ability to shoulder debt and all those things? And is there some kind of accident in the financial system we haven't yet seen come to light, whether it's because of Russia, Ukraine, because of commodity market volatility, because of what's

been going on here in the markets with margin debt? I don't think that's necessarily something we have a clue about, but it's the kind of thing that when the market's been under a lot of stress, it starts to let its mind wander a little bit in that direction. Well, health care is one of the remaining positive sectors right now. Shares of BioHaven Pharmaceuticals skyrocketing after Pfizer announced it is acquiring the migraine drug maker for more than $11 billion. The deal is Pfizer's largest since back in 2016 and gives it entry into the increasingly competitive and profitable migraine treatment business. Our Meg Terrell joins us. Meg,

do people in the industry expect this deal to spur more M&A, which has been very, very quiet lately for biotech? Yeah, there was a collective hallelujah that went up among biotech investors this morning when they saw this Pfizer news. They have been waiting for deals like this, given the depressed valuations of biotech and given that pharmaceutical companies have a lot of patent expirations coming up and a lot of cash to spend. As Raymond James pointed out, this is the third sort of major biotech pharma deal we've seen in the past nine months. Two of the buyers of those deals were Pfizer. The last big one before this was Pfizer's acquisition of Arena for about $6 billion announced in December.

And then Merck announced its Acceleron deal for $11 billion in September. But of course, it has just been such a rough go for biotech stocks. The XBI up almost 5% there. This is the index that tracks more mid and small cap names, and that's up even more than the IBB, which has some of the larger biotechs in it. But for the year, over the course of the year, down 45% and really just terribly performing over the last few weeks. So it's really been tough going. We're seeing a couple biotech stocks in particular outperform today on speculation that they could be potential future takeover targets. Stocks like Biomarin, Horizon Pharma, Intracellular Therapeutics, therapies and Neurocrin as well. All of those stocks kind of getting big gains, as you can see there.

Intracellular had had earnings today. So that drove that up, too. I remember talking to the CEO, Meg, a few weeks ago of Novartis off earnings and one of the because they had been a serial acquirer and they've been quiet too. And I asked him why no deals. And I think what Vosner-Simmons said was that it's the lack of quality of targets. And I'm just curious what you're hearing about why, why it hasn't been happening and why the sector has been so weak. Yeah, I think there are a couple of really interesting things actually that he said in that interview with you. One of the things is that there are just so many potential targets out there. So many biotech companies have gone public over the last few years. It is difficult to parse through everything

that you're seeing. Another thing that he and something we hear from a lot of big pharma CEOs right now is, do the sellers agree that where the valuations have come to is a good place to sell? And that is not usually the case. And so actually coming to an agreement on those things has been really difficult. Meg, thank you. We'll leave it there. One hot spot in the market today. Chip stocks are also doing well.

They're leading the Nasdaq gains today and significantly outperforming the broader market. Our Christina Partsenevelos joins us. Christina, how is the supply crunch continuing to affect the sector? I have, I guess, four new examples. The first one, Taiwan semiconductors announced that they're going to be hiking prices for a second time in less than 12 months. They're saying it has to do with inflation. The second major reason is that they need to expand dramatically across the globe to help ease the supply chain crunch, which leads me to my next point. We saw it in microchips earnings last night. The lead time, that's when a chip is made to when it's delivered, continues to be a problem. There's a long lead

time for a lot of these manufacturers. The third point that you're seeing on your screen right now is this lagging edge chip shortage. For all those that don't know what lagging means, think of the chips that are used in auto, analog, like radio, speakers, frequency like that. It seems like more and more new foundries, these are new manufacturers coming onto the market, they're focusing on the leading edge chips, those that are involved with AI. And so we could still see a shortage, especially within the auto sector.

And then last but not least, one, Sarah, that we've talked about a lot, and yet it's still an issue in earnings calls, Acer as well as Asus. These are computer hardware companies boasting that PC sales are declining. And so, of course, this weighs on companies with dramatic exposure to PC as well as GPU units, so processing units. Got it. Really good color, Christina. Thank you, Mike.

Or they just got too cheap. I mean, I think about Adam Parker and Trivariate yesterday out saying that he's buying semis because if you look over a two year horizon, these stocks have just priced in a lot of bad news and they have pretty good longer term trajectories in terms of growth. There's no doubt the valuations have come in a lot. Of course, at the highs in valuation, people say, well, yeah, you have to just pay up for this really clear and, you know, encouraging growth outlook that they have. So clearly the psychology has changed. The semiconductor index is interesting on a one-year basis. Just like the NASDAQ 100, it's fighting to stay above its lows from early 2021. And it's so far doing that.

One other piece of the supply logjam story that got some chatter as well is the crash in crypto might actually alleviate one big source of demand and perhaps shortage, which is from crypto money. Interesting. Crypto having a little bounce today as well. Mini one over with the broader market. Roblox earnings are coming out after the bell like much of tech. That stock's gotten hammered. It's down 80 percent year to date. A major concern among investors is user growth here, especially as we shift toward a post-pandemic world. Gaming stocks, EA and Unity also reporting after the bell today. Those stocks also underperforming so far this year. Joining us now is Brandon Ross from LightShed Partners. What is the big concern here with Roblox? Because there

was so much excitement that it was the first company into the metaverse and that's where all of the younger generation wants to be and are still gaming. Well, you've certainly seen a major slowdown in engagement across Roblox, like in other 3D interactive platforms, since reopenings happening. And that's been much more acute in the United States versus the rest of the world, where Roblox continues to really grow. And that's not a user change. It's more of an engagement change. On the user side, Roblox continues to actually add accounts and grow the number of users. It's just this time spent and daily activity versus kind of a weekly activity that's changed. So what's happened to the valuation? It's not trading about seven times sales. I know you think that it got too hot last year, but now that it's come down. I think it's trading at more like

four times bookings. If you look at it, it's still an EBITDA generator, a free cash flow generator. You're in this reset year right now, especially in the US, which you're about to lap. And we expect the platform, especially based on all the upgrades that are happening in terms of adding voice and layered clothing on top of avatars and brands flocking to the platform that you'll really return to growth in the second half

of this year and beyond that. So it sounds like you're a fan, right? What would you tell the most skeptical investors who just see it as a poster child of all the excess last year of the new companies going public and all the hype and excitement? Yeah, we believe that there's going to be a next generation of really valuable platforms that are gonna be rooted in a much more interactive world than we've seen on the current form of the internet. And this company has as chance,

as big a chance as any right now, along with maybe Epic and hate to say it, meta, to be a really important player in the next generation of communications and media consumption. Brandon, thank you for joining us. Brandon Ross of LightShed. It's a brutal day for the fintech stocks. Take a look at AI lender Upstart. It's losing more than half of its value just today after the company cut its full year revenue, citing interest rates and an uncertain economy. Upstart's disappointing results also dragging down competitor Affirm, which is down 11 percent in today's trading. Meantime, SoFi, look at that one, released its

Q1 results earlier this afternoon by mistake, citing a human error. The company is sinking after reporting a lighter than expected revenue forecast. Joining us now is Dan Doleff, Mizuho America's senior fintech analyst. You know, Dan, it looked like really great calls you had on some of these names last year. This year, not so much. It's among the hardest hit parts of the market. Why are you sticking with names like a SoFi or an Affirm, which are just not what investors want right now. No profits, negative free cash flow, and hiccups in growth. Yes. Thanks, Sarah.

Look, I think on SoFi, it's interesting that you say that the market cited lighter than expected guidance. Actually, they beat Q1. They raised up the guidance on both revenue and EBITDA. The fundamentals are hitting up on all cylinders. They're actually probably gaining share from some of the upstarts of the world. So I think what you're seeing today, that's a little bit of the era of pre-releasing. But also, I think a lot of the upstart kind of like, you know, sorrows of what, you know, it's dragging it down.

I really think that SoFi would have been up. Had they not done this, they would have been up like 10, 15 percent. This was a class A quarter for SoFi. But there are problems. Wait, wait, wait. Dan, there are problems here, right? What if we see a turn in the credit quality for consumers? The postponement from the Biden administration of the student loan payoffs, they're losing on that front. Aren't these big issues? Those are big issues, but they're actually the moratorium extension is already in the numbers. What we're seeing here is like an upping of the guidance despite the moratorium. And if you look at their personal

loan issuance on a quarter over quarter basis, they added like half a billion dollars of personal loans. So they're gaining share. Now, if we get a macro event and things turn south, that's not a SoFi issue. That's a broader issue. But I'm saying specifically for SoFi, this was an amazing quarter and they're not getting any credit for that. What about Affirm? You still stick with that stock? Another one that is not profitable and is falling in sympathy with Upstart. 100 percent. So it's the same issue, right? ABS, SFX securitization, those fears are hurting Upstart. They're hurting SoFi. They're hurting everyone. But a firm is a market leader in buy now, pay later. And if you look at even the trust data,

which we track, which shows you the delinquencies, they've actually gotten better in April versus the last few months. So it's actually trending better. That's going to be a key KPI. I think that people are going to be surprised to see the delinquencies actually come up better than expected. And that should be a big surprise. The Amazon deal that they have is massively accretive. And I think that's going to get to catch

all these bears by surprise. I'm very bullish about it for them. Mike Santoli, can you own these stocks? As Dan says, the fundamentals are good, but there are some real concerns about the consumer lending environment in this country and what's coming. I mean, both of them, Affirm and SoFi, are now around $5 billion market cap. So they really have been marginalized in terms of, you know, relative to the universe of their competitors. Can you own them at a price? You can own anything

I think if the question is are they really going to be accruing book value we're doing things that financial companies do you can't own them by thinking that fintech magic makes them something other than a lender and Sometimes a lender to perhaps lower quality borrowers where you're going to have an adverse credit experience at some point over the cycle. In a world where Capital One Financial traded six times forward earnings, I don't know what the world is going to want to pay for these companies if they come to just view them as the lenders that they kind of are at heart. Well, Dan, that's a question to you. What should you be willing to pay for a SoFi or a firm, given some of these concerns and the re-rating of all of tech stocks?

Right. But that's, I agree with Mike, but that's actually a backward-looking thing. I think what we should look for, and this is something we've seen across all of fintech, not just SoFi and the firm, we're coming off like massively tough compares. And you mentioned that last year was a great year for them. I think once we hit that inflection point, which is coming down to second quarter, growth will accelerate. And a lot of these worries that are dragging those stocks, they're going to fade. So I think it's pricing in like, I don't know if 08, but it's pricing in like a disastrous environment. It doesn't look like the environment is as bad from a demand perspective. So I think that both those stocks are severely undervalued even today.

You're still 14 on SoFi? Stock is like at $5. Yeah, 20 times EBITDA. Dan Dolop, thank you. Bullish on both SoFi and Affirm. And by the way, tomorrow on Tech Check, don't miss a first on CNBC interview with SoFi CEO Anthony Noto. That is 11 a.m. Eastern time. Two minutes to go, Mike, in the trading day. What do you see in the market internals hanging on to a gain for the S&P, but less than it was earlier? Yeah, very mixed under the surface there. Definitely a little bit of a negative skew. Softness in the breath data today, but nothing too dramatic. Yesterday, remember, was another one of these 95 percent downside volume days.

A really good, you know, pretty good washout readings. Here you have about a three to two downside to upside. It's the mega cap growth stocks that are holding the indexes together commodities interesting story here another one of these indicators that says that maybe the fever is breaking in terms of inflation anticipation you know the commodity index is now below where it was in early march it's still in an uptrend but it shows you maybe some of the pressure is easing on from that on that score market-based inflation expectations also crashing right now if you look at the 10-year break-evens. The volatility index has come in quite a bit here.

So we're now at 31. You're fully five points off the recent high. That's just because the market basically was diffident all day around the flat line, could not keep the VIX elevated too much beyond this, Sarah. Well, inflation expectation is going to be key to watch that market-based measure into tomorrow's CPI report, which is the biggie, of course, expecting 8% inflation for the month of April. Let's show you where we are into the close. Look at the Dow. We've seen an 800-point swing on the Dow from the highs to the lows today. Just unbelievable. Down 72 points right now. And there you see it's the most weakness of the major averages. Salesforce is still contributing the most. Again, it's been among the hardest hit. IBM is one of the bigger losers, along with the banks, JP Morgan and Goldman Sachs. S&P 500

still with a gain, and that is thanks to tech stocks like chips, which we hit, and some of the software makers as well. Coming back a little bit today, communications services higher today. Real estate and utilities are weaker. NASDAQ goes out with a gain of 1%. So a mini comeback for the market after yesterday's brutal day. Small caps also just barely in positive territory into the close. That does it for me.