Power Lunch - Apple falters, Boeing takes off and a bitcoin miner powers down. 7/18/22

Episode Date: July 18, 2022

Apple shares fell midday on a report that it plans to slow hiring. Plus, are Boeing shares a buy? The company lands a big order from Delta. A top analyst tells us whether sentiment is starting to shift. And the CEO of Riot Blockchain on the company’s decision to shut down mining operations to support the power grid in Texas. Hosted by Simplecast, an AdsWizz company. See https://pcm.adswizz.com for information about our collection and use of personal data for advertising.

Good afternoon, everybody. Welcome to Power Lunch. I'm Tyler Matheson. We're flying high right now with Boeing shares up 10% in a week. Delta placing a big order, and I do mean big. Bank of America hiking its price target on that company. If sentiment is turning, is Boeing now a buy? Plus, Bitcoin miners power in tech, power down, excuse me, in Texas, as the intense heat tests the grid there. the CEO of Riot blockchain here to discuss the impact on the mining community and whether today's rise in Bitcoin prices will continue. Kelly? Tyler, thanks. Welcome. Hi, everybody. Look at this. We are racing a 356 point gain on the Dow. We are negative by 30 right now. The S&P is down five points. The NASDAQ is down five and the NASDAQ was the outperformer with a one and a half percent gain earlier on. Now, we were losing

steam already. Then we got this report from Apple. Look at the shares. They talked. They turned lower a short time ago pushed the market into the red. This on reports that the company plans to slow hiring and spending in some divisions next year. No official comment from Apple yet, but the shares are now down 1.6 percent and they were earlier positive. It's around 147. It opened around 150. Goldman Sachs, for what it's worth this morning, also says it plans to slow the velocity of hiring. That stock positive today, off the highs, though, it's up 1 and 3 quarters percent after they're better than expected earnings and revenue this morning. And other big names report earnings this week. Will the results be enough to beat back the bear and power stocks higher?

Mike Santoli is down at the NYSC. Mike? Yeah, Kelly, well, you know, the bear got a lot done in six months, down 25 percent in the S&P into mid-June. Now, we haven't made a new low in the market in about a month. That also happened back in April. So it does not mean the downtrend is over, but it is notable. And I think if you squint at the market action in the last few weeks, you can spot the potential for four peaks, right? You have peak inflation getting priced in on some level, relatedly, peak bond yields, perhaps. That's definitely to be determined. Peak oil prices, maybe, and peak Fed hawkishness, which would go along with all those things. All them need to be proven. And the market bounce itself has not really stretched up to levels where it would

have decisively said this is anything more just yet than a reflex relief bounce. Is better than feared earnings going to be enough. That's the big immediate question to me. Clearly working for the banks, those sectors that have already been beaten down a lot, it seems like there's room for them to surprise pleasantly on the upside. For the rest of the market, the stuff that's held up better, we'll have to wait and see. And by the way, Kelly, Apple has held up extremely well relatively. You see what happens on a headline to that stock. Yeah, just as everybody was, you know, warming up to it, Mike, do you glean anything bigger, not necessarily from whether this report is true, but from the stock reaction in Apple shares in the market more broadly?

Yeah, I think mostly it's about the perceived safety of Apple as just an entity and as an investment. It was up, what, 14% in a month or something like that. So the fact that it was on a roll and people are buying it because of a no surprises type thing. Now, slowing down hiring, everyone's doing it. It's not a big deal if it, in fact, is true. But I do think it just sort of shows you the sensitivity also in a tape that was starting to wobble, as you mentioned. All right. Michael, thank you for now. Mike Santoli.

There is a lot going on this week. And it's one of the most complex earnings seasons maybe ever from inflation issues, foreign exchange issues, concerns about the possibility of a recession ahead, rising interest rates. Who knows? And the heat this week. We got Netflix. We got Johnson & Johnson. Tesla, American Express. just a few of the big names that report. You can see them there all on the wall.

Our next guest has a guide for investors on how to cope with us as Peter Anderson of Anderson Capital Management. Peter, you say that this is a time for intelligent fortitude. What does that mean? And what is the opposite of that? Well, good afternoon, everybody. So I have created, over time, Tyler, just a set of guidelines for what I think investors really need. going into an earning season like this. You know, we all go in with our minds on fire, what we expect to do, but sometimes I think it's better to just have a set of guidelines. So, you know, the first question I ask is, should you even be here? Meaning, do you have the stomach to suffer through this earnings period? I mean, I think this earnings period is going to be tremendously changeable.

You're going to have every kind of interpretation about what people are seeing for the next six months. So if you don't have a long-term horizon, I would say you probably shouldn't even be listening to earnings reports, a long-term meaning over a year. And then the second thing is with these companies, do pay attention to what they actually do rather than what they say? So as an example, you know, if a company says we're going to tighten our belts coming in the next six months, well, okay, you can interpret that in many ways. But if a company says we are ceasing our stock buybacks, then that's much more tangible. And that can give you a lot more insight into what these companies are actually thinking. And, you know, I also say, don't hang on every word, Tyler. These companies, although we think they know more than we do, in this case, I'm not sure they do,

simply because we're emerging from the most tumultuous period of a recovery. So those are some of the things I think will help us with intelligent investing. And I'm sure you know what the opposite of that could be. Yeah. What will you say we're emerging from a recovery? I'm not understanding. Maybe I don't understand you. No, recovery from COVID.

I don't necessarily mean a market recovery. I mean that, you know, we tend to forget. We get all worked up about, you know, how quickly this recovery is happening and whether or not it's happening. We saw last week. Will the Fed raise, I mean, for 24 hours, we were actually thinking the Fed was going to raise 100 basis points, and now we're back to 75. I mean, these things are changing so rapidly, and investors are trying to hinge on every word. And I think sometimes it's self-defeating.

So take a chill pill here, right? It's really what you're saying. Exactly. Take a chill pill. If these earnings are making you nervous, you probably shouldn't be in this market in the first place. If you're that upset and in turmoil over. So you have a couple of stocks. I know you want to mention by way of a kind of barbelly approach that can soothe your nerves. Yes. I think for those of us that want to stay invested in our

optimists, and remember, I think to be a successful investor, you have to have two things. You have to be a risk taker and you have to be an optimist. And those two skills are really, really in demand right now. So say you want to stay invested, one of the ways, but you're still kind of nervous about where the market is going to go. One of the ways to do this is to take a high beta stock and pair it with a low beta stock. And by beta, I just mean how responsive these companies are to a change in the S&P. So if the S&P sneezes and one of these stocks gets pneumonia, or I guess I should commonly say now COVID, then that would be a high beta stock. So you compare these two.

As an example, I gave Caesars and Equinix. Caesars is a very high beta stock. If any of you have been watching that, and I own that stock, and it's been stomach churning. It's, you know, three and a half times, but more volatile than the S&P 500. And then Equinix is actually one-third as volatile as the S&P 500. So you pair those together, you might be able to sleep a little bit better at night. Any other suggestions, Peter, for people who? who are a little nervous about which way we're going in the next 36 months time?

Yes. My thesis has always been that we tend to look at this really closely, and I am guilty of that too because this is my business. But I do think that six months from now, we will look back at this. And I'm hoping that the Fed is not going to be too aggressive because, you know, there's a six-month delay in any of the actions that the Fed takes. And I'm a little bit worried that the Fed might tighten too much. and that inflation will just take care of itself in the normal course of business, Kelly.

You know, looking at plywood and lumber prices, we were all really upset during COVID because the prices had spikes so much. And when you check those lumber prices, now they're back to pre-COVID levels without any Fed intervention or any kind of economic intervention. So I do think that left to its own, with a little bit of Fed tendering to this, tending to this, then I think we will probably be a lot better in six months, and we probably won't be as nervous looking into earnings and hanging on every word as we get more clarity.

Well, you've just painted the optimism side of the picture for us there, Peter Anderson of Anderson Capital Management. Thank you. You're welcome. Coming up, Texas Bitcoin miners shutting down their rigs as the state's power grid gets pushed to its breaking point, The CEO of Riot blockchain tells us how that's impacting business, with the stock rallying today despite the 70% drop for the year.

It's up 14% in the session. Plus, Netflix shares are down 67% this year. Roku down 60%. If the stocks plummet further, could they be acquisition targets for big tech? And as we had to break two stocks hitting all-time highs today, a health care name and taxes, it's Centine and H&R Block. Power lunch is back in two. Bitcoin bouncing back a bit today, up 5% back above 22,000.

Of course, recent weeks, 19,000 or thereabouts, but still down more than 50% so far this year. Even though it's crypto winter, part of the Bitcoin world is feeling the heat. Christina parts of Neville is joining us now to explain what she means by that. Christina. Got to love a good pun. But crypto miners flock to Texas to take advantage of lower electricity and housing costs. The Lone Star is one of the largest crypto mining hubs by computer. power in the world. But mining is incredibly energy intensive. That's why Texas's state-run

power grid Urquod asked industrial-sized miners to shut down as demand peaks. We need to understand that this is actually risking the ability of utilities to provide service. And in heat wave, that can be deadly. Across the board, we're seeing miners higher today as the cost of Bitcoin and other cryptocurrencies rise from recent lows. But, And you're seeing a sea of green right here. A three-month chart tells a completely different story. Take a look at Hive down 90%. Marathon, 52% riot, almost 57%. A strained power grid in the high energy consumption by crypto miners brings to light the issue of utility. The application of tokens and crypto is still hotly debated, while the cost of energy consumption is real, tangible, and costly. So how do we weigh that cost benefit?

All right, Christina, sounds good. But now, if Bitcoin goes back to 60,000, will miners be as willing to shut down? This is a good hypothetical situation where, as a journalist, I would say, I don't know the answer. But it does raise the question if they're making more money. Will they be willing to reduce their power? They're willing to reduce the power right now, perhaps because electricity costs so much. And cryptocurrencies are so low. So you've got to think of the cost benefits in this scenario. But I don't work there.

Let's ask someone who does. Christina, thank you very much. Our next guest runs Riot Blockchain. It's a Bitcoin miner that's been shutting down operations in Texas to support the grid amid the heat wave. They've also seen their shares surging 14% today as Bitcoin prices rebound, but they are still down 70% this year. Jason Lest is the CEO of Riot Blockchain. Jason, welcome. Thank you for having me.

Okay, let me ask you for like the math here. with energy prices and crypto where they are today, how much less are you giving up than you might be if Bitcoin was back at 60K and at energy prices were also where they are today? So it's really a dynamic calculation. There's a bunch of market factors beyond just the Bitcoin price. There's also the competition around Bitcoin mining that impacts what your revenue is as a Bitcoin miner on a dollar per megawatt hour basis. So as a miner, we look at that and then we can also make a judgment call in the power market on if it is worth it to mine or if it's worth it to curtail our energy and sell the power block that we've invested in and secured back to the

market. Alternatively, there are different demand response programs that we support in that reduce our energy costs annually and help support the Texas grid in our communities that we operate in. I noticed that that you have been selling power back to the grid. It says that would equate to a Bitcoin price at times north of $500,000. What do you mean by that? That was not a quote from me, so I'm not sure the math behind that. But I will tell you that the price of power in Urquot will tend to peak and spike to pretty high prices when there is not enough energy in that grade. And that is really when renewable generation sources like wind are not functioning as design. They're not functioning because there's no wind blowing.

So when there's no wind blowing, that grid has a lot less capacity than it otherwise would. So you guys basically have energy, let's call it credits, or. something to that effect that are so valuable right now, it equates to a Bitcoin price of, according to this source, half a million dollars. That's, that's, it is a good reminder that maybe market pricing can help here level out the power distribution on the electricity grid. At least that's the optimistic reading. Absolutely. Let me put it this way. Miners, Bitcoin miners like Riot make huge financial commitments into energy grids, into energy markets. we have commitments to purchase energy for two years.

So that's a reliable demand that generators and grid organizers can look at and rely on. Because we made that commitment, we own a block of power that we can then make available back to the grid when market conditions call for. And when power is constrained and spot prices are spiking up very high, yeah, it equates to equivalent Bitcoin price mind of very much higher than where it's at now. Do you sell that power back at a profit? Yes, with the block of power that we have secured, we can shut down, and we will sell that power back at a profit, you know, at a margin much higher, at a price much higher than what we're securing it for, provided that price is higher than what we would get from otherwise mining Bitcoin. Do you have any idea what percentage of state output in Texas you all consume or Bitcoin miners as a group consume?

Is it negligible or is it negligible or significant? Right now, I would say Bitcoin miners are probably around 1% of the total peak demand in ERCOT. There are a lot of projects underway. A lot of businesses have publicized plans to expand. out in Texas. To the extent they all follow through with that, you know, depends on their ability to raise capital and execute. But I think the more Bitcoin miners that are able to deploy in Texas participate in these different types of grid response programs, the stronger the ERCOT grid is going to be because generators and grid operators can rely on a consistent power source 24-7 that has

the flexibility, unlike other major loads, to shut off when demand for power is high. Does that make Texas still an attractive place for you guys to operate or has this kind of series of energy price spikes and heat wave problems made it worth looking elsewhere? It absolutely reinforces our strategy in Texas. The grid, the power market in Texas is an ideal place for Bitcoin miners. Having the ability to participate in these different programs helps lower our cost to production, which is the goal of any business and especially a Bitcoin miner. and on top of just those energy benefits, Texas is an amazing place to do business. They are very welcoming to all businesses, and they are very welcoming to Bitcoin companies and Bitcoin mining companies specifically. From every level of government, we have received a ton of support there, and that just

further reinforces our commitment to investing in Texas. How's the air conditioning where you are right now? Well, I am personally in our Orange County office right now, so I am not out in Texas. but speaking to the team, it is very hot out there, but they are committed to our mission and they're happy that Ryan's making money. California doesn't have any energy problems. No.

All right, Jason. Thank you so much. We appreciate it. Thank you for having me. All righty. Enjoy Orange County. Coming up, everyone is watching Netflix, at least the earnings.

Could another subscriber slump and share decline be a catalyst for more media M&A? Plus, speaking of earnings, which stocks are set up well on a technical basis. Heading into results, we'll break it down in today's three-stock lunch. And going green, one company is producing fossil-free hydrogen power. Our Clean Start series continues later on Power Lunch. It has been a rough start of the year for media stocks. Netflix down nearly 70%.

Roku, 60. Warner Brothers, down 40%. Paramount Global looks like a winner down only 17%. But could this media mayhem lead to mergers? Julia Borsden joins us now. There are lots of mergers in media, seems like. There have been lots of mergers in media, and now we're trying to figure out what the next round of mergers will be Tyler.

And the lower these media stocks fall, the more these companies could become targets for M&A. Now, Netflix kicks off media earnings when it reports tomorrow afternoon, and its results will be very closely watched. Netflix shares are down about 67 percent, year-to-date, and earnings tomorrow will be under the microscope, particularly guidance for subscriber trends in the second half of the year. As analysts raised concerns about the whole sector, Key Bank says it's seeing signs that streaming may not be recession-proof, price sensitivity

increasing. That company lowered its Netflix and Roku estimates. Morgan Stanley saying also this morning that this could be the first streaming recession downgrading both Paramount and Fox. So which companies could look to buy the likes of a Netflix or Roku if their stocks continue to plummet? Well, Microsoft could look to its newly inked ad relationship with Netflix as a starting point for more partnerships there. Apple has shown its growing interest in media with recent sports deals, though Apple as a buyer is certainly constrained by regulatory scrutiny. And then there's a Comcast and NBC Universal, CNBC's parent company. It could be looking for more scale to build on. its strength in the streaming ad space.

Now, others could feel pressure to merge as advertisers and consumers are expected to pull back. I'm talking specifically about Paramount and Warner Brothers Discovery. The latter is reckoning with a heavy debt load. So the numbers we see this quarter could give us hints of what kinds of deals to expect in the next few years. Very, very, very interesting. It's amazing how Netflix has gone from a presumptive buyer of other assets to, potentially a seller. Potentially.

And it all depends on how low its market cap goes. I mean, this is still a very big company in terms of a market cap closer to $90 billion. But if the market cap drops closer to $70 billion, then that would be in the same range as Disney's acquisition of Fox. And that starts to be a different conversation or even in the $50 or $60 billion range. So there's also this question, Tyler and Kelly, about whether or not you value the likes of Netflix as a media company or a tech company. All right, Julia, thank you very much. Julia Borsden reporting.

Let's get to Bertha Coombs now for the CNBC News Update. Bertha. Hey, Kelly. Good afternoon. Here's your CNBC news update at this hour. Four people are dead after two small planes collided at a Nevada airport. The pair of single-engine aircraft, each carrying two passengers crashed into each other. The FAA says, quote, preliminary information indicates that one plane was preparing to land when it collided with the other.

Extreme heat in the United Kingdom causing a runway damage and disrupting military and civilian flying. Flights were temporarily halted at London's Luton Airport after soaring temps caused a defect in its runway. Temperatures are exceeding or expected to reach, rather, 100 degrees Fahrenheit today. And New York's Governor Kathy Hokel directing state agencies to implement heightened patrols and surveillance of Shark Act. This will include drone and helicopter monitoring along the island's state park beaches due to recent shark encounters in the Atlantic Ocean. State parks will also increase lifeguard staffing through overtime at ocean beaches by 25%. It's kind of like jaws all over again, Kelly. Lakes looking better than ever.

Right? Bertha, thank you very much. Bertha Coombs. Head on Power Lunch, Boeing under the radar. the company getting its first order from Delta in more than a decade. The stock down this year, but could it be ready to take off on the back of a pretty strong month? Plus, an arch nemesis. Some McDonald's franchisees supporting a no-confidence vote on the company's CEO.

Details when Power Lunch returns. And we want to show you shares of Apple. The stock fell nearly 2% on reports that the company would slow hiring in certain areas of the business in the coming year took the Dow and NASDAQ down with it, and it is still down. one and a half percent. Stay with us. Welcome back, everybody. 90 minutes left in the trading day as we've gone into the red. And we want to get you caught up across the markets on stocks, bonds, commodities, and Boeing. We ask, are those shares about to take off?

But let's start with Bob Bassani down at the New York Stock Exchange. Bob? And we were tooling along, modestly positive, slipping a little bit. But then no about an hour ago, we got some reports. And I confirmed that Apple might be slowing higher. And you see what the effect that was. Apple was positive. Most big cap tech had been positive on the day, and we moved into negative territory on that. Predictably, Apple suppliers also moved down a little bit. I think the important thing about this is think of the context here. Remember, Apple only gets maybe a third of its revenues in the United States. About 25% of Apple's revenues are over in Europe. Would it be any surprise if sales were a little slower in Europe? And they get about 20% of their sales in China.

Would it be any surprise, given the lockdowns that we've seen over there if there were some slowdown, even in the revenues in China as well? So this is not entirely shocking, assuming that this information is true, that we move slightly to the downside. The question is, would it affect the broader markets and how much? And so far, the earnings commentary that has been cautious hasn't been dramatically dropping the overall market. So Apple is the most important stock in the United States right now, so obviously we're going to pay more attention to that. You see modest declines here in most of the big cap tech names that we've seen. Also, the other interesting feature of the day is they've been nibbling on tech stocks up until early this afternoon. And the defensive names have sort of lost their cachet.

So Kimberly Clark, Clorox, Johnson & Johnson, and even the Big Cap Farmer, which has been having a great little run recently, all we're down today, indicating that people are kind of interested in the growth here part of the market. And the question is, how much is Apple going to sort of turn that position around? Finally, I just want to note that energy with oil at 102 back up again, you know, people aren't ready to give up on energy stocks, even though they too have lost their cachet. And I guess the key point here, Kelly, is a lot of the growth people are dying to go out and buy some tech stocks on a fourth quarter turnaround. And the question is whether this announcement or whether these reports about Apple are going to sour them on that kind of deal. No, great context. Bob, thank you very much, our Bob Bassani.

Meanwhile, in the bond market, we've also seen yields climbing. That's been a headwind, I guess, too, if you want to call it that for the tech trade. But the 10-year, back at 3% or above it briefly, now we're down to around 296 this afternoon as the mood has turned a little bit more cautious. Yield still below that of the two-year, which is 3.16%. All of this happening is the market continues to wonder whether the Fed will hike by 75 basis points in its meeting next week. Looks like 100 is off the table for now, but it's not doing much. to push yield significantly lower. As for oil, it's just closing with crude, not only rising, but really reaching above 102

a barrel in the last few minutes. Pippa Stevens with the story. Pippa? That's right, Kelly. We are back above $100 on U.S. oil as this market volatility continues. We have this ongoing disconnect between the physical and the paper market. UBS saying the recent demand concerns have triggered a massive liquidation in oil positions by financial investors while the physical market remained.

tight. Meantime, President Biden's trip to Saudi Arabia not yielding an immediate agreement for the kingdom to ramp up output. The president, though, saying the Saudis share the urgency to increase supplies and to expect further steps in the coming weeks. OPEC is set to meet on August 3rd, and Saudi Arabia, of course, the de facto leader. WTI is up 5% at 102.56, burn crude also up 5% at 10623 and take a look at Nat gas up almost 7% and approaching that 750 level. That comes as much of the country and really, I should say, world faces scorching temperatures and that in turn, Kelly, driving demand for Nat gas. Absolutely. Pippa, thank you very much, Pippa Stevens.

Let's zone in now on Boeing stock today, which is up nearly 3% this afternoon, now hanging on to about 2 thirds of 1% gain. Some big news, though, with Delta agreeing to buy 100 of the 737 max 10 plane, The deal will have an option for 30 planes or more, marking Delta's first major Boeing order in over a decade. But as Boeing looks to turn a new leaf, a handful of problems continue to plague the company, including regulatory issues with the 737 Dreamliner. Boeing CEO David Calhoun spoke earlier with our Phil LeBow on the matter. I will not predict, but it's a constructive relationship. We've progressed through everything.

As everybody knows, we submitted all the documentation a while ago. It has been worked through. It's in a good place. So I am just as optimistic. Now, he also mentioned that the company expects to deal with supply chain issues for at least 18 months more. Let's bring in Colin Scarola here. He is a senior equity researched at CFRA research. Colin, it's good to see you. Boeing shares have been on the rebound over the past month or so. How big a deal is the latest news for them? I think it's always good to have a premier airline like Delta give you a good vote of confidence for your top product. out. So that's obviously a big win. I think it speaks a little bit to an advantage that Boeing might

start to be getting back in terms of Airbus having very long lead times and probably expecting a little higher pricing than Boeing being willing to take a little lower pricing. So certainly Airbus has taken a huge lead in the global aircraft market over the last few years, but this is a good signal that Boeing might be chipping back a little way at that lead. Well, when you put it that way, I don't feel quite as excited. You're basically saying airbus planes are going to take too long so people have to kind of turn to Boeing and the Boeing planes are going to be

a little cheaper. I mean, if that's the case, how long is this road back that you're describing? Well, I think that's an interesting question and that's sometimes when you're trying to make an investment case for Boeing, there becomes some confusion that sometimes people think you're saying

this stock should be back in the $450 range where it was pre-pandemic. that's not true. You could make probably 60% on your money from today if it just gets back to 40% below its peak. So we're probably talking about, you know, three plus years to get all the way back. But just in the next year, you could have a very, I think Boeing's already breaking even on free cash flow now. And so we'll have a nice ramp and free cash flow over the next year as, you know, these maxes get delivered out of inventory. We're very optimistic that 780,

will get recertified for deliveries by the end of this year. We don't want to just like to see us. I can't predict that timing, but I think probably it's sometime this year. And within a year, you won't have Boeing at anywhere near pre-pandemic earnings levels or pre-max earnings levels. But even at just 50% of what they were making before there, it could be a very attractive investment over the next year.

Make the case for us, Colin, that buyers will look past the reputation troubles that Boeing has suffered over the past years with the 787 Dreamliner, with the 737 max 8 or whatever, 800 max? We no longer have to try to make that case. You know, Delta's orders today, the huge backlog of orders with companies like Southwest United, there's huge confidence in that plane. People want it for its high performance and probably a better price point. So I think that case is kind of making itself. There's a healthy backlog for Max's. If they could be delivering more, they would. The market is certainly there. When you're a business, it's better to have short-term problems with a great market. And I think the market will help them kind of heal that.

I don't need to draw too close to comparison, but some years ago, as you will recall, Audi had a premium product in the market and some safety issues arose with it. And at that time, people were very quick to write the obituary for Audi. And that company has come back in the marketplace very, very strongly. I'm not saying this is directly comparable. I don't mean to compare the one to the other excessively. But it's always wise to take a long view, I guess. Yeah, I think that's an excellent point. You know, financial history is replete with examples of a very short-term-oriented investment marketplace, dumping companies. Dumping companies that were going through challenges, but over the long term, they still had very

good fundamentals for their business. So those are the two things to keep in mind with Bowen. They've got major operational problems, but this is still a very valuable duopoly-type business in a long-term growth market. So that's a great place to be invested over the long-term. And I think month by month, they are starting to show us that they're overcoming these operational problems. So you've got to be patient. There's certainly a lot of hair on this stock with their operational problems plus the debt. But again, you just got to keep in mind. Just getting back to something like 50% of their peak stock price would be a great return on investment from here. I like that image of a hairy stock. Colin Scarola, thank you, my friend. Appreciate it.

Thank you. All right. Hydrogen's clean start. We will highlight one company's method of reducing fossil fuels. Power lunch. We'll be right back. Welcome back to Power Lunch, everybody. In the move toward renewable energy, you hear a lot about hydrogen. But is hydrogen really a clean energy? That's a bit of a gray area. Diana Oleg joins us now with the latest in her continuing series on clean startups. Diana. Tyler, hydrogen produces next to zero greenhouse gas emissions, but extracting hydrogen to create fuel does. And that's the problem. Now one company, electric hydrogen, claims it can produce truly clean hydrogen. and big investors are banking on it. Our goal is to be selling the world's leading equipment set, the most cost-effective equipment set possible, for the production of renewable hydrogen.

Electric hydrogen builds so-called electrolyzer systems to create green hydrogen. The systems use renewable energy, like solar and wind, to split water into hydrogen and oxygen, creating fossil-free hydrogen power. Almost all of global hydrogen today is derived from, natural gas, not so clean. That's why it's called gray hydrogen. So when the sun is shining,

when the wind is blowing, we harness that cheap renewable energy through our equipment set to make renewable hydrogen or fossil-free hydrogen. Garibidian, who used to be chief technology officer for first solar, likens his new company to a solar panel maker for clean hydrogen. He expects to sell the electrolyzers to companies like Amazon. Electric hydrogen in particular is addressing some of the hardest to abate sectors to get to net zero, like ocean shipping, steel manufacturing, aviation, and these are ones that are really important to Amazon to address. Electric Hydrogen's backers include Amazon, Breakthrough Energy Ventures, Mitsubishi, Fifth Wall, Prelude, Capricorn, Energy Impact Partners, and S2G Ventures. Total funding so far,

$220 million. One of the other hurdles for green hydrogen today is cost, but electric hydrogen claims by using these large-scale systems, it can bring that cost down to be competitive with fossil fuels. And just one more thing, we've got an update for you on one of the clean startups we brought you earlier this year, source water, which produces clean water from solar-like panels, is just now announcing $130 million in new funding led by Microsoft, BlackRock, and Duke Energy. To see our segment again, check it out on the Clean Start page on cnbc.com. Back to this hydrogen company. At what kind of scale can they produce power?

Well, they believe that the larger they can, the better they can. And so they are starting now with these large-scale things, these large-sale basically factories for hydrogen where they can create this. Now, they don't create the hydrogen themselves, just the systems. So they will sell those systems to big companies, and it's up to the company how much, how large they want it to be. But on this larger scale, they can do it more cheaply. All right, Diana. Thank you very much.

Diana Oleg. Up next, a technical edition. of three stock lunch, which names are set up well ahead of their quarterly results and which aren't. And we'll also hear from two big bank CEOs coming up on CNBC. Brian Moynihan, Bank of America, joining closing bell at 3 p.m. at 6 p.m. David Solomon of Goldman Sachs will join Jim Kramer for Mad Money from its brand new location at the New York Stock Exchange. Short walk for him. Power Lunch will be right back. Welcome back to Power Lunch. Let's show you the markets. We've lost all of today's rally. The Dow was up 300.

56 points. The NASDAQ was up 1.5%. Now we're sitting near session lows, down 80 on the Dow, about a quarter of a percent, down 37 on the NASDAQ, about a third of a percent for that and for the S&P. All righty, time for today's three-stock launch. We take a technical look now at Domino's Tesla and J.B. Hunt ahead of their earnings this week to see which are set up for a breakout or a breakdown. Now let's bring in Craig Johnson, Piper Sandler's chief market technician. First up is Domino's, What do you think here? Well, when we look at a chart of Domino's pretty interesting, we started to reverse this longer-term downtrend. From our perspective, this is a stock that's probably got one of the bigger option moves we're calling out here today, up about 6.3% when they report results on Thursday before the bell.

From our perspective, I think this is one we've got to buy. We're seeing lots of upgrades here, a lot of promotional activity. And I think Domino's is one that's ready to take a next leg higher. All right, good signs there then. What about for Tesla? In terms of Tesla, I've got this kind of as a bottom fishing candidate. The shares have been stuck in a consolidation range for about 18 months or so. We got an options move coming up about 5.3%. The stocks in the 40% change range off of its all-time highs in here. And from our perspective, we're starting to see technically an improvement in the momentum indicators on RSI, lower end of the range. looks like this is one that we should be trading to the upside coming into the earning sprint later this week. All right. Interesting call there. Let's move on and take a look at J.B. Hunt, the big trucking company. I think this is going to be a super interesting telltale as to what's happening in terms of the transportation across the United States looking at these truckers.

This is one that's going to be reporting tomorrow before the open. We're down about 22% off of our 52-week highs. We've also got a pretty decent option of around 4% for this. And we're starting to hear discussions of softening spot prices in the trucking business. So I think this is going to be a really interesting setup. But from our perspective, just looking at the chart, we have broken the uptrend support line. We're back below a declining 40-week moving average at this point in time. So we see downside on this one, you know, Tyler, to about 155. Today's rally, Craig, has petered out. It's collapsed. Why do you think that is, is it worrisome to you?

Well, I think some of this comes from the news from Apple. I mean, Apple's been a company that has obviously been a bellwether out there for years. And we started to hear some, you know, softening with them as they're going to slower some of the hiring going into 2023. I think we also had a pretty big move on Friday. We're giving that back a little bit. We're still in the middle of earnings season. And I think a lot of investors are sort of waiting for earnings to decline meaning meaningfully in here. And so far, we haven't seen that happen yet. Yeah. Oh, are we ever in earning season? Craig Johnson, we thank you. Piper Sandler, chief technician. Coming up, growing McTrubble. Some franchisees are showing no confidence in McDonald's CEO. The stock's down 5% year-to-date. That story next. Some McDonald's franchise owners are becoming disenfranchised with the company's CEO. A new survey out from a franchisee advocate group shows a majority of the nearly 700 owners it polled, Support calling for a no-confidence vote. Kate Rogers has more on why they're so frustrated.

Kate? Hey, Kelly, the National Owners Association, which is a large independent McDonald's franchisee advocacy group, recently polled its nearly 1,000 members, and about 700 responded, an overwhelming 87%. Support calling a vote of no confidence on CEO Chris Kamchinski and U.S. President Joe Erlinger. It is worth noting McDonald's has reported it has some 2,400 franchise owners in total. The poll comes on the heels of changes being made to the franchise system in 2023 that include evaluating new operators equally instead of giving preferential treatment to spouses and current owners and separating its lease renewal process from assessments of whether owners can operate additional restaurants.

Owners are frustrated about the changes. The survey found that nearly 100% feel the company should have consulted owner leaders before announcing changes. 95% feel that senior management does not have the best interest of its owners in months. 83% also feel this is a veiled attempt to raise rents as McDonald's controls these lease terms. This also comes as McDonald's looks to recruit new owners to the system, including a $250 million pledge to help diverse candidates finance a franchise over the next five years. McDonald's did decline to comment on the survey and those changes to come. Kelly, back over to you.

They surveyed about a third to a quarter of the existing franchises. Is this survey usually representative of how everybody feels or is it just a vocal minority? Have there been no confidence votes before? This is the first one I've covered since taking on the beat with McDonald's in the last few years. And there have been tensions between these two groups. As you mentioned, McDonald's has about 2,400 owners. It says this group has about 1,000 members of its membership 700 or so did respond to this. 87% called for the no confidence vote.

So those numbers are certainly important. Kelly, these groups have butted heads before. There was a tech fee. The company claimed it was owned by owners. They went back and forth and settled on that. And then more recently, we've reported on a new grading system for the restaurants that the company is rolling out that some owners felt is harsh and will kind of isolate workers during this ongoing labor crunch. It is important for viewers to know, though. Franchisees run some 95% of McDonald's operations.

So the relationship between the owners and corporate business in particular has been very strong for the company, even in the face of inflation, per its last earnings report. So we'll see what this quarter brings. But certainly a key relationship here and some headbudding going on. I'm curious. You mentioned at one point that some believe this is a ployed by the ownership, by the management of McDonald's to raise rents because they have control over the leases. In what sense do they have control over the leases? They're not the owners of the land or the buildings, are they? In some cases they are, and if they are not, they do negotiate those lease terms for the franchisees. So that's where you're getting that veiled attempt to raise rents.

But the term that McDonald's will use is that it's a franchisor, But the owners, in some cases, will say landlord because in certain instances, that is the case. And so this is a case where the franchisees are really saying McDonald's, you did something that is injuring us. You've changed the rules of the game. Without consulting first, which I think is the key point here, that nearly 100% said that they felt they should have been consulted before these changes were rolled out. Because, you know, there is a large group of franchisees owners here. Some of them have been in the system for a long time. McDonald's is looking to bring new owners into the system as well because it wants to continue to move the company ahead.

Both of those things need to work in concert together to be successful. All right. Kate, thank you very much. We appreciate it. Thank you. Before we go, let's take a look at shares of alphabet, which look a lot different than they did on Friday. The 20-for-one stock split took effect today after being announced way back in February when the stock was trading above, way back in February it was announced, I should say, on Friday, the stock was trading above $2,000. a share. Today, 108, get used to seeing that on your screens. That's around the new territory. We'll be following. Yeah, if you woke up this morning and looked at that and thought it was a $1,400 stock.

It hasn't been that bad. Whoa. All right, folks, thank you so much for watching Power Lunch.