A Busy Night of Earnings, and the Chart Master’s Big Call on CAT 8/1/23

0:02Right now and fast and after the bell earnings parade Starbucks, AMD, Caesars, Pinterest, and more. The numbers, the conference calls, and the instant analysis straight ahead. Plus, bond bonanza. The Treasury Department set to flood the market with close to a trillion dollars in new debt over just the next few months. What impact will this have on yields? And later, charting Caterpillar's bulldozing day higher. Hoover's U-turn after a P market surge. And the options action on a uranium stock that has posted glowing returns this year. But never ends here. I'm Melissa Lee. This is Fast Money Live from the Nasdaq Market site on the desk tonight.

0:38Tim Seymour, Karen Feinerman, Dan Nathan, and Guy Adami. And we start off with an action-packed night of earnings. AMD, Starbucks, Intra, Caesars all out with results in just the past hour. Shares are all on the move here. We've got the A-team of reporters ready to dive into the numbers for us. Contessa Brewer, Julia Borson, Kate Rogers all on deck. We get right to Christina Parts Nevelis to dig into AMD. The conference call is just kicking off. Christina. Well, AMD shares are higher heading into the earnings call. we'll be looking for more clarity on two factors data center revenue is going forward and progress made on AMD's AI chip.

1:10Today's report shows us that data center revenue was mostly in line and its client business which includes PC processors sales actually came in higher than estimated so it's a very similar narrative to what we saw from Intel's earnings report just last week. Heading into Q3 this current quarter the company expects those two segments data center and client to each grow double digits percentages but they didn't actually provide any numbers in the report and that's going to offset some gaming weakness. And this comes even though IT budgets have been prioritizing AI chips over traditional servers.

1:42So overall, that's good news for the stock, contributing to the little bump that we're seeing right now, as well as the earnings beat, of course. Lastly, AI will, of course, be a theme on the call, given AMD's AI chip, which comes out in Q4. But keep in mind, it is only testing next quarter, Q3. It's coming out in Q4, so we shouldn't expect a steady flow of revenue until early next year. Mel? Christina, when they say that their customers had seven times the number of engagements for AI, what exactly does engagement mean? Engagement means it doesn't necessarily translate to orders. That was in the report, and that's an excellent question, but it does not necessarily translate.

2:21They have hard orders from Amazon as well as Microsoft for that new AI chip, and they've said that they've engaged with a bunch of other companies, but that still hasn't translated into sales just yet. All right. Christina, thank you. Keep us posted on AMD. Christina Parts Nevelis. Huh. Engagements don't necessarily translate into revenues. Interesting. I thought you were going to say weddings. I don't know. That's true. You got experience for that? No. I'm hesitating. I don't. So this, a year ago, it was a$92 stock. Just stay with me for a second. It's trading$123 now. Now, revenue was down 18 percent year over year.

3:00Revenue down 18 percent. Margins were 30 percent a year ago. Operating margins, by the way, 19.9 percent this quarter. Now, everything Christina said is fine. I mean, the quarter was fine. Unremarkable by their standards. The stock action is extraordinary. Again, I mean, it goes to show AI is everything right now, because if you just look at this at its core, I don't know why the stock is significantly higher, given the run that the stock has had. I mean, it's fine. But again, valuations come into play and look at where the stock was a year ago. Look at it now and look at the year over your comps.

3:32Interesting. I thought based on what they were saying about that data center, that maybe we would see a little bit of impact on Intel. But we haven't so far. Of course, Intel's still riding high on its report. Yeah. And they opened out. Right. So at first, these numbers weren't largely impressive until they started sprinkling in that AI stuff. We call that, I guess, pixie dust. We've coined that on this desk. But if you look at the hyperscalers, if you look at Microsoft, you look at Google and their spend and what they're targeting to be their spend in the second half of the year, that's part of what's taken the stock higher.

4:02And if you think where they're going to be in terms of AI server share somewhere in the next few years, even cutting into NVIDIA, this is where they're getting pulled up by NVIDIA, whether they deserve it or not. So I agree with Guy on the margin here. And if you look at the sales and if you look at the multiple, I will say that semiconductors overall as a group had an excellent July and came right back to this place on the charts where relative to the S &P, they're challenging for a breakout while the rest of the market gets there, too. Yeah. Dan. It's interesting when you look at the revenue guidance, the midpoint is below what consensus was.

4:35And if you look at consensus for gross margins for Q3 and Q4, they're expected to be up sequentially just a little bit from 50 percent this quarter to 51 percent Q3, 52 and a change in Q4. So there's something built in there that they're going to have higher margin products. And again, I think maybe that's what they're telling us. But we're also saying like engagement. Engagement doesn't exactly mean orders. And it doesn't. You know, so I don't know. I mean, listen, I'd rather buy AMD right here than I would NVIDIA, because I do think in a few weeks when NVIDIA reports, there's a lot of risk. if we don't have the level of upside that they guided to or are able to guide to for the current period, then I think there's risk to that stock.

5:14And AMD has a more reasonable valuation. And I don't think there's a whole heck of a lot built into it right now. But again, we know PCs are weak. We know smartphones are weak. We know lots of parts, a lot of end markets are really weak right now. So there just doesn't seem to be aggressive guidance here at all. So it just seems a bit more reasonable than NVIDIA. Are you still short NVIDIA or no? No, I actually have a bearish position in the SMH, and it's largely around this NVIDIA. I just think there's a lot of good news in there. I think there's much more risk of the downside near term, just given that guidance.

5:44Yeah. Karen? Well, I agree with everything you've been saying. It's certainly not a this year story and next year story, right? If you think about how they view the total addressable market, how gigantic it is, and the CAGR for the next few years heading, you know, probably 25, 6, 7, it would be much bigger years. if you know you got to buy the pixie dust story if you do that you can get to this being not so demanding on an earnings multiple a couple of years out now normally i don't like to wait at i don't like to wait at this bus stop at 41 or you know whatever times earnings where it is right now but i'm going to uh so i have some amd i'm not going to really trade i'm not going to trade around it and have some nvidia as well be interested to hear what happened what they say on the call because we all know it's not all about what they reported.

6:32It's about what they think is coming. And also, what is their timing of their newest chip, the MI300X, which is geared toward large language model training? That'll be key to this story. They say 4Q. We don't know, but I think that's really where this is. This is where people can do whatever they want to their models. And after the blowout that NVIDIA gave and the confidence of the guide, this is where AMD also gets a benefit. I also just think that the bottoming of the PC business is something that cyclically, you know, look what it did for Intel on some level. And look what also Data Center does.

7:05All right. Let's move on to Starbucks here. The company beating earnings estimates, but missing on revenues. The call is now underway. Kate Rogers has got the breakdown for us. Kate. Hey, Melissa, as you said, earnings call just getting underway. A mixed third quarter here for Starbucks. Slight revenue miss, but a five cent beat on adjusted EPS. COPs were also slightly lower than expected across the board, up 10 percent globally, 24 percent internationally, up 7 percent in the U.S. That's a miss versus the up 8.4 percent estimated by analysts. In the U.S., the company said it saw a 6 percent increase in average ticket, 1 percent increase in average transaction.

7:39Moving on to China, that is a key market for Starbucks. Same-store sales up 46 percent year-on-year, driven by a 48 percent increase in transactions, a 1 percent decrease in average ticket there. Last year, remember, COVID lockdowns were a huge drag on China same-store sales. So you're seeing a rebound there, even as analysts have warned that the China recovery could take a bit longer than expected. Starbucks also reporting it now has 31 million Starbucks rewards members. That is up 15 percent year-on-year. The stock is slightly lower by 1%. It's only up around 1.5%, Melissa, year to date, one of the weaker performers in the restaurant sector.

8:14We'll bring you any updates we get. We're looking out to hear if they make any changes to guidance on the call, because that's something that they reaffirmed the last quarter. And if you remember, the stock fell a bit after that news. Back over to you. Kate, thanks. Kate Rodgers. Tim, you own this one. I do. And I'm waiting on more of it lower. And I've been trading this one around for the last six months. And after that Q1 number, it's the same thing we saw. It's a lot of the same thing. And I don't think that their customer base can really withstand the higher price levels over and over again.

8:41Operating margins are excellent. Labor costs are certainly something they have to consider. These are record revenues. So they miss slightly. But again, record revenues for a company. It's nice to see international increasing. But North America is still bread and butter. And those comps at 7 percent weren't extraordinary. I don't think they're going to get an environment where they can raise prices like they've had. And I love the company, but I'm going to get it lower. Year on year, China was in full lockdown, wasn't it? So the transactions increased 40-something percent, almost 50 percent year on year.

9:09And the average transaction price went down a percent. I thought that was sort of weird considering the country was pretty much locked down. It's got to be noisy. That's noisy data. I mean, I think especially when you consider how much those transactions were up. North America is still the bread and butter. So 7 percent comp street was 8.4 percent. So that's a pretty significant miss. We talked about it last night where maybe valuation started to be a concern. And technically, where do you want to get back in this stock? And I think we decided at least we talked about 92 being the level. That was the high, I think, August of last year.

9:40We sold off from there. So past resistance should become support. And I don't think 92 is unreasonable given this quarter. Yeah. I mean, I think this is sort of the quandary that investors have with a lot of even consumer staples. Like, you know, Procter & Gamble, for instance, they are losing some volume, but they have the price hike still. They have that pricing power at this moment. But who knows what they have next quarter? Right. I think, you know, it was telling what Chipotle said about, you know, fear that the customer will start paying student loans again and price hikes. And maybe they've hiked prices as much as they can or that it's really starting to make a dent.

10:15So this is similar to that. Yeah, I think it's been a good job sort of, you know, selling upside calls and waiting for it. It's a it's a great company. It deserves a premium multiple this big. Probably not. Well, it's funny. I mean, look at the out year. Right. So next year, you know, 12 percent expected earnings growth and sales growth is trading at a peg. a PE to growth of two. It's a 24 and a half multiple or something like that. I mean, when's the last time this stock has traded that cheap? And it's funny that we're sitting here in what feels like a raging bull market. It's not confirmed that it's here to stay or not.

10:44And it's funny, because we talked about it last night. Nike, Starbucks, there's a few other names like this consumer discretion are just sitting it out. And I don't get it because I can look around the market and I see plenty of stocks that trade at ridiculous valuations based on really silly assumptions and companies like Nike and Starbucks have demonstrated to us as long as we've been doing the show or as long as we've been in the business that they execute decently in difficult environments. So I don't know why they're sitting out. It doesn't make any sense to me. Like, and this is, doesn't seem like an outrageous valuation right here.

11:15They're sitting out because they went from 70 bucks to 115 bucks from, from March through, you know, kind of March. Um, and, and I, I think that's a lot to do with it. I also think both the pent-up demand was. What are the places, what are the brands that are the most iconic brands that people are reaching for coming out of COVID? People are taking in as much as they can, obviously different product groups. But I think that's what you get to. I'm happy to own Nike and Starbucks lower. I think I'm going to. And I don't think there's anything that should worry you as an investor here, but this is not going to get away from you on the upside.

11:49That's the confidence I have. All right. Coming up, another pair of post-bill earnings as if they were breaking down the numbers from social media to the slot machines, plus anticipating tomorrow's Treasury sale today, the impact T-bill and bond issuance could have on inflation. Fast Money will be right back.

12:15Welcome back to Fast Money. We've got an earnings alert on Pinterest. Shares dipping despite top and bottom line beats. The conference call is underway. Julia Borson has been listening in. Julia, what's the latest? Melissa, that stock bouncing around. First, shares were lower, then they were higher. Now, shares are down just fractionally after a Pinterest beat across the board with a meaningful beat when it came to earnings. But worldwide monthly active users are pretty much in line with expectations, just about a million and a half ahead of the number analysts were looking for. Guidance for the third quarter revenue growth also pretty much in line.

12:47Guidance of high single digits, that's pretty much in line with the nearly 8 % growth that analysts had anticipated. Pinterest CEO Bill Reddy saying that after reducing expenses in the first quarter, that in the second quarter they identified further cost efficiencies leading to operating expenses that were lower than what they'd guided to. Reddy also stressing on the call the long-term potential of the partnership that they made with Amazon, saying that they have many strong synergies and that they're pleased with the pace of implementation so far. Reddy also noted that the broader advertising market is seeing what he called some signs of stabilization and recovery, though he did note that there's still a lot of choppiness.

13:28The company's CFO said that it continues to gain good traction with advertisers in verticals such as travel, autos and financial services. Those are relatively new areas for them. Both Reddy and the company's CFO also stressing the company's focus on operational efficiency throughout the call. Melissa? Operational efficiency is great, Julia, but it's tapping into that highly focused user of Pinterest who probably has a desire and intent to buy, to actually buy. And so when Reddy says that he's happy with the pace of implementation, that almost means nothing to me. I mean, what does that mean? What he's saying is that the majority of people who come to Pinterest are looking to buy something.

14:09He was throwing out the stats. I think he said half of the people who come to the platform want to buy something. And so what they're doing with this Amazon partnership and also the ability for brands, whatever the brand is, to share a shoppable pin is closing that loop, saying you're coming here to want to buy something. We're going to make it so easy for you to actually buy something that it's a more efficient platform for advertisers. And they say that this is this is a long process, but they're seeing a lot of uptick, both from the brands who have to put the shoppable pins out there, but also from consumers who are saving more of these pins that they could then click through to buy.

14:42So they're saying that they're seeing progress. I have to think that one of the reasons why the stock first moved lower and then, you know, it's sort of been bouncing around the flatline is the fact that the user growth was pretty much in line with expectations. I think there was some hope, especially after Meta's blowout quarter, that Pinterest would also have a blowout quarter. And I think this was a beat, but not a blowout. Right. Julia, thanks. Julia Borsten, I will go to the man who has a Pinterest page. Yes, I do. On this desk, that's me. That's you. Okay. This is why I think the soccer is low.

15:12And you're proud of that. Extraordinarily proud of it. I wasn't asking. I was just saying you are proud. It wasn't a statement. That was like a question. Have you engaged with your page? This video, by the way, was created like 10 years ago, but the page hasn't changed. So don't worry about the page changing. It's the same. It's the same page. So, I mean, oddly enough. It's a third quarter. It's third quarter revenue guidance. So they said basically high single digit. against the street was looking for like 9.6. So people are saying, you know what, that third quarter guide is not good enough to offset what was a pretty good quarter.

15:42Margins were actually very good. And our post, Tim, yes, we're actually beat as well. So I think the stock actually, if they're sandbagging, which they may be, I think the stock should be higher than this. It's funny. So when you think about digital ad spend and the opportunities with e-commerce, I mean, they're doing three billion dollars in revenue. You know, it's got an 80 % gross margin was growing at, you know, maybe double digits, that sort of thing. And so I guess unless you can really ramp users and really find new levers there, this is just one of those really small players. The same way we feel like every other quarter we're talking about snap down 20 % or Pinterest down 20%.

16:14You know, the fact that it's unchanged right now, I mean, I don't think there's anything in there. I think that you took some of the kind of animal spirits guy out of this name on that last print when it plunged down 20 % or so. And now we found a bit of an equilibrium. Closing the loop, though, seems like it would be a really powerful thing. If you had, like, a power user of Pinterest, who is, like, a very popular celebrity, or, like, a guy. Yeah, I mean, what do you mean? You were, like, strongly defined somebody. Check. Right, right. And you see a... Is he trading up on that? A Tory Burch coat and a bottle of Hawaiian Tropic suntan oil, and you want to go buy it.

16:47And you can actually, and you get a piece of it. Sure you do. Right? And the company gets a sale. Or you could buy Meta, which is 40 times, I don't know, 45 times the size, trades at a lower multiple. Trades at 140 at the multiple. So that's where I am, there and Google. All right, let's get to another earnings alert. This one on Caesars Entertainment, the casino stock, extending session losses despite topping revenue estimates in Q2. The company's CEO affirming that demand remains strong in Las Vegas and regional markets. Let's get to Contessa Brewer with the very latest. Contessa. Yeah, Melissa, CEO Tom Reak on the call right now.

17:21And first off, he addressed the Vegas results down in the second quarter year on year. He blamed a tough comp against an all-time record-setting quarter last year and bad luck for the house in Baccarat. Caesars says that bookings for the second half of the year, though, are on pace to deliver a record annual EBITDA. Again, that's the most important profitability metric in gaming in this particular business segment and the Vegas Strip. And Rieck says he thinks that Caesars will get a 5 percent lift from F1 just on rooms and food and beverage in November. That's not counting what gets played on the table games.

17:56Even further out, Super Bowl in Las Vegas in February. Rieck says they are seeing dramatically more reservations at higher rates. Let me spend a minute here on the digital segment, which includes sports and online sports betting and iGaming. That's casino games that are played online. Caesars, for the first time, just turned a quarterly profit in that segment. And on the call, talked about rolling out this new Caesars Palace app for iGaming. It's only legal in six states right now, but a lot of optimism. And he said, and he's like really pushing back against the analysts here, hey, you guys tell me I can't hit these targets.

18:29His target, he said, is half a billion dollars in EBITDA by 2025. And he says he's hitting all of the metrics. So he reiterated that guidance. We saw a little bit of stock movement when he said that here in the minute-by-minute trade. Contessa, thank you. Contessa Brewer, Guy, what do you make of this quarter? I think it's fine. I mean, they beat on all the metrics. I'm not really sure why it's necessarily lower. I mean, a lot of these casinos have had runs. So I think the knee-jerk was higher. I think people are looking and saying, you know, maybe some of the comps weren't up to snuff. I'm just going through it now.

19:02But I think this stock should be higher. I think wind should be higher. And I think Las Vegas Sands should be higher as well in the back of this. I think you stay in the casinos. And I think it's a combination of the, in this case, so with Wynn, you look at their core business, different than Las Vegas Sands. But the Las Vegas convention calendar looks really robust. You look at what's going on in digital, the fact that the losses are subsiding and that there's profitability. How much profitability in the near term, I don't know. But the lack of losses, I think the trends right now, especially given where the consumer for the casinos, which still traded a discount to where they were in 2019 on EBITDA multiples.

19:38I think you stay in this one, and I see buys probably 80 % of the analysts on the street. All right. We should note that we don't want to miss the CEOs of both Pinterest and Caesars on CNBC this evening. Jim Cramer will host Bill Reddy for a CEO exclusive on Mad Money at 6 p.m. Eastern time, and Tom Reek will join Brian Sullivan. Actually, I think it's Brian Sullivan tonight on Last Call at 7. Coming up on Fast, looking for nuclear gains when options traders betting this stock will power up your portfolio the name in the trade next and later Caterpillar climbing higher today. And yes, our chart master nailed this one.

20:10He is here for a victory lap and to tell us where the name is going next. You're watching Fast Money Live from the Nasdaq market side in Times Square. Back right after this.

20:28We want to bring you this breaking news. Fitch has downgraded the U.S. credit rating to a double from a triple A. They know the difference in governance between double A rated countries versus triple A rated countries. Also, the continuous or the many, many political showdowns surrounding the debt limit. We knew when the debt limit showdown was going on that Fitch was considering this downgrade even if the debt limit was not breached. And so here we are with a downgrade of the U.S. credit rating to a double A plus from a triple A. What sort of impacts are we looking for, maybe in the bond market, Tim, or elsewhere?

21:04Well, remember, we go all the way back to the downgrade that we had back in August of 2011, I think, going into that. And really, ultimately, what happened is there was mass buying of U.S. Treasuries and the dollar rallied. Now, some of that was a function, really, of a cascade of what was going on in the U.S. Remain's flight to quality. We're going to talk about what's going on with debt issuance. We're going to talk about a deficit that's being funded. And essentially, we are monetizing a lot of debt in this country. At some point, debt-to-GDP ratios and multiples matter. The political circus in Washington is something that, yeah, I get that, but that's not the reason.

21:40And frankly, politics have always been there. I think we just happen to know more about our politics than ever, even though we want to know less. Yeah, there's also a line here. Fitch says the U.S. has had limited progress in tackling medium-term challenges related to Social Security benefits and other benefits. here. It's going to be interesting to see. Now, the gold market should rally on the back of something like this, theoretically. Gold had a rough day today. I think part of the reason 10-year yields went back above 4%. But if you're a gold bull, these are the types of things, these are the types of stories that could be a catalyst.