Apple’s Record High… And Structure Therapeutics’ CEO On Weight Loss Drugs 6/11/24

0:02Live 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. Apple ascending. The tech giant rocketing to new heights. on the heels of its AI reveal yesterday, the massive numbers behind this move and what it says about the strength of the broader markets and shares of Structure Therapeutics pulling back from recent highs, but hopes for its obesity pills still have the stock up more than 20 % this year. We'll talk to the CEO, Ray Stevens, about its latest trial results in a first-on CNBC interview later this hour. Plus, a paramount plunge, its deal with Skydance falling apart.

0:34What caused talks to break down and what's next for the company? David Faber will join us here on set just minutes from now. I'm Melissa Lee. Come to you live from Studio B at the NASDAQ. On the desk tonight, C. Grasso, Karen Feinerman, Dan Nathan, and Guy Adami. And we start off with Apple's astonishing run to new records. The tech giant soaring more than 7 % today, its best day since November 2022. That move adding a whopping$215 billion to its market cap. That is more than one entire Adobe. It is now just$40 billion away from reclaiming the most valuable company title from Microsoft, a position it seeded back in January.

1:10Apple was the top performer in the S &P Dow and the Nasdaq 100, quite a turnaround after leading the Dow lower post yesterday's WWDC kickoff. So what changed for Apple in just the past 24 hours? It was just 24 hours ago, Guy, that we were all sitting here around the desk lamenting how boring the reveal was, how it wouldn't end up selling more phones. And here we are. The whole spiel took you 10 minutes to go through. Well, I mean, I don't need a lot of help looking stupid, as you know, but Apple managed to help me today. And look, I think that I guess the market had a chance to digest certain things.

1:45You know, Gene Munster yesterday put out a very compelling case. And then on Twitter about an hour or so ago, he said the crazy part of the factors driving Apple shares today are just getting started. And maybe he's spot on. He's been spot on. You know, I'll say this, though. I think the upgrade cycle was in place all along. You know, I'm still not convinced that this will add to it. However, the market seems to be maybe on the services size. It gives them that kicker where you get services revenue now closer to 30 percent, which helps their valuation. Right. I get that. But I'll say again, yesterday made sense to me in terms of the sell off.

2:19It had a big volume day. I thought you put in a bit of a double top. That clearly wasn't the case. All right. So yesterday, Gene Munster made a very interesting statement. He said yesterday was the biggest day for Apple since the launch of the iPhone. You pushed back pretty hard. You said, hey, Gene, you want to take that back? I'll give you a chance to take it back. And Gene said, no, I'm not going to take it back. But you clearly disagreed. And I still disagree, despite, you know, a nearly 8 % rise. And listen, you know, Gene, you know, is a great analyst who's been covering this for a very long time.

2:49And, you know, at the end of the day, Apple might have had its biggest market cap gain in its history, too, on the back of this. And, you know, I'm just hard pressed to believe that much of what they reported yesterday or detailed is going to be usable in the next iteration of the iPhone that comes out in September and October. And so if you can justify the sort of move that the stock had today, you really have to be able to think that earnings are going to go up meaningfully, that, you know, from a mid single digit sort of thing and revenues and mid single digits to, you know, and I'm not sure about that.

3:21I mean, so again, I think that investors are getting ahead of the street, meaning Wall Street analysts, because I did not see a bunch of analysts come up and upgrade the stock or raise their calendar 2025 earnings. So again, we are in a market where there seems to be no shortage of enthusiasm for stories that are perceived to work. And then the flip side, you just mentioned Adobe. There's no shortage of downside for the stocks that don't seem to be participating in the excitement around AI. It seems like the bottom line question here is, did Apple reveal something yesterday that will drive more sales of phones than previously modeled in?

3:59Morgan Stanley says, yes, it should accelerate the replacement cycle. UBS says it is unlikely to drive the iPhone replacement cycle. I mean, it's really split here. So accelerate is one thing. Does it create additional? Additional. Right. Additional. So accelerate, maybe. Because everybody thought there was somewhat of an upgrade cycle in place. So the question is, will there be additional incremental consults? No, I actually don't think so. I was kind of underwhelmed as well. The only thing I can imagine is, the only thing that makes sense to me is we used to have a hardware multiple and a software multiple, right?

4:31Now we have a hardware multiple, software multiple, and I guess an AI multiple, which maybe is what, I mean, at 30, I don't know, 31, 32 times, with a reasonable size element of hardware multiple, you've got to have a pretty good multiple on the rest of the business. And I guess that's what it is. I don't know. I have a tiny position that's so small, it's effectively short because I get upset when it goes up by this much. But I don't know. I wasn't so excited by that yesterday, particularly the Siri part. But, you know, I got it in for Siri, but I didn't think that was great. I think Gene's more excited about 2 percent growth going to 10 and 12 percent.

5:09So I think that's what is really moving the needle. And to Guy's point, services, that number will go up. Analysts will chase it at a certain point because they're not known for being first on it. They'll they'll they'll lag. They'll the analysts will lag and then we'll upgrade it as the story develops. I bet you you're going to see, I don't know, next week, week after a bunch of analysts upgrading their their sales numbers, their numbers on upgrade cycle. And they'll chase it. Yeah. But one thing, Mel, I just want to get in it. So the stock now is trading at 31 and a half times this year, 28, nearly 29 times next.

5:46So the fact that earnings estimates did not go up today, commensurate with the seven and a half percent move, makes the stock a lot more expensive. And if they don't continue to go up and listen, I can take out a few positives that I had to actually think about over the last 24 hours. I got to read some really smart people and what they had to say about it. One of the positives that they didn't have to pay for this, it sounds like. So they didn't have to pay open A.I. for this. So that's pretty good. They also said, and they didn't say this during the day, but they said it much later, that they're going to have Anthropics Cloud on there.

6:17And they're going to have Gemini eventually and that sort of thing. So they're going to become an aggregator of what is becoming a very commoditized space, this large language model. So they didn't spend the billions of dollars building out or building these models and training them and the like here. So that is a positive. That's a positive. But when you take a look at some of the other AI sort of beneficiaries, they are monetizing because they are charging. So analysts can model that. For Apple, how do you model something that will be incorporated into apps that will be developed later on? Because it was WWDC.

6:49It was a developers conference yesterday. And so those revenues won't come until later, until after more people have the 15 Pro, until after all these. So this is sort of a delayed increase in services revenue that we're talking about. The market is getting ahead of, I think, exactly what you just outlined. And it's getting ahead of it in a major way. And again, I'll say I think last quarter, and you can check me, but I think we were close to 25 percent of overall revenue was on the services side, which I think may have been a record. It would be nice if we continue to see the revenue growth that was commensurate with the valuation of trades that maybe we'll start to see that.

7:22But if that goes from 25 to 28, 29, then you could probably justify the multiple. But I think that's at the crux of your question. Is it going to show up in the services side of things? And I think they just didn't have to screw it up. I think that's the point is if there was a path, they just had to lay out a path. I mean, how could they? I mean, they had a partnership, right? Yeah, but to Dan's point, a lot of the stuff is they don't really innovate. We've all said this. They don't innovate. They replicate. And people love the iPhone. I have the iPhone 13. I probably will upgrade this cycle because of this.

7:55So is that another buyer? No, but it's getting me off the bubble sooner than I would have otherwise. The sidelines. and it may cause you to upgrade to the highest level phone as opposed to the second highest level phone. But the jury is still out. Okay, so I think about my iPhone. I use Gmail. I use YouTube. I use a whole host of Google products that Gemini is already embedded in. Okay, now that's going to the cloud and what Apple is trying to tell you that a lot of this stuff is going to happen on device. And then if you think about Meta, okay, there's Reels, there's Instagram, and there's WhatsApp.

8:26Their Meta AI is already embedded in that. So a lot of users who are really sticky with those sorts of apps on their iPhone are really not going to use Genmojis and all this other sort. They're just not going to use Genmojis. So think about this, Dan, they're making AI more. I think you're nailing a point in reverse. I think I think that the people that have the iPhone want to use an AI and they're more likely to use Apple's AI versus the other ones that you just named. So I just don't really think so. if you're using these apps, they're not, you know, iOS, they're not from, you're not going to change your behavior.

9:01So the apps that you use. You are a customer Apple has already lost. Yeah. I mean, it's going to be on the thing, but I'm not going to upgrade. And what did I say last night? No one's going to upgrade for this device, given how the staggered release of these products, like that's the other point. They're not all coming out on iOS 18 and it's going to take some time. And the other thing is it's going to be buggy. And you know what I mean? Like, so I just think the euphoria right now just seems to be a little misplaced. Katie Stockton was here the other night and said she would buy Apple higher.

9:27So Apple was in a proving ground on the chart and she would buy higher. This is, I think, past the level which she said she would buy. No, I think she made a great point. I mean, we were having the same conversation about in terms of how the stock traded, traded up to those prior highs. Again, yesterday seemingly failed on what was one and a half, almost two times normal volume. It made sense. She also said, though, if the stock proves itself and breaks out, then she would re-engage. And I think with the volume we saw today, that's exactly what happened. Would you re-engage here? Or would you pay?

9:55No, because again, I think it's still expensive. Look, but I've thought it's been expensive for a while. I'll say this as well, though. Apple's not a straight line higher for the last five or six years. And listen, in April, we saw a stock that went from 198 down to about 165 or so. So you do see drawdowns in the name. I don't really know necessarily what it's predicated upon, but it does happen in Apple from time to time. All right, let's move on to Oracle here. Shares are sharply higher after hours, despite reporting a miss on the top and the bottom line. News of a multi-cloud partnership with Google and OpenAI, the driver of the stocks gains.

10:26The conference call just started at the top of the hour. That's where the company will issue guidance. We'll be keenly listening into that call for the guidance part of it. We're up 9 % in the after-hour session. AI, it's just, it's AI here. Yeah, but again, okay, so cloud infrastructure, which is 15 % of their business, was up dramatically, 40 % year over year. It's$2 billion in the quarter. You know what I mean? So we're not even hitting numbers that are particularly impactful if you think about it. And I think without that headline, the stock is probably trading unchanged and down as we wait for the guidance.

10:58And then I go back and think about Dell and what they had to say. They put up a good quarter and their guidance was disappointing. This is not expensive stock. And so if you think that this is a bit of a laggard in the space, like I think you should continue to expect good news out of this company. But not right here. Not like this. I just thought that remaining performance obligation number was so high. It was so much higher than where the street was that, I mean, that's sort of looking at, all right, doesn't matter what they did this quarter. They're building a huge book of business going forward.

11:29So, I mean, should it be up$10 or$11, whatever it is, I don't know, but it certainly should be up. And they have to prove that they could build those data centers. So how quick are they going to come on to take advantage of that performance that's in the pipeline? And the truth is, when you look at CRM, you look at Workday and you look at MongoDB, they all sold off. So did this one. And this one sort of started bouncing back a lot quicker than the other ones did. So somebody knew they were going to beat on that number. It's a matter of do they beat and do they perform now? It was a quarter that came in at the lower end of what street expectations were in terms of EPS and revenue.

12:09X this AI announcement to Dan's point, the stock, which historically, if you go back over the last year and a half, two years, tops out at about 127 or so. It's been in this 102, 127 range. I think the same thing probably would have happened. However, you put that kicker in there, the machines pick it up. And here we are now. It's going to be interesting. If there's a conference call, it's going to be interesting to see what they say. All right. Let's get to a developing story now on Paramount. Sherry Redstone's national amusements deciding to stop deal talks with Skydance. David Faber. Come on.

12:39Come on. You can see with your own eyes. You know, before I know when I run it, when I saw David in the foyer, which I rarely do. What did I do? I was yelling David Faber's here. I was so excited on the phone. He was busy. I know. And much to his consternation, I did that. However, David, what's the latest? Thank you for that. Always always appreciate it. You know, I love you. Listen, you know, something of a shock late in the day here, Melissa, of course, as we reported and others have as well, that essentially the talks between Skydance, run by David Ellison, son of Larry Ellison, obviously playing right off of Oracle there as well, and their partner Redbird, the private equity firm, have ended.

13:19They had an offer out there, of course, that would have involved buying the control stake in Paramount through the purchase of National Amusements, the 77 percent of the shares of the voting shares that are in that entity, in addition to providing as much as liquidity for as much as 50 percent of the owned shares, the B shares and some of the other A's at a price of 15 for the B's and 23 for the A's that were not part of national amusements. Not going to happen. It's over. Six months of negotiation. Every expectation that they would figure out a way to get to the finish line is done. Why? Well, Sherry Redstone has decided against it, perhaps at the advice of some of her attorneys, perhaps some others as well.

14:05It's unclear exactly why, I guess, is what, you know, ultimately I've been reporting on this thing. This is just my recent file. This lasts a couple of weeks. You know, at the end of the day, some people say it was not about the economics. It was about other details, non-economic details. That may be the case. I go back, though, to the fact that while originally Redbird and Skydance were offering$2 billion to Sherry Redstone for national amusements. They reduced that to$1.7 billion when they increased the amount that they were going to be giving to the B shares. That made the special committee happier, perhaps, and their advisors, but it may have made Sherry Redstone somewhat unhappy, that reduction, even though I'm told it was coming back to her in other ways, including things like indemnifying her against potential litigation and the like.

14:52And so here we are. This is a company that does not have a CEO. It's run by three different people. It is under duress, of course, as much of the industry, at least in terms of where its position is and how it's trying to fight for relevance, really, in many ways. It's got an enormous debt load and it's very much unclear what the future holds for it, except that they seemingly have a plan to kind of continue as an independent company with Sherry Redstone's National Amusements, the control holder. Aren't there other options out there? You know, there are no other options for a deal in which paramount shareholders, as we described them, beholders, will get any money.

15:28Not that I'm aware of. There has been some reporting on Edgar Bronfman, perhaps trying to mount a bid for NAI and a couple of others as well. But that would be, as I understand it, for simply the control stake in NAI. By the way, that would bring on plenty of litigation of its own. The idea that there would be one beneficiary of said deal, whereas Paramount shareholders would see nothing. That was what the special committee was trying to sort of balance. Yeah, you get taken out at a more significant premium, but give us something. And they did get to a real point there. They got a lot from Skydance.

16:00And ultimately, it simply was not enough to convince Sherry Redstone, perhaps because they did lower her ultimate economic value just a couple of weeks ago when they came up to paying four and a half billion for that 50 percent of the B's and some of the A's that they were going to buy to premium. All right, David, you just mentioned that debt load. So a net debt is 2x its market cap now after today's decline. Right. It's around 12 billion, a little over that. Yeah. And so when you look at this thing, it does 30 billion dollars in revenue, but it's just on a gap basis. It's not profitable. How does this shake out if there are no buy?

16:31I mean, like and what does it say about like what comes next for some of these other streamers that are having a difficult time? Well, Paramount, you know, is in a difficult position, you could argue. I mean, they will say, obviously, Paramount Plus has had success. It continues to add subscribers. They have the NFL at CBS. They feel like that's an undervalued asset. But to your point, Dan, they have a lot of cable networks. And we know that that is a very difficult place to be right now, given the continued reduction overall of the cable ecosystem. Not to mention they have a convertible preferred out with Byron Trott's firm or the Michael Dell Byron Trott combination, whose initials I can never completely remember.

17:09There's a good so there's a good deal of indebtedness. There's also indebtedness at national amusements. I don't know is the answer. You'd have to believe that they're going to have to have one person running this company to begin with and then embark on whatever plan it is. Obviously, their former CEO, Bob Backish, left about a month or so ago. So it's a good question. I don't know what the future holds for this company. And there are many who believe it's going to be a very difficult road and thought that the Skydance deal and the liquidity it provided in the merger of Skydance Studio into the overall whole.

17:40And the plan that David Ellison, who runs Skydance, had been working on for many months was perhaps the best opportunity. So let me just ask you a question back to the art of the deal. So those terms seem to have been set some number of weeks ago. And so what is the nature then of why today? Why is it that those? You know, I mean, as somebody who knows a way around a deal, you know, I can't tell you specifically. First of all, let's not forget. She was the one. Sherry Redstone is the one who empowered a special committee in the first place. She said, I'm supportive of this potential transaction.

18:15Will you weigh in on it? That's the whole process began in part because she was supportive. I'm told over the last 10 days since perhaps that I don't want to call it a retrade, but since they lowered the overall value they were willing to pay, I am told that she seemed to sour on the deal. So maybe it was pure economics coming to her, you know, from two billion to one point seven billion. Maybe there were maybe she was having second thoughts in terms of just the emotional value of it, so to speak. It's been national amusement, certainly been in her family for a very long time. Paramount. That deal was done.

18:49Viacom was done, what, 1980, when her father Sumner bought that. I don't know is the answer. It's incredibly rare to see a deal like this collapse like this at the last moment. You would think you make the decision as to whether you want to sell first, not last. Right. Yeah. And I wonder what that back and forth was like. Yeah. Yeah. And I, you know, I'm trying to understand that specifically. Ropes and Gray is her attorney. Ellison was represented by Latham. I know there was a lot of friction there in terms of the back and forth. But really, as I followed this, Skydance and Redbird gave on virtually everything.

19:22The only data, the only thing they were not willing to give on was a majority of the minority vote. Otherwise, they gave them everything they wanted in terms of economics. So very much unclear why it would have come to this at the very end. David, always great to have you here on set. Thank you. Always good to be here, particularly with, you know, well, it's a Mount Rushmore. David Faber's pantheon. I mean, I don't know who the other three are. David's one of them. It makes me just feel really old. These guys are set in stone. You know that, right? They're iconic. They last forever. All right.

19:58Good to see you, David. Thanks. And you, Melissa. Coming up, all eyes on the Fed ahead of tomorrow's rate decision. What Chair Powell's comments will mean for markets and why our next guest is feeling positive ahead of the news. And check out these fast movers. Catching your attention, how the traders are navigating the action. Cleveland Cliffs, GM, and Bitcoin. Don't go anywhere. Fast Money's back in two.

20:23Welcome back to Fast Money. The S &P 500 and Nasdaq closing at record highs today while the Dow dropped 130 points as investors await tomorrow's CPI report and Fed decision. For more, let's bring in Stuart Kaiser, Citi's head of equity trading strategy. Stuart, great to see you. Thanks for having me. You say stick with the momentum in this market. It should keep going higher. Do you feel like embedded in that is really a call in NVIDIA? That's what it feels like these days. Yeah, I mean, look, the way the performance has been, it's hard for the equity market to work without large cap tech working.

20:52I mean, it's 30 percent of market cap and it's where the thematic and the kind of flows are. But, you know, our view is generally speaking, you run long equities until the labor market starts to show like real meaningful weakness. When that happens, you get out quick and you protect yourself. But we've been pretty resilient to the other data just on that kind of basic logic. What's the meaningful? It's interesting you say that. Is it going to happen? See, I thought last year you'd start to see a significant rise in unemployment. Didn't happen. We ticked 4%. The revisions month over have been bad now for the better part of a year and a half.

21:22What does that look like to you? Like, what number is that threshold? You know, it's a great question because if you look back to last year, we printed 105 on a revised basis in October. We had claims up to 260. I think you probably need payrolls sub-125K at least and claims above 250. So those are the types of levels where even though that's not recessionary, the market will start to extrapolate that out and kind of increase the risk that it happened. But something like that, it might even need to be sub 100K. What's interesting is you actually historically have more negative payroll prints than you have prints between zero and 100K.

21:52The market doesn't hang out between zero and 100. And I think that's why if you got to that level, the market is just going to start the price, the chance you kind of step off the curb a little bit. So, Stuart, when you look at the volatile food and energy that's pulled out, don't you want to see the food and energy now? Because they're actually lower in the last month or so. That might give a little tailwind to the deflationary aspect of that number. And where do you see the sell-off? If you do, on your ascent to your levels, where do you see the sell-off happening? It's a great question. I mean, right now you want to see the food and energy because it happens to be lower.