Power Lunch - Chip Wreck, and Never-ending Spending 1/27/23

Episode Date: January 27, 2023

Intel is the big loser today following brutal earnings results. The company missed targets, and also gave a weak forecast. So when will the “turnaround” take hold? We’ll speak with an analyst who says its transition is still in the early earnings. Plus, we just got another sign that inflation is starting to slow. And a key consumer sentiment number improved, too. But can the consumer remain strong enough to avoid a recession? We’ll debate. Hosted by Simplecast, an AdsWizz company. See https://pcm.adswizz.com for information about our collection and use of personal data for advertising.

Happy Friday, everybody. Welcome to Power Lunch. I'm Tyler Matheson alongside Kelly Evans. Welcome once again. Coming up, Intel, the big loser today after its results. The company missing targets left, right, willy-nilly giving a weak forecast. When will a turnaround take hold? We will hear the CEO and what he had to say, and we'll talk to an analyst who says the transition is still in the early end. Plus another sign, inflation is starting to slow. And a key consumer sentiment number improved. can the consumer remain strong enough to avoid recession? But first, speaking of which, let's get a check on the markets where we're off the highs. The Dow up about 88 points right now.

The NASDAQ up 1.2 percent outperforming in the week with a 3 percent gain. Let's look at some of the Dow movers right now. American Express Visa on the upside after results there, signs the consumer is still spending. Chevron giving back its gains from yesterday. It missed on estimates despite record profits. Then there's Intel down 7%. John Ford spoke to Intel's CEO, Pat Gelsinger, about the company's results, and its ongoing turnaround plan, and John is here with more now.

What's the big takeaway from the conversation, John? Well, Tyler, it's a really rough quarter for Intel. Maybe one of the worst that Intel has ever had, and a lot of that has to do with a slowdown in demand for PCs. And the inventory buildup that happened before that came along. I asked him about that this morning. What we've seen is, you know, customers carried a fair amount of inventory in Q3 and Q4, for the back to school and the holiday refresh.

Obviously, as they come into the new year and the macro situation for their business, major inventory adjustments. We're selling into our customers well below their sellout rates in their businesses. So it will be the biggest single quarter of inventory correction that we see in the marketplace, literally in our history that we can look back as we see records. So chips, inventory, what does all this mean? Tyler, Kelly, think about it like this. It's as if you and your spouse are in the midst of this huge remodel, like practically

rebuilding your house, huge capital outlay, you're already spending the money on the contractors and whatnot. And then between you and your spouse, one of you loses your job, right? So big revenue cut. You still got to pay the bills. You still got to do this project that's already out there. That's what Intel's dealing with trying to rebuild its manufacturing while having this enormous slowdown in PC sales at the same time.

Big fixed costs, big outlays, big promises, but revenues are tanking. How long might it take to get the ship back on course? Well, if you're talking about getting the process technology, kind of the manufacturing technology fixed, Gelsinger is saying that's actually on track. So building this house, we're actually on schedule. We're getting the walls up. You know, everything looks good.

But it's going to take a couple of years to actually get that house built. And then in the meantime, got to get another job. Yeah, where's the revenue going to come from? Right. So PC business is expected to stabilize in the back half of the year. Because it's happening now. Intel's selling fewer chips into PC makers than the PC makers are selling out and finished PCs, trying to work down those inventory levels. It's expected that in the back half of the year, that stabilizes, and all of a sudden Intel's PC revenues can come up.

But there's a question about data center server revenues. That's starting, you know, the Amazon's, AWS, Microsoft, Azure's of the world are slowing down on their spending. If they continue to do that and enterprise customers also slow down on that, even as PCs are coming back, the data center could come down, and then you're still not in a great spot. This may go into the category of tell me what I don't know, but is Intel simply put, too dependent on PCs? Well, Intel in a way would say yes. That's why they bought Mobile I, which they've now spun out a good portion of as a public company.

They've also got Data Center, which isn't PCs. But, you know, when you've got manufacturing issues, those chips, same chips come out of those factories, whether they're going into PCs or Data Center, and you've got to fix the process technology for both. So they've become, in a way, less dependent on PCs, but the stuff they've got to fix affects all of it. All right, John Ford, thanks very much.

Good to see you, my friend. Let's get the stock side of this story now with an analyst who did not slash his price target today. With us is Ruben Roy, Stevel's managing director and Applied Technology Analyst. Ruben, thanks. I'll just start with that question. A lot of people lowered estimates on the back of this. Why are you staying put? Well, hi.

Thanks for having me. Well, we did lower estimates quite materially like the rest of the street. Pretty shocking guidance, as you've seen. And my price target was at 28, and we're keeping it there because I think while we're not at a bottom yet, I think we're in a bottoming process. While I'm not thinking that there's a lot of downside potentially to the target price that we've got, 28, we do have a hold rating on Intel shares because we don't see catalysts to the upside in the near term. I think John just mentioned a number of the issues that are coming up, and they're longer term issues. It's going to take a few years for the company to catch. back up to parity on a transistor gate length perspective.

And we also have competitors that are out there, winning share, gaining share, and very important markets. So I think this for right now, for us, is a wait and see story. You know, we do have to bring up the government's involvement here. Is it helping or hurting Intel's prospects? Well, I think the longer term outcome will be helping because I think Intel does have a very large investment cycle ahead. and they need some capital offsets to have that investment cycle work itself out. As you've seen, I think the cash flow metrics of the company are challenged.

They were negative free cash flow last year. We've got them forecasted for another few billion dollars of negative free cash flow this year. So I think we have to see these capital offsets if we're going to get to the levels of manufacturing that Intel does need to get to both to reach their strategic. initiative of getting to five nodes in four years, but also the important Foundry Services business that Pat and team are trying to build. So I think it's a good thing, but again, it's going to take some time. The other thing I'd note is we haven't really heard from the government how the money is exactly going to be dulled out. And so that brings into the equation yet another

level of uncertainty as we look ahead to the next several quarters. How, simply put, did Wall Street analysts and most importantly, the management of Intel get the quarter so wrong. They missed on all kinds of estimates. And most strikingly, the company even missed its own estimates. So how did that happen, number one? And number two, does it cause a confidence question about the management of Intel? Yeah, it's a great question, Tyler. So I'd go back just a couple of months ago, Intel had been at some investor conferences, and they were trying to forecast and highlight that things had deteriorated in the PC markets heading into the end of the year, 2022. And at that time, Intel had set look, Q1, which they hadn't given official guidance for, but they did tell investors

that Q1 was shaping up to be at-best seasonal. And seasonal is down mid-single digits, typically, for a first quarter of a calendar year. What ended up happening is revenues are going to range from down 18 to 20 percent. So quite a bit worse than seasonal. And what happened was that the extensive inventory and the correction of that inventory digestion really had gotten out of hand. I think it's been mentioned on your program today

Intel was planning on raising prices in Q4 of last year and they have done so. But prior to that, it's certainly likely that some of the channel partners were stocking up on chips before those price increases were put into place. So now all of a sudden you've got demand coming down. You've got inventory in the channel, and there's a big digestion period. So that's where we all got it wrong, and it's going to be a question as to how long it's

going to take to see that inventory clear itself out of the channel. All right. Ruben, thank you very much. We appreciate your time today and your candor. Ruben Roy. Thank you. All right. Coming up, more signs.

Inflation is easing. So is it enough for the Fed to start easing off interest rate hikes as well? We will discuss the impact on stocks and more, plus shares of Chewy are no dog. The stock up 26% this year today, wet bush upgrading the stock, boosting the price target. Have you missed the Chewy run? We'll trade the name in three-stock lunch, plus Chewy's gains pushing former Macy's CEO, Terry Lundgren, into second place in the CNBC stock draft. But with just two weeks to go, the movie star, Ryan Reynolds, and, and the mountain goats are holding a huge lead.

Power Lunch will be right back. All right, welcome back to Power Lunch, everybody. There you see the major averages headed for a winning week on better than expected economic growth in part. Wall Street digesting a key inflation measure that showed the pace of price increases eased in December while consumer spending also declined. Two guests joining us now to talk all things fed, inflation,

the impact on stocks. Ron Insanis here. He's a CNBC senior analyst, commentator, and co-CEO of Contrast Capital Partners. Also a Buffalo Bills fan. Sorry. Thanks. Really?

You had to? And Doug Butler, portfolio manager and senior VP managing director, Rockland Trust. Gentlemen, not going to be a bad enough weekend. Yeah. Thanks.

Let's look at the inflation number that came out today. What do you think, Ron, it does to the Fed, not just in the meeting that will be held next week, but moving into the spring? Well, what's interesting I wrote about this today is that other central banks around the world are beginning to recognize that the fever is passing. So the Bank of Canada has indicated a pause. Brazil, the Czech Republic, Poland,

a handful of other Indonesia, other central banks are dialing back or stopping their rate increases because they're recognizing that the inflation fever has cooled. And we're seeing that all the data, whether it was yesterday's GDP numbers or this morning's PCE that the Fed likes to watch personal consumption expenditure deflator within the consumer spending and personal income data actually eased rather markedly and certainly at an annualized. rate, we're seeing a big pronounced slowdown in inflation. So look, the Fed's still going to go a quarter at the end of the month. They still may do two more.

Larry Summers, of all people this morning, came out and said the Fed should stop after this rate high. He did. He did. After spending the last two years saying it was the 70s all over again. So even Larry, who has held fast that this was a wage price spiral issue, said the uncertain outlook should give the Fed pause. For this meeting?

After this meeting. Wow. So, Doug, what is your reaction to what Ron just said, what Ron just said about Larry Summers and what the effect of a potential pause or some signaling that we're getting closer to the end of the trail on rising rates, what will that mean for equities? I think if they stop after one, it'll be a very good thing for equities. But it would also mean we've been very sanguine about inflation for probably the past six

months knowing that it was this two shall pass. We're getting a little concerned that people are moving to becoming overly unconcerned about inflation. We think there might be some wage stickiness out there certainly in the back half of the year. I think there's a decent chance of a recession. I'd love for them to stop probably after two. I'm sort of with Ron in terms of thinking that it's probably after two they're going to stop. I'd be very unlikely to get that there's a third. But I also think Larry, you know, Larry Summers may be right theoretically,

but I think practically it's very unlikely. Listen, I just take him more run. I'm not sure you're in that position. Well, for someone like Larry to come out who clearly would still have the Fed's ear and say that maybe it's okay to pause, feels like it gives them that wiggle room. That said, let me rattle off all the reasons people want to say they shouldn't. Commodity prices are up, lumber prices are up, oil prices, are up. The five-year break-evens are up 10 basis points. Forget it. We should start hiking again.

Yeah, but the five-year break-evins at 228, and it's down from 359 and the 10 years at 228 as well. You look at lumber prices are at 460. They were at 15 and 1,600, respectively, and their two pops, coppers up a little bit. That's all the China play, assuming China rebounds. And everybody's making a very strong assumption that revenge travel and revenge spending is going to be very big in China. We don't know. But if you look at the Atlanta Fed GDP now print for the first quarter, up 0.07 percent. Personal spending this morning, down 0.2%. Yeah, we could be in this acceleration taking place right now. And residential real estate's what else would you say in response to Doug's sort of idea that can we kind of hang on here

and ride this out, so to speak? Well, I mean, the market's going to price in the Fed stopping, right? And so we're seeing that. We've seen it already in the bond market where rates have come down considerably. The yield curve still inverted dramatically. And yeah, equity markets are sniffing out what other central banks are doing, too, the pause. And so if indeed, and I would agree with Doug, if the Fed pauses, you know, you get more of a rip to the upside in equities. But is it a lasting one when the curve is this inveter or is the damage done? Hard to know, because then you have earnings revisions and down rates that could affect equity sentiment. Doug, you mentioned the word recession.

If there is a recession, when, and if I had to guess, it might be a very spotty kind of, maybe not a deep one, but a very spotty kind of recession where some sectors of the economy will really feel it like real estate like housing other sectors of the economy may feel it less i think that's you're seeing it you're seeing the start of it in terms of housing um and you're certainly you know i think real estate commercial real estate's going to struggle going into the back half of the year but i still think it's only a one-third chance it's not we're not forecasting you know a recession's right around the corner right now we think that there's a decent chance of one but not, it's not, not even 50-50 for us. So a two-thirds chance of a, quote, soft landing.

Ron, your, go ahead, Doug, finish your thought. I stepped on you. I know, there's a two-thirds chance of everything working out okay, but the Fed stops appropriately. Look, we, as Ron was saying, we've got, we're not negative real rates in it. So that's a good thing. The rates, the rates coming down over the past two months has been really good.

If you're going to start to see mortgage refinancings will tick up of everybody who bought a house in the last, you know, six months, although it's not that many people. Yeah, it's not that many people. In fact, mortgage purchases are down or housing purchases are down 30%. Final thought. Yeah. Quick. Final thought. Look, I mean, I think that, you know, we need more confirmation, but I am shocked to hear what Larry Summer said this morning.

And if indeed the Fed takes heed of what other central banks do, we used to watch the Anglo Central Banks back in the Bank of Canada, Bank of England, Bank of Australia. They used to lead. Now, Bank of Canada is doing that. Bank of England and Australia have their own problems that are separate and apart from our own. But I would watch other central banks because those who were first in are now first out, and that means a Fed may be right behind him. All right, Ron and Sana, thanks very much. Doug Butler, thank you as well.

Coming up, a disjointed toy business. Hasbro joining a wave of companies cutting back on their workforce at an effort to lower costs and shift the whole direction they're taking as consumer trends get more and more radical. We'll discuss all of that when power. Lunch returns. Welcome back to Power Lunch, everybody. Just over 90 minutes left in the trading day. We've got stocks off their highs. Let's get cut up across that, bonds, commodities, and more. We start with Bob Pisani. And it really all comes down, Bob, to Visa and American Express. Yes, and I actually would say that. We are in the midst of a very powerful rally here,

not only for the day, the week, the month, two to one advancing the declining stocks. And I think Kelly's got it right. You can thank American Express here. Now, it wasn't so much the the actual earnings report. It was the guidance that was pretty good and the comments about the consumer and potential loan losses down the road. Mastercard also had decent comments. Consumer spending has remained resilient, they said, but I want to focus on Amherx, on what Amex said. Here's what their comments were. Highest ever quarterly card member spending. That doesn't sound like some imminent slowdown necessarily. But again, a lot of people were concerned about potential losses down the road, provisions for losses. Credit metrics remain strong.

below pre-pandemic levels. In other words, these higher provisions for losses they put in, they are higher provisions, but are not higher than the pre-pandemic levels. In other words, you can't compare 2021 and 2022 because it was unusually low levels of reserves that were out there. Elsewhere, we don't have a lot of new highs, but the market internals are looking very good. We're going to get an ocean of very big earnings reports next week, including really big global industrial names like Caterpillar, which is at a new high today. We'll get Honeywell as well next week. Big global consumer companies. Starbucks is going to be next week as well. That is Thursday night, I believe. We'll also get McDonald's next week. Starbucks is at a new high. We've got a small

number of oil stocks at new highs. Oil's popped to low 80s at this point like Marathon Petroleum, again, but a big week for earnings next week. So the key point I want to get across is the technicals have been tremendous in the last week. When people don't know, when active traders don't know what the fundamentals are, they go look at technicals. And the technicals have been great. We're up 6% so far, almost straight up since the beginning of the month. There are many more stocks advancing than declining, and that's the most important thing right now. And guys, the value stocks and the gross stocks are both up. That's what you call a market with a lot of breadth. Guys, back to you. All right, Bob Pisani. Thanks. Let's go to the bond market now. Lots of economic data to react to.

and Rick Santelli has pulled it all in for us. Rick. Yes, Tyler. You know, we had a lot of important numbers this week, but when you consider we're at 3.52% yield in 10-year notes right now, that means we're up two on this session, up four on the week. Not a huge change. And if you look at a couple of weeks of tens, something should jump out at you.

We talked about this yesterday afternoon. The ranges are pretty obvious, and traders are trading them like champs. Basically, mid-350s held on top and on the bottom, good support of 340. Notice to the left there that closed last Wednesday. That was a four-month low. Open the chart up. It was the lowest since mid-September. The reason I pointed out meager bounce, meager bounce on yields after that close.

And if we look at what's going on with regard to a one week of three months versus tens, nearly unchanged on the week. That's important. And finally, Fed Fund Futures, they stopped going down in price in June. of this year. That's the fulcrum. That's what we concentrate on. It's 25 basis points off. It's low close. And the higher it goes, the less Fed. And it's consistent at this level. They're still at odds between what markets looking for and what the Fed says they're going to deliver. And that means there's room for profits and trades. Kelly, Tyler, Tyler, back to you.

Have a good weekend. You too, Rick. Thank you, sir. Oil closing for the session. Wow, it can actually go down. 2%. Chevron falling 3% as well. after reporting the results. But but Stephen's here with Moore. Yeah, we got to start with Chevron down more than 4%. It does feel like expectations were really high going into this quarter. And their Q4 EPS did miss, and it was significantly below their earnings from Q2 and Q3. But again, taking a step back for the year, Chevron earned a record $35.5 billion.

So it was a very... We shouldn't feel bad for them or their shareholders. Exactly. It was a very good year for the company. And, of course, on the call just now, the very first question was about the by... buybacks. And the company said, you know, this is really consistent with our strategy. They said repeatedly that they've been buying back stock over the past few decades. This is consistent. It's not really a deviation from what they've been doing. And when asked about the reaction in

Washington, Michael Worth said that he thought it was a touch overblown. He said we weren't trying to be splashy and that they were just trying to make, to put a policy in place that didn't expire and gave them a little bit more room to run. Now, while we are talking about all the cash on hand on the healthy balance sheets. I did want to take a look at M&A in the oil sector because as this chart from Enveras shows, you can see that last year deal activity fell 13% compared to 2021 to about $60 billion. But deal count fell a lot more and actually dropped to the lowest since 2005. And Andrew Dittmar over at Enveris said this is really indicative of a new trend we're going to see, which is fewer but much larger deals. You know, this industry is maturing,

the land grab days are well behind us at this point. So companies will be more strategic and a little bit more focused in their activity. But we could see an uptick, given that they have so much. They have cash, and maybe they don't need to borrow as much. I would think rising rates might have influenced the deal count. But if they've got a lot of cash, they don't have to borrow as much. Yeah. Pippa, thank you. Pippa Stevens.

Let's get to Sima Modi now for the CNBC News Update. Cima. Kelly, here's what's happening at this hour. We are finally getting a look at the brutal attack on the husband of former House Speaker Nancy Pelosi last October. Some viewers will find these images disturbing. This is body cam video released today shows the struggle for the hammer that suspect David DePape used to strike Pelosi in the head. In Jerusalem, Israeli media say a gunman opened fire near a synagogue, killing five people and wounding several more.

The gunman was reportedly shot and killed. Police are describing it as a terrorist attack. The shooting comes days after the deadliest Israeli raid in the West Bank in two decades. And not a great week for one of the richest men in the world. Indian conglomerate Adani Group, headed by Gatim Adani, has lost some $50 billion in market cap following fraud allegations from short-seller Hindenburg Research. The loss is accelerated after activist investor Bill Ackman tweeted that he backs Hindenberg's report on Adani,

calling it, quote, credible and extremely well-research. And guys, I can tell you, this is getting a lot of attention back in India. All right, thank you very much. Simomodi, we appreciate it. Ahead on Power Lunch with inflation rising, consumers showing signs of improving. But retailers are still struggling with companies like LVMH and H&M. Seeing margin and profit issues, we will discuss that one when we return on PowerLunch. Welcome back to Power Lunch. Call at the Consumer Conundrum.

Personal spending data out today for December fell for the second straight month. But three major credit card companies reporting signs of a very strong, even resilient consumer. With us to break it all down, Melissa Repco, CnBC.com, retail reporter and Deborah Weinzwig, founder and CEO of Corsight Research and a former top-rated retail analyst at City. Deborah, let me begin with you. Are people spending money? Are they spending more of it on services than at retail? And what could change that?

That's a great question. So certainly we are seeing a lot of inflation in services, and we're also seeing spending up year on year, we are continuing to see the consumer buy goods, both food and non-food, because inflation and food has been high, right, that has taken a chunk out of non-food sales. So as I would summarize it, we've continued to see strength in spending. I do think when there was a lot of rhetoric around inflation and, you know, mid-22, we did definitely see a bit of a pause, but if anything, the gas has been accelerated and we're seeing a very different consumer right now. And maybe, Melissa, the way to sort of talk about this is to say,

yes, consumers have come out ahead a little bit lately, right? Their wages are up a little bit more as inflation is slowing. But we all wonder about the sustainability of this. Their saving rate is starting to go up because their actual savings is running dry. You know, we're just looking for those signs that while the downturn may not be here, here, is it starting, are people starting to feel the squeeze a little bit? Yes, that's definitely something I've been talking to retail executives about. It's very much on their mind. I spoke to Macy's CEO Jeff Gannett recently, and he was saying that on their credit cards for Macy's, for Bloomingdale's, and also for Amex, which they have co-branded, they've been seeing both the balance going up and the amount of money

people are carrying from month to month going up, which is what he said is a little bit concerning, is that that's what's leading to a sense of caution because he was saying, look, people are paying more, they're going out to dinner, they're traveling more, that takes a bite out of what they're spending at Macy's. But it also means that maybe they are not able to, able to pay down credit cards and when do they face the music. That's a great point. What about luxury spending, Deborah, LVMH out with numbers last night that were very good? So not only has luxury, so it goes back to this very much kind of parallels, but Melissa just said, we are seeing strength at the low end and at the high end. That middle is kind of getting squeezed

if you think about an hourglass. And if you think about China opening back up, right? And you've seen, I've seen as much as 100 basis points added to global GDP for 23, which may be on the high end. But not only has luxury kind of done fairly well throughout the past three years, but we believe it'll take another step up as we look ahead to 23. Deborah makes a really good point about China reopening and how that could be a helpful element for a lot of companies that are in the luxury space and do have more of a presence there. It is a market where people care about labels. They're going to be spending more on beauty.

and they're going to have a delayed kind of revenge spending dynamic that we saw play out earlier on. You know, we're kind of through that in the U.S., but China's just starting. So that could potentially help. But it's just a question of, is that enough if the U.S. consumer is getting weaker in the month ahead? Right, exactly. Where else can we glean sort of some signals? I mean, we've had everyone report from, you've had Procter & Gamble, you've had some auto companies with exposure to that sector where things are looking a little rockier.

It does feel like it's very sector by sector right now. It does. And I think that you're seeing a lot of the discount players feel a little bit more confident. I spoke also to Saksoff Fifth CEO recently. And, you know, off price has been a space where there is a lot of growth potential for value conscious consumers. We saw Walmart earlier in the week say it was going to actually raise its wages. It's feeling better position in this environment. So, you know, on the one hand, you see that. But I think on the other hand, you have to look at indicators like the housing market because the housing market has so many implications. We saw people, you know, spend a lot more on furniture. They say, you know, spent a lot more on home goods. And so that's the domino effect. Really, if the housing market does start to cool, what does that mean for all the different goods that people buy when they buy a house? I mean, not to put too fine a point on it, but bed bath is not finding itself. The news flow just keeps getting worse as they kind of flail around for options here. Exactly. I mean, bed bath and beyond, it had a lot of strategic problems on its own. You know, it pushed a lot into private label. that didn't quite resonate. It maybe shifted too far away from some of the national brands people loved. But now it's trying to do a comeback and really pay the bills when home goods has gotten very soft. That was a really popular pandemic category. How many more of those items do people need? So it's kind of in the toughest time to make that comeback, let alone its financial problems and its business problems that are unique to that company. I think the water has come out of the bed, bath, and beyond tub. Deborah Weinswig,

Do you have a favorite stock in retail, if so, which? That's a tough one here. But I would agree with Melissa that, you know, it's really kind of those at the opening price point or at least viewed by the consumer. I think Walmart, right, a decade ago, talked about themselves being a technology company. And I think what we've seen during the pandemic, right, is they put many of those pillars in place to do that. And, you know, they've built out this marketplace. there's still, and what I like, there's still a lot of wood to chop. The fact that they are, you know, kind of moving ahead with raising wages for, you know, it's a shocking number of, you know, kind of minimum wage employees that work there. I think it's like, you know, almost 350,000 people. I mean, you're talking about real changes. And I think that if you, you know, if you look at how we do a lot of work around consumer sentiment, what they've done during the pandemic is they've not, they've always had the value kind of position, but they have not. But they have not. more of the quality as well.

And so you do have a different consumer who's shopping them both in store, you know, buy online, pick up in store and online. And as they're moving to more of this kind of loyalty and, you know, this Walmart Plus, and a lot of what they're doing around live streaming and a lot of other technology, Metaverse, etc., they really have pushed the envelope.

And I actually want to kind of also tag on to what Melissa just talked about with Bedbath and Beyond. Think about, right, Walmart's off mall, bed bath is off mall. Walmart sells everything that Bedbath does, more branded actually. And so they could actually be a significant beneficiary of the fallout from Bedbath. Very interesting insight there. Deborah Weinzwig, thank you very much.

Melissa, always great to see you. Have a great weekend. You too. After the break, we'll take a look at a company focusing on the development of smart cities and roadways. Working lunch is next. Welcome back, everybody. There's a ton of volatility in tech these days, as we know. Just look at the results out of Intel today.

But there are pockets of continuing growth. John Ford brings us up close with a company who's building on AI and the Internet of things. I remember when that's all we talked about. Yeah, well, it's still happening, Kelly. David Roberts, the CEO of Vera Mobility, which actually came public via SPAC in 2018. But it's up about 50% since then and is up over both the past 12 months and the past 24. Vera's technology powers transportation like technologies like red light cameras. automated speed enforcement, toll payments in rental cars, and digitized parking.

Last earnings report, revenue was up 22%. Roberts brought the company public and actually grew up with a dad who ran a business. His dad had a big influence on him as a leader, and when his dad was diagnosed with cancer, when David was 23, it reshaped his outlook. As my dad got sick, that was like an immediate like control-alt delete moment that I call it, which is like, hey, we're going to redo this relationship. And so what I would say is over the course of the last, oh, even 24 months of his life, you know, I was with, you know, certainly after I graduated college, I was with him. I was learning from him as much as I could.

And then as he got sicker and sicker, obviously, I was just present for him. So what I would say is the ending of that story was a really great relationship. And I think what it did for me is, one, I think it, as I have, as I mentioned, I have four kids. I have two boys and two girls, it sort of gives me a much brighter line of, hey, I need to be connected to these kids much earlier. I'm not just sending them off on their way. I want to give them room to grow, but having a tighter connection. All right, right now on the business side, Roberts is focused on paying down bearer's debt and growing its influence and technologies connected to traffic and safety. Both are top of mind with people traveling more and governments needing

revenue. We today do tolling and violation processing, but in the future, you could really see us looking at things like vehicle payments, how car makes a payment, or telematics, and how do you manage these assets, and where are they, and how do we increase driver safety? These are all areas that are potential interest for us over the next 12, 18 months. And then if you look at on the urban mobility side, there's so many new things coming with a world of environmental awareness, things like congestion pricing, the increased attention to things like distracted driving. Those are big problems that we feel like we're really well suited to help drive solutions for, and we're excited at the challenge to do so.

He said travel just remains extraordinarily strong, including business travel, which is interesting because a year ago, people were still saying a big portion of that wouldn't come back. Various numbers on rental car tolls suggest otherwise two plus billion dollar market cap there. Four kids, can you believe it, Kelly? Two boys, two girls. No, that's like, no, I mean, the fact that he is, the numbers that they've put up is incredible. They're literally a toll collector, which, you know, you always joke that you want to be. Yeah, it just, it's impressive given some of the headwinds we're facing.

Are there main clients, governments, municipalities, toll authorities as opposed to consumer, I know, yeah, consumer connection here? Absolutely. Mainly those, but also universities, like if they've got a parking garage, for example, want to do parking enforcement. But yeah, local governments, up to state governments, dealing with those highway areas where there's construction going on or they've got the camera on you to snap the picture of your license plate if you're not doing the right thing, all that. Good economic indicator as well, like you said about the rental car piece of it. John, thanks.

John, thank you. All right, still to come. Chips, charge, and Chewy, the three Cs in today's three stock launch. All right, time now for three stock launch. Looking at some big movers of the day. American Express surging after issuing upbeat guidance, its dividend. Chewy, hire after an upgrade to outperform at Wedbush and Intel. Yikes, sinking on a brutal earnings report here to help us trade them all. Craig Johnson, chief market technician at Piper Sandler. Craig, let's start with American Express. What do you see? What do you say? You know, fundamentally here, you just look at the American Express and things are better than what people have been expecting. Credit trends are better than you've expected. And you come back and you

start looking at the chart, you got a great downtrend reversal back above your 50, 200, day moving average. From our perspective, this is a stock that looks terrific and on any sort of pullbacks back toward the breakout levels, back toward that 160-ish level we think should be bought. All right. I am tempted to dwell on this and ask you, all right, let me just throw the Visa at you then. What about that one? In terms of Visa? Yeah. Visa still looks like another constructive looking chart. We're seeing all these credit card companies between Visa, MasterCard, Capital One. Again, the credit quality trends are stronger. And so, a lot of these charts still continue to look very constructive.

And from our perspective, Visa is certainly moving up in sympathy with what we've been seeing with American Express today. Yeah, that's what I figure, just making sure it was across the board. Let's move on to talk about Chooey, up 4.5% today. What about that one? You know, Chewy, the number one sort of player in the pet category at this point in time has been in this kind of seven-month consolidation. And from our perspective, this is a very interesting looking chart.

I know it's neutral from a fundamental perspective here at Piper, but, Technically, we're just about to break topside of this seven-month consolidation range, and we would be a buyer of Chui here on a top-side breakout. Up 5% today, as you see right there at 4620. Let's move on to, I guess you'd call it the dog of the day. That would be Intel. Yeah, in terms of the semiconductors. So we like the semiconductors across the board.

And I feel like something like the SMH, it's making a very nice bottoming pattern. and we continue to think that semiconductor should be bought. Now, Intel specifically, they got some challenges. It looks like it's a little more specific to Intel than not. But from our perspective, we are coming back to an area of support. I'm not ready to buy it yet. There's other names I'd rather buy than Intel right now, that being Clack and Amat and ASML and Invidia and WALCOM.

But Intel, for me, got to wait to see if we can hold that support. It's down, not recovering. very different than what we saw with Microsoft earlier in the week that did have an earnings miss but was able to recover throughout the week. Maybe have another one of those martinis while you wait. Absolutely. One of those ones that's already been emptied over there.

Some people think you need to drink, Craig. If you still think you can be that bullish on the market this year, make the case for us. I mean, yes, we're seeing some green shoots right now, absolutely. But make the case that the market can kind of move throughout all of the economic events that may be to come and close this year higher. I know you're looking at this from a chart basis, but how compelling does it look to you?

Well, Kelly and Tyler, keep in mind when you talk about having another martini for lunch, it is always 5 o'clock somewhere. And that's always been our thesis in this market. There's always something to do. And in terms of why we think this market can ultimately continue to move higher in here is, simplistically this. One, we're finally technically seeing a reversal of the downtrend resistance line we've been seeing on the S&P 500. and frankly, a lot of the popular averages for more than near. We're finally pushing through that. Second, the breadth of the market is improving. The number of stocks in uptrends and confirmed uptrens in our work,

the number of stocks making 26 and 52-week new highs continues to expand at this point in time. And then lastly, I'll just say this. Again, there's $4.3 trillion of cash sitting on the sidelines, and the higher this market goes, the more pressure there's going to be for investors to feel the formal, the fear of missing out. And as that really starts to unfold, it's going to drag people back into this market. And again, most portfolio managers didn't have a great year last year, can't afford to get too far behind the benchmarks early on here in 2023.

The market will go higher. No change with our year-end objective of 46-25. And I think in the near term, a move toward 42, 4,300 is probably in the cards before you get a deeper pullback. Very interesting, Craig, the case made then on a technical basis for higher stock prices. Craig Johnson, have a great weekend, sir. Thank you. You too. You're welcome. Meantime, Hasbro announcing massive layoffs, saying they'll refocus aspects of the business.

We will get the Wall Street take next with a stock down almost 8%. Welcome back, everybody. Shares of Hasbro are down nearly 8% today after the company says they'll cut 15% of their global workforce or about 1,000 staffers. This, like many companies, an effort to reduce costs. Let's bring in Linda Bolton-Wiser. She's senior analyst with DA Davidson. Linda, welcome. It's good to have you here. And I guess the main question is, why isn't the market responding positively as it does sometimes to cost cutting efforts? Well, I think that, you know, it's been a real disappointment here with Hasbro. Even though we've been expecting kind of a weak quarter for the toy companies,

Hasbro seemed confident when they gave guidance for the quarter and they were guiding to down revenue. And it turned out that the toy business was much worse than expected at down over 20%. And even the other two divisions, the entertainment and the wizards in digital gaming segment were also a fair amount below expectations. So it wasn't even just the toy business. It was across the board and it does raise issues kind of with regard to their visibility on forecasting their own projections. In toys, how much of their problem and the industry's problem has to do with sort of working off inventory that was loaded up in 2020? early so that so that people avoided supply chain problems and avoided the problem of having too few products to sell. Yes, that in fact is really the issue here that's going on. If you recall,

last Christmas in 2021, there were some supply chain challenges and actually toy shortages. And so retailers didn't want to have that problem again in 2022. So they really bought quite heavily in early 2022. And then the consumer started to weaken up around the summer, June, July, and then retailers found themselves with excess inventory. So how long does it take for that process to work out? And obviously, we can't know exactly what consumers are going to do and when they're going to come back and start spending again on toys. But how long will it take for the inventory issue to work off so that fresh orders start going to Hasbro and Mattel and others? We expect that there could be some overhang of inventory reductions in the first quarter of

2023, but then we expected things to be really back to normal in second half of 2023 with a strong outlook for the toy companies in the second half. Are these job cuts just unwinding positions that were added the last few years? And are they the only ones in the industry who are cutting back now? A lot of what's going on here at Hasbro is company specific. They're going through kind of some management changes, reorganization. They have some activist pressure on them right now. And they did announce there would be some actions taken a few months ago. And so they just gave the exact number. But Mattel did a bunch of headcount reduction and their own restructuring that started several years ago. And are they then the, so part of this is Hasbro specific.

Part of this is really the industry like Tyler was saying more broadly. But does this just unwind sort of growth that they've had or this really kind of cuts from the existing, you know, workforce? Well, I think that, you know, Mattel and Hasbro both at some point in time here, had the ability to just get leaner. So I think when the pressure is on you and when you have declining revenue for a few quarters in a row, that puts the pressure on. And so, you know, they're doing this in terms of right-sizing their cost structure. Linda, thank you so much. We appreciate it. How many of these toys that are in the background here do you have in your house? This was a picture from my house.

It's a picture from your house. No, it's too organized. Many of these things, I know, or probably, especially the xylophones. She's probably got several of the xylophones. A lot of the Legos, too. We appreciate it very much, everybody. Thank you, Linda. And thank you all for watching Power Lunch. We'll see you next week.