Power Lunch - Boeing's Mid-flight Blowout 1/8/24

Episode Date: January 8, 2024

Shares of Boeing are sinking today, after a door plug blew out during an Alaska Airlines flight. And it’s just the latest problem for the 737-Max series.Is it just another one-off unfortunate event, or a bigger black eye for the company and its management team? We’ll discuss.Plus, stocks are higher across the board, despite Boeing’s move lower. So were last week’s declines just a healthy pullback? We’ll explore. Hosted by Simplecast, an AdsWizz company. See pcm.adswizz.com for information about our collection and use of personal data for advertising.

Good afternoon, everyone, and welcome to Power Lunch alongside Kelly Evans. I'm Tyler Matheson. Coming up, shares of Boeing down big today after a door plug blows out mid-flight. It's just the latest problem for the 737 Max series, and is it just another one-off unfortunate event or a bigger black eye for the company and the management team there? Excluding the Boeing impact, stocks are actually higher across the board. In fact, even with the Boeing pullback, the Dow has turned positive, so where last week's declines just a healthy pullback, what is still a strong market or a rallying one. Here are the numbers right now. Boeing is costing Dow about 100 points, but it's up 23,

while the NASDAQ is up almost 1% right now, and the S&P is, I should say, the NASDAQ is up 1.7% as it continues a strong session tie. Plus, more pharma deals to tell you about. Merck in talks now to buy Harpoon Therapeutics for $23 a share. The move would boost its cancer portfolio, and Johnson & Johnson will buy Ambrex Biopharma for about $2 billion. Ambrex is also working on cancer therapies.

And shares of cytokinetics are popping intraday as the Wall Street Journal reports. Novartis is in talks to buy the company. They're up as much as 16%, about 13.5% higher. Now the company has been going through a sale process, so there remains the possibility of other bidders interesting and they're interested and they're promising heart drug. But we start with the leading story of the day and the weekend, Boeing. Boeing shares down sharply today after a door plug blew out mid-flight on

737 max 9. The FAA ordering dozens of those planes to be grounded and inspected. And let's bring in Phil Leboe now for more. What's the latest, Phil? Tyler, as this investigation continues, really there's going in two tracks right now. You've got the NTSB investigation into the incident itself. And let's start first off with that part of the piece of the latest news today. The NTSB and regulators not only looking at the plane that is parked at the airport, Portland, but also at the fuselage plug, which was recovered in a neighborhood outside of Portland, that was blown off of the plane. The FAA, meanwhile, that's the other part of this, it has approved the inspection process that it worked on with Boeing. What is that? That allows them to say to

airlines who have grounded planes, okay, if you meet these inspection protocols, if everything on there matches, those grounded planes are closer to resuming flights, I wouldn't be surprised. we start to see some grounded max nines reenter service tomorrow. In terms of the number of planes that are out there that are grounded, that have been built by Boeing, you have 218 max nines, 171 of them grounded around the world. United has 79, Alaska 65. By far, they have the most of any airline in the world. Those two have the most of all the airlines.

Six other foreign airlines have 74 max nines. United and Alaska are feeling the ripple effect of this. Today, United cancelling more flights, not just because of the max nine, many of these are max nine, but the ripple effect, 228 flights canceled today. For Alaska, it's a similar situation. Not only have they pulled those max nines out of service, so you have flights there canceled, but the ripple effect means 143 flights canceled today. And again, don't be surprised if we start to see some of these max nines reentering service

tomorrow or the day after as these inspections take place. A couple other things. As you take a look at this from the perspective of Boeing shareholder, the question becomes, what does this mean for Boeing max production? Dave Calhoun, the CEO, will be holding a safety town hall at the rent and plant in Washington. That will happen tomorrow. The focus will be on building the safest planes possible, making sure that they're doing exactly what they should be doing, and that they are not letting quality controls slip. As you take a look at shares of Boeing, remember, they currently build 38737 maxes per month. That's going to be gradually increasing, steadily increasing over the next year and a half until they hit 50 per month

in the 2025, 2025, 2026 timeframe. Some of that increase, by the way, guys, is scheduled to be happening in the first half of this year into the second half of this year. I'm curious, as to why you say that some of these grounded planes may be back in service as soon as the next couple of days when it doesn't sound as though the investigators really know what caused this anomaly to happen. I think that could tell you something, Tyler. Well, they may not know exactly why, or they're not saying publicly, why they believe that this part of the fuselage was ripped off of the Alaska Airlines plane. They, the FAA is confident from working with Boeing in terms of making sure that whatever issue might be at cause here is not reflected in these other max nines. And so they put

this process together. The FAA would not approve it if they were not confident that these planes could be safe to fly again. And Phil, is it also true according to Jeffries that only 2% of the max backlog is of these kinds of planes or planes that have this kind of feature? No, it's not that they have this kind of feature, Kelly. It's the max nine is a relatively small part of the Boeing backlog. So when you look at the max, the bulk of the maxes that are built, and by the way, Boeing's backlog is primarily about 80, 85%, 737 maxes, and then you've got wide bodies and some other planes in there. But the bulk of it is the max. Of that, the dash 8 is the most popular that's being built right now. The dash 9, which is what's in question here, is a rather small number. What,

218 have been delivered since they've been approved. Then you look at the backlog. There's There's a lot of orders, especially Southwest Airlines, for the smallest variant, the dash 7 that has yet to be certified and approved for manufacturing. And then there's the dash 10, which is the largest, the extended version of the 737 max. That has also not been approved yet by the FAA. But that's in the backlog. That's airlines have said, we want the 10 or we want the 7. That's where a lot of the backlog is. But not so much for the 9.

Okay. Thank you, Phil. We appreciate it. Our Philobo. For more on the fallout for Boeing and what CEO Dave Calhoun has to do now. Let's get to our panel. Jason Gersky is senior aerospace and defense analyst at City. He's got a buy rating, a 315 price target on the shares.

And Michael Boyd is chairman of the Boyd Group in aviation research and consulting firm. Michael Boyd, what's your reaction to the situation here? A piece of an airplane fell off in the sky. And I think it's not as simple as just I worship Phil, but I'm wondering if this is a little simpler than it really is going to to be going down because we did have an airplane that had a structural failure. Are there other airplanes out there? I think, as Phil said, the FAA is going to be very, very circumspect about it. The good news is it's not going to affect the air transportation in the extreme America. It'll hurt Alaska. It'll affect United. But I think going forward, it may be going on a little

bit beyond the next couple of days. I asked Phil the question about allowing these planes back in the air before it would seem we know or the investigators know what exactly happened here. And his answer was basically, well, they wouldn't let them back in if they were concerned that they didn't meet the standard. Am I understanding that correctly? Michael, that's for you. Yeah, it is. Absolutely. and Bill Wright. And I'm thinking something as serious as this, where you have a fuselage failure in flight,

I think it's going to be a lot simpler than just looking at it. I know Alaska initially let 16 up and back on the sky until the FAA said no. So I think, I'm hoping we're right about that, but I think- A lot simpler you said. A lot simpler you said. What do you mean by that? No, I mean, it's not as simple. What I'm saying here is what we have here is a simple situation. where we do have a failure of a structure of an airplane. That we know. It's a serious problem. And it's a serious problem.

I don't think the FAA is going to let anything hit the sky, hit the runway, until they're sure that it and the airplanes that have already been built. And those already at Spirit Aerosystems are completely compliant and safe. Jason, the stock is moving off the lows. And as I cited earlier, the Max 9 appears to be a small fraction of the backlog going forward. You also say it's the only configuration. and Phil mentioned there's more demand for the seven and the 10, but only the nine has this plugged door configuration. Is that right? And what do you think is going on with the shares today and from here?

Yeah, that's right. The dash nine is the one that has this plugged door. It's an aircraft that's largely designed for Ryanair, right? It flies a more dense seating configuration and therefore needs the extra doors. Other airlines aren't flying it as in such a dense way, don't need those doors. And so they plug them. And I think it's really important to note here that these plug doors have been in the dash nine going back to the NG program, which goes all the way back to the late 1990s. So this configuration has flown safely since the late 1990s. The max has been in service since 2015.

So there's a long history of operations here where we haven't had this kind of issue. And it's, you know, just keep in mind this was a brand new aircraft. There's only a couple of months old. It had recently come out of an MRI facility. So it's not entirely clear what happened. but it's pointing to something in the near term on the manufacturing side versus a design issue with the aircraft. So shares are down today because, you know, people have got a discount some level of risk associated with this for Boeing. And I think the financial implications for the company are going to be pretty de minimis and not material to the overall long-term outlook for the company, though, at this point, particularly if we get planes back up and flying here sometime this week.

So it sounds as though you think that the immediate stock reaction is overblown. Oh, for sure. Yeah, we put out a note last night that suggested, you know, it's about $70 million a month in potential, you know, compensation charges that Boeing might be facing. Two airlines. I see. And then, yeah, and then maybe three percent of its cash flow target is at risk here. If they were never to deliver another dash nine again and they weren't able to

convert those orders into other variants of the air of the 737 max, which I think they'd be likely to do. But what about the reputational damage to Boeing from now a second, widely public, really a third, widely publicized event affecting this max series of jets? Because, of course, the max eight was grounded for a couple of years having to do with some software issues. And so how damaging reputational, I suppose, could this be? I know who that question to you? Jason, why don't you go first and then let Michael have a swing at it? Yeah, I'll be really brief here.

I would just say that I think it depends on what the root cause of this is, right? If this was manufacturing issue at Boeing or one of its suppliers, not great. If it's a design issue, that's a bigger problem. But if it is, you know, the operator itself was doing some MRO work that had a an impact here and this ends up being, you know, at the feet of the operator, then I don't think there's any long-term reputational damage to Boeing. And how about you, Michael? And obviously, it's what a blessing that apparently the seats immediately adjacent to that

door plug were not occupied. Yeah, I think it is correct. I mean, this is going to be forgotten, I think. But the problem is, you know, Boeing's already been squeezed out of China politically with the 737, seven, at least new orders. Other places in the world, there may be some reticence to order more them, but the good news is you ain't got no place else to go. You've got Boeing or Airbus, and Airbus' dance card is full. So I'd have to agree, in the near term, there might be some snickering, but in the long term, it's not going to have any effect on Boeing's demand.

All right, gentlemen, thank you very much. Jason Gerski and Michael Boyd, we thank you very much. Let's move on now to shares of Invidia and some other chip names surging today, helping to give than Azdaka Boost, and that's on news. We're starting to get from the Consumer Electronics Show that is about to get underway out in Las Vegas. Let's bring in Christina, parts of Nevelas, with more. Christina. Well, InVitia is playing up to its strength by announcing today new consumer desktop GPUs that can run on your PC at home, specifically three new graphics cards for video gamers, which have been more or less leaked in the past few weeks, so nothing too major in news, along with some updates to generative AI, robotics, and auto parts.

partnerships. The stock, like you mentioned, is up about what? Is it 5% over 5% now? As is the case for competitor AMD. They also launched a new gaming GPU. InVi and AMD say these GPUs and CPUs also for cannot be used to run AI at home and that the chips can power local generative computers, aka AI PCs, a popular theme at CES this week. For those that don't know, AI PCs are computers that can run powerful AI software with companies like Intel and AMD suggesting it will actually help revitalize the PC market. Nvidia also noting that all of these new gaming chips are compliant with U.S. export controls put in place this past October and can also be shipped to China, Tyler. All right, Christina. You mentioned China. Invita is making AI chips for China, also trying to comply with U.S. regulations in the process.

You have some updates there? Yes. So we know that they've been blocked by the U.S. government, so NVIDIA has been working to create. these lower powered AI chips. News from Reuters today that these chips are going to be in mass production for China. In Q2 of this year, I reached out to Invidia. They wouldn't confirm this, but they said that they're just working with the U.S. government. But the second point, which was the news clipping that you just saw on your screen from the Wall Street Journal,

saying that some of these larger players in China don't want these lower powered AI chips like Tencent and Alibaba. Instead, they may opt to go for local alternatives from, let's say, a company like Huawei. If that should be the case, especially in the medium term in a few years from now, that means that NVIDIA will slowly start to lose even more market share in China because of these U.S. export controls. Wed Bush is a little bit more optimistic. They put out a note today saying that, hey, that's not necessarily the case. It's a net positive that NVIDIA was able to make these China-geared chips.

But overall, in the long term, that could mean NVIDIA loses market share and may no longer dominate the AI chip space. But that could be a ways out when you're dealing with China. Chinese competitors. All right, Christina, thanks very much. Christina, parts in nevertheless. Coming up, markets stumbling a bit to start the year, a combination of some suboptimal headlines for some key names, as well as overdue profit taking, I suppose. But is any pullback in this market actually good for stocks in the long run, buying a little breathing room, weathering the storms or lack thereof, relatively low snowfall this season, hurting the ski industry? We'll talk about that when

Power Lunch return. Welcome back to Power Lunch. Despite Boeing's drag on the Dow, all major averages are higher today, with the NASDAQ surging more than one and a half percent. Does this prove that last week's pause in the rally was just a healthy pullback? Mike Santoli joins us from the New York Stock Exchange for more. Michael? Yeah, Kelly, it certainly suggests that. And of course, even after today's gains, there's no saying that this choppy period that started the year is truly over. We could go down a few more percent and still have it be, in retrospect, a fairly healthy reset of the market. up 17% over the course of two months, down a couple percent in the S&P, really no big deal. And there were no real trip wires that were breached that would say that this is something more.

Credit spreads have been absolutely fine. The volatility markets have been firm. You've also seen kind of the NASDAQ 100-type stocks have the deeper setback just because there was more air under them. To me, the issue is going to be that the rally at the end of last year was the market's way of taking a lot of credit up front for the soft landing being executed. And so you have to constantly monitor that. Seems like there's a little more confidence on the inflation side of the soft landing thesis than maybe that growth is going to be resilient. So I think focus on soft patches and the decline in fourth quarter earnings forecast going into reporting season is probably the next test here. But I guess the rally kind of cemented bull market status for this tape, which means that, you know, the benefit of the doubt goes to the dip buyers.

All right. Stay right there, Mike, as we build on this conversation with our. next guest who thinks the soft landing thesis is playing out. And she doesn't expect six cuts from the Fed this year. Let's bring in Stephanie Link, Chief Investment Strategist with High Tower Advisors and a CNBC contributor. Hey, Tyler. Hi, Stephanie. How are you? I'm good. How are you? Happy New Year. So Michael just laid out the idea that a lot of the rally may be sort of front-loading the presumption that the economy is going to achieve a soft landing. Do you agree with that?

And I do note that you believe that a soft landing is what is playing out in front of us. No, there's no question that we're seeing a soft landing right this moment. What happens in the next six to eight, 12 months from now is obviously the biggest question. But I do think that the surprise all of last year, Tyler, was the resiliency in the economy. Last week we got more proof of it, not only in jobs, but we actually got factory orders and Durbelgood orders. quarter's cap-X numbers were actually better than expected. And we know inflation is coming down. All right, wages are a little sticky, but they're down from their peaks. And the CPI number is going to be very big this week when it gets reported. Add it all up, I kind of have like three

takeaways. One, the strength in the economy is going to mean that the Fed probably doesn't cut as much. Maybe it's three. I don't know. It's three, four, whatever the number is. But I think that's starting to get priced in. And that's because the inflation number does remain a little sticky. But also, I think the better growth means better earnings. And the better job numbers mean better consumer. And consumer is 75% of US GDP. So all three of those things, I think, are very healthy. Yes, maybe we did pull in to Mike's point on the soft landing thesis to the markets overall. But I do think earnings are going to be better than expected. And so therefore, not only are going to continue to see kind of the market grind higher, but also broadening out.

and we've been seeing it broaden out. Don't give up on tech, but also look at some of these other names that have been beaten down that will also participate on that earning story. Steph, two sectors that peak my interest right now. One is energy because it's behaving so poorly all of a sudden, and you'd think there'd be plenty of catalysts to move higher, and maybe putting too much on the commodity versus the stocks. The other is health care and this stream of deal.

I mean, you pointed it out, right? How much dealmaking have we had there over the past year feels like maybe, maybe a near-term negative for the buyers, maybe, but what they kind of have to do in the long run. On the healthcare side, it's so exciting, right? Because this sector has been dead. Biotech, I mean, in the last year. Biotech Twitter is like all of us.

Everyone's trying to find the next, you know, big one now. I know. I'm just trying to find the ones that are making the acquisitions that are building on their pipelines that are going to be able to facilitate long-term growth. And the stocks, all of them, Maybe exception is Lily, but that's a different animal. But there's almost all of the pharmaceutical companies are super cheap.

Bristol is a name that I recently owned, I bought rather, and I've been buying. And they've done, Kelly, they've done $115 billion of M&A since 2019. Wow. And it's gone on notice. Now, they have to because. $11 billion of M&A in four years? That's insane. Yep.

Yes. Well, they have to because they have a lot of products that are going, off patent, but they are building. And it's kind of like not got, it's gone on notice. And the stock trades at seven times earnings. They have a lot of free cash flow, as you know, because they're doing all these deals. And they have an ROE of 25%. So this is a company that's kind of left for dead, and I kind of think it's exciting. But then today, we had three deals announced also. So it just keeps on growing and building. And that's why I think that sector is super exciting for this year, especially since it's lagged for a while. Michael, let me come back to you. I mean,

Stephanie just taps into the idea that there's a lot of deal activity in the pharmaceutical business. What is the view on Wall Street as to whether 2024 will be a better or a much better year for deals than 2020 was? Yeah, people will always point to the ingredients of more active deal activity, and it is in place. What is interesting is as soon as yields came off their highs and credit spreads have come in with yields going down. So the corporate credit expense, corporate debt expense, has really come in a little bit. It just took the pressure off and it did release maybe some pen-up appetite for getting bigger in that fashion. Now, whether that spills into whether the rally can kind of last long enough to also have IPOs come through, you know, it's easy to point to the hype over AI and maybe even some areas of biotech and, you know, the GLP ones and everything and say,

this has gone too far. We've already kind of over-discounted how big these opportunities are. If all that happens and there hasn't been any IPOs and there's not, you know, the ticker of the day saying this is seizing on a huge trend, it's not usually the way a bull market ends without that at least being tried. Yeah. So, Stephanie, you mentioned a couple of names that you've added recently, Bristol Myers, Johnson and Johnson also, Schwab and Exxon Mobil. And the theme here is not necessarily sector specific, but the fact that these were kind of also RANS last year. Yeah, it's the laggards, and that's what I'm looking for, because I'm really big into mean reversion. I think it does eventually happen. Exxon Mobil down 4% in the year. We know what the overall broader averages did.

And so big laggars, because they have great assets. I love the pioneer deal. They're going to be number one in the Permian, and they've got $38 billion in free cash flow, and it trades at 5.7 times earnings, which is ridiculously cheap compared to the 7.9 times average over the 10 years. Bristol Myers, you know, we talked about that again, too. That was down 36% by the way. So that's why that one to me is very appealing. Schwab, I think, also down 15% in the year. And I think as kind of the yield curve kind of steepens a little bit, I think you'll see a little bit less cash sorting, which is a good thing. I think net interest margins have actually bottomed. So so says the CEO, by the way. NNA is actually recovering and they have the Ameritrade acquisition. And so the stock is trading at about 13 times what I think they're earning. earnings power is, which is $5.25, so super duper cheap. And Jay and Jay, I love the acquisition that they did today. They're building on their cancer franchise. They've got a great balance sheet. I love spins. They spun off their consumer business. Now they can focus on pharmaceuticals and MedTech. And I think they're going to do really well. Eventually, we'll get the talc situation behind them. And I think the stock will then re-rate. By the way, they have actually increased their dividend, 61 consecutive years in a row. So I count on this year being the 60-second.

Well, I'm going to add you to the Michael Farr fan club of J&J. That's the one he always mentions. He always mentions. He does. Stephanie Mean Reversion Link. Thank you. Michael Santoli, thank you as well. Thank you.

And further ahead, we'll talk some carbon capture. Looking at the startup, taking the fight directly to the main cause of climate change, carbon. We have details in today's clean start. Welcome back to Power Lunch. I mentioned this a moment ago, but oil is falling more than 4% today as Saudi Arabia cuts its prices. Got to get to Pippa Stevens for the details. What's happening here, Pippa? Yeah, that's right, Kelly. So this is all about Saudi Arabia cutting the price of its oil, which is raising concerns that they see the market as oversupplied. So they slash prices for

Asian customers by $2 per barrel, meaning their official selling prices are now at a more than two-year low. It comes as OPEC and its allies try to put a floor under oil prices through their continued production cuts, but there might be a limit to the market share Saudi Arabia wants to seed amid record production from non-OPEC producers, including the U.S. Now, ongoing protests in Libya means that 300,000 barrels per day of production is currently shut in, but clearly that is not enough to counter the fears of this oversupplied market. Now, Nat Gas was very much in focus at the end of last week, jumping 15% ahead of the winter storm, but it's retreating.

Oh, actually, now it is up 3%. It was lower earlier today. Now, the mid-January forecast has turned colder, but it's still not enough to counteract high storage, which is about 13% above the five-year average. As Elon Rubin from EBW Analytics put it, even a severe weather event would create fireworks for spot prices, but do little to support the medium to long-term outlook. But, of course, this is always a volatile trade now approaching that $3 level. Kelly Tyler. Pippa, great to see you. Thank you very much.

Pippa Stevens. Let's go to Julia Borsten now for a CNBC News Update. Hi, Tyler. Well, the Pentagon says Defense Secretary Lloyd Austin remains in the hospital today. A spokesperson said this afternoon, Austin is recovering well and his prognosis is good, and he's no longer in intensive care. The Pentagon did not share any details on what procedure Austin had. He's facing backlash right now for keeping the president and other senior government leaders in the dark about the hospitalization. A White House official said earlier today, President Biden is not considering firing him. The Red Cross is issuing an urgent call for blood donations. The organization said today it is facing an emergency blood shortage that is leaving patients at risk of not getting life-saving blood transfusions. The Red Cross says its number of donors is at a 20-year low. And the Peregrine Lunar Landers' mission is in jeopardy. The company behind the first commercial robotic launch to the moon says there is a failure within the propulsion system.

It says its team is trying to stabilize the loss and exploring alternative. alternative mission profiles. The rocket launched early this morning and was supposed to land on February 23rd. Tyler, back over to you. Yes, oh my goodness. Well, that sounds like a real setback for that program. Thank you, Julia, Julia Borsden. And coming up, Bale Resorts down 14% in six months. One potential factor holding the stock back recently is warm weather. That's usually good news for a resort stock, unless it's the ski resort company. We'll discuss more next. Well, a weekend storm blessing some relatively green northeast mountains says New York City nears merely 700 days without an inch of snow in Central Park. So are skiers happy with the powder? Of course they are. Or are they changing vacation plans considering the fact that snow has been lighter than normal in many parts of the country?

During us now is Chris Rouranka, Deutsche Bank Capital Markets analyst covering Vail Resorts and other names in leisure and hospitality. Chris, welcome. Good to have you with us. Thanks, Tyler. Thanks for having me. Lack of snow. I mean, if you're sitting where you are looking over Central Park there or with a background of Central Park, there's no snow. Out 10 miles west in New Jersey, there's plenty of snow. It's like four or five inches. That being the case, snow has been lighter than normal in many of the northern mountain areas of the United States. Whistler, I hear, has not had a lot of snow. Montana has not had a lot of snow. How does that affect a company like Vail Resorts? Yeah, well, it affects them less than it used to, Tyler, many years ago before they came along with the Epic Pass, which is their big offering that lets you go to any resort on one pass. You know, they were totally weather dependent. Right now, they're getting about 70% of their lift ticket revenue and skier visits from the advanced sale pass, which is an advanced commitment. It's non-refundable. You have to buy it before the season starts.

and you're somewhat at that point at the mercy of the weather. And so they have done that to kind of eliminate that. Also, Vail is a much more, yeah, they're more diversified than they've ever been. Oh, yeah. They have 37 resorts in the U.S. versus five when I started covering the company back in 2006. Yeah, no. And as you say, that Epic Pass has been a game-changing product. Rivals in the space have done similar things, but nothing is quite as large in scale

as the Epic Pass is. But I gather that the unit sales of Epic Pass are a little down, even though total revenues are roughly tracking where they thought. Yeah, as of the latest update they gave us, which was back in early December, they were actually up 4% in volume versus last year on a pre-sale basis. Now, that doesn't mean that's where it's going to end up. That is partially dependent. That is just a past sale number from here on out. it is going to be partially dependent on weather. There are a lot of folks that don't want to go skiing if conditions are less than optimal. For others, there's options, spa, restaurants, things like that.

But for most folks, if they bought the pass, you know, they're going to go a certain amount, but it works a lot better if there's ample snow for sure. That's fascinating, Chris, that so much of this is a, you know, you have to decide, and I don't know, pick the month, September, whether you're going to buy the pass. and it's non-refundable and you have to have it. So if someone like me wanted to show up and ski on a casual snowy weekend, what would my options be? Can I still go?

Yeah, that's what's difficult now, Kelly, compared to what it used to be. You have to buy an advance ticket now. You can still do it with relatively short notice, but they're really eliminating the walk-up sales. And those are, by the way, if you go out to veil and you try to buy something they have, you're going to pay well over $200 for a single day of, versus if you buy some kind of pass, you can get that same ticket for somewhere between 75 and 100, depending on the date.

And I understand the economics of that, but don't you think after a couple of years of no snow, people are going to start going, you know what, I'm holding off this year? Or maybe they just go for the socialization and there's enough. How much of the snow is man-made versus not? Yeah. So at this point in the season, they're still making a lot of snow. Vale and a lot of its sister resorts in Colorado have very recently gotten some more snowfall. and I know there's more in the forecast, which is great.

But in November and December, which used to be big snow months, you know, they're making a bunch of snow now. How big a portion of Vail's business are real estate sales or real estate related initiatives? And how have those been tracking? Yeah, Tyler, that's really no longer a part of the business. It's a very tiny sliver, less than 1% actually of their revenue is going to come from real estate. back in the day, back in 2006 and seven, it was significant. It was over a quarter or a third of profits. Do you go skiing a lot, Chris?

I don't go a lot. I go occasionally. I tried to pick up snowboarding also, which is very fun. You're a brave man. I've always been afraid to try the snowboarding because I thought I would spend most of the day on my backside and then most of the evening taking Advil. Well, Vail has some pretty good instructors. You know, then ski school is also a big part of.

their business. And that's from all ages. Kids on up to seniors, they will teach or try to teach anybody to ski or snowboards. So that's, you know, that is a component of business that has grown pretty meaningfully over time. They do have a tremendous reputation in ski schools and also in hospitality. You know, sort of right up there with Disney in terms of creating an experience for you. Chris, thank you very much. Chris Wuranka of Deutsche Bank. Thank you. And I know snow or no snow. You know, social media was filled with all the Celebrities out in Aspen over the weekend. Oh, and Aspen, yes.

Oh, yeah. Good, okay. Coming up, capturing carbon out of thin air. We'll hear from a startup using cutting-edge filtration technology to improve the environment. It's time for Clean Start when Power Lunch returns. Welcome back. One of the fastest growing weapons in the fight against Global Warning is the technology to remove carbon dioxide from the atmosphere. It's called Direct Air Capture.

It's not a perfect science yet, but it's on its way. Diana Ollick explains in her continuing series on the... climate startups. Diana? Well, Kelly, direct air capture is one of the hottest technologies to cool the planet, with the U.S. government now investing billions of dollars in so-called DAC hubs. But the method currently requires a lot of water, which is a major downside. Now one startup is about to change that. Sucking carbon directly out of the atmosphere is becoming big business, with firms like Climbworks and Carbon Capture using massive fans. But most of these technologies consume vast quantities of water. A California-based startup called Avnos does just the opposite.

We produce as opposed to consume water. We don't consume any heat, which is a major differentiator and allows us to be more cost-effective, more resource efficient, and ultimately more scalable than other solutions in the space. Avnos invented what it calls hybrid direct air capture, which uses a dehumidification technology to produce approximately five tons of water per ton of CO2 captured. Others consume about that much or more. We have the opportunity to turn a cost line item for other forms of direct air capture in spending money on water to a revenue line item where we can generate revenue by selling the water that we produce directly from the air. Both water and captured carbon can be used to make sustainable aviation fuel. That was particularly attractive

to investor JetBlue Ventures. It is not only more climate friendly, but is also a cheaper way to pull carbon from the air and actually produce a feedstock for the future for sustainable aviation fuel. In addition to JetBlue Ventures, Avnos is backed by Shell Ventures, the Grantham Foundation's neglected climate opportunities fund and Rachine Capital Management. Total funding from VCs so far, $35 million. Like other direct air capture companies, Avnos is benefiting from both government tax credits and direct funding. Critics argue direct air capture in general is never going to remove enough carbon to make a dent in the 50 billion tons of COT emissions each year. But Kane argues this is just one tool in a decarbonization ecosystem that includes renewable energy like wind, solar, and geothermal.

Back to you guys. Diana, thank you very much, Diana Oleg in Washington. Coming up, Footwear Phenom, shares of crocs soaring on record revenues for 2020. expecting to report nearly $4 billion in sales. We will trade it and other big movers of the day in three-stock lunch. That's next. All right, time for today's three-stock lunch. We will trade some big movers in today's session here with our trades.

David Wagner, portfolio manager at Aptus Capital Advisor. Up first is Boeing, a sort of stock of the day down following that incident with the 737 Max 9. David, what's your trade here? Do you buy this sell-off? Is the sell-off overdone? What do you think? I thought, I think it's overdone here. You know, I thought the price action that we saw this morning was a bit draconian. Luckily, the stock has started a rebound since the opening bell. But I see

this price action is overdone really because of two different reasons. First, the max nine represents only about 16% of the max fleet and the max nine is only about two percent of the company's backlog. Secondly, it seems like this is a one-off manufacturing issue as the earlier generations of the 737 ERs had the same exact approach to the store, and there's no incidents on like a million or so flights. So I don't believe that this incident should really have a significant impact on the Boeing manufacturer ramp, but it does highlight, you know, a history of quality escape problems for the company. And these problems just aren't acceptable in this type of industry. So hence why you're getting a little bit of a discount. Just for the

record, do you own it personally, or does your company have a stake in Boeing? Our company has a stake in Boeing. Okay, great. And let's move on from Boeing to Crocs. Going the other way today, posting impressive guidance, strong outlook for 2024. The shares are surging 20% now. They just keep going. David, are they ever going to go out of style? I hope not because I'm wearing them right now. Unfortunately, it was soft. But Kelly, I've been known to say on this program for a long time that I don't believe that brands matter unless your Crox or Bush Light. And the announcement, The announcement that you saw this morning at the ICR conference down in Orlando just shows the powerful growth story for this company, not only for how the brand matters here in the U.S. domestically, but also internationally. We know that China grew by like 90% last year, and there still appears to be a long runway for growth in Asia as a whole.

But more structurally, I think that investors have learned that Crocs brand is one of the few brands that performed well during COVID and out of COVID. I think most other brands really can only say they did that on one side or the other, but not both. But if there was a black eye for this company, I think it's easy to point to that hey, dude brand, counts for about one quarter of the sales of the company. It's more of a turnaround story. But the good news for me, in my opinion, is that the company really de-risk that narrative on their last earnings call. So Kelly, Tyler, Bottle, I think you really strap these clogs on, you know, put them in four-wheel drive and hang on for the ride. All right.

Let's go to Five Below, the company expecting strong fourth quarter and full year fiscal 23, 23 results. Shares of the value retailer down today, down about 10% in the past week. So how do you trade this one, David? Yeah, I'm not a buyer here on Five Below for a few reasons. But if I was a buyer in this name, it almost feels like I've really missed out on the story, given where the name trades from a valuation perspective. The valuation isn't palatable for me whatsoever, trade it 32 times forward earnings. though I would say some believe that it is warranted. I mean, the story for five has always been

about unit store growth. I mean, Tyler, find me another retailer that's grown. It's unit stores by 15% on an annualized basis, not just in the past, but in the future. You really just can't. So I understand where they've gotten that robust multiple. But the thing for me that really caught my eye on some of the management's commentary this morning down in Orlando was the expectation for increased costs regarding unit store construction. So if there's a any type of hiccup in this nature, you could see the main catalyst for that premium valuation really go to the wayside. And I think that the shares could hit even more of an air pocket. So that's why I feel like I've missed out on the story, and I'm remaining on the sidelines.

All right, David, thank you very much. David Wagner, aptest capital. We appreciate it. So many headlines. So little time left. Let's power through as many as we can in closing time next. Welcome back, just two and a half minutes left in the show. Several headlines. Let's get right to it. Starting with Apple, according to analysts Jeffries, their iPhone sales in China fell more than 30% last week compared with remaining flat for competitors like Xiaomi and Huawei. Jeffrey's saying iPhone sales volume could fall double digits in China this year. That's a stark decline tie. Yeah, no, it really is. And Xiaomi and Huawei have come on and eaten some market share. It's not just that Apple's sales have cooled, it's that others have come on and are competing with

them very effectively. it's worth Apple is finally breaking its losing streak with a 2% gain today. All righty. Moderna says 2023 COVID vaccine sales plunged by two thirds year over year to $6.7 billion as fewer and fewer people opt to get immunized. That figure was actually in line with the company's full year forecast, but was still a giant drop, the $18 billion in vac sales that the company posted back in 2022. I think people are just sort of feeling as though they've had.

enough vaccinations and they'll just take their chances. Although I did just get the RSV one and that's been rampant this year. So who knows. But again, four percent. I think we're moving in. For the record, I did get jabbed. So there you go. There you go.

And how about this Tiger Woods decades-long partnership with Nike is officially over? He announced on social media today. His time with the iconic sports brand has come to an end. He's worn Nike since he first signed with the company in 1996. No word yet on his future endorsement plans. Very interesting there. I mean, he's, I think, with tailor-made for golf equipment now that I think Nike is out, basically, of the golf equipment area. Let's talk about a hot ticket. The average price for tonight's college football national championship game. Diana Olegs family will be watching very closely.

Oh, yeah? Yes, they will be. Between Michigan and Washington, now tops $2,800, according to Seat Geek. That is the highest figure since 2017's national championship game. $1,100 more than last year's title. game between TCU and Georgia. The game is tonight. It is in Houston, the wolves, and Washington Huskies. And remind me, are they changing it next year or? They expand the playoff to 12 teams next year. Can't come too soon, frankly. Yes, after this season. Too many balls. Thanks for watching, Powerline. Closing Bell with the Dow, not only reversing its losses, but up 150 points. It starts right now.