Power Lunch - Bad year for bank stocks, Nike bull-bear and CEO of the year. 12/19/22

Episode Date: December 19, 2022

Bank stocks are on pace for their worst year since the financial crisis. Will 2023 bring additional headwinds for the sector? Plus, can Nike’s recent bounce hold into the new year? A bull and a bear share their outlooks ahead of earnings tomorrow. And, the CEO of the year. 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, and welcome to Power Lunch. I'm Tyler Matheson, along with Kelly Evans. It's good to be back together again. Here's what's ahead, folks. 2022 promised to be a banner year for bank investors, but the opposite happened. The sector on pace for its worst year now since the financial crisis. And there may be more pitfalls to avoid in 2023. And we've got the CEO of the year. Yale University's Jeff Sonnenfeld has our power rankings, find out which executives top. the list and which found themselves embroiled in controversy and getting the short end of the stick. Kelly. Thank you, Tyler. It is so nice to be back together at long last. Hi, everybody. Let's get a check of the market. We are not seeing a very pretty, but this is a familiar story from the past week. We're trading heavy and heavier throughout the afternoon. It started with the NASDAQ, but it's spreading. The NASDAQ is now down one and a half percent. The S&P is down 1% to 3815.

Watch that 3,800 level, that band where a lot of people have been watching for downside price action. Dow is down 200 points now, or about two-thirds of 1%. Now, yields are moving higher today. That's not really helping the 10-year yield up around 11 basis points. 357 is the latest there. Tesla shares, that's the whole other story, rising, then dropping and rising and now dropping again after CEO Elon Musk signaled he may stop running Twitter based on the results of that poll.

But then he tweeted, no one wants the job and there is no successor. You can see Tesla shareholders putting the shares down about a quarter percent higher today obviously don't help either tie. All right, this week could show some new light, Kelly, on whether the Fed's rate hiking campaign is going to tip the U.S. into recession, or maybe already has. Key economic data and a handful of earnings will signal to investors whether earnings estimates need to come down and hear with her look ahead. Stephanie Link, chief investment strategist and portfolio manager at Hightower, advisors also a CNBC contributor. Stephanie, welcome. What do you think? are we looking at an economic slowdown and maybe or most probably an earnings slowdown,

neither of which are good news for stocks? No, neither are good. But I would say that that's consensus, Tyler, that the Fed is going to be restrictive for longer, just and hold rates at a higher level. And I think that's what the market is kind of trying to digest at this point. What does that mean for economic growth in six to 12 months down the road, given the lag impact? And what does that mean for earnings? But the markets are down 20 percent.

The NASDAQ's down 30 percent. We're pricing in a lot of bad news. And I would say on the good news is we're getting closer, at least, to the end of the hikes, even if they remain higher for longer. And we will start to get some kind of clue on what that means for earnings in the first quarter, obviously in January slash February, I do think that there are some favorable attributes right now that are not getting mentioned. You have lower gasoline prices. You have higher wages. You have good jobs. You have more job openings than unemployed people. So we do have momentum in the economy

right now. That's going to change. I get it. But maybe we can handle higher rates for a bit longer. So if the market is telling you is looking six months down the line, you would have to say that over the past couple of weeks, it's been flashing a red signal, right? Yeah, yeah. No, I mean, it's it doesn't feel good, right? And I think it's been a really hard year. I think you have tax loss selling as well. People forgot that you could lose money in bonds and you're losing money in bonds as well as in stock. So it's just been a crummy year all around. My only point is the market's a discounting mechanism. And perhaps maybe, just maybe, down 20% is telling you, okay, yeah, a slowdown is coming. We don't know if it's a recession or not. A slowdown is coming. And this we have to figure out what happens with earnings. Let's talk about Nike stuff. You think this is the biggest one to watch this week? Yeah, you know what? It's a busy week, Cal, right? I mean, Nike is a big one. And I think we're going to, well, here, I think, solid demand because we heard from Capri and Tapestry and even Skechers that demand is fine. And Nike has SG&A leverage they can pull. They can tweak it up or down if they need to. And DTC, of course, direct to consumer, is 40% of their total revenues.

And that has positive margin implications down the road. So that's the good. The bad. inventories. Remember last quarter they were up 44% up over 60% in North America. So I think that's the one thing to watch. And I think the bogey is about mid-teens. If you see a mid-teens growth in inventories, I think that's okay enough. It looks like it'll make progress from that 40% number. And then, of course, did they have to give away the merchandise? What our gross margin is going to look like? Guide is down for 300, down 350 basis points to 400 basis points. So we'll see if they can actually come in a little bit better than that. Another one you're watching is Micron.

Yeah, so Micron, I don't expect fireworks, Tyler, because they did negatively pre-announce in the quarter, this past quarter, twice. So we know that DRAM is weak and it's going to be down. We know NAND is weak and that's going to be only up single digits. And that's all tied to PCs and smartphones and auto and industrial and that whole thing. That's not a surprise. What it's more important to me anyway is what it does for the semi-cap equipment companies, because obviously if Micron lowers wafer starts by 20%, which is expected, that's going to impact the equipment guys.

I actually bought Lamb Research last week because I do think you're at close to trough earnings, and I think a lot of the bad news from Micron is in it, and it's very cheap at 13 times. Final comments have we've got General Mills, we've got FedEx. I mean, FedEx feels like more relevant since we're in peak shipping time here for Christmas. Also kind of a leading indicator maybe for the economy. But of these two stocks coming up, what do you think the real tell is going to be for investors? Well, for General Mills, it's all about their pet business. We know that J.M. Smuckers reported a month ago, and their pet business was up 9%.

That's about 12% of their total revenue. And so can it hold the multiple that it has seen 21 times? It's up 28% of the year. FedEx is absolutely, you're absolutely right. It is all macro. And it is about they were a stay-at-home beneficiary. They had pricing power. What happens?

Express is going to be weak. is probably going to be strong. And what about their cost-cutting story that they have as well? So there's a lot of moving parts going on at FedEx. Yeah, exactly. And overall, you think we're going to feel better or worse about the market as we get through these reports? Well, I hope because I own Nike that will feel better.

How's that? I don't think we're going to feel very, I don't think we're going to feel that good about FedEx. I do think you will get an opportunity, though, to buy the better of the two players in that space, UPS. All right. Stephanie, great as always. Thank you so much for your time. Thank you.

Stephanie, Link. Well, the year was supposed to be a good one for banks, with interest rates finally moving higher, but the financial sector of the S&P is down 14% heading into the final two weeks of trade, and that's with the insurance names outperforming. Anyway, what's ahead for 2023 on CNBC.com today? 2022 didn't go as expected for investors,

but we have how to avoid some pitfalls for next year. Joining us is Hugh Sun, the author of this great article. to have you back. And yeah, I mean, again, insurance worked, but a lot of the other things didn't. So what now? You know, it's a little bit funny, Kelly, because going into the year, it was one of the favorite trades. And Bank of America is an example of one of the topics of the Amos community. What happened? They're down 28%. You know, a few weeks ago, Brian Moynihan talks about higher than expected expenses, lower than expected net interest income for the fourth quarter. And that's basically in a nutshell

what investors are worried about. They're basically looking at net interest margin, net interest income that is peaking earlier than people thought. That is the benefit of those rising rates that they were waiting for that they finally got. They're looking at higher expenses because wage inflation and obviously a huge component of their workforce needs to get raises. They're looking at most of all the bigger reserving for loan losses as we head up into a recession. So what banks ran into was higher inflation, which means higher. costs, labor costs most especially, and also the fact that maybe the economy is going to slow down here in the next year, and they're going to have more defaults.

It's all of those things. On top of the fact that if you look at wealth management, if you look at investment banking, if you look at the mortgage business, these are three really pillars. They haven't exactly lit it up this year. Terrible businesses to be in at this point of the cycle. And so you look at the investment at the analyst community, and they're saying, for the most part, it's too early to get investment banks. stay away from banks at the very least until delinquencies peak and until QT.

So my question, forgive me for jumping in here. I've been away for a while, so I've got all these questions pent up inside me. Weren't all of the things you just mentioned absolutely clearly anticipatable by the analyst community? In other words, inflation's high. It's going to cost them more. They're going to run it. Investment banking isn't good. The mortgage market is stalling.

All of these things, we're going to. visible as how. To cut the analyst community a little, this like a year ago, they thought there were there'd be three hikes, they thought a year ago. They got seven. So the velocity,

the aggressive nature of the Fed because of the outer control inflation that they had to combat was far higher than they anticipated. Therefore, you know, we're all sitting here worried about recession in a few months. That's the thing that really kind of, you know, kill the bull narrative

for banks. And now, I mean, the inverse is, if you take a look at this, and I'm going to sound like John Ford saying, on the other hand, you know, if everybody is pessimistic about banks coming into the year, perhaps they weren't to look at it, right? I mean, perhaps if there's a soft landing, shallow recession, perhaps, you know, embedded in their valuations, there is already a bunch of that. So, you know, there is a possibility that we get the inverse of 22,

which is pessimistic heading in and a better than expected result heading out. To the point in your great piece the other day about some of the changes of Goldman-Hugh and N markets, not really panning out. I mean, is there a case to be made that this year is going to prompt bigger business overhauls to any of these businesses, or do they just ride it out and wait for better fortunes, basically? Yeah, I mean, you know, for, okay, for the incumbent banks, they are set up, they've got the scale that they need, they've got the millions and millions of customers they need. They just need to do fintech, sort of let that leverage the tech and let, you know, get humans, get heads out of, out of their business. For the others, you know, I think,

Basically, we're looking at M&A. So we're looking at banks, smaller banks, potentially, buying other smaller banks looking to scale up so that they, too, can invest more into technology. Yeah, technology replacing headcount. That sounds like a subtle, maybe theme for the year. Hugh, thanks, as always, Hugh Sun. Great to see you.

All right, coming up, Nike shares. We talked a little bit about Nike with Stephanie Link just a moment ago. Those shares up 23% quarter to date, even as that company faces issues related to China, to inventory, promotions. We're going to debate that stock ahead of its earnings. earnings tomorrow. And AT&T's dividend made it a very attractive stock for investors outperforming the S&P over the past few months. But a prominent analyst says it's time to sell to make his

case in front of all of you. And as we head to the break, take a look at shares of Disney. The worst, that's the worst performing stock on the Dow after its new Avatar Way of the Water film. Well, it got was sort of soggy. Sagi performance. Yeah, power looks back in two. All right, welcome back to Power Lunch, everybody. Nike scheduled to report earnings tomorrow. It is often considered a proxy for consumer strength. China's health and the state of the retail industry, all in one stock.

The stock down about 37% for the year so far, but it has rallied about 23% so far this quarter. Will the Nike Bulls win out in the new year, or will the Bears prevail here with the Bull case, Omar Saad, with Evercore ISI. He has a buy rating and a $185 share price target. Sam Posner of Williams trading is more cautious on that stock. He has a hold with a $96 price target. Why don't we begin with the bull case, Omar? Tell us why you like the stock and think it can go up so much from where it is now. Sure. A couple quick key reasons behind our, you know, obviously very bullish stance. You know, number one, We think the sentiment is relatively weak right now, like you mentioned, the stocks down.

It's at the lower end of its historical valuation range at roughly 26, 27 times, or the earnings that they reported last year. And we also think at the same time, we think this company still has tremendous profitable opportunities ahead and key possible catalyst, including China, going from a headwind to a tailwind. Of course, our Sneaker Supercycle thesis, our view that sneakers have hit an inflection point sidelily and global demand for sneaker. Sneakers across all use occasions is going to significantly accelerate from here. And Nike is the biggest industry player is well positioned to benefit the most. I'm going to go back to this point. I thought you were going to say that we hit peak sneaker and everyone's going back to high heels and, you know, whatever, and it's over. But you think we're going to keep growing?

We mean we've sort of hit a tipping point? There's going to be more sneaker sales to come? Yeah, actually, I think it's a little bit of misperception that sneaker boom during COVID. I think actually active a leisure apparel did much better. People wearing a lot of casual, comfortable, athletic, yoga pant and sweatpants type of apparel. Sneakers, especially because of the supply disruptions in Vietnam,

you know, really missed about, you know, several hundred million units of volume during COVID. And at the same time, our consumption of sneakers, the frequency we use sneakers, the number of sneakers, we all want to keep in our clauses because now we're socially acceptable to use them at a lot of different use occasions, including going to work, work from home, as well as going out to even fine dining restaurants. So there's been this inflation in demand in sneakers, but the supply still hasn't caught up to that inflation in demand. So I see a multi-year trend. That's really going to benefit all the sneaker companies, but Nike the most in the end. So, Sam, what are the holes you see in the narrative here? You've got a price target of 96. The stock is a little above 100 right now. So I guess sort of what are the holes in the narrative? And is your hold rating on the stock really a hold or is it a wink, wink, wink sell? It's a hold.

I am not afraid to have sell ratings on stocks. As people who know me, no. The problem here, though, is that Nike is the best sneaker company out there. However, there's a lot of holes in the story right now. There's not a lot of visibility. Their supply chain, you know, for a company as big as Nike, and with all the resources it has, its supply chain is pretty much lagging everybody else out there.

China could be good, but the reopening doesn't seem to be going well. And they've been very promotional lately to clear a lot of inventory, which, excuse me, which puts them in an interesting position because they've got to come out with a lot of really good stuff next year. And our checks are saying that there's not outside of Jordan Air Force Ones and dunks, there's just not a lot of great product, especially in running out there. So, and then on the apparel side, I think that's sort of a coin flip. But once people get used to buying things on sale, you better come out with some pretty good stuff to get them off that.

Let me bore in on one of the things you said there that Nike's support. chain is lagging everybody else's out there. What does that mean and why are that, why do they find themselves in that position? What does it mean that their supply chain is worse off than their competitors like, I suppose, Adidas and others? I think that, and I believe that they, that a couple years ago, a lot of very senior people were let go from Nike. And then when the supply chain issues came down, there weren't people that had all the relationships. So as recently as, you know, I think the last quarter, maybe the quarter before, they were still out 70, 80 days on orders coming across the Pacific,

while a lot of other companies, you know, are in the 40s and going down. And, you know, I granted Nike is the largest company of all of them, but they also have all the best resources. And I can't tell you why, but, you know, it's evident. And it's also evident in the product that came in late from spring and then on time for fall. And you had, and, you know, they didn't talk about that in June. They waited until September to talk about that. So, you know. Let me, let me give Omar the last word here by way of rejoinder to what Sam has been

talking about. And you've got a $185 a share price target, which is basically double what what Sam's is and up roughly $80 from where it is today. Yeah. So a shout out to Sam. You know, Sam's a great, great football analyst for sure. And I don't necessarily disagree with his comments in the supply chain. Nike has lag. But I would say this, these are mostly apparel issues. The company's really two-third sneakers in terms of sales and probably 80 90% of the market values really wrapped up in the sneaker side of the business not the apparel side of the business and these are transitory issues in the end you know as they their management builds experience and manages through this it's not going to be rocky like this forever even if there's another global pandemic we know

the supply chain is going to react differently in the future so i've kind of view these issues real but transitory and the real market value sneakers and all the reason data points on sneakers whether it's Footlockers' comps or Dick's sporting goods' comps. They've been excellent. So that's Nike's bread is buttered. We will leave it there. Gentlemen, thank you so much, Omar Assad and Sam Posner. We appreciate your time today.

Breaking news now out of the January 6th committee hearing in Washington, and Elon Moy has the details. Elon. Tyler, the House Select Committee investigating January 6th has just voted to issue criminal referrals for former President Donald Trump to the Justice Department. Those referrals cover obstruction of an official proceeding, conspiracy to defraud the United States, conspiracy to make a false statement, an inciting or assisting an insurrection. Now, the House Committee had approved the referrals in a unanimous vote.

Lawmakers said that President Trump broke the faith at the foundation of American democracy and is unfit for office. We proposed to the committee advancing referrals where the gravity of the specific offense, the severity of its actual harm and the centrality of the offender to the overall design of the unlawful scheme to overthrow the election compel us to speak. Now, the committee also released a summary of its final report that lays the blame for the attack at the Capitol squarely at Trump's feet. It states, quote, the central cause of January 6 was one man, former President Donald Trump, who many others followed.

None of the events of January 6 would have happened. without him. Now, no former president has ever been indicted. We have reached out to the Justice Department for a response, but do remember that the DOJ has already named a special counsel to look into whether Trump possibly committed any crimes. In addition, we expect to learn more from the committee later on this week when its full report is released on Wednesday. But for now, the committee sending criminal referrals for former President Trump to the Justice Department. Guys. All right, Elon Moy, thank you very much. Up next, telecompetition. Moppeton-Nathanson downgrading AT&T to sell. It's had a decent year,

but at the same time they're getting more bullish on Verizon, one of the only outperformers last week. At certain points, Craig Moffat joins us next with both stocks down today, AT&T by 4%. Plus, are today's winners, tomorrow's losers, often are. We're going to trade some names that could be due for a major decline in 2023. You can see a sneak peek there. It's today's three-stock lunch. It's coming up here on Power Lunch. Stay with us. back, everybody. In a year where the markets lost most of their 2021 momentum, a flat year has actually been pretty good, especially if you're a stock that for nearly a decade was burdened with bad news and tons of debt. We're talking about AT&T. It's had a stellar quarter,

up 26% from its 52-week low, but our next guest says the stock has run its course. With us is Craig Moffat. He's the co-founder and senior analyst with SVB Moffat Nathanson. Craig, great to have you here. And looks like this call is taking a toll on AT&T even today. It's down four What are you concerned about for next year? All right, Kelly, good to be back. Well, so look, it's no secret. We've been relatively bearish about the wireless sector for the past couple of years. And to some extent, this is just positioning.

Back in July, we downgraded Verizon, not because we thought Verizon's prospects were meaningfully worse than Verizon, or than AT&Ts, I mean, but because expectations weren't as low for Verizon, and we thought they should be. In the past few months, Verizon has sold off so hard, and perhaps partly in response to that, AT&T has actually bounced a bit. So you've had this really wide and quite unusual divergence between the two stocks. And it flips the relative value as you go into the year. As we go into 23, it looks like now the expectations and the valuation for AT&T are inflated,

and Verizon has, if anything, slightly overshot to the downside. I've got to question this. Of all the companies I can think of over the past half decade or so, I can think of none where the executive decision making has been more questionable than AT&T. You agree or disagree? Look, it's very hard to make any other case than they've had a very tough go of it, right? There was an article in the New York Times a few weeks back that called the Time Warner acquisition, perhaps the worst deal in American history.

That's compared with another Time Warner acquisition of AOL. And the direct TV deal may have been worse. The direct TV deal may have been worse. Exactly. So in some ways, a lot of AT&T's troubles really fraced back to the direct TV deal more than the Time Warner deal. But they're all the same. And you know, you can't just unwind those transactions with a wave of an arm and say, well, you know, sorry, my bad, but it's all taken care of because you're left with an enormous amount of damage. Yeah, you're, you've got reputational

damage, you've got debt, you've got a lot, you've got a lot of things that are going on there. It is funny or ironic, I suppose, that Time Warner shows up in the list of worst deals multiple times. I mean, it's just, well, they don't exist anymore. more so whatever. What turns it around for AT&T, if anything, Craig? It's very tough. Look, here's the bottom line, Tyler. There are any industry that really isn't growing.

The growth rate for subscribers is now coming down relatively sharply back toward a more sustainable growth rate. It's close to the population growth rate. I mean, the penetration of wireless is pretty well saturated now. So it's not a growth industry. and they charge high prices in an industry where T-Mobile, and now increasingly the cable operators, charge lower prices and have equivalent or better products.

In T-Mobile's case, you can make it for the first time a strong argument, T-Mobile has the best network. It's exactly the same problem that Verizon, AT&T are both struggling with, is they charge too much for a product not differentiated, and their marginal costs are low enough that they could cut their prices. The problem is their balance sheets are too bloated for them to cut their prices. So they have no choice but to stick to these very high prices. And that leaves a very awkward and problematic consumer value proposition.

The one thing they do have is Lily, the pitchwoman. I guess that's their benefit. Craig Moffat, thanks, man. Have a good holiday. My pleasure. Good to see you again. Let's get to Bertha Coombs for a CNBC News update. Bertha.

Hey, Tyler. Thanks very much. Here's what's happening at this hour. President Vladimir Putin made a rare trip to Belarus for talks with President Alexander Lukashenko amid fears over a fresh ground offensive in the Ukraine. The visit raises speculation that the Kremlin is looking for military support from Belarus. It comes just a few days after the Biden administration told members of Congress that Ukraine has the military capability to take back the disputed territory of Crimea.

Holiday travelers should be on alert. A high-impact storm, is expected to wreak havoc this week, bringing heavy snow and winds to portions of the U.S. just in time for holiday gatherings. Most significant impacts are expected to hit the major travel hub stretching from the Midwest to the northeast between Thursday and Saturday. Need a lot more Rudolph. And Tom Cruise thanked his fans recently in, well, a very Tom Cruise way. The actor offered his thanks to fans for supporting Top Gun Maverick. while skydiving. The crews performed the stunt while filming the next Mission Impossible movie.

He's got two very lucrative franchises there, Tyler. I saw this the other day, and I didn't know it was Tom Cruise. I didn't know who it was, but he looks a little different there with the, where he's going. I think everyone looks a little different skydiving. 200 feet per second or whatever. I can't imagine being able to speak skydiving. No, I wouldn't either. He cared out of my wits.

He's famous for doing his own stun. Here's yet another. Bertha, thanks. All right, after the break, our power rankings with just a few days left in the year, we wanted to take a look back at corporate America. And today we focus on the boardroom, ranking the top CEOs, as well as some of the biggest disappointments of the year, all before the start of a fresh new year. Plus, speaking of starting fresh in today's clean start, we look at one company that is building high-powered battery generators.

Power launch would be right back. Welcome back. Elon Musk putting his roles as Twitter CEO in the hands of tweeters. The company's new owner posting an informal poll asking users whether he should step down as CEO, and a majority of them said yes, 57% say he should give it up. Musk claims he'll abide by the results, but it's unclear yet whether he actually will do so. I think he took Chief Twitter out of his Twitter biotype or what that's worth. While the poll went against him, our Power Lunch viewers seem to think he's doing a better job than some other prominent chief executives.

As you can see from the results here, we said, who do you think was the CEO of the year? And Musk got 40% of the vote, followed by Tim Cook, Jamie Diamond, and Bob Eiger. Wow. Well, whether you think Musk is a good or a bad CEO, you can't deny he was a prominent one this year. In many ways, 2022 has been the year of the CEO. And today we rank the best and some of the worst from Musk buying Twitter to Sam Bankman-Fried's collapse at FTX, Bob Iger's return, Jamie Diamond's dire economic warnings. Which companies are set up for success or disappointment with his 2022 rankings? Let's bring in Jeff Sondonfeld, Yale School of Management, Senior Associate Dean for Leadership Studies, and a CNBC contributor.

Which should we choose first? Should we go with your top five, your best guys, your besties, or your worsties? Let's go with the besties, led by a person who has taken this huge company from basically being dead money to being red hot red money. I think that you're right, Tyler, and Kelly, it's good to join you guys. It's a lot of fun to always come in, end of the year to get, when I'm busy grading final exams to grade the final year performance of boards and CEOs. And yeah, if you take a look at Microsoft, it's a remarkable story. Since he's taken over Satya Nadella, the stock is up 1,000% at Microsoft and things that he's

done there. We just had him with us and Bill Gates a few days ago at our CEO summit. And Bill Gates gave him a ringing endorsement. I was friends with Steve Ballmer. And some of the things, though, that Gates pointed out is they deserve credit for fortifying Microsoft's peerless position. After all kinds of efforts at transformation into the cloud, a year-long transformation of Microsoft reignited the culture of innovation. He's got a great footprint in the software space. $60 billion of commercial cloud business with Azure and Office and LinkedIn commercial put together,

which has been remarkably successful. And these are, you know, some 50 companies, too, that he seamlessly had wove into the tapestry in these acquisitions, very smooth integration. And, you know, on the social impact front, he's really been a leader in fortifying democracy and in taking a look at environmental impact without detracting at all from shareholder value.

In fact, shareholder value has been soaring with this. For the first time in many years, I mean, maybe even since Gersner, You've got an IBM CEO in second place here. Yeah, and I think that's pretty remarkable what we have seen accomplish at IBM. IBM, you're right, it has been difficult. Arvin Krishna has accelerated IBM's transformation, although in fact at our summit last week, he was very generous complimenting Satcha Nadella, what Microsoft has done.

But what he's done, I guess his stocks up around 50%, but half of his of his, of his revenue now is software and consulting solutions where, you know, we would have thought of them so much as hardware and heavy metal just in years earlier. Cash generation is doing well. He's, it's really been quite a successful reign in a full suite of software solutions and doing quite well, I think, as he's forged great partnerships that's been terrific, even with Microsoft through Azure and others. And I think that that's been, I think, a surprise to many And what's been a tough year on the stock market, tough year, of course, for technology is Microsoft and IBM have stood together

as towering above the pack. Jeff, I really want to get to the CEOs on the hot seat. Elon Musk, you actually think the finance CEO, WeWork, I'm going to ask you why, you know, should Mark Zuckerberg be on there. But I don't want to give short-triff to Jane Frazier of Citigroup, who you think is your number three CEO of the year. I'm just confused as to why. Yeah, I know.

You can see the stock performance is not off the top. She's only been in office for just over a year. So it's really soon to consider somebody's evaluation, except when you take a look at a startup, I can't think of a CEO in a non-crisis situation, a more successful taking charge process. She has pivoted away from focusing on international consumer business to develop wealth management. She's also moved away from a lot of the cyclical business that used to drive. them that was a low end cyclical business to a much higher end fee for value. And I think that a lot of re-engineering of her risk management has been, you know, she's classically sort of taking over it

and reversing course on a battleship has been hard. It's been ambitious. Yeah. And like you said, it's not quite, you know, peace prize when Obama's elected, but it's early. It's a vote of confidence. I mean, I would have put Mary Barr on the list, but we had her on last year. But Mary would have been there. Let's pivot and talk about the CEOs on the hot seat. Elon Musk, an obvious one. What about, you know, in Binance in particular, and in the world of crypto, Jeff, how do you think this is going to play out? It's really tough. I mean, I'm surprised to see the CNBC viewer response. You saw what the Twitter vote was overnight on this strange poll that he put out. Obviously, with, you know,

60% of his viewers saying, his users saying he should step down, we saw that that was good news for him compared to what the CEOs had to say about him. People suggest that he already was getting pushed out by some of his investors, because he couldn't buy this, by the way, on his own Tesla stock. But roughly 80 percent believe Elon Musk has become a detriment to the value of his business, according to the CEOs we survey. And roughly 70 percent believe Twitter's best days are behind it. Only 25 percent think it'll be more valuable in five years. Ninety-eight percent believe that Musk has overpaid for Twitter, 256% believe that people should stop advertising on Twitter. Now, some tech titans tell us they think he's going to take, you heard to hear first,

the engine that he has behind PayPal that he and the seven others who founded PayPal, he and one other actually control that one. And he's going to try to move that in to create some sort of a currency, electronic currency business here. If people don't trust Twitter with advertisers fleeing and all the rest, even though he's trying to perhaps drive traffic with the electric. of the hate speech and the rest. It's going to backfire if people don't trust the platform. And everything else that's collapsing around him, when you're running six companies,

if you're working the 12-hour day, which he claims, as we know he's not, with all of his clowning around, let's give him the 12 hours. That's only giving him about less than an hour and a half per company to run these companies. You know, what's the boring company done, except live up to its name? Where's that tunnel connecting Las Vegas and Los Angeles? Where's that fleet of autonomous taxis? Look at the production, let alone sales problems in Shanghai and China overall. He's got a lot on his plate to work with, with Twitter being a distraction he didn't need. My sense is that there is a core of folks reflected in our poll who like Musk because he is so unwoke and he takes on the woke, so-called woke crowd. Let's go to

CJ Zhao of Binance. Why is he a problematic CEO in your view? Well, it sure seems like he had something to do with taking down a major competitor that C.J. may be single-handedly, although he tries to present himself as heroic, he surely had a crashing influence on FTX. And rather than celebrate that, he's got his own problems where policymakers are very skeptical of him, a lack of transparency. He may, in fact, have suffered comparable loss of trust there that he has yet to yet to, to produce, the public has gotten weary of a lot of the ambiguities and the jargon and the crypto confidence. And I think that given his exposure, that's all he has there. He's got big trouble. He's a lot of accountability problems coming after him. That's an enviable task.

All right, Jeff, thank you, as always, for your insights and for this provocative list. We appreciate it. Have a great holiday season. We'll see you next year. Thank you so much, Tyler. Thank you, Kelly. You got it. I want to draw viewers' attention to the fact that the Dow is not down 305 points. We've got an eye on it. So should you. Yeah, it's trading heavy again into the close. Coming up, generation change. We'll look at one company trying to fix the problems caused by diesel generators in today's clean start. Replacing gasoline power in a car, bus, or even aspects of your home with battery power is fast becoming a common desire. But diesel generators are still

the go-to for big industries that need high-capacity portable power. At least until now, Diane Oleg explains in her continuing series on climate startups. Diana? Well, Kelly, go to any construction site or movie said, and you will hear the rumble and roar of diesel generators. They're high powered, they're portable, and they're terrible for the environment, emitting dangerous levels of carbon. So as with everything else, the race to electrify portable energy is now on. While big legacy companies like Generac and Caterpillar are beginning to offer small battery power generators in addition to their larger diesel. lines, California-based startup Moxion is focused entirely on this new power frontier.

It's building high-powered battery-powered generators that can be used in anything from construction sites to movie sets, replacing diesel. Generators are notoriously difficult and expensive to maintain. They burn diesel fuel very inefficiently. You have this problem where generators are kind of running on idle a lot very regularly and so that's extremely wasteful and terrible for the environment. Under Moxion's model, clients can either buy the generators or rent them. For rentals, Moxion uses technology that alerts them when the batteries are running out so they can replace them with no laps.

We know exactly what the state of charge is. Amazon is currently leasing Moxion generators for two productions, a movie and a streaming series, powering cameras, base camps, lighting, hair and makeup trailers and other production equipment. One of the beauties of Moxion's unit is it is dead quiet and zero emission. Roughly half of the carbon emissions from the average movie set come from the fuel used to power generators and transportation. Ellis says since these generators are zero emissions, they're more versatile. It can be moved indoors for unique shots and they really allow our team to think about new ways of filming productions than they used to. Moxion's backers are the

Microsoft Climate Innovation Fund, the Amazon Climate Pledge Fund, Enterprise Holdings, Energy Impact Partners, Tamarack Global, and Sunbelt Rentals. Total funding so far, $110 million. Moxian CEO says they're still looking at expanding the potential uses for the generators, but already he said they are competitive in price for companies looking to buy the generators, and may in fact end up cheaper because they're less expensive to maintain than diesel models. But it sounds like cost is an issue right now, which is why everybody's leasing them. Is that right? Well, also because this is very new technology. So you never know that it's going to improve more. Maybe next year they have a better model so you don't want to invest in it now.

All right, Diana, Diane Oleg, thank you very much. Still to come, we've got today's three-stock launch. We will run through some names that are set to potentially drop in the new year. Power lunch will be right back. All right, welcome back. It's time for today's three-stock lunch. CNBC out. out with a screener of stocks to beware in 2023, 20 names with the most to lose based on the average analyst price target for the shares compared with where the shares are trading today. On that list, we got Clorox, Etsy, and Campbell's Soup. Don't mix these up, okay, folks, at home.

Let's bring in Ava Ados. She is chief investment strategist at ER shares. Ava, welcome. Good to have you with us. Let's start with Clorox. is Chlorok. Chlorox was a pandemic, darling. You don't drink it to get rid of the pandemic, but certainly it was part of the cleaning frenzy that we all went through. Yes, definitely. It's a dead COVID play. In fact, it's experiencing the worst profits,

margins. It has had among the worst profits and margin it has had in the last 25 years. And among the highest SG&A costs, it has had in 25 years. So that's a COVID play in the scaled up very quickly to meet COVID demand. Now the demand is down. And so they have an extremely high SG&A costs that are not able to shed quickly. And so for that reason, they're seeing their margin squeezed. That's why it's a sell. Oh, a full-out sell. Okay. What about Etsy? Etsy is a hold. It's actually among the few companies in this category that are making money now. In fact, its EBIT margin is 16% compared to minus 9% for its fears. It's also about seven times the margin of Amazon.

So its fundamentals look strong. However, its valuation is slightly higher on a relative basis, and that's why it's not a buy. It's just a hold. All right, let's move to the last one, which was, again, I guess, a hot shot during the pandemic, because it's comfort food, the ultimate comfort food, Campbell's soup. Now, I like this one because I like the category in general. Staples, including food, will do well in a recessionary market. They have already been performing well.

And even though I think it's a short-term buy and I wouldn't encourage investors to hold it as we exit the recession, I think it's a good play for this recessionary market. I want to note that over the long term, their margins have been eroding. And so for that reason, it's just a short-term buy. All right. And look, there's a nice, look at the move in that stock this year. Eva, thank you very much. Eva Ados. We appreciate it. And for more stocks to beware in 2023, head to CNBC.com slash pro. More on the markets when Power Lunch returns, like Tyler pointed out,

where at Session Lows, Dow's down about 300 points. We'll have more on the other side. Welcome back. There we have the markets. Dows down 314 points, and it's actually the outperformer today. So 1% drop there. S&P trying to cling on to that 3,800 level. It's down about 1.3% today, Tyler. The NASDAQ, again, the bottom of the pack down 1.7%. And it's down 8% this month. You also begin.

You're still seeing, I think, the idea that rising interest rates are anathema to high multiple growth stocks, especially tech stocks, because it means that their cash flows are going to be discounted even more. And you're right. Look at the 10-year 3.58 now. They're going to be worth what they used to be. Yeah. And there's the 10-year note. see it at 3.58. So at any rate, the market seems to be, you know, it's thinly traded right now.

This is not going to be a high volume week as opposed to last week, which was. It's still throwing a hissy fit about the Fed, I think. And, you know, until any signs that they might ease off and say, you know what, we've have so many inversions and so many forward-leaning indicators, maybe we should back off and we're going to take those seriously until we hear that kind of talk. I think you're going to see this kind of market. Yeah, until there's really a pivot. Yes. Is it just figure more good to be back with you. It's great to have you back. Great to have you back. Great to be back together.

All right. Thanks everybody for watching Power Line. Closing bell starts right now.