Cracks In Consumer Stocks… And Trump’s Media Merger 3/22/24

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. Downward dogs. Shares of Nike and Lululemon plunging after their earnings reports last night. Is this just the start of more aches and pains for the stocks? And should you exercise caution in these names? Let's debate that. Well, it's back from the brink. It wasn't long ago that we were ready to write off Alphabet in the AI war, but the search giant has seen shares climb steadily this month and just put in its best week since last July. What the comeback says about the future of big tech and a potential SPAC windfall, how former President Trump's stake in his soon-to-be public social media network could net him billions of dollars in what the options markets are saying about this deal.

0:42I'm Melissa Lee coming to you live from Studio B at the NASDAQ on the desk tonight. Tim Seymour, Karen Feinerman, Courtney Garcia, and Steve Grasso. And we start off with two paragons of the discretionary trade falling from grace today. Lululemon plunging nearly 16 percent, its worst drop since the start of the pandemic, while Nike down almost 7 percent, hitting its lowest level since last September. The two names were the worst performers on the S &P 500 today, and both stocks now down double digits this year. So due to today's move, signal cracks are starting to form in the consumer ivory tower.

1:15Tim, you brought this up. These are once the places you wanted to hide out where they had defensible moats. Everybody loved these brands. Well, I think they're still ivory tower brands, and I still think that they're companies that are extraordinary in terms of the power of that brand And the innovation they've even shown within their respective parts of call it discretionary, call it the wellness part of sportswear. But I think if you look at, first of all, Lulu, the question is really the question that I think we're asking about a lot of parts of the market, but most notably, Lulu Lemon. What are you what multiple are you putting on a company that really kind of said, you know what, 24 from here on out might be kind of difficult, that the comps are difficult, that some of the innovation, but that, you know, you're growing in North America significantly less.

2:02Thank goodness for that international growth. And that's really where you have a discrepancy, not only in terms of the outlook, I think, with the investor community, the analyst community. You could look at, you know, there's J.P. Morgan, I think, is somewhere around five, five and a quarter piper out there, too. And then you've got someone like Cowan and Jeffries. Jeffries, I should say, is, I think, closer to 300. And it's all the multiple. They're at 22 times, and these other folks are at 35 times. Lulu at 35 to 40 times for the kind of growth they were giving you over the last three years was worth it.

2:30The question is, what are you doing now? Nike, it's another case of, hey, we know that they actually have to invest in innovation. They kind of said that. There may be some pressure on margins. We're going to grow, what, 1 % in the first half of 25 for Nike? Like, what's the multiple you're putting on that company? So it gets back to these are fantastic companies. They're companies that I guess I believe some of this slowdown I was going to hear about six months ago. And that's really how I played these stocks. And for Nike, it worked as a short. And for Lulu, I talked about this last night. And I'll say it again.

2:59I actually covered that short yesterday during the day because it was, you know, around 15 % in my face. And I said, going into these numbers, I'm pretty confident in what Lulu is doing longer term. I still think these companies are going to wash around these levels here. And I think actually, I know we're going to talk to Carter on the charts about that. I think the charts don't look all that good. Which one looks better to you, Karen? I mean, Nike's been sort of a slow-moving train wreck for a while. Yes, and I actually thought I bought some around 90 or so when they seemed to kind of get it together, when they sort of had the inventory, not sort of, they seemed to have the inventory situation somewhat worked out.

3:35And so actually now I think I'm in the wrong one. If I had to pick one, Lulu has just been too expensive for me. Talking about that multiple, you know, 37 or so was just too high. And it gives you no room for error. They deserved a high multiple for sure. Now that it's coming down to 28, you know, there is some fear. Is it Bori or is it Aloe? Is it, I don't know that Athleta is, I don't know, maybe Athleta a little bit as well. Isn't Aloe a plant? I mean, isn't that? It's both. But that's what they need. You can put aloe when you get a sunburn. But aloe without the E is just a brand. I see. Just a brand.

4:11But a good one. Viore. I don't even know if I'm pronouncing it right. Those are really nice clothes, actually. I think, though, that Nike's strategic position is a little more challenged. And also the challenges they talked about, you know, of innovation. They're sort of behind there. So it deserves to have come down. I think I would rather actually be, if I had to pick one, I'd probably wait another day or two to... But you did. Oh, I did it myself. I'm self-redued rather. But that's okay. Of course that's okay. That's a lot there. I'm in the wrong one, but I think I would look at Lulu. I think, I mean, one thing that I remember, Leon Cooperman always said, you never see one bad quarter.

4:54Right. There's always more than one. So I think that may be more true for Nike here. They're telling us, actually. Well, the product cycle seems to be in sort of this weird spot We're sort of ramping up in terms of the new launches for women. We've got the Air Max DN launch next week on Air Max Day, apparently. I didn't know that was yesterday. Come on, you've been following this. I know. Just one more thing, the On and Hoka, those are real. Take a look at the stock for On. It's up 32 % this year. And you would never think that those small brands could even take any share from Nike whatsoever.

5:27So I don't think it's a discretionary thing. I think it's a full-fledged. It's a Nike thing. It's a Nike thing. It's a Lulu thing. I think the competitors are really gaining ground on them. I think they're too big, too inefficient, and now they have competition. Do you wear an aloe? No, I had to think about it. I am wearing Vineyard Vines pants that I used to wear, 100 % Lulu's. Now I'm wearing Vineyard Vines. And everyone has the same thing, and they're much better than the Lulu's. These are smaller companies. It's a private company. I asked the question. Boy, I didn't know what I was going to get.

6:02It's a lawyer. You've got to know the answer before you ask a question. But when you look at Hoka, everyone, they used to look like an orthopedic shoe. And now if you go around the street, they still do. Now it's normalized. And now they have colors, though. So you see people using them. When you see people using them and wearing them now, everyone wears them. And they have, what's the other brand I should know? It's the slides. No. The slides. You know what I'm talking about? I have them. You don't have to. You don't need to lean down and slide. No, no, no. No, they're athletic slides. They're supposed to be recuperative shoes.

6:37They look like cloud-based. No, no, I'll get it before. Go to Courtney, and I'll get it. I can't wait. No. Courtney. Actually, I think this is a combination of the two, right? I think you are seeing that consumers are moving away from some of these discretionary items because inflation has still been a pressure on the consumer, but they're still going and spending money on dinners and experiences and travel. That's not going away. So I think it's that pitted with the fact that these are real competitors. I mean, I used to only wear Lululemon and Nikes. I do. I love Viori. I love Aloe Yoga. I should have asked you.

7:07I'm not going to.

7:12I'm pretty sure I changed out of that to come here, which is funny enough. But I think these things are colliding. So, yes, I think they could have some pressure here. But honestly, I do think over the long run, these are going to continue to be strong brands. I think it's something you probably want to have a piece of. But it probably still will have some short-term pressure. So I think that's something to keep in mind. Oofas. That's the name of the show. No, O-O-F-O-S. And by the way, just another tailspin on this. Oh, you really are out of it. I was surprised you don't know it. I think I do know, yeah.

7:41Your kids have to have it. Are they making those for men? They're recovery shoes. So a lot of the athletes, Major League athletes, are using them. But just one little thing on this. Is there a button to this? No. I don't think it's a button to Ufas. There's a button to the Lulu story. Okay. So when we first started the pandemic, People were overloading on appliances and on technology. Then we went to vacations and services. And then we went to spoil the revenge spending, buying the high-end stuff. Now we're coming back to appliances and electronics. Best Buy. You saw it today. So that's the button up on this.

8:22I think it's a cyclical thing, and it's also a competition thing. But I would be I would be looking at Whirlpool or things like that that is just starting to ramp back up. The CEO of Lulu said on the conference call, consistent with what we've seen from others in the market, the consumer environment in the U.S. has been somewhat challenging. Would you agree with that? Or well, I I'd be interested to know the cadence of the quarter. Right. And how it went along. They had a slowdown, right, slowdown trend in the beginning of the year. Yes. And I don't know about the rest of it. And then I've heard of improvement post that.

8:59So to me, it's more about the trajectory than what the quarter overall was. Steve is right to challenge the companies and not necessarily the macro. I think it's probably both, but Courtney said it was both. But if you look at Lulu, they only grew 9 % in North America. And that's just not good. That's just not good enough. 54 % is a nice number. And I think these wide-bottom pants, Steve, apparently were not selling so well. They're catching on? Well, not for me. But they are definitely, I think, something that was brought up. And in Nike's case, they're Air Force One. They're reducing. They're taking some models out of commission.

9:34There's going to be some cost to this, even though that 4Q was about margins and things that were pretty impressive. And those numbers were absolutely fine. But again, Nike in the first half of 25 is going to be flat to maybe 1%. And we're now waiting for a second half inflection of 25. So we're talking about a year and a half away. And I just, you know, I think stock's stuck here. I always wonder, just as a matter of style, why do you drop a bomb during the conference call? Why not sort of come out with all of it at the same time? Which bomb are you referring to? The Nike bomb, right? That didn't come out until later.

10:12You mean their guidance? Yes. They always do that. The guidance is always on the conference call. Same thing with Microsoft. There's just some companies, they just always do it on the conference call. I know. I don't know why, though. But in Nike's case, back to your Cooperman comments, which are often astute, you know, Nike's been dead money. If you take out a gap that it had kind of in the end of 23, you know, largely this company's done nothing for two years. And I think that in this environment means it probably could get weaker. All right. Let's get to our other big story of the day. The seeming resurgence in shares of Google parent Alphabet.

10:45The stock's dropping more than 2 percent today after some positive notes from analysts at Wedbush and Morgan Stanley. and shares are up more than 15 % from its lows of the month. Back then, we were asking here on this desk, what is wrong with Alphabet? Did we mark the bottom? Was the concern premature? Karen, what do you think? Well, I think that the concern is there that the rollout for AI was just bungled multiple times, right? And then I just think it got too cheap. I mean, people were like, you know what? The Mag 7 is now Mag 4. They're not in it anymore. And I don't know. So it's a big position for me.

11:21I still think it's cheap. It is cheap, unless you really believe that that moat they have around search is going to be sort of, you know, attacked so quickly. The cash flow here is tremendous, and I think that they could be a lot more efficient. I'd like to see that. I'd love to see a year of efficiency there. In the Wedbush note, in which they put it on their best ideas list, they make the point that over the past six months, Google's share of search is stable at 92%. So that concern, at least right now, that it is actually ceding share of the search market to others doesn't seem to be backed up by numbers.

11:57Yeah, and I would agree with that. I don't think that that's going to get eroded any time in the near future. And I think what you're seeing is it's the optimism on what's going to happen if AI. I mean, that euphoria is not going away any time in the near future. So you're seeing suddenly as Apple might have be using Google as part of some of their AI searches in the near future, that's going to say, OK, maybe Google is going to be the next place for that. And suddenly people are going to put so much more of a multiple on that. And how much that is justified, I don't know, because how much of that is really going to impact their revenue in the short term.

12:25I think that's the question. But investors are clearly rushing to be there. And I think that's probably not over yet. I think it was just a matter of when we said did we hit the bottom. They overworked the woke angle, and that was the really eyeballs on Google. That's why the stock was sold off, because they bumbled AI so many different times. This week, it was about the 2.2 billion install base on Apple phones that Google, basically it's a Trojan horse now coming in and stealing stuff from Apple. So I thought it was originally was a win-win for both companies, but it's definitively in my brain a bigger win for Google to have that install base, and I think that's what rescued it.

13:07Yeah, I thought the Gemini announcement was interesting with Apple, and I do think that it's all incremental to people reassessing. I just think in terms of AI and impact, Micron's a great example this week of a company. No one was pricing with a big AI bid, and suddenly they say they're alive and well in terms of AI memory, and suddenly this is another AI play. I think there's so few ways, obviously, other than NVIDIA and some of their suppliers and some of the periphery directly there and a Facebook. You know, in concept, of course, Google is a company that you think is right in the middle of AI.

13:38And we all know that they are. They've also been investing in this for a decade, not for three weeks. So I just anyway, I get back to Karen and valuation and a company that for so many years, we've questioned whether their core business was actually being eroded. And right now, I don't think anybody's close. The past few weeks has all been about finding the secret or the hidden AI plays, right? the areas of the market that have not caught up to what NVIDIA has done in the market. Is Alphabet one of these names that people sort of look? Hiding in plain sight? Hiding in plain sight, exactly. Well, Dell's been hiding in plain sight, too.

14:09Which one, Dell? And Dell and Micron and a lot of these other names. Yeah, I mean, I have Dell. I don't have Micron. I think that, I mean, if you think about it, this is a low 20 multiple. It doesn't even take into account the$80 billion of net cash, which is extraordinary. So you're getting down to a 20 multiple. Should this be a market multiple stock? No, it should be higher. You know, when you look at Micron, when I've been in and out of this name, unfortunately, I did not capture this spike higher. And you need DRAM, right? AI is going to overload DRAM. It's amazing to me that the market was so caught off guard with a Micron name that it took this long for it to finally pop higher.

14:50But I think you have to concentrate. Go back and look at NVIDIA's conference and look at all their names that they discussed and keep an eye on all of those names that were mentioned at the conference. I just think the cost discipline, I think that year of efficiency for a lot of people, especially Google, is something you should be watching, and it's going to be a driver. All right, let's get the technical take on both of these top stories tonight. Chartmaster Carter Worth of Worth Charting joins us now. So, Carter, let's start off with our retail stocks, Nike and Lulu. Disasters today, but what do the charts tell you?

15:19Well, that's right. So news-related drops and gaps on heavy volume, meaning resets lower in response to fundamentals, earnings that were good or bad. But either way, they have to be bad because you don't go down if they're good. Let's go right to the charts and try to figure it out together. So in the case of Nike, you could see that drop and gap today. We didn't really undercut the October low, which is the intermediate low for the market. But to put this in more context, if you look at a longer term chart, this is sort of the critical trend line. This picks up the COVID low, the low of, again, 2022, the low of 23.

15:55And my hunch is here we kind of stabilize, which is to say if one has been short, I would cover that. But it doesn't make it a long. So now it just, I think, goes dead and I would leave Nike alone. No trade. All right. How about Lulu? Sure. News related drop and gap as well. We look at the short-term chart, and there you see it. And it, too, this is the non-random nature of pattern interpretation. Why did it stop on that line to the penny where it was two other times? It's not a P.E. level that it stopped. It's not a price to sales or a dividend discount amount or enterprise value. Stopped there because a lot of people look at charts, including big computers.

16:33Let's look at the longer-term chart. And where does it stop? It stopped to the penny at the line that's been in effect since 50. This stock has gone from 50 to 500, and now it just got re-rated lower to its major trend line. My hunch here, too, is that it's now where it belongs. The news is out. The market has spoken. And if this is a pair of twos as well, it just sort of goes sideways here. OK. And how about Alphabet? We were just saying that it's had a resurgence of late. What do you make of that turn? Yeah. I mean, to be fair, this is the opposite. it. One thing to note is that on a five-year basis, both the Qs and Google are up the exact same amount, 150 percent, literally.

17:19And so it hasn't really been a laggard. But the symmetry of it all is quite beautiful. So if you look at this chart, those lines sort of draw themselves. You have a cup and handle. You can call it that. But either way, we're back at well-defined tops. And the presumption is it makes a new high, as, of course, so many other stocks have already done. All right. Carter, thank you. Stay close. We'll see you again later on in the show. Pair of twos on both of them. So, Karen, are you rethinking Nike? You said you wanted to be in Lulu, but Carter also said that's a pair of twos. Well, sounds like you have four of a kind, though.

17:52That's a good point. Am I rethinking Nike? I mean, I don't feel like he's sort of saying this is sort of where it's going to settle in. So that's sort of a pair of twos. I get why he gets that. It makes me lukewarm on it. What do I need to own it for? Lulu, I'm a little more optimistic, but also there, I don't feel the need to rush out. Right. Right. We have a little time. The cup and saucer, to me, looks like a smiley face. Oh, so like a good sign. Which says it's happy. Right. Yes. I mean, that is a smile. You know, everyone sees what they want to see. Right. But we saw the same thing, actually.

18:26Well, and he also calls it fundamentals. Yes. Imagine a bunch of chart guys, like, sitting in a bar, like, laughing at all the people. Right on the analyst. Fundamentals. Right. But he's right. And charts are indiscriminate on some level. And to the extent that Lulu is the most interesting of those charts, because that chart is extraordinary from 50 to 500. But if we've just checked back to the bottom of that channel, while it might be dead money, you know, I kind of heard my pair of twos was that it was a positive pair of twos. It was a positive glass because actually you're at the bottom of the channel of an uptrend.

19:00All right. Coming up, could Apple be teaming up with the Chinese tech giant on AI? Brand new report says the tech titan is already in talks with one of China's biggest names. Who and why next? Plus, is Netflix rolling out the red carpet for a new all-time high? The streaming giant already up nearly 30 % this year. Can it stand the spotlight long enough to set a new record? We'll dive in right after this. This is Fast Money with Melissa Lee, right here on CNBC.

19:35Welcome back to Fast Money. The Wall Street Journal reporting that Apple is in talks with Chinese tech giant Baidu about a potential AI partnership to help navigate regulatory hurdles in the country. Apple and Baidu both making slight gains in that report. For more on this potential partnership, let's bring in our very own Steve Kovacs. Steve, great to have you. Welcome to Fast Money Land. Yeah. So it has to go with a Chinese partner. Yeah, it kind of has to. And this is just another name now. we're adding to the increasingly growing list of companies that Apple may partner with. We got we heard about the Google Gemini deal early this week.

20:08On top of that, they've been talking to OpenAI. They've been talking to a startup called Cohere. That's also according to the journal. And now Baidu, though, Baidu is different. They already have a search deal with Apple in China, similar to the deal they have in Google here in the United States and elsewhere. Obviously, there's just regulations in China that is blocking this from, you know, think of it this way. You will not have a Google product embedded into an iPhone in China. You wouldn't have a Facebook product embedded into an iPhone in China. That is why Apple would have to talk to Baidu for this.

20:39Look, I think what we're really seeing here is this feels more like a search thing than it does like some kind of fundamental iOS AI thing that's going on. That's because of these already existing agreements and the companies they're talking to and what they're capable of doing. I know some of the commentary early on when these reports started coming out said something to the effect of, oh my God, here's Apple giving away everything to Google or one of these other companies. Maybe it's just a search deal and it's just one part of the whole AI puzzle. That's at least what I'm reading now into this, but who knows?

21:13It could be bigger than that. And if it is bigger than that, that says a lot about where Apple is in this AI development and just how far behind and how much further can fall behind as it spends so much time fighting the DOJ over the next two to three years. Right. It does seem, you know, Apple teaming up with Google versus Apple teaming up with Baidu are very different. Like the perception is very different. China has not approved a single large language model developed by a foreign foreign company. It's Baidu. It's called Ernie Bot. That's all they got. Exactly. And so Apple is forced to team up with somebody.

21:45But here in the United States, that's a completely different. I mean, the takeaway can be completely different. And also imagine if they had to integrate Baidu into the U.S. and Western versions. We freak out about TikTok on our phones. Imagine if we had Baidu Chinese AI embedded into our iPhones. That would just be a nightmare just politically for Apple to do. So, yes, they have to do it. If this does end up happening, it'll just be geofenced to China. Everyone else would have the Gemini version of this. But, Steve, give us some sense of really where we'd be tracking the AI players in China. People are looking at the mega cap, you know, the K-Web and those Chinese names.

22:19And I realize it's not an apples to apples. And to the extent there's not there's there is no NVIDIA of China. No, but there is. They wish they had it. It is the Google of China on some level. And Tencent, certainly you can make an argument or Alibaba is is the Amazon of China. So to the extent that you think some of these plays or Tencent, which is really social media, and we're arguing here that Facebook is certainly putting this to to to their benefit right now. Any thoughts on that in terms of these players? I mean, it behooves these other guys more than it behooves Apple. Because they are going to be, whether or not, which way the money is going.