Power Lunch - Minimum Wage Hike, The Road To Dow 40K 4/1/24

Episode Date: April 1, 2024

California’s new minimum wage law takes effect today: $20 an hour. We’ll speak to the CEO of fast-food chain Raising Cane’s, which nearly has nearly 100 locations there, about the real impact of this wage hike. Plus, stocks are hitting a speed bump on the road to Dow 40K. Friday’s inflation data and comments from Jerome Powell have led some to believe the Fed could cut rates later than initially expected. We’ll discuss. Hosted by Simplecast, an AdsWizz company. See pcm.adswizz.com for information about our collection and use of personal data for advertising.

Good afternoon, everybody, and welcome to Power Lunch alongside Courtney Reagan. I'm Tyler Mathes. I'm Tyler Mathis. Glad you could join us on a Monday. California's new minimum wage law takes effect today. $20 an hour. We'll talk to the CEO of Raising Cains, which has nearly 100 locations in the state about the real impact of this wage hike. And Stock City's speed bump on the way to Dow 40,000, Friday's inflation data and subsequent comments from Fedger Powell, leading the markets to believe the Fed will cut rates later rather than sooner. That's a big reason. Stocks are pulling back today. On this first day of the second quarter, the Dow Jones Industrial Average, that's the lagger down about 7 tenths of a percent. S&P 500 down about a third of a percent, NASDAQ down, but, hey, only just marginally.

Plus, the S&P 500 was up more than 10 percent in the first quarter, so it might not take much to convince investors to take some of those profits. Let's bring in Mike Santoli now for where on the market stand. Mike, how much of this is seasonality when you're talking about the turning of a quarter? There is a little bit of an unwind, I think, today based on some of the very, very end of quarter action yesterday. I'm not sure it's broader seasonality. I do think it's a market that's earned a rest, not just up 10% in the S&P 500 for the quarter, but in a steady fashion for five months, five straight up months, two straight up 10% quarters.

So you can kind of pile up these superlatives. You look at what's happened historically after similar periods. When we haven't had a 2% pullback in five months, for example, it all nets out. in a similar place, which is longer-term uptrend intact. It's probably not the ultimate peak, but you ought to expect a little bit of a give-back. In the meantime, the other thing I'd mention is the yield move up today. Ten-year treasuries toward 4.3. We've got some strong economic data.

It causes rethink about the Fed. So that's sort of a natural place to maybe locate some of the selling because the downside drivers of the Dow today, the two biggest ones, Home Depot, Goldman Sachs, so rate-sensitive moves. What we will hear endlessly over the next couple of months is the old cliche, selling May and go away. Maybe April is the new May, but given the weather, maybe April's a new February. That's right. So hard to actually pull that apart from what the single cycle, you know, kind of handicapping is going to be. In other words, yes, broadly speaking, the best returns are the six months from November through April. That's just the way it's gone

for many, many decades. However, I always say that's climate, that's not weather. That kind of tells you general tendencies. Because, you know, we should have had some pullbacks, for example, in late February, based on all the seasonal patterns. We didn't get one. April has actually itself been a very strong month. Maybe we'll get some turbulence around tax payment deadlines and things like that. But I don't know if that's going to be the driver. To me, it's about, does the economy hold up? Is the Fed still going to be poised to cut into a record stock market high and a good economy? In a hot economy. Or not. And that's, to me, where the debate's going to hash out. Yeah. Was there an inflation number that came out late last week?

On Friday morning, which the market didn't really have a chance to react to until today. And interestingly, I think the number itself was palatable. In other words, it was good enough. It didn't show a continued acceleration in inflation. But then this morning, the ISM manufacturing numbers came out, and it just seems as if there are parts of this economy that are kind of reawakening at a time when nobody's convinced that inflation is coming down. Prices paid within ISM was higher.

Anyway, the point is, there's a reason to kind of be concerned if you're inclined to think inflation is going to be stubborn at these levels. And so that's why the bond market's kind of pulling out that possibility of a near-term cut yet again. All right, Mike, stick around as we bring in our next guest, who says the market still has strong support from solid growth, but wouldn't be surprised to see a pickup in volatility this quarter. Dan Suzuki is Deputy CIO at Richard Bernstein Advisors. Dan, welcome. Good to have you with us. How do you explain today's action in the market? Is it a little bit of reaction to the inflation number last week, maybe to the ISM number today,

a little bit to the fact that we've had back-to-back excellent quarters, as Michael points out, and maybe it's time for a little breather. What is it? Well, I think everything Mike said was spot on. I think, you know, the market's really trying to balance, you know, the two sides of the growth coin. On one hand, you know, growth is coming in hot. Growth is coming in strong. And I think the market likes that.

and I think that bodes well for this coming earnings season and the earning seasons to come. But as Mike also alluded to, you know, you're seeing a lot of stickiness in the inflation numbers. You know, you're seeing that in the PC number we got last week. You're seeing that the ISM report this morning. And remember that inflation lags growth. And so growth numbers continue to come in hot and you're starting to see that flow through to inflation. I think at some point you do have to worry, you know, that that's not only going to

come with the good reaction, but there's going to be a negative reaction given, you know, what the Fed's response made. The market is a, is an instrument that discounts future profits. Walk us through the prospects for future profits, Dan. Yeah, I think, you know, listen, you know, there's, there's tons of people that come on your show and, and proclaim that they can see exactly what the world's going to look like in a year's time. I have yet to meet anybody that's very good at that and predicting the future that far out. I think the next best alternative, which is where we hang, our hat is looking for the signs that growth is rolling over and inflecting. And the reality is we're just not seeing those signs. I mean, people have been bearish on the economy for years now,

but growth continues to show signs of not only resilience, but actual acceleration, including today's ISM report. So I think that, you know, underlying the surface of everything, earnings growth is going to continue to accelerate. Now, the drivers of that earnings growth made shift a little bit in terms of the mix, but while earnings growth continues to improve over the next one, two, or three quarters, I think that's a good time to be in markets. I think that provides that strong support that we started the conversation. Mike, we are six minutes into the show. We haven't talked about the magnificent seven yet before of these big mega-capped stocks.

We haven't said in video. We haven't yet. So let's do it now, Envidia. How important is all of this to the market where we stand now? Well, what's interesting is they've grown a little bit less important over the last month. I think the big question really going into March was, can the market not reliance? lie on those handful of stocks for the upside. Well, tech underperformed in March in general. And really, you had Nvidia working, Microsoft's hung in there fine. Apple is still a weight today. And that's

actually been down 10 plus percent for the year. The market's held up. Why? Because a lot of stocks that were still getting back their losses from 2022. I mean, regional banks started to act better. A lot of cyclical parts of the market have managed to catch a bit. The question is, can we have this magical perfect rotation, you know, indefinitely? Or is it at some point we're going to fumble the baton as we hand it over to another sector and get a proper pullback? That to me is the bigger question. But so far, I don't think you can completely have the AI story, you know, go cold. But for now, it's good enough and Nvidia's up again today. I think the Walsh Journal, Dan, this morning, said the Magnificent Seven has now become the Fab Four when you take out Apple, Tesla, and I forget which

other one, maybe was alphabet. What is your reaction to that? Is it a good thing that maybe we're not as dependent as the market was on seven stocks alone to pull it forward? Well, 100%, Tyler. I think it's extremely bullish that you're seeing the breadth of this market really broadened out because if you go through bull markets historically, you've never had a sustainable market that was incredibly narrow throughout its full period. So I think that it's a necessary requirement to see breadth broadened out. And I think the reason behind the breadth broadening out is that earnings breadth is really broadening out.

And I think that's the key inflection point looking forward is that magnificent seven earnings, while continuing to be very, very strong from an absolute growth level, those growth numbers are actually set to decelerate in the coming quarters, whereas the rest of the market is what's going to be driving the further earnings gains from here. All right, Dan, thank you very much. Good to have you with us. And great to have you in the house, Mike. Yeah, appreciate it.

Thanks. Well, that fear about rates not coming down anytime soon and also being reflected in the bond market today. Mike talked about this a little bit. Yields moving sharply higher. Rick Sampelli is in Chicago to take us more in depth. Hi, Rick. How are you? Hi, Courtney.

Yes, sharply higher. That's a good way to put it. And there's a couple of good reasons. Let's go over them. Here's the good. The ISM manufacturing headline breaks the string of 16 consecutive months under 50 to come up with the best number, 50. since SEPA 22. The bad. Well, this is prices paid. You'd rather have it go down, but as you see, highest levels since July of 22, and finally the ugly. Listen, this is Employment Index.

Six in a row under 50, 11 of the last 14 under 50. That doesn't look like it. If that was a stock chart, you probably wouldn't be looking to buy it. But yet, after having said that, last year, nine out of 12 months were under 50, and the jobs market was pretty good. So how much can we really glean from these? And finally, what did it do to the markets? Well, here's twos, tens, thirties on one chart, 24-hour chart, 10 o'clock Eastern. You could clearly see these numbers, as Mike Santoli said, fed the sell-off. But the sell-off was already afoot.

Why? Because every analyst I read all weekend, every economist, boy, the numbers were pretty much as expected. I was there at 8.30 Eastern on Friday, and the numbers did not make any progress on inflation through the Fed's favorite. And it certainly does demonstrate that there's a definite Roar Shack going on when it comes to the Fed still. And Chairman Paul on Friday still underscoring, he doesn't really see a problem. And finally, all of these issues with rates, two's on pace for a two-week high close, tens on pace for a four-month high close. Dollar index? You guessed it. It's solid as a rock.

It's been trading above 105. It's on pace for a four and a half month high close. Courtney, back to you. Thank you very much, Rick Santelli. Well, coming up, a power call on some footwear stocks. Berkeley's getting bullish based on some strong survey results. The analyst will join us next. Plus, California, raising the minimum wage for fast food workers,

a potential hit to some businesses in the state. We'll talk to the co-CEO of one chain that will be affected. Power Lunch. We'll be right back. Welcome back to Power Lunches. The second quarter is officially underway. Barclays is taking a big step to expand its coverage into the footwear apparel space, firm out with a note, initiating four footwear stocks, Crocs, Skechers, Decker's Outdoor, and On Holding, with each stock receiving an overweight rating.

Here with us now is the author of that note, Adrian Yee. She's managing director and consumer discretionary analysts at Barclays. Adrian, it's wonderful to have you here with us. I guess, you know, you've got four stocks here. Let's start with Crocs. Why are you so compelled when you look at a name like Crocs? I think so many of us look at them as a fashion fad that surprisingly has not faded. Yes. You know, when I say about the four names that we initiated on, I would say that the footwork space is unique in that it allows for a lot of white space. So if you have a compelling

brand and you have loyalty across, you know, for different income brackets and different demographics, you can actually continue to succeed. I think what we like about crops is they command, I mean, literally the highest product margins, as one can imagine, right, 70% versus the sector sort of 50, 60%. And then in terms of operating margins, once they get that leverage on the model, they are printing north of 25% operating margins, which is far away, like 1,000 basis points, 10 points above others. Yeah.

And when it comes to some of these names, obviously they operate in slightly, different sub-sectors, but obviously Nike has been just this mega brand for so many years. We know they have their individual stumbles. Are any of these names also partial beneficiaries of Nike sort of working out its own problems? So you hit the nail on the head. If we look at the horizon from 2016 to 2022 globally, Nike and as well as Adidas have given up, you know, 4% from Nike and about, three and a half percent from Adi, Adidas. And so that opens up a ton of oxygen in the room for

these nascent brands, like the hookah and like an on-running, as well as a bunch of other running specialty, you know, sneaker brands. And so what we've heard from Nike, self-admittedly, is that they really didn't do a good job in closing the door over the past two to three years and blocking out some of these innovative competitors. And I think we also heard on the last call from Nike, that it's going to take some time for them to retrench, right? So they're doing franchise management, and they're going to hold back on selling, you know, certain of their products into the market. Again, it takes about 15 months to two years to build this innovation pipeline back, and it's going to leave some room for Hoka and for on. I wonder, I think of these

brands, and I mean this in a non-pejorative way, whether it's Hoka or whether it's Krocks or whether it's Uggs or even Skechers, maybe even on, as nichey. You know, they're a little fun. They're nichey. And maybe their future is in not trying to take on Nike, because who can? Am I barking up the right tree there that if they play their niche really well, if their niche can mean rich? Yes.

So, Tyler, I think you are spot on with the notion that. that each of these has a technology, a loyal following, a brand differentiator that at their size, right, can last them for years on the count. We like to think about kind of these brands as the S-curve of adoption, and we always like these brands are their best and strongest when they go from late early adoption to early mass adoption. That runway that has low brand awareness and high brand desirability can propel these brands for years. And we used to see this kind of back in, you know, the early 2000s where you would see three, five, seven-year runs on these great brands. So I think you are absolutely correct. These guys need to stick to their technology and kind of play their own game in an area where they're still the smaller competitors. And they could double in size pretty easily with, you know, not a lot of, you know, harm, you know, in terms of kind of taking a ton of share from the incumbents.

Adrienne, I continue to be fascinated by the idea of balancing direct-to-consumer with wholesale. When you're a new brand, wholesale can be very valuable because it sort of offers marketing opportunities. If a consumer goes in thinking they want Nike, but then, oh, my gosh, they see a new shoe from On Holdings, and maybe they want to try that out. That's valuable. But in your notes, you're talking about growth opportunities through the direct-to-consumer channel. Nike is just now sort of saying, yes, we want direct-to-consumer, but maybe we do need to refocus on these wholesale. relationship. So where is the opportunity? How do you find that balance if you're one of these nichey brands? Do you go direct to consumer? Do you go wholesale? How do you find the balance?

So when you are low brand awareness, the greatest propellant of brand awareness is to go wholesale. It's the fastest. And that's how you become discovered. So in our analysis, we did a proprietary survey. And the aided brand awareness for on is 8%. And the aided brand awareness for on is 8%. And the aided brand awareness for Hoka in the U.S. among our survey participants was 22 percent, compared to Nike at 95 percent, right? Wow. So in order to get known and recognized among the consumer landscape, the fastest way is to go through a wholesaler like a Dick's sporting goods or a footlocker.

So you're put side by side for trial next to Nike, next to Ayas, next to Puma, right? Right. And that's the greatest way. Having said that, once you get to this nose, of I am aware, people are aware of the product, then you want to take back control, right, of the branding, the promotionality, how the brand is positioned, the innovation pipeline, and you don't have as much of that control in the wholesale channel as you do in the direct-to-consumer. So if you want to control the message, right, there's a very fine balance between going DTC

and wholesale in tandem, and it's a very fine line, and people kind of straddle it right now. But I would say, you know, in the early stages, it's wholesale away. Quick answer, if I might. With the exception of Skechers, which has an endorser in Howie Long and maybe a couple of votes, I think of these companies as going low on advertising and endorsements compared with an Adidas and even an Under Armour or a Nike. Am I right on that? And how have they done it in the absence of a big advertising budget and endorsements? So it's interesting because there's a bucket that's called demand creation, which we would know as advertising and promotion. Within that bucket of demand creation are personality endorsements.

And I would say that each of the running brands, for sure, sort of has personalities, particularly in the running segment. So it's possible that you may just not recognize them as well as, say, the, you know, the Skechers, a spokesperson, Howie. So, you know, to the extent that these companies are investing anywhere between 7% up to 10 or 11% of their P&L, that's kind of of, you know, status quo. Okay. Adrian, thank you. Thank you very much. Adrian Yee. Appreciate it. All right, still to come. It has been one year

since the boycott that hit Bud and Bud Light specifically. So where does the stock stand now and how does it approach branding? Well, welcome back to Power Lunch, everybody. Shares of AB InBev still haven't fully recovered following a controversy which began last April following

its partnership with a transgender influencer. Brandon Gomez joins us now with more on an eventful year for the company. Brandon? It's definitely been eventful. And the road to recovery for Bud Light definitely still continues. He reported sales being down as much as 28% in the months following that partnership. Nielsen data at the time showed Bud Light lost its number one spot in U.S. beer to Constellation Brands Modelo. Consumers also turn to Molson Coors. And look at shares of some of those companies, right? A.B. Mbeb still down about 8% since that time. Consolation, Molson,

up 20 and 30% respectively. Now, look, Bud Light was able to stabilize. it's declined by fall, investing in some strategic brand partnerships, even former President Trump posted on True Social back in February of this year to give the company a, quote, second chance. But Bud Light still hasn't been able to fully recover. The latest Nielsen data shows that market share remains down 4.8% compared to pre-boycott levels. A company spokesperson talked to me over the weekend said that Bud Light remains the number one beer in volume sales year to date is improving and off-premise and that the company has been, quote, on a, positive market share trajectory over the last seven months. So the question remains, is the stock a buy?

Well, Bernstein in a recent note, says the company's recovery appears to have stalled for now, emphasis on the for now, but they do maintain a buy rating, citing the company's broader portfolio. Last quarter, it saw profits rise despite the boycott. So, Tyler, it's been a long year for Bud Light as a brand, but perhaps there's some light at the end of the tunnel for Anheuser-Busch as a I guess the simple question is, have people forgotten what got them into hot water in the first place? I don't know that it's a forgotten case, right? I think that Brutley and specifically Anheuser-Busch has been strategic about their partnerships moving forward, right? Their core consumer demographic felt alienated because of the decision by what the company made, by what the company decision.

But then now they're investing in country music stars, partnering with them. They now have a partnership with the UFC. They have a partnership with the Olympics. So I feel like they're trying to develop more and more partnerships that are more in line with what their core consumer demographic was pre-controversy in order to sort of pull them back. I wonder if some of those investments ring a little hollow with the core constituents who go, oh, you got in trouble there.

So now you're coming back into a more mainstream group of endorsers. And you see with that post from Trump on truth social saying, you know, let's give them a second chance. Even if that kind of an endorsement isn't enough to get that core demographic back to the brand, what's it going to take? This fascinates me, and I know we're sort of out of time. But can we really attribute all of the sales decline to this incident? No, I mean, it was happening before the boycott incident happened, right?

That market share shift to Modelo was already happening. This may be a catalyst that expedited the process, but, you know, you can talk about even more broader consumer trends where folks are turning away from beer, going into ready to drink cocktails within the space. So can it all be attributed to this one moment? No, not necessarily. But it definitely was a catalyst that sort of pushed the needle in one direction. Compare Modella.

I watch a lot of sports. I know you do too, especially this time of year with the basketball. Modello's advertising is very effective. It stands out. I mean, I can't even put my finger on the theme, but they're sort of vignettes of people who are artists or barbers or entrepreneurs. I can hear the music, actually. It's very effective and catchy.

So, I mean, I guess they've done very well at that. We appreciate it. Thanks very much. Thank you. Thanks. Go ahead that. Let's get over to Leslie Picker. She has our CMDC News update this hour.

Hi, Les. Hey, Courtney. The White House said this afternoon it is aware of reports of an Israeli air strike on the Iranian consulate in Damascus. A spokesperson says the president has a team looking into the claims. Meanwhile, Iranian officials said on state media channels, the country reserves the right to take reciprocal actions against Israel. A top revolutionary guards commander and several diplomats are among those reported dead. An expert panel appointed by the FAA said today the agency should stop requiring pilots to disclose if they're in talk therapy. The panel said

the current rules lead to health care avoidance or non-disclosure and create barriers to reporting mental health issues. The FAA says it is reviewing the recommendations. And U.S. traffic deaths likely fell about 3.5% in 2023, even as people spent more time behind the wheel. But even with the progress, the statistic is still higher than it was pre-pandemic. Federal highway safety regulators are urging people to put down those phones and avoid other distractions while driving. Courtney, back to you. That is very good advice, something I often harp on people about. Thank you, Leslie. Well, California's minimum wage hike beginning today, workers using it as a backdoor to organized without forming a union. Multiple public chains will need to comply, but after the break,

we'll talk to the co-CEO of Reason Cain's, a private fast food chain, which is planning to open 20 new California locations this year. Power of Lunch will be right back with that and more. A new minimum wage going into effect in California for fast food workers, $20 an hour, but with money in politics, things are never quite that simple, are they? Kate Rogers joining us now to explain exactly who is covered by this and who isn't. Hi, Kate. there, Court, the minimum will be among the highest in the nation and the sector's highest as of today with ripple effect sure to be felt for all parties involved in varying ways. Now, right now, rather, glass door data show that just over 20% of California fast food workers are making $20 an hour so many more will get a pay raise. The law targets fast food chains with 60 plus locations nationwide and impacts here more than half a million workers in the sector, Governor Newsom said in the fall.

Now, there are exemptions for bakeries who make bread on site, restaurants and airports, museums, hotels, and event centers. The SEIU president, Mary Kay Henry, told CNBC the focus was on fast food because workers were inspired to take action in the wake of the pandemic. It's among the most meaningful developments since Fight for 15 began a decade ago. It's taken us 10 years to get to this table. And they feel like they're going to have a voice on the job that they've never been able to experience before. for now business advocates say this will have both ripple effects and unintended consequences for workers and businesses alike. The IFA president saying, quote, these are small businesses and they're facing now mandated higher costs and those costs are going to get passed on to the

customer and will likely result in fewer jobs. That's Matt Holler, the president and CEO of the International Franchise Association. And that group was involved in these negotiations as well. So a lot of back and forth here on how this will play out, Courtney, and certainly will be something to watch over the next year. There are so many questions I have for you, Kate, but obviously California is a big state. There's a lot of companies there, a lot of fast food companies. Are there any publicly traded chains that are being affected that you've been able to identify yet? I know sometimes the pay data isn't always super transparent.

I think you said 20% are already making this wage, but 80% that means are not. That's right. So, Courtney, if you think about companies that have a large footprint here, McDonald's, of course, Chipotle, Young Brands, there's Jack in the Box, there's Starbucks. And it kind of depends also keep in mind here on how long. these chains are operated. So a Starbucks, for example, those are company-owned locations. They'll have to comply, but the company sets the prices there. Chipotle, same thing. Company-owned McDonald's, though, those are run by franchisees. So franchisees wind up deciding how much they're, you know, going to raise prices. But it all could wind up impacting these larger companies as well, because

if consumers do indeed pull back, as some are projecting, then that will wind up hitting the bottom lines of some of these companies. But on the other hand, the SEIU says low-wage workers will have more money to spend. And we know a key theme this earning season and beyond has been the low-income consumer pulling back. So does this wind up, you know, boosting business for some of these companies that have experienced that. And it's kind of too soon to tell. We look to Seattle, for an example. They raised to 15 years ago, and that was a big to do there. And there's data to support, rather, both of those arguments. So we will be watching this one to see how it plays out. All right, Kate, thank you very much. Raising Cains is among the many restaurants being impacted

by the minimum wage hike today in California. The chicken finger. The finger chain has currently 87 locations across California. Plans on opening an additional 20 this year. More here, let's bring in Raising Kane's co-CEO and Chief Operating Officer, AJ Kumaron. AJ, welcome. Good to have you with us. Thank you. Good to be here.

What is this wage height going to mean to you and what's it going to mean to the prices that customers might have to pay? You know, look, honestly, we have always been above the minimum wage. We believe in doing the right thing by our crew members, having a great place to work. When that comes to benefits, wages and all of that. So although this is 16 to 20 in minimum ways, we are not there. We are far about that. You're above 20? No, sir, about the 16, which is minimum today.

You're above 16. Correct. But you have to now go to 20. We have to go now 20. And honestly, we have to go above that because what we don't want to do is we don't want to compromise on the quality of training that we provide, the benefits that comes with it, the quality of food that we serve, any of it, which means that our average is now going to be closer to 22. or $23.

And honestly... So that you can retain the workers. Absolutely. And you won't have exact parity with the others who are coming to 20. You will keep that edge. Right. The crew members who worked hard to train themselves on additional jobs and things like that, they've earned that gap versus the other crew members.

And we want to continue giving that. So it will be about $20 to $23. And honestly, we are happy that we can give those for our crew members. We're always happy when we can provide them better pay, better benefits and all of that. Unfortunately, though, we don't know, razor-thin margins. You alluded to 20 restaurants. We actually have 50 more restaurants in the next 24 months or so that we have to open. We want to create those opportunities for our crew members, the new ones joining and all of that.

That means taking price, you know, so we will be taking a small price increase somewhere around 7%. And that is in the hunt of what I'm hearing all the other companies are doing as well. Is that just in California or across the chain? No, that will be isolated to California. We, you know, honestly, you know, taking prize gives me a, you know, not in my stomach. I really don't like doing it. We want to provide a great value to our customers day in, day out. So it's not our choice.

But to protect the margins, not even all the way through, at least the most of it, so we can continue growing. We're a company-owned system. We're the fastest growing company-owned system out there, one of the anyways. So we'll be taking prices just in California. Are you? Am I right? 60-some consecutive quarters of same-store-sale growth? Yes, sir.

more than 15 years of consistent same store, restaurant, sales, growth, that's what we maintained. Wow. What about if your workers are making more money and then others are as well in California, do you anticipate any kind of sales potential benefit from

people having more disposable income to buy more chicken fingers? You know, we have always tried to do, stay consistent, do one thing better than everyone else. So we focus on what I call everyday value. So we have, we don't do limited time, offers, we always, we focus, we do five things. It's chicken fingers, fries, toast, sauce,

and a coleslaw. That's where we serve, and we do that really, really well. So our customers come to us for everyday value, and they're pretty regular, they're very loyal, and we are very transparent with the way we prize, the way we serve, our customers, crew members, and all of it. So I did not anticipate any kind of decline in customers, customer traffic, because if they're eating, they're going to find this as a great value. Now, would there be an increase? reason that, I don't know. I mean, I think the better players will rise up to the top. Probably that looks good. Boy, that food I'm looking at right here. So a lot of fast food restaurants, I assume, are trying to cut staff. They are automating. They're using artificial intelligence.

They're using kiosks for ordering. Are you doing that, or are you maintaining your store-by-store headcount or maybe even increasing it? We're not. We actually have some of the largest number of crew members per restaurant. We have over... That's what I thought. That was my sense, was you have a lot of people. Exactly. We have over 10,000 crew members in California, spread over 90 restaurants, a little over 100 of restaurants. And the reason is we also want them to have a great workplace. So we don't like to have them working long hours when it's triering, et cetera. So, no, we're not automating. We're not changing our benefit plans. A lot of people are doing

that. We're not changing anything that we do with our food. None of that. We're going to stay our path. We really like the product that we're serving, our service model, and a smiling crew member who serves you. So we're not going to change any of it. We're going to stay our path. Wow. Fast food service and food service in general is a tough job. So that's good. I'm glad you're thinking about the employees in long hours. It's tough. It's tiring, hard work. Thank you so much for joining us. Appreciate it. Keep us updated how it goes. I'm going to be very interested to see if you actually end up with more sales from individuals that end up having more disposable. Let's hope so. Let's hope so. Thank you very much.

We'll still add powering AI, the unlikely source that's helping fuel the massive energy needed for artificial intelligence projects. We're going to discuss that and more when Power Lunch returns. We'll be right back. The NASDAQ 100 is up 67% since the beginning of last year as this AI craze boosted stock, such as NVIDIA. But if you think that run is done in chip names, maybe there's an opportunity in energy names, which will be needed to meet AI's huge power demands. Pippo Stevens is here with more and the ripple effects. Okay, where's the opportunity? Well, Courtney, a whole lot of power is needed. Data Center's electricity demand could more than double in the next two years, according to the IEA. That means data centers would consume as much power as all of Japan. And renewable production just can't keep up with that kind of growth, meaning that gas demand could also rise, boosting drillers like EQT, Kota, and range resources. But after you get the gas out of the ground, you've also got to make.

move it. So think pipelines. It's hard to build a pipeline quickly, especially an interstate one, so companies with pipes already in the ground could have added value. Equatrans recently bought by EQT and Bridge, Kinder Morgan, and Williams are names to watch. And then you'll need to keep your data center up and running 24-7 so companies that make generators, cooling equipment, and other control systems could be winners. That's where names like Eaton, Westcoe, and Atchore come in, as well as Johnson controls and train technologies for cooling equipment. RBC called the group a quote, often overlooked piece of data center operations, noting there's been a meaningful uptick in multi-industry companies mentioning data centers on earnings calls. And, of course, everyone wants to get in on the momentum behind this trade, but there really is a big power story here.

Absolutely. I mean, you need so much power to do everything that you need to be able to do with all of this stuff, crypto as well as AI, every iteration. It worries me, actually, that we're going to have enough. and be able to support the grid. All right, PIPA, thank you very much. Pippa Stevens. Coming up, the comeback kids, CNBC Pro, highlighting some underperforming stocks that Wall Street says are poised to rally.

We'll get our traders take on a few of them in three-stock lunch when we were. All right, time for today's three-stock launch. Stocks are off to a hot start this year, maybe not so much today, but there is always something lagging the market. CNBC's Pro screen for stocks that could be due for a turnaround.

We're taking a look today at three of them that are down this year but have room to the analyst's average target. Room to rise, that is, here with our trades is CNBC contributor Courtney Garcia, senior wealth advisor with Payne Capital Management. Up first, Courtney, Match Group shares down 1% so far this year. Your trade on match. Shall we strike a match? We do, yes.

I would be a buyer of Match here. I don't really think our online dating is going away any time in the near future here. They have some really popular platforms. Tinder being their main one, which has really been the reason largely that the shares have been under pressure as they had some increase of prices, which meant less users for Tinder. But now you're seeing growing revenue and popularity in Hinge, which is their second largest platform. And that's not just growing here in the U.S. They're actually starting to push into European markets, let alone when you look at Asia,

that isn't a hugely untapped growth over there. When you just look at the demographics, there's just such an addressable market there that hasn't yet been tapped into. And I think that's really going to be their longer-term growth story is when you look, not just here in the U.S. but abroad. And it trades an attractive valuation. Over the last five years, it's average about 28 times forward earnings. It's currently only traded about 12 times earnings. So I think for all those reasons, I would swipe right on match. There you go.

Exactly. I was going to say that, but I can't remember if it's right or left or what the right way is. Anyways, up next, Courtney, let's talk about Cesar's shares down 6% for the year. But the average price target suggests an nearly 37% rally. Of course, the sales site analysts are correct. So what's your take on this one, Caesars? I'd actually stay on the sidelines of Caesars. I do actually like a lot of casino operators.

But when you're looking at gaming demand, a lot of that is much more abroad than it is here in the U.S. So specifically Macau and Singapore is I think where a lot of that growth potential is going to be. And some of your other casino operators do have that exposures. Seizers doesn't. And they also did have a recent merger with El Dorado, which I think longer term is going to be a benefit for them. But what happened is they had to take on a lot of debt. for that. So although they do have good operating margins, a majority that is going just to pay off of interest payments, which is likely to continue to weigh on their shares for a little while here.

So I would stay on the sidelines for those reasons. All right, Courtney Garcia. Let's go to the last one of the day, and that is United Health, UNH. United Health, I would be a buyer on here. This also has been under pressure this year, like the other three. Most recently, they did have that cyber attack, which put pressure not only in them, but the entire healthcare sector, which hopefully they're starting to get under wraps here. And I don't want to discount the fact that that is going to be a short-term issue here. So we have no idea how that's going to affect their margins here in 2024. They've already had to pay out, I think, over $3 billion to service providers who were affected. But longer term and bigger picture, they are the biggest Medicare advantage provider. And as you're

looking at demographics here in the United States, you've over 10,000 baby boomers every day hitting age 65 that is going to continue to benefit them. And their shares traded about 17 times forward earnings, which is still lower than their historical averages. So for all those reasons, I would hang in here for the long term. All right, Cort. Thank you very much. Courtney Garcia. We appreciate it.

And for more on stocks that are expected to make a comeback, why don't you go over to CNBC.com slash pro pick. That's where you'll find them. Well, coming up, the impact of Clarkonomics. Caitlin Clark and the Iowa Hawkeyes said to take on LSU tonight in a rematch of last year's NCAA championship in what could be the basketball star's last college game. Or break down the impact she's had on end.

off the court when Power Lunch returns. There are two women's college basketball games tonight, one in Portland, Oregon, and one in Albany, New York. In Portland, you can get a nosebleed seat for about 10 bucks in secondary ticket sites. In Albany, even the worst seats are going for $125 not including fees. That's because Caitlin Clark and Iowa are taking on LSU in a rematch of last year's title game. And that's just a small example of the economic impact Caitlin Clark is having here with more is Jeff Oman. He's business analytics professor at the University of Iowa. Two of my

sisters-in-law went there. We are very excited about Caitlin Clark and everything that she's done. It's been really fun to watch athleticism and skill at that level. What in your estimation, has she brought to Iowa and or the university because of all of the attention that she's gotten for, frankly, her skill as a women's basketball player? I mean, what's the value of her? Well, I focused on two basic measures, and that's just attendance and and the ticket price. And if you just look at those two things and ignore even merchandise sales, spending on restaurants and concessions and lodging, you're already at an unbelievable number. For instance, if you look before Caitlin, the attendance was around 5,000 since Caitlin.

She sold out every game this year. So that's an increase about 10,000 tickets per game. The average ticket price has gone up, say roughly $100. So that right there is looking at a million dollars. per game. And so if you take that times 14 home games, that's $14 million. And that's not even considering anything else. Can you put a number, a guesstimate on the total economic impact of Caitlin Clark, the Clark effect? Oh, I don't think you actually put, I couldn't put a number on that I even be comfortable with the on the scale. I mean, I've seen other studies that are somewhere between 14 million and 52 million. And I would even say that's probably underestimating it. Because when it's all said and done, I think, you know, after the lag and you get to macroeconomic data,

it wouldn't surprise me if, you know, an estimate might be even close to $100 million. I guess there was a report released by the Common Sense Institute, Iowa, and they are saying Clarkonomics has generated more than $82 million in increased community and state consumer spending. If you are at the University of Iowa, obviously, you are an employee there. How do you continue to capitalize on the Caitlin Clark effect? if this does end up being her last game as a college athlete for the university. I mean, can the team continue sort of this intrigue with the broader country going forward? Well, yeah, Caitlin's going to move on, move on to the WAMBA, and I think she'll do great things there.

But Iowa will always be part of Caitlin. And so just because she'll move on, I don't think you're going to see a drop-off in the attention that women's basketball and women's sports in general, Iowa, get Iowa has a long-standing tradition of supporting women's athletics. We might not be the Caitlin Clark craze, but I think you'll see appreciation of the great women athletes we have here. Very quickly, Iowa at the university, the state, have done well, women's basketball has done well from the Clark effect. How has Caitlin herself done? How much money has she made through NILs or other means? Well, interestingly enough, she hasn't made any money from the, no, you've mentioned how there's no money coming from the university, from the university collective,

but she has definitely garnered millions of dollars from private deals with, as you're showing, Gatorade and Nike and so forth. And those deals will only multiply, one can assume, when she is almost certainly to be the first pick in the WNBA draft later this month. Jeff Oman, thank you very much, and, well, good luck to Iowa tonight. Yeah, go hawkies. I'm going to say it. I can't believe it, but for my family, go hawkies. Well, that was interesting. Yeah, I'll be watching tonight.

Absolutely. It will be a very interesting game. Very compelling to watch and awesome for women's sports. And playing the defending champs who are very good. Very good. Very tough. Thanks for watching Power Launch everybody.