Power Lunch - Anticipation Situation 5/2/24

Episode Date: May 2, 2024

A day after Fed-induced whiplash, markets are moving higher. There’s a lot of anticipation for Apple’s results after the closing bell. We’ll dig into what the company could possibly say to satisfy investors.Plus, shares of Carvana are surging, up more than 30% today and nearly 1,500% in the past year. And more and more analysts are now becoming believer in it. Should you join them? We’ll trade it. Hosted by Simplecast, an AdsWizz company. See pcm.adswizz.com for information about our collection and use of personal data for advertising.

Good afternoon, everybody. Welcome to Power Lunch. Alongside Leslie Picker. I am Tyler Matheson. We're both glad you can be here. A day after Fed whiplash, markets are moving higher. Once again, 255 points on the Dow. A lot of anticipation for Apple results after the bell. We'll dig into what the company could possibly say that would satisfy restive investors. And check out shares of Carvana up more than 31 percent today. And look at the number in the corner. Nearly 1,500. 100% gain in a year. But more and more analysts are becoming believers. Even at these levels, should you join them, we'll trade that stock coming up. But we begin with two big tech topics. Steve Kovac in Cupertino covering Apple's earnings and Aiman Javers in Washington as the antitrust case against Alphabet, the historic case, wraps up. Steve, let's start with you. Yeah. So, Leslie, we have Apple earnings coming at 4.30 p.m. Eastern. And the real top thing we're looking at here is What does it look like over there in China?

We're expecting overall revenue to be down about more than 4.5%. And a large part of that is because of these struggles we've seen Apple go through in China, weak demand for iPhones. We saw overall sales in China down 13% in the December quarter. And since then, loads of data showing that iPhone sales has been down as much as 19% while we see other rivals like Huawei grow significantly. So huge competition there. And by the way, a lot of that data has caused some analysts to trim their estimates for the June quarter in addition to this disappointment they're expecting in this current quarter.

So the question, of course, becomes what can turn things around? And everyone's also going to be paying attention to any commentary about artificial intelligence. Unlike the other big tech peers, Apple has not really told a clear artificial intelligence story about where it fits into this picture of generative AI. We've heard them talk about behind the scenes and how they use AI in their devices. but not necessarily generative AI. So any hints ahead of the big worldwide developers conference next month that we can get from there with you worth paying attention to.

And then on the positive side, it's services. Services is the one bright spot right now. It's huge growth there, double digit percentage returning again. The street's expecting 10% in services growth. And I also expect to hear Tim Cook and company talk a lot about the install base. That means the number of devices out there that can take advantage of their services. So those are all the numbers we're watching, guys.

Yeah, I know every quarter for Apple is important, but this one certainly seems to stand out. Thank you, Steve, and stick around. Our next guest says big tech companies have to deliver almost perfect results as investors get choosy about which ones to reward. And this bodes not too well for Apple today. Joining us now for more is Daniel Newman, CEO of Futurum Group. Thank you for being here, Daniel. So dispersion, a lot of people say that's a good thing. But if you're an investor and you're in this market where investors are getting more choosy, as you say. How do you kind of know the good apples from the bad apples, not to use the, you know, the well-known idiom there? Well, right now the apple is seemingly the bad apple and investors are

running away. You know, we've seen the Nvidia trade and that's even getting a little bit tiresome right now. You're seeing investors are getting a little bit fatigued. You saw meta had a great result and then investors ran away because they had too much cap-ex in a future investment of reality labs. Everyone right now wants perfect results. They want super fast growth. They want a AI strategy that they can see the monetization path. But at the same time, they also want to know that these companies are managing OPEX well, that they're dealing with the macroeconomic situation in a way that doesn't put them in a position where if all of a sudden we see a turn, we see interest rates suddenly pop even higher, that these businesses can't continue to grow and then deliver these high EPS

and heck, they're even throwing dividends in now just to try to lure investors into the fray. still call Apple a growth stock? And if you can't, what does that imply for the multiple and for investors? They aren't showing the trend line of being a growth stock right now. And haven't for a long time? No, they really haven't. And right now they're behind on all the trends. And they have been for some times, but they've gotten away with it for quite a long, quite a long while. And so all a sudden they're saying, what is their AI strategy? Do they have one? Are they turning to Google? Are they turning to Open AI? Is that really the best that Apple can do? And right now, if I was putting a dollar somewhere, I'm looking at Microsoft. I'm looking at Google. I'm looking at Nvidia. I mean, even AMD showed great results

growing their MI300 product and Qualcomm are showing some compelling opportunities at the edge with AI. I'm not putting a dollar into Apple right now. But if you're seeking tech stocks that are already, you know, kind of delivering these perfect results, how are you able to get a good deal and provide a return in the future? Is that perfection, in other words, indicative of future returns or better future returns? or are you better off looking for those that may have kind of missed the mark a little bit, traded down, buy on those dips, and then capitalize in the future? Well, I think what's going on is investors are just in this kind of pause moment, Leslie. They've seen that the macro environment isn't really a stable. You know, these jobs numbers are a little bit flimsy.

We see how GDP isn't growing. You know, companies have been really rewarded for lowering OPEX. Right now they're being looked at to have a perfect blend of CAPEX spend. So you've heard that in the last few weeks of earnings. And so there are some companies that had, multiples pullback. You heard me mention Qualcomm just now. There are multiple compared to several of the other chip stocks that they're being compared to was much lower. So when they came out with some good news, they showed some stability in their handset business, and they showed this boom in their

automotive business, and people are saying maybe there is an AI story there, we'll pour into it. And I think it's up like 15 bucks today. It had a huge jump. And that's after several quarters of really falling, falling, falling, and so that's the kind of things that investors are going to be looking for, whereas an Apple is, you know, there's no story. There's no AI. Their handsets are declining, and their situation in China is really, really constrained. And it's not just their handsets, and it's not just one quarter. It's their iPads. It's Max. And we had a graphic up here of the revenue declines, and they're really quite something. What can they do to turn it around? Well, I do think the leak on their next M3 chip was a bit interesting. You see all the momentum for

AIPC right now. We heard Intel, which had a tough quarter, but actually did show 31% growth in their PC business, the client business, and then AMD had an 80 plus percent growth. This AI PC trend is real, and Apple almost missed this one. So you heard them leaking this next generation chip, which is going to be their AI-enabled PC equivalent. But I don't know if there is a quick fix. And right now with China showing its constraint, showing its strength against the U.S. companies, I don't know, maybe Tim Cook needs to pull an Elon Musk and head over to China.

Well, he did. He just did. Yeah, he was there. Maybe he needs to go back, yeah. All right, stay with us, Daniel and Steve, as we want to move on now to our next big tech topic of the day. And that is the Justice Department's case against Google. Amen Javers has that story for us from Washington, as this case may come to a crescendo very soon. Yeah, that's right, Tyler. This is closing arguments today and tomorrow in the DOJ antitrust case against Google. This is the last opportunity for both teams of lawyers to make. their case to judge Ahmed Mehta, who has been presiding over the previous 10 weeks of this trial. We don't expect a decision here until later in the summer, but everybody is watching today to see what kind of questions Mehta is asking. Remember, the core of this whole case comes down to these tens of billions of dollars that Google is paying to be the default search engine on a lot of platforms, especially Apple platforms. Is that anti-competitive conduct, or is that just simply as Google would say, smart business?

So we're watching what META says. Couple of red hot questions, I would say, for the Department of Justice side, right out of the gate, Mehta a little skeptical with the Department of Justice side. He says, look, search today looks a lot different than it did in the past. A lot of that's due to Google, isn't it?

Suggesting that Google has been innovating in search, despite sort of the assertion of the government. He also says it seems a hard road for the Department of Justice to get him to conclude that Google has not innovated enough over the past 10 years. So also some skeptical questions here, though, for the Google side, or some skeptical statements anyway, for the Google side. Meta's saying, I don't think the average person would look at Google and Amazon as being the same. They are different.

That goes right to the heart of what Google is saying here, which is that their broad market includes search from a whole lot of entities, including things like Amazon and TikTok. Meta here saying, hey, wait a second, that's a little bit beyond what the normal person would think of as a competitor to Google. Also saying here that there hasn't been real competition for these slots, that is these exclusive slots for about 10 or 15 years, really suggesting that he sees the world in a similar way to the way the government sees the world. We'll see ultimately whether he sees this whole case the way the Department of Justice sees it. But so far, some skeptical questions now from the judge here for both sides of this case, guys. Back with you. Amen, hang around as we continue our conversation and bring back Daniel Newman and Steve Kovac for reaction. I wonder whether you would say this Google case has lost a little juice because search, the way Google made search, isn't the future of search.

AI is going to be the future of search. That's a great point. I think we're at this huge inflection point where there's no circumstance in which search in a few years is going to look anything like it does today. We're already seeing it, whether you're using chat GPT or whether you're searching on your social network or you're seeing the growth of Amazon. ads business because of the way people are searching for goods and services, not on Google. We're going to get these consolidated summaries, which means click-through is going to be very different. Google right now is looking inwards and saying, how do we continue to monetize the behavior that we've monetized for so long? And so they have very worthy competition, which is part of what antitrust is going to focus in on.

And of course, consumers are looking for a better thing. Worthy competition, where? In search per se or in AI-related products? Yes. They have. Yes. Yes. So yes. So, I mean, Microsoft for a long time is a very worthy and very capable competitor, has plenty of resources and has tried very hard with Bing. Remember, they had an early lead with ChatGPT and having access to that in Bing, and they made almost no real meaningful market shift. But that was because it was early on the behavior. Now what we have is this next set of behaviors that are going to be how people search, how they get that abstracted summary.

And then, of course, the next policy battle is going to be how we actually regulate and give credit for that content that's going to be utilized to provide summaries to make. make sure that content creators, like CNBC, are monetized properly for the value that's going to be created when people get these abstract summaries and don't have to click through anywhere. And this is at the heart of some lawsuits at the New York Times and others have brought against some of the artificial intelligence providers. Steve Kovac, let me ask you to jump in here with your perspectives on this Google case. Yeah, and I'm going to throw it right back into how it applies to Apple, because the company right behind me here,

they get $20 billion a year, at least that was the number in 2022, straight from Google. And that's all tied to how many people are searching on their phones using Google as that default search engine. So if the remedies in this case, if Google's found guilty,

and then one of the remedies in this case is that deal that Google has with Apple has to be weakened or go away or in some other capacity, that means Apple has to find a different way to make up for that lost revenue that it's doing in its services business. I just mentioned services is the one bright spot right now that everyone's pointing to at Apple because of its wealthy user base because it has over 2 billion devices out there that give

them chances to charge for services. But without that $20 billion from Google, what does that look like? Does that mean whatever AI announcements they have and what are their AI-powered Siri or search that they might have can kind of augment or replace Google? At the same time, we're hearing those reports that. they're working on another deal with Google on the AI front and whether or not that deal can be at risk if the DOJ rules against Google in this case, guys. Yeah, Cupertino is definitely watching the goings-on in Washington very closely here. Amon, I want to turn it to you.

I'm just curious how this Google case, which is the first of its kind and kind of the big tech monopoly of this current era, how it has the potential to set precedent for other tech giants that have been sued by regulators, such as Apple, such as Amazon, such as meta, for potential or alleged monopolistic behavior. Well, look, it absolutely does have the potential to set precedent, and that's why so many eyes are on this case. You know, so far in the court today, you know, they've been reading back through the old Microsoft case going back more than 20 years ago now looking for precedent there. You can imagine a court 20 years from now sorting through the AI industry,

looking at precedent from this case. So it is very precedent setting. But as Steve brings up the question of Apple, you know, of course, Apple also facing its own antitrust case. That one, the detail in that case that got everybody's attention was whether the green bubbles in the Apple phone when you text an Android person, if that's anti-competitive because it somehow makes the Android phone seem less than, right? That's a case where Apple's going to have to face the Department of Justice as well. And my guess is, guys, that the Department of Justice is not done. We're in the last year here of the Biden administration, or at least the Biden administration's first term. But I don't think that this Department of Justice, which has been very focused on antitrust, is out of gas just yet.

I would watch for further cases to be brought between now and the end of the year as well. All right, Daniel, let me conclude just quick answer here. If the judge, and this is a judge trial, this is not a jury trial, if the judge sides with the government here, what are the potential remedies that he could apply to Google? It's really difficult to say what exactly could be applied. There could be an opening up of some of the algorithms and some of the technology that Google uses to create this better search experience. They say, our search is better. That's why people use it.

But like I said, I feel like it's going to be a forever cat and mouse game between regulators and technology companies. The tech is going to move faster. AI is only going to accelerate this. And they're going to have problems regulating this in a long term, Tyler. All right. Thanks very much, Daniel. I appreciate it. Good to have you with us. Daniel Newman.

Amen Javvers. Thank you. And Steve Kovac in California. Coming up, we'll take a dive into markets before tomorrow's very important jobs report, plus a CEO soundoff. John Ford's sitting down with the AWS CEO following Amazon's earnings beat Hill wrap. The key highlights for us coming up. Power Lunch will be right back. Welcome back to Power Lunch, everybody. Stocks are near session highs as investors turn their attention from the Fed to corporate earnings and tomorrow's jobs report.

Our next guest says, while you should pay attention to interest rates, you should rely on earnings trends. for long-term stock market gains. Let's bring in Doug McKay, President and Chief Investment Officer with Broadleaf Partners. Doug, welcome. Good to have you with us. Thanks for having me.

The profit picture looks pretty good for the most part right now, and you say emphasize that. Yeah, I think so. The Fed is important, as you're just saying, but at the end of the day, watching what the Fed does and policies a little bit like going to the dentist.

No one wants to go to the dentist. My dad's a dentist, and I didn't want to go to the dentist, right? but you get through whatever your procedure is and you get out and you're done. And at JP Morgan said it best, or Jamie Diamond and JP Morgan said it best that there's an interest rate reset and then it's earnings growth from there. So temporary pain, but we've noticed over time blips that the market then grows through. One of the things that we hear a lot about is discussion and something that you mentioned as well, is discussion about data centers and data center builds and all the power that's going to be required to operate them, but largely the people that build them.

Is this a smart investment play for individual investors? I think it's a play that matches both the industrial sector and the tech sector. I'm from Ohio, and I've never owned so many Ohio-based companies before, and I'm not targeting Ohio companies, but it just is a fact that we're in that more. where the Rust Belt. So companies like VIRTIV, which sell cooling systems to data centers, I think it's a part of the infrastructure that we are renewing. And so, yes, I mean, I think there's going to be a lot of money spent, you know, the Microsofts and then Vittias are monetizing things now, but even Amazon yesterday on the earnings call talked a lot about how they have 100,000 sellers of products can scan their URL and have their products automatically

uploaded it onto their site. So, I mean, just massive productivity savings. Unfortunately, I got hit in the rear end my car a few days ago and took some pictures through Geico and had claims within two hours. So I think the productivity benefits would be quite immense. And obviously building new data centers is all a part of that path. So, yes, earnings are to come from there. I hope you're okay and I hope your car is okay. But just to hit on the earlier point about kind of what goes on with the Fed versus focusing on fundamentals, there are certain pockets of the market, pockets of the economy where they're more inextricably linked. I think of maybe regional banks, for example, those companies that have a lot of debt on them

that are kind of part of this whole refinancing wall, this maturity wall that's going to take place over the next 18 months or so. So would you be shying away from that in this current environment where the macro picture looks a bit more uncertain, maybe a bit murkier? Or are you incorporating it? You're just kind of focusing more on how this translates into the fundamentals as you decide what stocks to invest in? You know, I don't have a big participation in the financial sector. There's so much competition there. Aren't that there's a lot of good companies. But as far as growth companies, I think the set is a little bit different. But what I would say about interest rates, again, bidding back to the macro.

I mean, economics is a very soft science. And so many people and strategists have been predicting a recession, soft landing, hard landing over the last two or three years. And I subscribe more to what Ed Yardinia said. I used to work with him, but you have this rolling recession through different sectors at different times ever since COVID turned on and off on the economy. And as a result of that, I think a lot of sectors are out of sync from what they normally do, even in the employment section.

So I guess I would say I'm not so confident in what interest rates will do to certain sectors compared to what they have done in the past. Housing, there's a shortage of. I just think you have to be careful making generalizations like that. All right, Doug, thank you very much for being with us today. We appreciate it. Doug McKay. You bet. Coming up, stubborn inflation remaining a concern for small business with 75%, 75% saying they expect.

to decline even higher. That's further ahead. And check out shares of Paramount. That stock now up 12%. CNBC confirming Sony and Apollo have made a non-binding expression of interest to potentially buy the company for $26 billion in cash. Power lunch. We'll be right back. Welcome back. Welcome back. Time now for a look at how bond yields are doing 24 hours after Chair Powell's press conference. The two-year yield holding just below 5%. Rick Santelli has those details. Hey, Rick. Yes, and not only that, short maturities,

two-year, three-year, they're leading rates down post-Fed meeting. Let's look at a two-day chart of the two-year note. Currently at 488, down about eight basis points on the session. And you can see the right side is so much lower than the left side, because that's a two-day chart. Now, let's go to the longest maturity, the 30-year bond. It's only down three basis points,

and you see that the right side is actually a little higher than the left side because we have not traded under yesterday's lows in the longest maturity. So there's definitely a curve implication, and that makes sense. The Fed, for all practical purposes, was not very hawkish, and that's why short maturities are leading rates down. Now, if we look at the 10-year, which is down about six bases points, it is on pace right now for a three-week low-yield close, going back to the 12th of April, as you see on that chart.

But what's maybe more important if you're really trading interest rates is to look at a year-to-date chart of that said 10-year. Because currently, at its current yield of 458, it's up 70 basis points, almost three-quarters of a point from where it closed 20-23. And it's down a dozen basis points from the high-yield close for this year. So even though rates have gone down, and even though we may close at a three-week low-yield close,

as you can see on the year-to-day chart, there's still much loftier than when we began the year. Tyler, back to you. All right, Rick, thank you very much. Let's talk about uranium stops. Jumping this week after the Senate passed a bill banning Russian imports.

Now goes to President Biden. Pippa Stevens here with more. It's a different element every day with you listen. Yeah, and today it's uranium because those stocks are bouncing. So the Senate passed this bill to ban enriched uranium imports from Russia,

and President Biden is expected to sign it into law soon. It also unlocks $2.7 billion in funding to build out the U.S. reshoring our nuclear fuel cycle. Now, this was a kind of a long time in coming in the sense that Russia invaded Ukraine more than two years ago. And through all of these rounds of sanctioning, their nuclear system has never been targeted. And that's because they are a very key player here. They control about 40% of the global uranium enrichment market. And for the U.S. specifically, 24% of our enriched uranium comes from Russia.

So they are the largest outside player. And there had been multiple bills raised looking at banning their influence on the U.S. and also on the world. Now, Adam Rodman from Sacred Capital, who invests in uranium equities, said that this geopolitical catalyst comes at a time when these fuel cycles were already very tight. Our mining conversion enrichment in the U.S. is just not what it used to be and doesn't cover all of our needs. And so he said that should be supportive for the Western miners that are already in production and those that are bringing production online.

And then final point here is that Russia could, of course, retaliate by deciding to ban exports all together. So that's why we're seeing a response in the stocks today. And uranium, the importance there for kind of the U.S. economy is what? So about 19 percent of our power grid is actually fueled by nuclear. And so enriched uranium is what goes into those nuclear reactors. And so while people, you know, might think that all their power is coming from that gas, that nuclear is actually the second largest power supplier.

And so you cannot just turn off. We have 93 reactors in the U.S. you cannot just turn those off overnight. Now, important to note here that this is a very long fuel cycle, and so this will not have an immediate impact. You know, the lights are by no means going to, you know, turn off tomorrow. Utilities tend to have enough uranium for about two years. But looking into the future, they now have to move away from Russia,

and so they will probably turn more towards those U.S. players, those Canadian players, Australia, that are looking to build out production. Interesting. Thank you, Pippa, for breaking it all down for us. Pippa Stevens. Appreciate it. Let's get over to Julia Borsden for a CNBC News update. Hey, Julia. Hi, Leslie.

Well, the CEO of Trump media is urging the House to investigate eight firms over alleged short-selling of the company's shares. Former President Trump is the majority shareholder. CEO addressed a letter to several House committee chairs naming the firms. Former Nickelodeon producer Dan Schneider is suing the makers of the documentary series, Quiet on the set, the Dark Side of Kids TV, accusing them of defamation by falsely implying he sexually abused. the children with whom he worked. The suit names the show's production companies and Warner Brothers Discovery, which is the parent company of ID where the documentary aired and Max where it is streaming.

And the director of national intelligence, Avril Haynes warned Congress today that worldwide ransomware attacks grew by nearly 75% in the past year. She reported U.S. entities were the most heavily targeted, with attacks and sectors such as health care doubling from the year before. Leslie, back over to you. Julia, thank you. As we had to break a quick power check, you can see there on the positive side of the S&P helmet aerospace higher by 15%, this despite the CEO warning of potential demand issues.

On the negative side, Corvo, tumbling the smartphone supplier part offering weak outlook, not a good sign for one of its biggest customers, Apple. That's your power check. We'll be right back. Welcome back. Amazon's profits tripling this past quarter, and the AWS CEO says, Cloud growth is due largely. No surprise here to its AI push. John Ford sat down with the CEO and joins us now with more.

Hey, John. Hey, Leslie. Yeah, I just spoke exclusively with AWC CEO, Adam Solipski, after an Amazon earnings report that saw the cloud division crush expectations, maybe shift the narrative about where AWS is in the AI race. Solipsi told me Amazon seeing measurable productivity gains internally in tasks like upgrading Java environments, and large customers are steadily adopting AI as well.

We saw 83% productivity gains. We did in a few days tasks of like a thousand different Java applications to migrate them that would have taken us months collectively. So it's just incredible efficiency gains. I think it's going to be very powerful. You're seeing it in other areas like customer service, both Delta Airlines and United Airlines are deploying Amazon-based generative AI chatbots or consumer assistance. and helping a lot of travelers answer a lot of questions and getting a lot of satisfaction.

So trying to take it to Microsoft and Google, much more coming up in overtime on that. So were these typically current customers that are kind of using AWS in new ways? Are they able to generate business from new customers that are more focused in the GenAI space that are using AWS? Well, what he said was, and I don't want to put too much focus on AI, because while that's an important part of the business, it's just a piece of the overall cloud puzzle. Enterprise customers had stepped back this year in spending on cloud migrations.

Now they're stepping it up again in part because they know they need to have their data in the cloud in order to take advantage of AI down the line. So it's not necessarily just to do AI stuff now, but it's like, okay, we can't slow down on the cloud migration because we've got to be future-proofed. That's really interesting. Yeah, I was talking to a bank example. executive recently who is like they're very much in that stage of just getting all the data, getting all the data together and then one day being able to use that for AI. So it really speaks

to kind of that part in the process where a lot of companies are at. Competition is just getting started. That's right. John, thank you. All right. Still ahead. Inflation Nation. America's small business owners think inflation will continue to rise and many are losing confidence in the Fed's ability to control it. We'll get the results of our CNBC Survey Monkey Confidence Index. After the break. Welcome back to Power Lunch. Stock Market investors, the Fed, everyone wants to know if inflation has peaked. We ask small business owners for what they're seeing.

Kate Rogers joins us with the data of the CNBC SurveyMonkey Small Business Confidence Index. And, Kate, it sounds like inflation has not peaked in the minds of the majority of these small business owners. That's right, Leslie. So inflation remains a sticky and top issue for our small business owners. According to our latest CNBC survey. Monkey Small Business Confidence Index only one in four now say that inflation has peaked. That's down from nearly a third last quarter. Meanwhile, three quarters say they still expect inflation to continue to rise.

That's also up from 69% last quarter. More than one in three said that inflation rather is their biggest threat to business right now. That is three times as many who say consumer demand, labor shortages, supply chain or interest rates are their top threats to business. Also, there seems to be less confidence this quarter in the Fed's ability. to control inflation, 31% saying they are very confident that's down from 35% last quarter. But on the whole, some good news confidence is holding stable right now for owners at a score of 47 out of 100. That's on par with last quarter's score and up one point from the same time last year. There's good news here as well. There's still economic optimism for owners, 27% saying that the

economy is excellent or good. That's similar to 28% last quarter and even higher than 21% who said that same thing the same time last year. Maybe we have these results or maybe we don't. When you look at inflation and the number of or the percentage of people who say it's their number one concern, do we know whether it's different region by region or different industry and by industry or anything like that? Or do we just know that that's what they're concerned about? We just know it's a top concern, Tyler. It's a great question and maybe we'll ask it next quarter. Yeah. Be interesting to know if people in the construction trades are seeing more or the restaurant trades are seeing more inflation. to see more inflation than people in general basic retail or whatever.

Certainly. I think in talking to different small business owners around the country, everyone's feeling it in some capacity, whether it's having to raise prices, whether it's consumers pulling back a little bit, whether it's paying more for materials or having to raise your own prices. There's just so much of it that's touching each part of the economy in varying ways.

So I think everyone's feeling it to some extent. Yeah, it sounds like though they're still relatively confident, And obviously this is an election year. So kind of given what's going to happen in November, how does that factor into the sentiment from the small business owners? Yeah, what is going to happen in November, Leslie? So something we just talked about, top of mind here for the election as well, inflation.

Three and five of our small business owners said that inflation and economic growth are their top issues when deciding who to vote for this year. Those come in ahead of other issues, including tax policy, safety and crime, foreign policy, and health care costs. So a lot of eyes on both. inflation in the economy right now. All right, Kate, thank you very much. Kate Rogers, reporting from San Francisco.

Shares of Carvanna cruising higher on the back of record first quarter results and boosting O'S Pearlman in our stock draft up 37% in the week since he picked it. That tells you something. A mentalist leading the way, we'll trade that name ahead in three-stock lunch. And be sure to join the CNBC Financial Advisor Summit. It's Wednesday, May 22nd. You'll hear from top investing experts about the current bull market, whether it's going to last, what it means for financial advisors and investors.

You can scan the QR code that you see right there or visit CNBC Events.com slash FAA. You got all that? Invents.com slash FAA. We'll be right back. Special appearance from Steve Kornacki as well. Welcome back, everybody. Time for today's three-stock lunch here with our trade. Scott Nations, President of Nations Indexes.

First up, we got your Carvana shares on the. the rise up more than 30% today alone. The used car retailer posting a record first quarter. The stock has already had an incredible run. Your trade on this stock at these new elevated levels, Scott. Tyler, at these levels, it's a hold. You're right. They had a great earnings release EPS of 23 cents when the market expected a loss of 64 cents. And this time last year, the stock was just barely over $7 a share now at $1.15, so it's up 1,500 percent. Incredibly impressive because the stock was essentially roadkill in 2022 when they were stuck with a bunch of expensive inventory as rates rose. So why is it just a hold? Well, while it's gotten a bunch of upgrades

and raised price targets today, some of those price targets are actually below the $115 the stock is at now. And that's that's worrisome. The fact that it's up 1,500 in 52 weeks is worrisome. The fact that they're expected to lose money for the next two full years is worrisome. And so the stock is where it should be. It's probably at value now. And it's much more expensive than the competition. It's realized that this is really just an auto retailer, so much more expensive than both Penske and CarMax. If you've been, And along for the ride, congratulations, but it's a hole. Yeah, it's still about a third of the highs it reached in August 2021 as well.

Next up is Qualcomm. Shares also on the rise there up about 0.9% today after giving a better than expected revenue forecast. Scott, what's your trade on Qualcomm? Yeah, this is a buy. They beat on revenue pretty much in line on EPS, which is fine. This is reasonably priced access to the chip space. It's cheaper than Nvidia. That's probably not the best comparison, but it's cheaper than both Intel and AMD on a PE basis. And those are much better analogs. It's tied to the phone space, which could be good, except it exposes this to China. What they really want to do is put AI on your phone. And if they can manage to do that, then they are going to print money. So Qualcomm is a buy. And finally, let's move on to MetLife announcing first quarter profit rising, higher premium,

strong returns from investments, that'll help. Analysts bullish on the stock, but shares are down about 3% today. Is this a buy? Scott? This is a buy. We can buy this one on a dip. So they missed on revenue, EPS more or less in line. The company has done a really poor job of meeting or beating EPS recently.

They've managed to beat the consensus estimate only once. in the last four quarters. So I think what we see today in the price action is some investors finally throwing in the towel. But the company should have good EPS growth over the next two years. Higher rates should help. They just announced a $3 billion buyback, although I wouldn't get real excited about that because they didn't complete their 2023 buyback allocation. So this is a buy, but I would trade this a little bit differently. We talk about stop loss orders regarding price. if the company can't figure it out in 18 months, I would use a time stop. So if it hasn't started moving in 18 months or the company hasn't figured it out, I'd sell it.

All right, Scott, before we let you go, we learned that you appeared on another TV program recently. It usually makes us very jealous. It's not nearly as prestigious as power lunch, but you did a good job on Jeopardy. Let's take a look. What is the kingpin? Yes. What is Brunswick? Good for a thousand.

What is the pocket? Pocket is right. What is laundry? Yeah, washing clothes. Not your everyday words for 2000, please. The answer there. The other daily double. What is mint mark?

It is the mint mark, yes, and suddenly you're on the lead. Man, you're good. Okay, the answer is power lunch. What's the question, Scott? Tyler, what is the best TV show on in the middle of the day? There you go. Correct answer! Ding, ding, ding, ding, ding.

You are our Jeopardy champion for today. Scott Nations, congratulations. Thanks again. Thank you. Appreciate it. That was fun. Shares of Rivian jumping on the news of new funding from the state of Illinois. Our Philobo is in Illinois with those details.

Hey, Phil. Leslie, Rivian will be expanding its production at its plant in normal Illinois. And the state of Illinois will be chipping in $827 million that will help Rivian as it expands production, gets ready to start building the next model that will come out from the company, the R2. that was originally going to be built at a new plant in Georgia earlier this year. RJ Scringe told us, you know what? We're going to put that plant on hold and move the production of the R2 to the plant in Illinois, which means you're going to have to expand production.

And the state of Illinois is saying, we'll chip in $827 million. That's why shares of Rivian are moving higher. Guys, back to you. Phil, are there any contingencies on that money? Is it a loan? Is it a grant? What kind of funding are they? offering. Near as I can tell, Leslie, it's a grant from the state of Illinois.

Sort of a development fund grant, if you will. I've got to read the fine details here. This is not alone. So they clearly want to keep this production close to home. Phil, thank you. Close to your home, too. You bet. Coming up, Peloton sinking on news of layoffs and a leadership change there. We'll get those details. And remember, you can always hear us on our podcast. Be sure to follow and listen to Power Lunch on your favorite streaming service. We'll be right back. No shortage of news from Peloton this morning, management changes, and more cost cuts in focus. Our Brennan Gomez joins us on set to go through how we got here on the road ahead. And here, by the way, is a sub-3 stock as of today's trading. Yeah, and a bumpy road

ahead, it is for sure. Look, shares following double digits today on the news that CEO Barry McCarthy is stepping down. Plus, an earnings miss with lowered guidance announcing another restructuring plan. The company cutting its global headcount by 15%, reducing its retail showroom footprint, consolidating global resources, all to minimize its annual run rate expenses by more than 200 million targeting the end of its 2025 fiscal year. But listen, to get the full picture, you have to zoom out back to IPO day of 2019. The stock, a pandemic darling, it's all-time closing high back in January of 2021. At 167 a share, we're very far from there. After some expensive investments in those showrooms that I mentioned, some recalls on products. And the company,

banking on the at-home fitness trends sticking post-pandemic. Barry stepped in in 2022 to help the company recover, started announcing massive layoffs, close the showrooms, developed an app to capture new members, but under him, the stock's still down over 90 percent, hasn't turned profit since December of 2020. Look, two big questions here for investors. What is the company? Is it a hardware company? Is it a software company?

As well as, you know, the second point here, which is debt, right? Debt is the big question here as. the terms come up on that, and we'll sort of have to continue to follow and see how the company restructures. They're in conversations with their lenders. It's really, apart from the debt question with which I'm not familiar, I am familiar with the product. It is a hardware, to me it's a hardware company that sells subscriptions. And if they don't sell the subscriptions and keep people paying 44-95 a month, that's going to be a big drain. And you see how they've tried to push those subscriptions, right, by partnering with brands like Lulu Lemon.

They tried to partner with brands like, or retailers like Dick Sporting Goods and Amazon in order to move the hardware, but they really saw underberry this shift towards the app consumer, right, trying to get people to use the app who maybe weren't at the price point to be able to afford a $3,000 bicycle or a $5,000 treadmill. So at this point, because I know one of the big issues was during the pandemic, they weren't able to size up appropriately to meet demand. Then they finally met that, you know, previous demand and demand slip because everything reopened and people were able to go to gyms and so forth. Is that still part of their dilemma? Are they still working through that inventory? Because it seems like after multiple rounds of restructuring at this point, you have to kind of wonder what's left? What is left to cut at this point in time?

You also have to remember the recalls that were taking place to with a lot of the inventory that they had as well. You also have to look at what the gyms are actually doing, the brick-and-mortar gyms. A lot of them are downgrading their replacement cycles for their cardio equipment. They're seeing that the consumers don't actually want to go to a gym, hop on a bike, hop on a treadmill. They're much more gravitating towards these open floor plans. free weight as well. So yes, there's, I'm sure, inventory there that the company is sitting on trying to move out. But is the consumer demand there now, is sort of the question moving forward. Is there best bet to be bought by somebody? And if so, who would a buyer be?

There have been conversations over the years, right? Even back when Barry stepped, Barry McCarthy stepped in as CEO, there was conversations of possibly an Amazon stepping in. Over the years, you've heard names like Nike, Apple, with their health products as well. All rumors, right? No official bids or, or, or, or, or, you've heard. spoken interest, but you will have to sort of wait and see if perhaps there is. Their market caps the same size as the debt load. They have to get the debt loan under control before they get any offers, I'm sure. All right. Thanks for being with us.

Appreciate it. Thanks for the report. And thank you for watching, Power Lunge. Closing bell starts right now.