Power Lunch - Big Tech Backlash, Yearning For Earnings 5/9/24

Episode Date: May 9, 2024

Apple’s new ad is drawing criticism that the company is “crushing” everything. And at Google, profits are high, but worker morale is low. We’ll dig into that.Plus, many companies are making big moves after reporting their earnings. We’ll cover 3 key reports in a deluxe edition of Three Stock Lunch. 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 alongside Kelly Evans. I'm Dominic Chu, and coming up on the show, Big Tech Backlash, Apple's new ad drawing criticism that the company is crushing everything, and that Google profits are high, but worker morale is apparently low. We're going to dig into that story. Plus, so many companies with big moves after their earnings were beefing up three stock lunch to handle it all. We'll get the stories from our reporters and the advice from our trader. First, let's get a check on these markets, though. We see the Dow up 250. 50 or so, 2 thirds of a percent outperforming the S&P in NASDAQ, but keep an eye on the S&P above the 5200 level. He just heard Lee Munson, he thinks 5400 is next. And the NASDAQ composite, about 2 tenths of a percent today. All right.

Take a look at shares right now of Sinclair. Sources are telling CNBC that the media company is looking to sell more than 30 percent of its 185 owned or operated. O&O broadcast stations. Those shares up nearly 15 percent in trading so far, Kel. As disruption continues in that sector, and we're carefully watching the consumer. Several food-related companies reporting results. Cheesecake Factory beat on earnings. Analysts encouraged by strong traffic trends in the face of some consumer difficulties who have heard about.

Krispy cream also with better than expected results. Dom, it's heart-shaped donuts made February 14th the biggest sales day in the company's history. I would just say I'm going to admit that since they've started distributing in grocery stores, my waistline has definitely taken a hit. This is why you're wearing the Apple Watch. Yes, I am. It is. Papa John's lower on a sales miss as well today. All right, well, let's start with the Apple story and the backlash to this new ad, as you are seeing right now for its brand new iPads.

What it shows is musical instruments paint, other creative type tools, literally getting crushed, seemingly showing you that you can now do all of those things on a new, slimmer, thinner iPad. But many are saying that the iPad and Apple are crushing something else, and that is, dun, dun, dun, humanity. Indeed. All right? Steve Kovac is here with more on this story. This is kind of polarizing, mostly because of the reaction. I saw the ad, and I would say I immediately didn't think, oh, my God, humanity's being crushed.

I did? I did you. Did you mean? It's like this giant, scary looking steel thing crushing all the life out of the world. This is like the dress. Remember, the dress is it blue? Blue or is it blue? Yeah.

Exactly cool. Because I had the same interpretation as you. I saw this as like, cool, they're showing the iPad is really thin now. And it's doing everything. Yeah, and it's doing all those things. And they didn't just crush creative tools. They crushed Angry Birds and emojis in there, too. An arcade machine. You know, this is nothing the iPad hasn't been able to do for many, many, many years. But I guess it's like this dark. Okay, you have to admit, go back to the first ad campaign for the iPod. Yeah. The colorful silhouette. Oh, yeah. The silhouette. The somewhat that's dancing around. This ad is not that. Yeah, so that I understand. It's probably the dark, the weird Sunny and Cher song playing over it. But it shocked me just how wide and polarizing this is. Senator Chris Murphy of Connecticut was tweeting about this and saying how upset he was.

Hugh Grant. The British actor is upset about this. All replying to CEO Tim Cook, by the way, I get it. I understand why this is upsetting to some people, but it's just amazing how different the interpretations. There's the emojis. This came out 48 hours of. ago, by the way, and it was, you know, part of the iPad event that they announced his new iPads two days ago. Again, when I saw it, I thought nothing of it other than, okay, cool.

I have to say, if nothing else, my sense is this company is toned up. Apple right now is in the middle of a societal, like, like, we, like, comeuppance over the impact that these technologies have had, especially on children. And they choose now as the moment to drop this dystopian-looking thing about how we're going to cry. Come on down the big power crushing all of these things. You get what they're trying. I get what they're trying to do and, you know, show that they can crush all this into a super thin iPad. Cool. But I think it was just the lighting is really dark.

The music is weird. It's slow motion. I get why it's upsetting. I sympathize the people. I had to be told why it's upsetting. It wasn't my initial reaction. It wasn't like, oh my gosh, all of this creative stuff is being annihilated. It was more just like, hey, they're putting it all into a small person.

package and this is what it's going to look like. This is really the dress. This is the dress all over again. It just depends on who you are and your background. The only reason I mentioned the tone-deaf aspect is because this is a moment where the company really has to come out and justify, hey, we're just innocent, fun technology, we're lighthearted and it just, it doesn't capture that sense. So maybe they don't feel as though they're on the defensive, but I think the next couple of years they're going to realize they will be. And look, this is what we're really waiting for Apple to show us is artificial intelligence and where it plays and all this. People are going to forget about this ad.

no time, I think. The real show is June 10th. What is going to happen with artificial intelligence? They talked a lot about artificial intelligence with this iPad, by the way, not really showing what that means or what it can do. So what gets unlocked with the iPad on the AI. By the way, some of the criticism is AI. AIs ruining our jobs. It's going to suck up all our jobs. And it's going to make music for us. It's going to make art in place of humans. It's going to do all kinds of voiceovers and acting without even having people do it like us and everything else. So I get that aspect of it now. but I had to think about it. It wasn't my first reaction.

I literally had to have it explain to me. And I'm not alone. But Kelly got it right away. I mean, I think it's pretty obvious. Stay with us because we do want to talk about Google as well, where it's not paint and instruments being crushed. It's the employee's spirit. And a new article on cnbc.com,

Jennifer Elias, writes about a decline in morale at the company, despite blowout earnings. At a recent company town hall, the CEO, Sooner Pichai and CFO Ruth Porat were asked to explain why the company was still cost-cutting and not increasing pay, but they did announce their first ever dividend in a $70 billion stock. Buyback.

Jennifer joins us now. How did Google executives respond to those comments? Right, that's right. I mean, Google may have reported blowout earnings and its biggest rally since 2015, but celebrations internally have been a bit more muted, just exacerbating, already growing discontentment of internal morale.

According to audio, we got from the company's all-hands meeting last week, it included the CEO, Sunar Pichai and CFO, Ruth Porat who responded to this in some vague terms and other ways they kind of turned it around on employees and said, you know, Sundar joked at one point needing to give employees a finance 101 lesson. But then there were other times when they said, you know, we're like in this transition of a period for this company, at times also making a rare admission of missteps they made

in the financial planning for the company over the last few years. So it really was a culmination. They got so many questions about this that they had to address it at length and came up with some different responses to kind of like take a little bit more responsibility, but also say, look, we're in this new era where we can't. It's just hard for employees to listen to this when they are getting laid off pretty regularly and seeing some jobs offshore to India and Mexico, which we reported last week. Jen, it's Dom. How much in your reporting has gone into just how extensive or pervasive this morosephous? morale issue is. It seems to me like, yes, that this is certainly a cause for concern, but how many employees are likely to quit, leave, or try to find something else in this kind of environment when it seems like many other tech companies are not exactly going out and

hiring gangbusters as well right now? Right, Don, that's a good point. I mean, I think it's the power is definitely more in the employer's hands right now. And employees know that. Okay, they're not, they're among the smartest people in the industry. And so they, they understand. that but at the same time it's a competitive AI market and a lot of these companies including Google are asking employees to move back to very expensive locations like the Bay Area which even with a Google salary is still you know sometimes not easy to like buy a house for instance so there are a lot of things playing into this that has just bubbled up over the last couple of years but but also a lot of them

tell me they're kind of resigned to just what's happening in the market and not going to try to rock the boat too much Steve if I may adventure maybe the problem Google stems from A, it doesn't really have a cutting edge AI story to tell that can kind of maybe reignite excitement firm wide. And B, people were initially drawn to its workplace culture, but now perhaps at a moment in their lives when they value not having to go into the office and they're not being given that flexibility. Google's not a young company anymore.

This is like a real, this is grown up stuff, right? There's no bowl pits and slides and free lunches and massages and all that stuff that we used to talk about. Now they're facing the reality, hey, we overhired during the pandemic. By the way, that's on Sudobrichi. That's on Ruth Porat. Interesting. during the pandemic and now dramatically cutting back and doing these really weird and we

seen Amazon do this too rolling layoff so it's not just one big cut like they did at beginning of last year it's you know every few weeks we get a headline like stressful saying that's probably what a couple hundred more people so yeah how can you work on this next leg of the company and feel like you're contributing if you don't know if you have a job because you know in a couple weeks here we go another announcement this group is getting cut that group is getting cut what I was just out in the Bay Area in Silicon Valley last week. And I was talking to people about this.

And these people are fed up with the bureaucracy within Google. That's kind of the vibe I'm getting and just how they can't get out of their own way to make AI happen. Is there more than to cut or is there a sense of whether these layoffs are now complete? No, they said, I think, in that meeting that Jen reported on that, no, there will be more, maybe less cuts or fewer cuts, but there will be more. But look, a lot of these people have an opportunity to go out there, raise a bunch of to cash and start their own AI company that's more nimble, less bureaucratic than Google. But how many these are literally middle manager type people who are just, you know, looking for, and Jen, maybe you can speak to this, but is that where the cuts are still expected to come from?

Yeah, they started that last year because they realized they had so much bureaucracy, like Steve said, so many middle managers, but they're also kind of taking it a step further and offshoring some jobs, you know, hiring core or firing core engineers and then hiring in India and Mexico, which we broke the on last week. So it's really happening in so many ways. And in some ways to employees, it's a little, little, too little too late. All right. Jennifer Elias, Steve Kovac, Jen, Steve, thank you both very much for the great conversation on big tech right now. So let's talk more about this. Google is facing heat for allegedly sharing cash with shareholders, but not with the workers, as we just mentioned. So what message does that send to smaller private companies? Dear Dr. Robosa joins us now

for today's tech check on another angle to this big tech story and the buybacks and dividends that Alphabet has just put in place. Saddam, I love that anecdote that Jen just shared, where Sundar said that maybe he needs to teach a course on finance 101. Because when you think about it, if you're a public company, you have more stakeholders, right? You have the employees. You have the outside investors, shareholders, big and small. So there's a lot of scrutiny that goes along with being a public company. And that's exactly what some startups and founders are wanting to avoid, and they can avoid it because billions of dollars, they remain available in the private markets for the right

kind of startup, of course. Now, in Google's case, being public, what Jen was just telling us, that can sometimes feel lose-lose, right? Your shares underperform. Employees worry about the value of their options. Shares outperform. And as Jen just said, other employees take issue with buybacks and dividends. They say, hey, why isn't that being put towards our compensation,

increases. Now, at private companies, valuations, they aren't shifting. They're not marked to market every day or even on a weekly basis. It typically only happens or changes when a startup needs to raise more money or increasingly do secondary sales that allow some employees to cash out on some of their shares. So there's ways around it and increasing ways around being public. I was at a lunch here in San Francisco yesterday with a soft rap report. He's the co-founder of Cloud Cybersecurity Startup WIS. He just raised a billion dollars, billion with a the be in the private markets. He told me that he considers an IPO a key milestone, but the bar for getting there is higher these days. He's targeting a billion dollars in ARR that's annual recurring revenue. That's more than what Ruberk had when it went public successfully a few weeks ago. So the reasons are kind of mounting, and especially when you see stories like this from Google to build in private when you have more longer term investors like venture capitalists that aren't marking to market on a daily basis. Dee, this feels like a pendulum that swings in perpetuity, right? That's the definition of it. These things go back and forth. That's a great way of putting it.

I mean, it is because at some points in market history, there has been this desire for companies and their founders and executives to stay private because it keeps them a little bit more in line with their vision. They don't necessarily need to raise public money. They can get it done on their own and not have the public scrutiny or oversight about it. Then there's other times when, yes, they just want to cash out. This feels like it's just going to keep swinging back and forth, but at what point, at what stage does that conversation change for employees, the lifeblood, the talent that go into these private companies? Well, employees want liquidity events, right? They don't want to just be sitting on paper cash. It's hard to buy houses to increase their quality of living with that.

So, you know, there's a bit of a push and a poll, but like I said, those secondary transactions is helping that's letting companies stay private for longer. But the other part of this, Dom, which you well know, is that an IPO can be a marketing event, right? For companies that need to win over Fortune 500 or Fortune 50 companies, it helps to be public to report your results every quarter and have that kind of level of transparency. You know, in terms of that pendulum swimming,

we saw a downturn in the private markets over the last few years with interest rates going higher. But like I said, for the right kind of company, particularly generative AI ones, they're still billions and billions of dollars available to them, not just from VCs, but from strategics as well, right? The mega caps. And we'll see how much hiring they can do as well as the other companies trim back.

Deirdre, thanks very much. We appreciate it. Deirdre both. Coming up, a pulse on payments. We'll get some insight into consumer spending from the CEO of Shift 4. And as we had to break, we'll do our power check. On the plus side today is Equinix having its best day since 2020. The Data Center Real Estate Investment Trust,

posting and earnings beat shares. 11%. On the downside is EPM having its worst say since 2022, shedding 26% on the back of week guidance. That's your power check. We're back after this. Welcome back to power lunch. Shares of shift four payments are moving higher today, despite missing quarterly estimates on both the top and the bottom lines. The company reaffirmed guidance and gave an update on potential bids to actually acquire those companies. The shares are up just about 2.5% right now. Joining us now is Jarek. Jared Isaacman, he's the CEO of Shift War Payments and the man who founded the company when he was just at this 16 years old. And of course, here is our own Morgan Brennan on set with us to bring us that

interview. This is going to be a fun conversation. This is going to be a fun conversation. Guys, it's good to see you. Jared, it's always great to see you. Thanks for being with us today. A lot to get to. I am going to start, though, with the acquisition, the strategic review process that you gave an update on today because it was a big part of your shareholder letter. It came up on the conference call to the fact that the board received multiple formal offers. You're not moving forward with any of it. What you said in the shareholder letter was that I intend to see the story through his CEO. I want to ensure that shift towards growth and wins are problematic for the competition until such time as they choose to make the problem go away. So in light of that, is it completely

off the table, the possibility of the company getting acquired? I mean, Morgan, well, first, thanks for having me. Second, you know, we're a public company. People can buy and sell our shares every single day, and if they want to, they can buy all of them. And I think, you know, we did go through a strategic review process. There was a lot of interest, a lot of formal offers. The reality is we're just growing really fast. We're going to payment volume 50%. We're going to process over $170 billion in payment volume this year. We're growing EBITA over 30% right now. So, like, the simple reality is, like, the price keeps going up, and the longer people take time to decide what they want to pay, the price keep moving. So that was the process we went through kind of, you know, earlier this year.

We're obviously still like executing on our game plan. We got a number of like really awesome wins we've shared this quarter, lots of good growth, expanding free cash flow. We got another good acquisition that we announced. So we're just going to keep running our playbook again. Like I said in the letter until such time as somebody finds us problematic enough to make the problem go away. Yeah. Of course, growth continues as you just laid out there. Even if the top and bottom lines missed consensus estimates, which you talked about as well on the conference call, the fact that Q1 tends to be seasonally softer than other parts of the year. So walk me through what you are seeing across your different verticals, because you do have a very unique viewpoint into the consumer,

whether it is restaurants or hotels or stadiums, casinos, e-commerce, to name a few. Yeah, sure. And by the way, like, we loved our results this quarter. Like, from our perspective, relative to plan, we blew them out. The hard part was because we were going through a strategic review this past quarter, we couldn't engage with analysts. to the extent we normally would have to get them familiar with the seasonal cadence. That's why I think the stock is responding as well as it did, because we're still growing faster than anyone else out there, expanding margins, lots of free cash flow.

To your point, like, we are in a lot of verticals, and a number of them isn't really great for me to talk about the health of consumer because we're taking share very quickly in sports, stadiums, e-commerce, customers we didn't have last year. So, you know, what we got to do is kind of drill down in a couple key verticals that we have a lot of concentration in to get a pulse from the consumer. In restaurants, I would say, throughout the first quarter, it was relatively flat in terms of same-store sales growth. We did see that start to pick up in April, so we returned to positive same-store sales growth in restaurants.

Now, the one that's just been a stand-out is hotels. Like, I mean, we've just been watching this for the last couple years now. It's our fastest growing vertical, which is in hospitality. The same store sales just keeps going up. And you think at some point, you know, those room rates got to reach some sort of a ceiling. They're not. They're still positive throughout the first quarter and into April. Jared, it's Tom. I want to kind of hit on that a little bit more. Is the fact that you have such success on that side of the business with hotels and even more broadly the experience market overall, more of a function of your market share and growth, lack of competition, or do you think it's more macro in nature that the experiences market, concerts, hotels, travel, leisure is still on a steady, steady path higher?

Look, there's no question that like throughout the reopening and the revenge travel, that helps us. But we're growing volume at 50% year over year. We're talking about same store sales improvements in like the low single digits. You know, hotels could be up, you know, another 3% hypothetically in April. Like that's not moving the overall numbers for the organization. But it's just a good sign to know that consumers are still getting out there. They're still traveling. Like that's obviously something we're all paying very close attention to.

But I mean, our growth and as it's been for, I mean, we've grown revenue and volume double digits for, I think, 25 consecutive years is far more a factor of taking share just how we're structurally set up to win in the verticals we choose to focus on, that it is any real macro conditions. And certainly investors seem to be wrapping their arms around that today with the stock up 3%. I would be remiss if I didn't ask you about Polaris Dawn. It's going to be your second spaceflight, another private astronaut crew. You're going to fly at the highest orbit that humans have reached since Apollo 7. so more than 50 years. You're also going to do the first ever private spacewalk. The SpaceX suits were just unveiled a couple of days ago,

and now you're targeting a launch window here in early summer. Walk me through it and what has to happen to get there, especially as we do see, for example, Boeing Starliner capsule waiting to get off the ground. Yeah, I mean, I can tell you, Morgan, sometime around 7 a.m. this morning in the premarket, I was wishing I was on another planet. But that'll come soon enough in the next month or two.

SpaceX is an extraordinary organization. I mean, honestly, like, we've been everything about our shift four ways, how we've tried to optimize our organization, our philosophies around execution. I've literally robbed from SpaceX over the last couple of years. Like, I literally want us to become, you know, the SpaceX of FinTech. And I think that's shown in their brand new suits that they just did develop, which are super cool. You know, and they're helping enable, like, a lot of extraordinary things. Because what better of a vision than, you know, opening up space so everyone can journey among the stars? So we got some really awesome objectives coming up.

We're still raising funds for St. Jude Children's Research Hospital. And I think we're going to get you getting to the pad in the next month or two. All right. Maybe you can report from the moon at some point, Jared. Or shoot for it in the meantime. Thank you for joining us. It's really good to see you today. Jared Isaac made a shift-for-payment CEO.

Morgan, thank you very much for bringing that to us as well. I'm Morgan Brennan. Coming up a huge collapse in a former growth stock, Roblox falling 30 percent. A little off that now. Bad guidance. Weak engagement will break it all down. in today's a three-stock lunch. Welcome back to Power Lunch.

A big interview coming up tomorrow. We've got two, count them two Fed presidents, Neil Kashgari, over on the left, Austin Goolsby on the right. That's tomorrow at 2 p.m. Eastern time right here on Power Lunch, and we know how comments from Fed speakers like these can sometimes move markets.

It's something to watch for sure there, an exclusive interview with both Fed presidents coming up tomorrow, 2 p.m. Eastern time. Now, what's happening today with Bonnue, yields. Let's get over to Rick Santelli in Chicago for more on that story and what's moving the bond markets. Yes, Dom, there was a double whammy for the bond market this morning. Let's look at number one. Initial jobless claims, look at this chart going back to August because they popped to 231,000. That's the highest level since the end of August. Let's call it an eight-month pop. And when that happened, one of the things, one of the markets had paid close attention was the dollar index.

Look the way it fell as initial claims popped. And if we look at what's going on with respect to the dollar index, well, let's look at other majors. Because even though the dollar was down here, it was the yen that was down against the dollar, the pound, and, of course, the euro currency. You see that chart starting at the beginning of the month of April and how after testing the 160 level at the end of April,

all the currencies now are starting to rally again against the yen. We want to pay particularly close attention to that because of the rumored intervention and what the half-life of that effect was. And finally, 30-year bond auction was round two of what push rates lowered down because it was best-debree, $25 billion, and when it hit the wires at 1-Easter

and I gave it an A-minus for demand, you see that rates dropped on the 30-year. We know that the initial claims is an important aspect of the labor market and we know that Chairman Pyle's stress that that's one of the key ingredients if we're going to see eases in 2024. Kelly, back to you. Wow, Rick, thank you very much. We appreciate it, Rick Santelli.

Meanwhile, it's Groundhog Day because we have another solar stock declining after reporting results. And Pipp was back to talk about it. What's going on with Solar Edge? So this time at Solar Edge hitting a five-year low today after another disappointing quarter. So they had a larger than expected loss. Their margins were negative 6.5%. That's never something you want to hear. they also gave weak Q2 guidance.

Now, revenue did beat, but at $204 million, that is way, way short of the almost $1 billion the company was earning less than a year ago in revenue. And so beat is really relative there. Now, I did speak to CFO Renan Fire, who told me last night that the margin issue was thanks to higher than expected sales of low margin products, specifically batteries into the U.S. And then he said because their revenue has come down so much, those specific sales had a larger than it had an outsized impact. Now, the reason why their revenue has come down so much is because there's simply too much product out there.

So to correct for that, they are selling less product to their distributors so that their distributors can work through their excess inventory. And so demand has most definitely slowed, but it's not as bad as Solar Edge's revenue numbers currently look. So it's more in the like $440 million range is what they said. Now, FIRE told me that he thinks the inventory issue will be solved by the end of the year, at which point margins will go back to 30%. But the U.S. still not looking great. he called it a broken market. Same with EVs. Just too much supply, not enough demand.

And high rates and also just higher costs. Like, you know, here, a system is 3.30 per watt in Australia, less than a dollar. So that has a big impact. All right. Pippa Stevens with the latest on the solar trade. Thank you very much for that. Let's now send it over to Bertha Coombs for a CNBC News Update. Good afternoon, Bertha. Hey, Dom.

Donald Trump's lawyers told the judge in his New York hush money case that they planned or knew a call for a mistrial. It came after Stormy Daniels finished her text. about her alleged affair with the former president. Trump's legal team says it will also fight testimony from former playboy model Karen McDougal. Judge said he would send the jury home at four to hear arguments. The Israeli military says it has the weapons it needs for a ground invasion of the southern border city of Rafa. Without the help of the weapons, the U.S. is withholding from Israel over fear that they will be used on civilians there. An estimated 1 million people are said to be sheltering.

And Harvey Weinstein is back at New York's Rikers Island Jail as he awaits a retrial in his overturned New York rape case. In a brief court hearing this morning, the former Hollywood mogul denied his consent to be extradited to California, where he was convicted of rape in a separate case citing serious health issues. Dom, back over to you. All right. Thank you very much, Bertha Coombs, for the news update there. Coming up on the show, you've got a deluxe three-stock lunch edition here because bigger is always better, I think, right? We'll bring you the story and the trade on three-key earnings movers of the day.

Power lunch is back into. All right, time for a deluxe three-stock lunch edition, hungry man style, I guess, if you want to call it that. We have three stocks making big moves on earnings results today. We're going to give you the story and then trade each one of them. Our trader today is Brian Vendig of MJP wealth advisors. But first, let's get the setup and go to Julia Boyd, for the story on Warner Brothers Discovery. That stock is now trying to rebound into positive territory.

Jules. Hey, Dom, that's right. Shares first fell on quarterly results that missed expectations on both the top and bottom lines with Warner Brothers Discovery's revenue falling 7% in a much larger loss and anticipated. But shares are now up nearly 2% bolstered by streaming, which was a bright spot for the company. The company added 2 million direct-to-consumer streaming subscribers in the quarter. streaming ad revenue grew 70%. Now, this is in contrast to the 8% decline in TV networks ad revenue. CEO Dave Zazov saying of the bundle of his max streamer along with Disney Plus and

Hulu that is in the works, he said this will help increase retention, lower turn, and also drive marketing efficiencies, though he didn't share pricing or timing of the bundles launch. Now, T.D. Cowan reiterating its buy rating on the stock saying, the most important and significantly positive development is news of the bundle and saying we believe the economic advantages of the bundle will push the rest of the media groups to announce similar deals. Zazov also said that he's still in conversations with the NBA and that he has the right to match third party offers,

seemingly refuting reports that CNBC's parent company NBC Universal is securing TNT's NBA package. Dom? So many variables at play. Julia, thank you for the report there. Brian Vendig, there are a lot of positives in Julia's report there, but is it positive enough for you on Warder Brothers Discovery? Thank you, Dom. Even though streaming does look like it might be the future here to turn the stock around, there are other segments of the business. And with all those conflicting variables, as you mentioned, this is one that I'm looking to stay away from and would sell at this point for me.

And the way I look at that is when you look at the other business models, you have within their business, you have television, you have movies and gaming. And these are all highly competitive segments. And also just the fact that sports rights are kind of up for grab, so to speak, or a jump ball, no pun intended there with the NBA as a crown jewel on T&T as part of the Warner Brothers lineup. Just gives me some pause at this point and rather see, you know, things play out. a little bit more over the balance of the year. All right. We'll see how that goes and we'll move along to Roblox. Then this one, much bigger mover today.

The shares tanking 20% at one point. Steve Kovac brings us the story. Steve, what happened here? Yeah, they're off their lows, by the way. It's down as much as 29% pre-market. That's what I saw. But look, Kelly, this one's all about the guidance. They managed to beat on the top of bottom lines.

But guidance at Roblox for the current quarter and the full year is pretty rough. Company says it saw a lot of weakness in engagement on the game. It turns out the problem is more technical than anything else, at least according to the company. I caught up with CEO Dave Bazuki on these results. He told me at the end of last year, the company launched a bunch of new features that caused a few technical hiccups, especially on low-end Android devices, which is what most Roblox players actually use. He even called performance of the game one of the company's key growth factors. If Roblox isn't running smoothly, well, people aren't going to spend as much time and money on it.

Some other things, though, to watch at Roblox, the ad business, still rolling out slowly earlier this month. They launched ads in the video, sorry, video ads in the game for the first time. And also one other trend, kind of bucking the trend among the gaming space, no big layoffs like we've seen at other gaming companies like Sony, Electronic Arts, Take 2 Interactive, and Microsoft. They really managing their CAPEX there, Kelly. All right. Steve, thank you. Brian, what's your trade on Roblox? Well, Kelly, great to see you back, first of all. And secondly, on Robox, when I read into the information, what I'm seeing is that there's an aging demographic issue with some of the consumers on the platform. And also the fact that we've also saw a lower spending from consumers as well in the Roblox universe.

And so moving forward, as much as they are making some changes to try to increase revenue through ads and some other initiatives, I think when we think about a environment where people have more choice of where they're going to spend their time, and where they're going to spend their dollars, that's the concern that I have on this valuation moving forward. So this is another one that I would take a step back from. The last point I would say also is that the market has also spoken. When you look back at where the stock was trading in November of 2021, I think it was around 130 per share. It's down about 80 percent from there. So again, I think from evaluation and business model perspective, some concerns moving forward. All right. So there's a trade on Roblox. It's still down 22 percent. The final name we've got in the hopper is Planet Fitness. Those shares, by the way, are up nearly just about 10% right

now in trading. Brandon Gomez has the story on this one. Brandon, this is interesting. When I first did the report in Squawk Box this morning, these shares were decidedly lower. Now they're decidedly positive. What gives? Yeah, absolutely. I mean, it's the turnaround story of the day, right? Shares off their morning lows when you were talking about it. They were down double digits then. They fell on a reported revenue miss for Q1, cut guidance for the year. Even interim CEO Craig Benson, saying a shift in consumer focus to savings, and, yes, COVID concerns weighed on the quarter. Doesn't that take us back? So why the turnaround, right?

Well, despite those warnings, the company is full steam ahead with its plan to hike new base-level membership prices to $15 a month from $10. Now, that's a big deal because it's the company's first hike in base rates since 1998. Worth noting on demand elsewhere in the fitness space as well, last week, Lifetime Fitness posted better than expected results, strong member growth, though they do. do have an older, more affluent customer base. Planet Fitness appeals to a younger, more budget-conscious consumer there. Dom, some other factors to consider here. The company's new CEO starts June 10th. It's still looking for its new CFO. The street really waiting to hear new leadership's roadmap to

understand how much of Planet Fitness' weakness this year so far is the economy and how much of it is the company's strategy, Dom. All right. So, Brian, you heard the story here. I was a planet fitness member and I remember paying the $10 a month, now it's going to cost 50, 50% more. That should be a positive for some investors, right? I do agree with you, Dom.

Actually, I like this story here with Planet Fitness, and I'll tell you why. We saw growth both in the top line and the bottom line, and they're still holding to an outlook of expanding locations over the balance of the year. I think in the short term,

there were some concern that advertising that they thought would generate a little bit more growth really didn't hold and capture consumer attention primarily due to price. But because they are more of a cost or value-focused gym membership as compared to others in the segment, I think there's some durability and resilience around that. And if we do see a slowing services part of the economy due to slower consumer spending, I think Planet Finish does have as a place to play, Dom. So, you know, $15 might still want to get you out there to pump some iron. All right.

Brian Vendig with the three-stock lunch trades. Thank you very much. We appreciate it. We'll see you soon. And still to come, we'll sit down with a power player. Billionaire and tech founder Bob Parsons will be live in studio to discuss his new book. I've been reading it, honestly, in breaks. The tech landscape, corporate America, movie.

The Danica Patrick's stories are so interesting. This is one of the most colorful guys in American business. We cannot wait to talk to him. We'll do that right after the break. Welcome back over the years. Bob Parsons has parlayed his serial entrepreneurship into billions of dollars in net worth. Perhaps best known as the founder of web hosting and domain registry giant GoDaddy, Parsons took the money he made from selling that business and others

and diversified into everything from Harley Davidson dealerships to commercial real estate to high-end golf equipment with Parsons Extreme Golf or PXG. He's out with a new book titled Fire in the Hole, details the untold story behind his trauma-filled life and subsequent billionaire success. Bob joins us now in studio for a power lunch exclusive interview. Bob, you have been and have been for years one of the most colorful American entrepreneurs and success stories out there. What is it about this book that's got you so excited and why did you want to write it? Well, I wanted to write it because I thought the story needed to be told, certainly for later

generations of mine down the road. And, you know, it is a unique trip to say the least. And so when I did it, I promised myself it'd be raw. I would, well, I'd tell everybody how to cow ate the cabbage. And you do. I've read a good bit of it at this point, and you certainly do. I mean, it's crazy because you talk about some of the traumatic experiences. First of all, a lot of folks know, but maybe some don't.

You are a decorated, wounded Marine Corps veteran from the Vietnam War. You took those lessons, but also the trauma from that as well, and it's shaped a good part of your life. Can you take us through that part of the story? Well, when I came back from, well, before I went over and joined the Marine Corps and went to Vietnam, I was, you know, pretty, pretty missed, you know, well, didn't have any focus. every year, you know, when I went to school, every grade, pretty much, well, it was a photo finish, whether I passed or not, I failed the fifth grade. Nobody can ever take that away from me. And so when I joined the Marine Corps when I was 17 with two buddies, and my mother had the sign so I could go.

And she did, and she said maybe this will be what you need. And so six months later, we were carrying rifles. in Vietnam. And I was at 26 Marines. We were rice paddies as far as you could see. We were running ambushes to keep the North Vietnamese out of the villages from getting their rights and so forth. But when I came back from the war, it was a couple of things. First of all, I went to college. And in college, I graduated Magna Cum Laude with a degree in accounting. Past the, P.S.P.E. exam. I'd have never done that without the Marine Corps. So everything I've ever accomplished in my life, I owe to the Marine Corps. But there was a downside to. I had PTSD to beat the ban. And what I did was,

well, I would, like for example, my first software company, you know, I bought a book. I learned how to program a computer from the book. And a couple of years later, I started a software company in my basement. and I used to work 60-hour shifts, 60-hour straight, and writing code, and I dealt with the PTSD by burying myself in my work. And, I mean, so that was the genesis of how all this stuff got going. Sure, Kelly, I mean, it's crazy. You talk much later in the book about now treating that

and some of the newer techniques and psychedelics and things that people are experimented. Psychedelic is the best thing. You know, I read this book by Michael Powell called How to Change Your Mind, And this thing is, well, it's all about psychedelics and what they've been used for for millennia. And for me, I mean, I told my wife I wanted to try this because, I mean, it's just a PTSD. He was eating me alive. Sure. And so she had me hooked up with two guides a couple weeks later that treat guys and, I mean, people with, you know, mental issues with psychedelics.

and we met in Hawaii, and over four days I was treated, and, you know, a lot of therapy, a lot of tears, a lot of reliving, all that stuff. I never want to go through it again, but I was a different guy afterwards. I was like I should have been. Yeah, a lot of people, you know, are looking at it as potentially a market after cannabis. There's a lot of business advice in here. One of the things that jumped out to me, because it goes back to a conversation we were having earlier, but you say, you know, every company has to decide who's most important,

the customer or the employees, and you have. an interesting answer about that. Oh, for sure, the employees are. The employees, he says, yeah. And why is that? The reason the employees are more important is because the employees are the one that relates to the customers, and they convey the company to the customers. So what you need to do is you need to charge your employees with enthusiasm, so they're excited about what they're doing. And what do we know about enthusiasm? When they deal with the customers, it's contagious. But what about the whole Amazon strategy of, you know, relentless focus, customer first, customer first? And, you know, the corporate culture just has to be, you know, laser focused on that.

Well, the customer is first, but the employees come before that. Interesting. Yeah. Now, here's the question I have for you. And this is one that I know that you have a lot of thoughts on. Really quickly, just a few moments left. Is the American dream still alive? Can it still be achieved? Oh, absolutely.

I think the American dream is alive as it's ever been. It's, you know, you don't really recognize it because. it looks like hard work. And, you know, you hear all these people that say, well, you know, I work smart, you know, I don't work hard. Well, you show me somebody that works smart. I'll show you somebody that they work for and that'll be a person that works hard. By the way, I love the anecdote as well about how the Super Bowl changed everything for GoDaddy. You know, you almost went out of business and then here you, you know, I have the splashy ad. Your market share goes up and then, of course, the rest is off to the races.

But I'll let people read the book. They want to hear the full story. There you go. Thanks for joining us today. Folks cold firing a hole. That's right. There you go. Books stores everywhere. We'll be right back.

Welcome back, everybody. Don't look now, but the market is putting together a nice string of gains lately. Extending into today's session, Dom, with a 320-point session high pop. This could be the seventh straight day of gains for the Dow. First time we've had that this year. You know, it's crazy because it's just a couple of weeks ago that we've been talking about this notion that the markets were testing their 100-day moving average for the S&P 500. Could this be the break?

Could we see a real downside? side move and people just stepped in to buy it. Yeah. And that's just what happens. And it's been the same muscle memory for years now at this point. Of course, watching rates not seeing a lot of movement there had the 30-year auction, relatively uneventful, 445 still on the tenure. Watch small caps because it's been relatively the power catch-up trade in the last few sessions.

All right. All right. Well, thanks very much for watching Power Lunch, folks. We'll see you later. Closing bell starts right now.