Power Lunch - Another Bite Out Of Apple, Eli Lilly’s Direct Approach 1/4/23

Episode Date: January 4, 2024

Another day, another downgrade for Apple’s stock – the second this week. The shares are down more than 5% to start the year, as concerns over iPhone demand grow. We’ll speak to the analyst behind the latest call. Plus, Eli Lilly is taking weight-loss drugs directly to the consumer, setting up a new service to help patients get telehealth prescriptions. We’ll ask a medical doctor about the potential implications. Hosted by Simplecast, an AdsWizz company. See pcm.adswizz.com for information about our collection and use of personal data for advertising.

Welcome to Power Lunch, everybody, alongside Kelly Evans. I'm Tyler Matheson. Glad you could join us here on this Thursday. Coming up, another downgrade for Apple. The stock down more than 5% so far this year, and it's early. Concerns about iPhone demand are growing, and we will talk to the analyst behind that latest call. Plus, Eli Lilly taking weight loss drugs directly to the consumer. They're setting up a new service to help people get telehealth prescriptions. We'll ask a doctor about the potential implications. But first, let's get a check on these markets with a new. The Dow up 128 points. The S&P up three, but the NASDAQ can't snap its losing streak. Now, it's only down 15 points, but it's trying to snap its longest losing streak in several years. Time after having its worst two-day start to the year, I believe, since 2005.

All right. And shares of Walgreens Boots Alliance getting crushed today after the company cut its dividend nearly in half. The stock is in the Dow for the time being. But since the Dow is price weighted, this drop only costing the index about 10 points. It's a $23 a share stock. We begin today, however, with another Apple downgrade, the second one this week. Today's downgrade coming from Piper Sandler on worries of cooling demand for its products, particularly the iPhone. Shares dropping now to an eight-week low.

Let's bring in the person behind today's downgrade. Harsh Kumar, senior research analyst with Piper Sandler. Also with us is CNBC Technology correspondent Steve Kovac. Harsh, why don't you just explain the reasoning behind your call today? First of all, thank you for having me on your show. I think there are four to five things that bother me about Apple at this point. First of all, we see handset sales challenging in the first half of this year. Apple gets roughly about 50% of its revenues from handset sales, so it automatically becomes a big deal.

We see units recovering a little bit in the second half, but it's going to be a lacklusty year with sort of mid-single-digit units growth. We also anticipate that following a week sort of Christmas, there will be some exceptional. inventory left over into the March quarter, which could potentially spill into June. We also feel that it's been a long time since Apple's done a form factor change. So the phones are kind of old-looking, old-ish. They keep upgrading the camera, but people anticipate that. The point number two is really interesting. They have a lot of legal headaches all of a sudden. The watch is a problem now with the issues around Massimo lawsuit. On the services side, you saw Google lose to Epic, which could be a problem.

It could come back to Apple in another form of a lawsuit. We also know that the DOJ is questioning the browser and the payments that Apple gets from Google. So all this could be a side show distracting sort of motion. Point number three, as Apple gets about 10% of it's. Let me, if I might, Harsh, let me pause there. And I'll let you pick up on point number three in just a second. But I want to bring Steve into the conversation because Harsh has laid out two very key points here. Number one is slowing handset sales and legal disputes that the company is facing.

Well, it's not just that legal disputes that Apple's facing. It's legal disputes that Google is facing as well because Google makes part of that case that the DOJ is suing Google over. It's over the payments Google makes to Apple. It's $19 billion a year or so ago. It could be about that again. So that puts their services business risk. That's basically a free check that Apple gets. all the time. Something harsh did not mention also on the regulatory front is what's going on in the

EU, which is going to force Apple to allow users to download apps from outside the app store, and those are all missed sales too. So Harsh, pick up where you left off. Let's go to point number three, which I think is the Chinese economy, and you don't know where and how strongly it will come back and where Apple will fit in it. Yeah, so the issue here is that Apple gets about 10% of its revenues or phone revenues from China. And we just don't know, you know, how long it'll take to recover. It could be six months. It could be a year.

It may be a long time after that. The last two points of easy. The valuation is running a little bit higher than the five-year average. Stocks about 27, 28 times, trades it about 24 times. It's had a great run. And I think it's time to take some chips off the table, quote, unquote, and just wait for a little bit of a pullback. I think it could be constructive. Harsh, was this in some ways a reaction to Barclays making the same move?

Or, you know, if you did it on Monday, you could have had the whole market moving lower as a result. I guess to put it differently, I wonder if we should expect more of your colleagues to follow suit now. You know, I can't say for what my colleagues do, but we had a 30-something page report that we were working on. We downgraded several names. As you saw, we are negative on the chip sector on a lot of different areas within the chip sector. In fact, one of the few things that we like is we like memory a lot and we like generative AI and compute a lot. But outside of that, we're sort of dower on everything else in semis. And the stocks have run up a lot in the fourth quarter, which is a cause for us to worry some more.

So that's another thing that's happening. But, yeah, it was a long report, and it just happened to be within a couple of days of a competitor. That's interesting. So you had really been working on this for some time. Does the chip, tell us how these two relate. the kind of weakness you see with Apple, the weakness you see with chips? So the two are a little bit different. Obviously, the handset sector affects things a lot for Apple,

because, you know, again, 50% of revenues for Apple come from the handset side. But outside of that, the rest of it doesn't really correlate. On the chip side, we are concerned about these high interest rates we've had for a long time now. And these high interest rates tend to skew the spending habits of consumer. It puts a lot of pressure on them. You have things like automotive and industrial, which a lot of, large segments of the semiconductor end market that are finally starting to cool off. You've had a bunch of analog companies come out and say, hey, there's excess inventory in the

channel. Car guys are starting to sound the alarm. You saw Mobilize this morning. So, you know, we feel like things are starting to fall apart. It could be a quarter to two quarters before all the numbers are reset. And so we don't like analog. We don't like handsets. We don't like consumer chip stocks.

We love memory and we love generative AI. We love Envidio. I was going to ask you, what do you like? Gosh, love memory and he loves generative AI. Tell me all the things. He does it. I was like, Steve, why don't you jump in with a comment? Yeah, we've got to talk about computers, too. Apple also makes computers. And the Mac business has just been in free fall for the last few quarters here. A lot of pandemic buying. They put out their new chips in the Macs that were very successful. And then today we get this news from Microsoft saying, we're going to put this co-pilot button on keyboards on Windows PCs.

They're calling it the year of the AI PC. don't know what that means exactly other than they have everything that you're saying captures what we've been talking about this week, which is is there some kind of real problem with tech or is Microsoft and is AI the new Apple, the new ecosystem? That's exactly it. They're the best idea right now is even to integrate it into the computers. And that seems natural. You know, let's go back to the 90s and early 2000s. Internet PCs were the big thing, right? Now they're trying to inject this AI into PCs and calling them AI PCs. Don't know what that is. means beyond just, you know, putting some good chips in there and as far as the capabilities, what can I do now with this AIPC that I couldn't do a year ago with the non-AIPC? They're not explaining that. So Microsoft actually has to do some work here. Fill that gap. So the hardware manufacturers have the shell that needs to be made into whatever this magical AIPC thing is.

So what there would be a button on my keyboard to launch co-pilot, which is their AI. And that is good. But beyond the co-pilot thing, what does an AI PC mean? You don't need one of these AI PCs to run co-pilot. To go there. To go to copilot. You can use the computer you have right now to run co-pilot. So the real question is, what are they going to do on the software in Microsoft that's so special in this Windows ecosystem that makes AI PCs the big thing that they've been hyping early this year?

But I tell you, a button on my keyboard that would take me directly to a place is not a bad idea. Whatever the place is. And that's what the computer you have right now. There's a Windows key that takes you to the start menu. They did that about 30 years ago. That was a big change. This is the first. Oh, look at that.

He just popped up his start menu. So this is the next big change that they're making to the keyboard. It's interesting. I mean, I was eight years old the last time they made a big change to this. And so now this is a signal where they want to go with it. You just changed my whole life. There you know. I have no idea with that key.

Whereas the nerds like Steve and I were so excited when it came out. Like, wow. Yeah, finally. Finally. All right, harsh. Thank you very much. Happy New Year, my friend. Appreciate it. Harsh Kumar.

I'll hear you. Thank you so much. Thank you. We'll see you soon. And Steve Kovac. Thank you. Speaking of Apple, our next guest just increases stake in it, even as everyone else has been backing away and says he'll keep buying if the selling continues. Let's talk to Keith Fitzgerald. Fitzgerald Group's principal, Keith, it's good to see you again. Welcome. Thank you so much for having me back. It's a pleasure. Unbridled enthusiasm for Apple here. I think this is a golden opportunity. I mean, both of your former guests are obviously extremely intelligent guys. they know their stuff, and I respect their opinions. But I don't think we're living on the same planet here.

We're looking at Apple, and we're seeing a golden opportunity. You've got a 240 million phones due for an upgrade. You've got a sensor platform. You've got a billion paid subscribers. You've got a business that is growing 30, 40, 50 percent. The services are sensory network with worldwide at this point. They're getting into finance. This is the year they're going to hear AI and Apple in the same sentence. I mean, I just frankly don't get it. I'm perfectly happy to buy more shares here. And when we talk about buying more shares, give us the case, Keith, that this isn't the moment that we look back on and say, nope, that was the year Apple matured, its market cap never got back to where it once was, although I guess they could keep buying back stock and it would do just fine. Well, look at it this way, Kelly.

I mean, and just respectfully, let me push back. You know, people have been arguing with me for years saying, well, these big tech companies can't possibly get any bigger, can't possibly get any more popular, can't possibly get any more valuable. And that's exactly what they've done. You know, throughout all of the economic weakness. I haven't heard one person giving up their iPhone because the inflation is getting too high or they aren't scapped. They're cutting back on their groceries, all these other things. The company has an MO that is proven and proven and proven. They come in, they wait, they watch, they want everybody do with their thing. And then they come in with more panache, more cash, and a better consumer offering.

I think, you know, again, a pullback like this, if you're talking about the next three, four, five weeks, fine. But over the next three, four, five years, I think you're going to shoot yourself in the foot. What about some of the longer-term issues that harsh raised in his sort of essay on the company? One is the not knowing about China and the competitive position in China for Apple where they get 10% of the revenue. That's number one. Number two, the criticism that the company has not broken through with a new sort of form factor or breakthrough other than incremental improvements to the existing product incremental improvements to the camera on their flagship, the iPhone. Well, I think those are both very valid concerns.

And let's tackle the second one first. So foreign factor, right, do you hear consumers complaining about their iPhone? Because I don't. I'm perfectly happy, for example, personally, to carry mine. It's about the right size, about the right weight. It does what I needed to do. So I'm not begging to have a photoable phone or rolling phone or any kind of other thing like that.

I just simply don't hear consumers talking about that. So to me, that's a false flag argument. The second one, talking about your criticism of the company and where it's going from here, those are very valid concerns. But again, this is a company that has a long distinguished history of watching competitors, fight it out to be first in the space, learning from that experience, and then coming in and changing consumer behavior the way they do every single time they release new product. I think we're going to see that again.

You also bought Microsoft Palantier. I remember talking about Nvidia last year, Keith. Where else? Oh, my goodness. Well, those are at the top of the leaderboard for sure, and I was fortunate enough to get that right, because this is a super tough business. But I'm not giving up on any of those companies. I think they're all, again, within the context of what we've been discussing with Apple, Kelly. I think they are absolutely viable, must-have companies that people, four, five, ten years from now are going to kick themselves if they don't start accumulating on the buybacks.

And what about people? And maybe you're the perfect person to talk to about this. The valuation, Nvidia, Microsoft. It's not that crazy. We're talking about, I don't know, around 30 times, but they've also been on historic runs. They're well-loved. Everyone owns them and so on and so forth. So I don't know if you can just address that.

And the broader stumble we've had here to start the year, especially in the NASDAQ, if that worries you or it sounds like it's just a buying opportunity. Well, again, it's a buying opportunity, but, you know, I don't take these, I'm not cavalier about this. We do our homework. I have a tremendous background in nonlinear science, and I was king of the propeller heads when I was growing up. But this is an interesting point you raised. Is it really expensive? Accounting regulations are set up to value manufacturing and hard goods. They don't recognize or capitalize digital expenditure and investment appropriately. So what you're seeing today is a shift in the way the world looks at these things.

I would submit that accounting valuations, PE ratios, any of the classic metrics, no longer applied because you cannot amortize or expense the digital expenditures because they don't come into the balance sheet or the P&L for several years into the future. that's very different than making a widget, than making a Peloton bike, than making an oil rig. So to me, this is an opportunity time. I'm less concerned with valuations than I am with growth. All right. Keith, good to see you. We appreciate it today. Thank you. Keith, it's Gerald. All right, coming up, Lily's launch pad to customers, the drug maker, going direct to consumer on weight loss drugs, what investors like you need to know.

Plus further ahead, a power player in solar, the CEO of Sunrun. We'll join us live from the goldman. In the NSAC's Energy Conference, the company shares still trading it a fraction of where they were in 2021 under pressure from noted shortseller Carson Block. All that and more when Power Lunch comes back. Welcome back to Power Lunch. Shares of Eli Lilly are up today after they announced their popular weight loss drug, Zepbound, can now be ordered directly from the Lilly website. Recently, weight loss drugs have become wildly popular with companies talking about shortages, warning of fake versions entering the market. And my next guest says, Lilly's service could improve access and lower cost, drug costs for consumers. Joining us now is Dr. Shad Mavastia, practicing physician trained in primary care, public health, and integrative medicine.

Dr. Shad Mavasi, welcome to the show. We appreciate it. Thank you very much. Okay, so have we ever seen something like this before, by the way? I don't think we have, and I think it's interesting the strategic plan here behind this move by Lilly. especially when you think about the potential impact I could have on, you know, the pharmacy benefit managers and the kind of system of distribution and access to pharmaceuticals. So I think in that sense, it may be really an interesting testing case for them and for the market to kind of see how people react to it. They've cut costs. They've increased access.

And they've kind of provided this direct-to-consumer outlet, which post-COVID era, we've seen that to be a really important thing. and combining it with telehealth services, you know, could be potentially impactful in terms of changing the landscape on how all these things are done. Is this a threat to the PBMs? I mean, when they do something like this, I think, well, why hasn't everyone always sold drugs this way?

And are they elbowing the PBMs to the sidelines as we see a lot of pressure regulatory and innovative from Cost Plus and otherwise coming to that space? Well, I definitely think it puts the PBMs on notice. You know, when things like this start happening, These are disruptions that occur in the system. and with the medical industrialized complex being the way it is

and how we saw things pre-COVID before we really pushed the envelope in terms of what was possible from a telehealth perspective and access perspective. I think this whole idea of bureaucracy and healthcare, as high of a percentage of GDP that we spend on health care more than any other nation in the world really begs the question where PBMs and other entities that are kind of middle managers really serve a role,

in the future as we're trying to increase access and efficiency in terms of getting medications to those who need it most in a quick and cost-effective manner. So I think that this definitely is something that begins to question the current status quo of this, and I think we should question it because that's how improvement and change happens. How would this work with respect to these weight-reducing drugs? In other words, would I, the consumer, receive a prescription for? from my doctor and then upload it to Lily's website, and they then send me a kit.

I have to inject myself, I guess. I don't know. How would it work? Yeah, they have created a platform where ostensibly they're still leaving the decision about this to the physician who's gonna be prescribing it, and they're going to either connect with a telehealth partner who will do a video consultation,

much like we're doing this interview right now, or connect you with a local doctor as part of a network that they've, you know, tapped into, and then from there, they should be managing the care. And I think that's a really good point that you bring up with these medications, these GLP-1s, just like any other medication, they have side effects. And you can't just have an episodic kind of care encounter where they're just going to get a medication prescription, and then, you know, you're off and running and I'll see you in six months. Because there's side effects, and you need to manage that. So there

needs to be that continuity. And if you don't have that continuity, you're not getting good care, and you also need to be objective in terms of determining who gets this based on objective medical criteria. So I think all that's critical and then also guiding the patient with the education in terms of how to administer the drug, all the things that you would get standard if you went to your doctor's office. but this kind of cuts out that whole process of getting that initial appointment, which it's very difficult to get both for obesity management and also because of our chronic shortage of primary care physicians, which is a big problem with the American health care system.

Kelly pointed out an hour ago on her prior program that Eli Lilly is up something like 1100% since 2013 and has had seven or eight years in a row of positive returns. Let's cut to the question of how big this drug Zepbound could possibly be, or its correlates in the medical armamentarium. How big can they be? I was talking to a physician a couple of days ago who said the benefits of these drugs go well beyond weight loss, per se. They go to questions of inflammation, cardiovascular health, even cancer treatment. Absolutely. I mean, I think there's, you know, this is a new era with these GLP ones. And I think that there's many different implications for a lot of the chronic diseases of our time, as you

mentioned, cardiovascular disease, cancer, diabetes, obesity. So they really do provide a relief for the, you know, 34% of Americans who are obese, the 11% of Americans who are diabetic, and, you know, cardiovascular disease that's the number one killer. So I think it is a game changer in terms of what these provide, but I also would just add the cautionary note that we need to concommonantly prescribe food and lifestyle prescriptions alongside these medications. Because if you don't make those changes, which are really underlying causal components of these chronic diseases, you're not going to get lasting positive effects. And so I think we need to kind of go hand in.

So when Lilly does platforms like this, it's great to get the medication, but it would also be great to get a dietician, consult, a health coach, and someone to help people make those lifestyle changes. And this can be a bridge to make those changes, which reduces inflammation and improves health outcomes across the board. I mean, clearly, what I hear you saying is Zepbound may be great, but that doesn't mean you can go eat a bag of chips every day. So. Exactly. And drink sodas. Doctor, thank you very much, Dr. Marvost, Shad Marvasti, University of Arizona. My pleasure. Yeah, we'll have you back soon. Thank you. As we head to break, let's get a quick power check on the positive side, software engineering firm EPAM, Wolf Research, upgrading the stock

to outperform on the negative side. APA Corp, lower after striking a $4.5 billion all-stock deal to acquire Callan Petroleum. That's your power check, folks. More power lunch. Straight ahead. The 10-year yield once again popping above 4%, this time on a strong ADP number, raising hopes for tomorrow's jobs report. Rick Santelli is in Chicago with higher. Rick. Hi, Tyler. Indeed, 164,000. Not too bad. Four-month-high. Best numbers since August. And we did see initial continuing claims also well-behaved, but it was holidays over the calendar the last couple weeks, and sometimes that has a depressing effect on claims. Tyler's referring to this two-day chart. Yes, we touched 4% yesterday and today almost an identical range. And if you

open the chart up a bit, you can see it certainly looks like it is turning. Many traders that I deal with in sources say certainly looks as though that 380 is the bottom, at least temporarily on 10-year yields. Hey, the dollar yen. Look at this over three days. Of course, earthquake on January 1st has affected potentially the pace of BOJ strategy. In other words, many were thinking that they're going to have to get rid of negative interest rate sooner rather than later. This might postpone that.

So we see the dollar doing better. If you open the chart up to a two-month chart, You could see how it is pop. That's the dollar. And at this point in time, remember, the dollar index, its biggest percentage is the euro at 57.6%. The yen is second at 13.6%. So don't expect to see a huge impact on the dollar index. Tyler, back to you.

All right, Rick, thank you very much. And now to a market flash on Mobile Eye, which is tanking today and bringing chip stocks down with it. Christina Parson Nevelas is in the house with details. Hi, Christina. Well, it's quite the start for the auto chip sector with Mobilize massive guide down. The autonomous driving systems company expects a 50% drop in revenue for the first quarter of this year because of excessive customer inventory issues. Keep in mind about 30% of Mobilized business is exposed to China. And expect from the company, they said, to expect sales to be relatively flat throughout the rest of the year.

And that's why Mobilai is having its worst day since going public in October 2020. Its fifth straight days of losses, stock is down about 25, 26%. And the dire warning weighing on Intel. Since Intel bought Mobile Live back in 2017, and is still the majority shareholder, it's not that bad right now. It's down about a half a percent. But the news also weighing on auto semis, like STM down 4 percent, NXP, 3 and a half on semi over 3 percent. And competitor Amberella, which makes chips for EV cars, specifically for the videos, fell about 6 percent yesterday on an analyst downgrade and continues to fall today, which leaves only three names positive in the SMH ETF,

a barometer we often use for the chip sector. This is also the first negative pre-announcement from a chip company in 2024 and could be isolated to mobile or set the tone for auto-exposed names like on semi-NXPI as they meet with investors at the Consumer Electronics Show in Vegas next week. Yeah, they'll definitely have more to answer to. Christina, thanks very much, Christina Parts and Evelace. Let's get over to Julia Borsden for the CNBC News Update, Julia. Hi, Kelly. The White House says it has evidence Russia is using North Korean weapons in its war with Ukraine.

National Security spokesperson John Kirby says the administration is raising the declassified intelligence with the United Nations Security Council. And he called the arms transfer a concerning escalation. Kirby also warned Washington thinks Russia is trying to purchase missile systems from Iran. Several southern capital buildings on high alert again today as they face a second consecutive day. of bomb threats. The fresh wave comes one day after at least eight capital complexes evacuated following similar threats. So far today, multiple bomb threats have been reported in Mississippi, Arkansas, and Florida. And a child started the fire at Miami Dolphins star Tyreek Hills Mansion yesterday. That's the word from fire officials who say the kids spark the flames while playing with a lighter

in a bedroom at the house. Hills agent said crews contained the fire to one room, but there was extensive water and smoke damage to the home. Officials say everyone in the home at the time made it out safely. Kelly, back over to you. So scary. I always think we have, you know, those candlelighters and I'm always worried, I don't know, like someone gets in the drawer. Julia, thanks very much. Julia Borsden. Still to come, solar stocks and the political hot seat. Sun run down 15% in just a week, down 28% in the past year. We'll hear directly from the CEO next. Welcome back to Power Launch, everybody. Solar Stocks having a rough start. to the year and getting hit hard today, following a pair of downgrades of Sun Run and Enphase

Energy by Key Bank on valuation concerns. Sun Run, one of the biggest losers in the space, down 6% today, but the stock has rallied in the past month on some optimism about the Fed cutting rates this year. Let's send it over to Brian Sullivan, who has an exclusive with the CEO of Sun Run to kick off our coverage of the Goldman Sachs Energy and Clean Tech Conference in Miami Beach. Brian? Tyler Matheson, thank you very much. Yes, and we are joined by Mary Powell. She is the CEO of Sun Run, also a former utility executive. So she comes out of it from both sides.

Mary, we chatted here last year. It's good to see you again. Oh, it's great to see you too. So they came in on the interview. I want to talk about solar and storage, but they came in on the interview with, you know, talking about big moves and stocks. And how frustrating is it to be a CEO of a company? You're just trying to build out solar, storage, capacity, etc.

when every five basis point moving in the 10-year yield, send your stock up or down 10%. Why is that? I mean, we're, you know, Brian, we're up, what, over 60% over the last three months. And the fact that the Fed has indicated that, you know, likely the rate hikes are over. And in fact, we could be looking at some decreases

in this coming year. It is actually a significant tailwind for us, you know, basically our... Lower rates are a tailwind. Yeah, for sure. Lower cost of capital. You know, when we live... look at the future, we've looked at a cost of capital, we've structured it around a higher cost of capital. So we're actually doing much better already just in the last few months with what

has happened with rates and with the outlook for 24. So we're feeling... But you understand my point. The 10-year yield goes down a quarter percent. Your stock goes up 50 percent. It's, there's a lot of things that are happening that are not based, I'm assuming, on the pure fundamentals of Sunrun's business. 100 percent. And what we stay focused on at Sunrun are the pure fundamentals of Sun Run's business, and that's why we've been very clear with our investors that we are about generating cash, and that's what we're going to be doing in 2024,

and that we've already guided to generating $200 to $500 million in cash generation as we exit 24. So we're feeling really good going into 24. We also have, you know, you have hardware costs coming down, you have the ITC adders flowing in, the Inflation Reduction Act. What is that? What is the... The Inflation Reduction Act.

adders, you know, the incentives for low and moderate income households across America, those are starting to flow into the economy in 2024. So we see a lot of great things happening. But most important, Brian, like when we spoke a year ago, I said we were going to make 2023 the year of storage. And guess what? We did. We did. We actually had over 100% growth in our storage megawatt hours over the last year. So I am so excited about our position. 100% growth. Yes. So it doesn't.

Yeah. In storage. Because people, I'm sure a lot of people think of you primarily as a residential storage, a residential solar company. We're going to put solar panels on a roof, the conversion more to battery storage as well as distributed energy. Almost a power wall type, not that I'm dropping Tesla, I just want to be clear, but almost that type of you're shifting into that direction. In fact, one of your programs is called shift. Yes, exactly. how I just worked that in.

Yes, you did, you did. And in fact, that's what we talked about is there was a policy shift in California last year that we really leveraged. That's how we led our interview last year, by the way. It was not a good thing for you. Exactly. But it really, what we did is we used the year. We used the change that was happening to build a much stronger platform for growing

as a storage company. So we called it the year of storage. We led a storage first strategy. At the beginning of the year, your typical Sun Run customer was attaching storage at about 15%. So 15% of the customers were also buying storage. You know, at our last earnings call, I said we're already up to 33% and we were selling at a 40%, which is so significant because not is it only more value for the customer. It provides a much more valuable energy experience, but it's way more valuable for our investors and for the company in the context

of our bottom line. I know my colleague, Kelly, in Chile, in frigid, Woodcliffs, New Jersey has got a, I'm not going to lie, guys, it's 70-something degrees down here. It's not terrible, Kelly. Yeah, no, we're chilly in more ways than one. Mary, the company has been accused by short-seller Carson Block of overstating your subscriber numbers by 20% based on what you tell investors versus the EIA. Can you explain that discrepancy? And answer his claim as well that you are over-claiming tax credits as a result. Yeah, so we love, I mean, we've always welcomed healthy debate questions, and we've responded to every single inquiry with detailed responses. And what I can tell you is we work actively with the EIA. We go over in depth how we report and we've had them confirm that we're doing things the right way. So, you know, again, Muddy Waters has it wrong. We've responded in detail, but we always welcome any and all questions. And we've been in that situation.

ever since we started Sun Run, where you're always going to have people asking and wondering what is going on, why you're doing things the way you do. So again, we've responded, they have it wrong. EIA has confirmed the way we're doing it. And his latest sort of analysis was after you were asked about it

in the earnings call in the fall, and he said that the reasons given by the company didn't hold up to his scrutiny. He says you could solve the matter by releasing in each quarter the number of subscribers that generate gap revenue for the quarter versus the number for which you claim or effectively sold tax credits.

Would this be something that investors could maybe expect any more transparency on in the quarters ahead? We've been very transparent. As I said, we've responded with detailed responses to every single request, and we feel very comfortable in how we're reporting data and what our investors have told us as they feel the same. From the macro side, very quickly, because as I, I noted, Mary, you are also a former utility executive. So there's been this weird dichotomy, and I heard from some high-level people in D.C., by the way, so hopefully they're watching this right now. I've got some angry tweets or text today, which is we've seen natural gas.

I'm going to ask you to take your sunrun hat off for a second, if you don't mind. Natural gas and coal prices have come down year over year, but in a lot of places, electricity rates are still on the rise. People are getting notices. I'm up 14, 21%. As a former utility executive, explain the lag. Why are utilities slow to respond and why are rates still going up, which probably is good for your business, by the way, while commodity costs are falling? So there's a number of factors that drive what happens with utility rates and what customers pay.

And it's also different depending if you're in a fully regulated state versus a deregulated state where you have different components coming on your bill. But simply put, I mean, one of the reasons I fell in love with distributed generation, and the kind of work that I'm doing now in solar and storage as a utility executive was because I saw it as a way to control the cost of the grid. And one of the things that I love about where we're at, particularly with the amount of storage we've been selling, is that we now have over a gigawatt of stored clean energy capacity

that we can use and help and put back to the system. You can actually use your customers to push it back into the system. 100%. I think it's probably fair to say it's about a small nuclear plant. Yes. Yeah, exactly. So, and when you think about the pace at which we're scaling, that gets very powerful. But back to utility rates, there are so many pressures. Just climatic events alone are putting so much pressure on transmission costs, distribution costs. So yes, coal and natural gas can fluctuate,

but the base inputs to what's driving up rates, I see no end to. I mean, as far as the eye can see, I see those cost pressures happening. There you go. I hate to end on that note, which is It's very inflationary. Mary Powell, Sunrun, shifting more to storage. Really appreciate you joining us. Thank you. Have a successful conference, Mary. Thank you so much. Always a pleasure. So there you go, Tyler Matheson. You just heard it. I think your electricity rates are going up, and they're going to keep going up.

All right, Brian, thank you very much. Brian Sullivan and Mary Powell. We appreciate your time today. Quick programming note, folks. Don't miss a special last call tonight live from where Brian is now, Miami Beach, and he's going to speak with the CEOs of Chevron. Royal Caribbean and many, many more. That starts at 7 p.m. Eastern time tonight. A special edition of Last Call, live from Miami. Still ahead, model behavior.

Struggling EV maker Fisker is adding dealerships to its business structure to help boost sluggish sales. We've got the key details when Power Lunch returns. Welcome back to Power Lunch, a lot brewing on the auto front today. So let's get right to it with our Phil LeBoe and run through several topics, Phil, Well, starting with our first story and welcome to you. Tesla's market share slipping in the U.S. and China's BYD passing in worldwide sales, but also we're hearing reports about some short selling against BYD, and that's increasing lately as well. Yeah, and we'll keep the BYD short selling.

I mean, there's a lot of factors that are going into this. I want to focus first off on the EV sales here in the U.S. And yes, Tesla's market share has slipped. It's down to 55%. But keep in mind, two of their models, the model three and the model three in the model, Model Y are more than half, more than half of all EV sales here in the United States. They dominate that category. And so as you take a look at shares of Tesla, keep in mind that we will hear from the company

coming up in three weeks. That's when they will report the fourth quarter results and we'll hear from Elon Musk. And perhaps we'll get an update on a refresh of the Model Y. All right, let's move on to topic number two. And that is Ford sales out this morning. Last year, it sold more trucks than cars, more hybrids, than EVs? What say you, Phil? Look, in the fourth quarter, you can look at this and say, well, their overall sales were up only

0.8 percent, and their ice vehicles, internal combustion engine models, were down 3.4 percent. But look at the growth in EVs. Look at the growth in hybrids. 55 percent. And when you look at Ford, remember, the F-150 is still the straw that stirs the drink. It is the most profitable vehicle. It is the most popular vehicle in North America. And so for Ford, this is an interesting thing that's happened here in terms of EVs and hybrids. Increasingly, I hear from dealers saying when people come in, they look first at an F-150 hybrid if they're looking at an F-150, then a gas model, then the lightning. Interesting. Interesting. I suppose on that note, we should move along to this news that Fisker, Phil, a surprise announcement that they're going the dealership route instead of direct

to consumers for their sales. What are we to make of this? Well, they'll still do direct to consumer. They're not giving that up completely, but they also realize they've got to get their product out there as much as possible. And in an increasingly crowded EV market, a dealer who can also sell your product can do nothing but help you if you are Fisker. They would like to have about 100 dealerships between North America and Europe. The first ones will be announced later on this quarter. How much it moves the needle remains to be seen, guys? But if you are Fisker, you've got to do whatever you can, short of advertising in order to get people exposed to your product. Let's talk a little bit. Let's go back to Tesla and zero in on two things.

You pointed out that their market share, I believe in the U.S. has fallen, fallen to 55%. Yep. Has it done that principally because there's a problem with Tesla or because the competitors have gotten more traction? More traction from competitors, more offerings from other companies. competitors, more EVs are in the market. It's only natural you're not going to be able to hold 67, 75% market share, which they've had over the last couple of years. Look, Tesla's sales are actually growing. This is not a case where Tesla's market share is slipping. It's a case where there's more offerings out there. And as a result, you're just not going to be able to have as much of the pie.

And then question two is the Chinese manufacturers, B.YD, is it B.D? I'm sorry. I've forgotten. forgotten. B.Y.D. You said has started now to outsell Tesla worldwide. That was just in the fourth quarter. The fourth quarter was the first quarter where BYD globally sold more vehicles, electric vehicles, than Tesla. But for all of 2023, let's be clear, Tesla is still number one worldwide by about a quarter million vehicles. So they still have a lead there. Now, what happens over the next several quarters remains to be seen. So is most of BYD has momentum? Are most of BYD sales in China or are they really globalized? They're in China, but they're expanding. They're in China, but they're expanding. All of the Chinese automakers are expanding.

Why? Because they've got capacity that needs to be used. And if your market is slowing down, because the economy has slowed down, what do you do? You ship to Europe. You ship to Latin America. You ship to Central America. You ship to Southeast Asia. And that's increasingly where you're seeing the Chinese automakers expand their presence. Fascinating stuff. Phil, thank you. Appreciate it. Phil Leboe. Coming up, losing taste with investors. Packaged food giant ConAgra brands lower after cutting forecast due to slowing sales. We will trade it in three-stock lunch.

We'll be right back. Crypto Watch is sponsored by Grayscale. Crypto investing begins with Grayscale. Welcome back. Time for today's three-stock lunch, looking at some movers of the day. with our trades. Victoria Green, founding partner, chief investment officer at G-squared private wealth. She's also a CNBC contributor. First up, Victoria, happy new year. Glad to have you with us. Let's talk about American Express. I just paid a big bill. It's slightly higher today.

The Matheson effect. J.P. Morgan upgrading the shares to overweight safe haven, it says, from deteriorating household balance sheets like mine. Victoria, your trade on Amex. It's a buy for me. Thank you so much for supporting the stock. We all appreciate it. premium name. And yes, delinquencies are rising. You're seeing all the headlines around, but their charge off and delinquency rates is like 1.4% still below 2019 levels. They're just such a premium brand with more affluent customers. And I think they're very well positioned. And they're expecting EPS growth in the mid-teens and revenue growth in around 10%. And I think that's just that that's the runway they've been on the last two quarters. And I like it. And they can hit 205-215.

From 187 now. Okay. Let's see about Walgreens's very different story here. The shares down more than 6% after they cut their quarterly dividend nearly in half. It's already been a laggard. What do you do with this one? No, don't touch it. Sell it. Look, it was such a confusing quarter. They actually beat on revenue.

They didn't have a bad quarter, but they didn't raise their guidance, and they slashed their dividend 50%. And there's the new CEO. He came in in October, Tim Wentworth, and he did come from health care, so he does know what he's doing, but he said cutting the dividend was important and necessary. And so I don't know what they're going to do. I think you just sit this one out. He's pivoting the company, whatever.

direction he wants to take it. There's rumors. Maybe they're spinning boots back off, but boots have better operating margin than the U.S. So, no, don't buy it. Just sit this out. All right. You couldn't be clearer, Victoria. You could not be clearer on that one. Finally, ConAgra brands. The stock is down 2% after cutting sales and profit guidance and lagging amid lagging demand. Your trade here on Conagra. It's still a sell for me. Everybody's waiting on this valuation trough, and we thought it was coming. No, now it looks pushed out and it doesn't look like we're getting top line recovery until 2025. They're likely going to have to continue to sacrifice margins in 24 by doing more advertising to try to boost top line sales because their two main segments refrigerated and snacks are continuing

decline in volume and decline in revenues. So I just don't see a trough yet. I just don't see a buy yet. I think they've got to figure out how to boost some of these flagging brands and that's going to cost money and drag on earnings. All right, Victoria, thank you very much for being with us today. Again, happy new year. We'll see you many times in 2024. I am sure. Dow's hanging on to 122 point gain. Watch the NASDAQ, which has been in shallow negative territory. See if it's losing streak continues. For several days, see if it's losing streak continues. Thanks for watching Power Launch, everybody.

Closing bell starts right now.