Appeals Court Upholds TikTok Ban… And UnitedHealth’s Worst Week Since 2020 12/6/24

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. Tick tock, tick tock. U.S. regulators have stepped closer to forcing a sale or ban of the viral video app, and it's having a big positive impact on some names here at home. Will these trades still be the ones to bet on in the new year? We'll debate that. And stretched valuation. Shares of Lululemon seeing their best day since 2018 on the back of earnings last night. But with the stock up a whopping 75 percent from August lows, is it in danger of pulling a muscle. Plus, UnitedHealth sees its worst week since 2020.

0:34Chevron makes some cuts to its spending plans. And we're live at the Reagan National Defense Forum with the CEO of Air Environment. I'm Melissa Lee coming to you live from Studio B at the Nasdaq. On the desk tonight, Steve Grasso, Bono and Eisen, Guy Adami, and former Bridgewater chief strategist, Rebecca Patterson. Welcome, Rebecca. And we start off with new records for the Nasdaq and S &P, led by some major momentum in mega cap stocks. Amazon surging nearly 3 % today, Meta more than a percent, both stocks, as well as Apple hitting all-time highs during the session, though the iPhone maker ended the day just in the red.

1:04And it wasn't just big gains today. The so-called Mag 7 have added a combined$872 billion in market cap just this week. And now a new ruling from an appeals court could be a catalyst for even more gains. Julia Borson's got all the details. Hey, Julia. That's right, Mel. Meta, Snap, and Alphabet all moved higher today after a federal appeals court upheld the January 19th ban on TikTok if ByteDance does not divest its ownership by then. Metashare is up about 2.5 % to an all-time high today as those tech giants are seen as beneficiaries of any ban, potentially gaining TikTok's consumers, advertisers and creators.

1:44The court ruling acknowledging the impact on competitors, saying, quote, TikTok's millions of users will need to find alternative media of communication. Now, Wells Fargo taking this news and predicting that TikTok's rivals will definitely benefit, saying that if this does go through, TikTok's nearly$26 billion in ad revenue would go 75 % to Meta, 20 % to Google, and 5 % to Snap. TikTok, which plans to appeal, says the law would censor the American people, and this is far from a done deal. President Biden could grant a 90-day extension if it seems that a divestiture is in the works. The Supreme Court could allow the app to keep operating while litigation proceeds or the court could rule on the suit before January 19th.

2:32And then once inaugurated, President-elect Trump could choose not to enforce this ban. So a lot of moving parts here, Melissa. What is the latest in terms of President Trump's stance on TikTok? It seems to have changed over the years from his first administration. It certainly has changed, Melissa, because back in his first administration, he was trying to get this done. he was trying to enforce a ban on foreign ownership of TikTok. But he seems to have changed his perspective on this. More recently, when he was on the campaign trail, he said that he would protect TikTok. So based on the most recent comments that Trump has made publicly about this, we do expect him to take some sort of action to keep TikTok alive, though this was legislation.

3:15So we'll have to see how this could all be unwound. But he did sort of change his perspective on this. So we have to know, Melissa, that the people that Trump has working for him or that will be part of this new administration do seem split on this issue. All right. Julia, thank you. Julia Boorstin. How many days this week, Guy? Were we on the 1230 phone call? Oh, I thought that was a question. Sorry. 1230 call saying, Met is up again. Met is up for no apparent reason. And here we are, up 8.6 percent on the week. At an all-time high. All week. All week. All week. Five days because there are five business days when the market's over.

3:52But Steve is correct that there are seven days. For now. For now. For now. You can't do this, I understand. So please don't at me on Twitter. But if you were to somehow magically back out the fall of 2021 into the fall of 22, when Facebook went from$3.75 a share to$100 a share and just sort of said, you know what, that was the last year of Facebook, and just said, okay, that didn't exist, and then looked at the chart through that lens. This has been an incredible story the entire time of its publicly traded life. And at 25 times earnings, forward earnings, it's still not expensive, Mel, despite the fact that it seemingly had this parabolic move.

4:33So you're right to bring up the fact that we've talked about Facebook all week on the call, but you're equally right to point out that, you know what, maybe there is no reason. Maybe it's just because this is one of the most valuable companies in the world still trading at a very reasonable valuation. And let's just think, who had dinner with Trump? Zuckerberg had dinner with Trump. So we went from him saying let's ban it to not ban it to possibly not interceding now because maybe he's getting cozy with two tech giants. Maybe it's Musk. Maybe it's Zuckerberg. That wouldn't be beyond comprehension.

5:09If you look at what would Julia just show us? 75 percent of ad dollars will go there. I think everyone could agree upon that. Snap gets five percent. But it's all sort of a crapshoot right now is where everything is going to go. We all agree that they'll be the biggest recipient of ad dollars and maybe cozying up to Trump helps him in the long term. You know, I think we've talked a lot about Alphabet and some of the overhang there. And then, you know, Guy mentioned the drop from the precipitous drop down to one hundred dollars. And a lot of the issue with that drop was that the capex spend seemed to be out of balance.

5:46The investment in the metaverse that wasn't going to be monetized for whatever period of time, we just really couldn't see through that. We couldn't really discount that forward and really understand what the earnings potential was there. They have completely changed that. And even though there is still this AI capex spend, they are able to monetize that in terms of ad positioning. So I don't think that they're coming under the same scrutiny that some of the other players have in terms of capex spin and capital discipline. So it would make sense that when you are seeing things being elevated, keep in mind, they were at like 25 times forward across the market.

6:19Why not pay for a company that still has growth potential and still has a cash on balance to provide some some downside protection? We are just getting this headline from the CEO of TikTok saying we will seek the Supreme Court review to halt this ban. This is according to the information. This is the latest response from TikTok. They're going to do everything they can to keep on operating here in the U.S. while this whole thing is being sorted here. Rebecca, it doesn't necessarily change either way the fact that the MAG-7 right now is the place where people want to be. And in your view, is that the place you want to be in this market environment?

6:52Well, I certainly want to be at least neutral weight, the sector, not necessarily exactly those companies' weights, but broadly. I want that exposure. You know, in the case of TikTok, who the heck knows exactly how this is going to play out? So putting a big bet just on the possibility of an increase in ad revenue for X or Y, to me, that's not a smart play. But thinking about this new cabinet is going to be more tech friendly broadly, maybe to some companies more than others. It's going to be less regulatory. It's certainly pushing the freedom of speech thing. Now, the challenge with TikTok is that you have the China element as well.

7:27Right. So if Trump is saying he's going to be hawkish on China, how do you square that circle with the freedom of speech? and I'm going to be curious to see how he explains that one, if he allows this to be sold to Mnuchin or just stay in business or whatever he does, right, or whoever. But I do think, back to your question, that when you think about the free cash flow these companies are generating and the amount they're able to reinvest every year in their own innovation, they're going to continue to grow. There's going to be fits and starts. Yes, they're highly valued overall, but I want to stay in that game.

7:59Rekha brings up an excellent point, as she often does. She always does. When she participates on this show as a panelist, the China aspect to it. And if we do this to TikTok, what will China do to our tech companies? And so you have to wonder, you know, for our tech companies, Apple, who is working feverishly to get that AI, you know, element in their phone there. I don't know. China could make it a lot more difficult to do that. And I've thought that, Mel, and you know this for a long time. And it's been unfounded in terms of the concerns around Apple and China. because we're sitting here today and Apple's at an all-time high.

8:33So I don't think it's gone away, but the market doesn't seem to care about it. The good news about Facebook is they don't have that problem. And amongst the existential risks out there for Facebook, I've never been convinced TikTok is one of them. There are other ones, like the economy slowing down and them being obviously so much of their business is relying upon small and medium-sized business, which is lifeblood of this economy. So if the economy were slow, Facebook would have a hit. But TikTok is a nuisance, I think. but I don't think it's an existential risk. All right. We've got a news alert on Supermicro.

9:03The company is saying it has received an extension from the NASDAQ, giving it until February 25th to file its 10K annual report for the fiscal year ending last June. Shares are up 2 % after hours, but, of course, it has risen substantially since the reports initially. It's short sellers entering this one. It's, you know, questions about its accounting, et cetera, et cetera. It's really been mired in this, but we're watching shares of Supermicro. You know, you brought this up on the call the other day. You always bring up good points as well, as does Rebecca does. And you said when we got to about$43.50 or so, it almost got back to the entire move from that down draft from$48.

9:39And here we are approaching that level. I don't think their problems have been fixed. That outside counsel was one person that did. The special committee. The special committee of one. The surprise of a single person. But this shows you you can't short it, right? It doubled. To your point. To your point. It doubled. And that's why when you first enter Wall Street, unlimited risk is when you short stocks, right? Anything could go to zero. You have a finite amount of risk. This is one that you have unlimited risk if things go their way. All right. Let's get some more on TikTok here. Let's bring in Fast Money friend Gene Munster.

10:08He is a managing partner at Deepwater Asset Management. Gene, great to see you. Hello. So, you know, I know you were listening to the discussion very intently that we were having here on the desk. Meta has upside, but not necessarily any down. I mean, do you think that there could be any sort of retaliation on the part of China if a ban on TikTok goes through? Absolutely. I'll add my kudos to Rebecca for pointing that out too. I do believe that this is ultimately part of the chess game chess match that's going on with the Trump administration with where his relationships are growing potentially with Zuckerberg and what that means for TikTok.

10:44And potentially your question is that if this in fact does happen, if the U.S. does go and ban this, I think there's two paths. One is that China just basically folds and it's a negotiating piece by saying they don't want to sell. I say China. China basically controls TikTok. It's a negotiating point. They say they don't want to sell. that negotiating piece is basically to scare lawmakers that their constituents would be disappointed if the app got banned. But at some point, if it's clear that they are going to get banned, they could fold and take the$100 billion and walk the TikTok show. But if not, it's going to come down to if this does, in fact, get banned and they don't take the money, there's going to be some form of retaliation.

11:32The two obvious targets are Tesla and Apple. In what way do you think the Chinese could exert, I don't know, pressure on, I mean, Tesla, they could do whatever to their factories. In terms of Apple, what would be the way you would be concerned about retaliation? So China is the master at red tape. And I spent seven years, spent a lot of time in China, covering a lot of the China internet companies, worked with a lot of Chinese people. And I was taught just in terms of what they want to do things is below the fold. And so the master of red tape would be just making it difficult. How many hours a week they could change some laws about number of hours a week that potentially someone could work.

12:13They could change how much power a given Foxconn factory can use in a given week. They can work. They did this to Tesla. They can impact the shipping, the trucking companies that would take the Teslas to port to be exported to Europe. They could do something like that with Apple. So I would, I don't think it would be something where it'd be a big headline the last piece that they could do is they could have a big influence in terms of how chinese people think about apple products or tesla products they obviously control like what weibo and that that language is and they can influence that conversation and so there's a lot of levers below the fold that can be used unfortunately for investors it's not going to be an obvious headline it's just going to be something where it just the gears of of progress just slow so gene is apple mature enough and diverse enough now that you know maybe five years ago this would have been huge for the stock but in today's apple world you know it's not going to necessarily move we're sitting here it's at an all-time high despite the fact that we're having this conversation so this is my biggest concern i uh own apple our firm owns apple i think that the stock is a big opportunity ahead of it relative to ai but this is the biggest concern related to china and to answer your question is that if we look at the total revenue from apple we estimate about 45 % of that is somehow related to manufacturing in China.

13:34As you said, that's been coming down, but it's still a relatively big piece. And what I described about that red tape, that slows things down. It doesn't take it to zero. It would be a slowing factor, and you'll know it in lead times going up for products that are impacting the quarter. So I think investors are going to have some room to watch how these dials are progressing before any quarter's reported. Gene, great to speak with you. Thank you. Thank you. Have a good weekend. Gene Munster, Deepwater Asset Management. In terms of Apple, Bono and Gene brings up all these good points, and it doesn't necessarily have to happen, these sort of soft ways of throttling their production just because TikTok gets banned.

14:14It could be for a number of other reasons, other sort of conflicts the U.S. has with China. I do think that's the pervasive risk with Apple, is that there's not an explicit attack, so to speak, that there's just kind of these things that are bubbling under the surface that make it a less efficient operation going forward. And I think the rhetoric coming out of Washington right now might lead to some of that being done in a more preemptive way than is currently being priced into the stock. It would be really ironic if TikTok is actually the way the trade war accelerates, right? Everyone's been glass half full.

14:48It's going to be negotiating. We're not going to see the big, broad tariffs that were talked about on the campaign trail. And that's definitely part of how the market's risen so much. But wouldn't it be interesting if shutting down TikTok leads to these quiet retaliatory measures that actually gets things going and catches people off guard? And it could deflate equities a bit. Let's get to shares of Chevron dropping more than two and a half percent today. The energy giant announcing CapEx cuts of about two billion, less in 2025 than this year. That's its first budget cut since the pandemic. Chevron also taking up$1.5 billion in fourth quarter charges for restructuring and asset sales.

15:25Guy, this is not the C. I don't believe in your clam. I always get confused. I think you have Conoco and Chevron. My clam. Mm-hmm. Yeah. No, go ahead. Finish yourself. Well, but I think, again, yeah, I believe that is correct. However, all three of those stocks, if the two Cs and the Exxon Mobil, so whether that's an X or an E, depending on how poorly you play the game, we'll see. But it's interesting to hear this. Now, some people said this is a positive. The market's not taking it that way. And, you know, I can understand why there's some apprehension to be in the space. But I will tell you, on valuation alone, these names are still compelling.

16:01And until a week or so ago, names like Exxon were trading right around a prior all-time high, which I think is interesting given the backdrop where everybody's in technology and other service names. Nobody wants to be in energy, yet these stocks have held in there. So I'm not running too far from this. The first go around with the Trump presidency, energy names did not do well because there was a lot of supply on the market. But the way you introduced this segment, you said the first time since the pandemic, they cut CapEx. There's nothing positive about that pandemic cutting CapEx. They also had Ebene, right?

16:34So they're increasing cash flow. Guy mentioned that normally free cash flow. Normally, that's a positive for a stock. But I think the market's looking at this as why. Why do you need cash flow now? I mean, one thing we've seen with these companies over the last several years going to technology is that they become much more productive. They're doing more with less workers and more tech. And so their break even to be profitable has come down. They don't need oil prices as high as they did five, 10 years ago. So it's interesting to me. Oil prices have been coming down somewhat. They're expected to come down more next year as supply outstrips demand globally.

17:11I kind of go with you, Guy, on this one. See that? The valuation is attractive. They can make money at lower prices. They're focusing on free cash flow. The question on why I think is totally valid, but assuming there's a decent answer on the why, I'm really happy about free cash flow as a shareholder. Flex your clam. Just seeing the clam. You know, Rebecca makes great points until she agrees with me. And Mel's like, well, maybe not so much. It's true. I can see it in your face. Rebecca makes a great point. All right. Coming up, Lululemon didn't even break a sweat beating its latest earnings expectations.

17:48Just how much higher the athleisure name could stretch after its best say in six years next. With Bank of America betting its bottom dollar on Dollar General. Why this long-struggling discount retailer just bagged a double upgrade right after this. This is Fast Money with Melissa Lee right here on CNBC.

18:17We've got a news alert on some entrants to the S &P 500. Bertha Coombs has got the details. Bertha.

18:25Hi, Bertha. Yes, Melissa. Two changes, two additions, Apollo Global Management and Workday are being added to the S &P 500. They will be replacing chipmaker Corvo and aerospace company Momentum. So Apollo Global and Workday will now be part of the S &P 500. Back to you. All right, Bertha, thank you. Bertha Coombs. Lululemon surging nearly 16 % for its best day since 2018 on the back of earnings last night. The stock is now up 70 % in just four months. Will it stretch higher from here? Amazing. For the sound effects. So here's my problem with Lululemon. First of all, when we've talked about this, Guy has not adopted the pants.

19:12I went to Lulu, and now I'm in Vineyard Vines. I think they're much better. There's too much competition. But when you see them perform like this, you think, okay, they're out of the woods. Everything's fine. U.S., North America was only 2 % of the growth. International was 33%. Do you want to buy this with just banking on international? International is only 28 percent of the pie for them. So you're placing also 70 percent of the pie is either moving sideways or, you know, up slightly for the international growth. I'd rather leave it alone. I don't know. I mean, that's a pretty big, sizable core business to be stabilizing at this point, which is what is viewed as U.S.

19:57business is stabilizing. When you have the upside kicker of, say, China mainland was up 27 percent year on year. I mean, these are tremendous numbers on the growth part of the pie. 100%. Still a North American story, though, I think, to Steve's point. But you're right to bring that up. Now, they got their inventories in line against sales growth, which I think the market took its cues from. We had Courtney here last night. She broke it down. And margins were better. All good. You just said it, though, at the top. I mean, the stock is up almost 80 % from those lows we saw a few months ago, which gets us back to a 50 % retracement of the all-time high in this recent low on big volume today.

20:33So I think if you've enjoyed this move, which many people have, I'm sort of with Steve on this one. I'm pulling the ripcord. Yeah. Now to the call of the day here. Dollar General popping 2.5 % on a double upgrade from Bank of America. Analysts pumping the stock from underperformed to buy, saying the dollar store is back to basic strategy seems to be paying off with improved inventory positioning. It's interesting given the tariffs that might come down the pike, which could really pressure all of the dollar stores. They only have so much leeway to pass that cost on to the consumer. Yeah, I mean, I think that coupled with the fact that you really have exposure to the lower earning cohort in terms of the consumer.

21:12And I think there was a lot there. Now, this stock did, I think, top out around November and kind of then and then immediately bottom out. So I do think part of the trading action that we're seeing and part of the call is just a retracement of that. With that said, I think they're strapping on like a 13 or 14 multiple on 20, 27 numbers, and they've lowered 26 numbers. So I do think there was probably a little headwind still existing. And the question is, do you want to be, you know, allocating the incremental dollar here versus somewhere else in your complex? Is the somewhere else Walmart? Because that's the way I took it for me, because to your point, 65 percent of their revenue comes from people that are earning less than thirty five thousand dollars a year.

21:54Walmart is grabbing those people and they're also grabbing. I think it was 100 K plus. Exactly. So I'd rather I'd rather sit and look at a chart like Walmart than look at a chart like this. I'd rather get the extra dollar going to Walmart versus Dollar Jack. How do you think through that premium that Walmart trades at? Although, granted, with the execution that it provides. Right. No, I'm with you on this one. I'd much rather have some of that upper income consumer as part of my base to count on because it's not clear to me things are going to get a lot better, if at all, for the lower income consumer next year.

22:27We might get a couple rate cuts, but even through, you know, we have four between today and the end of next year. That, to me, probably feels optimistic. So they're not going to get a lot of love there. The job market is doing fine, but it's moderating. It's getting harder to find a new job. That's hitting that part of the consumer. So I'd much be happier in a Walmart despite paying the premium. I think it's a safer bet as I look at the year ahead with the risk of tariffs as well that you mentioned. When you think of retail analysts, what name comes to your mind? We had her on the show. That was unbelievable.

23:00That was like looking at a split. I knew even before you asked me the question that you were looking for Dana Chelsea. No oz or ums. She always dresses in black. Go ahead. No, but that's amazing. Like, you didn't even flinch. I'm in your head. And Telsey just, their advisory group, the analysts there, just lowered the price target on the back of this. So I go with what they're saying. Still an$88 price target, but I think the stock is sort of topping out yet again. All right. There's a lot more Fast Money to come. Here's what's coming up next. An exclusive sit-down with the CEO of one of the defense industry's most exciting names.

23:30We'll get a sneak peek at the road ahead for a company on the cutting edge of robotics and beyond. Plus, UnitedHealth's worst week in more than four years. But our next guest says this embattled insurance stock could be a top pick for 2025. The headlines and the bottom lines moving this name. Next, you're watching Fast Money, live from the NASDAQ market side in Times Square. We're back right after this.

24:06Welcome back to Fast Money. The S &P 500 and Nasdaq both clinching fresh record closes to end the week. The Dow in the red falling 123 points. Shares of DocuSign surging nearly 28 % to its best stay ever. On the back of their earnings report yesterday, the company topping Wall Street expectations, delivering strong guidance. That stock is up 80 % this year. Shares of Peloton getting a bump up 4%. analysts at UBS upgrading the name from sell to neutral, citing benefits from cost cutting and an optimistic view on the company's recent CEO transition. The stock is up 270 percent from May lows. And sports betting stocks taking a small hit.