Power Lunch - Walmart Warns, Buy the Builders? and the Liberty Energy CEO 7/26/22

Episode Date: July 26, 2022

What WalMart, McDonald’s and GM are saying about the consumer. A new picture is emerging on spending and demand and that’s creating new opportunities for investors. Plus, home builders are boosting incentives to sell more homes. We’ll speak to a top analyst who says they’re a buy. And the Liberty Energy CEO on his strong quarter and the demand-supply imbalance. Hosted by Simplecast, an AdsWizz company. See https://pcm.adswizz.com for information about our collection and use of personal data for advertising.

Good afternoon, everyone, and welcome to Power Lunch. I'm Tyler Matheson. Inflation, changing consumer behavior. Walmart, Warns, GM, and Coke say demand is holding up just fine. The new divide means new opportunities for are emerging for investors like you. And Power Player Liberty Energy, North America's second largest fracker, easily topped estimates, and issued strong guidance. The stock surging. We'll talk to the CEO of that company about his investment plans and the soaring price, Kelly. of natural gas. Energy headline again, and we're seeing the impact across the consumer space. Let's start with the Dow down 146, so we're near session lows. The S&P down 41 points. That's 1%.

And the NASDAQ down 1 and 3 quarters percent right now, so we're feeling a little heavy as we head into the last couple hours of trading here. Shares of Alphabet down more than 2 percent. Microsoft down more than 3 percent. They report after the bell today. Lots of anticipation here. Google is trading just about 104 a share. If it breaks below-trial, triple digits, of course, that'll make people extra nervous. Walmart is the worst performing stock in the Dow after that warning and also the worst performing stock in the S&P. It's down just under 8% right now.

This profit warning we saw last night from Walmart, they're saying inflation is causing consumers to pull back outside of the grocery space in particular, and it's rippling through the entire sector, target down 4%, Amazon down 5%, Costco down 3%. All right, well, Walmart is not the only company to give in some. into the consumer. There's, of course, McDonald's and General Motors, AT&T, Marriott, to name just a few. They're all painting a different picture of whether the consumer is starting to crack. We're going to take a close look now at demand and spending in retail, in restaurants, and automobiles as well, and what it all could mean to the economy and your investments. We will start now,

though, with the industry bellwether, Walmart that Kelly was just talking about, the stock, as she mentioned, down seven, nearly 8% right now, trading slightly above where it was at the start of the pandemic. Courtney Reagan starts us off with the news on Walmart. Courtney? Hi, Ty yet, and it's actually been eight and a half years since Walmart issued any kind of warning. And this one is pretty unique because sales are higher,

but profit is lower. CEO Doug McMillan says, quote, the increasing levels of food and fuel inflation are affecting how customers spend. Particularly, the company says, hurting spending on general merchandise and apparel. So, Walmart is cutting prices further to incentivize shoppers to buy more discretionary merchandise. However, the retailer is increasing its total sales expectation because it's selling more grocery items, which in turn are less profitable. About 55% of Walmart sales come from grocery.

Food is only about one-fifth of targets revenue, by contrast, a retailer that all over. warned earlier. Goldman Sachs, Wells Fargo, BMC partners, D.A. Davidson and Oppenheimer, those are among the analysts that actually say they're not worried about Walmart as a longer-term investment despite the warning. They are, however, lowering those 12-month price targets, as you mentioned, the pressure on the stock today. Deutsche Bank and Morgan Stanley are concerned, though, about the impact to brands that derive a lot of sales from Walmart, including General Mills, James Smucker, Conagra, and Clarke. rocks. If consumers decide to be trading down to more private label names, it could hurt some of those

brands. Now, Walmart did note a good start for school supplies for back to school, but still anticipates more pressure on overall general merchandise and the back half of the year. So take me through that number you led with. Sales did what, but profits did what at Walmart? Yes, so what Walmart is saying for this current quarter and then as it impacts the rest of the year that sales are anticipated to be higher, both revenues and comp sales, than they had initially forecast at the end of the first quarter. But total profit is expected to be lower than they first forecast because they're selling more goods, but goods that are of lower margin or less profitability. And if they're having to cut prices on some of those discretionary

goods that you mentioned, which I assume include clothing and furnishings and other items, like that, you end up subsidizing the sale that you're getting and making less money in return. Okay, Cort, thanks very much. We appreciate it. Yep. Let's turn to McDonald's now. That stock trading higher on better than expected same store sales. But wait a minute. What about everything we just talked about? Oh, the growing popularity of its value menu, a contributor as well. But that can't be good for profits, can it? Kate Rogers is here with more on McDonald's version of the consumer. Kate? Hey, Kelly. Well, McDonald's admitting the road ahead is challenging, but reiterating that it's operating from a place of strength as a potential recession looms. It beat today on EPS that was driven mostly by its price hikes as guest counts have been relatively flat. CEO Chris Kempinski said they routinely poll consumers in every market they operate in and nearly everywhere, including in the U.S., they're leading amongst their peers for value perception. He said the company is, quote, pushing through pricing and the consumer is tolerating it well. The company is starting to see.

some trade down from lower income consumers to value offerings and fewer combo meals, which are a little bit pricier. McDonald's is also looking at more local options for value compared to national ones, as location will often determine if consumers are willing to pay a bit more or if they're more price-sensitive. Franchisees, remember, do set prices with help from the company and overall evaluators. Menu price hikes for the second quarter were in the high single digits, and the company said it's expecting the same amount for the full year. So, I mean, again, Kate, maybe how do we square this with what we're hearing from Walmart

and why the market is taking this so much more friendly? And how did McDonald's fare in the last recession? Yeah, I think analysts are kind of looking as our investors to the last recession. McDonald's did well. It still grew revenues and same store sales, and it was resilient again due to its price point. So analysts are saying for those same reasons, it's well positioned to hold up while this time around. Also, the franchised model works in its favor. Franchisees have had a very strong performance, even this.

this quarter, McDonald's calling out their strength versus the company-owned stores. Casual dining tends to rise and fall a bit more with economic conditions because that's priceier. It's a sit-down experience. Maybe consumers can't justify spending as much money. McDonald's, again, at that lower price point and with options, be it value offerings or combo meals, has more to offer the consumer in an environment that could be challenging moving ahead. All right, Kate, Kate, thanks very much. Kate Rogers reporting from the West Coast. General Motors trading lower after it missed Wall Street estimates, but the automaker said demand remains strong. Phil LeBoe picks it up from there.

Hi, Phil. Hey, Tyler, one indication of that demand is that revenue came in much stronger than expected. And the reason why? Check out the transaction prices, a near record high. The average for the second quarter, for the average vehicle sold by General Motors, the average transaction price, $50,499. And again, that's close to a record high. They're still seeing more demand than there is supply. Here's CFO Paul Jacobson talking with us this morning on Squawk Box about what he sees in the consumer right now.

Everything that we've seen indicates that demand for our vehicles remains very, very strong. Despite the fact that we've had increased production, inventory levels are staying down. We think there's a lot of demand that was unmet over the last couple of years as we've gone through COVID and through the chip issues. As you take a look at shares of General Motors, one other piece of news from today. General Motors announcing that it has secured the EV raw materials and components needed to make the EV target in terms of production by 2025.

And remember, they're going to be ramping up dramatically over the next couple of years, targeting to sell one million EVs in North America alone in 2025. Guys? I can tell you, Phil, when I drive by a large Chevy dealer every day on my way, and from work, there's not much inventory in their lots, which suggests that they haven't quite got supply and demand and balance. They have a lot of SUVs there, virtually no sedans, and some trucks. Let's talk about auto delinquencies. There are reports we talked yesterday about ally, possible defaults, late payments on auto loans. Is that a troubling sign that auto sales

could slow? It's worth watching, but keep in mind the delinquencies and the defaults that are being seen right now. The increase is on the very low end of the market, the subprime part of the market, and it doesn't seem to be growing into the broader market. And also keep in mind, right now, the inventory levels are just not growing. That is an indication that the dealers, they're essentially selling everything in advance. So if you or I go into a dealership, it's rare, Tyler, that you find something that's available to be bought. You are now placing an order, customizing that vehicle, so to speak, and then they'll call you when it's ready and it's been delivered to the dealership. That's quite a change from the way it was. It goes back to the way I remember it

when I was a little boy and you had to go down to the Chevy dealer or whatever dealer you chose and place an order and wait six weeks for the car to come in. Phil, thanks. Great to hear from you. We've also heard from other CEOs recently who have pointed to a diverging consumer and changing spending habits. Let's listen. The consumer continues to be quite strong. The employment numbers continue to be quite strong. So we're guardedly optimistic, but there are certainly headwinds that we're watching. The consumer is experiencing a bit of stress. You know, I see a lot of the same numbers you see, and we know that there's some tradeoffs occurring right now and decisions on dining and travel and a variety of other things. And it's mostly hitting

those in lower socioeconomic tiers. So how do you invest, given that consumer backdrop? Let's welcome Courtney Garcia, Payne Capital Management Senior Wealth Advisor. Courtney, welcome. Good to have you with us. You've heard a lot of conversation just now from Walmart to McDonald's to General Motors to AT&T and others. Are you sensing what they are largely sensing? And that is a slightly slowing consumer, particularly at the lower economic end of the scale. Yeah, and I think you are seeing that, especially when Walmart came out, they really highlighted the fact that people are having to choose on groceries versus things like clothing, which is clearly hurting their earnings. So yes, inflation is clearly a problem. I think we all know it's a problem. I don't want to read into this too much. I think this is negative for the consumer overall. I'd actually argue if you look at

like when the banks reported, the banks probably have a really good foothold on how the general consumer is doing rather than, for example, just people who are shopping at Walmart. And generally, they're actually finding that consumers are still in a good place. There are a lot less leverage they were like, for example, back in 2008 leading into another recession. So I think ultimately we need to see inflation come down because it's clearly affecting people. But at this point, I don't think it's the dire warning that a lot of people are worried about. Well, the Fed is certainly going to have a word about whether, about how inflation is going to come down when they get to it tomorrow. We'll ask you about that in just a little bit.

But let's talk about the investing implications of what you see. Typically, when inflation is up, you want to invest in companies that have pricing power that can benefit and push prices through. That's one or two, offer some kind of inflation hedge. Where do you find them today? what names, what sectors? Yeah, and we've talked a lot about, like, the energy and the natural gas space, but I still think has a lot of room to run. But also your commodities tend to be a really good inflation hedge.

And I think people have gotten overly negative on this. So like a good example of this, if you look at Freeport, McMran, has really taken a hit this year as of copper prices have come down. But over the long run, I mean, copper is really has a huge demand, especially when you look at this, one of the greenest metals. And China is one of it's basically half of the world's copper demand. and as China starts to get back on board, I think you're going to start to see that benefit. But having some of those inflation hedges is important because even if inflation's peaking, it's still going to be higher than it has been the last decade.

So you want to still make sure you have those hedges in there. Also, you're saying services instead of goods, but Yum brands, you know, how does that fit into the services bucket? Yeah, and actually you saw this with like your CPI numbers came out. People are still going out there. They're choosing to eat out rather than eating at home, even with inflation kicking in. And I think you're seeing that just sort of that pent-up demand. post-COVID. What I like here is that is a way to play that, but also you tend to have these

kind of restaurants, your Taco Bells, your KFCs, your Pizza Huts. They do tend to also be a little bit more recession-proof because these are the kind of, you know, casual restaurants that people are going to go to even if there is a recession, even if people are going to be a little more, more pinched with inflation. So I think it's a good way of playing both of those items. Again, I'm not necessarily of the impending recession camp, but having some of those things are going to hold up regardless is going to be important. Let's assume that the Fed raises interest rates by three quarters of a point tomorrow, as most people expect. How soon would you expect those interest rate hikes to trickle through and start to really affect the inflation we've seen?

Is it three months? Is it six months longer? Well, you're already starting to see, right? If you look at futures markets, their pricing that the Fed actually is going to likely start to bring interest rates down early next year. So you're looking at, yeah, through the end of the year here that it's likely going to take until inflation is really, start to brought down. You're already starting to see the commodities prices have come down, energy prices have come down. So I think we're starting to see the peak of that already from the, A, what the Fed has already done. But B, I think people are just already starting to bring some things down like your supply chain constraints and the things that the Fed doesn't necessarily

control are already coming down regardless. So I think the hope is that it doesn't really matter as much what happens tomorrow with what the Fed's doing. But later this year and early next, if that starts to come down, that's what the markets are going to be really honing on. I think you're starting to see a sign that that's going to be lowering. All right, Courtney, thank you very much. We appreciate it. Courtney Garcia. Thanks.

You bet. Coming up, new home sales in June just dropped to their lowest levels since the pandemic. Inventories are also rising, and so are the incentives to buy. But the builder stocks are hanging in there. They've actually rallied this month. We'll make sense of the moves next. Plus, the CEO of Liberty Company, Energy Company, Liberty. She said, on the company Strong Porter, his reinvestment plans.

and whether supply will ever catch up with demand. As we head to break, here's a look at the strong dollars impact on quarterly results we've seen this far. Coke saw a six-point negative impact. 3M saw a four-point headwind. The Power Lunch continues in just a moment. Welcome back to Power Lunch. Sales of newly built homes just fell to a two-year low. Inventory rose up to a nine-month supply, up from five months at the end of last year.

And CEOs are responding to this fast-changing market with Pulte, which reported better than expected earnings. still down 3% today. They're offering incentives to buyers. The stock is 25% off its year high. But many of the builders have rallied this month, outperforming the S&P even. Let's bring in Stephen Kim. He's home builder analyst at Evercore ISI. And I always think there's like a small band of bullish people on the builder, Stephen. It's you. It's Bill Smead. I mean, I keep talking about these low valuations. What do you say can power the next leg of a rally here? I think the real issue, Kelly, is whether or not this buyer slowdown that we've seen as a result primarily of unaffordability or some mental issues, such as like just negative psychology, concern, fears, and maybe a little strategy from people who think they're going to get a real buying opportunity if home prices go down. We're hearing that it's a lot more mental than it is math. In other words, we're hearing that it's not so much that people can't afford as much as they're sitting on the sidelines, and we don't think that these folks have very much in the way of alternatives.

Rents are going through the roof. There's just not a lot of standing inventory on the market in a finished form. And as a result, we're pretty confident you're going to see buyer demand come back fairly strongly by the end of the summer. And we think that's probably going to be the catalyst for this group, which, as you point out, is just historically cheap. I, you know, I just, I look at the market, Stephen, and you see what I see, bond yields rolling over and all this talk about the consumer. I mean, it just seems like that would be out of keeping with where momentum is heading. Would it not?

Well, I think you're right. Bond yields are rolling. We're also seeing MBS yields roll. We think spreads right now are really, really high. The mortgage rate is much higher relative to the 10-year yield than it usually is. These are all reasons why we believe the mortgage rate is very likely to remain range-bound. or frankly, even lower by the time you get to the end of the year. That would be a help. Now, certainly, I don't want to misrepresent what we're seeing in the market. The market right now has

definitely cooled. Many would argue that it kind of needed to. It was getting a little bit too frothy, if anything, that we were a little worried about that earlier in the year. So we do think the Fed's going to see signs of housing slowdown. We think in particular we're going to see housing starts slow. We're hearing that the builders are reacting to this environment by slowing their role a little bit on production, actually, that's going to help sustain pricing, because if you don't add a lot of supply, you actually help sustain pricing. So folks who think you're going to see a big drop in prices, I think that's where the disconnect is, and that's why I think this group is mispriced. That's where I was going to go, Stephen. You anticipated my question. If you have more tentative

buyers, that suggests a softening of demand, that would there, for in turn, suggest maybe a softening of prices. But if you're squeezing supply or slowing down new houses coming on, then you're compensating for that. Are you seeing the possibility of price cuts, or are you seeing any builders having to throw in incentives a little less premium price on some extras or whatever? Yeah, so that's the good news and the good news. So on the one hand, yes, you are starting to seize concessions. You need it. to see that. I mean, I think for the housing market to just not see anything would defy belief, and it also wouldn't make the Fed too happy. So we are seeing concessions increasing. We are seeing

incentives rising. However, we're seeing those incentive levels still below normal. That's what we heard from Pulte. We heard it from D.R. Horton last week. These are some of the largest builders in the country. So yes, we're seeing some deals starting to materialize, but they're actually less in the way of discounting than we have historically seen as normal. And so it bodes very, very well for the outlook, for the fundamentals for these stocks. Would you differentiate sort of favorite to least favorite in the space? Well, I think there's some timing issues. So I think right now, interestingly, what we're seeing is that home buyers are really prioritizing and valuing homes that they can move into quickly. In this environment where so many things are changing and people are really

kind of nervous about the outlook. Once they make a decision and they find their home, they really just want to get in there quick and close the door behind them and be safe in their home. And so we're actually finding the builders who are doing speculative building, but builders that sort of build the home first and then work on selling it once they've gotten a little bit further along. They're actually doing better. Pulte told us that, for example, this morning. They said that, contrary to what you might think, their sales were stronger at the entry level, because at the entry level, the homes are more standardized and they actually start those speculatively versus their move up and active adult and luxury homes where they actually have to wait,

they do that on a more build-to-order basis. So really spec building, I think, is really getting the nod right now. All right. Stephen, thanks for joining us today. Thanks for having me. Stephen Kim with Evercore ISI. All righty. Further ahead on the program and all you can eat lunch. First, today's working lunch, highlighting one company that could benefit from Amazon's acquisition of one medical, plus a streaming slowdown. Wall Street taking shots at some of the biggest names in the group. Those three among them will discuss in today's three-stock lunch. Power Lunch will be right back. Welcome back to Power Lunch. I'm Dominic Chiu. We want to bring your attention to what's happening now with Shopify, one of the big retail stories of the day,

under pressure down by 15% as the e-commerce infrastructure company lays off around 10% of its global workforce. That amounts to roughly 1,000 workers. Shopify's CEO citing a pullback in online spending and says he misjudged how long the pandemic-driven e-commerce boom would last. Now, like many others in this industry, Shopify has been an underperformer this year down more than 80% off its November record highs. And right now, we've traded roughly, Kelly, 52 million shares of stock way above its normal average trading day. For good reason, I'll send things back over to you. Yeah, it's like the whole market today. Dom, thank you very much. Let's get over to Sima Modi now for the CNBC News Update.

CMA? Kelly, good afternoon. Here's a CNBC News Update at this hour. A bipartisan bill to heightened domestic semiconductor manufacturing and boost U.S. competitiveness with China has cleared a key Senate vote, setting it up for a final passage in the chamber in the coming days. The vote was 64 to 32. A short time ago, a live debate between the two conservative party leaders who are competing to be the country's next prime minister

was interrupted by a loud noise as foreign minister Liz Truss was speaking about Vladimir Putin. The feed was cut off, and after several minutes, Organizers of the debate said the moderator of that debate had fainted, and although she is okay, doctors advised them not to continue. That in the UK. The Biden administration announcing a new website designed to help keep Americans safe from extreme heat. The heat.gov site will provide maps, data, and other information to help the public and local officials prepare for heatways, understand the health risks, and identify who is most vulnerable. And some sad news, Tony Dow, the actor and director,

best known for playing the stalwart older brother, Wally Cleaver, and the iconic series, Leave It to Beaver, has died. He was 77. Kelly and Tyler back to you. Remember growing up with that show, Seema. Thanks very much, Sima Modi. Ahead on power launch, energy is lower except natural gas. That's up 3%.

And one energy firm in particular is doing very nicely. Up next, we'll speak to the CEO of Liberty Energy. How they're benefiting from the state of the energy industry right now and how long those benefits will last. That's all when power lunch return. Welcome back, everybody. 90 minutes left in the trading day, and we keep seeing stocks moving to the downside.

So let's get caught up there and with bombs, commodities, and the CEO of Liberty Energy. Let's start with Bob Bassani down at the New York Stock Exchange. Bob? Kelly, good and bad news. The good news is that on the earnings front

amongst companies who earnings we now have in front of us today, the earnings apocalypse a lot of people are afraid of, has not materialized generally good results today from the largest companies out there. So just take a look. Coke had good numbers, their organic revenue growth, the guidance was excellent on that. McDonald's was good. Global comps, good for them. 3M was good, although the 2022 full-year guidance was a little bit lowered by them. And even GE had a decent outlook here. The problem is in big cap tech.

They are very nervous ahead of Apple's numbers and to a lesser extent nervous ahead of Microsoft numbers, Microsoft and Alphabet, of course, reporting tonight. You see them down fairly heavy volume, actually compared to what we've been seeing in the last couple of weeks. Apple's the one sort of light one. Nobody particularly wants to dramatically sell off Apple. And yet, if you talk to traders, these companies are mostly already in a very serious bare market. I just want to point out the top five stocks that are out there so far this year.

Look at the declines that we've seen. Amazon, Tesla, Alphabet, all down almost 30%. Microsoft 25. And Apple's the one that's really not in bare market territory. S&P 500's down 17%. And it's a lot worse for some of the other ones. Meta's down 50%. Invita's down 40%.

People complain to me, how much more do you want them down, Bob? 40% down for Nvidia is a pretty big bare market. So how much further can we drop at this point? We'll find out. Finally, I just want to note a little piece of news. Credit squeeze is down about 6% here. We had a Wall Street Journal report saying that the CEO, Thomas Gottstein,

excuse me, would be leaving shortly. That was just out a few moments ago from the Wall Street Journal. We'll get confirmation from that, hopefully very soon. Guys, back to you. It's been a very tough stock and a very tough story lately. Bob, thank you very much. Let's turn to the bond market now where forget how hawkish the Fed might be. Bond yields are lower, five-year auction was strong.

Rick Santelli with all the latest. Yes, it's all which part of the yield curve you want to concentrate on, especially considering the dance that markets normally do in the fixed income space leading up to a Fed meeting. Look at a June 1st start for two-year note yields. realize that right now, two year or three year, and it just crept to the five year, or the only maturities with a higher, yield, lower price than yesterday. And it was only twos, threes, now fives. It's creeping down the curve.

And if you look at the same start date for tens, you can see exactly what I'm talking about. You know, the tens have a high watermark close to 350. So did twos. But two year, about 20 basis points away from their high water mark, but you look at how far we are at 2.78 percent with regard. to 3.5% for a 10, and you can see how much the curves flattened or inverted. Let's look at twos to tens. This is really something.

At minus almost 26, today's close should be the most inverted close in 22 years going back to August of 2000. And maybe it'll happen even more in the next few sessions because our Fed may be going in one direction and so did the ECB. But look what their yields have done since that half point tightening on Thursday. last week. They have dropped like a rock. As a matter of fact, boons closed today at the lowest level since May 12th. And if we look at tens minus boons, that also is the closest together since May 12th. Two and a half months. We need to monitor that. People say who's going to buy treasuries?

A lot of investors because they're certainly not going to be aiming to buy sovereign debt in Japan or in Europe. Kelly, back to you. Great point, Rick. Thank you, Rick Santelli. Let's get to the part of a lot of what's ailing Europe and the U.S. these days. It's been energy prices. Pippa Stevens with the very latest. Pippa? Hey, Kelly, well, let's start here with Nat Gas because there are some eye-popping moves. The U.S. contract surged more than 11% earlier in the day to 975, which was the highest since July 2008. It has since pulled way back from that level, but is holding right around the $9 level. Now, this August contract rolls tomorrow, meaning some of the activities due to

in trading volume around expiration. But on the fundamental side, we do have hot temperatures and little production growth. And Nat gas now on track for its best month ever. And if you thought our prices were elevated, take a look at Europe. Nat gas there is surging nearly 20% today, crossing above the 200 euro per megawatt hour mark for the first time since March. At 211, that's equivalent to about $63 on Henry Hub, according to Argus Media. today agreeing to voluntarily cut gas usheds by 15% between August and next March.

And those cuts would become mandatory in the event that an emergency is declared. This deal, of course, comes one day before Russia is set to further cut gas deliveries via Nord Stream 1. Beginning tomorrow, Kelly, it will be operating at just 20% capacity. And they're paying six times what we are paying for natural gas and we know already more for gasoline as well. Amazing. Pippa, thank you. our Pippa Stevens. Let's stick with energy now with shares of Liberty Energy, which is the second largest fracking company in North America, rising almost 8% on better than expected earnings today. They're also announcing plans to put additional equipment to work as strong demand has

boosted pricing for these services. Chris Wright is the chairman and CEO, and he joins us now. Chris, it's great to see you again. Welcome. Thanks for having me, Kelly. So how do we fix the global energy problem? How many more rigs can you add? How quickly? Well, the solution here will come slowly and gradually. But what we're seeing is a culmination of eight years of underinvestment and frankly, bad policy demonizing hydrocarbons and not allowing the needed infrastructure to bring the immense amount of American gas over to Europe. Better to get gas from the U.S. than to get it from Russia. We have that gas.

We could deliver that gas, but we need the infrastructure, the boats, the ships, the pipelines, and of course the wells to make. move it. We also know that this was going to be a record, maybe all-time high for our nat gas exports until that facility caught fire and went offline. What impact is that having? I mean, that's softened natural gas prices for a little bit. Weather and other sources of incremental demand have offset that, but it's a big negative for Europe, two BCF a day of U.S. exports, most of which would have gone to Europe, is now off for a few months. I hope we see that back in the fall. I hope. You know, Chris, I guess personally, I'm kind of in the, in the, we need a little bit of all of the above camp in terms of energy supply.

But I'm curious, you said we've had notably bad energy policy. I'm not going to get into a debate on that. But let me ask this question. Is it or is it not true that one of the reasons we haven't invested in energy infrastructure, whether it's drilling, refining, pipelines, etc., has to do at least. at least as much with where the prices were and the fact that boards of directors didn't want to make those investments given what those prices were. That's point number one. And let's not forget that the Trump administration, whatever anyone thinks of it, was pretty friendly toward oil companies and carbon-based energy supplies. Yeah, spot on in your first point, Tyler.

There's two reasons for today's tight markets and under supply of oil and natural gas. One is simply the economics and resistance to invest. The Shell Revolution changed the world, but for 10 years, bad returns in our industry. So people are understandably gun-shy. You're right, that's a big factor. The problem is prices have rebounded for a year or so now, and that additional factor, whether it's government regulations, and it's not just federal government, pipeline regulations. It's been very hard for years, including during the Trump administration, to build pipeline

infrastructure, to get natural gas export terminals. It's been a broader societal. We're soon going to be away from hydrocarbons. So let's just cut back investment now. And that premise was wrong. Of course we want new and exciting energy technologies, but the modern world runs on fossil fuels, and that will be true for decades to come. And we can't prevent the investments required.

make that work. It's an interesting point. It's an interesting point because, and I think you're spot on on it, it's not just federal regulation that has been an impediment to some of these infrastructure investments. You know, communities do not want pipelines often coming through them. Communities do not want additional refineries built in their backyard. Why, why, if I'm not remembering incorrectly, I thought that the pipeline, the one that was supposed to come down from Canada, was approved under Trump. Was nothing built in those years? It was built. It was built on the Canadian side of the border, but it wasn't built at the border crossing. Billions of dollars were spent building the Keystone XL pipeline.

That's the one I couldn't think of it. Yep. But it never got the final approval to come across the border and that money to be spent. But you're right. That opposition is broad. That's a wealthy society thing. It's harder to build a wind farm on shore today than to drill an oil and gas well. So it's not just oil and gas. There's very much in opposition to building anything these days. And that's a problem for our country. Yeah. And it's a national security problem. I, you know, I don't know how old you are, but I, and I grew up with politicians all the way back to the 60s and 70s saying, we have to end our addiction to foreign oil to foreign energy supplies. Well, here, over the last decade or two, via fracking and other extraction techniques, we have been able to do that.

Shouldn't we be celebrating that and investing in responsible ways to do it? I don't know. That's just my editorial thought for a damn hot Tuesday afternoon. Oh, we're grateful. All right, Chris, thanks, my friend. Appreciate it. Thank you. Take care.

Appreciate you too. You too. All right, still to come. Mr. Ford will bring us another working lunch sharing his interview with the same. CEO of Carbon Health. Similar to that Amazon acquisition. Before we go, a quick programming note. Tune in to Squawk on the street tomorrow at 10 a.m.

The crew will sit down with the always provocative Senator Elizabeth Warren. We will be right back. Amazon's $3.9 billion bid for one medical put a spotlight on the intersection of technology and primary care. This week, John Ford, brings us up close with the CEO of a tech-driven doctor's office who says big growth is ahead. Hi, John. Hey, Tyler. Yes. Aaron Bali is a co-founder and CEO of Carbon Health, which has locations in 16 states. It's raised about half a billion dollars. Before Carbon Health, Aaron co-founded Udeme, the publicly traded education technology, you know, online learning platform with a $1.5 billion market cap. He grew up in a

small village in Southeast Turkey, the youngest child of two teachers, who had the family pick apricots in the summer to make ends meet? One of the summers, the apricot harvest was a lot better than we predicted. So we end up, I think my parents ended up making a profit for the first time. And then there was this moment where we had this kind of meaningful thing between the family about whether we will go to our first family vacation ever, like the next year, or whether we would be buying a computer. So I had heard about this thing called computer.

I had never seen one. I was like one of my distance cousins was coming to a village, and he would explain these computers and modeling and all the internet. And I would listen to it for hours without ever seeing them. So my parents bought a computer, which was definitely a sacrifice on their end. Get this. Aaron loved math. And with the computer, he found sites where people were discussing tough math problems.

After finding his own online resources, he won the gold medal in Turkey's Math Olympiad, which brought him to the United States. States. Now Aaron's using tech to expand access to important things his village didn't have. And while the economy's tough, carbon health cut back on growth plans earlier this year, he sees room for lots of innovators, including Amazon, to expand. In the beginning of this year, we changed our strategy to grow a little bit more slowly. And when I say a little bit more grows slowly, so that is still 70% Kagar growth.

But I think there is a we had been growing at like 300. three, four hundred percent year or year rates, which in a new physical locations, that's a real range as unusual amount of growth, right? So even as 70 percent is going to be twice as fast as any public health care provider. So, but I think there's definitely emphasis towards a little more capital conservation and also the advantage of growing a little bit more slowly is that you can just get profitable to faster. Everybody wants to see profits these days. Now, one of the interesting factors here, just like Shopify is saying e-commerce trends have gone back to what they were pre-pandemic, the same is happening with doctor visits. Telehealth, visits through webcam, have gone back to where they were, and that means to disrupt health care.

You need brick-and-moter locations, and that means, guys, you need capital, which carbon health has, and certainly Amazon does it. So let me understand what they do. Are they the owner of medical practices that are then linked together and operated in efficient? ways via technology or what? Are they sort of general practitioner practices or are they orthopedic practices or dermatology or what? They've got primary care. They've got urgent care. They've got some specialization in women's health and actual physical locations where you can go get care, use your insurance, et cetera. But really also they've got an app on the phone that allows you to get that care more efficiently. And also they're trying to combine. Aaron was telling me

that right now patients really want a one-stop shop. They're trying to combine prescriptions with that. So maybe even out of the same location, you actually get that prescription or you get it shipped to you. Amazing. He's a very, very impressive guy with everything he's achieved. I hope he can do it. You know, my thoughts on the waste and the chaos of the current health care system.

It's amazing, too, John, the number of entrepreneurs you've introduced us to who were born hungry. Yeah. I mean, they were born hungry. They did not have. The advantage is that Tyler Matheson had. Absolutely. So many entrepreneurs who achieve a lot are either running towards something or running away from something, right?

Interesting. Yeah. Something that they had that they want more of or something that they didn't have that they want to bring to the world. That's what I'm finding again and again. We love the personal insight. There's a book in there somewhere. Yeah. Probably working on it.

American Stream or American Nightmare. Roku, Paramount, and Disney getting bearish calls from analysts today. Are any of them? worth buying. Our trader will tell you next in three stock lunch as we go to break. Stocks are near session lows. The Dow wade down by Walmart, of course, but also Salesforce and Nike. We're back in a moment. Time now for today's three stock launch on the menu. Some streamers on the rocks. Wolf Research downgrading Roku to underperform amid mounting challenges. Goldman double downgrading. Ooh, the dreaded double downgrade, paramount to sell on macro headwinds. Goldman also lowering its

for Disney by $18 on ad market weakness. Here to help us trade these stocks. Tom Leiden, Vice President at Veta Phi. Tom joins us on the phone. Let's start with Roku. You sort of like Roku. Is it because you like the business or you like the possibility

that it's a buyout candidate or both? Well, a little bulk, Tyler, it is 85% off its high. The question is, can it go down further? advertising-based streaming will continue to be competitive. We know Netflix is diving into that space. Netflix needs subscribers, and Roku has them. So if there's ever a buyout, that's a possibility there. On top of it, there's not a bigger fan out there in Roku than Kathy Wood with Ark Invest.

She sees the target at $240. A lot of people are looking at a target of $150. I think there's going to be a rebound at one point. All right. makes me nervous. What about Paramount, Tom? Yeah, so Paramount, this is one of those stories where I don't think even Tom Cruise can win this battle. The most valuable part of the business at Paramount is the NFL and March Badness Madness Streaming deals. It's 75% off its high. It's got a good dividend, 3.8%.

And no single-digit PE. However, although Top Gun Maverick should take them through the third quarter, order from a profitability standpoint. The news that the NFL has just announced they're going to watch their own streaming service. NFL Plus is probably of great concern to Paramount because they depend tremendously in an NFL deal. I think it's a hold right now. Yeah. Well, Disney is also a company that has an awful lot riding on the NFL as well through ESPN

and college sports for that matter. Well, you're right, Tyler. The big concern is ESPN Plus It's got a price hike of 43% Almost $10 a month That they're trying to push through during tough times And as you say, if NFL is going solo on streaming, What about Major League Baseball or basketball or hockey

Or the NCAA? All those their organizations could join as well And again, although it's 50% off a tie, PE is way too expensive. It's a sell at this point. You got a sell on Disney. Tom, thank you very much. I just want to show.

Look how Tom drained those three drinks right there, Roku Paramount in Disney. Not saying anything, just observing the graphic. Tom Leiden, thanks. More power lunch right after this. Alphabet and Microsoft earnings are just hours, almost minutes away at this point. Dom Chu is looking at the valuation reset we've seen. So if you take a look at this chart here on a year-to-day basis, the moves lower that we've seen in the NASDA, specifically Microsoft and Alphabet really kind of set them up

with lowered expectations going into these numbers. From a valuation perspective, just for all the watchers and viewers and listeners out there, if you take a look at Microsoft first, the reason why valuations are coming into question right now is because at 23.5 times next year's earnings, we are now talking about levels that are hovering just above

where we were at the depths of the pandemic from Microsoft. Now, if you take a look at that, it's even more compelling here with regard to alphabet because at 17.5 times next year's earnings, you've got to Kelly, Tyler, go all, the way back to the summer of 2015 for valuations this low. So can they get lower? Of course they can. Always. But there's always a reason why the people are trying to figure out an investment thesis right now. They're playing the walk off music, Dom.

They are. I'm going to walk off. Yeah, go. There's a go. Thanks for watching.