Power Lunch - Breaking News: Elon Musk buys Twitter 4/25/22

Episode Date: April 25, 2022

An historic tech deal. Elon Musk buys Twitter for $44b. Tyler & Kelly reported the news as it happened – from the stock being halted to the deal being done. Experts were on hand with reaction, analysis and what it means for the future of the social media company. Hosted by Simplecast, an AdsWizz company. See https://pcm.adswizz.com for information about our collection and use of personal data for advertising.

Welcome everybody to Power Lunch. I'm Tyler Matheson. Here's what's ahead on a Monday. Midday market turbulence, yet another volatile day for the major averages, investors bracing for a few intense days of earnings coming up from Boeing to big tech, should you proceed with caution or start taking new positions. Plus, it's harder to hide in this market. The traditional safety playbook may not work with inflation at multi-decade highs, but there are some surprising places that could offer some peace of mind in the market and we, Kelly, will list them. Tyler, thank you. Hi, everybody. The NASDAQ's fearing better than the Dow and S&P today. Still, stocks are broadly way off their worst levels of the session. The Dow was down 488 at the lows. We're down about 194 right now.

The S&P, the worst performer. It's down 35 or so points right now. And the NASDAQ was positive. A short time ago, it's now negative by nine points. We mentioned Twitter. Let's get a quick check on the stock. Up about 5% on those reports that Elon Musk is nearing a deal for the social media company, 5420 still the rumored price.

51.39 is where the shares are at the moment. And energy, the leader this year, the big laggard on the session today, Schlumbergerge, Halliburton, APA, all some of the worst performing stocks in the group. We're talking about 8% declines in some cases as crude oil has been slipping on concerns about Chinese demand tie. All righty, Kelly, nearly a third of the S&P 500. Half the Dow set to report earnings this week. The results come against a backdrop of high inflation, tighter-fed policy. The stakes are high.

The results will tell us if corporate profits are healthy and whether the bulls will force back the bears. Joining us now for a lightning round of the name. She's watching. Stephanie Link, Chief Investment Strategist and Portfolio Manager at Hightower Advisors, also, of course, a CNBC contributor. Okay, we call this a lightning round.

I don't know how you can go faster than you normally do. So this is lightning squared. Let's go through some of these companies. I'll let Kelly jump in in just a minute. Let's start, why don't we, with Boeing, a company that has earnings out this week. And it's good to see you and be with both you and Kelly. Yeah, so 180 companies in the S&P 500 are reporting this week. So it's going to be very busy.

Boeing, though, I think is very important. It's a reopen name. We know the airlines last week reported okay results, but the guidance for the second quarter was very, very strong on traffic trends, on pricing, on capacity. This story also trades on the recovery of 737 max, which it's happening. and then the 787 deliveries, which I think is going to be second half, 2022. That's what the rumors were over the weekend. But it also trades on free cash flow. And while they'll see a cash burn this quarter, I expect them to reiterate 5 to 6 billion in free cash flow for 2022.

The stock's really lagged, and I think this is their year to see a recovery. All right, let's talk about a company that is also like Boeing, been through its hard times, and that is General Electric. Yes, and this is a reopen, too, and it's tied to Boeing because they provide engines to Boeing and to Airbus. But aviation has been their strength over the years. And I think commercial aftermarket are going to be really good results. They've done a good job in health care. That's been their gem, but it's been supply constraints.

So I think you're going to hear good things about the supply constraints, easing for them. And then power, they're doing a good job on cost controls. This, too, Tyler, trades on free cash flow. $5.5 to $6.5 billion for this year is the bogey. Let's move on to the next one, which is McDonald's, has been in the news lately. It has been in the news lately, but a couple of years ago, they decided to simplify their menu. And it's really worked. It's led to double-digit same-store sales throughout the pandemic.

This company also has the three D's, if you will. They've been investing in digital. They've been investing in drive-through, and they've been investing in delivery. And those three things will keep same-store sales. And the load of mid-single digits. I like the story. It acts like a staple stock, too. The three-D's at Mickey D's, delivery, drive-thru, and digital.

Stanley Blackendekker. Stanley, I mean, they've done all the right things, but the stock just can't get out of its own way. But this past week, they actually sold out of completely their security. Finally, this is what we were looking for. They're going to take that $4 billion and buyback stock. The story trades on tools and storage. That's 70% of total revenue. Home Depot and lows is 30% of that 70%.

I think that they're doing just fine. And we want to talk about, we want to hear what they have to say about supply chains because they've been really plagued by the supply chain issues. But I think it's going to get better for them sometime in the second quarter. And the last one is a company that we used to talk about all the time, maybe a little less today. That's Texas Instruments. I know, and I don't own it, but I like to pay attention to it because it's so diversified with their customer mix and also their end markets. They have 100,000 customers, and some of their end markets are auto, very important, auto, electronics communication services. They also had an analyst meeting in February and talked about increasing CAPX to $3.5 billion over the next three years.

And also, though, with that higher cap X comes higher growth, 7% versus 3 to 4%. So I want to hear about how all that shakes out, and they, too, will talk about supply chain. If it weren't busy enough, Steph, we do have Twitter results this week. But if the stock goes private, our days of being able to even talk about it are numbered. I know. No, we will not talk about it. Absolutely not, unless he takes it private and then takes it public. Yeah. So we'll have to see. We'll have to see. Stranger things have happened, Kelly. So there's absolutely, they have a lot to fix, though, Cal. And I think he running the, running the show that will help pretty substantially. So I say take the money and run. All right, we will leave it there.

Stephanie, appreciate it. As always, thank you. Thanks. Stephanie, Link. Let's pivot now to big tech, because we have Alphabet, Microsoft, Meta, Amazon, all reporting this week, like you heard from Paul Hickey last hour. This almost never happens that they're all reporting in the same period. The results come as the NASDAX are down about 20% from their 52-week highs. So does this represent an entry point, or should you proceed with caution following Netflix as disappointment last week. Jason Ware's partner and CIO at Albion Financial. Jason, that's the thing. Netflix has kind of left a bad taste in our mouth. Hi, Kelly, good to be with you. Yes, Netflix certainly left a bad taste in most folks' mouths, especially as it pertains to

technology. But, you know, we think despite the volatility in tech, despite the drawdown, despite the fact that the group has been unloved for about six months or so. And despite those weak numbers from Netflix, we think investors should continue to own large-cap, growth tech for the long term. And I want to stress own, not trade, because over the coming days, weeks and even months, the group's probably going to remain a bit choppy, given the fact that investors are still trying to get their hands around when inflation is going to peak and cool off and what's the path of Fed policy, how steep is it going to be? And more importantly, how far are yields going to back up? What does 2023 look like? These are all a bunch of unknown answers right now,

and that's going to keep tech probably on a short leash for now. But again, owning these great companies long term, especially at these valuations, we think makes a lot of sense. I wonder, I mean, it's pretty obvious that the different, lumping all these companies together no longer really serves much purpose. The differentiation this year has gotten even more dramatic with Netflix and meta down more than 40 percent. Apple, relatively speaking, hanging in there down 11 percent. Who has the most to gain or the most to lose this week? Yeah, that's a great question and a great way to think about it is segmenting out these companies into different groups. And, you know, we're pretty excited for the Google quarter. We think they're going to show a pretty decent upside to consensus estimates. One, because Google manages their quarters very well. But two, not only is this a structural growth story, but there is a bit of a cyclical element to Google's business with digital advertising. We didn't really know that going into the pandemic. We now know that after living through a pandemic, that there was a step down, a slowdown in that business. And we think that there's probably still upside and analysts are catching up to that name. We're also pretty excited about Apple.

later this week, and we think Amazon, just given the, you know, the stock hasn't done anything in almost two years, and everyone's pretty negative on it. It's trading it two and a half times forward revenue estimates, or at least our revenue estimates. So we think there's probably upside in those three quarters as we look out over the next few days. One of the things that I think is interesting in your analysis is as you look at some of those established tech names that you just mentioned, and you compare their multiples with other companies like a Procter & Gamble, like a Coca-Cola.

You go, which would you rather have an A or a P and G? I guess I'd rather go with the tech names, thinking that they have a greater growth future. Yeah, Tyler, I'm glad you brought that up because if you look over the near term, those defensive names still look well positioned, just given the economic slowdown and given the heightened fear in the market. But when you take a step back and back out the aperture a little bit, and you say, you know what, would I rather own Google at 22 times forward earnings, a great secular growth story with a huge huge economic mode. Would I rather own Procter and Gamble 29 times earnings? This is basically a

nominal GDP story with probably margin pressure due to enduring inflation. To us, the answer is very simple if you look out over the next two, three, and five years, which one makes sense. A lot of the outperformance from bang of the last few years has now been worked off in valuations of a reset, except these businesses have done so much better than some of these slower growth businesses. So just making those comparisons, Microsoft versus Walmart, you know, Apple versus utilities now trading at 22 to 25 times earnings for us doesn't make a lot of sense. Again, near term, they might work out being more defensive, but longer term, we think you own the better company. Can you can you make money in what you describe as old tech, IBM, Cisco, Oracle, say? Yeah. Yeah,

we think so. If you're highly selective, a lot of those companies, their best days are behind them and they're probably longer term value traps. But yeah, IBM, Cisco, companies that have great dividend yields that are growing their dividends much faster than inflation that are trading at depressed multiples relative to businesses that are perhaps turning around, we think, are interesting areas. But again, you've got to be very careful there. You also have to be very careful in the new tech names, those pandemic winners, those Kathy Wood type stocks that are really, really had high valuations are going to have a difficult time in the new monetary policy regime. So you've got to be very selective in tech. You can't own.

own it as a monolith. Jason, do you want to give us potentially a parting thought on Twitter here? Stephanie Links, that you think they should take the money and run. As you guys know, we used to own Twitter many years ago. I haven't owned it in some time. You know, hard to say about taking the money and run. Twitter's been tough. It's been hard to monetize. Maybe Elon's going to do something different, although Elon is an interesting figure. So I'm not sure whether that's good or bad for the company long term. But if you're an investor in the stock, these valuation right here looks pretty interesting. maybe you do take the money. Well, that's two for two. Two for two. Keep asking. Jason, thanks. We appreciate it. Jason Ware.

All righty, coming up, lockdown fears in China, rippling through the global markets, adding to the risk of a worldwide slowdown. China's Shanghai composite dropping more than 5% today, but Chinese internet stocks are turning around on Monday. We will find out why. And as we head to the break, shares of Snowflake up 8% after Wolf Research initiated coverage of the company, and outperform rate. Welcome back, everybody. Check out what's happening with Chinese stocks. The Shanghai Index dropping more than 5% today,

and it's having its worst months since 2016 when the Chinese economy was really in crisis. Now, they're struggling to contain another COVID outbreak, prompting fears of lockdowns in Beijing that could lead to a broader global slowdown. Midday, though, Chinese tech stocks have been behaving a little bit better. You can see, especially the Chinese Internet names

in the green, D.D.4, for instance, up 4%, J.D. up 3%. Here to explain and to talk about what this might mean for the Chinese investors potentially, is Crane shares, CIO Brendan Ahern. Brendan, it's great to have you back. And the first thing I thought when I looked at Chinese internet names outperforming is, is it actually the classic stay-at-home trade? Well, it is true, Rachel, that, you know, in some ways these companies are beneficiaries to lockdown policies.

At the same time, the government is going to work to ensure that these companies, aren't taking advantage of residents. So certainly we're seeing a little bit about performance, but I think some of that is just really driven by just Shanghai and Shenzhen, the A share market, which did, had a pretty decent year in 2020 versus Hong Kong U.S. names underperforming. We're seeing a little bit of a reversion between those two sets of Chinese equities. So do you read into this? In other words, are these stocks rallying for good reasons or for bad reasons? Because sure, you know, a K-Web investor might get a little bit of a reprieve if the internet stocks do well for four weeks as COVID spreads, but in the long run, I'm sure they would

want a stronger Chinese economy, better earnings and profitability potential, right? Yeah, 100%. That yes, they are in some ways a short-term beneficiary, but certainly the aggregate slowdown in China's economy would weigh on consumer sediment, household spending. So, you know, I think in general what's happening is these names have already come down so significantly that the net effect is pretty de minimis. at this stage versus the Shanghai and Shenzhen market, which were up 9 and 13% last year, are kind of reacting to the potential for the capital to experience the type of lockdown that we've seen in Shanghai. So the simple question, I guess, for individual investors,

not pros like you or people who specialize it, is China really investable? Well, we're talking about the world's second largest economy, the world's second largest stock and bond market. So I think investors have to understand what's happening there. And that's obviously something we're very focused on here at crane shares, Tyler. So I think, yes, it is investable. I think we've seen that there is going to be volatility to single country emerging market investing. And we have to volatility adjust our positioning to make sure we can ride out situations like we've experienced over the last year. So how do you do that? How do you adjust that volatility? Is it by by diversifying in other emerging Asian markets or what?

Well, I think first and foremost that the U.S. and Chinese economies are very intertwined. So you as an investor have exposure to China and broader emerging markets through great companies like the Apple and Nike's and the Boeing's, which do General Motors, which are doing great business in China today. At the same time, there are going to be domestic players, particularly on the technology side where there's less foreign competition. And so that's an aspect of how we've tried to build ETFs like KWeb to give you a unique exposure that you might not be able to get elsewhere. You also, Brendan, now have the headwind of the weaker currency.

What's going on with the weakness in the Chinese currency? Its moves lately have been as extreme as anything we've seen to the downside. Is it just a one-off phenomenon? Well, I'm a big believer that interest rate differentials really drive the majority of currency movement. So you've seen the U.S. 10-year Treasury get up to that 280 level, which is exactly where a Chinese 10-year Treasury yields today. So it's more of the catch-up of the U.S. Treasury yields to where the Chinese yield is, and that's putting pressure on the currency. I think China will try to slow things from getting too far out of hand. They don't want to be labeled a currency manipulator.

And so even after today's closed, they made some adjustments to how much the banks have to keep. on FX reserves in order to try to stabilize, keep this thing from spiraling out of control. Yeah, and still the hope is that maybe everything stabilizes looks better ahead of their own, what should we call it? It's not an election, selection. Yeah, well, the party Congress is coming up this fall. And I think it highlights that China really does need a strong MNRA vaccine. And that's probably getting closer and certainly situation of COVID in the capital will only expedite the efforts to get a shot. strong vaccine up and running in China. And I think some element of the little bit of the bid for

K-Web today is also, again, we had more chatter over the weekend about the two sides, particularly on the China side, coming up with a holding foreign companies accountable Act solution. So hopefully some progress there, which would be a big, eliminate a big overhang to the K-Web names. Yeah, and a couple of other important points to watch that you just highlighted. Brendan, thanks so much. Brendan Ahern. All righty further ahead on the show, we will continue to watch markets. The Dow struggling today trying to turn positive, I guess you could say. It's down just a little bit now.

Plus Twitter reportedly nearing a deal for Elon Musk to buy the social media giant and what could be the most surprising acquisition in decades. And Bank of America feeling a little homesick. The firm saying rising rates and home prices creating serious affordability issues and could hurt the home builders will do. discuss that group when we have our three-stock lunch. But before the break, we are celebrating financial literacy month and featuring some of our CNBC contributors. Here's contributor Sirot SETI on why personal finance should be taught in school. I am a strong believer that a personal finance

class should be given to every student in high school. It should be given to every student in college, and I think every consumer needs to understand what is personal finance, what it means for them currently, and what it could mean for them in the future. Welcome back to Power Lunch. I'm Dominic Chu. We want to call your attention right now to what's happening with the markets because we are now sharply off the lows of the day so far. What you're seeing right now is the Dow Industrial is down three whole points on a 33,800 base, which means we're just about flat. You may recall earlier today at the lows, we were down 480. 88 some points at those lows of the session.

But right now the down industrials, maybe in the next couple of seconds, taking a peek at positive territory. We'll see the S&P is down one quarter of 1%, 10 points. And the NASDAQ up now, one half of 1%, so a strong move higher there. Also want to get a check right now on some of the fertilizer stocks out there like Mosaic and CF industries, which are among some of the worst performers on the session so far today and now down double digits in the month of April. Those names were relative beneficiaries of rising inflation earlier in the

year. Some of those pressures may be starting to weigh on stock prices. Now, the war in Ukraine between them and Russia also exacerbating shortages, sending those fertilizer prices to record highs. Other ag-based exposure plays also under pressure today, including some of the chemical and seed companies like Cortiva. Bank of America also downgrading deer shares today with analysts saying that a higher than expected number of dealers are seeing waning equipment demand due to higher fertilizer costs and concerns about tighter supplies. A lot of moving parts now on that trade, but still, very big, interesting market macro narrative, Tyler. We're off the session lows and maybe seen some positive territory, Tyles.

All right. Thanks very much, Dom. Let's get to Leslie Picker now for a CNBC News update. Leslie. Hey, Tyler, here's your CNBC News update at this hour. Supreme Court conservatives appear sympathetic to a high school football coach who says he should be allowed to pray with his players after a game. The judges heard arguments in the case of Joseph Kennedy,

who claims the prayers are protected free speech. The school district suspended. that teacher saying he was acting as a public employee while encouraging students to pray. The White House is asking Congress for more power to track and counter the malicious use of drones. The plan would expand drone monitoring by federal as well as state and local agencies. The Biden administration is asking for legislation that will close critical gaps in existing laws that prevent law enforcement from halting threats posed by drones. And the first all-private team to visit the International Space Station,

has splashed down off the Florida coast. The four-man team spent 17 days in space at a cost of about $55 million per person. NASA is doing a quick turnaround to get a new crew up on the space station. Their launch could come as soon as Wednesday. Lots to watch for in that space, Kelly. Yeah, super impressive.

Super, super, Leslie, thank you very much. Still head on power lunch, nowhere to run, nowhere to hide. For investors seeking refuge from market volatility, are even the safety place becoming too risky? We examine that next on Power Lunch. Welcome back, everybody. Second half of Power Lunch starts right now.

90 minutes left in the trading day. Want to get you caught up on everything. Market, stocks, bonds, commodities. Plus, is there any safe place to hide during all this market volatility? Let's begin with Bob Bazani at the New York Stock Exchange with more on this midday turnaround. Hi, Bob. Yes, and the Dow's gone positive. S&P, not quite.

And one of the reasons is Microsoft, big earnings mover this week potentially, went into positive territory and tech in general went into positive territory, consumer discretionary, another group having trouble recently going into positive territory on the S&P 500. But we're still having problems. The problem we're having is the leaders have become laggards, and the laggards aren't yet real leaders. So look at oil stocks. We've had problems on two fronts, number one, that COVID lockdown in China. And number two, of course, concerns about a general slowdown here. You see Occidental, Halliburton, Schlumberge. Four days now in a row. this is a leadership sector that's been down every single day. Same situation with the big material names,

New Corps. Freeport McMorans down, oh, almost 20%, about $10. That was a $50 stock just a few days ago, so almost a 20% decline in four days here. The two-year yield came down today. That's a proxy for concerns about the Fed raising rates, but it's not really helping a lot of the tech stocks. They've started rallying here late, late in the day, but in general, we've seen some new lows in some of these big tech names sales force meta skyworks PayPal holdings all at 52 week lows another group that's not doing much the higher rates are not helping the banks because the yield curve tends to be flatter right now and of course there's concerns about loan growth so we have new lows on a lot of the big banks today bank of america p and c jp morgan chase finally just watch the s and p 500 remember we've been trading that in that 4200 to 4600 range uh 4150 was the old low in the beginning of march that's got a hole because other Otherwise, you're going to have a lot of the technicians, Tyler, squawking like crazy. Right now, encouraging midday action. Back to you.

Robert, thank you very much. Now to the bond market where yields are falling. Rick Santelli tracking the action. Rick. Yes, they are not higher. If you look at it one week of tens and last Tuesday was our cycle high yield close at 2.94%. You can clearly see right now we're trading what? about 2.81%. So not only are we down about eight basis points on the day, it's very telling

that we've turned around a bit. And Bob is right. If you're looking at interest rates and you're nervous about the Fed, you should look at two-year. Because even the Fed fund traders are looking at two-year. Look at a two-day of twos. If you look at 260-ish right now, we're down seven basis points. Now let's go to the two-day of Fed Fund futures and realize that on Friday, they close at their lowest close for the contract. 97-27-half applying 272.5 basis points of tightening. And they've pretty much shadow boxed with two-year yields. As they move down or up, of course, two-year yields, it changes the notion of how much

tightening there is. So today, there's about 10 basis points less, around 263 basis points of tightening at current levels. And finally, look at a two-day of boons. New yields were at 97 on Friday, down 13 and a half basis points from their cycle, high yield close. That's a big move. And finally, the onshore wand against the dollar, that's the dollar's version. So you see it moving up, explosively moving up, to a one-year high.

I know many have been looking at not only the yen, but along with the wand, in terms of what may happen with some of those buyers that like to buy treasuries. Well, we'll have to stay tuned because obviously the Fed's going to be buying a whole lot less. Tyler, back to you. Rick, thank you very much. Oil closing for the day. China, the key today on fears that COVID lockdowns will slow oil demand. Pippa Stevens joins us now with more. Hi, Pippa.

Hey, Tyler, oil dropping more than 6% at the lows of the day and still down about 4% with WTI now firmly below $100. This all comes down to the lockdowns in China, which are prompting demand concerns since China is the world's largest cruise. importer. The dollar is also on the move, which is weighing on oil. Natural gas, though, is bucking that trend and moving higher, up about 2%. It is coming off a 10% drop last week, though, so today's move does little to dent those recent losses. Now, turning to the impact on energy stocks, the group is down about 4% today falling into correction territory. Services companies are leading those declines. With Baker Hughes, Slumbergay and Halliburton, all down sharply today. The three are also well below recent highs with Bigrick Hughes, Tyler, now in a bare market. Back to you.

All right, Pippa, thank you very much. It's getting harder to hide in this market with inflation at multi-decade highs, the traditional defensive sectors like healthcare and staples and utilities don't necessarily have the pricing power that others do. And our next guest has some counterintuitive safety plays. Art Hogan is chief market strategist with national securities. Art, welcome back. Good to see you again. Let's cut right to the chase. What are these unconventional safety plays and why are they safe now when you wouldn't typically think of them as being so? Yeah, thanks so much for having me. Great question. I think when we think about defensives and the safety plays, what happens is everybody's thinking about at the same time. So a lot of those groups, the staples, the utilities,

telecom operators, the reeds have gotten a bit stretched as a lot of sectors have. So I think that's one of our issues right now. So when you think about safety, defensible cash flows, shareholder-friendly managements, first company that comes to mind, obviously, is Apple. I think when they report on Thursday, they've beaten eight out of the last eight quarters. They're likely to beat again. I think analyst estimate revisions have been moving higher throughout the quarter who will likely do so into the second quarter. I think that when we think about the multiple of the trading at 26 times, if you backed out that cash component, it'd be trading at a market multiple right now, for a company that's growing about twice as fast as the S&P in terms of earnings and revenue.

So I think that's one defensive way to play this, and certainly, you know, 10, 12% off of its all-time highs. Now, I was going to say, now, REITs are another area, an area that you said, you know, typically, maybe aren't the defensive plays they used to be, but your next pick is a REIT, a so-called net lease reet. You've got to remind me what those are and why this one is a good one, WP. Carey. Yeah, W.C.B Carey's been around for a long time, about a $16 billion market cap company. It's grown its earnings and it's grown its dividend payout consistently over the last 25 years. It's throwing off about a 5% dividend. I think what's different here is they actually are going to be much more diversified than any typical reed that sits in one sector. So they're diversified with geographies and they're diversified with product type.

And they've got a great management team that continues to find the right. cap rates, pays a consistent dividend. And I think this is one of those reits that is actually going to be defensible in this environment, throwing off a 5% dividend with the yield on a 10 year, poking up to out of about 3% at the close of business last week. But it's interesting, and this is Kelly here, to note that at a time when people are getting fed up with mega cap tech, maybe less so than smaller tech, but a little fed up with the whole space, you're saying now might be the time to tiptoe back in? Yeah, well, what's interesting, Kelly, we've seen this throughout the course of this year,

and clearly in the month of April, is that when we are in a risk-off environment and yields are moving higher as they have precipitously over the course of, you know, call it the last two months, the growth trade really gets punished, and the growth rate sort of encompasses all of technology. So while it's harder to defend some of those price-to-sales or price-to-revenue disruptors, it's a lot easier to defend companies that actually have defensible moats, steady cash flow, growing earnings are measured on a multiple earnings. So we think Apple fits all of those, and there's likely a couple other names that are reporting this week that fall into that category.

So when we think about technology, we'd like to bifurcate that with the haves and the have-nots, and right now the have-nots are clearly those fast revenue growers that are pre-earnings, and the haves really are the stocks that have actually been sold off. but not focusing on what they really should be worth. And I think right here or now, Apple's probably got a very defensible multiple. And your final pick in this sort of unexpected defenses is defensives is ABV. Yeah, another great company, a biopharmaceutical company, very diversified in what they're attacking and has done very, very well this year to year, up about 40% in the last 12 months, throws off a 3.65% dividend.

And they really are probably the best of class when you think about getting into health care that has a defensible yield to it right now. So if you want to be defensive in health care, this is one way to look at it, Tyler. Art, it's great to see you, sir. Thank you. Art Hogan. And after the break, Elon Musk reportedly near a deal to buy Twitter. What it means for the whole social media space next with Twitter shares still up about 6%. And here's a look at the Dow, which is now positive.

By 56 points, we erased a first. 488 point loss to turn higher, led higher by J&J, Amex, and Microsoft. Stay with us. Welcome back. Are we close to a deal? Elon Musk reportedly is at least a step closer to securing his takeover of Twitter. The Wall Street Journal reporting that the deal is worth $44 billion now just over Musk's original bid for the social media giant. Twitter shares jumping on the session until they were halted just a moment ago.

So five and a half percent higher at 51. 63 is the last print as we await to see if there is pending news. Let's bring in Brent Phil. He is Jeffrey's senior technology analyst. Brent, it's fun to cover. What do you think is going on here? And there's not been a rival offer at this point. So everyone who rolled their eyes at this initial bid, even the 5420 price and all the rest of it,

this now looks like it's close to being a done deal. Yeah, we think it's done, Kelly. sounds like it's in the final stages here. So now we're just thinking about what's next. You know, where does he take the company? Does he move the company to Texas? What does he do with the head county? He said he wanted to convert the headquarters to a homeless shelter in San Francisco. I think it was more of pointing out the productivity losses at Twitter. So there's, you know, I think moving to the next chapter. But yeah, you're right. I mean, look, no one thought this would be done at 5420.

I think ultimately they're the only better. There's no one else out there. And they had a long, long road to get back to health from a usability perspective with advertisers. And clearly we've been talking about this for a while. It's just been a tough road for Twitter and hopefully going private and Elon's magical, you know, dust that he can sprinkle on this can help resuscitate the story. The company is supposed to report results later this week, and you said if there were no other buyers, if this musk thing weren't going to be consummated, do you think the stock would go to the $30-35 range? Absolutely. And this partly might be why they're trying to get this done now, because the numbers may not be that good or at least the outlook.

So that's another determination that the board had to make is, you know, do we fight this off? If you have good numbers, why would you take this, right? You're about to blow up the quarter and say things are amazing. and the new management teams put this back on track, you would delay it, right? And so I think this is another sign that the core financials of the story may be under duress is one way to look at it. Let's assume that Musk does get his prize. How does Twitter look different, feel different six months from now, a year from now?

I think in the, you know, I guess now hundreds of tweets we've unpacked that he's, mentioned he's going to take traumatic action. We know he thinks that the company is not productive. So unfortunately, I think he'll take a pretty swift action with the employee headcount. I think secondarily from usability perspective, Elon has had some amazing comments about the usability. And we agree with that in terms of getting the product more usable. If you get the product more usable, then more users come and then more advertisers want to be there. So I think it starts with the product, and they've got to get that fix first.

So I think there's multiple steps that he's already hinted in his tweets about the solution that he's going to take action on. And we think these are long overdue. So usability is one big change. That's interesting because a lot of the focus has been on, quote, free speech that he says is one of the things he wants to encourage there. Yeah, I think at the end of the day, the product is noisy. is clean and usable. The targeting mechanism, anyone that's on Instagram or TikTok knows how good

they're at a targeting when you're on Twitter. It's, you know, all of a sudden you're reading the story and then there's five different things you might want to subscribe to and you can't get rid of it. I mean, it's just he's been very open. I mean, in the car analogy, right, it's like if you have a Tesla, you know what I'm talking about. The Tesla user interface is incredible. You know, the dog mode, you can bring the dog to the grocery store and leave it in the car and it locks. It's got the air conditioning and the screen on. I mean, there's just little things that he's thought of that no one else has thought about in the auto world. And ultimately, I think, you know, when you think about that from a Twitter perspective, you've got to get the usability. So more users

come to the platform. If they come to the platform, then you'll, you can generate a broader subscription model. You can generate better ad revenue. They've just, they've kind of just been striking out. Then they win. They strike out. They win. I mean, it's been all over the map with advertisers, you know, ever since we've covered the story. Really interesting, Brent. Thank you so much. Thank you. Brent Phil, we appreciate it. Dear shares, dear shares, sinking. Worst day since 2020.

We'll hit that name and others in today's three-stock lunch. And we are watching Twitter, of course. The stock has been halted. Keep it here. Welcome back, everybody. Twitter shares are now halted for news pending. I think we know what that means. Don't know exactly how long it'll last.

At last tick, they were up 5.5% to 5163. The reported deal with Musk is at 5420. and as soon as the news crosses and or the stock reopens, we'll bring it to you. Sounds like something's happening. Yes, it does. All right. It is time for our three-stock lunch, and we're going to take a non-Twitter break here for just a minute. We're going to highlight three stocks that are moving on some big analyst calls of the day.

On today's menu, deer lower after a downgrade to neutral at B of A, saying most good news is already baked into the share price. I sprayed deer repellent all over my backyard yesterday. Penn National Gaming rising after an upgrade to overweight at Morgan Stanley, saying it has most upside of the gaming stocks in a weak macro environment. And shares of Lanar higher, despite B of A lowering its price target by $18, citing cost pressures for home builders across the board. Cliff Hodge is Chief Investment Officer at Cornerstone Wealth Management. Cliff, welcome.

We're going to go with Breaking News to... Excuse me, Cliff, we're going to go to Breaking News with Julia. Borsten on Twitter. Yes, the news is out. Elon Musk to acquire Twitter. It will become a private company. It's going to be Twitter is to be acquired by an entity wholly owned by Elon Musk for $54.24, I'm sorry, and 20 cents per share in cash. An evaluation valued approximately $44 billion. This is the amount that was originally proposed by Musk. So worth noting that as he had originally said, he was not open to negotiation there. I'm going to continue to dig into this. Oh, here we have more here. So just for a little bit more here, they say that Twitter stockholders will receive that $54.20 in cash for each share of common stock.

And that represents a 38% premium to Twitter's closing price on April 1st. That was the last trading day before Musk disclosed his 9% stake in the company. There's a statement here from Brett Taylor, who's Twitter's independent board share. And this is it. He says, quote, the Twitter board conducted a thoughtful and comprehensive process to assess Elon's proposal with a deliberate focus on value, certainty, and financing. The proposed transaction will deliver a substantial cash premium, and we believe it is the best path forward for Twitter's stockholders. Then Parag Agarwal, who is Twitter CEO, who is not very well known by the investment community. He has not done an interview with us here on CNBC. He says, quote, Twitter has a purpose and relevance that impacts the individual. entire world, deeply proud of our teams, et cetera. And then I just want to here mention what Musk says

in this press release. And this goes back to why he wanted to buy Twitter. He says, quote, free speech is the bedrock of a functioning democracy and Twitter is the digital town square where matters vital to the future of humanity are debated. He says, I want to, I want to make Twitter better than ever by enhancing the product with new features, making the algorithms open source to increase trust, defeating the spam bots and authenticating all humans. He says Twitter has tremendous potential. I look forward to working with a company in the community of users to unlock it. So here it is the news that we've been anticipating all day to day. And I would say, guys, many people were very surprised that this would happen as quickly as it did. No other buyers

came in. And the board accepted Elon Musk's offer at that original. offer price. Julia, just one quick observation to point out here is that Twitter shares is still about $3 below the deal price. So the market is still baking in some probability that the deal doesn't get done. Yes. So just going into some of the terms and financing, they say that the transaction has been unanimously approved by the board. It is expected to close in 2022, subject to the approval of Twitter stockholders. And then they talk about the debt and financing. thing. So no details here on whether or not there's a go shop period or what the breakup fees will be, but we'll continue to dig in on that because I guess that's the question. You see that, yeah,

the stock is pretty much unchanged from where it was before this press release came out. All right. Brent, Phil, we're going to welcome back. And Chris Hodge, we're going to have you stick around also and talk a little bit about Twitter. Brent, let me start with you. This $54 a share price or $54.20 a share is a 30% premium to when he announced his 9% stake in the company. How much lower, though, is that price from where Twitter traded, let's say, a year 18 months ago or at its peak? Yeah, I mean, clearly none of us thought they would accept this number one at that number, which is kind of a sad day for corporate boards that they'd have to go with that number. Number two, obviously, stocks a lot lower relative to where it was at historically.

I mean, I think the board gave up. I mean, honestly, this tells you how bad it is, really, in my perspective. And they had no out. You know, they knew they could have probably fundamentally turned this around and maybe it would have taken a couple of years to get turned around. Obviously, he targeted the management team and said, hey, look, we, I don't have conviction in this team. There was Jack Dorsey saying, you know, really negative things about his own board,

which, you know, I just think it just shows you there's been, there's a ton of turmoil inside, you know, with the product we talked about with you earlier, obviously at the board level. I mean, so board waves white flag and says, hey, basically, we ain't got a better idea about how to turn this around. So we're going to go ahead and sell. Exactly. So, so let's, let's, let me go. No one predicted that this would get done at that price, which just tells you there was no plan B. There was no plan B when the number came out. It was the number. I'm not going to negotiate. This is it. You take it or leave it. But let me ask you. And then I'll turn to Chris in just a moment. How much does Dorsey deserve some blame for, I guess what I would say, having too much on his plate because he was running square and he was running Twitter and did one suffer to the benefit of the other? I mean, perhaps, but I think ultimately, you know, there were a lot of people at Twitter to running this.

And ultimately, I think they had made the change in the fall. It was maybe too late. And they need to make these changes earlier. But I think here's the good news now, right? Musk knows usability. He understands that. And I've said this many times. Like, he is going to fix this and how severe it gets in terms of what he does is now the next question.

As you move the comedy to Texas, what, you know, there are many questions we're asking. But I think ultimately, this can be improved upon. And it's, again, I think a disappointment and certainly was not what many would expect from a financial worker. Many sense it to the moment, none of his rockets. I don't know. Kel. Well, again, to your point, Brent, about usability. If any of us could identify usability, we'd all be billionaires.

You know, it's actually not that easy to do. If you have the touch, you have the touch. And he has a chance to do it with Twitter now. I know you're not a Tesla analyst, but how much of it. it's time do you think he'll spend on trying to fix Twitter? I was asked this earlier. I mean, I think, again, I'm a Tesla owner. I drive one in my family, and we love the car, it's the best car we've had in our family. So in terms of the usability and, and, you know, look, my 16-year-old, that's all he wants to drive is it. So I think he's got that

fixed. Like, he's got Tesla on the right path. He heard them in the TED talk about the pain and suffering. He went through on that manufacturing floor to get it right. So from my perspective, again, not the Tesla analyst, but someone that owns a Tesla, you can see that it feels like he's got that in the right spot. Ultimately, I think he'll put a new team in. He's going to put a new team in to run this. He'll be involved. He'll have insight. But his checklist of what he wants to get done is very clear. In my opinion, I'll have someone else. I want to go back to Cliff Hodge and get your thoughts here.

I mean, Brent, it takes a pretty negative. This was surrender. This was white flag. This was a board that said, hey, we have no better idea on how to fix it. What do you say? Can we get an added button? Yeah. That's one of the things he wants is an edit button. It's been really interesting, been really entertaining as almost everything surrounding Elon Musk is these days.

But, you know, I tend to take the other side from the board direction. I mean, at the end of the day, they are fiduciaries to their shareholders. They are responsible for getting the best possible deal. Sounds like there were not any other serious bidders. And so I view it as them following through on their responsibility. So let's follow that up. What do you expect Mr. Musk to do with Twitter? As you look at it, what do you think his item number one is?

And what does he mean by this needs to be the public square, the epicenter, I guess, of free speech. I guess from a libertarian concept of free speech. Less censorship, right? There have been multiple opportunities, and he's been the target of one of those over the past year or so, where there has been a lot of scrutiny on things that may be said or may be tweeted that perhaps may not align with everyone's views.

So, you know, taking the approach that, you know, we're going to allow, or they're going to allow free speech, they're going to allow less censorship to really open it up. I think that's what he means with the town square. All right. Very interesting. Cliff Hodge, thank you very much. Brent Phil. Thank you. And Julia Borson, I think we're going to be hearing more from you very shortly.

What a historic day. Wow. Amazing. And it happened during the day. And that's it for us here on Power Lunch. Thanks for joining us.