Power Lunch - Apple's AI Strategy & Tech Stocks 2/1/24

Episode Date: February 1, 2024

CNBC’s Tyler Mathisen and Kelly Evans take you through the heart of the business day bringing you the latest developments and instant analysis on the stocks and stories driving the day’s agenda. “Power Lunch” delves into the economy, markets, politics, real estate, media, technology and more. The show sits at the intersection of power and money. “Power Lunch” gives viewers a full plate of CNBC’s award-winning business news coverage, plus a healthy dose of personality from the show’s anchors and the network’s top-notch roster of reporters and digital journalists. 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 Courtney Reagan, I'm Tyler Matheson. Despite a record-breaking rally, there is always, always something for the markets to worry about. A regional bank stock losing half its value in the past two days, could we be in for a replay of that crisis from a year or so ago? And Mega Cap Tech earnings, meta, Amazon, Apple, all reporting today. It's a big day. Can they meet lofty expectations? Plus, the world's number one female golfer will join us. She's got a new corporate sponsor. And there's also a deal to beef up the prize money. for the Women's U.S. Open. We'll discuss that and more. But first, let's get you a quick check on the market. Seriously, you tried to say on this Thursday. We are higher across the board. Dow Jones Industrial average higher by 7 tenths of a percent, S&P 500 higher by 9 tenths of a percent, and the NASDAG leading the way, making up some of yesterday's losses up by about a percent or show. Check out shares of New York Community Bank down again today after losing more than a third of its value yesterday after the company lost money and slashed its dividend. Week to date down 43%. Other regional banks falling for the second straight day in sympathy, if one bank can literally

have sympathy for another. But the question is whether these issues are NYCBs alone or whether they could spread, as we saw with Silicon Valley Bank last year. Let's bring in Leslie Picker now for some analysis. Leslie. Yeah, Tyler, that is the key question today. The fallout from New York Community Bank Corp continues. Those shares, as you mentioned, adding to yesterday's 30.

8% declines, currently down more than 8.5%. NYCB's fourth quarter earnings yesterday revealing a biting slump in credit quality, thanks to troubled loans for a co-op within its multifamily portfolio and an office CRE loan. For many bank investors, it was a deja vu eliciting fears of contagion akin to what they experienced last spring. Even more ironic since NYCB acquired part of signatures balance sheet from FDIC receivership after that bank failed last March. The question now is whether NYCB's issues are isolated to that one bank or whether there's broader systemic risk at play. Bank of America analysts say that the regional bank sell-off is likely overdone, quote, given idiosyncratic factors tied to NYCB.

The firm notes that NYCB crossing the 100 billion in assets threshold after acquiring signature subjects them to a whole host of additional costly regulations. However, B of a note of a note that, quote, higher losses tied to commercial real estate, CRE office exposure, increase in criticized loans tied to multifamily CRE, are a reminder of ongoing credit normalization that we are likely to witness across the industry. And of course, yesterday's FOMC meeting, pushing back against the notion that rate cuts were imminent,

served as just salt in the wounds for this already battered sector, guys. Leslie, what does all this mean for Basel 3 regulation? And then, of course, these looming higher capital, requirements. That's another great question, Courtney, because on one hand, some of these losses are tied to just compliance with some of the stricter regulatory compliance, getting ready for Basel 3. But then there's been this kind of notion in the market. People are expecting some sort of watering down of the Basel 3 proposal as it was written. And regulators could turn to what's happened this week and say, look, these are why we need higher capital requirements. This is case and point

as to why we're doing this. So now there's kind of this question as to, you know, will they hold up New York Community Bank as the canary and the coal mine as to why these stricter regulations need to take place or will that argument that, you know, these are really costly regulations and it's creating a lot of turmoil, you know, themselves be kind of the winning arguments. So additional uncertainty as well as pertains to regulation.

No one likes uncertainty, especially the regional banks right now. Leslie, thank you very much. All right, switching gears now to Apple on deck to report first quarter earnings in just a couple of hours among investors' top concerns is iPhone sales in China, where the company is facing regulatory headwinds, increased competition from domestic brands, Huawei, among them. Also, its future ambitions in generative AI, which could become a deciding factor in retaking its crown as the most valuable company in the world. That title now belongs to Microsoft, in part because of its partnership with Open AI. And while Apple shares did jump almost 50% last year, it was the smallest gainer in the so-called Magnificent Seven. So what lies ahead for that company?

Joining us now our own Steve Kovac, who is live in Cupertino. And here on set is Ben Wright's head of technology research at Mellius Research. Steve, let's start with you. Fill us in on what we expect to hear from Apple today. Yeah, Tyler, muted expectations. At least that's what Wall Street's looking at here. they're expecting for Apple to return to top-line sales growth for the first time after four quarters in a row of declining sales, but not by much. Revenue expectations for overall $118 billion

that would represent, you know, more or less half a percent of revenue growth, but still growth again. But yes, like you said, there are a lot of troubling expectations here. I'll note those estimates used to be about $123 billion last fall, and they've been since paired back. quite a bit just because of all this troubling data we've been seeing out of China and just overall smartphone demand. You mentioned a new competition. Huawei is a big one that seems to be putting a dent in Apple's market share over there in China. And also top analysts, Ming Ching Quo, very tied into the supply chains that Apple uses. Said Apple is going to ship 15 percent fewer phones this year potentially. So really important to look at beyond all that is what guidance

Apple gives on its earnings call after that initial report comes out. 5 p.m. is when that call starts. And we should expect to hear something, some caller and commentary for looking on the March quarter. A lot of sour commentary around that. And of course, Tyler, we are on the eve of the Vision Pro launch. This launches tomorrow, that $3,500 augmented reality, face computer, whatever you want to call it. Tim Cook had a big Vanity Fair cover story today where he appeared for the first time. We saw a photo of him actually wearing the Pro. So big launch event for Apple starting tomorrow, their first major product in nine years. Expect to hear a little bit about that during the earnings report today as well, Tyler.

Very interesting. Steve, stay with us as we bring in Ben Wright says, Ben, I guess the immediate concerns for Apple have to do with iPhone sales and demand, perhaps most especially in China. But maybe the longer term issue here is how does Apple wear the mantle, don the mantle of an AI company? And how do they make that their narrative? address both of those questions, if you would. First, the iPhone sales issue, and second, the AI question. Yeah, well, iPhone is the majority of revenue and profit, so it's the engine there, and it attaches, obviously, a huge amount of the services. So that's going to be the laser focus. The data I've seen is that the fourth quarter is actually not so bad. The big concern is what's happened in the last month

in China. Is it deteriorating every week? Why they do the discounts? What are they seeing? And what does that implicate for the March guidance. What does not so bad look like, sound like? Well, some of the data I've seen in the fourth quarter in China is down just in the single digits, but there's potentially been a deterioration in recent weeks. So we've got to ask them that on the call and what they're seeing. But there is a chance that things accelerate out of this quarter. They have new Macs, they're going to have new iPads, their services business is doing well. They've had some price increases there that cushion the blow from the app store changes. So if the iPhone can hang in there, They can get back to revenue growth.

But let's talk about your AI question. Revenue growth is going to be the key. If they can grow in the March quarter, stock may catch a bid, and what they say about China. But I think AI is going to be like the third most important thing, what they say, what they're teasing. They have an event in June, their developers conference, and I think they're going to announce some new AI features.

We want to see an updated Siri, and we want to see services that people are going to want to use on your iPhone. and that could drive an upgrade cycle. I'm not so sure that this year is going to be the huge upgrade cycle, but I think next year will be. And it reminds me of past cycles, like super cycles. And that could be driven by AI? Yes, I think, yes.

Ben, you have a buy rating, but your price target's 222 or about 185. So what's going to drive us to 222 from here? How do you get that 20% upside? Well, what I think is if we start to re-accelerate on the revenue side, it's warranting of a very high multiple. Their services, business, and gross margins are excellent. They are in rarefied air. And those are actually what keep a floor in the stock.

And if revenue starts to reaccelerate, I think that we could see earnings power touch eight bucks within two years, well within two years, at least earnings power, and that could power us even much higher than my target. But I think we've got to see this cycle. We've got to see the iPhones accelerate, and then that's what takes us there. All eyes on Apple.

As usual, thank you, Ben. Rightes and Steve, Kovac. Stay warm out there, Steve. We'll see you soon. All right, thank you, Ben. Shares of Norfolk Southern hired today on reports of a proxy battle. Now the company is responding, and Morgan Brennan is in the newsroom with the details. Morgan.

Hi, Tyler. That's right. So an investor group led by Encore Holdings has built a large stake in Norfolk Southern with plans to run a proxy fight and to attempt to overhaul the board and replace the railroads as CEO, Allen Shaw. Norfolk Southern just issuing a statement a short while ago saying, Quote, the Norfolk Southern Board and management team regularly engaged with shareholders and take their perspective seriously. We are committed to acting in the best interests of the company and our shareholders as we continue to execute our strategy to balance safe, reliable service, continuous productivity driven by our precision scheduled operating model and the pursuit of smart accretive growth. First reported by Wall Street Journal, I can confirm the details of that report that Ancora has built a roughly $1 billion stake.

It's nominated a majority slate of directors to Norfolk Southern's board. This is a bid to oust CEO Alan Shaw, according to people familiar with the matter. We're seeing this because Norfolk Southern has underperformed on certain financial and performance metrics, and as such, has underperformed in terms of railroad stocks over the past year or so. As you could see right there, though, shares of Norfolk Southern are up 7.5% on this news of activist pressure today, guys. Morgan, thank you very much. Please keep us updated as this story moves along. Well, coming up, Elon Musk, seeking a Tesla shareholder vote to move the incorporation from Delaware to Texas. What legal ramifications could they face? Plus, teeing off, a new team up, Ally Financial and the USGA announcing a new multi-year, multi-million dollar corporate partnership. More on that, further ahead on the show. Stay with us.

The 10-year yield continuing its post-fed slide, and now at a one-month low. Rick Santelli in Chicago for us tracking the bond market action. Hi, Rick. Hi, Tyler. You know, about 24 hours ago, everybody was kind of nervous. Wow, what a hawkish statement that was. Well, let's see. It looks like green is the favorite color in equities and yields are lower.

Let's look at a two-day of two-year notes, shall we? Under yesterday's lows, look at two-day of ten. under yesterday's lows. And keep in mind, we had a lot of cross currents and data today. We had productivity popped, but you had a 16-month consecutive months in a row in contraction for ISM, meaning under 50.

And prices paid was the highest in nine months, and that's not a good thing. Now, if you look at a chart starting in December of 10-year, a couple of things should pop out at you. Very fascinating. First of all, we're on pace for the Lowest yield close since the 27th, so the lowest yield close of the year. More than that, we ended 22 at 3.88.

We ended 23 at 3.88. And a few minutes ago, guess where we were at? 3.88. I find that very fascinating, and I think that if you look at 2s 10s spread right now, at minus 33 basis points, it wasn't that long ago. It was at minus 17. So 2's 10 is now the most inverted in one month, and some of the cross currents, once again, look like slowing economy might be something to pay attention to.

But which way that moves the spread can be anybody's guess. Right now, 10s seem to be looking at weakness, and with respect to the Fed, whether it's the March meeting or not, it certainly seems as though they're partying like it's March of 24. Courtney, back to you. Thank you very much, Rick. Appreciate the analysis. Well, the tech-heavy NASDAQ is down about a percent this week, even though it is higher today. Our next guest expecting to see tech underperformance this year, pointing to unrealistic expectations of the MAG 7, those magnificent seven names we talk about so often.

Let's bring in Jack Ablin. He's founding partner and CIO of Crescent Capital. Jack, thank you very much for being here with us today. Rick Sinteli kind of just gave us the low down there and fixed income. But I guess I'll get your reaction after we got that hawkish statement and press conference from the Fed and from Jerome Powell. has anything changed about your approach for, say, the next several months in your management of a portfolio? No, I think nothing's really changed on our front. Our base case scenario is probably close to consensus. We do expect slowing growth, slowing inflation. The economy has actually been a little more resilient

as we started the year, certainly labor market and alike. And that's giving the Fed a lot more elbow room. They don't necessarily have to tighten as quickly as perhaps the Fed Funds Futures would suggest. And I think that's probably putting a little pressure on that tenure. So I have a lot of focus on tech today, of course, as we're waiting to hear from some big reporters after the bell. And then we talked about the Magnificent Seven as well, clearly have come a very long way. So is valuation the reason that you potentially see some underperformance for that group? Is it somebody else's turn, frankly, to pick up that performance? What's your theory about the Magnificent?

and 7 and tech more broadly going forward. Yeah, so absolutely. I think there are really two factors at play here, Courtney. One is, look, the Magnificin 7 did great last year, right, collectively up over 100%. But keep in mind in 2022, they were down nearly 50%. Now over the last week since Tesla's pretty lackluster earnings announcement and Alphabet, we're seeing that Mag 7 down around 3% over, you know, that time. between last week and this.

And in fact, two of the Mag 7 are in negative territory, Tesla and Apple year to date. Where we see an issue is we're setting up now with relative valuation of tech in particular, trading at a 53% premium to the rest of the market on a forward PE basis. When you look one year out, the chance that tech will continue to outperform when it starts at this high of a relative valuation, premium is tough. In fact, the best result we've ever seen is probably a plus 5% outperformance, and there's certainly a lot room to underperform the market. Now, it doesn't necessarily mean that this sector will drop. It just means that with lower yields, with a broadening of the economy, making financing costs a little bit easier, it creates a tailwind for just about everybody else.

You mentioned among the other beneficiaries of falling rates, small caps, select ones, and financials. And yet three of the stocks you mentioned are REITs. Why REITs? Yeah, so REITs certainly have been punished. Perhaps, you know, everyone is looking at the commercial real estate and how owners are somewhat in denial. The general partners aren't moving their marks in tandem with where we think the market is. The fact is, reits have already gotten hammered. In fact, we're looking at implied cap rates in double-digit territory in a lot of these categories. The good news here is these names are high quality because we have a very high quality screen, but they also have high dividends and high dividend growth.

So, realty income, 5.6 percent dividend yield with a 3 percent annual dividend growth, Essex property, 3.9 percent dividend yield. with a 4.4% annualized dividend growth and federal realty, 4.3% dividend yield with a 1.4% annualized dividend growth. So constant growth, I think it's probably in an environment where we think if overnight rates will come down. We don't know early as March,

but financing will start to become a little bit easier. That will help financials, but it should also help the real estate companies, in particular. Excellent. Jack Ablin, we thank you. Appreciate it. And after the break,

Chinese shipping lines have started to advertise guaranteed safe passage via the Red Sea, thanks to their escort by the Chinese Navy. We will head live to Beijing for that story

when we return in two minutes. All right, welcome back to Power Launch, everybody. Attacks on ships in the Red Sea causing problems for manufacturers, which may need to find another way to ship goods

to markets. But Chinese companies have found a different approach. Eunice Yunn joins us now live from Beijing. Eunice. Thanks, Tyler. The Houthi attacks on shipping have created turmoil in global trade, but some here in China see opportunity in crisis. Worried about your TV sets from China getting hijacked in the Red Sea? Shipping firm Sea Legend, managed out of Shanghai, says send your products on their boats.

This is the most frequent and reliable direct setting. from China to the Red Sea region. Robin Lee's year-old company is marketing itself as the answer to your Red Sea shipping problems. The Houthis in the Red Sea have declared they won't assault Chinese vessels as long as they have no connection with Israel. The Red Sea crisis is mostly focused in this area. For Lee, this is a hot business opportunity. It's very, very hot.

I mean, when customers realize they can choose their service, more and more costs come. Lee's ship is headed from this port for the Red Sea. carrying Chinese goods bound for the Suez Canal, protected from the Houthis by its Chinese flag. Night and day, the all-Chinese crew is equipped with barbed wire, barricades for the doors, and armed security. But the real protection is China's increasingly close relationship with Iran, which backs the Houthis.

The company can organize an escort by the Chinese Navy. Do you ever worry about, like, a backlash because of the politics of it, that people would say, oh, they're just taking advantage of the situation? No, I don't worry about that because I think we think we are doing the right thing. The people in the Red Sea, they need us. To keep trade flowing. Not everyone is as brave as Mr. Lee. Some of the bigger Chinese shipping lines have told their customers that they're steering clear of the area.

Tyler. How many ships have, has this entrepreneur or others sent through the Red Sea with Chinese escorts? Do you have any idea? Well, he is operating a weekly and sometimes twice a week service. And he said that as of now, he has 11 ships. Even when I asked him that same question yesterday, he said the day before I would have told you 10, today I'm telling you 11. And so he says that there's a very little space now on those ships because of all the demand. All right.

Thank you very much. Eunice Yunn, reporting from Beijing, where it is the middle of the night. Yeah, that's a fascinating story. We've got some big movers in the energy space today. Pippa Stevens is here to give us the names on the move. Hi, Pippa. Hey, Courtney. While starting here with NextTracker, that stock is surging after Q3 results came in ahead of estimates,

with the company also raising its annual guidance. Now, NextTracker makes specialized solar tracking systems that follow the sun throughout the day, therefore optimizing power generation. The company said it now has a record backlog thanks to strong demand, leading J.P. Morgan, to reiterate the stock as a top pick, raising its target to $73, that's about 30% above where it's currently trading. Moving over to Sunpower, also on the move after receiving another waiver extension from its creditors until February 16th. So in other words, some additional time to write the ship. Now, the company also announced

20 million in financing from majority shareholders total and global infrastructure partners. Still, the stock is down 80% in the last year and also has relatively high short interest at about 33% afloat. Finally, uranium stocks jumping after Kazadamprom, which is the world's largest uranium producer, said this year's production will be below prior estimates thanks to sulfuric acid shortages. Now, this comes a spot uranium prices have already jumped to a 16-year high, thanks to a tight market. And with the supply side, unable to quickly respond, Sprot asset management, John Champolia, told me that institutional interest in the space has never been higher. Those stocks up about 7% today. Tyler?

All right, Pippa, thank you very much. Let's go to Contessa Brewer now for a CNBC news update. Contessa. Tyler, it's a potentially good sign out of the Middle East, as a Qatari official tells Reuters, Hamas has received a truce proposal for a ceasefire and hostage release with Israel. While he said there's no deal yet, Hamas has received the proposal positively. That's a quote. The mother of a Michigan mass shooter who killed four fellow students in a 2021 rampage just took the stand. She's on trial for involuntary manslaughter. It's a rare case of a parent of a school shooter facing criminal responsibility.

Her husband will face charges, the same charges, in a separate trial. And if she's convicted, she would face up to 15 years in prison, as would he. And Paris gets ready to welcome international fans to the Summer Olympics. The city's public transportation system is equipping more than 3,000 agents with AI translation devices in time for the games. The handheld machines can translate between French and 16 different languages. Bien-sue, bienvenu, Paris. Welcome to Paris. Of course we're going to translate for you.

Wee, yes, yes, thank you. Okay. Well, Elon Musk trying to move the Tesla incorporation to Texas, what pros and cons would come with such a move. We're going to talk about that coming up now. Welcome back to Power Lunch. Elon Musk announces that Tesla will hold a shareholder vote to transfer its state of incorporation to Texas from Delaware. This is just days after a Delaware judge voided Elon Musk's $56 billion compensation package at the company. The stock up more than 2% for the week.

So let's bring it NBC News and MSNBC legal analyst Danny Savalas. Danny, thank you so much for being here. Delaware is often a state you hear about for corporations choosing two, incorporate. Why is Delaware so popular and what could be a pro and con of leaving Delaware and going specifically to Texas? The vast majority of corporations, particularly large corporations, are incorporated in Delaware. And that's because the state has essentially made it an appetizing place for large corporations with favorable corporate taxes, very, very favorable deductions, a very established body of case law. In other words, there are specialized courts,

the court of chancery, that is dedicated to handling corporate disputes. So you have certainty in your law in Delaware. You have flexibility. And you have a state that is very favorable with its tax and other advantages given to large corporations. But states like Texas in recent years have started to try to compete with Delaware. But because they're new at the corporate game, they simply can't compete with an established body of case law. And a tendency, by the way, perhaps ironically, for Delaware judges and courts to mostly let corporations and their governance do what they want, which would be an interesting reason for leaving Delaware, if that is one of the advantages in Delaware, is that freedom it tends to give corporations

and their boards. Seems a little petulant then, perhaps, to leave because of this pay package, albeit $56 billion, is an awful lot of money. I mean, if you were a shareholder, what would you advise a vote to be? Vote yes, vote no. Well, generally speaking, it's not exactly leaving the known for the complete unknown. Texas is one of those states that's been saying, come to our state, we're good to corporations as well. But corporations don't like uncertainty, And like I mentioned before, you don't have an established body of case law. And generally speaking, investors are more comfortable with Delaware corporations. Because as you know better than anyone, one of the most important things when it comes to investing is some degree of confidence, some degree of certainty.

And with Delaware, you get it. Delaware has been the place for corporations, large corporations, for decades, if not, you know, many decades now. other states may offer favorable advantages, but without an established body of case law interpreting corporate disputes and other corporate issues, there's an element of uncertainty in taking your corporation to another state like Texas, which may still have some favorable laws in taxes. Is Delaware known for looking at executive pay packages in a tougher light than Texas? In a sense, it's known for the opposite. It's known for generally speaking leaving corporate boards alone to do their work.

So there is a bit of a paradox that the very reason that Elon Musk may want to incorporate in Texas over Delaware is because he may have found Delaware courts to be too meddlesome in the affairs of the company, which is not something that is a common accusation against Delaware courts of chancery. However, I mean, in this case, this is an example of a court in Delaware. we're stepping in and overturning a compensation package by and for Elon Musk. I guess the board would have to approve of this. Would the shareholders of Tesla necessarily have to be consulted for a vote on this?

And what if the shareholders voted against it? Yeah, in all likelihood, they would have to be consulted. Indeed, it was one of the factors in the court's decision that shareholders weren't given enough notice and opportunity. and that is one of the reasons why the compensation package to must was eventually overturned. But yes, generally speaking, you have to notify shareholders. They're entitled to a vote when it comes to a publicly traded company. We're mostly talking about almost entirely large publicly traded companies.

By the way, as an aside, if you are a small company, an LLC or something like that, you often want to incorporate in your own state. I often get people asking me who live far away in Oklahoma and they want to start up a little company to maybe sell knick-knacks. Should I incorporate in Delaware? The answer is usually no. If you become a gigantic knick-knack corp, then you can talk about incorporating in Delaware. But what we're talking about here is the favorable advantages in Delaware for large, gigantic style companies, Tesla being a good example. Danny, man, you've got range. You can move from defamation suits and Dr.

Goodman suits to this, like the best of them. Danny Savalos, thank you, man. Thank you. Huge beat in the drug space. Merck, higher on strong results. We will trade that name and others in today's three-stock lunch. Be right back. Time for today's three-stock lunch. Where we look at three big movers of the day here with our trades is Jerry Castellini. He's chief investment officer at Castle Arc Management. Up first, we've got Merck. So shares of Merck jump as earnings beat expectations. The company sees strong demand for two of its top drugs. Jerry, what's the trade for you on Merck? Yeah, I guess I'm happy to see their current drugs are doing well.

But in a bigger context, I think this year it's important for investors to appreciate. We're not going to be moving as much in the 24 market as we have in the last few years based on sector. It was always all tech or all health care or something. I'm over the mind that you have to pick winners now and not try to pull or bootstrap up some of the laggards. Merck has been a laggard. and it's not one I would choose over a lily. But more importantly, we tend to avoid when big pharma companies have upcoming approvals with the regulators. And they have three drugs in the pipeline that you're going to hear important news about this year.

And I'm always leery about what you pay for going into those type of announcements. You tend to do quite well after the fact rather than leading up. All right. Let's go to Norfolk Southern. We heard earlier, Jerry, about the proxy battle involving that company. The stock on track, highest close in nearly a year. The trade here, sir. Yeah, so, and Cora is of the view that by taking and being an activist here,

that they can have an impact on the board. They can have impact on how management should or shouldn't behave. That's a tough road. Again, we're not a buyer here. We're a holder, essentially, because, you know, With an activist in there, usually you don't have big downside. But again, you're asking a lot of basically a monopoly business like a railroad to all of a sudden have a bunch of things that an activist can fix.

They don't like the management. The management's clearly underperformed. But at the same time, what can they do to really drive this to outperform? And when you look at the route structure of their operations, they're not as good as, let's say, a Union Pacific who has a monopoly from the West Coast, and to the south, and right now is seeing much better year-over-year numbers than a north-forth southern, and they're not as dependent on coal. And again, we just feel like you can hold this. It's got some downside protection, but we would look at the other name.

Okay. And finally, we've got Boot Barn very quickly. The company beat Q3 earnings missed on revenue estimates. Shares up 10% today, though. So, Jerry, what's the trade on Boot Barn here quickly? Yeah, definitely sell. This is a short cover rally. People were really concerned about the crummy weather during the Christmas season and the impact it would have on boot sales. Obviously, it wasn't as bad as we thought. But if you look back over the last few years, the earnings power of this company has just not met expectations. And there doesn't seem to be a quick answer for that.

So we would take the opportunity of a quick pop like today as people are trying to cover and mark up their books. We wouldn't stay in this day. All right. your booster made for walking. Thank you very much. Jerry Castellini for joining us for three-stock lunch. All right, a major partnership in golf. We're going to speak to the USGA CEO along with the number one women's golfer, Lilia Vu. We'll be right back. Welcome back to Power Launch, everybody. Big deal in the world of golf, the nation's largest digital-only bank, Ally Financial, announcing a new multi-year, multi-million dollar corporate

partnership with the U.S. Golf Association. Ally will be the presenting partner for the U.S. Women's open, which will elevate its purse for the 2024 championship to a record $12 million. In addition, Ally is signing Liliya Vu, the number one women's golfer in the world as a brand ambassador. Here with us is Lillia Vu. Welcome, Lillia. Good to have you here, along with Mike Wan, CEO of the U.S. Golf Association, and Stephanie Marchiano, head of sports and entertainment marketing at Ally Financial. Stephanie, let me start with you. Why was women's golf such an appealing partner target for?

for ally. First, thank you for having me and giving voice to this partnership. That just starts with the fact that we believe in investing in sport and it's powerful for our business. And golf basically provides an untapped territory for us and the opportunity to reach millions of fans that we are not currently reaching with our sports partnerships. We know that sports fans have higher preference, likability, and consideration of our brand. They are more loyal toward our brand and they convert with our brand at our brand. a lower cost to convert. So we knew that it was time to expand our portfolio. Golf was the right territory and USJ and Lillia were the right partners because they share our values. They're always

prioritizing the women's game and together we have built a partnership that will help drive greater equity and access in this world golf. Stephanie Lillia has just said why they liked you. Why did you like them? I was just going to echo the same thing. Ally and I share the same values. they really push hard in women's sports and really try to make women's sports hard to miss. And after hearing that, how could you not collaborate with that? So, Mike, this is going to elevate the purse here

at the LPGA, not the LPGA, the U.S. Women's Open, which is distinct from the LPGA, I should point out. And the purse at the U.S. men's open is going up as well. Is there any ceiling here? Yeah, by the way, you won't offend me with LPGA. I spent 11 years as the LPJ commissioner

before we're going to the U.S.GA. So I know how big this is for women's golf. If you go back just a couple of years ago, the U.S. Women's Open's Purs, which was the largest on the LPGA, was 5.5 million. So today to be talking about 12, we're not talking about small change. This is quite significant. So $2.16 million winners check. If you miss the cut at the U.S. Women's Open, you get $8,000. We really view making the cut is being one of the people that get the 156 T-T times.

There's over 4,000 people to try to get in that event. So that's exciting. And you're right. I mean, the game itself is really exploding. There's 32% more people playing the game now than we're just playing the game four or five years ago. So exciting time for the game. But for us personally, for a 130-year-old company, we don't get to talk about firsts very often. And this is a first.

First time we're having a presenting partner of the U.S. women's open, while at the same time being a corporate partner on all of our championships, while at the same time being our first founding partner of the United States development team, which is really about helping the next pipeline of American players. reach the top of their game. So this is the first time in 130 years. We can sit on chairs and talk about what Ally is doing because it's really special. What I find really special too is Tyler mentioned

in the intro is the purse going up to $12 million. Now look, it's still below what the men are making, but we've paid a lot more attention to pay parity for women's sports. What does it mean to you to have someone really pay more attention to the value that you bring to the game? This partnership is absolutely impactful in the sense that now that other companies

like Ally and Yoshi are, partnering to bring this type of record-breaking deal, also shows other companies to invest in women's golf and kind of sort of bridge the gap a little closer. So, Lillia, I am told that a ways back, you almost gave up on playing golf. Now, let me tell you, it is a sport that will make you want to give up on playing it. It's hard. It makes us all feel better. There is not a golfer out there who hasn't thought about giving up. Tell us about your journey from that point, why you got to such a point of despair.

I guess. You're a UCLA graduate, golfer there and so forth. And what led you to be able to persevere to now being number one in the world? Yeah, so a lot of things, not just one single thing that I could point out. Coming out of college, I was a top amateur, felt put a lot of pressure on myself to perform well on LPGA, didn't have any success, thought that this might be the end of the road for me. But somehow COVID happened, I was able to kind of throw myself into a lot of self-help. books and personal development and just trying to guide myself into falling in love with golf again. I play my best golf when I'm having fun, so I really dedicated my time to building a team around me that helps me have fun and just does everything for me so that I can focus and play my best golf. Golf is a head game, isn't it? 100%. It's a head game.

And if it gets in your head the wrong way, it can take you down a spiral. Yeah, absolutely. I'm pretty sure. So Stephanie, this is a long-term deal. Give us some of the particulars here. And how much is Ally paying for the right to do what it's doing? Well, I can't share the exact financials with you, but it is a five-year deal. It's a multi-year, multi-million dollar deal.

And with it, we will become the official bank of the USGA, of the U.S. Men's Open, and the presenting partner of the Women's Open, as well as, to Mike's point, the founding partner of that national development program. So for us, it's the start of something very, very special. We will be investing with Lillia, creating content with her. She will be on our athlete advisory board, helping us discuss our investments and where we should be pushing and pulling those investments. Hearing directly from athletes is critically important to our business and how we strategize moving forward. So for us, it's the first time we're stepping on to the golf national stage, and we have a lot of things in store for 2024 and beyond.

All right, Stephanie, thank you very much. Mike, thank you. And Lillia, a continued good sense. Yeah, thank you so much. Thank you, have a great year. Well, more Power Lunch is coming up next. Stick with us. Welcome back to Power Launch, quick check of the markets. At the highs of the session, the Dow Industrial is up nearly 300, S&P 500, up 51,

and NASDAQ up 184 or 1.2% the leader of the pack. Well, shares of Ferrari zooming higher today. Is it the news of Lewis Hamilton joining the Ferrari Formula One team, or is it the company's earnings? Let's ask Robert Frank. It's all that, Courtney, ticker symbol race appropriate for today. It's up 12%. It's market cap.

Now it's $73 billion. that is basically 50% higher than GM or Ford and they make millions of cars. Ferrari just makes 13,000 a year. So think about that. But the big reason today was that they reported a beat on sales. They were meeting the earnings targets. It was the 2024 outlook that analysts really like Ferrari reaffirming that 2024 guidance for 7% earnings growth to $2.6 billion.

The CEO is saying there is no sign that the wealthy are slowing down on buying their Ferraris. quote, demand is very strong into 2025 and 26, he said, quote, there is not an impact of any kind on our clients. Hybrids now account for 44% of Ferrari's sold. That's double 2022. So that's a big change for them. They're going to launch their first EV in 2025. A lot of their profit growth coming from personalization, that's where buyers sort of customize their cars. And they're selling more expensive models.

Also probably helping the stock, as court just mentioned. Lewis Hamilton, the rock star of Formula One may be joining Scooteria Ferrari in 2025 commercial activities. That includes clothing, merchandise, brands, and racing. They're about 10% of Ferrari sales, so it could be meaningful if he really boosts. If they start winning more and they get more visibility, they're already the most famous team on F1. But he's been the dominant player, and he was with for Mercedes? He was at Mercedes. And right now it's Red Bull on top, but Lewis Hamilton is a legend.

This is fascinating with the demand for Ferrari. It's much stronger than some other. other luxury categories. Yeah, and if there's any category that is immune to just about any economic shock or even concern, it's people who buy $300,000 sports cars as their 12th or 13th car. So they have more than any other publicly traded stock. They have the clients that you can pretty much, I mean, they're back ordered now for the next two or three years. So what we're looking at in terms of production now is stuff that was ordered two or three years ago. So even if there's a slowdown, we won't see it for another couple of years. And there are.

executive saying we're full through 25 into 26, so they know that far in advance. Amazing stuff. Yeah. Luxury is strong. It is. Robert Frank. Thank you. All right, I want to say a farewell to Jack Weber, who for 38 years has been a teacher in the Montclair public school system teaching economics and monetary policy. In fact, he and his classes have won multiple mock-fed competitions where they go up against other schools. He's a coach, a great teacher taught both of my sons sailing on after 38 years. Good luck, Mr. Weber. Thanks for watching Power Lunch, everybody. Closing bell starts right now. Thank you very much.