A Big Night For Big Tech, and We Count Down to the Jobs Report 2/1/24

0:01Live 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. Meta's monster breakout, the stock rocketing higher as the company announces a huge buyback in its first ever dividend. We'll go inside the numbers. Plus, Apple's China challenge, the tech giants' revenue growing for the first time in a year, but a slowdown in China raising eyebrows for investors. We're live in Cupertino. And later, Peloton hits the skids and touches its lowest close since going public. Gold shines as the mining stocks catch a bid, and an activist gets crafty on Etsy stock.

0:32I'm Melissa Lee, coming to you live from Studio B at the NASDAQ. On the desk tonight, Tim Seymour, Karen Feiderman, Dan Nathan, and Guy Adami. We start off with a huge slate of big tech earnings, more than$5 trillion in market cap reporting in just the last hour. Kate Rooney is standing by on Amazon. Steve Kovac is digging into Apple's numbers. But we start off with Julia Boorstin, who's diving deeper into Meta's quarter. Julia. Yeah, Melissa, Meta's shares are soaring after the company beat expectations across the board and reported its first ever dividend. We see shares are now up 14.5%. It's going to be paying a dividend of 50 cents a quarter in addition to increasing its share buyback.

1:10Now, the company is accelerating revenue growth to 25%, and it has continued user growth, even adding 2 million users in the saturated U.S. and Canada market, guiding to first quarter revenue in a range ahead of expectations. Also saying that Reels is now contributing to net revenue across Meta's apps. CEO Mark Zuckerberg saying on the earnings call that this all shows the company's investment in AI paying off, saying they will continue to invest both in AI and the metaverse. Now, one weak point here, perhaps the only weak point, was Meta's Reality Labs division had larger than expected losses of$4.6 billion.

1:47This even as the division's revenue topped$1 billion for the first time. But Zuckerberg saying that they will continue to invest heavily in both AI and the metaverse and that the Quest 3 is off to a strong start, as are their Ray-Ban meta glasses. He predicts that people will want new categories of devices to engage with AI, saying that smart glasses will be what he calls a compelling form factor for this combo of AI and the metaverse and how the two are connected. And we also just got some interesting details from Meta's CFO just moments ago. She said they will no longer report daily and monthly active users, but instead will begin reporting year-over-year changes in ad impressions and also the average price per ad at the regional level while continuing to report family daily active people.

2:36Now, after last year's year of efficiency, the company doesn't have a new tagline for this year, but they did reiterate their expense guidance in the range of$94 billion to$99 billion. And haven't heard much on that dividend yet, but we're continuing to listen. Melissa? Yep. Julia, thank you. Julia Borstin, I'm sure a lot of people had a sigh of relief when they reiterated that CapEx guidance for 2004. What do you make of this dividend? Because on the one hand, you theoretically like the dividend. But on the other hand, does that signal anything about how they think their prospects for growth are?

3:07Well, I first thought that, right, that now they're sort of a mature company and into a different phase. A$2 dividend, if it's a 50 cent run rate a quarter, is really insignificant to the stock. I don't know why they would do it, except maybe that are there any kind of indices that need to be a dividend pay, need the company to be a dividend payer to be able to be included in them? That might be one reason. I'm pretty surprised, although it's a little bit of noise to me. The buyback, which had 30 billion dollars left. If I read it right, this was a 50 billion dollar increase on top of that 30 billion dollars.

3:43So if someone saw that and that's wrong and it's just 50 billion, please let me know. But so that was very big to me. But the numbers themselves were just on almost every metric, like a reacceleration that was I mean, the strength of it is pretty surprising. This dividend dynamic to me, I think it's kind of their Apple moment. And I think of the re-rating that Apple got. And I realized the Apple re-rating was also about services. But the ability of Apple to be a company that continues on the capital market side to give people reason to own it longer term. We're talking about a stock in Meta that doesn't trade like a growth company, right?

4:15I mean, yes and no. And so of all these mega cap tech stocks, it's got the lowest multiple. It's the company that if they are giving a dynamic around buybacks and dividends, I just think this is going to be very important. I think it's it's it's part of that year of efficiency. It's part of that. This doesn't scare this guy about the growth story that I think. I mean, look at their advertising revenue is up 24 percent. Very, very solid. The ability of this company to at least be now spending in areas that they think are the right ones. And I think they're going to get rewarded for that. So I think the dividend was as big as anything, and I think that's part of the reason for the response.

4:49Are we going to look back on this quarter and think that was the quarter where we did re-rate Meta because of all these things that these guys said, but also AI? And this is what Brad Gerstner told us in Miami. Not only is AI a good thing for its users, but it's also obviously something they're using to their own benefit, in this case, in more effective ad targeting, which we've seen in these results. Yeah, and I would say this is the quarter where they probably got appreciated for that focus that they've had. And I've heard Brad on Scott's show over the last year talking very specifically. Everyone was focused on NVIDIA as the largest beneficiary of this move into AI.

5:26Brad has been talking about monetization, right? And I think that's what you're talking about, Karen, and what they were able to demonstrate right here. But then if you have that re-rating right now, that kind of gets into the stock a little bit. I do think it's interesting that they're changing the reporting. We've been talking about monthly and daily active users since the company went public in 2012. And that's been a key metric right now. What they're talking about, if they're going to start, it speaks to what Brad's been talking about. It's why he, I think, has such a concentrated position.

5:52It was so bullish the other day when I think I was fading it, the bullishness. I just, the idea of buying that stock after where it was in 2021, where it got to in 2022, where it got all the way back to now at a trillion dollars in market cap. The fact that it is up$150 billion in market cap right now in the aftermarket based on that, again, you know, I don't see it, but I wouldn't be buying it here. But I get why folks can now start to think about this as a longer term trend. And if the metaverse ever does work, then you have multiple. You have this barbell approach because those things do find an intersection at some point when the technology is there.

6:27And that also speaks to Oculus. It speaks to those Ray-Ban glasses. It speaks to wearables, Guy. And I know you have all of them. I love the wearables. At my age, you need them. I'm just saying. No, I mean, listen, people that loan the stock have to make the decision tomorrow. On this gap higher, what do you do? Do you stay with it and let it ride? Understanding you can see a pullback, or is this time to pull the ripcord? But, you know, free cash flow, that's a Tim Seymour thing, up 28%. I mean, look at year-over-year growth in terms of revenue, 24.5%. And ARPU, Tim? Average revenue per user from Timmy cash flow.

6:59You know, it's up from 12.8. So everything is really good outside of, obviously, reality labs, which I think everybody knew was a disaster. The question is, on a big volume day tomorrow, on a gap like this, what are people that own the stock going to do? The fine answer might be do nothing, let it ride. Some other people might say, you know what, this is a good opportunity to get out. Let's quickly ask some people who own the stock, Karen. Yeah. I think I'll probably look to sell some calls against it. You know, if I own none, that's the question, right? If I own none, would I buy some tomorrow?

7:30Yes, I would have some if I own none. Yeah, I like that call. And I'd like to sell them farther out because I think you have some opportunity. Everybody believes eventually these things go a whole lot higher. I will also say that Facebook is now 20 percent through that September 21 high. So they're now slightly ahead of Microsoft, which really has pushed fresh highs in this last run. We're waiting for we're waiting for Amazon to do it. We're waiting for a couple others. And remember, we had Carter on, I think, late last week. The argument is, do you follow some of these mega cap tech stocks that haven't made new highs in this run higher?

8:02And I think the answer is yes. And I think Amazon, who we're about to talk about, is part of that reason. Yeah, let's get to Amazon here. It is jumping following a beat in the top and the bottom lines. The company passing Alphabet in market cap after hours. Kate Rooney joins us with the very latest on this quarter. Kate. Hey, Melissa. Yes, it was a beat across the board for Amazon. The quarter was really driven by strong holiday shopping and cloud strength. Guidance was also in line. Amazon met expectations on its all-important cloud business. AWS grew 13 % year over year, which is exactly what the street was looking for.

8:32It was up from 12 % last quarter, so growth re-accelerating there. Amazon notched its highest quarterly operating income ever. Operating margins were 7.8%. That was up from less than 2 % about a year ago, but it was pretty much flat sequentially. For North America, margins almost doubled, coming in at 4.2%. Margins were negative there a year ago. So costs are improving here for Amazon. Advertising revenue was strong, growing 26 percent, bringing in close to$15 billion. Then North America and international revenue both came in stronger than expected for Amazon. CFO Brian Olslotsky saying just now on the media call that we expect AWS acceleration to continue into 2024 on AI.

9:12He says, quote, we have seen significant interest from our customers wanting to run generative AI applications, build large language models and foundation models with privacy, reliability, and security of AWS. He wouldn't say exactly what it meant for revenue, but said there's interest. And then costs were a big discussion on that media call. He said, we continue to be careful about what we invest in, and they're trying to do more with less, as he put it. Amazon should also mention announced a generative AI shopping assistant called Rufus this afternoon, head of earnings. Mel, back to you. Sounds like a dog, but, you know, we'll try it, I guess.

9:43Kate, thanks. Kate Rooney. So it did exactly what it had to do in terms of reacceleration of AWS growth. And it's amazing to think the ad business is this big at this point. Yeah, and that's manifesting itself. And again, we talk about operating margins, 7.8 percent. And I think the street was low sixes or so and up from like 1.8 a year ago. So good for them. Now, what does it set it up for? It sets it up for that, I think, the 2021 high, I think, in August of that year, July was about 183-ish. I mean, a quarter like this, given what we're seeing from these other names, should get you about right there.

10:17So just one sort of read through on that. If you look at NVIDIA is up$10 in the aftermarket just on the, you know, the AI buzz. And I think tomorrow we're just going to see a race for analysts to who can be the most bullish on NVIDIA, on Amazon, on cloud, on meta, on everything. Yeah. Yeah. I mean, listen, as far as AWS, like reacceleration, 12 and a half percent to 13 percent. They've obviously been losing some market share. They are the market share leader. Advertising, you love that. I do love that. And that's the one thing I really liked about this story. And everything that you said about the greater monetization on the meta side, okay, and how they're using generative AI tools, right, to get that better monetization, that will apply to Amazon on a business that is growing really fast and has become an absolute behemoth.

11:03And ultimately, this will also be a story for Apple at some point. They don't have the tools yet in place. But, you know, advertising is becoming a big business for them. I know we're going to talk about Apple, but it's not going to be a story right now. So Amazon, again, is going. I think it was 188 guy. I mean, if it's the only one of the Mag 7 that has not gotten back to its all-time highs, it's going there. I mean, so I don't know. Did you chase it here? Have added people. Have added people, which means no. Yeah, so there's some elements in here and some of the guy that indicates some bit of a moderating margin.

11:34And I do think Dan's right to not. I don't think we're doing cartwheels here. I think maybe on a 13 percent growth in AWS, but it does tell you how far this stock has come in terms of understanding some of the value and maybe some of the value that wasn't given to its core retail e-commerce business and some of the other pieces of the puzzle in terms of advertising. Because 13 percent growth would have been a disaster for this company in terms of the stock price two years ago. So it's nice to see the increase here. It's nice to see the dynamics. I do think it's going to hit those all time highs.

12:03I do think it's a case where this was just good enough on a day when, yeah, I think the rest of big cap tech is helping pull the whole thing forward. It is also nice to hear that Amazon is very conscientious when it comes to costs and spending. That has always been the issue with Amazon. A lot of analysts thought that they would be in harvest mode, but we have it actually stated by the company that they are going to be mindful. They are going to try and do more with less. So it will continue here. No question. Listen, and I think that's why you could probably, with those margins and those comments you just made, which is why you can sort of justify a valuation that sort of gets rich at these levels.

12:35But, you know, that's been a concern before, founded, concern other times, unfounded. Probably one of the reasons why it'll be unfounded this time and move to those levels Jim just talked about. Is it irritating? Is it understandable that Alphabet has gotten so penalized on the back of its earnings? It's understandable. I mean, their growth actually in cloud was not bad, right? But their cloud business is significantly smaller than AWS, right? So it was$9 billion versus, you know, much higher for – it is a little frustrating because they – you know, when you hear about the strength of Meta on AI, right, you would think there should be more flow through to Alphabet.

13:12I guess you want to bright it out a little bit. I mean, so, you know, there was a lot of pessimism, you know, just into this earnings period, out of my mouth. I mean, when you think about just the level of excitement, where the stocks were trading, where they had basically come off of their lows just in January. And you say, well, how do you get above the bar? You know what I mean? At that point, just based on the price of the stock. So I say to myself, you know, on the NDX and Asdaq 100, is that a new all-time high? These companies, you know, the ones that were able to demonstrate the reason why they ran into their prints.

13:40But what do you do? I mean, like, you know, we're one month into the year here. We had this exceptional year last year. We know that these top five or six names have been dominating both of the major indices. And so I guess the better the results are, the more people pie into it, the more acute that concentration becomes, and the more risk there is to a broader problem across the market. Because I don't know about you guys, some of the earnings that we saw outside of mega cap tech this week weren't particularly great. And there was a regional banking issue. And there was, you know. But maybe that's why these stocks should trade at a premium.

14:11People should pile in. Maybe that's the flip side of this argument. And we're seeing queues in the after hours up 1 % on the back of these amazing results. They delivered. Why shouldn't the market run to these names when the rest of the market looks sort of crappy? Well, particularly Meta, which was not in a super inflated, right? Netflix, very expensive, but they delivered. One thing also, it's worth noting that the 10-year has gone from 420, maybe, I don't know, 10 days ago, to high 380s now. That's a nice move for a high multiple stock. I also think that positioning on this for the hedge fund community is different than the retail community.

14:43I actually think there are shorts here, and I think this could actually lead to a little more squeezy time. I also think that there are a lot of people that are feeling this FOMO. Of the cash they have on the sidelines, it's great to get a clip of 4.5 % coupon at Treasuries. But when you see the market running like this, and a lot of people thought they were a lot smarter than the market in the fourth quarter, and they missed a big run. Let's get to Apple. We can't forget about Apple. Dropping after its report, weakness in China, outweighing the top and bottom line beats. Steve Kolbeck going just now with the very latest.

15:10Steve. Yeah, Mel, so the headline here is Apple showing growth for the first time in a year. There's, of course, four straight quarters in a row of declining sales. This time revenues came in at 119.58 billion. That's about 2 percent revenue growth. Now, there's a shorter there's a week less this quarter rather than a year ago and some other funky things comparing. But I would also note that those expectations for revenue came way down from where they were at 123 billion back on in November of last year. Still a beat there. Also a beat on the bottom line. I fund revenues also look pretty good.

15:46There's some other numbers in here to talk about. 69.7 billion. That is was also a beat. And services, a new record there showing reaccelerating growth again, up 11 percent to 23.1 billion. But look, China, that is what's really dragging things down here. Sales in the greater China segment down 13 percent year on year to 20.82 billion. And then the earnings call is just getting started, Mel. But I do want to say one AI headline already coming out from CEO Tim Cook. He just said on the call that they're spending a tremendous, this is his words, tremendous amount of time and effort on artificial intelligence and plans to have some kind of announcement later this year.

16:29This is me talking now. If I had to guess, that would be the WWDC event in June where they talk about software. So teasing a big AI announcement there. I also did get a chance to catch up with Tim Cook about these results in particular, asked of what happened in China and why sales were down so significantly there versus a year ago, especially as that country was largely shut down in the December quarter due to COVID. Here's what he told me on China. largely blaming foreign exchange here, saying, quote, the dollar is very strong versus the R &B, and so that negative 13 goes to a mid-single-digit number.

17:04So that's how we did on the phone last quarter. The good news is that we're four out of the top six top-selling smartphones in urban China. I will also note he's citing some data there that shows Huawei actually took share in that same report he's talking about there. So still losing some market share to the Android competitors over there, but still very strong in China, according to Cook. Also saying there's a record level of iPhone installs in China, which is obviously a big opportunity for services. I also asked Tim Cook about the Apple Watch ban, that O2 sensor that causes them now to sell the Apple Watch without the O2 sensor and able to do that patent dispute with the health tech company Mossimo.

17:45Specifically asked him, would you be willing to pay some sort of licensing fee? But Cook's position right now is basically, I'll tell you what he said, quote, we're focused on appeal and there's lots of reasons to buy the watch even without the blood oxygen sensor. So basically saying we're going to go through the legal process here. I don't want to get into some kind of licensing fee agreement quite yet, but does believe people still want to buy the watch without that O2 sensor, Mel. All right, Steve, thanks. Steve Kovach. So no AI pixie dust for Apple, even though Tim Cook himself teases some sort of big announcement to come later this year.

18:21I think these numbers were pretty solid, and they were solid in the places that they needed to be. Obviously, the reacceleration in iPhone sales, MacBooks were also better, and the services business was kind of in line. But the gross margin of 45.9 is better, and they talked about the profitability. And it's interesting to see where some of the profit margins are with different products. They seem to be moving around. We knew China was weak, right? I mean, maybe obviously it's been a huge and important growth market. And on a day like today, you don't hear at all about the growth in India and all the places that they're looking to find that growth.

18:52But as someone that hasn't been terribly bullish about Apple, these numbers were fine. And I actually think give you a reason to kind of breathe a sigh of relief. I thought they were kind of really, I mean, of the group. Right. I thought that I'm not buying the currency thing. Everybody knows each day where the currency is. So to sort of if that country cross was as bad as he was saying, we'd be talking about that for other reasons like capital. Yes, they can't be the only one. So I didn't really love that. I think, you know, the services miss is a little bit of a problem since when you think about the multiple, if you take out the hardware, which is a much lower multiple, of course, it leaves that higher services multiple.

19:30Should it get that if it's a little slower than we thought? Tim Cook sounds like a Met fan. You know, we're the top four out of six. Really? Four out of six in urban China. So he's although although Tim Cook's team has been to the World Series more recently than the fair enough. But with that said, that's not something you really want to plant a stake in the ground. Here's what this is. Revenue beats. I want to be careful here. But service revenues as a percentage now is below 20 percent. I think that top tick, what, close to 25 percent or so. So the reason they got the premium multiple was because of the service revenues as a percentage of overall.

20:04If that's going the wrong way now, that's something you have to watch in terms of should you be paying for this stock, the multiple you're paying right now. Yeah, that being said, that 45.87 % gross margin is the highest gross margin this company has ever had. And so if Tim Cook, who does not, they do not tell you what they're going to do, just said we are, you know, between the lines, there's going to be some generative AI thing. And it's going to be built around services. And we know that this Vision Pro at$3 ,500, this is not something that's going to be mass market, but it's a bit of an entree how they see spatial computing.

20:38And we know our friend Gene Munster, who comes on a whole heck of a lot. This is what excites him long term about this story. You start seeing a hardware ecosystem that is just run of the mill, the stuff that we use every day. And then there's going to be all this other stuff that we're clipping on us or this and that or whatever that is going to be part of that services ecosystem. system that's going to be a much higher margin that's going to draw this reacceleration of growth. So to me, I think that I'd love to see Apple get killed on China concerns, on Huawei concerns, on some of this sort of stuff, because you're going to have a great opportunity at some point in the not so distant future to play a generative AI move like you've seen in a half a dozen other stocks.

21:17You sound bullish. You sound bullish on Apple. And again, I thought these numbers were okay. Don't do me like that. Don't do me like that. I mean constructive. Great talk. Really quickly, a number that I don't spend a ton of time looking at in Apple, but the fact that devices outstanding is 2.2 billion over up from 2 billion a year ago. I mean, a growth of 10 percent devices for a hardware company that we're saying is just a hardware company is something. And it gets back to that whole point that we say that it's hardware as a service. And they grew total devices on a massive base, 10 percent year over year with higher product margins and ASP.

21:52So, again, I think that's pretty bullish. Coming up, we will be monitoring all the after hours action, bringing the very latest from the company conference calls. Fast Money friend Gene Munster is listening in. He'll bring us all the headlines. But first, a trio of big stock moves today. Peloton plunges, gold miners shine, and one of our traders is scooping up Etsy after the name got some activist attention. How to trade these moves when Fast Money returns.

22:21Welcome back to Fast Money. We are diving into a couple of the biggest movers in today's session, starting with Etsy shares rising 9 percent after announcing Elliott Management's Mark Steinberg would join the company's board. It was a stock's best day since July. The activist investor has reportedly built a 13 percent stake in the company, whose shares have been nearly cut in half in the past year. Karen, you like this. I did like this, although I own some from higher, so I didn't love that. But I like this and I bought some more today on the heels of this announcement. I love Elliott. I love, you know, they've done similar kinds of things in eBay.