Power Lunch - Tesla Troubles & TikTok Tug-of-War 3/13/24

Episode Date: March 13, 2024

Tesla was once the darling of Wall Street, but now analysts are bailing on the name. We’ll talk to one who downgraded the stock today, cut his price target well below its current level, and said it isn’t so magnificent.Plus, the House just voted to ban TikTok. It’s splitting parties and joining strange allies. And two big Republican donors are on different sides of the issue. We'll explain this political tug of war. Hosted by Simplecast, an AdsWizz company. See pcm.adswizz.com for information about our collection and use of personal data for advertising.

Welcome everybody to Power Lunch alongside Contessa Boor. I'm Tyler Mathis. I'm Tyler Mathis. Glad you could join us. Coming up, Tesla's troubles. Once the darling of Wall Street, now analysts are bailing on the name. We'll talk to one who downgraded the stock today, cut his price target as well and well below its current level. He said also it isn't so magnificent. No. Well, the House is voting to ban TikTok. They don't think it's that magnificent either. The issue is splitting parties and joining strange allies. Two big Republican donors are on different sides. explain a political tug of war. But first, let's get a check now on the markets. We're seeing a mixed day on Wall Street. The Dow Industrial's up a third of a percent. You can see the S&P has just now turned positive. It's been down today. And as that composite, it is off by a third of a percent. Dollar Tree falling following its results. And the company says it will close nearly 1,000 stores, most of them, family dollar locations. We'll have more on that coming up.

But we start with Tesla down 30% year-to-date. Phil Leboe joins us now with more on Tesla's woes. Phil. And Tyler, it's a lot of things that we've been talking about. The industry has been talking about for some time that people are now saying, well, maybe we should expect Tesla to really face slower growth over the next couple of years, or at least in 2024. Really, three things stand out.

First of all, the hybrid ice vehicle demand. Ice vehicles, the sales are not growing there. they're still gradually losing their dominance, but it's still an ice market. Hybrids are growing in sales. There's the EV price war, especially in China, but we're seeing it worldwide. And that brings up the question when it comes to Tesla. What do we expect for 2024 deliveries? I went back and I checked the analyst estimates.

Go back to January, most were about 2.17, 2.18, when you looked at the fact set estimates, that's not the case anymore. It's down closer to 2.07 million vehicles expected to be. delivered this year. Remember, they delivered 1.8 million last year. Meanwhile, the Berlin Gigafactory, which was shut down because of suspected arson nearby. That is once again resuming production. Elon Musk was over there today. And then you have the question of, where do the analysts see shares of Tesla right now? Wedbush out today, reiterating its price target of $315, but I know we're going to talk to Colin Langen shortly. He and other analysts are saying,

look, the writings on the wall, at least near term, that the headwinds facing Tesla are sizable, and they will be continuing throughout 2024. Guys, back to you. All right, Phil, thank you very much. We'll ask you to stay right there as Tesla is getting hit with a big downgrade to underweight from equal weight over at Wells Fargo, citing numerous headwinds ahead. The firm expects volume to disappoint and also lowered its price target from $200 a share to $125. Here's the analysts who made that call. Colin Langen, Phil also on the line with us. Colin, welcome. Good to see you. I'm curious. What is the market share of Tesla in the U.S. among total automobile sales, auto and truck sales, and among EV sales. What kind of share do they have? I mean, they're very small into the overall market. I mean, they're very large in EVs. I mean, what we're seeing, and that was the point of our report today is that we're actually looking at the impact of the price cuts. are surprisingly low at this point.

We saw volume, actually, if you look at first half to second half globally, up just 3%. And pricing was down five. And that's really what driving our lower deliveries. We're expecting deliveries to be about flat this year because we're really expecting more limited ability to cut price. Otherwise, you're going to hit a point where you're not very profitable anymore. So you cut price, you hope volume will increase, but you're not seeing the kind of volume increase that is commensurate with the price cuts.

What about this Model 2 that they expect to bring out in 2025? Is it going to be a game changer or is it too little too late here? Well, I mean, I think that was the other part of our report today. We were looking at the potential for Model 2. I mean, and one of the things that really is concerning to me is that it's different from other launches. This is a mass market priced SUV. That's going to be very tough to do. I mean, the actual, if you go to an internal combustion engine, you know, compact vehicle today,

they're not very profitable. You add on an e-power train, you're probably starting off in a losing point. And then you're then really betting on this unbox production, which is the new manufacturing methodology they plan on launching with the Model 2. That's a bit of a wild card. It's just never been done before. And we still estimate you need most of those benefits to come through to get this to profit of levels that we're seeing on their current vehicles. What does unbox production mean? I noted it in your note and I wasn't sure what it meant. Yeah, I mean, it is a new term. No one has actually done it before. So the idea is it's a change in the entire assembly line. And from experts that we talk to, you know, they're trying to eliminate all the bottlenecks, automate as much as possible. The vehicle won't run through one line. It'll actually be assembled in different subcomponents and then come together at the end. This enables, you know, one of the potential benefits maybe is you could put more throughput through the paint shop, which is the bottleneck today. But also you probably could automate more along the line and eliminate some of the manual inputs. So it's supposed to improve your efficiency. What we found in our report is that, you know, there's probably between labor and fixed costs that are absorbed for the vehicle. It's

probably $9,000 to $10,000 per car. So if you could double that, there's like $4,000 to $5,000 in benefit. You really kind of need most of that benefit to get Model 2 to probably profitability, given the power train cost you'll be adding. Phil? Hey, Colin, it's Phil LeBoe here. I'm curious, when you look at all of the headwinds, not just for Tesla, but for electric vehicles overall, what do you believe is the biggest one right now? Is the fact that we're not seeing enough models at the lower price points that would drive sales? Is it the concerns about range adoption or range anxiety, charger anxiety that is out there? What do you think is the number one headwind?

I mean, I think number one has been pricing. I think it's, you know, and I think it's just the price. I also think we want need sort of SUVs too, so I'm not sure a small vehicle actually necessarily addresses that for what Americans want. So I think one, people want more affordable EVs, and then two, it's always been charging. But the one thing we talk about in the industry,

and one reason we're cautious on all of the Detroit three as well, so we're pretty cautious on the automakers right now, you know, is the fact that there's still regulations coming. So the industry is going to be a really tough spot here because the automakers are going to need to sell more EVs to hit those standards, which means everyone's going to be forcing these vehicles into the market, which is never very good for profitability when that happens.

Colin, I'm just curious, when they have price cuts, is Tesla concerned? Maybe in Phil Mitt, this might be a question for you too. Is Tesla concerned at all about brand erosion? I mean, that whole idea of Tesla as a luxury car gets offset if everybody can afford it. I think that's absolutely a problem. I mean, with the price cuts, the sort of the residual impact is the residuals on the car have actually come down. That's actually going to sort of upset your prior customers that lost value in their car, which is actually one of the biggest cost of ownership is your depreciation.

And it does impact the brand image. Now, I think Tesla, if you read them for their mission, what they say, they do want to sort of make EVs mass market available. And so this is part of their mission. But it is a concern to the overall profitability for sure. If you move luxury to mass market, we estimate pickups and luxury are probably half of the auto profit landscape, but less than 20% of the vehicles.

So when you're talking mass market, you're talking a much smaller profit pool, which is kind of important to keep in mind. Let's sum it up here, Colin. You call this a growth company with no growth. It's got a growth kind of multiple and then some, but not the kind of growth in market share or in unit sales that you would expect from a growth company. Well, that's our view over the next few years. I mean, I think we've hit a point here where the growth is definitely slowing down. I think the company itself will admit that they're in a sort of product lull.

But I do think the growth in the next couple of years is actually going to be flat this year, down next year. Our earnings growth is not going to be very good because of the pricing and the margin compression. And so, yeah, in the near term, this is not a growth company from my perspective. Colin Langen, it's great to have you today. Thank you for sharing your perspective with us. And Phil, I wanted to ask you about another company that you follow. This one rather troubled. Look at Boeing.

It's got a similar stock trajectory to Tesla. It's down 30% so far this year. Yeah, but the pressure on Boeing is far greater because of the concerns in terms of manufacturing, investigations, a number of problems that it, is not going to be able to clear up anytime soon. It's going to take some time to clear these up. In regards to what's happening with the 737 Max, we know that there are three investigations, the FAA, the DOJ, and the NTSB. And with regard to the NTSB, the door plug work video, according to a letter sent from the NTSB to senators, which was reported within the last

couple of hours, they are looking for the video of the work that was done on the plane in question when it was in the rent and factory. And the video, according to the NTSB letter, was overridden. So overwritten. In other words, it's gone. There's not the video, security cam video, to show you who was working on that door plug.

Remember, the NTSB has set August 6th and 7th as the dates when it will be holding door plug hearings. That's when we are likely to see more questions, likely more revelations in terms of what the NTSB has learned from its investigation. In terms of the Max 9 Incident and Alaska Airlines, This is the story that got a lot of attention late yesterday and then early this morning. Alaska saying that, yes, the plane was scheduled to have maintenance for the day of the flight. It was doing three flights that day and then was going into maintenance.

It was on the second flight when the door plug was blown out. Engineers had noted warning lights. That's when they said it was time to bring the plane in for some checks. And remember, this plane just started flying in November. So that would have been much sooner than normal. Alaska Safety Chief, by the way, stands by the decision in terms of, terms of saying, yeah, we'll do these flights and then we'll do the maintenance check. I know hindsight's 2020, there will be people who say, well, look what happened. You should have brought

it in sooner. But Alaska says because of the way that they look at incidents or look at potential problems, they felt that it was the right decision to continue flying. As you take a look at shares of Boeing, keep in mind that the company yesterday said that it's planning on doing its own internal safety audit this month. In addition to what we saw from the FAA as Boeing tries to step up its efforts to improve the quality controls at the rent and plan. You mentioned warning lights on that 737 max. What were the warning lights? Did they pertain to the door plug?

Pressurization. A couple of times, pressurization lights were shown. And remember, I get this question from people. They say, well, wouldn't they immediately been able to find out that the door plug was missing bolts if they did an inspection? Depends on what they do and what they look at. And there have been some reports that perhaps you could have seen a shifting of the door plug from the outside. Clearly, if they were doing a maintenance check, they would have seen that if there was a shift in the door and it wasn't flushed with the rest of the fuselage.

But from the inside, Tyler, keep in mind, you don't see the fuselage. It's not like you could walk in there and say, well, look, there's no bolts here. You have to take off that panel to do those inspections. And whether or not they would have caught that in a maintenance check, that remains to be seen. But pressurization lights was one of the reasons that they said, okay, let's see. bring this in and let's do a check. What about this terrifying story? I think it was on a 787. It could have been a 777 that was circulating yesterday. A plane just sort of anomalously began a nose dive. The pilot couldn't control it. Right. And then it came back on. This is another Boeing point.

Yeah, they're doing an investigation there. And that brings up the question about whether or not the software have been restarted regularly. Now, that's purely conjecture regarding that software. And so the investigation will determine exactly what happened with that flight. That was a Latam flight. I believe it was going from Australia to Auckland, New Zealand when the incident took place. All right, Phil LeBow. Thank you very much. Appreciate it.

All right. Coming up, the Nvidia ecosystem is growing. That's benefiting both public and private companies. Details in tech check. And as we head to a quick power break, a quick power check on the positive side. Report MacMaran on the negative dollar tree. We talked about that one, shutting stores, down 14%. Be right back.

The Nvidia Halo has been crowning winners in the public markets, including chip manufacturer arm. But that's been reaching the private markets, too, spurring new unicorns. Deirdre Bosa has the story for today's tech check. Hi, Deirdre. Contessa, another day, another newly minted unicorn in that Gen. A.I. space. Together, AI just announcing more than $100 million round at a more than $1 billion dollar valuation, proving that the NVIDIA Halo effect does go beyond public markets and into the private

markets where VCs operate and new companies are being built. Call it the NVIDIA venture ecosystem. It is developing around access to GPUs, laying on efficiency, and it's used to build the consumer models that we know, some of the ones like Chad GPT and Character AI. It is rapidly expanding as well, and leading to talk of a bubble, which has been around here, at least in these parts, in the Bay Area for some time. Now, together AI, for example, doubled its valuation in less than six months. There are other startups that have raised hundreds of millions of dollars at billion-dollar-plus valuations with little to no revenue.

For now at least, though, guys, as long as NVIDIA thrives, so does this ecosystem. And that will be on full display next week at GTC, which some are calling the Woodstock of AI or the new WWDC and not to Apple's big event, one of the biggest events in tech over the last 10 years. anyone who is anyone in the AI space will be there. We'll hear from founders and execs from OpenAI, Anthropic, Mistral, XAI, cohere, character AI, many, many more. But it's clear that GTC is now about so much more than just Nvidia GPs. It's about that ecosystem, both public and private, that Nvidia has helped decree. Let's just say if it's the woodstock of AI, let's hope that they have bathrooms and that the rain holds out.

Just a thought there. Deirdre, thank you very much. I'd brand myself as Tyler AI. I think that's a good idea. Anything with AI works well. It just works. You can probably do that using some of the products right now, Tyler. Yeah, I think so.

And a new headshot to go along with it. A new headshot. Tyler A.I. All right, thanks, Dee. House passing a bill that could lead to a ban of TikTok, despite nearly being a unanimous issue, Republicans are now finding themselves caught in the midst of an internal struggle as two major GOP donors take up opposite sides on the issue

and threaten to pull donations. That story is ahead. Welcome back to Power Lunch. Bond yields rising today as the market's deal with inflation, which is moderating, but not back to the Fed's 2% target. Rick Santelli. joins us now from Chicago. Hi, Rick.

Hi, Contessa. Indeed. That word moderating certainly seemed to get many traders offside yesterday because yields are reversed higher. But let's start at the beginning. 30-year bond auction, the last of $117 billion in coupon supply. and today's reopened $22,000,30 years was the best of breed. If you look at the chart, you can clearly see it. One Eastern, when the results of the auction hit the wires, interest rates fell.

But they didn't last long, and if you look at twos, tens, and thirties on one chart, we're staircaseing, which means all maturities, twos through 30s, are trading or have traded at a higher yield than yesterday, or a lower price than yesterday. And that, of course, is building on a reversal. Because if you look at a chart starting in early February, what you'll see on twos and tens is that basically each of those maturities last Friday was hovering either at or slightly above a one month low yield close. And boy, if we reverse, consider this. The high yield close for 2024 for twos is 472 for tens 432.

You could see we're starting to get closer. Twos are getting closer faster. that's the result of yesterday's CPI. Tomorrow, we have not only retail sales, not only initial continuing claims, but we have the cousin to CPI, wholesale form and producer price index. Let's see if tomorrow also gives the markets

a little bit of a jolt because everybody's pretty pacified with regard inflation, except for the inflation numbers. Tyler, back to you. Rick Santelli, thank you very much. After months stuck in a range, copper breaking out.

Best day since 2022. Pippa Stevens here with more. today? Yeah, copper. It's been a while since we hit copper. We have not hit copper in a while. Because it's been in a range and not doing all that much. But today it is at an 11-month high. It's best day since November of 2022. And that comes after Chinese smelters reportedly are cutting their output so that can tighten the market since they are then turning less. China is a very big deal in terms of the smelters. And that is the price that we are seeing on our screen. So if they cut their output, collectively cut it, then we could see prices go back up. Now we have this chart from BTIG, which today, Jonathan Krenski,

that firm said it's a significant breakout on copper. You can see that range we were talking about and now getting right up to that resistance level. Now, on the fundamental side, Daniel Ghali from TD Securities, said that things have actually looked pretty good for some time, but that the commodity price just hasn't been reflecting that, but if we look longer term on the futures curve, it does point to this tightening fundamental landscape.

And so that's pushing up the copper miners today, the CPOX, which tracks the space, there it is, up about 6.3%. In terms of individual movers, we've got Freeport, Southern Copper, and Glencore, all on the move there, Southern Copper up 11%. On the flip side, though, Natalie Gray from Stonex told me that she thinks today's move is just a knee-jerk reaction and that it's great if Chinese smelters say they're going to cut their production, but we have to see actual confirmation and follow-through in order for prices to stay.

So the smelters aren't smelting. So what about demand? So demand has been pretty solid is what people who track the fundamentals say. But of course, it is tied to the economy. That's why it's called Dr. Copper. And so in places like China, we haven't seen demand as robust there. However, we have to look at where the Chinese government is sending their stimulus because one thing they're focused on, according to TD, is this property completions.

And so it's targeted, and that does boost demand for copper. We also heard from Freeport CEO Richard Adkerson, who earlier this year told CNBC that the demand from green energy actually surpassed the weakness that they saw in the property market because, of course, copper is key to the electrification story. It's used in wires, all those transmission lines, EVs, all of those depend on copper. All right, Pippa, thank you very much. Pippa Stevens. Let's get to Julia Borsden now for CNBC News Update. Julia. Tyler, the Hamas-run Health Ministry says five people died in a strike on a food distribution center

in Gaza today. One of the victims was reportedly a United Nations relief worker agency staff, Fawork's agency staffer. An agency official said dozens of people were working in the warehouse when it was hit. The Israeli military has not commented on the reports. The Federal Trade Commission is sending refunds to nearly 28,000 people who fell victim to student loan schemes. According to the agency, the scammers went by several names, including Mission Hills Federal and Federal Direct Group. The FTC says they lured people with fake loan forgiveness claims and pocketed their money. The refunds will total more than million dollars. And Neil Young announced today his musical return to Spotify. He pulled his catalog two years ago in protest of the streaming giant's exclusive deal with Joe Rogan.

The famed musician said Rogan's podcast spread disinformation about COVID-19 and the COVID-19 vaccines. The singer says he can't afford to boycott ever since every service if he wants his music to be heard. Back over to you. All right, Julia, thank you very much for that. The The Dow is higher today. Let's take a look right now. You can see that it's up about a third of a percent. The S&P 500 just hanging on to the green, but barely, barely. The NASDAQ, though, it's off by a third of a percent.

Mixed markets today. We'll have more on them when we return. All right, welcome back to Power Lunch. Stocks remain mixed today. The Dow on track to be higher for the fifth time in the past six sessions, but not by much right now. Not up as much as the Dow today. The S&P basically flat right now. NASDAQ and S&P higher by 8 percent.

so far this year. Given the rally we've seen, should investors stick with the U.S. or look for opportunity elsewhere? Let's bring in CNBC contributor, Courtney Garcia, Senior Wealth Advisor with Payne Capital. Courtney, good to see you again. How are you doing? Great. Thanks for having me, as always. Awesome. Let's talk about your predilection or you're leaning toward international or emerging market equities. What do you see there that persuades you that they may be a place to put money now? Yeah, and we remain with the idea that it has an important part of your portfolio. I wouldn't say I'm leaning more towards that than U.S. We actually still have more U.S. exposure than we do EM, but I absolutely want it as part of your portfolio. And you're really starting to see the

sentiment shift there. If you look at China, for example, that's really what people think of when they think of emerging markets. And the tech index in China is off 20% from its lows, meaning it is officially in bull market territory. And Morgan Stanley did just come out to show that investment managers are less bearish. So I guess less pessimistic on it, if you want to take that for what it's worth. But they really have. been under invested in China as have individual investors. In a certain point in time, I do think you're going to see more money go in there, which may already be happening. It's something you want to make sure your position there before that leg goes higher. Now, we want to own emerging

markets as a whole. So like Vanguard emerging market index, VWO is a good way to look at that. EEM is the I-Share's version of that. China's about a fourth of that. So you also have India as the other big name or big country exposure that's going to be in there. So we want to broadly own it, but absolutely you want to make sure you have that as part of your portfolio. You kind of pre-answered one of my questions, which was, is it better to play a fund here or to go and try and pick individual stocks? I guess your answer is go with a fund. There is no typical investor, I realize that. But what would be a sensible percentage in one's portfolio for, let's say, a typical investor for emerging markets?

Is it 10%, is it 25%, what would you say? It completely depends on the investor and the time horizon. I would say for most of our clients who are long-term investors, we don't have any more than about 10% of our equity exposure there. So it's enough we can take advantage of that upsling, but not so much that as it is volatile or if this political risk in China does continue, you don't need to drag you down either. So it is going to be a longer-term play, absolutely. Are there ways to play emerging markets without including China?

There are. And actually, I shares came out with the fund specifically for this. They have an Emerging Markets X China Fund, which I've had a lot of clients ask us about because the idea of emerging markets, a lot of people are on board with. but the political risk in China is what's keeping people out of that, which I do think kind of contrary, and it's actually probably a good sign that people are so nervous with it. But there's absolutely ways that you can get into it without China

and still play the broader EM markets. And are there particular regions of the world that you mentioned China, but India, Brazil, are there other regions that you think are really poised for investors to see outsized returns on their investments? Yeah, I think India is easily the other big one. They actually just surpass China in population, and you're actually seeing companies are really starting to turn their focus there, whether it's they're looking at moving manufacturing processes there, but also just realizing how big of a population boost that that's going to be. I think is probably going to be the next thing that we're talking about over the next five, 10 years. It's probably India more so than China.

So absolutely, if you're using those funds, that gets you the next second largest exposure, almost as much as China, just a few percentage points less. Let's bring it back to the U.S. the industry with the fastest earning growth in the S&P 500 next year will be health care rates. Tell us about that. Yeah, which is interesting because I think a lot of people have been very negative on real estate because with interest rates being high and especially any potential issues with those upcoming redoing of the debt that's going to potentially be higher could lead to some issues there. But a lot of that has really been priced in.

And if interest rates do, in fact, come down, I think you're going to see a lot of relief there. And health care, which we've talked a lot about, does come with real estate exposures. That's what healthcare reits are actually, interestingly enough, one of the highest sectors of earnings growth when you look at 2025. I think absolutely something that you want to make sure that you're forward-looking there. Courtney, thank you for the advice. Appreciate the perspective. Thanks for having me, as always. Still ahead. TikTok tug of war, the House just passed a bill that could ban Gen Z's favorite social media site. But Donald Trump says that's no longer the right call.

to the former president's 180 cost his campaign, big time, we'll discuss when Power Lunch returns. Welcome back, everybody. The House passing a bill which has the potential to lead to a total ban of TikTok here in the United States. The action seems to carry a decent amount of bipartisan support, and we're seeing division spark among Republican donors. Two in particular. On one side, supporting the ban, you have TechVC, Keith Raboy. He's given more than $3 million to prefer GOP candidates in the 2024 cycle. Most recently, a $500,000 donation to the Congressional Leadership Fund. Before the vote earlier today, he threatened to pull funding to any Republican who voted against the bill. And then on the other side, you have billionaire and Susquehanna co-founder Jeff Yass.

He's opposing the ban. His firm owns a 15% stake in TikTok parent bite dance. Hasas has donated about $47 million during the U.S. the 20-22 midterms. Let's bring in CNBC.com, political finance reporter Brian Schwartz, to discuss this. So whether you have presidential campaigns getting donations may seem to be like, where do you come down here on the side of TikTok or against it, huh, Brian? Well, that's right.

I mean, it really has become, in a way, this battle of the billionaires. Jeff Yass, as you mentioned, is, you know, a bike dance investor historically. And he's been giving millions of dollars to a group called the Club for Growth. growth, which is subsequently has been pushing back on this idea on a TikTok ban, which was, you know, in a way featured in this recently passed House bill. And then on the other hand, you have somebody like Keith, who is telling us that he is not going to be giving to Republicans who voted no on this bill that passed today. So this is the type of dynamic that we're seeing here in the business community. And there's also something else we didn't mention.

Elon Musk, he's been pushing back on this bill on X, the plastic. The plastic. that he owns. So business leaders are coming out in force with their money or their stances on social media and either supporting this idea or pushing back in a little bit. Well, it could be that Elon Musk sees Jeopardy to his venture to X if Congress decides to start acting against TikTok, like if TikTok goes then who else. How do you think that the people who are running again for office or running in the first place, how do they manage both to need? the donations coming in, but also they need the votes. And everybody wants more younger voters to go to the polls and to be casting their ballots. I think that's what's going to be talked

about when we get to when this bill actually gets brought up to be discussed in the Senate. I think that's really going to be a focus from Senator Chuck Schumer, who, of course, is the majority leader in the Senate, and even maybe Mitch McConnell or the minority leader. This is going to be what's really going to be a focal point for some Democrats in particular who are on the fence about this. There are Republicans who use TikTok. But, you know, to be fair, I mean, even President Joe Biden's campaign uses TikTok. And that is a connection with young voters. That app is really easily used to connect with young voters. So it's a great question. I think that's what's going to be debated by Senate lawmakers as this gets debated in the Senate. So Yas wants to protect TikTok.

Do we know whether Yas has been a donor to Mr. Trump or Mr. Trump's PAC or whether he's been in touch with Mr. Trump, Trump to push his position in protection of TikTok? I don't think he's necessarily given to Donald Trump's PAC yet. I mean, there's no indication that he is going to give. But the two did have a conversation, I believe it was earlier this month, at a separate donor retreat for the Club for Growth, the group who was opposing this TikTok bill. And, you know, the people that are close to Jeff Yass tell me that that conversation didn't really focus on TikTok at all, focused on education. related matters. And I think Donald Trump actually told us that in his interview on CNBC. So there's a

real question now as to whether this connection, this parent connection between Trump and yes is going to lead to any money. And it's still very unclear if that's actually going to happen if money is going to go from YAS to Trump as we go through this debate about whether TikTok should exist in its current form. Brian, how's the fundraising going so far for Trump? I mean, there's a lot of legal problems, a lot of legal hot water. There are advances there. But has it slowed down what we saw in in his similar campaign from past campaigns of President Trump? Well, that's a good question. I think that, you know, we're going to have to wait and see.

But from what I'm hearing, there is this effort by the Trump campaign, and I believe Donald Trump himself, to reel in some of these big money donors, these wealthier people that were either on the sideline of those past primary that just ended with Nikki Haley dropping out or who were, in fact, supporting Haley. And, you know, there's this kind of tug of war going on between the Trump world and the Biden world to bring in donors who were supported Nikki Haley into either of those two camps. So the money, I think, is going to be start flowing from both sides very, very soon. But Trump also has this other scenario you pointed to, which is the legal bill situation.

Part of each donation that goes to a joint fundraising committee helps the campaign, the Trump campaign, but it also goes to a pact that is spending on Donald Trump's legal bill. So the question I have is, you know, how much money really can be, is actually going to be used by the campaign, versus the paying for Trump's legal bills as he goes up against Biden in the general election. And do you have any indication whether those big money donors that had been backing Nikki Haley have decided that they're going to back either Trump or Biden? I think there is a movement by some, I'll put it this way, to go toward Joe Biden. I'm very confident in that.

I think there's also some people who are wavering on what to do here who were supporting Nikki Haley. There's some who are thinking, let's go help Donald Trump, maybe, but there haven't had really any commitments from that side to go help Trump, not like with fundraising or anything that notable. And then there's some saying, well, I'm not going to help either of these two candidates. I'm just going to go focus on helping Republicans in Congress. And then going back to TikTok here for a minute, and all those people, especially young people who are on TikTok, is there any indication

that fundraising efforts using TikTok and putting content out there for rabid users of TikTok is successful? Like, is it a successful way to fundraise? I'm not to tell you sure if it's a successful way to fundraise. I think that there is something to this idea of using the platform to connect with younger voters. I think that there, I don't have any data to back up that TikTok is some sort of boom for fundraising. But yes, of course, you know, if you put out an ad on TikTok and, you know, you have someone who's younger, say, you know, 18 and above who can give, I think there's going to be some intrigue to give to a campaign who is actively involved in TikTok trying to race to that platform. There's no doubt about that. We saw with Donald Trump and with Barack Obama in those campaigns

how much small donors matter when collectively they're engaged in a campaign. Yeah, that's right. And the small dollar donors for Donald Trump at the end of last year, and this is a critical time period. We don't know yet what's happened in this year so far because we haven't had the data back up. But at the end of last year, Donald Trump was struggling with small dollar donors compared to 2019, the year before the 2020 election. It was down significantly. We've done reporting on that. So Trump is going to have to do two things at once here. One, he's going to have to corral some of these wealthier donors back into the camp.

I believe he's trying. And in some cases, maybe being successful in some cases not. And two, he's going to have to find a way to rebuild that small dollar donor base, something that he just hasn't had, in part because some of the money, like we said, is going to pay for his loan. legal bills. A quick answer here. What happens next with this TikTok bill? It goes to the Senate. What will happen there? And if it passes there, what will the White House do? The White House, I believe, is going to sign this bill. If it passes the Senate, I give this a 50-50 shot of passing the Senate at this time. All right, Brian. Brian, thanks very much. Brian Schwartz. And still ahead. Piper Sandler, just screened a thousand stocks. So I'm the best buys of the month. The firm's head of product

management will share his picks in today's three-stock lunch. And as we celebrate Women's Heritage Month, We share the stories of some of our newly named CNBC changemakers, an annual list of 50 women, who are innovating and transforming business. Here's lead, CEO, and co-founder, Jacqueline Reesis. As someone who is a changemaker, it means someone who's pushing the boundaries of innovation, changing the way things work and having a new vision for how business should be done around the world. You know, I feel like I operate with grace, humility, with execution. with grid. And I'm not sure that's something that can be defined by gender. I think as a female leader more than anything is that I want people to look at me and say leadership can look different than maybe they expected. Welcome back to Power Lunch. It's time for a special edition of

three-stock lunch. Piper Sandler is out with their triple select stocks report for the month of March. Today we're covering a few names they would consider to be the best of the best. And joining us to highlight those stocks as Jason Glazer, the head of product management at Piper Sandler. It's great to have you on. First up, we have Crocs. Shares are up more than 37% since the start of the year. But Piper considers it a high conviction buy. Why are you so comfortable in those shoes?

So we're very comfortable. We're very comfortable. I guess Crocs is really about newness and innovation. And what we're seeing in the consumer is brands that have fresh new product or innovating are winning. They're able to sell full price. So less discounting. It's better for gross margins.

Particularly the Crocs brand is what's leading the charge. They've got new product coming. They've been outperforming on the sales side. What is the new product? Oh, they're adding height. They're adding color, more sandals, but they're still keeping that molded form that we're all familiar with. And importantly, they're growing in Asia, which is part of their growth story.

India, Southeast Asia, and China. And importantly, though, the stock is up a lot this year, it had a tough time. The Hey Dude acquisition, they had struggled with sales there. It finally seems like inventory has been clearing from the channel. We are seeing, again, more newness, more product innovation. They're expanding their sneaker line, their boot line, all under $100. And importantly... I guess you can never have too many crocs, right?

You can never have too many crocs or hey dudes. especially in a world where it's athleisure and still pretty casual. And Hey Dude, again, is doing a better job as well with, you know, adding height, segmenting the market a little bit better. So for us, it's a stock that's set up to beat and raise. The doubters around, Hey, Dude, I think will be surprised come the second half of the year with the new product ramping up. I think it sets up to be a winner.

All right. Hey, dude. What do you think of Microsoft? So it's funny. I like that. So Microsoft, you know, it's been. the poster child for AI. And I think the thing we'd say is don't sleep on the cloud. It's pretty staggering how big this cloud business is. We think Azure can get to about 95 billion in two years.

Microsoft 365, which includes co-pilot, could get to about 50 billion. And in about three years, the entire cloud business can be 200 billion in revenues, which is incredibly high margin. The other part, which I think people do sleep on, is the non-cloud business. It's It's Windows. It's now Activision. And that has very easy comps this year. So what's almost half their business can really accelerate. So yes, AI has been the story.

It's booming, but it's still only 2% of revenues for Microsoft. Granted, growing in a massive rate. But Microsoft to Us literally fits the bill. It is owning a stock with growth, high returns, cash flow, high yield. It's just a terrific setup. You think it's a diversified portfolio in one stock, it sounds like. What about Valero Energy? Look, this is the only stock, the only energy name on the list.

So why is it peddled to the metal here? So Valero is the poster child for refining stocks. It is large cap. They have the best assets. They have the best operators. They are specifically set up to benefit from the strength we're seeing in Gulf Coast margins, which is really Maya crude, that gives them an advantage in product costs from input and then, of course, selling it at a higher price.

And importantly, we see the tightness in the market, which I think investors have been looking to sell against, continues to stay tight, the supply that's coming on this year, if all of it comes on, about a million four barrels of supply in the industry, that barely keeps up with demand. The EV has not killed gasoline demand. And the reality is about a million of those million four barrels of supply coming on are high risk in Mexico and as well in Nigeria. So if anything, the market's going to stay tighter than people think. This is a cash flow machine that is benefiting from the strength in gasoline. You see the stock is taking off today.

Gasoline drawdown was really strong today. Distilates have a little build counter, but reality is, distalate margins are leading the whole refinery complex, and they are best positioned to benefit from that. They said we're going to have Jay Glazer. I was getting all my NFL questions ready for you for the Jay Clazer of Fox Sports. I'll have similar questions. I'm a different Jay Glazer. Different Jay Glazer.

Jason Glazer is the name. But as a New York Giants fan, it's tough. Sequin. That hurts. Sad to see Seekyll. Thank you, Jason. Appreciate you having you. Jason.

Thank you so much. Still ahead. The New York Times taking legal action against Wardle, L-E-G-A-L, against their copycats, at least. going to share details when Power Lent returns. Two minutes and 15 seconds left in the program, and we've got several more stories we want to tell you about, and let's get right to it. Let's start with shares of Dollar Tree, down 14%. We referenced it earlier in the program. After the struggling discount, retailer said it's going to shut nearly a thousand of its family dollar stores. CEO Rick Dreiling said our

biggest problem right now is getting enough merchandise into the stores fast enough so the consumer can respond. So there you go. Dollar Tree. Down a big 14, almost 15% today. Yeah, big drop. Okay, so we have new information now in the investigation into betting irregularities in the Temple versus University of Alabama, Birmingham game last week. Multiple sportsbook reported unusual activity at about the same time in the run-up to the game.

So, for instance, a player trying to make an unusually large bet at a retail location of one of the nation's leading sports books. A Vegas sportsbook odds changed, and the line changes at an offshore sportsbook. MGM sportsbook in Atlantic City at Borgata actually took the game off the board for a bit, according to its director. The signs seem to indicate coordinated activity, although the investigation, we're told, is still ongoing. I've also been told that the FBI has been brought in. We are reaching out to the FBI for confirmation on that. But one highly placed industry insider told me something here stinks.

So you've got a spread that it balloons shortly before the game in multiple locations at roughly the same time. And this would be because someone's putting a big bet on UAB? That can happen. A big better. If you have a mattress mat, come in and make a big bet, it will move the line. But it's easily explainable. In this case, there's no immediately apparent explanation for why the line moves. But what I was told was when you have sharps, when you have these almost professional gamblers who are not following the movement of the line, and they're not betting, they're not betting when the line changes, something's on. All right.

Contessa, thank you. And thank you for watching Power Lunch. Closing Bell starts right now.