transcript
Speaker 1:
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Speaker 2:
[00:31] Trading at Schwab is powered by Ameritrade, giving you even more specialized support than ever before, like access to the trade desk. Our team of passionate traders ready to tackle anything from the most complex trading questions to a simple strategy gut check. Need assistance? No problem. Get 24-7 professional answers and live help and access support by phone, email and in-platform chat. That's how Schwab is here for you to help you trade brilliantly. Learn more at schwab.com/trading.
Speaker 3:
[01:00] Live from the NASDAQ Market site in the heart of New York City's Times Square, this is Fast Money. Here's what's on tap tonight. Tesla takes off. Shares of the EV maker popping after an earnings beat. What the company had to say about margins, its humanoid robot and when we will finally see cybercats on the road. We're surrounding the trade this hour. And the picks and shovels of the AI trade in rally mode today. What the gains in everything from semis and memory stocks to power providers say about the state of big tech. Plus, pot stocks light up. Boeing shares soar after earnings and Best Buy names a new CEO. What new leadership will mean for the electronics retailer and how you should trade the stock now. I'm Melissa Lee, come to you live from Studio Viet and Asak. On the desk tonight, Tim Seymour, Dan Nathan, Steve Grasso, and Katie Stockton, founder and managing partner at Fairlead Strategies. We start off with Tesla moving higher after posting first quarter numbers, earnings coming in ahead of estimates, while revenues fell slightly short. The company also saying it's making meaningful progress in its robotaxing businesses. Phil LaBose got all the numbers and the details. Phil?
Speaker 4:
[01:59] Melissa, a lot to like in these numbers if you are a Tesla bull. The company earning 41 cents a share. That was 4 cents better than the street was expecting at 37 cents a share. Revenue as you mentioned coming in a little bit shy of expectations coming in at 22.39 billion. The street was at 22.64 billion. And then some key numbers within the numbers in the first quarter. Gross margins north of 19%. Anything between 15.5% and 17% is where most of the analysts were expecting. So this is better than expected at more than 19%. Free cash flow 1.4 billion. A pleasant surprise. That's because CapEx was not as great as many were expecting. And then you have FSD subscriptions, 1.28 million. For a point of reference, at the end of the fourth quarter, it was 1.1 million FSD subscriptions. By the way, that 1.28 million, 51% jump year over year. And in terms of production, you talk about the CyberCab, there has been some news, at least this is what Tesla is saying in its earnings report, the CyberCab and Tesla Semi will be going toward volume production. They are on track for that to happen this year. And the Optimus factory is expected to begin production shortly in Q2. That's according to Tesla in its earnings report. As you take a look at shares of Tesla over this last year, keep in mind the real mover of this stock is coming up in about 25 minutes. That's when we'll hear from Elon Musk during the analyst conference call. Melissa, I'm going to send it back to you, but this is one of those days where if you are a Tesla bull, you're looking at at least the numbers right now and saying, all right, I like what I'm seeing.
Speaker 3:
[03:38] Yep. Phil, thank you. Keep us posted. Phil LeBeau with all the sort of puts and takes of the Tesla quarter. You know, part of the bull case is physical AI and we are seeing it. I mean, it is a reality. It's not just humanoid robots out in the future. It's beginning production in Q2, cyber cab, semi truck. It's not out in the future. It is volume production this year. It is playing out, Tim.
Speaker 5:
[04:00] It is. And it's doing it at a gross margin that, as Phil pointed out, 19.7 percent x the regulatory credit is a good story. And a story that's greatly improved over where it was. I think the dynamic around energy storage is also kind of interesting, although those numbers were slightly lower quarter over quarter. I think it gets back to really, where are we with Optimus? Where are we with cyber? And those are details we're going to get at 530. I think there's still some unknown about what's going on with Tesla and SpaceX, too, even though I think that's, I don't think that's something we're getting or something we're going to hear about. But it is something the market wants to know.
Speaker 6:
[04:36] Is it interesting that I didn't think Phil really built out on cars? I don't think Tim really built out on cars. You didn't say anything about cars.
Speaker 5:
[04:45] I said nothing about cars.
Speaker 6:
[04:46] So this is not a story about cars anymore. So this is about a story about FSD, free cash flow and margins. They're hitting on everything right now. Then you throw in some humanoid or some robots. So I think they've changed the narrative enough to put the bar where they know they could step over it.
Speaker 7:
[05:06] Margins, it looked like one-time thing. It looked like early tariff refunds and then some warranty reserves. So if I want to focus on that, I know how to read and Claude's amazing. I mean, this guy, Claude, in real time, maybe, did more than I did. I mean, margins was a thing that used to drive it. It was deliveries, right? And the fact is that Elon used to guide 50% year over year those sorts of deliveries. They started falling short or whatever. But I'm with you guys. If they printed 17.6, I don't think it really would have mattered. And if you look at FSD and they're looking at the progress they're making there and miles driven and all that sort of stuff. But it is interesting to note that their FSD is still supervised FSD for the folks that actually own the car that's not going to be a robot taxi. So again, maybe it's not about the cars that they're selling to individuals right now. It is more about the production that's going to go into a fleet.
Speaker 8:
[06:03] To me, it's one of the more attractive mega cap stocks. It's actually kind of diverged from the group, and it tends to have a weak first quarter, which is of course what we saw this time around. And because of it, it came into this print pretty oversold on a weekly basis. Retest are somewhat common, very strong support in the 351 area, and resistance honestly is not that strong until you get to the highs around 488. So I think it's an interesting setup, secular uptrend.
Speaker 3:
[06:32] You know, if you are wanting to invest in the physical AI story, there aren't that many pure plays out there. There aren't many other companies that you can do that with. I mean, Waymo is a very small part of the alphabet story. I can't even think, I mean, robotics companies out there. I mean, I don't even know. I mean, Tesla fills that sort of void in the AI trade.
Speaker 5:
[06:52] It's funny that this is now a pure AI trade and not an auto company.
Speaker 3:
[06:57] Yeah, I mean, I don't know if it's a pure AI trade, I mean, it fulfills that sort of notion of a physical AI.
Speaker 5:
[07:02] No question. And I still think we just don't know from a capital markets perspective what Elon might put through here. And he's well insented to take this market cap higher. So I think your point is well taken. I think there are other parts of the story. I mean, FSD approval and other ones. Where's it going to be next? I mean, there is really some decent follow through on some of the stories that again, don't get me excited, but I think it's interesting what Katie's bringing up. And I give Dan some credit who called this stock back in November, which is this stock has these moments where it has in fact lagged. And in fact, you see almost a rotation by people that are not 1.0 Tesla investors. There are people that are opportunistic and tactical. This is a market right now, at least the market we have, where semis are going to all time highs, where this company is supposed to rally. And I think because someone like me might hold my nose on the valuation and say I don't even understand it, there are plenty of people that aren't that predisposed and I think are buying it.
Speaker 6:
[07:59] It reminds me back in the day with Amazon when you had AWS and people didn't understand the AWS angle that they could turn that spigot on, they could turn it off whenever they wanted. He's got a bunch of flows now that he can really look to. But he definitely did attract in the stock, maybe Katie can speak to this. I'm long from right around here. So I suffered with it a little bit on the downtrend and now I'm staying with it. Looking for probably 10% move to the upside, where do you see it stopping technically?
Speaker 8:
[08:30] So there is a minor level around 410, which maybe that is tested soon. The problem is that the influence of the market is very real on the chart of Tesla, right? So as you bought it and it went down, that was probably mostly related to the market, right? Not something specific to Tesla. So the market influences are very real and I think it largely depends on whether you think the equity market can continue higher from here after such a strong move as to what kind of gains we'll see at least in the near term.
Speaker 3:
[08:59] If you're a believer in Elon Musk and his vision of the future, are you an investor in Tesla or are you an investor in the SpaceX IPO to come?
Speaker 7:
[09:08] Probably SpaceX and partially because I think these companies will ultimately merge if you think about it and if you think about this incentives that Tim just mentioned that he had for Tesla when that came out, I mean there was not really a whole heck of a lot of talk about SpaceX and the valuation was coming at and that valuation has been skipping higher, you know, went from 250 to 500 to where they're talking about right now. And he's going to have similar incentives as it relates to SpaceX. The other thing that's really interesting, it came out, I think the information was reporting this the other day, that in a secondary sale, obviously in the private markets, Elon bought $1.4 billion worth of stock in SpaceX. Now if you go back since the IPO of Tesla, this was I think either late last year or early this year, and it's kind of indicative of what he used to do with Tesla. They used to have all these different offerings. This is after their IPO, secondaries, converts, that sort of thing. He used to buy on all of them. Like when they were not producing a whole heck of a lot of cars, this is 11, 12, 13, that sort of thing. So I think that actually bodes very well. He's obviously all in. He's obviously going to be the first trillionaire out there. He's got a couple different levers in which to play it. And so why not buy in if you have this vision of the future that he has?
Speaker 6:
[10:17] Dan, sorry, Dan brought up an interesting fact when you said, what are you more excited about? And he said, I think they merge them. I think that's the only way that he actually gets his pay package. Right? So the trail to getting that trillion dollar is merging every company that he's ever thought about.
Speaker 5:
[10:33] Isn't Tesla cheaper?
Speaker 3:
[10:35] I mean, that's a backdoor way into SpaceX.
Speaker 5:
[10:37] Right. Yeah. So wouldn't you rather have Tesla here?
Speaker 3:
[10:39] Yeah.
Speaker 6:
[10:39] Yeah. That was my point, but thank you.
Speaker 3:
[10:43] For more on all of this. That's for you, Tesla, Bull, Gene, Munster, Gene. Great to have you with your, of course, managing partner, Deepwater Asset Management, somebody we would never replace with Claude, by the way. What was your take on the quarter, and why do you think the stock is higher?
Speaker 9:
[10:59] Most of the stock is higher, probably because of this margin piece. There was essentially 19.2 percent was the auto most garages ex credits. Dan did mention there was some noise in there. If we back out that noise, we're still looking at a high 18 percent number. That compares to 17.9 in the previous quarter. Now stick with me, is that deliveries were down 14 percent quarter over quarter. Typically, when deliveries decline, then you have lower gross margins on auto. And so I think that that was kind of the initial reaction. Once the numbers came out, as investors were looking at that, we saw that 4 percent pop. As I dug through the numbers, a couple of themes really reinforce this idea that they're doing well when it comes to physical AI, but I want us to underscore how early we are. And so based on me looking at the charts in their shareholder deck, they probably grew their FSD miles 93 percent quarter over quarter, and they doubled their paid miles for the robotaxi. But I want to quickly put those in a perspective is that sounds great. They're doubling. Right now Tesla, as those doubling on the FSD miles, that accounts for about 0.2 percent of total miles driven in the US. It still is just a fraction of a fraction. When it comes to autonomous miles driven, if we take what Waymo is driving and what we just reported with Tesla, it accounts two and a half percent of the total ride share miles. So very early. Last fun fact. If you look at the RoboTaxi paid miles driven and compare that to Waymo, Waymo is about 50 times bigger.
Speaker 3:
[12:39] Wow. That is a fun fact, Gene. I want to ask you about the transition or the increase in production that we'll see in Optimus, and how it will impact what is going on elsewhere in the company. In the shareholder deck, there was some language around turning off basically a couple of lines of vehicles and putting Optimus in there. What does that mean in terms of margins and just sort of mix shift as this transition happens?
Speaker 9:
[13:09] Well, the units are going to be just so small. Of course, Heon's talked about that million Optimus for calendar 27 and we all know how to kind of factor in that million number. And so I think that this is really about storytelling related to what they can do, even if they're in physical AI. It is storytelling today, but if you fast forward five, 10 years from now, I think there is going to be some substance around this human right opportunity. As far as your question about the impact to margins, since units are going to be still so small and the investment relative to everything else they're doing is still relatively small, I wouldn't expect too much disruption there.
Speaker 6:
[13:44] Gene, when you look at this, you sound like you still look at it as a car company and you're still factoring in car and delivery numbers and pricing overhang on the story. What are you most focused on for the future? And do you just buy this stock as an access point to SpaceX?
Speaker 9:
[14:03] I think you had it right in the setup here, Steve, that it's not a car company. I talk about that because those are important because deliveries are part of the network that eventually they can monetize through FSD and kind of car production is a way that they can build robotaxis that can further monetize that. So yes, I think that, I mean, this is a physical AI company. I think we're starting to see the substance in these numbers. They are very small right now. And as far as like an access point to what's going on with SpaceX, this relationship eventually is going to come together. I agree, Dan, with your commentary on that. It's probably a couple of years out, and I just want to come back. I mean, my thesis on SpaceX is they're not going to position themselves as like a space company. It's going to be a sovereign AI company. And Tesla is essentially the physical AI piece. You really can't have sovereign AI unless you have the whole story, unless you have a physical AI piece, and they need Tesla to do that.
Speaker 7:
[15:02] Hey, Gene, you gave a great example why physical AI is really, I guess, really a big part of both these stories, right? And ultimately, if they're going to merge together, it's going to be one big story. Where else are you thinking about that as a play, right? If we think about AI in general, we kind of have the ecosystem down here, and it's the components that go in the servers, and they go in the racks, and they get cooled, and they go in the data centers, all that sort of stuff. But where else are you thinking about this and as this kind of broadens out away from just data centers?
Speaker 9:
[15:30] Well, I mean, AI is a theme, and then within that, we have sub-themes. Probably the most exciting sub-theme right now is energy, I think, and then separately optics. On the energy side, some of those companies have gotten bit. There's some companies that are really boring companies that traditionally we wouldn't look at. We have an ETF, LLUP, that invests in these smaller sub-500 billion companies that kind of play into this. But safe to say is that what we're hearing, what we're seeing in the Tesla numbers today, and what we've seen more broadly from TSM and ASML last week, is that I think we're still early, and I think that this energy piece is going to be an underappreciated for probably a matter of years in terms of the investing community, or will soon be appreciated in the coming years.
Speaker 3:
[16:20] Gene, keep us posted on the conference call. That gets underway in just about 15 minutes time. Elon Musk should be on it. Gene, we'll check in with you later. Thanks, Gene Munster. Meanwhile, the proverbial picks and shovels of the AI trade leading the NASDAQ to new records today. Chips stocks for one soaring, the SMH ETF hitting an all-time high led by big breakouts in Micron, AMD and Broadcom. The memory stock darling's also making big moves. Sandisk, Seagate, Western Digital with outsized gains. Round Hill's new DRAM ETF. Yes, there is a DRAM. There's an ETF for everything. But that is seeing more than $1 billion of net inflows in just 10 days. And strong earnings in guidance from data center provider GE Vernova this morning, lifting names like Consolation Energy, Talon, Eaton as well. So what do these moves tell us about the AI trade? Where do you see strength, Katie?
Speaker 8:
[17:10] Gosh, I mean, mostly semiconductors as you mentioned. So I went into the S&P 500. I sorted it by month to date returns. And every one of the top stocks is a semiconductor stock of different varieties. But it's just a broad based move within the complex, and it really needs to sustain itself in order for the market to sustain its rally. We do have a lot of breakouts on the charts. These breakouts are not confirmed yet though. So what we like to see is more than just a week above, but a second week above. We don't want to see the gaps from last week penetrated very quickly. That's another thing for folks to watch. When you see these very fast and furious rallies, like we have done, they're more often fragile, sort of counter trend. So with that in mind, I just be managing risk, but hopefully enjoying the returns while they're here.
Speaker 5:
[18:00] And Katie, where is that break out on NVIDIA by the way? Because I think if we get a break out on NVIDIA, look out is my view. And the move on semis while you're checking that, what's that chart level?
Speaker 8:
[18:12] Because they- So for NVIDIA, the resistance, the final resistance is around 212, but Broadcom is already through equivalent resistance. So I see them almost as one in the same, just by the way they act. So I'm sort of treating NVIDIA like it's very close to all time highs, treating it as a pending breakout with the rest of the group. And indeed, I mean, it's really lifted the major indices in a meaningful way. So we're going to translate what we see in the semis to that. But there are very widespread short-term cell signals from the demark indicators. And these are the first cell signals that we have seen on the way up. And they show exhaustion and they are pretty timely in general and they only have short-term implications in the daily charts, but for about two weeks, we'd expect consolidation.
Speaker 7:
[19:00] It's so hard. I mean, this is what you do. And you talk about demarks and exhaustion and all that. I just look at things like Micron, that breaking out up 8.5%. It doesn't seem like there's any slowing down there. And the Sandis, it's up 70% in less than a month or so. And I think all of us have been around in the markets for a while. And you can call something a bubble. It doesn't mean you're calling the top. It doesn't mean you're saying that the fundamentals of these companies that are rallying these ways don't make a lot of sense. But at the end of the day, this is a bubble and it will burst. And so a lot of folks are only things and it's fabulous. And you just said about ETFs and these things are becoming outsized positions in a lot of different ETFs and that's a great way to participate in it. But make no mistake about it, there is idiosyncratic risk in some of these things. If a Sandis goes from $20 to $1,000 in a year, if it were to go from $1,000 to $500, you should not be surprised if that happens at some point.
Speaker 6:
[19:54] So, I thought that Micron topped out mid-March and I looked good for about a month, and now it's overtaken that level. This is something where it's 75 percent DRAM, 25 percent NAND. If you look at NVIDIA's chips, they're riddled with HBM, high bandwidth memory. That's where Micron has their sweet spot. I do believe this is in a quasi-bubble and I wouldn't be a buyer here in Micron.
Speaker 3:
[20:17] Coming up, we'll keep an eye on shares of Tesla in the after hours. The conference call about to kick off. We'll be listening in, bringing you all the headlines from that, as well as the other reports tonight, but first, Boeing soaring on its own report this morning, what the CEO had to say about 737 production that had shares taking off. Don't go anywhere fast when he's back in two.
Speaker 10:
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Speaker 11:
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Speaker 2:
[22:07] Trading at Schwab is powered by Ameritrade, giving you even more specialized support than ever before. Like access to the trade desk. Our team of passionate traders ready to tackle anything from the most complex trading questions to a simple strategy gut check. Need assistance? No problem. Get 24-7 professional answers and live help and access support by phone, email and in-platform chat. That's how Schwab is here for you to help you trade brilliantly. Learn more at schwab.com/trading.
Speaker 3:
[22:36] Welcome back to Fast Money Boeing, flying to the best gain of the year after reporting better than expected results for the first quarter. The plane maker seeing a narrower loss on increased deliveries and improvements in the defense and services parts of its businesses. CEO Kelly Ortberg spoke to our Phil LeBeau about the ramp up in production and its cash flow goals.
Speaker 12:
[22:54] I think we posted a better first quarter in terms of free cash flow than we anticipated. So we're on track for a second half positive cash flow and a full year of positive cash flow. It's all a part of our recovery.
Speaker 3:
[23:07] He also talked about potentially the meeting between President Trump and she yielding some new plane orders which could benefit Boeing. I mean, you've been in this one for.
Speaker 5:
[23:17] I love this one and boy, I wish it was the bee in Timbo.
Speaker 3:
[23:20] It's not? What is the bee in Timbo?
Speaker 5:
[23:22] Biogen. Biogen has been fine. But I mean, this is Boeing's time to shine. And yes, Boeing was on the beauty tour with President Trump too a year ago or at least around tariff dynamics. And it should be. There's no question. We know how important the company is in terms of what's going on in airspace and manufacturing. We know about the duopoly. But the most important thing here is this company is entering free cash flow. We heard about CapEx. It's kind of in line with where we thought it was going to be. It's not getting out of control. I think that's really the story. I think the margin beat is something in BCA that's very important. And I think that's something else. If you can get a margin story on top of that, that free cash flow starts to become a bigger story.
Speaker 6:
[24:06] They're out producing Airbus, I think head to head competition there. And if you look at the stock itself, it is about free cash flow, return to positive free cash flow. CEO says that they're looking for the back half of this year or 2026 to actually get there. That's what you're buying the stock for. I bought it below 200, sold it in the 230s. I have not got back in. I think the lid on the stock right now is probably 250.
Speaker 3:
[24:30] You agree?
Speaker 8:
[24:32] It looks like a big six year basing phase, doesn't it?
Speaker 3:
[24:36] The longer the base, the higher the space.
Speaker 8:
[24:38] That's right. So on the monthly chart, the cloud model that I use, Boeing is actually breaking out like today. So even though it's not clearing previous highs, which would be a more traditional resistance level, this could be a breakout for Boeing, assuming it's confirmed. And then the next resistance would be at the top of the range, around 278. Looks good.
Speaker 3:
[24:59] Coming up, more earnings action. The results moving IBM, ServiceNow and more. But first, cannabis stocks smoking today. New hope the Trump administration will reclassify marijuana. Is this time finally different? Can the trade keep rolling higher? You're watching Fast Money Live from the NASDAQ Market Site in Times Square. Back right after this.
Speaker 11:
[25:22] From college send-offs to retirement dreams, life is filled with many important milestones. And making sure you have a plan in place to protect the people you love can give you confidence for whatever comes next. State Farm life insurance can help protect your family's financial well-being through life's milestones. Your State Farm agent can help you choose flexible coverage you can adjust as your family's needs change. Contact your local State Farm agent today. Like a good neighbor, State Farm is there.
Speaker 2:
[25:52] Trading at Schwab is powered by Ameritrade, giving you even more specialized support than ever before. Like access to the trade desk, our team of passionate traders ready to tackle anything from the most complex trading questions to a simple strategy gut check. Need assistance? No problem. Get 24-7 professional answers and live help, and access support by phone, email, and in-platform chat. That's how Schwab is here for you to help you trade brilliantly. Learn more at schwab.com/trading.
Speaker 13:
[26:20] She loves it hot.
Speaker 1:
[26:21] He loves it cold.
Speaker 13:
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Speaker 3:
[26:36] Coming back to Fast Money, cannabis stocks lighting up today on reports the DOJ is getting ready to reclassify marijuana as a less serious schedule three drug soon. The president signed an executive order to loosen federal regulation of the drug back in December, though efforts to reschedule have stalled in the past. We've had these reports come out in the past, stocks rally, it doesn't happen. Now what, Tim, is this time for real?
Speaker 5:
[27:01] It really looks like the DOJ is ready. There had been some buildup on this news in the last week that President Trump was really kind of asked, and it was almost like, yeah, we need to get done what I said we were going to do. This executive order was four months ago, and to remind, reclassification effectively takes cannabis from schedule one to what we don't totally know. But yeah, I mean, schedule three, which would certainly remove punitive tax dynamics for the sector, which means that companies would be generating a lot more free cash flow. And it's also notable that a lot of the companies have essentially withhold taxes payable, seemingly have discussed this with the IRS, and so have already kind of begun this process of at least feeling like the world had changed for them. But the executive order was four months ago, and this issue went so quiet. So the fact is, this is moving very, very fast, and this is finally, to me, at a place where the DOJ, who has to still work out some details on what reclassification actually means, it's a very exciting time for a sector where people, as you said, have been through these headlines before. This does not federally legalize. Do not expect federally legalized. I'm not even sure in my lifetime. I'm not sure that that's important here. I think the most important thing is the profitability of the companies. Obviously, access to capital markets, exchange listings, opening up the market to traditional investors is the next step.
Speaker 3:
[28:22] All right. We've got a news alert out of Washington. In the Senate Banking Committee, Emily Wilkins has got the details. Emily.
Speaker 14:
[28:28] Hey, Melissa. I just spoke with Senate Majority Leader, John Thune, who said that the Senate Banking Committee will be going ahead and opening up an investigation into cost overruns with the Fed building construction. This could potentially provide that off-ramp that everyone has been looking for, that would allow Senator Tom Tillis to vote for Warsh if and only if, of course, the Department of Justice ends their criminal investigation. And we should just be clear here, there are two different things that are closely related. A DOJ criminal investigation into Powell's testimony over the cost overruns, and then this proposed Senate investigation into the cost overruns that would not be criminal. Technically, they could both go at the same time, but at this point, everyone in DC is trying to figure out what that off-ramp is that would unlock Tillis' vote and allow the committee to move the Warsh nomination onto the floor and get him confirmed, ideally, of course, before the May 15th deadline, that would be Powell's last day, if, of course, there is no one to replace him as chair. Guys?
Speaker 3:
[29:30] Emily, thanks. Emily Wilkins. Coming up, a lot more earnings action to bring you the FHR's moves in IBM, ServiceNow and more, and all the numbers when Fast Money returns.
Speaker 13:
[29:42] Missed a moment of Fast?
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[29:43] Catch us anytime on the go.
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[29:45] Follow the Fast Money Podcast.
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[29:47] We're back right after this.
Speaker 3:
[29:57] Welcome back to Fast Money Stocks, jumping after President Trump extended the US ceasefire with Iran. The S&P and NASDAQ both jumping more than a percent, closing at fresh records. The Dow climbing nearly 350 points. WTI crude settling just below $93 a barrel. Bitcoin meantime taking a leg higher today, the trading around $79,000. They ended up more than 15% over the past month. Ethereum climbing as well, and crypto-adjacent names like Robinhood Coinbase Strategy, they were also up. Some after hours action, shares of Lululemon down the company announces a former Nike exec would be its next CEO taking over in September. Lululemon is looking to turn things around after a rough year with shares down nearly 40%. On the earnings front, Southwest falling after missing EPS and revenue estimates. Texas Instruments jumping after topping expectations. Hiking Q2 Guidance. Rail company CSX higher after beating earnings estimates. And Lamb Research beating both on the top and the bottom lines. And Hiking Q4 Guidance. Meanwhile, we are getting the first read on tech and software earnings for the first quarter tonight. IBM and ServiceNow both down sharply after reporting results after the bell. John Ford has the latest on those numbers. John.
Speaker 15:
[31:05] Yeah, Melissa, rough reaction for software. Maybe it's investors rethinking the idea that the bottom is in and around negotiations will take oil price pressure off. That optimism had some software names bouncing for the last two weeks. So IBM first. It's off about 6% here. Trading levels from around April 10th. CEO Arvind Krishna telling me today it's prudent to maintain, not raise guidance despite the strong quarter given that macro uncertainty. The software business was up 8% cost of currency for IBM. Red Hat did rebound a bit for them. And then you've got ServiceNow. That is down 13% right now despite solid growth and a guidance raise. CEO Bill McDermott telling me their rule of 56, they're confident, they're leveraging AI. Annual contract value of customer spending, a million dollars is up 130%. Five million plus is up about 80%. Now Bill McDermott himself is going to be on with Jim Cramer in Mad Money. I know he'll have more to say about what he thinks investors are missing, Melissa.
Speaker 3:
[32:10] But to be clear, John, both companies are acknowledging that there is an impact from the war from energy shocks on their outlook as well as what they've seen so far in the second quarter.
Speaker 15:
[32:21] In a way, so the reason why I'll say in a way is what Arvind Krishna is saying is we really don't know what the long-term impact of that will be. So given that it's just Q1, we're not going to raise our guide now. So not so much that he's seeing the impact, but just that he might see it. Now, in McDermott's case with ServiceNow, yes, for data centers, we even saw some data centers getting hit by Iran. For those installations, there is an impact, but he had already talked about that. So that's not new information that wouldn't necessarily justify specifically this reaction.
Speaker 3:
[32:56] All right, John, thanks. John Fort, what do you make of this? Obviously, it'll be interesting to see how it plays out in the software trade, the IGV trade tomorrow.
Speaker 5:
[33:04] Yeah, I mean, it's been a fantastic bounce in software. I guess, I think some of the concern around the war and energy cost is something that has been a later part of the software trades down. I still think it's about people just don't know what to do with the companies that had big multiples going into this. On IBM, I think expectations were very high, especially on the software side, but consulting was light and I think that was something that else. It's not terribly cheap here. It's certainly been a very good run for IBM that, for a long time, we said was a big underperformer.
Speaker 3:
[33:36] Quick on the charts, Katie.
Speaker 8:
[33:37] Yeah, for software in general, I mean, we've seen a nice bounce as to mentions, but it's not enough to suggest that they're done going down. We need a series of retests and this could be one of them. When I look at ServiceNow, it's not likely to break down on this move, but a retest can be pretty severe.
Speaker 3:
[33:52] All right, we got some more breaking news out of Washington we want to get to, and the Secretary of the US Navy. Amen, Javers, details on this one, amen.
Speaker 16:
[34:00] Melissa, the Pentagon says the Secretary of the Navy, John Phelan, is stepping down from that position. The statement here from a Pentagon spokesperson is short and sweet. It says simply, Secretary of the Navy, John C. Phelan is departing the administration effective immediately on behalf of the Secretary of War and Deputy Secretary of War. We are grateful to Secretary Phelan for his service to the Department and the United States Navy. We wish him well in his future endeavors. Undersecretary Hung Kao will become acting Secretary of the Navy. So no explanation given for this unexpected departure of the Secretary of the Navy, Melissa, and no recent flare ups that would suggest anything in public that might be precipitating this right now. CNN did have a story earlier this year that said that Phelan had been spotted on Jeffrey Epstein's plane years ago. That may be entirely unrelated to this though. It is unusual to replace the Secretary of Navy in the middle of an act of war, particularly a war that involves naval operations in the Strait of Hormuz. So we'll push the White House for some more detail on what exactly happened here. Back over to you.
Speaker 3:
[35:14] Keefe has posted. Thanks, Amen Jabbers. Let's get another check on Tesla stock. Just taking a leg lower, Elon Musk making some comments about capital expenditures by leg lower mean down a percent or so. Let's bring back Deepwater Managing Partner Gene Munster for more down a percent from where it was. It's still up. Gene, what's the latest here?
Speaker 9:
[35:31] Melissa, Elon started the call talking. The first thing he said was that we're going to be making substantial increases in our CapEx investment, and that will down the road have substantial increases in revenue. And if you think about just kind of the reason, the takeaway here is not only should we expect a meaningful step up in their CapEx, and is the fact that he's highlighting that at the beginning of the call, he doesn't want to hide from that. And he talked about investing and really across all of their businesses, batteries, AI training, and the chips all the way down to new storage opportunities. And so I think that investors are kind of getting their hand. He did say something like, you understand this because this is what all the other big tech companies are doing. So right now, investors are just going to try to wrap their heads around how much is substantial.
Speaker 3:
[36:23] Yeah, a number would be good. Gene, thanks. Keep us posted.
Speaker 9:
[36:26] Thank you.
Speaker 3:
[36:27] Down to up 2% right now. I mean, I say that seriously though. We want to find a number out in terms of this math. I mean, is it the scale of the other hyperscalers? That's hundreds of billions of dollars.
Speaker 7:
[36:38] But do investors care? I mean, like, that's the thing. If Elon's going to spend their money, it's shareholders' money, then you place this faith in him already, right? And so, like, we shouldn't assume that he's probably doing the right thing to achieve the goals that he wants to achieve. I mean, I'm not, you know, endorsing. I have no idea, to your point, what the numbers are. But if he came out and said they're spending $50 billion on CapEx over the next 12 months, I don't think the stock will get hit. You know, I think it's just kind of giving some clarity. I mean, you know, Amazon's going to spend $85 billion, or I don't know more.
Speaker 5:
[37:07] The thing that's difficult about this is we don't know for which business we're talking about. Again, there's four or five different verticals here that are all part of the exciting Pure AI story, and we don't know where this could be going in addition to not knowing the number. So when I hear about it from Microsoft, I hear about it from Meta, and I hear about it from, you know, we have some understanding of what this means in terms of infrastructure, especially around cloud and the chip side of it, and building those platforms. We don't totally know. I agree with Dan in that Tesla, historically, the detail has not mattered. And I'm sure there will be a lot of goodies on this call that will get people excited.
Speaker 3:
[37:45] So far, we do have a couple more headlines from the call, which is about 11 minutes in at this point. Elon Musk saying, Optimist will be the company's biggest product. Also, the Tesla has a pipeline of major improvements to full self-driving that will lead to unsupervised full self-driving, which I guess is, you know, the holy grail when it comes to...
Speaker 6:
[38:03] Yeah, that's the linchpin when you talk about RoboTaxi. And when you look at these funding or CapEx, it's return on investment that the investors are worried about. But if we talked about that circular financing within the Tesla network or within the Tesla ecosystem, I don't know what's legal, what's not legal there. Can he just borrow from another company, invest it into another one? Is he self-funding whatever CapEx is doing?
Speaker 3:
[38:30] You're only questioning where the CapEx dollar is coming from.
Speaker 6:
[38:32] Yeah, so that might change the angle.
Speaker 3:
[38:34] They have a lot of cash flow. I mean, they could use their cash.
Speaker 6:
[38:36] And he could use it from wherever he can borrow. Right, he could use it from wherever. So I don't think it's a reason to sell the stock. I think it's a reason to get more excited about the ecosystem.
Speaker 5:
[38:44] He could issue equity. I mean, you know. It could.
Speaker 3:
[38:47] There's all of it.
Speaker 5:
[38:48] There does seem to be that going on. There could be converts. There could be different things. And building a war chest right now, in terms of the capital markets, is something we've seen out of MegaCap Tech.
Speaker 3:
[38:57] Sure, definitely. The stock Tesla is up by about 1.5%. We'll see how this conference call plays out and what else Elon Musk has to say. Coming up, one rental car company pulling a UEE after a big drive higher. Why shares of Avis are pulling back after surging 350% over the last month. Fast Money is back in two. Welcome back to Fast Money. The tires on the Avis trade finally going flat today. The car rental stock falling almost 38 percent, but still more than tripling just this month. Two hedge funds have recently bought heavily into the stock according to SEC filings, now holding about 70 percent of shares, but still short sellers keep piling in, with short interest now standing at more than 60 percent of the float. This according to S3 Partners. The chart master was out with a note this morning saying, sell it all. He said, today's the day. After the bell said, there could be days or weeks more pain to come, given the heavy volume that we saw in today's session. It's almost like they took a page book out of Roaring Kitty, in terms of the GameStop short squeeze.
Speaker 6:
[40:06] Yeah. The first thing to look at is the short interest whenever you buy a stock. It could be a bullish theme, and most of the time it's a bearish theme. This stock fundamentally is in trouble, and then you get people chasing it and it creates that sense of urgency and that meme stock approach to it. But don't confuse the price action with the fundamentals. This business is in trouble, and it's usually sparked by some bullish headline that gets everyone feeding frenzied on it.
Speaker 5:
[40:34] I feel like Avis has been a meme stock since before Roaring Kitty kicked the slats out of his litter box. I mean, this is definitely one that, the story here is certainly one of structurally broken, and how it got here, again, I'll leave it to the hedge funds that are on the other side of this trade, but not one I'd get in front of.
Speaker 3:
[40:55] All right. Meantime, the broader transportation sector, in which Avis is a part of, took a hit today. Dow transports falling 8 percent, but still up since the start of the Iran war. So Katie, what do you see in the technicals here?
Speaker 8:
[41:06] Yeah. So, I mean, there are major breakouts on the monthly charts of transports, and that even includes some of these beleaguered names previously. But to me, it's overdone in the short term, and I think Avis is exemplary of that today. We have outside down days for Avis, for also the Dow Jones transportation average, and Avis was down, I think, about 50 percent intraday. And of course, that's going to be a drag on the index itself, down more than 8 percent today. There's still another 8 or 9 percent room to initial support for the transports. However, once we see a deeper pullback, I think that's going to be a really compelling entry point for the transports, because when you zoom out and look at the long-term setup, you'll see a major breakout. And just as important, we also have a major bullish reversal in the transportation average relative to the S&P 500. If you look at the curvature of the 200-day moving average, you'll see that it has turned to the upside. So it follows multiple years of underperformance for these names. And if you dig into the group, you'll see some really interesting setups among the shippers. UPS is an interesting turnaround, longer term. Kirby, which is a marine shipping company, has a nice setup as well, good momentum there. JB Hunt and a lot of the truckers also have major breakouts, just a little bit overdone in the near term.
Speaker 3:
[42:28] People might listen to you, Katie, and think, okay, I believe that, I'll go to IYT, but the construction is completely different. Transports is market cap weighted, right? IYT is not, I think. So the impact of Avis, for instance, on transports is huge. The impact on IYT is very small. So what do you see for IYT?
Speaker 8:
[42:51] Always have to break apart the ETFs and know what you're buying when you buy them. There's the same problem with some of the consumer discretionary areas where you have no idea really what the underline are, and you could be buying something totally unrelated to Amazon and the things that you're going for. So IYT is really nothing like the transportation average and the way it sets up, so I'd keep that in mind. It wouldn't be the best way to position for what we feel as an entry following this major breakout.
Speaker 3:
[43:16] Coming up, the pops and drops. In today's session, we are digging into the moves and Best Buy, Philip Morris and Masco, all the headlines moving those names when Fast Money returns. Welcome back to Fast Money Shares at Best by Tumbling, almost 5% after the electronics retailer announced a CEO transition. Jason Bonfig, the current Chief Customer Product and Fulfillment Officer, will take over from Corey Barry on October 31st. He started at the company in 1999 as an inventory analyst. Barry has served as CEO since June 2019. Shares are basically flat under her tenure. What do you think of Best Buy, Grasso?
Speaker 6:
[43:57] So when I look at it on a chart, it doesn't really give you that much clarity, but I would have to assume that margins with the expense of memory chips and the expenses all around the process, everything that they sell, margin should be crimped. So I wouldn't be a fan of jumping in at this price level.
Speaker 3:
[44:13] All right. And tobacco giant Philip Morris jumping almost 7% despite giving disappointing second quarter earnings guidance, cutting its failure forecast. The company behind Marlboro and Zin Tobacco, nicotine pouch, I should say, did beat on the top and the bottom lines for the current quarter thanks to strong sales of smoke-free products as a major driver. Tim?
Speaker 5:
[44:32] Yeah, I like this one. Kids at home, I don't like you out there with the tobacco. I do think that the the heated tobacco as a product category was a nice beat. Zin slippage a little bit. Free cash flow. Fantastic. This is continually a story of these guys having better numbers than the street was expecting from them. And I think it's a stock along with staples that have actually sold off a little bit going into today's move. I think you stay in this one.
Speaker 3:
[44:58] All right. Shares of home improvement company, Masco, having a banner day up almost 11%. The company in its latest earnings report seeing improving demand, particularly in its plumbing supplies business. Quarterly earnings and revenue both beating estimates. Shares are now up 26% over the last four weeks. Katie, how does the chart look?
Speaker 8:
[45:16] Nice gap up today. So I'd watch that gap and it's around 73. Wouldn't want to see it fall right back within the gap. To me, it's a longer term range, short term upside within that range.
Speaker 3:
[45:28] All right. I want to go back to Gene Munster. We got some more commentary from that conference call. Gene, what's the latest here?
Speaker 9:
[45:35] So we did get that number, Melissa, in terms of what that CapEx looks like. It sounds like 25 billion this year. That comes from like 8 billion or so last year. So pretty big step up year over year. I'm scrambling to see where the street was at, but you saw shares drift lower. The tone on the call is basically trust us that we've made these kind of investments in the past and they've paid off handsomely.
Speaker 3:
[46:00] Right, and free cash flow will be negative as a result.
Speaker 9:
[46:02] That's correct, yep, for the next three quarters.
Speaker 3:
[46:05] All right. Gene, thanks for keeping us posted. Gene Munster, and as Gene had mentioned, we went from up by about 4% on the back of the earnings results to about, up about a half a percent, quarter of a percent, as a conference call is about 55 minutes in. Up next, final trades.
Speaker 5:
[46:34] Fastest energy, along with the other high octane parts of the market, this once was, and I think they are trading together, but the fundamentals support this one.
Speaker 3:
[46:41] Katie Stockton.
Speaker 8:
[46:42] I have to go with Boeing, I like its long-term potential on the chart.
Speaker 3:
[46:45] Great to have you on the desk tonight, Katie. Dan.
Speaker 7:
[46:48] Yeah, IGV Software ETFs had a nice run here. I think tonight's results suggest you'd probably let this one go.
Speaker 3:
[46:54] Steve.
Speaker 6:
[46:55] United Airlines been in the news for probably the last week or so. I like it down 5% today. Better entry level, United Air.
Speaker 3:
[47:03] Thanks for watching Fast Money. Mad Money with Jim Cramer starts right now.
Speaker 13:
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Speaker 2:
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