Power Lunch - Disney vs. Warner Bros. Discovery & The High Cost of Gene Therapy 2/23/24

Episode Date: February 23, 2024

CNBC’s Tyler Mathisen and Kelly Evans take you through the heart of the business day bringing you the latest developments and instant analysis on the stocks and stories driving the day’s agenda. “Power Lunch” delves into the economy, markets, politics, real estate, media, technology and more. The show sits at the intersection of power and money. “Power Lunch” gives viewers a full plate of CNBC’s award-winning business news coverage, plus a healthy dose of personality from the show’s anchors and the network’s top-notch roster of reporters and digital journalists. Hosted by Simplecast, an AdsWizz company. See pcm.adswizz.com for information about our collection and use of personal data for advertising.

Welcome to Power Lunch. I'm John Ford. Stocks finishing up another strong week with gains for the major averages between one and a half and two percent. After yesterday's huge rally, NVIDIA adding another about a percent and a half so far today. It's $272 billion of market cap added yesterday. We're a record for one company and one trading session. And now the market cap sitting right about at $2 trillion. And that's bringing up an old problem for the market. Halitosis.

Bad breath. Are the markets too concentrated in just a small handful of stocks? Bob Pisani joins us now to tell us just how concerned we should be. Bob? Maybe not so much, John. How much should we really worry about this concentration risk? The top 10 stocks in the S&P 500, which include the magnificent seven stocks like Nvidia and Microsoft, it's now 33% of the value of the S&P 500.

That is high, but it is not unprecedented. During the 1950s and 1960s, it was not unusual for the top 10, stocks to make up 30% or more of the market cap of the S&P. In the 1970s, when the nifty-50 stocks, companies like IBM, Polaroid, Xerox, American Express were in vogue, the top 10 holdings jumped to more than 40% of the S&P 500. It jumped towards 30% again at the end of the 1990s during the internet boom. And other countries like China, France, and Germany have far higher concentration in the top 10 names than the U.S., typically 40 to 50% or more in those country.

Bottom line is this. The concentration is a characteristic of market cap weighted indexes like the S&P 500. These indexes reward the winners and they petalize the losers by definition. So this concentration has been a boon to index investors and do U.S. investors in general. For example, investors who own the S&P 500 or other top indexes, they don't have to pick the winners. They're just going along for the ride. And Nvidia, Microsoft have been winners. Second, U.S. stocks are global market leaders. When a small group, like the Magnificent Seven, become the market leaders, it almost always means the U.S. stock market outperforms the world.

And that is exactly what has happened. The U.S. stock market was 40% of the global market capitalization a year, a year and a half ago. It's now over 50% of global market capitalization. U.S. investors, John, have benefited from the AI boom and the innovation. of U.S. technology companies. I know, John, everybody says what happens if they correct? Nvidia corrected. It was down 60% at one point in 2022. Who knows it could get to correct again,

but this is a characteristic of these stocks. And you saw those numbers, John. They were truly mind-boggling those earnings numbers. Oh, yeah. We saw them up close in overtime for sure. Bob Pisani, thank you. So right now, it seems only two things matter to the markets, maybe, big tech and the Fed.

Our next guest says while market performance is concentrated in a handful of tech names, the focus should be on the competitive edge of a company and its sustainability. Joining us now is Carl Farmer, portfolio manager with Rockland Trust. Carl, happy Friday. I hear you. At the same time, I worry about, I remember when bond investors were caught off sides when the Fed started hiking so fast and everybody was surprised. Like, oh, where did this come from? Couldn't the same thing happen in equities here? It's possible. Hey, John, thanks for having me on today. Certainly, As a previous guests have mentioned, NVIDIA's amazing quarter and guidance showed improving margins,

strong demand, backlog, stocks up over 60% year-to-date. And Bob just commented that market performance, although concentrated in some of the tech names, responsible over half of the year-to-date returns, there is some broadening out, though, which is certainly helpful in terms of health care and financials are up over 7% so far. So there may be some worry, but I think the focus needs to be on what is the companies, like you said, competitive edge and is it sustainable? Certainly, NVIDIA had a wonderful print yesterday, and it's all the talk of the town. Talk more about health care and financials, because normally 7% would be, wow, eye popping kind of in a regular year for equities, but up against what we're

seeing happening in tech with NVIDIA driven by AI. It looks small. So talking to Medtronic earlier this week, I believe it was, they reported earnings. Their diabetes business turning around, some of that GLP1 anxiety from last summer easing off. What's the potential, particularly in health care? No, certainly. What you mentioned Medtronic, I think a lot of the medical device makers, particularly coming out of the pandemic where the voluntary and elected procedures were at a decline

because, you know, certainly you couldn't get in to see anyone. When you've had more of a rebound in that area, all of a sudden you needed to get supply and demand more back in line, and you're starting to see some better things from health care moving forward, and you should see that in device, and we certainly see it on the pharmacy as well. Can we finally stop worrying about the health of the concerns? We just had the Live Nation CEO on last hour talking about just how strong the appetite for

concerts and going out continues to be. It's not just about Taylor Swift and Beyonce. It's about a lot more than that. But at the same time, prices remain stubbornly high, and there's a concern out there about how long this continues. Should we stop worrying? I don't know if we should stop warning. I think it's always a concern.

You know, you mentioned the Fed just a bit ago. When we first started the year, I think the thought was that the Fed's potential dot plot of only cutting three times might be a little too conservative, and they might cut out about six times to get us below 4%. I think now there is the belief that given the inflation prints, like you said, costs aren't coming down maybe as quickly as thought a couple of months ago, kind of staying between 3 and 4%. And the consumer's been very resilient. I think the Fed is less likely to try to cut until maybe you start seeing a little more weakness. I think they're fine with the pause where they are until they see some data saying otherwise. Okay, you like Alphabet, Pepsi, and Nextera. We had a guest just a few minutes ago making the case for Alphabet, so I want to leave that one out.

Tell me about Pepsi and Nextera. No, absolutely. So as far as Pepsi goes, again, a non-tech name, soda and snack foods. You mentioned the consumer, very resilient. Pepsi's basically trading in a market multiple. It's a less cyclical business, and it's actually growing faster overseas now. It's over 40% of sales. So certainly for investors focusing on the long term and maybe not trying to catch a trend,

we certainly still like snack foods and soda. Okay. And next era? On Nextera. So this is maybe a name people who haven't heard of as much. It's one of the largest power producers around. And that's kind of a concentrate in the Florida area. A third of their revenues are renewable resources.

And the sell-off has provided a very attractive valuation for investors to get in. And also right now they're trading it around a three-point. $1.6% dividend yield, and they've committed to raising that 10% a year over the next couple of years. So we kind of like that as a utility, but also a play in the future. All right. Some interesting ideas. Carl, thank you. Carl Farmer from Rockland Trust.

Now, let's tackle the big week for tech, the NASDAQ, slipping lower today, but still positive for the week, thanks to huge gains from Nvidia and its cousins. But how much longer can this AI excitement last? Our next guest thinks the AI space is going to continue to grow. but questions whether Invidia will be able to continue to grow at the rate it has so far. Daniel Newman, CEO of the Futurum Group. Dan, good to see you. So, first of all, why questioning Nvidia?

Hey, John. Well, in 2020, I said this will be the next trillion-dollar market cap company. And in 22, when the stock was trading around 170, I was on CNBC and actually said, this is the time to get behind. I always worry when you get too much momentum, when you have the entire bandwagon is full and everybody's running to pile on. That's the moment where you have to start to say, can this continue? And this week in tech, John, there was some inflections that took place. We heard Pat Gelsinger at the Intel event, and Satya Adela joined him, talking about making networking chips because they want to reduce the reliance on Nvidia. You are seeing all of its major partners in ecosystem, you know, cloud providers,

Google, Microsoft, Amazon, Oracle with Ampeer. They're all looking to make their own chips. And so, Nvidia's had this kind of no headwind run, and it's done incredibly well. But for the first time, competition is coming. And I didn't even mention AMD, but Lisa Susan play now, too. Yeah. Well, meanwhile, there's a lot of money continuing to flow into this space. And as an example of what's driving AI demand, a bridge is a startup that's doing AI for clinical documentation. So doctors can focus on conversations with patients, and it, the AI can do note-taking and follow-up in the background.

I spoke to Dr. Shivrao, who's founder and CEO of a bridge, about a $150 million series C he's announcing today and three places that money's going. One is proprietary data sets that we can use to train models, but then compute is the other piece of this. And then finally, it's about world-class people. And so those are the three major important puzzle pieces that we're putting together with this new fundraise. One of those pieces is compute. and though others are getting ready to have products to sell, Nvidia is selling them right now. And that's just one startup with, you know,

not saying they're spending all that $150 million right now, but a big chunk of it is going toward compute. Yeah, the case is very strong for Nvidia. And I guess when I say there's a bit of a risk or contrarian view, it's the speed of which it's grown and the lack of competition and how much that's driven this price up. I feel like there is a desire across the ecosystem to see more competition. I think Microsoft and AWS making big bets on homegrown silicon are just a couple of

the for instances, but it's the pylon that concerns me. Like I said, in 22, when it was at 170, and people were like, oh, this could go to what, below 100? And I was like, no, absolutely not. AI is going to be a massive tailwind, and this whole industry is going to grow. But people, John, they want this huge growth rate. They want to see, you're talking 265% plus in revenue growth, 400% plus in EPS growth, that's eye-watering. And so when that number slows, you know, I have a comparison from a few years ago with Zoom. Now, AI will grow faster and it is more sustainable, but you have the biggest companies in the world. And I haven't even mentioned Apple that are all entering the space in different capacities.

And they're going to see some, there's going to be a catch-up trade. And there's going to be some other companies that have to grow. It can't all go to one company. It's just not good for the innovation or for the competitive landscape. A lot of people are expecting that the, next wave of dramatic potential for growth is going to come from application companies. And, you know, your sales forces, Microsoft still fits in that arena. Service Now is one that's been pushing pretty hard, Adobe, et cetera.

Who do you like in that set? Yeah, you actually named a few of the ones I really like. I'm a big fan of Service Now. I think what they're doing for productivity and efficiency is going to be really important. You know, Microsoft across the application's landscape, the business is just so well. diversified and of course sales force on the CRM side you didn't mention one that I think is done really well which is Oracle and Oracle is really really sticky and it has made big investments in AI and it's not something that companies can turn over I mean SAP has some of those similar

characteristics all of these companies are looking at net revenue expansion by making AI part of their story and by the way a lot of it will be built on invidia but it's going to be built on other architectures as well these companies are going to be looking to get in involved in the profitability. Invidia's taking 80, 85% of the bomb right now on most of these AI projects. And these bigger companies have to find a way to make money. And that's part of the reason I like some of these other companies getting involved in the chips as well. Yeah.

I'm also curious about some of these smaller industry-specific AI-driven plays, like your samsaras, like your pro-cores, dualingo. We'll talk more about all of that. Dan, on the other side of this break, you're going to be back with us. After the break, Reddit is going public with some well-known investors, as well-known controversy behind it. So how big a moment is this for Wall Street? Plus, it's a troubling time for the media space. Companies are fighting for every bit of ground, content, consumers, partnerships, but some doing better than others.

We're going to have a media bull fight further ahead. Power Lodge. We'll be right back. A Reddit revolution might be hitting Wall Street, but it won't be like last time. The social platform that served as the backdrop of market rebellion is now going public itself. Our Julia Borsten has the details. Julia. Well, John Redd's S-1 revealing that it's looking to list in the New York Stocking Exchange under the ticker, RDDDT. It had $804 million in annual sales for 2023.

That's up 20% from the $667 million. It reported the prior year. The company's net loss of last year was $91 million. that is smaller than the $159 million net loss in 2022. Now, Reddit's average revenue per user declined over the past year to $3.42. But the company announced it has 73 million daily active unique users and 267.5 million weekly actives. So now the company is working to involve its community in its IPO.

It's reserved approximately 1.3 million shares of Class A common stock to fund what they're calling community-related programs, and its non-employed moderators, they're called Reditors, will be able to participate in the IPO through the company's directed share program. Now, in the S-1, the company explains the value in its primary revenue stream, which is advertising, saying that its users see Reddit as a trustworthy place to inform their purchase decisions. The company also saying it has an emerging business and data licensing and a future business around the user economy, including some e-commerce. Now, in terms of Reddit's ownership,

A Open AI CEO, Sam Altman, owns 8.7% of the company, making him the third largest shareholder behind the Newhouse Families Advance, which owns a third of the company, and Chinese tech giant Tencent, which owns 11% of Reddit. Now, among its risk factors, Reddit warns that its high brand recognition with retail investors and its own sales, subreddit Wall Street bets, which drove up GameStop, could actually cause what they're calling extreme volatility for reasons unrelated to its underlying business. So one of its own subreddits

is part of the risk there, John. Yeah, the call's coming from inside the house, perhaps. Julia, stick around for more on Reddit's rise and the company's future. Let's bring back Daniel Newman, CEO, the Futurum Group. Daniel, here's what I don't get about Reddit, right? It seems to be doing fine, but in a world where meta has surged again, where Snap has been having its difficulties, and power seems to be accruing to those already big, is there a case that Reddit is somehow going to embed itself in either the commerce or advertising fabric of the internet the way meta did, the way Alphabet did, or is it just going to stay, you know, a fine little business? Because that's going to matter to what kind of multiple we put on this.

Yeah, John, I'm actually a little public. about this whole deal. You have a company that's losing money. Now, this is maybe indicative that we're pivoting from the era where we really turned companies focus on operating and profitability back to growth. But we also have a company that does have some very in-depth data. And the depth of the data, the commitment of its engaged community could be really invaluable in the era of large language models and AI. You know, we have these kinds of very light transactional interactions that take place on other social networks. Your talk about here rich insights. We talked a lot about the Wall Street bets. The amount of time that these

folks spent learning in their communities and putting knowledge back into the communities, could this be somehow bundled and monetized? That's what I'm really wondering. And then the other part is the API. You know, they have the connection with Google is how do you take the API of all this data and then make it usable across these other LLMs? And of course, Sam Altman's involvement, where could he help take this thing? Yeah. And Julie, at the same time, with all that data on Wall Street bets and other places. A lot of Redditors made some really dumb trades. You know who else has a lot of data governments, and they're not necessarily nimble or worth a lot of money in the public market. So is there an argument out there that you've heard

about why Reddit is going to be the next Google that that investor should know about? Well, I would say the main comparison to Google is that Reddit says that it has this huge untapped opportunity when it comes to search. But I don't think that Reddit is saying it's going to be the next Google. I mean, they did. did say that the addressable market for advertising is right now about a trillion dollars. But the question about who's going to be able to take a meaningful share of that. I mean, right now there is a digital duopoly in the advertising, the digital advertising market. That is Google and meta.

The third player, Amazon, is growing incredibly quickly in terms of digital advertising. I think that this business has the potential to be able to use the data on the platform to better target ads, to be able to use AI, to better target ads. They talked a lot about the opportunity in search and to really leverage that there. But I don't think this is talking about becoming the next Google. This is talking about becoming something a lot more personalized and intimate with perhaps a lot of opportunity even around e-commerce, but not at the scale of a Google. So maybe the next Pinterest, huh, Dan?

Yeah, I think they have to go down that route, John. I can't see a situation in which they're going to get the growth in the scale. They're coming in on a slow, mid-double-digit growth rate, which is okay. but again, there's sub one billion in revenue, and then, of course, they're coming in with losses on the bottom line. The market turning, yes, the high-quality data, definitely interesting for advertisers, but the growth, I just don't know who's going to be there besides its own community. And we've seen how that's worked out with Robin Hood and others. It doesn't always work out well.

I just don't like it that much. Julian, maybe a heck of an opportunity for a pivot. I mean, it is a well-known brand. They have a decent amount of revenue. AI is the future. I imagine there are some things out there that they could buy. I mean, I'm trying to put a smiley face on this after my, you know, skeptical line of questioning. Look, I think that there's a huge opportunity here because their community is so very much engaged.

And so the question is, is that opportunity around e-commerce, which is something they say is a potential down the line? Or is what they describe as a more near-term opportunity, which is in selling there and licensing their data to these large language? language models. So I think that AI is going to be a big piece of it, whether it's using AI to improve the ad business or leveraging their data to improve other companies' AI models. But there's no denying that this is a very committed, perhaps even addicted community to these subreddits. Well, you know, maybe they can use their stock as a currency and buy GameStop or AMC. Julia, Dan, thank you. Further ahead, equity and opportunity in healthcare, a new push to make expensive sickle cell drugs more accessible.

Power Lunch will be right back. Welcome back to Power Lunch. Major indices are taking a breather after yesterday's rally, but bond yields, they're higher once again. Our Rick Santelli joins us from the trading floor in Chicago. Rick? You know, John Ford, it's been a wild week. Whether it's Nvidia, the whole tech rally, magnificent seven,

the great eight, however you want to look at the world, look at stocks, look at the Dow, look at the S&P for two weeks. It's a rocket chip. Geez, everybody's portfolio should look that good. And what have twos and tens done? Well, yesterday, they're their highest yield closes of the years. As a matter of fact, two and a half months for twos, three months for tens. Now we see that 10-year yields are down on the week, two-year yields are up on the week,

curves the most inverted since the end of December. How do we interpret all that? Well, I know how we can interpret it. We can come over here and talk to Shane. Shane, how's it going? Good. How about yourself? All right.

It's been a wild week. It looks so NASDAQ is slipping just a little. little bit. S&P Dow Jones on pace for another all-time record high close. How could all this be going on after all the inflation data last week? Yeah, you certainly got that right, Rick. I think what the investment community was looking for, they found yesterday in Vindio's earnings. So I think they're looking to see if companies can remain successful and through this business climate. Now, the notion of recession, you know, you look at the papers, when I used to say there may be a recession, or I think there will be and there wasn't, that was called a mistake. Nowadays,

The big communities of dealers are reevaluating. They see the recession much lower probability, but they still see the Fed tightening, excuse me, easing, not happening in the first, but in March, maybe all the way back in the junior thoughts. They do. What we saw last week in the CPI print on Tuesday was a little bit higher than expected. So they pushed that rate cut back from March to mid-year. And I think what they're going to see is that it's going to depend on the next two weeks where data comes in and how the Fed reacts to that data. As far as I know, they're not watching the S&P 500.

And you bring up a great point. They shouldn't be watching the S&P 500 or the Dow Jones Industrial Average. But we all know it must have some type of effect on them, especially after the resurgence of last week's inflation. Do you think those numbers for January PPI and CPI were a one-off? I don't know if they're a one-off. What we have seen in the Options marketplace is a renewed interest in upside-versed downside protection. So what we're waiting to see in the next couple weeks is to see if that was one-off

Or is it sign to tell of something to come? I see. And, of course, we all know in the beginning of March, not that far away, we get our first major employment report. Many have been whispering that claims might be lowered because certain states are giving estimated readings. Is there any talk that some of these numbers that we all put so much credence in might not be as representative of strength as we think they are? You might be right, Rick. I'm not sure about that.

But we're waiting to see what Powell says on March 6. So we're waiting to see what he has to say about the numbers and their new data coming out. Right. And that, of course, is the week of the jobs report. I want to thank you for joining me today. Thanks for having me, Rick. I appreciate it. John Ford, back to you and have a great weekend. All right, Rick, interesting. Move to upside protection. We'll watch that.

Now let's get to Eamon Jabbers for a CNBC News update. Evan. John University of Georgia officials say a person of interest is facing questioning after a nursing student was found dead Thursday on campus. Police discovered the young woman's body after a friend called them concerned she had not come back yet from a run. UGA canceled classes today as authorities investigate. Police say they suspect foul play. More than a dozen people are still missing today after a large fire broke out at an apartment block in the Spanish city of Valencia. It killed at least 10 people.

The cause of the fire is not clear, but some experts say it likely spread quickly from a combination of strong winds and the plastic materials used in the building facade. And the NFL announced a record-breaking salary cap today for 2024. It now stands at $255 million per team, a more than $30 million jump from last year. The league says the unprecedented increase is partially from a big jump in media revenue for the season. No word, John, on whether it's going to be enough to help the Philadelphia Eagles next. My cousin Edwin would be worried about that as well. Eamon, thank you. You back. Warner Brothers' Discovery reporting a big miss. Warning of cash flow headwinds in the year ahead. We're going to dig deeper after the break.

It has been a tough few years for media stocks, cord cutting, colossal costs, content competition. Shares of Disney are down more than 40% since 2021, while shares of Warner Brothers Discovery are down more than 80%, including a 10% post-earnings drop today. So, which falling knife do you want to catch and which one do you let hit the floor? Next guests disagree, which means it's time for a bullfight. Needham's Laura Martin has a buy rating on Disney but says it's too early to get into Warner Brothers while TD Cowens, Doug Krutz, says opportunity in WBD, but is more cautious on Disney. Laura, perhaps my falling knife joke wasn't fair to Disney. It is up 19% year-to-date, but why do you like it here? I really, we just recently upgraded the Walt Disney Company after five years at a hold.

We went to a buy recently right on their earnings, actually. I really like what Bob Eiger is doing here now. I like the ESPN joint venture a lot. I like the fact he keeps having cost cutting more and more and more. So he's going to exceed his $7.5 billion of cost cutting. We have a new chief financial officer there from Amazon. That empire really comes at free cash flow growth is their primary metrics. So I think we're going to get over delivery of profitability and free cash flow growth.

And you've got the parks. So whereas Warner Brothers is sort of pure play, the melting ice cube of linear TV, at Disney, half their revenue comes from parks. So you're sort of hedged. One can be working and one can't be. You don't have all your eggs in one basket. Okay. So, Doug, give me the best case scenario on WBD. Yeah.

So, you know, I think if you look at Disney and Warner, there's sort of one A and one B in terms of having the best content libraries, the best content creation engines. Warner is trading exceedingly cheaply in about six times EBITDA. Disney's 2X set, and I think even if you were to say the parks business is worth a higher multiple, which it probably is, I think Disney's content business is still selling it a premium to Warner's. You know, Warner has said that they're going to get their DTC business to a billion dollars in EBITDA next year. They're the only major media company to put out a DTC earnings target of more than break-even. And I think that speaks to the strength of their product. They're also in the middle of de-leveraging,

and as they de-leverage the balance sheet, the value accreets to the equity very quickly. Okay, Laura, so what if I tried to make this a bear fight in a way because sometimes the answer is neither? There's a reason why Nelson Peltz is, you know, on Bob Iger's case right now. And in a way, Disney's got to compete with some deep, deep pockets in Apple, Amazon, alphabet for distribution.

that it didn't have to compete with before. What's going to be the first clear sign that this IGRA-led turnaround is working? So the keyword, because I agree 100% with you, is very hard to compete with Apple and Amazon and Alphabet, but they are distribution. And what you have here at Disney is world-class IP and world-class storytelling.

So that's what you have to see. And both of these companies are, their core business is making content. My opinion is Warner Brothers, is unproven under current management because a lot of people left from the traditional under AT&T's ownership. But at Disney, you sort of have the same crew,

although it would be so in Iger's back, and he really is a content guy. So if you had to bet on one guy making great content over the next two years with $10 billion spent on content, excluding sports, I think you'd bet on the Walt Disney company with its Marvel and Star Wars franchises and you wouldn't really bet as much on Warner

until the Discovery guys can prove they can do the big budget films. So far, they're really hit and miss. Well, I might personally bet on Comcast, but that's because I work for CNBC, which is owned by Comcast. I'll throw that in there. Doug, tell me about

why you think this management team at Warner Brothers is up to this task. How much depends on how much they're willing to spend on direct to consumer, which might just be lighting money on fire. Well, the lighting money on fire happened under AT&T and David

Zossop, but it stopped to that pretty quickly. You know, they're still willing to take big swings on good projects. They've got Dune 2 coming out next weekend. It's got a 98% positive rating on Rotten Tomatoes. Clearly they hit the mark on quality there. You know, Laura alluded to the fact that, you know, Iger is a proven commodity, but he's also going to be out of there in two years if they stick to their plan. Does I ever stick to their plan on Iger leaving, Doug?

Yeah, well, they've been trying to replace him for 10 years and haven't found the right person yet. So, you know, it is a pretty big question mark. Dave Zonslav hired James Gunn and Peter Saffran to run to run DC. That's an asset that had massively underperformed for them compared to what Disney's been able to do with Marvel. And I think that was a bit of an inspired hire. James Gunn really knows the content, loves the content. Safran's a very proven producer. So I do think that the DC part of the business, which really underperformed in 2023, is going to get a lot better and starting in 25. All right.

I know this is a bull fight on these two stocks, but Laura, I'm going to put you on the spot. What's your, what's your other bull pick, if not Disney? If not Disney.

So I cover all the big caps. So right now I'm very high on Gen. AI, right, as Navidia is proving to us. So I really like Amazon this year. I really like alphabet this year because data, the future. Oh, in media.

Okay. So in media, yeah, so sorry. Yeah, so we have a buy on Paramount because we think it's going to get taken over, but that's the only reason we'd be in it. And specifically, he got asked today, Zazlov on the Warner Brothers call, are you looking at acquisitions? And of course they were referring to Paramount. And he said, look, we're talking to everybody, but we have a really high bar.

It's my opinion that Paramount is cheap enough and that David Zazlov at Warner Brothers needs CBS, which is a broadcaster in order to maximize his negotiating leverage with Comcast and Charter. So I think he needs to buy Paramount. and I think it hits those hurdles. He can't move until after April, otherwise he risks his tax status. So after April, I think it's going to get louder. Doug, I wanted to ask you, too, but we ran out of time. You can give it to us in one word if you have a secondary pick.

Sony. All right. Sony, it is. Laura Martin, Doug Cruz, thank you. Still ahead. Equity and Opportunity in Healthcare, the new sickle cell drugs could cure a lot of patients impacted by the debilitating disease, but getting the cost down is going to be the biggest hurdle. Bertha Coombs is going to give us the details from Power Lunch returns.

Welcome back to Power Lunch. Let's now take a look at a disease that in this country disproportionately affects African Americans, sickle cell anemia. New treatments offer hope, but Bertha Coombs looks at the challenge of providing access because of the high cost. For Michael Goodwin, crippling pain from sickle cell disease makes life unpredictable. I could be in the hospital 20 days out of a month sometimes, which hurts me. me because I have a son now. Still, he's leery of new gene therapies, which require months of intensive medical prep, and then there's the cost. Vertex's Cass Jovee vests for over 2 million, Bluebird Bios Lefgenia for over 3 million. I do have insurance, but those, I mean, I already have

medical bills. Goodwin's hesitancy doesn't surprise Dr. Julie Cantor, director of the adult sickle cell center at University of Alabama at Birmingham. is even if we opened the gate today to everybody getting this therapy, at most only 10% of those individuals affected by sickle cell would want this therapy. And even that would be too much for us to manage right this second. More than 100,000 Americans have sickle cell disease, according to the CDC, with 50 to 60% of them covered by Medicaid. Dr. Cantor says it will take time to ramp up capacity to treat patients at scale. In the meantime, states are grappling with how to ramp up access for those on Medicaid. The immediate consideration is the cost. It is very high. And state

budgets simply cannot manage that on their own. The Biden administration is launching negotiations with Bluebird Bio and Vertex for Medicaid plan discounts with payments tied to health outcomes. For Michael Goodwin, the outcome is key. If they could guarantee me the outcome that I wouldn't have single sale, I would do it in a heartbeat. Michael Goodwin is back in the hospital today dealing with his disease. You know, researchers hesitate to call this treatment a cure, but during Vertex's recent earnings call, the C-O said that they've already signed outcome-based agreements with individual Medicaid plans and they're working on it with commercial payers.

And they're confident because so few people, he says, fail to respond. Both Vertex and Bluebird anticipate starting treatments for their very first patients in the coming weeks, John. So is it a matter of if it works, then it's worth it? It's really a matter of paying it all at once. Researchers at the University of Washington said if you look at the cost, they're saying if it's under $2 million, which it probably would be under negotiations, you look at the long-term cost and the lifetime cost, it balances out and it would be worth it. But you pay that over years, so $100,000 a year. And at this point, nobody's talking about a net. Netflix model. But that is one of the things that people are starting to look at longer term for

these breakthrough gene therapies, and a lot of them are coming down the pike. Yeah, Bertha Coombs. Thank you for that important reporting. Coming up, hitting the gas on Carvana. Shares of the online used car seller are up 41% after the company reported its first ever annual profit. Our three-stock lunch trader is going to tell us how he's playing that mover and a few others next. And during February, we are celebrating Black Heritage. Here's Worldwide Technology founder and chairman David Stewart sharing his story. I was so inspired the other day when I heard the quote from Dr. Martin Luther King. Everybody can be great because anybody can serve. You only need a heart full of grace,

a soul generated by love. Let's make 2024 a great year in service to others. Let your light so shine before men, so your good works will be known, and your Father in heaven will be Lord, Brian. That's the only way that we can receive an eternal return on investment. Time for today's three-stock lunch. Today, we're looking at three stocks with huge gains over the last 52 weeks. Here with our trades is Brian Vendig. He is president of MJP wealth advisors, and up first is Carvana. Shares there are up nearly 7X in the last year. Stock soaring about 33 percent intraday after posting its first ever annual profit. Brian, this stock was $360

$2.5 years ago, so can you buy it here? Well, John, I think, you know, with the pop that we're seeing today, it's one of those stocks that I would say might want to consider selling on the news. Just because, you know, the enthusiasm for the stock is because it posted its first annual profit. But when we think about Carvana, and like you said, the volatility and the price,

it's because it's so tied to the cyclical nature of what's going on in the economy. And considering that we're still in a high interest rate environment, and there's some questions about the consumer moving forward, I think this is one where we'll traditionally sell on the news here. Okay. Up next, speaking of volatility, Super Micro. Shares of this up more than 9x in the last year as part of the AI chip excitement driven by Nvidia. Brian, what's your trade on Super Micro? Yeah, Super Micro. I mean, look, from a longer term point of view, you know, definitely this AI trend is going to play out over five. to seven years, I think. And Super Micro is unique. It fits in the space where it's offering those high-end servers focusing on that AI infrastructure. But with such a run that we've seen in the stock and knowing that demand for those GPU servers could come into question over the balance

of the year, I'm sorry to disappoint, John, but I think I might have to throw out a sell on this one as well, because I'd just like to get a little bit more information about Super Micro and where it's positioning moving forward, and especially considering it's trying to add in a cooling system. to those servers, which still hasn't really taken hold in their numbers. Yeah, I mean, the move looks crazy, but look at the market cap. It's still under 50 billion, right? No, I agree. Look, it's a perspective evaluation, John, and thinking about those growth potentials moving forward. So I am not discounting that there's not going to be growth in the technology space coming from AI and a company like Sucre micro. But one thing I think you've been

talking about is with some of your guests and even on some of your other. commentary, his competition could be heating up over the balance of the year. And if that demand weighs, you know, that could affect the stock. So I guess what I'm trying to say is short term, take some profits, longer term, keep an eye out because there might be an opportunity to buy on the debt. All right. From AI to AF shares of Abercrombie and Fitch up nearly 320% in the last year, thanks to rebranding efforts. Brian, what's your trade on Abercrombie? Well, Abercrombie is one of those stocks outside of the mega. It's actually outperformed when you compare it to NVIDIA, believe it or not.

And this is a company that actually has provided some durability in what they've been doing and running their business. So yes, they're in the retail space and sensitive to consumer demand. But when you think about some of the announcements that they make earlier in the year and earnings are upcoming, they've really focused on controlling their inventory, improving their profits, and their cash flows. And for those reasons, in a place where their products seem to be in demand for their consumers. This is one I think it's worth taking a flyer on and a buy as we head into earnings

early next month. All right. Well, one of the three gets the nod. Brian Vendig, thank you. Thank you, John. Still ahead. What do big tech and energy have in common? Well, not a whole lot, but there is one factor that the two sectors share. Our Pippa Stevens is going to tell us what it is next. Big Tech certainly consumes a lot of energy, but our Pippa Stevens says they have something else in common that investors should note. Pippa, what is it? Well, John, hefty shareholder returns with both tech and energy companies topping the list when it comes to capital returns. So within the S&P 500, Apple takes the top spot with 98 billion paid out via dividends and buybacks over the last year, according to data from S&P Capital IQ. Alphabet and Microsoft round out the top three

with Exxon taking the fourth spot at 32.7 billion return to shareholders. Chevron is not far behind at number six. But now, when you look at returns relative to market cap, big energy actually tops big tech. Exxon's distribution stands at 7.9% of its market cap with Chevron at 9%. That compares to Apple and Alphabet's 3.5%. Now across the S&P 500, the energy sector has the highest overall yield, followed by utilities and real estate. And within the energy sector itself, upstream players are the largest payers with Marathon Oil, Cotter, and APA coming out on top. And while we're talking about market cap, get this, Microsoft, Apple, Navidia, Amazon, and Alphabet are now each individually larger than the entire S&P energy

sector, John. That's a pretty kind of astounding stat. It is. And you bring up the issue within what you said there of dividend yields, right? Because it's become complicated, hasn't it? For energy stocks, as you've had interest rates overall rise, it's not as if investors have to go to dividend payers in order to take. get that yield, they can go to treasuries, they can go other places. Exactly. And especially when there's so much excitement in other areas of the market, if you look at the energy sector, it's a much

less growth profile, and so it's not attracting that same level of interest. But I think one thing we've heard from companies this round of earnings is that they are really committed to shareholder returns. It's no longer drill, baby drill, and so they're kind of a solid bet looking forward if you do want income. I do wonder if at some point, though, these begin to converge, in part because

of the relationship, I kind of jokingly nodded to off the top, which is that big tech consumes a lot of energy and this AI revolution that we've been talking about, especially there's so much data being crunched and these AI chips run so hot, at least in the near term, there's going to be a lot of energy consumed until we can figure out how to make that more efficient. And also, I mean, I was joking when I said that they only have one thing in common because in reality these energy companies harness so much data, as you said, think about even their subsurface knowledge. They are constantly looking at all these different data points and harnessing a lot of intelligence using the fastest, the newest technology. So there's more to meet the eye

between the overlap there. That's a very interesting. We should explore that because energy exploration is often one of the top uses for big data. And then at the same time, you need energy to feed these models. Hmm. Food for thought. Thank you, Pippa. And thank you for watching Power Lunch. I'll see you in about an hour on closing bell overtime. But first to Scott Wapner and closing bell.