Power Lunch - Yearning For Earnings, Stock Draft On Deck 4/24/24

Episode Date: April 24, 2024

Earnings season rolls on, with many major companies reporting results. We’ll break down some of the reports we’ve gotten so far, and preview some that have yet to come. Plus, we’re just 24 hours away from one of our favorite days of the year: the CNBC Stock Draft! Analyst Tim Seymour will join us with some key names to watch in this year’s competition. 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 Contessa Brewer. I'm Tyler Matheson. Glad you could join us. The big story today is earning so many major companies reporting results, and we've got reporters breaking down the results we've got, previewing the ones yet to come, and our trader will offer his take on three names making move. Oh, buckle up. We are now just 24 hours away from one of our favorite days of the year. The CNBC Stock Draft, a great lineup of guests this year. Our color commentator, Tim Seymour, will join us with some names to watch. But first, let's get a check on the market. right now. As you can see, we're in the greens, but the Dow barely hanging on there. S&P 500 is up by 0.14% and the NASDAQ composite up by a third of a percent. Small moves here for the major averages, but we're seeing some big names in individual stocks. With Tesla jumping more than 10%, you have, it's up almost 12% now. This is really Elon Musk's vision for the future of the

company, and we have more on that coming up. And speaking of Texas, Texas instruments jumping on its results, taking the chip sector with it, Hasbro jumping, even though revenue fell there. That's because margins improved and, as a result, so did profitability. Hilton, gaining on improved results and a raised outlook, but Masco down lower revenue there, worst day in a year and a half. Well, two big earnings on the docket for Phil LeBow. They would be Boeing and Tesla. Let's start with Boeing, Phil. You're in Washington for an interview that you had with the CEO, Dave Calhoun. Take it away, Phil. Tyler, you know, when you look at Boeing shares, the main question on Wall Street is they're building a bottom.

How much worse can things get? Many on Wall Street believe they can't get worse, and they point to the first quarter as an example of that. Look, it was still a terrible quarter. They lost a lot of money. The loss was less than expected, but they still lost a lot of money. Yet within that, there are some things that Boeing bulls, and I'm not really sure people would call themselves bulls at this point, but Boeing enthusiasts could point to and say, look, free cash flow in the first quarter, the loss was smaller than expected. They are making progress on the FAA review, and the spirit fuselage issues, they appear to be declining. We talked about that with Boeing CEO Dave Calhoun this morning.

Here's what he had to say. It's more about whether it's a low or not. It is wildly sporadic because, again, we're trying to sink up our supply chain. This will begin to steady as we get through the second quarter, and then it will be all about how many perfect fuselages do we get from spirit. That will be the constraint and that will be the opportunity. I'm confident we'll get there. And that raises the question.

Is this the low for monthly production of 737 maxes, which the company is not releasing where they're at, but it's definitely not at 38 per month. It's well below that. But the belief on Wall Street is at some point they start to make progress. And perhaps that starts here in the second quarter. Also, they're keeping their free cash flow guide in terms of their guidance to hit $10 billion annually in free cash flow by the end of 26. Those are the reasons why if there is enthusiasm, much enthusiasm for shares of Boeing stabilizing at this level.

Tyler, that's the reason why. All right. And Phil, there is clearly enthusiasm for Tesla, the stock soaring today. And, you know, this is often the case when we're talking about Elon Musk and Tesla. It's not really about the quarterly numbers. It's the storyline about what's to come. Oh, he told a good story. He told one that Tesla Bulls are rallying behind, and they should,

because if you believe that Tesla can take where they are right now and improve, look at what he told people during the conference call yesterday. First and foremost, they need to do something in terms of volume in proving over the next couple of years. He said we got more affordable models coming. Never mind, he didn't tell us exactly what the affordable models will be. Are they brand new models or are they simply tweaks on current models? More models coming that are affordable.

That pushed the stock higher. He also talked about robotaxi optimism. And then 2024 deliveries, while they're not going to be growing as fast as they did in 23 at 38%. They are expected to go higher. And last year they delivered $1.81 million. The estimate right now is for $1.9 million. And Elon Musk was asked point blank, will you hit at least 1.81? He said, yes, we expect to at least.

grow deliveries in 2024. If you take a look at shares of Tesla, keep in mind that the revenues were down 9% in the first quarter. That is the biggest year-over-year decline in revenue for Tesla since 2012. So the story is one that people embraced after hours, guys. All right, Phil, thanks for setting it up for us. analysts appear to have some mixed feelings about Tesla's first quarter results. Guess that's expectable. CNBC Pro highlighting some of the calls on the street in an article published today. thinks Tesla's results at the start of a big turnaround. Analyst John Murphy raised his rating to a buy from neutral price target, 220, implies

a more than 50% upside from yesterday's close. Morgan Stanley's Adam Jonas, also relatively bullish with an overweight rating. Still other analysts not ready to ride with Tesla. Bernstein's Tony Sakanagi reiterated his underperform rating and remained skeptical about the company's shift toward autonomy and robotaxie. And the analysts at UBS remaining on the sidelines, reiterating his neutral rating, lowered his price target on Tesla, saying Tesla took the ultimate bear case off the table as there is a new lower cost product coming. Joining us now to talk about Tesla and Musk, CNBC contributor Tim Higgins, reported with the Wall Street Journal, the man who literally wrote the book on Musk and Tesla. It is called PowerPlay.

Welcome, Tim. How do you see, I mean, it seems like Musk sort of steadied the ship a little bit in his conference call. Do you agree? Yeah, it was a classic performance by Elon Musk, showed up to play, if you will, kind of giving relief to those supporters out there that he's still in charge, still looking at the future, still has his hand on the wheel. Of course, as some of these analysts point out, there's still concerns about the core business, still concerns about where things are going. If you are a true believer, if you are a fan of Tesla, if you are a fan of Elon Musk's vision for the future, there was a lot to be excited about. What if he doesn't reach agreement over his big fat pay package with Tesla and he walks away? How much does that hurt Tesla? Absolutely, and that was one of the questions top of mind for people yesterday, and he was asked about that.

In one hand, he says, hey, listen, Tesla is on a path to creating driverless cars with or without him. The momentum is there. It might not happen as quickly without him, but he's not. He thinks it's going that direction. The bigger question and the question that, you know, super fans have is what can Tesla become beyond that? And he has laid a future that would have a human robots called Optimist and other of these kind of the future, the exciting future that he predicts. And he's saying without him, he's not so sure that Tesla can do that. And so really the kind of the push, the last minute push, the last time he's really going to be able to talk to shareholders before they get a chance to re-approve his package that was struck down by the,

Delaware judge earlier this year, that mega huge financial package, kind of essentially kind of lobbying for that. And also a little bit of a suggestion that if Tesla is making a lot of free cash flow, that maybe there could be a buyback in the future as well. The goal of getting to 25% control of the company, he stated is what he wants if he's going to stay to do the robots and the AI that he envisions. You know, Tim, it's interesting because the language that gets used around fans of Tesla is, and you just said, believers, right? There is this brand of Elon Musk, a cult of Elon Musk. I'm just curious, when we saw the report come out yesterday, there was this real disconnect

between what was being reported and what the stock was doing. And then Elon Musk gets on and he lays out his vision for the future. But as Phil just pointed out, and Tony Saganaggi pointed out, okay, they, He says there's lower priced models coming. What is it? Where's the specifics in that? Does it really matter what he says, where the specifics are, as long as he's there and guiding the ship?

You have this interesting question. In a lot of ways, these calls seem to rely a lot about his tone and the fact that if he sounds happy or sad, I mean, not to be reductionist here. But if he is not optimistic about the future in the past, we've seen shareholders get nervous, he came sounding optimistic, and I think we're seeing that in the results today. But do all those investors then, are they just relying on the mercurial nature of Elon Musk?

For some, absolutely. One of the things, though, I think is helping today is the suggestion that this is just not robot taxis in a future that maybe is years away that is some experts predict that there is some pull forward of some sort of product that can continue to fund the intram before the next. thing, right? This idea of a lower-priced vehicle. The details are scant. Is it really just a tweak to the Model Y? Is it a new product altogether? We don't know. And that's some of the challenge of being an investor in Tesla is that this is really kind of a muddled kind of interim vision that has been laid out. Is there attention within the company, or let me put it this way, to you, which is the more important thing for Tesla to do? To solve the robotaxy issue or to come in with a lower priced car that has more mass appeal than their current offerings? The Robotaxi is a bet the company kind of idea that is likely years and years away at best.

To survive, to get to that point, the company needs to continue to make money and generate the cash to kind of bridge to that future. So understanding what that interim is is key, is critical. They have to have something to sell, and Elon is facing, in a lot of ways, kind of, list facing a lot of ways a three-body problem, right? They have incredible competition in China that's eating their lunch. They have in the U.S. a consumer base that maybe isn't necessarily sold on EVs as increasingly going towards hybrid technology. And then you have Elon Musk himself, who has a habit here in the last few years of being kind of mercurial. And some investors are already distracted with X or XAI. And really wanting that reassurance.

that he is fully vested in the idea of making Tesla to that next level that has been promised over the last few years. All right. Tim Higgins, thank you very much. Always good to see you, sir. Thank you. Appreciate it. Moving on to the next big earnings report. Now, META will report after the bell today.

Let's get to Julia Borson for a look at what to expect. Hi, Julia. Hi, Contessa. Well, after META blew past expectations last quarter, shares are up 40% year today. They're also up about 130% in the past 12 months. So now the pressure is on for META to keep accelerating its revenue growth. It is expected to grow the top line in the quarter by 26 percent, a 96 percent growth in earnings per share. Now, all of that growth is expected to come from tailwinds from reels, from the advantage of its AI tools driving results for advertisers, from a solid digital ad market, as well as perhaps some early revenue coming from messaging.

Analysts are bullish. 86 percent have a buy or overweight rating on the stock, and 11 percent have a whole. JPMorgan writing, quote, first quarter ad checks were solid and meta is emerging as an AI leader among ad names, but comps do get tougher through 2024. AI will be top of mind on today's earnings call after Meta's AI assistant rolled out just last week. And then the other big topic, the law that President Biden just signed today forcing a sale or a ban of TikTok. Analysts have predicted that a ban would boost meta's revenue and engagement. We'll see if Mark Zuckerberg has anything to say about that. Yeah, we're going to grapple with TikTok in just a few minutes here, Julia. But I'm just curious, do you think analysts on the call are going to press meta about how they can pivot and react and try to take advantage?

Well, here's the thing. There have already been a number of analysts knows that have laid out how much meta would benefit Instagram and its core platform would benefit from increased engagement if the time spent on TikTok were to go away. I mean, TikTok is the most popular app in terms of time spent for Americans. So if that were to go away, there's no doubt that META would benefit both in terms of engagement and in terms of ad revenue. They've already laid out a lot of those numbers. So I don't know if there's as much of an expectation that META would even need to pivot to take advantage of that. So there might be some questions. I suspect that MEDA will avoid saying anything too specific,

especially given that TikTok has been very clear that they're going to be challenging. this in the courts, but there's no doubt that if TikTok were to go away, it would benefit. Imagine what you could do with all those hours spent scrolling right now. Like you could go pick up litter on the side of the highway. I waste a lot of time on Instagram. I need to figure out TikTok because I want to be an influencer. It's one of my goals in life.

Oh, trust me, you are. Just not on TikTok. Julia, thank you. Thanks, contestant. Well, as we head to break, let's get a quick power check. On the positive side, Hasbro up 12% reporting a strong earnings beat. On the negative side, Teladine down 12%. The industrial firm is seeing a decline in sales,

and that is your power check. We'll be right back. CNBC Stock Draft is back, hoping to take this year's title as competitive eating champion, Joey Chestnut, ranked number one by Major League Eating. But now he is turning his attention from devouring hot dogs to devouring the competition. Which stocks are on his men?

menu? We'll find out starting Thursday at 2 p.m. Eastern. Hi, welcome back to PowerLont. Shares of Boeing moving lower. Moody's has downgrading Boeing's senior unsecured debt rating to BAA3. That is the lowest investment grade. Boeing is junk maybe. Wow. Moody says its rating outlook on Boeing is negative. Go ahead. I'm sorry. Stocks are mixed, though, after a mostly positive start today's higher rates appear to be offsetting relatively strong earnings. Some big names here, including. include meta and IBM, set to report after the bell. Our next guest is watching some key consumer names and expects earnings to grow outside of the biggest tech companies as the year progresses.

Jim Tierney is CIO of U.S. concentrated wealth at AB. It's good to see you, Jim. Okay, so we've already seen sort of a broadening of the market growth and the results. Do you think that continues? Absolutely. We're seeing two things, certainly a broadening, but a heck of a lot of dispersing. within sectors. Look at Alta Beauty and the slowdown that they saw in Combs versus a Costco that had great comps or a Proctrin Gamble who had flat volumes versus a Luriel that had great

volumes. It's going to be a lot more pressure on investors to find the winners. Do they have those that are winning right now, do they have anything in common? I think there's a little bit of a trend of trading down and consumers looking for value as the pent-up savings. is finally going away, particularly among the lower and middle class, I think that's going to create some difficulties and different dynamics than we've seen the last couple of years. Where are you looking for opportunities if you think that the middle buyer, that middle consumer, is looking for better bargains? So there are two ways.

One, you could pick the providers that are winning, the brands that are winning, but maybe an easier way to do it is not be worried about where is the consumer spending, but just is the consumer spending. The answer to that is absolutely yes. So you look at a company like Amazon. It doesn't matter what product you buy on Amazon as long as you're buying. They're a winner. And when I look at the cost to deliver that, as Andy Jassy talked about, down 45 cents year over year in the fourth quarter,

they're widening the moat around their business by lowering cost. You look at a MasterCard is another great example. Visa reported last night, Amex reported last week. The consumer keeps on spending. As long as it's on cards, the mastercards of the world are happy. And you don't have to, again, pick who's a winner or a loser. MasterCard, I think, is a real winner in that example. Why are some consumer product companies or consumer-oriented companies, Nike, P&G, Ulta, Pepsi, maybe?

Why are they struggling with organic growth while others are doing well? What's the difference or the distinction? I think there's a real backlash against those companies that raised prices aggressively over the last couple of years. Constellation Brands is a great example. They were much more muted in raising prices, and they just reported earnings and saw 8% depletion growth versus a procter and gamble or a Pepsi flat. So the repercussion of the price increases over the last couple of years is coming home to roost. So consumers are looking for value. They're increasingly looking for good value.

and where they see that value eroding they're not buying? I think there's a pocketbook issue here to a degree, just around affordability. And when you have to make those hard decisions, now is the time that that's happening, whereas a couple of years ago, when you had pent-up savings, it wasn't quite as big of an issue. Jim, how are you playing AI these days? Well, obviously, the hardware side is what everybody's chasing. But I think there's the next stop on the train, and that is who are going to, to be the beneficiaries of using AI in their business. And we own a company called IQVIA.

I think IQVIA plays in that in a couple of ways. First of all, drug discovery is going to get sped up. Icubia has a proprietary database of all the prescriptions written. That is going to be the source material for discovering new compound. When you discover a compound, it still needs to run through a clinical trial, and that's the other side of the house with IQIA. So IQIA has been looked at as a company that is facing headwinds from biotech spending, a little bit of an inflation headwind as contracts that they wrote a couple years ago at lower costs, are now seeing higher costs, that washes through and the AI benefit should really start to hit IQVIA over the next couple of years. And at the valuation that it's at today, I don't think the market's appreciating

that at all. Jim, thank you very much. Jim Tierney of AB. We thank you. And coming up, Thank you. End phase down 5%. Reporting a drop in revenue. We got more on that one. Play out for this. Welcome back to Power Lunch. Stocks slightly lower, but bond yields are moving higher.

Let's get to Rick Santelli for the latest in the bond market. Hi, Rick. Hi, Contessa. Indeed. And let's start at the beginning. We had durable goods this morning, and the revisions really took some of the fun out of the number. It was generally as expected with negative revisions, meaning last month was downgraded in pretty much every category. As for the next big variable, it was a five-year note auction.

$70 billion, biggest ever, very mid-leaning demand by investors, unlike yesterday's record-sized two-year at $69 billion, definitely was much more aggressive. The demand on that shorter maturity seemed to be much deeper. Tomorrow we finish with $44 billion in seven-year notes. And you can see on that five-year chart, right at 1 o'clock Eastern, rates were lower than they are now. They're hovering right around $4.65.

They have crept higher. Now, long maturities, like a 10-year note, 20-year bond, 30-year bond, they are leading the entire curve higher. As a matter of fact, the 10-year note yield today is trading above yesterday's high yields, which are right around 465. And if we look at the Tuesday 10 spread, right now at minus 28, it's the least inverted in three months. Why is that important? Because many believe that Friday's important PCE number may generally come out as expected. which is keeping the two-year note a little less aggressive. And do keep in mind, we haven't been able to close above 5% giving some investors confidence.

And the steeper yield curve ultimately is probably focusing on supply and debt where the long end is concentrated. Tyler, back to you. Rick, thank you very much. Solar stocks lower today following earnings from N-phase. Pippa-Seevins is back now on what's sinking that stock. One of the worst performers in the S&P today after they missed Q1 results in both the top and bottom line. and gave weak Q2 revenue guidance. However, CEO, Badrake Kahnaraman, did tell me that Q1 was the bottom in terms of the supply issues. So remember, the market has been very oversupplied, and so to correct that, NFACE has been undershipping product into the channel,

which means that the demand side looks artificially very low because they are selling less to work through that excess inventory. So the company said that this current quarter, Q2, is the last quarter when they're going to undership. And so what that means is in the second half of this year, Q3 and Q4, their revenue numbers will align with the underlying demand side. So that's on the supply side. But the demand side, even though they are going to start to match up in the second half of the year, the demand side is harder to predict because it's so tied to interest rates. And now with, you know, who knows what the Fed's going to do? And so that is a big wildcard. However, they said things in Europe are looking better.

So cautiously optimistic is sort of what Wall Street analysts are saying. here, but clearly the stock down 5% and now down about 50% of the last year. So they work through this revenue, excuse me, this inventory issue. But when they come back to a more normalized sales pace, it seemed as though their estimates were still below. That's right. So the more normalized sales base is about 400 million revenue, and that is well below the more than 700 million revenue they were earning just, they were reporting just a year ago. And so while it is starting to go, it's going to now be a kind of level playing field in terms of the supply and the demand side matching. It is well below, simply because when rates were so low, it was easy to sign up for solar, but that's no longer the case.

All right, Pippa, thank you. Welcome back from vacation. Good to have me here. Let's get right to Kate Rogers now for a CNBC news update. Hello, Kate. Hi, Contessa, Arizona lawmakers are expected to vote on an attempt to repeal a controversial abortion ban today for the third time in three weeks. The state Supreme Court allowed the near total ban from 1864 to be upheld earlier this month. GOP representatives in Arizona's state house where the party holds a narrow majority have so far prevented a repeal of the law from advancing. House Speaker Mike Johnson says he will call for the resignation of Columbia University's president during a visit to campus today. He says she has shown to be a weak leader who cannot guarantee the safety of Jewish students. Pro-Palestinian protesters formed an encampment on campus last week. Colombia will finish out the academic year remotely amid security concerns.

And U.S. agriculture officials announced a requirement today for dairy cattle moving between states to be tested for bird flu. The direction from the USDA came a day after the agency said it found bird flu virus particles in some samples of pasteurized milk. Officials say the milk supply is safe based on the information currently available. Candessa, back over to you. Well, that is attention getting and rather concerning. Kate. Thank you. The ban on TikTok passing the Senate along with the foreign aid bills, the platform will have nine months to divest once the president, well, in fact, the president has signed it.

Is this the end of TikTok? We will discuss when Power Lunch returns. Welcome back to Power Lunch. TikTok is a big step closer to getting banned in the U.S. because President Biden actually signed the into law, a bill that requires TikTok. Chinese parent company, ByteDance, to sell TikTok within nine months or be banned here in the United States. TikTok responded with a statement saying, quote, this unconstitutional law is a TikTok ban,

and we will challenge it in court. The company's CEO also posted a video saying that TikTok will prevail. Our next guest testified before Congress supporting the TikTok ban. Ivan Serini is CEO of Fairfoot Security. He's a cybersecurity expert. it's great to talk to you today. I think it's for root, right? The for root security?

Okay. So, Ivan, let me just ask you, first of all, when you testified before Congress, what did you tell them about TikTok that you thought was concerning enough to deserve a ban in the United States? Yes. Thank you for having me. So some of the findings that we presented and we identified is the fact that TikTok has a lot of information on people who never even used TikTok in their lives.

And they didn't even suspect that TikTok would be collecting their information. How do they get it? Yes, it's one of the most common ways is through something called pixels, tracking pixels that we all come across and touch on websites that we use every day, like when you're booking a doctor's appointment or buying something online or banking online. Okay, so you're saying that TikTok is getting information about us, even if we've never downloaded TikTok, if we never use TikTok, if we never go on the platform and scroll other people's videos?

That is correct. And that was one of the findings that really started a lot of people, that amount of data collected on people who never even used TikTok in their life. So then what's to stop TikTok from continuing to do that if the app is banned, cannot be downloaded, cannot be updated, or is somehow disabled on phones? If you don't even have to have TikTok on your phone to be subject to data theft by TikTok, how's a ban going to fix that? That's a very big question.

So, by the way, something that can really help solve this broader problem, not just the TikTok problem, but a data collection by adversarial companies and countries, is something that is called the proposed. that will ban transferring Americans' data to companies that are controlled by adversarial states like China and Russian, Iran. So that could actually ban and prevent this overall problem that we face when our data is being collected. Okay. And then what if you have bite dance saying, okay, it's valuable enough this U.S. business that we don't want to see it banned, or presuming, I'm presuming that a court lets this lost

But should that be the case, if they divest of TikTok, does it solve the problem? It's definitely a step in the right direction when it comes to TikTok only. So, yes, once, let's presumably the divest thing happens and there's a new control of the company. So what this means, first of all, is the data still being going to be collected, but it's going to be collected and sent to call it mother's. ship that is in America, not in China. So it has to follow American rules, not what the Communist Party says. And after that, putting the controls, security controls, governance controls in place to make sure that all the data is safely stored. There is no back doors. All the kind of digital gremlins are removed and all of the doors, back doors, windows, everything is shut and everything is secure.

And people also are vetted. So there's people who have access to our door. data, do not leak it back to China or any other places. To my knowledge, TikTok has said repeatedly that they have never, not once, shared any user data with Chinese government officials. How do we know whether we can believe them at all on that? How would we ever know? That's a very big question. So first thing is the bi-Chinese law, cybersecurity law, any company that is under their jurisdiction, in this case, Biden's would be under jurisdiction, has to disclose any information or any data that they have, and they have

to disclose it to the authorities. If the authorities ask, if the authorities ask. That is correct. And having reports already by journalists that have been confirmed that TikTok information collected by TikTok was used to spying them, including geolocation and tracking some of the journalists. Do you see problems beyond TikTok with other social media platforms and the way data is collected and disseminated? Absolutely. There is a lot of data that is being collected. And it's not just TikTok and not just big tech from China or other countries. It is a broadly data collection, a bit of a wild vest in a way. And so what I personally believe is that companies that collect data need to have very clear rules to follow, firstly.

And secondly, be held accountable, just like, for example, executives have personal responsibilities when it comes to following financial laws like Sorbonis Act, or they can go to prison if they do not follow the rules. Ivan, it's a fascinating saga, and we will be following it, and hopefully with you. Ivan Serini, thank you. We're less than 24 hours away from this year's CNBC stock. Forget the NFL draft. The real thing is right here tomorrow at 2 p.m. Eastern. Coming up, we will speak with draft analyst Tim Seymour about strategy, the stocks that are in play, and much more we're back in two. The big day is almost here, if you can believe it or not. A 2024 CNBC Stock Draft will kick off tomorrow precisely at 2 p.m. Eastern time in this studio and in Studio A as well. This year's draft includes 16-time Nathan's hot dog eating contest winner and world champion, Joey Chesa.

That qualifies him to pick stocks, ladies and gentlemen, right there. Actor and comedian Drusky with more than 7 million followers on Instagram. The Washington Commander's new prize running back, Austin Echler, former Tennessee Titans running back, Heisman Trophy winner, I believe, Eddie George, fitness person. Jillian Michaels, the mentalist O'S Perlman, MTV's Catfish host, Nev Schumann, and Inside the NBA co-host Kenny the Jet Smith, WMBA MVP Brianna Stewart of the New York Liberty. That is the lineup. Wow.

And now for a quick preview of tomorrow's events and the names on the board, the stock draft board, is commendator, the Mel Kuiper of the stock draft, Tim Seymour. Hey, Tyler, how are you? How are you? I mean, you can feel it. It's palpable. It's one of the great events in sports and markets that brings them both to you. And I'm excited to be a part of it.

So what we do here is we give the contestants, what, a list of how many stocks from which they can choose? It's not all 2000. How many is it? No, it's a list of 50 or so stocks. Clearly, it's across a broad swath of the economy and the market. But it's interesting. It does seem like this year's draft is going to be dominated. much like the NFL draft will buy quarterbacks, the sexy part of the market, which is chips.

I mean, whether it's Nvidia or AMD, you know, does seem like every year is a slightly different tone. And I expect it to be, you know, alive and well today. What you, what the winners typically do is they pick a, if they hit a home run. You kind of have to have that, the game theory says, when you're getting two choices. I guess it's two choices or three, is it, Tim? Yeah, it's two. It's two, and you're right. I mean, game theory is on some level, for me, as a former retired athlete that has moved into the booth, you know, it was about finding the most bombed out

stocks that are companies that I thought could have some kind of an inflection point. So it's almost so bad they're good, like a Boeing, which is down almost 40 percent, had numbers out today, free cash flow dying, except for this is a company that ultimately, I think, will have eight to 10 percent in free cash flow yields in 25. And I think despite all the headlines there, there's exciting picks in there. And I think every team, really is in a win now mode, which means, you know, you go for the names, the two names that are going to give you the best combined performance against the other teams. And it's a really important combination of fundamentals, meet technicals, meet momentum, meets, frankly, you know, you got to stay as smart as the pack. The ladies dominated last year. Looks like Karen Feinerman is the number one overall pick this year.

So it's, you know, it's exciting. You know, in my world, this would just be begging for sort of at least, at the very least, squares where you could bet on which team was going to come out on top. But like, why not place your bets early in the season? You could even parlay it and say who's going to come with an over under kind of thing. Like, we're not licensed for that, but maybe we could be. I don't know. In the future, Tim. Go ahead.

I was going to say, I would do some side bets with you for sure, although I think we have to be careful being banned from CNBC for. forever. Apparently, this is something you got to watch out for. It's exciting. And again, it is about everyone's going to have a slightly different approach to how they're picking these stocks. And this is a group of teams that are athletes that are from the entertainment world. You've got, you've got O'S Pearlman, who really probably has seen already the winners ahead of time. I mean, it's a really fun event that actually is rooted in a whole lot of reality of where this market is right now. You know, you made the point earlier. You look at a Boeing, which is so down, it's painful to watch.

I remember last year thinking that one of the participants, I forget, was an NBA player, an NFL player, I thought one of the participants made a brilliant move in picking Peloton. I was so wrong. I was just dead wrong. If you had the first pick, who would your quarterback from USCB? If you had the first pick. Right. There's no obvious Caleb Williams here, but as someone that likes to buy the names that have had a little bit of a tough run,

I mean, even a United Health Care, which to me is really a five-tool athlete. I mean, this is a company that I think is a growth company, though, that's pulled back a lot. If they hadn't rallied 15% off those numbers last week, I might have said this was a no-brainer. I like Boeing here. I think you have to consider Bitcoin. You have to consider the dynamics that have had gold and Bitcoin moving over the last six to nine months. If you like gold, you probably like Bitcoin more in that context. to say that the mega-cap tech stocks are to be counted out is crazy.

Because if you think about the move that NVIDIA had last year when Charlotte Flair picked this for victory, Nvidia had already had a big run, and yet it had an even bigger run up its sleeve. So I think the mega-cap tech stocks are not to be counted out. If we're in an environment where people are worried about growth, and we've seen even some rotation in the market over the last couple days from value back into defensive growth, I think you're going to see some of those names. They're going to be obvious picks, right? They're going to be names that people want to own because they're names that people want to own.

Well, Apple has been so unpopular recently, and the shares have just taken such a leg lower that maybe that provides some opportunity, and we haven't heard that. And Vidi has been hogging all of the oxygen in the air around here. So we'll see it. We'll see it tomorrow, Tim. It should be great. All right. Coming up, Texas Instruments higher on a big Q1 beat and a rosy forecast per second quarter lifting other chip stocks along with it. We'll trade it ahead in three-stock lunch. That's next.

Well, it's time for today's three-stock lunch. Today we have a few earnings-related movers here with our trades. Jerry Castellini, president and chief investment officer with Castleark Management. Up first, Jerry, we have Texas Instruments, the shares moving higher. The chipmaker reported first quarter results that topped Wall Street estimates. But the company's guidance for Q2 is really what's moving the stock here today. What's your trade on Texas Instruments? I'm a buyer of this name. It's a great to see this market, the semiconductor market, beginning to broaden.

So it's been seven quarters since Texas Instruments actually forecasted a higher forward growth rate in their quarterly sales revenue. So this is a big move, let's say, for the past two years, in the part of the market that TI dominates, which is the analog side. Not going to get a lot of attention from the AI crowd per se. But it's an important milestone. And when you think of semis in general, you have a powerful case that the entire marketplace is going to broaden out here, partly because of AI and partly for cyclical reasons. And this is just the beginning for them. So it's really important to own these types of things early.

Let's move on to Biogen, which is on the move higher today. The company reported a first quarter profit, the top estimate. its cost-cutting efforts taking hold. So says the company sales of the Alzheimer drug it owns came in higher than expected. Your trade on biogen. Yeah, I'm a seller. It's hard, hard. I mean, this has just been one of the hardest area of medical research of all time.

We've been looking for solutions for this for well over 30 years. Their drug that did pass the FDA, it's the only one on the market, really only buys you a couple months of disease progression. And my fear is, this is a company that that's kind of the only growth engine they have. Lilly and others will be coming out with a new version or somewhat similar to this. So you have upcoming competition and you have just a very difficult overhead with their patent portfolio. My inclination is to let it go here, partly because I'd rather be looking at a therapeutic

solution that is much more powerful than the one they had. Jerry, final name here. Chipotle reports after the bell. It's seen some favorable earnings estimate revisions recently pointing to an earnings beat. The shares are up about 28 percent so far this year. What do you think of Chipotle? I mean, you said Chipotle, so I'm going to start with how often I go to the restaurant itself. Love their menu. I think it's fantastic. And so do all. all of its shareholders. The concept here is that it's hard to find a theme in ReadyD that has surpassed what these guys have been able to accomplish. They have a great demographic. They have upgraded menu. They have been beating. And this is a 20% top line growth business. We're very

impressed with it. But all that said, when you throw on top of it, this massive share cut that they're going to do that will bring the stock back down to a regular person's buying, you know, kind of like their menu. All those things are in the stock today, and I worry that they might not today be as enthusiastic against those expectations. So my feeling is hold this stock, listen closely to what they say the trends are in the second half of the year, and then decide if you want to own a business that's trading it over 40 times earnings. Jerry, I appreciate you joining us. Thank you very much. much, Jerry Castellini.

Eat the food, hold the stuff. All right, remember, you can always hear us on our podcast. Be sure to follow and listen to Power Lunch on your favorite streaming service. We will be right back. It says right here, we only have 90 minutes left in the show, but I know better.

We have 90 seconds left in the show. So let's get with it. A recent credit news study tallied America's least affordable metro areas for the middle class, and perhaps unsurprisingly, four of the top five are in California. The top five. least affordable metro areas are San Jose, San Francisco, Los Angeles, Long Beach, and San Diego

in the Golden State, followed by Honolulu, Hawaii, and then Oxnard, California, Seattle, Boston, New York, New Jersey, where we are, and Bridgeport, Connecticut, running out the top ten. This is the interesting thing. To afford a house in San Jose, you'd have to make $468,000 a year. Advertis something like a million floor or something like that. That's crazy. Well, speaking of affordability, millions of American work. workers could soon become eligible for overtime pay. The White House just finalized a rule raising the minimum salary threshold to qualify to 40 hours a week and a work week to start in July people earning just a little less than $44,000 a year would become eligible. So good news for them.

For the employers, probably fighting them. Thanks so much for watching, Power. Let's be sure to tune in for the stock draft tomorrow right here at 2.