Countdown to Retail Earnings, and a Long-Term Bet on EVs 11/13/23

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. It's been two very different tales of the tape for major retailers this year, with Walmart hitting all-time highs and Target plumbing multi-year lows. Will this week's earnings reports exacerbate that trend? We're counting down to the latest read on the consumer and what it could mean for the markets. Plus, a weight loss wonder? New data on Novo Nordisk Wigobi diabetes drug, showing strong results against heart disease, too. But is this and other drugs like it really the cure-all for the industry?

0:31And later, a big bet on EVs, one of the nation's biggest pension funds scooping up shares of Tesla and Rivian. So should you bank on these names for some long-term gains? I'm Melissa Lee coming to you live from Studio B at the NASDAQ. On the desk tonight, Tim Seymour, Karen Feinerman, Dan Nathan, and Guy Adami. We start off with a kickoff to retail earnings season. Home Depot leading the charts with its report tomorrow morning. Target, TJX, Walmart, Macy's, and Gap all following close behind. They're not the only reads we get on the consumer this week. CPI and retail sales, of course, also on deck.

1:00But a new report suggests the consumer may not be as strong as previously thought. The just-launched real-time retail monitor distributed by CNBC in conjunction with the National Retail Federation and Affinity Solutions shows spending, ex-autos and gas, dropping nearly 0.1 % in October and has been decelerating for months. So from Wall Street to Main Street, what should we expect this week's Consumer Reports to show us here, Guy? What we've seen all along, I think, that certain places Walmart's going to continue to do well. I think Target will struggle. The wild card will be Home Depot tomorrow.

1:36Now, you go back to the last quarter, inventories, they got themselves back in line. They were down, I think, 10.5%, 11 % year over year, which suggests that margins should be good. And this 280 level-ish has been the lower end of a range now we've been in for quite some time. So Home Depot, the wild card, I think you play it from the long side. I'll get fast fired if I'm wrong. But I think the Walmart target bifurcation or chasm will continue to grow in Walmart's favor. You know, really interesting. The FT ran a poll over the weekend, I think, and it was with the Michigan Ross or something like that.

2:07It was talking about the Biden administration's approval on binomics, basically, and a disproportionate amount of people think they are not better off four years on. OK, but here was something that I took away from this. I thought was really interesting. In response to inflationary pressure, 65 percent of voters said they had cut back on non-essential spending, such as holidays or eating out, while 52 percent said they had reduced spending on food or other day or everyday necessities. When you think about that stat and you think about that sort of response, granted, it is through a political lens and these are registered voters and that sort of thing.

2:37You say to yourself that inflation is still on consumers' minds right now and it's not going anywhere. So I think we're going to continue to see that through a lot of these retailers. I do agree that the Home Depot is going to be very important, especially with interest rates where they are. And when you think about what the housing market is doing, but I don't think it's going to be a great read on what consumers are going out and doing in the near term. I think that's going to be more Walmart and Target. I mean, the growth in prices is slowing down, but prices are still going up. I mean, consumers still feel the pain.

3:03Yeah, I think they are. It's also interesting to me as I read previews of CPI, there seems to be some perception that actually the feds had nothing to do with the fall in CPI prices, that this is really just about the end of COVID and supply dynamics and things. And if that's the case, by the way, you can't tell me that 500 basis points of hikes aren't going to have an impact. And that's where I think people think that the Fed may be overdoing it. I'll leave myself out of that debate. But I do think that CPI, from a market driver's perspective, I think is less ammunition. I just think, you know, we're at this place where looking at CPI numbers either, you know, we could have a hot CPI number.

3:38And I think the risk might be to to the negative upside. but back to the consumer, back to Home Depot, back to Walmart. It really gets to the places where you're willing to pay more for a company. And I think the Home Depot over Lowe's. We talk about Walmart over Target. Home Depot deserves a premium over Lowe's. At some point, I think actually the top down for the home improvement sector is very much intact. But I do think, and we're going to see comps out of Home Depot that are going to be down. They're going to be down 3.5%. Some people are actually pushing those numbers down into numbers. So I think CPI, as much as we're focused on it, I think it's a lot more important what we're hearing from these companies about their holiday season.

4:12Home Depot might be the choice over Lowe's, but maybe other is a choice if it's Home Depot, Lowe's or something else. I mean, that's totally unrelated. Exactly. Not home improvement. Yes. Not home improvement. And the consumer. Yeah. I mean, I guess, you know, part of it is I look at it. It's interesting. The home builders are doing well. That's a little different dynamic, of course, because we don't have those existing homes for sale. But I mean, there's a lot of mediocrity priced into Home Depot's numbers. Right. They've cut the stocks. come down a long way. You know, it trades at a market multiple.

4:42I don't think of this as a market multiple kind of stock. I think of this as a premium multiple kind of stock. But Long Little Home Depot, long lows. I don't know. I guess in the short term, who knows? I really want to hear what their outlook is. I don't know that this quarter matters so much. I think, you know, I've seen revenue declining over the last couple of years for this quarter, or flattish, let's say, flattish. But I really want to hear their outlook. We've heard some commentary from companies about we were a little cautious as the quarter began, but now we're actually starting to see things are shaping up nicely.

5:13So that's what I really want to hear. And so listening to the call is going to be really important. It'll be interesting, too, to see what the difference is between the pro segment and just the regular retail segment, because we can get very different messages from that. Yeah. Pro has been great for Home Depot. Let's be clear. That's part of that multiple. Right. And it's part of where they I think even during some of the difficult times of COVID were able to extend. There's also dynamics with commodity deflation that should be helping these guys as well, if you think about the margin. But it gets back to, again, retail sales.

5:40If you're someone that's selling stuff, higher ticket sizes and basket sizes is actually good for your stock. You like inflation. But I think in this case, actually, it might help them. Well, I'll just say two things. I mean, this is anecdotally. I don't know if you guys noticed this, but Black Friday turned into the month of November. It started at Halloween. I mean, it's super promotional. OK, so that's going to weigh on margins. Let's just be, like, really clear about that. And so, like, you know, I mean. Kind of takes the pressure off, though, doesn't it? I mean, I don't. I mean, on Thanksgiving, you're starting to digest.

6:10And you're like, I get it. You know, not only did I don't have to get out there anymore. I know Guy at that point will be waiting outside of a Walmart somewhere. On Monday. On Black Friday deals. No, but the fact that you can kind of ease into the holiday shopping. I might be ahead of the game right now. I'm getting there. You're the guy who buys the day before. So getting ahead is not the thing. I enjoy the sport of shopping as much as I can on Christmas Eve. But it's a good time. I think, real quick, the pro at Home Depot, that's Tim Seymour. Thank you. He goes in there for batteries and he comes out with a chainsaw because you have to almost.

6:41They get me for everything. TJX on the 15th, I think, because that stock's making an all-time high as we sit. 20 times, not ridiculous multiple at all. The stock is impervious to seemingly everything. But you know what? Dollar Gen and Dollar Tree were nine months ago as well. So if you start getting hiccups in a TJX like you did in the dollar stores, that actually might tell a really interesting story two days from now. You think we've got a hiccup? I do. I think the dollar stores, because of the price point, it's a very tricky endeavor. I think that TJX is sort of its own animal. I had a little bit higher multiple than that, but it's not crazy.

7:14They've done a great job. It does trade a little richer than raw stores in Burlington, but it deserves to. But one last thing. Wouldn't it be funny if inflation were transitory after all? Well, but it's not like, listen, CPI tomorrow morning, 3.3 percent. That's still up year over year, 3.3 percent off of a much higher base that's just been accumulating. You know what I mean? So one other thing I was going to just add is like if you think about what we heard from the digital ad companies over the last month or so before, like I think the market took a turn after that November. And even Disney the other day.

7:44I mean, like there's a lot of trepidation about advertising. We think about how cyclical that is as a leading indicator to possibly consumer softness. I thought it was decent. October 7th? I mean, oh, yes. The commentary was related to what's going on in the Middle East. It was related to that, not to the ad market. Well, I think that's the mulligan that they use right there. I mean, think about that. I mean, I don't think it, you know, I mean, we didn't even hear it. Remember that day two months ago or a month and a half ago, Snap rallied because they were talking about something. And then even on their conference call, you remember the stock was up like 15 % and gave it all back because they had some cautionary comments.

8:16So it was meta. It was Google. It was, you know, Snap had all these things to say. Look at Twitter's ad revenues down dramatically. The consumer, when they gave those numbers, I mean, I think we could argue, I would argue, I know you've been arguing, but I'll say that that consumer was very different three months ago than they are now. This stuff is catching up to them. Again, variability on auto, variability on not so much housing but credit cards and all kinds of revolving debt. It's catching up. We know that the consumer came out of COVID very flush. We also know that there really is a dynamic here where I actually think that not only the lag effect of where the Fed is, But I just think you've got a lot of pent-up demand that got satisfied.

8:55And I think at some point the unemployment rate is going above 5%, and I think that's really the story. I think these companies haven't had to push down expectations because the numbers have been really, really strong. But I think we are in a different place. And I agree with you on the fire. I think it's going to happen faster than people think. I think there are a lot of people who believe this would be some linear thing, 3-6, 3-7, 3-8. No, it's going to be 3944, like, whoa. And then one day you're going to wake up and be pushing 5%. And I don't think that's particularly good for the stock market.

9:25Of course, the rub is when does that happen? And I think it's happening right before our eyes. Clearly, the stock market, though, is impervious at this point. All right. Meantime, more pain for Macy's. The retailer dropping more than 14 % since last week. The chartmaster thinks it may be time to take it back to the store. Carter Wirth of Wirth Charting joins us now with more on that and broader retail. Carter, you're saying simply sell Macy's, huh? Yeah, I mean, what a mess. I guess we know we have a very bifurcated consumer, right? Things like Urban Outfit are up 43 percent, AEO, right? Williams-Sonoma up 30.

9:58I mean, Abercrombie & Fitch up almost 200 when you've got things like Macy's down 40 percent or Dollar General Target down 28. So a real winner-loser market. But let's look at three identical charts of Macy's earnings coming up this week, along with obviously many retailers. So this is a weekly bar charts. We're hovering right at the lows of the past three months. So mid-September, mid-October, here we are, mid-November, right at the 1075 plus minus level. I think we break. So the annotations you see there, that's one of three. Look, it's the second way to draw the lines. You can call it what you want to call it, but it has all the elements of an important reversal from, obviously, a year ago with prospective further downside.

10:42Final way to draw the lines, we've broken down out of these converging trend lines. Now, the COVID low is down at 443, and that's a long way from here, obviously at 1074. But there are many stocks in retail that have already taken out their COVID lows, and there's no reason we can't get a whole lot closer to them in the case of Macy's. Which other stocks, Carter, just before we move on to Walmart Target, which other stocks have taken out COVID lows in retail? Well, let's see. Obviously, Dollar General, Foot Locker. Macy's is close, but not there yet. I don't know if Target has, but it's real close.

11:20So and certainly beyond retailing, there's a lot of stocks that have taken out COVID levels. Let's get to the Walmart and Target then since we're on that subject. Yeah, let's look. These are these are bigger, obviously more important animals. And let's go right to the charts. So it really depends on where you start your narrative. In terms of the all data, of course, Walmart is about a 6x over Target going back to 1980, blue line, orange line. But look at over the past 25 years, actually. They're even money, essentially, with Target slightly ahead, which is to say Target is the high flyer, and this massive giveback simply brings it back in line with Walmart.

11:55Another way to do this, of course, is to look at a ratio chart. First, though, now look at here is the current spread. And this is a two-year chart. And that's what catches the fancy. Do you think, wow, maybe there should be some mean reversion, one up 14, the other down 60. But the purest way to do this, again, is to look at one line ratio. And that's what this is. This is what you see on the screen is Target divided by Walmart, which depicts a relative strength line. And what that's essentially saying is Target is not the steady one. I'm sorry, Walmart's not the steady one. Target is the high flyer.

12:27It's boom bust. And this current bust, though, only takes it back to maybe where it was 8, 10, 12, 20 years ago. It's still in line with Walmart. But finally, let's look at the two charts themselves. And this then gets the issue. Walmart, there's another three, four bucks to go, and it will be up against that trend line. I think there's limited upside. I think this stock is loved. And for those who are into funny mentals, price to book, tangible, price to earning, price to sales, it's all at the highest it's ever been. And then COVID lows for Target,$90.17. There's no reason we can't go visit them.

13:05Okay, so that was my question, Carter. Are we at a place where Target still hasn't really given up the ghost? And that spread, which I do follow that ratio, and I do think we have an extreme, and I think chasm is the word, Guy's been educating us on his wordsmithing. With a C. With a CH. You think we're going to COVID lows, and why not, when you consider that the headwinds they might be facing now are very different than COVID and they might be more long lasting. Right. And so then it depends on who you are in the market, right? A short term player would play for the break. I think that you get to those COVID lows and the long term player looks at that ratio chart and says, we know targets the boom bus one.

13:42But at this point, if I can sweat it out and take a one or two year view, I think I can make money in mean reversion in the spread. So both those approaches are valid. It's just knowing who you are and what your time frame is. When you say for Walmart, for those who own that one, that it has just another $3 or$4 upside and then it sort of tops out, what sort of top is that? Is that going to be the end of its run for now? Or how long does that top stay in place? You're very kind to say that it'll top out because that's a judgment and we don't know that it will. But my thinking is it can eke out some gains from here.

14:16It just feels awfully perfect, awfully loved, awfully unquestioned. All right. Carter, thank you. Carter Braxton Worth of Worth Charting. We prompted Carter to look at that spread since that is the premise of the trade that Tim and Karen both have in terms of being in Target. Karen, what are you thinking here? Just in terms of that spread. I mean, we've talked a lot about how Walmart's business is different, where the grocery business is. They're really good at that. It's not a huge margin business. And for Target, they have that business. It's smaller, but it's taking away the consumers changes.

14:53are making their lower margin because they're not buying as many of the sort of home goods and lifestyle and apparel and things like that. I have been wrong for a while thinking, all right, this is this is about as low as target's going to go. But this divergence between the multiple of the two, I do think, is really, really stretched. And so that is a pair of trade, I think, is really interesting. And I'm not in that spread right now. I'm actually still long some Walmart and a lot less Walmart. and started to initiate a position in Target. Carter said it, though. Isn't Walmart priced to perfection on some level?

15:30There's no question. You're expecting 4.5 % to 5%. I see the street tweaking up those comps on U.S. comps, and I do think that that's something to be worried about. On a trailing, it's 32 times. That gets really expensive. Let me just add one thing, if I could. If you look at Target, if you look at Kroger, just as a supermarket business, and think about that multiple under 10, what does that mean for the rest of Walmart's business if they should have a similar supermarket multiple for that part of their business. That makes it really high. Yeah. High. You know, that COVID low in Target, which I think is, what did you say, 90 bucks-ish?

16:04I mean, it hasn't, yeah, it's bounced recently. But if you look at close 107 and change today, the 52-week low is basically 103. It does not trade well in the face of a broader market that's not okay. I think you have to be concerned in earnings that Target's going to have another one of these situations where, you know, an inventory glutter, they just missed the boat in terms of the product mix. They have not acquitted themselves particularly well over the last two years. You're a believer that unemployment is going to go to 5%. I am. Exactly, which is why I lay that out. Can you be a fan of Target here, or is Walmart really the answer for you?

16:36If you're looking at me, I'll say Walmart is the answer. I think under that circumstance, Target goes a lot lower. No matter what the premium valuation is. I believe so. Dan? There's just so few valuations that trade at 25, this sort of premium to its peers and to the market right now. So you guys are saying, like, this is Walmart. This is a mid-single digits grower over the next couple of years. And if Target's had all of these problems but still expected to grow at a higher pace, at some point you will see money come out of Walmart into Target. It just makes sense, unless there's something that is so impaired about their business.

17:06But to Carter's point on the technicals, you know, he showed us that resistance, that one-year line where it's almost up to. If you look at the support line, and it's pretty steep off of this year's lows, you get back down 10 % pretty easily. That's a couple turns on that multiple. And then you have people probably coming back into it. But it can do that for not anything, no disasters. You know what I mean? It could just be kind of this one is such an outlier relative to so many others. And he set it up where there's almost two timelines for the trade, right? For the long-term player, that spread trade, I think that long-term spread looks really interesting.

17:38It doesn't mean it can't drift lower. Coming up, the semi-surge continues for NVIDIA, the chipmaker climbing back toward its all-time high after unveiling a new AI product. So can anything stop this seemingly unstoppable stock? Plus, a big bump for Boeing. Shares taking off as a planemaker inks a major aircraft deal. The buyer and how much they're paying ahead. Don't go anywhere. Fast Money is back in tune.

18:07Welcome back to Fast Money. You've got to address that. Yeah. What? That was the thank you. But we were cranking. I know. Cranking. I don't know if anybody actually heard it at home. They did. No, I could hear it. That's what that's what we do. I mean, we're talking chips here. NVIDIA outperforming the broader semi space today, eking out a gain as a broad industry drop. The move coming after NVIDIA unveiled a new high end processing unit used for training A.I. models. The stock is now up nine days in a row and has risen nearly 20 percent this month alone. It all comes ahead of President Biden's meeting with Chinese President Xi Jinping this Wednesday.

18:40It'll be the first meeting between the two leaders in a year. Dan, where are you on Nvidia? I'm on the sidelines because when you have a stock that moves 20 percent in a straight line, which is what it has done, it is more than it's almost tripled the performance of the S &P 500. Just put some math around that. OK, that's more than 200 billion dollars in market cap in a straight line. So the H100 chip that is in really high demand is now the H200 people, and it's going to use high bandwidth memory. And listen, this is all the stuff that you would expect out of a chip like this that's training these models and doing all this sort of stuff.

19:16So I guess my point is, is like when this sort of headline comes out after that sort of move, I don't think it's the thing you want to buy. We know that they report next week, and you better get this one right. Because the gains that they're having after they're putting up their numbers and that sort of thing are kind of getting smaller to the upside. The magnitude of the beats are getting smaller, that sort of thing. And at some point, I think that's going to be factored in as a stock that trades at a very high premium. And to me, is all of the enthusiasm that is encapsulated about AI is in this stock right here.

19:45You know, and so I don't know. I think it's a dangerous name here. Well, we for quarters, we've been saying that their earnings, the next earnings report is going to be a key earnings report. But the next earnings report, November 21st, seems like it will be a key earnings report because we will look to them for some sort of guidance for next year. So do these trends continue? Where are these where's the H200 chip in relationship to Intel and AMD, which is, you know, they also have stronger chips that are going to be released later on this year. So how does it all stack up here? Well, it's looking like it's similar to the last quarter's earnings.

20:14Right. Obviously, there were huge expectations and we expected a giant beat over what they said, which was a giant beat alone. We expect that again this time. So normally I like to think more about the fundamentals, but this is really kind of a game here. Right. And to your point, can they can they continue to put up enough bigger beats to satisfy this mark, this stock? I don't I'm sort of thinking it might be a sell the sell the news. What are you doing? Sold some upside calls too soon. But I that's what happened last time. I think Guy knows the numbers in his head exactly what happened. But I think that may happen again this time.

20:53However, I think the lead that they have is still in place for a while. And I think we'll get some sense of how big this AI market is. I mean, I'm interested to hear what their what their backlog is, what you know, how much of couldn't they fulfill in order. So I think there's still some legs to the story. But in the short term, I'm looking to sell either right before on earnings. I'm not sure it even I mean, how big the market has already been proven to nobody. No one really cares or seems to even I mean, in other words, it's big and it's getting bigger and it's getting absurd. I think the importance here, and I don't they announced pricing on this chip yet because I don't think they have.

21:28So, I mean, what's key is that the product cadence, as they said it would, is increasing. The key is also I think I think analysts are trying to extrapolate if this is 40 to 90 percent more powerful. And if we look at the A100 to ultimately where you got with that next chip, where you got with the H100, where are we going to be on 200? That's kind of what's going on here. The fact that the stock is basically within a whisper of at least a closing, maybe not the intraday gap in July, but I mean, or yeah, back over the summer. It's it's extraordinary. And I get it back. I get back to the semiconductors as a group, which which have made a relative high.