In short
Podcast Summary: CNBC's "Fast Money" - Episode: Did DataDog Ring the Bell for the AI Trade? And Is There More Trouble Ahead for the Regional Banks? (8/8/23)
Episode Overview In this episode of "Fast Money," host Melissa Lee and her esteemed panel of traders discuss significant shifts in the market, particularly focusing on DataDog's disappointing sales forecast and Moody's recent downgrades of regional banks. The episode delves into the implications of these developments on the tech sector and the broader market, as well as individual stocks that are exhibiting notable trends.
Key Topics Discussed
DataDog's Impact on AI Stocks
- DataDog's Guidance Cut:
- Shares of cloud computing company DataDog fell nearly 20%, marking a significant drop after it lowered its sales expectations for 2023.
- The discussion revolves around whether this signals a broader concern for the AI sector, as many software stocks are interconnected.
- Market Reactions:
- Panelists noted that the software stocks (IGV) dropped over 1.6%, indicating a sector-wide sell-off.
- Analysts debated whether the AI trade bubble is bursting, highlighting the expensive valuations of tech companies amidst rising interest rates.
Analysis of Market Trends
- Rising Interest Rates:
- Discussion on how the Fed's indication of maintaining higher interest rates may be impacting stock valuations across the tech sector.
- The sentiment reflects that investors are becoming cautious, leading to a reevaluation of high-multiple tech stocks.
- Value vs. Growth:
- The panel noted a potential shift towards value stocks as growth stocks face pressure from rising rates and economic uncertainties.
- With tech stocks losing momentum, energy stocks have shown resilience, suggesting a market rotation.
Regional Banks Under Pressure
- Moody's Downgrades:
- Moody’s cut ratings for several regional banks, raising questions about the timing and relevance of such downgrades at this point in the economic cycle.
- Gerard Cassidy from RBC Capital Markets argued that the downgrades were late and questioned their implications, asserting that some banks are still in good shape to weather economic slowdowns.
Sector Performances
- Energy Stocks:
- Energy sector has outperformed, indicated by the success of stocks like Schlumberger, which reached multi-year highs.
- Panelists discussed the financial health of energy companies and their capacity for debt repayment amid rising interest rates.
Individual Stock Analysis
- Lyft and Rivian After-Hours Moves:
- Lyft's stock fluctuated post-earnings report, highlighting challenges in the rideshare market amidst competitive pressures.
- Rivian's stock saw a trend change with its first "Golden Cross," signaling a positive shift despite the broader market concerns.
- Healthcare Stocks:
- Eli Lilly and Novo Nordisk reported strong earnings driven by weight-loss drug sales, raising debates about valuations in this hot sector.
Market Sentiment
- Investor Sentiment:
- The segment concluded with a discussion on current investor sentiment, noting that many are optimistic yet cautious about entering the market given the potential for downturns.
Key Takeaways
- DataDog's revenue forecast may indicate a broader trend affecting the AI and tech sectors as investors reconsider valuations.
- Regional banks are facing scrutiny post-Moody's downgrades, yet some analysts believe the sell-off may be overblown.
- The energy sector appears strong, contrasting with the softness seen in software and tech stocks.
- Investor sentiment is growing optimistic, but concerns about valuation and economic slowdown persist.
Conclusion The episode provides significant insights into current market dynamics and the implications of DataDog's forecast on the AI trade, as well as the impact of Moody's recent downgrades in the banking sector. With the shifting focus towards energy and value stocks, traders are left to navigate a complex landscape of investment opportunities amidst rising economic uncertainties.
Written by AI. May contain mistakes. Listen to the episode to check what was said.
Transcript
Automatic transcript. May contain errors.0:01Right now on FastDataDog, the software stock blocking its worst day in more than three years after slashing its sales expectations for 2023. Did that warning just take the air out of the AI bubble? And later, a big downgrade from Moody sending regional banks reeling. What's behind the call and is there more pain to come for these beaten down names? Plus, weight loss fattens up the fortunes of two health care stocks. Is the China sell-off an emerging concern or an emerging opportunity? And Disney on deck, what options markets are expecting from that earnings report out tomorrow? I'm Melissa Lee.
0:30This is Fast Money. We're live from the NASDAQ market site on the desk tonight. Tim Seymour, Bono and Ice, and Dan Nathan, and special guest trader Chris Verone of Strategas, a Baird company. We start off with the wild ride on Wall Street today. Stocks closing well off session lows. The Dow is down 466 points at its low, but finished the day off about 160 points. The S &P 500 shedding almost half a percent. The Nasdaq down nearly eight-tenths of a percent. The FIRA index, the VIX mirroring the market's moves, hitting 18 for the first time since May before pulling back some. Still settling higher, closing above the 16 mark.
1:02but one sector of the market stayed under pressure all day, and that would be software stocks. The IGV dropping more than 1.6%, closing below its 50-day moving average for the first time in more than three months. One big drag on the group, Datadog, the cloud computing company slashing guidance, seeing shares drop nearly 20%. That's its worst day since the start of the pandemic. So did the news put a pall over the whole AI trade? Then you add to that a little pale into your action, Dan, and that was trouble. I think this is less about AI. It's more about like rising tides, lifting all boats, right?
1:33So when you think of these consumption-based cloud models, right, in the software space, all of them have traded very expensively all year long. I think the AI and the promise of AI and these tools being deployed across lots of systems, I think companies like Datadog have obviously benefited from that. I'll just tell you, if you look at the quarter they reported and you look at the guidance they gave and you say to me, the stock's down 17%. I'd say to you, I don't get that. Okay, here's a company that's expected to grow sales 20 % a year for the next few years. They are profitable on an adjusted basis.
2:01They have like high 70s gross margins, if you will. I don't get that. And this might be the reason why you want to extrapolate it out a little bit to the broader software sector and really focus on valuations. When you think back to late 2021, when the Fed said they're going to raise interest rates and they're going to do it to battle inflation, the first things that got hit were really high price software names and a whole host of other tech stocks. And so maybe this higher for longer is starting to sink in a little bit. And if you think of just the mega cap names, if you think about a Microsoft that's down about 10 percent from its highs just last month, because I think some of the froth is coming out a little bit of the excitement about AI.
2:40They weren't able to guide to a point where people said this deserves a 32 multiple. Maybe it's working its way across the tech sector. And it does make sense that it starts in software. Chris. You know, Dan, I think one of the ironies here is that the rotation out of the software and out of the techs began with the very benign 3 % CPI print back in early July. And basically ever since then, you've gotten the exact opposite market response than one would expect. I mean, even look at the tape today. What actually led today was energy. I mean, the price at Accru today was fantastic. They opened it down 3%.
3:10They closed it up. The XLE actually closed out a new high today. You've seen relative strength coming from that group for the last three or four weeks. So under the surface, there's been these subtle leadership changes. Energy has dominated both discretionary and tech since that July 12th CPI print. I think very important message there. Yeah. Well, I think the market is paying attention to valuation. And so there was nothing right. Those data dog numbers. I think the bar was set high. I think actually the expectations had been built up by what they were seeing in other cloud. And ultimately, I think they beat revenues by 2 percent.
3:42And the problem is that do you pay 11 times 24 sales for this company? And that's what the market has to digest. We're out of places. Chris is talking about things like energy. Energy sector earnings were down 40 percent, but that was off of a ridiculous base of last year. And the fact of the matter is these energy companies are paying down debt, paying back capital and have never looked better balance sheet wise. And they are attractive. And so industrials are attractive. This is that broadening of the market. So it's less about, you know, AI gone, you know, parabolic than I think it's finally a recognition that people think, OK, the economy is slowing, The job market's certainly seen its peak.
4:20There are going to be pressures. But maybe this is not – this is certainly not 2008. It may not be, you know, 1990. You know, pick your recession. And it's not that. Right. And then, therefore, these companies are all attractive. That's what I'm taking out of this. The reaction to today's market and where it closed relative to where we started, even for banks. I know we're going to spend a lot of time on banks. But I thought the market traded great today. At one point this morning, I was just doing like where the S &P was down 3 percent from the recent highs and where it had moved. That was the biggest move down off a peak on the S &P since SVB.
4:55So, in other words, it doesn't take a lot for people to feel a little squirmish here. And, you know, I thought the market traded pretty well. Bono, and you're in some of the higher multiple names. Are you starting to rethink? Because it seems like that's what the market is doing at this point for an amalgam of reasons, not just data dog, obviously. But that sort of just underscores this notion that we've got higher rates, higher for longer. We've got uncertainty about the economy. We've got a little bit of a published action going on in AI related, AI adjacent names. You're in NVIDIA, Tesla. Yeah, I mean, it's it's it's definitely name specific.
5:27Right. So, again, drilling down on the data dog, like I think this somewhat flies into the face of what we saw from Amazon and AWS. Right. And to Dan's point, if you look at the numbers, there's a large divergence between their numbers and that quarter. But like this thing trades at, what is it, 80 times forward? So anytime you have any type of pullback, any type of guy down, those are the names that are going to get punished. So to your question about do I still think you can be owning more expensive pockets? Yes, if the sales growth is there and the cash burn is kind of reeled in. But you have to understand that you're going to need to pivot, which is why I've always said those names, when you double or triple, you've got to take some money off the table just because you should be expecting to have heightened volatility in those type of names.
6:06particularly when you have some questions about the economy. One thing that's pretty unique is we're about 90 % through the S &P 500 earnings cycle for Q2 is we didn't hear about a lot of guide downs. We certainly didn't hear a lot of second-half guide downs. And so that's something I think that if you had your antennas up or you were listening to these calls and reading the transcripts, that's not something we heard a lot. So at the later stage of the earnings cycle, I think it's interesting that the headline is that they guided down. This is data dug. Again, not too big a deal about this. Last night we talked about it, Tim.
6:34You and I were talking about semis. If you just put this together over the last few weeks, what Taiwan Semi said to us, what Texas Instruments said, what Qualcomm said. So we're talking about what Taiwan Semi said I think is really important. All of the demand for AI is not going to outweigh the weakness that we're seeing in other end markets. And it was confirmed by Qualcomm and handsets. It was confirmed by Texan and Automotive. AMD doesn't have the chips. They're not competing with NVIDIA right now. August 23rd, we're going to hear from NVIDIA. We're also going to hear from Snowflake that day.
7:00And I think that's in the data dog camp. That's really important. Look at that chart that's up there right there. That's Taiwan Semi. Sorry to step on your toes, Verone, but this is an interesting one. That stock traded today right to that uptrend that has been in place. And, you know, a guy, if he was sitting in your seat right now, he'd say one of the five most important companies in the world. They told you there's weak demand right now. That chart, if it bounces here, we might be in the all clear a little bit. If it breaks down, I think the semis are going to go with it. I'm positioned that way in the SMH.
7:27I think when you look at the semis, Dan, and you're spot on here, is that there's really treachery everywhere. for as good as NVIDIA or Avago have been, you're basically back to the 200-day on Texas, on Qualcomm, you're through it. TSM has maybe broken down here. So this has not been a straight shot. I think it's a reminder that two things can be true at the same time, that these could be great companies, that ultimately the long-term uptrends may still be in place, but also stocks correct. And a lot of these have been a straight shot all year. And I think it's very reasonable. We have seasonality no longer at our back that you expect some consolidation into this time of year.
8:02Well, we've had it. And I just you know, the semis, if you look at the socks relative to the S &P, as we said, you know, I've said this a lot many times, but I was looking at it again this morning. I mean, support for the relative. So do the ratio of the S &P against the S &H, SPY divided by SPH. And at around point three three nine zero, you've got major support and it's testing it and it's been testing it for a while. So I don't think it derails. I also think that some of the other dynamics out there, exports out of Taiwan. We got a lot of data out of Asia last night in terms of macro and Taiwan exports were down.
8:35And certainly there's less demand from the rest of the world right now. So, yeah, I tend to agree. I mean, I don't I think I think semiconductors are going to continue to be a high growth, exciting part of the market to invest in. I think they've had a ridiculously strong run. And Taiwan Semi last quarter did their best to kind of de-risk the rest of 23, but we really don't know about 24. So put this all together for us, Bono. I mean, we're seeing softness in software, softness in semis, as these guys have pointed out. But good price action and energy. We still see the broadening out of the market.
9:09Overall, are you constructive here? Well, I think it's always constructive when you see broadening out of leadership, right? And you want to see that passing the baton. We've seen the rollover in big cap tech. Yes, but I mean. And then the softest in these sectors. But it could be much, much worse, right? And so, like, we talked about SIMIs. I think, like, the more economically sensitive pockets of SIMIs, perhaps seeing those numbers out of China today, will give you some concern. But the pockets that still, that are most expensive because of this, the pockets that still are seeing revenue growth and profit growth are still going to be leadership, I believe.
9:43to the point about energy. You know, I really think as rates have risen, we've kind of thrown out that dividend yield and, you know, debt pay down. And that may just start to be more of the focus in the forefront now, especially as people are expecting to say, yes, higher for longer, but perhaps we've reached that terminal rate. All right. Can I just say one thing? Yeah. August 23rd. If NVIDIA can't guide up meaningfully, and Karen said this last night, and she owns it, it's lights out for the semis. Can I say something? Yeah, go ahead. No, no, no. I say yes to that. Oh, it's your show, actually.
10:14Mine is just mine is an inane comment. Every time we say data dog, I think devil dog. And it was a terrible it was a terrible dessert. Now you're rethinking letting him say something. Oh, wow. Yeah. Sorry. Yeah. Yeah. Let's move on. Deep dive now into the technicals for the software space. Did we see any real damage being done today? Well, I think when you look at let's start with the story of the day, data dog. It's a reminder that there is treachery even when you have good numbers. And I think when you go back and you look at kind of prior instances of coming off lows, remember, the first year off the 2002 low, tech worked for a year.
10:53And then they went dead for the next number of years. A lot of these names have worked, as we know, very well for the last year. I guess the best thing you can say about a data dog right now is it's oversold. It's at the 200-day. You could probably get a bounce. I would expect it to be a tepid bounce. I do think it's going to fail on any rally. Microsoft, as we all know, has been below the 50-day now for the better part of the last month. This is not a new story. And as Dan says, I think the big story going forward is what happens to NVIDIA on numbers. If you lose NVIDIA below the 50-day, right now we've seen Apple below the 50-day.
11:24We've seen Microsoft under the 50-day. If you lose NVIDIA under the 50-day, I think it just reinforces the story that this is becoming more of a value market and less of a growth one. Avago, very similar story. It's been quietly consolidating for the better part of the last two months since that big volume explosion on the May NVIDIA quarter. Below the 50-day, I think very, very vulnerable there. And the big picture here is the IGV. Why do I want to own these stocks breaking down when I have value names starting to break out? I mean, Schlumberger made a new high today, right? Why am I going to play in a space that's run all year and is technically vulnerable when I have names that have basically been on the sidelines now starting to perk up?
12:03So I think this market is splitting. It's bifurcating. I lean more towards the value side of the equation. Treachery. Treachery. Great word. And really kind of gets the fear factor to the front. I think that if I look at where the top seven, the magnificent seven, sorry, guy, wherever you are, you have a case where we're never going to see that weighting in the S &P again. OK, it's not going to happen overnight. But I still I love this. It's why I've said this. I said it last year. I said it. You know, I should probably keep saying it. I will say it again. And like energy at 4.2 percent of a weighting in the S &P, I don't think so.
12:36I think it's going higher. And I think you're going to start to see a lot of these things change. I also think investing in tech as a sector from a secular perspective, you had only a few places to go globally. This was really the place to go. And I think there was disproportionate global interest in a lot of these stocks for that reason. Many companies are tech companies at this point. And companies like Google are really more, you know, we talk about Apple's probably a consumer products company. What are the other of the seven that look vulnerable to you, Chris? Well, I think when you go name by name, obviously, we've lost Apple over the last several days.
13:07Amazon and Google still generally trade OK. Let's watch Google. It's given back a fair amount of the earnings from last week. Let's keep our eye on that. But for me, it's Microsoft, it's Apple, it's NVIDIA, where the weakness is evident. And I would just ask the question, can the S &P itself stay above the 50-day when you've already lost two, if not three, of the larger weights? No, Tim. Can it? I would argue probably not. Okay. I don't think that's some calamity. We've had an uncorrected move basically since SVB. I think it's very reasonable that the S &P in the 200-day meet somewhere in the middle here, maybe 4 ,250, 4 ,300.
13:44But, Tim, you bring up a very good point. Energy at 4 % of the S &P. The 70-year mean of energy's weight in the S &P is 11. Let's say that's wrong by half. Let's say we go to 8. That's still a big move from where we are right now. So I think there's upside there. All right. So Alphabet is easily the best looking of the hateful eight. That's Stuart Kaiser. Remember from Citi he came on and he said that? This is called the biggest seven or the biggest. I don't like any characterization of stocks. I think we should remain neutral. Nice. Got it. We're not getting pulled into that. That's not too magnificent these days, is it?
14:16Well. Case in point. Fair enough. All right. I think that Alphabet, which is one of the largest stocks in the stock market. I think it's the best looking chart. if it were to come in, let's say the market were to go to some of the levels you're talking about. We did lose Microsoft. We lost Apple. They broke those really well-defined 45-degree uptrends that have been in place all year. Google, if it came back 10%, it comes right back to where it was when it broke out on those earnings, and it comes back to a base. And technically, it looks good. And then valuation-wise, it looks good, right? So to me, I think there are names that you want to pick at.
14:47Guy was talking about that 176 level on Apple. You were saying if it got down to 160, You have a relatively cheap stock on an install base that's only growing. I think they announced a billion subscribers to their subscription stuff. You want to own Apple. You're trading Apple here. And, boy, we did this forever. I'm an investor. I'm a trader at Apple. You're a trader at Apple right here. And I think, though, for this first test, for wherever we are, and it's going to happen, it may not be on this run, but when these big market cap names, we're not labeling them anything. No, we're done with that.
15:22They are going to challenge the entire market, to be clear, because there's been too much passive investing in it. There's been too much sentiment attached to them. You can't have those companies, which are 27 percent of the S &P, break 50-day for the first time in nine months and not even pull down sentiment in the broader market. I think you have to be careful about that, but I think it's an opportunity. Yeah, that's kind of my point there, right? So if you're starting to see the erosion in those names, whatever, call them 7-8 and, again, no characterization, like why would you— We're not scared to call them that.
15:51I'm playing by the rules here. Why would you then start to deploy new money, even in a cheaper pocket of the market, when you're expecting overall multiples to come in? For me, I just think it sets up for you to be a bit more passive, particularly given that risk-free gives you so much yield at this particular point in time. Coming up, two big names driving the after-hours action, Lyft and Rivian, both on the move after reporting results and details about the quarters next. Next, plus weight loss stock gain. Shares of Novo Nordisk and Eli Lilly jumping after results. But are these two stocks worth their weight in gold?
16:25Don't go anywhere. Fast Money's back in two.
16:34Welcome back to Fast Money. We've got a couple of after-hours movers. Let's start off with Rivian. Shares are struggling to charge in the after-hours despite exceeding expectations on the top and the bottom lines. The EV maker also upping its 2023 production targets. The conference call is underway right now. Phil LeBeau has been listening in. Phil, what's the latest? Melissa, they're just beginning the Q &A portion, and I'll be curious to see how many questions are in here that might give us some insight as to why the stock is selling off. Keep in mind, it was up 80 % in the last three months, so I'm not surprised that there might be a bit of a pullback here.
17:05When you look at the Q2 results and the guidance, it's pretty hard to find anything to complain about if you are a Rivian investor. Smaller than expected loss of$1.80 a share. The street was expecting a loss of$1.41. They also had revenue beating better than expected, coming in at$1.12 compared to just over a billion. And then here's the guidance. Let's keep this up for a second. The guidance is what people thought would move the stock higher. They now expect to build at least 52 ,000 vehicles instead of 50 ,000 this year. The adjusted loss for the full year expected to come in at$4.2 billion.
17:39Previously, they expected to lose$4.3 billion. And CapEx, because some of this has been pushed out to 2024, This year, they will be spending less, coming in at$1.7 billion compared to$2 billion previous CapEx guidance. So as you look at all that, the other question is out there, okay, what about their business? They produced more R1S, the SUV, as opposed to the R1T electric pickup in the second quarter. They have greater production of their Enduro motors, which they now have moved their motor production in-house, which has been a big driver of the improved performance. And then the question becomes what's happening with the electric delivery van that they provide, that they build and sell to Amazon, which is also a shareholder within Rivian.
18:21They have 800 or those vehicles are in 800 cities now. So you're seeing the ramp up in production that RJ Skirinj has been talking about for some time. And he talked about maybe about a month ago about how he feels better about where the supply chain is. Lots to discuss with him tomorrow morning. A first on CNBC interview you don't want to miss on Squawk Box coming up at 830 tomorrow morning. We'll talk about Q2, but more importantly, we'll talk about where they are for Q3. And as they head now towards production of their second generation models, the smaller R2 model that will be built at the new plant in Georgia, which is under construction.
18:57Melissa? Yeah, there are a lot of other headlines that are great, seemingly great. 35 % reduction materials costs. They're talking about gross margins of the R1 franchise of 25%. They've got a ton of cash on the balance sheet. I mean, you said it, Phil. There's not a lot to not like in this report at this point. Yeah, and that's why I'll be interested during the Q &A if we see anything that comes out. Look, the inventory numbers, you might be able to quibble about that and say, well, why do they have higher inventory numbers? They say it's because they are ramping up production. But other than that, Melissa, this is a case where they set the bar, they exceeded expectations, and they are raising their expectations for the full year.
19:36But when you have a stock that's almost doubled in the last three months, you can understand why some people might say, OK, let's take a pause here. Yep. Phil, thanks. Keep us posted. Phil LeBeau, what did you make of this? I think you just made a point, the cash. So they have a little more than$11 billion. If you look at their expected losses over the next few years, that kind of taps it right now. They don't have a ton of debt for a company that's losing a lot of money right now. So you think about that, you know, that investor, that Amazon, I mean, and they have orders, right? Was it 100 ,000 of those Vans or something like that?
20:05I think that's what we heard a couple years ago or a year ago when they went public or so. So to me, I think if you're Tesla, you'd probably have like prefer a competitor like Rivian than you would maybe like Detroit, if you will. And so I think there's a lot of like interest in keeping these things alive. Don't forget that Tesla lost money for many, many years as they were ramping up. So these cars are good looking cars, too. I don't know, man. Like, I think this one is OK. And we talked about Lucid last night. I mean, they have a real competitor on the high end to the Germans when you think about some of the cars that they're making and Tesla's Model S, too.
20:39So I think that you're going to see Rivian and Lucid pull through this difficult period. I think after a move from 10 to 25, if the worst you'd get is 2 or 3 percent of profit taking on good numbers, you kind of view that as a win. And something happened today on the Rivian chart that hasn't happened in the history of its life as a public company. Here we go. This is the business. Build this up, man. The 50-day broke above the 200-day. First time we've had a trend change. Golden Cross. First time we've had a trend change in Rivian since it became a public company. I think at a minimum, putting aside whatever intellectual leanings you may have on the space or the name, you'd say, okay, let's be open to the idea that this has turned, and that's where I am.
21:18All right. Let's get to Lyft now. The ride share stock turning sharply lower despite a bottom-line beat. Lyft also hiking its revenue guidance for the current quarter. Leslie Picker has all the details. Leslie. Hey, Melia. Yeah, that aftermarket trading clearly erasing some gains it saw during the market day. A sizable bottom line beat for Lyft reporting 16 cents of earnings per share on an adjusted basis where the street was expecting a loss of one cent. That initially sent the stock skyrocketing as much as 13 percent in after hours trading. But it has since come down on a Q4 revenue growth outlook that was a bit lower than analysts were expecting.
Read the full transcript
21:52The conference call near completion here, but kicked off with questions for the company's relatively new CEO, David Risher, on his strategic vision. He gave a sense as to how he thinks about volumes versus profitability with Lyft's wait and save offering. First do the right thing and then do things right. So the right thing is for us to offer an option in our app that allows our riders to choose to save money when they want to, and everybody likes a deal. And then over time, we're optimizing the profitability of that. Now, any portfolio is going to have some lower margin and some higher margin products.
22:30And I expect this will be a lower margin product forever. Our producer, Laura Batchelor, spoke with Risher earlier, who told her that Lyft's market share ticked up two percentage points to 32 percent quarter over quarter. Obviously, market share, a really important piece of this industry, Melissa. All right, Leslie, thanks. Leslie Picker. Got to go to Tim. The L in his lags trade is, in fact, lift. It has lagged the S &P 500 year to date. It has. So going into this announcement after the bell, the stock was actually flat on the year. What it's done in terms of the price action after the bell is so emblematic of what the stock's done all year.
23:04It was up 14 percent. It's down now nine or it's down down five. But, you know, this is a stock that went up almost 80 percent to start the year, had a move down of 35 percent, rallied 45 percent into these numbers. it's about the competitive landscape and where rideshare demand is proving to be both resilient, normalizing and something that actually is very good news. The dynamics with their drivers, supply of drivers. I think the regulatory environment is is not bad. This is about profitability. And when there's two players, you know, I think there's still plenty of room for Lyft. And that's the problem in this number.
23:38Yeah, I mean, exactly. It's essentially a duopoly. So, again, there's enough room for both players here. Clearly, Lyft is more of the pure play versus Uber having kind of diversified revenue stream. So you're really in a situation where you're essentially competing on price. I will say the after hours trading did surprise me a little bit. Given the short interest in the name, I would have thought a move of 13%, 14 % might have led to some short covering and perhaps a squeeze there. So I'm still scratching my head a little bit on that one. All right. There's a lot more Fast Money to come. Here's what's coming up next.
24:07Check the scale. These stocks are heavy. The weight loss drug surge, sending some farmer stocks to all-time highs. But is it too late to beef up your portfolio with the group? Plus, a credit conundrum. Regional banks taking it on the chin after a ratings cut. But the move has our next guest scratching his head. What he sees next for the group. You're watching Fast Money, live from the NASDAQ market site in Times Square. We're back right after this.
24:45Welcome back to Fast Money Pharma Stocks. Eli Lilly and Novo Nordis topping the tape today on the back of strong earnings from Lilly and positive obesity drug data from Novo. Lilly beating on the top and the bottom lines before the bell and raising full-year guidance on the back of strong sales of its diabetes drug Monjaro. Meantime, trials showed Novo Nordis' Wegovi lowered the risk of major cardiovascular events by 20%. Both stocks closing at all-time highs today. We were just talking to Jared Holtz of Mizuho yesterday, and he was saying, you know, 18 % would be great. 20 % was really knocking it out of the park here.
25:19Tim. Yeah, and I think you have an opportunity for analysts to upgrade the stock given the obesity study. And the addressable market, the ability to at least gauge how much of this is kind of one-off dynamics, how perpetual and residual the fall-on might be. It's really what you're willing to pay for it. I mean, this is this is the NVIDIA pharma. What do you do here? These numbers were as maybe not quite NVIDIA like relative to the peer group. But I tell you what, they were extraordinary when the bar was very, very high. I have trouble with the valuation. I think I think this is coming back to earth.
25:53It's the NVIDIA pharma, except that this time NVIDIA is out with a chip that that people will get paid to accept. I mean, the importance of this study is that health care will now pay for this drug because it actually reduces the cardiovascular events. And so that's a game changer in terms of total addressable market. Game changer. And think about it. A year ago, we were talking about the stock. We're talking about the prospects with this Alzheimer's drug. And the stock has since rallied 80 percent. When you think about that, it's a half a trillion dollar market cap. And I think I just heard that last year, Mongerna was 16 million dollars in sales.
26:26This year, it's going to be a billion. and some of the estimates Jared was saying is maybe$100 billion drug annually. I don't know how you get comfortable. You look at Novo and you look at this, and they have a combined trillion-dollar market cap. I think the valuations are getting a bit stretched. You had times to buy both of these stocks this year. I don't think you chase them like this right now. Well, you were actually, you know, Tim mentioned NVIDIA of health care. Yeah. You mentioned it sort of felt AI bubbly. Well, listen, themes in a market like this where there's a lot of uncertainty and there's valuation, trepidation, you want to lock into multi-year themes.
26:56I think that's what's going on. I think it's a good comparison in a way. But, like, listen, we've seen this in technology. We saw NVIDIA sell off 75 % from its highs in 2021 because all of the themes that they were playing really well up until that point, gaming, Web3, AR, VR, crypto mining, all that sort of thing, they all fell by the wayside. There's no slam dunks here. It's so tempting to want to fade a move like this. But when you go back and look at the history of the chart, eight times in the last five years, Lily's tested the 200-day. Every single time it's rallied from it. We were there several months ago.
27:29We rallied hard off of it. I think you stick with the longer term trend here. And speaking of Eli Lilly, Jim Cramer is chatting exclusively with CEO David Ricks tonight. Catch the full interview at the top of the hour on Mad Money. After the break, cutting up credit. Moody's slashing credit ratings in a number of regional banks. But are they too late to the party? RBC's Gerard Cassidy breaks down what has him scratching his head about the call. More on the financial fall when Fast Money returns.
28:01Welcome back to Fast Money Stocks, ending the day well off their lows, but still red hours across the board. The S &P shedding nearly half a percent. The Dow down 466 points at the lows, closing with a loss of about 160. And the Nasdaq lagged down nearly eight-tenths of a percent. UPS also closing well off its lows of the day after it cut revenue and margin forecasts for the year. The delivery giant seeing lower demand as it grappled with labor-related issues with its Union and emerging market stocks, particularly those in China, taking a hit today. Data overnight showing imports to and exports out of the country fell more than expected in July.
28:33And take a look at shares of WeWork. Yes, it's still publicly traded. The stock plunging after the company filed a statement saying, quote, substantial doubt exists about its ability to continue as a going concern. That's never good. It's down 17 and a half percent. It closed the day at 21 cents a share with market cap of less than$450 million. All right, moving on to regional banks dropping in today's session, though the KRE closed well off its lows of the day. The move coming after Moody's cut its ratings for 10 lenders and put six more on downgrade watch. The firm citing ongoing concerns with the sector's credit strength as higher interest rates put pressure on the group.
29:11But our next guest questions the relevance of the rating cuts at this point in the cycle. Gerard Cassidy is head of U.S. Bank Equity Strategy at RBC Capital Markets. Gerard, always great to speak with you. So if clients are calling you today and you're saying, you know, this Moody's thing is off base, it's late to the game, et cetera, which banks are you saying you should buy at this point based on the sell-off? I think, Melissa, what we have to look at is, you know, the track record of these companies through a full cycle. And we're certainly going to see banks have higher credit losses as credit issues normalize.
29:46We all know that the credit picture for the banks was amazingly strong coming out of the pandemic. And the numbers were unsustainably low in terms of credit losses. And they're starting to normalize now. But we think they're very manageable. And so as a result, when you see a sell-off today based upon the Moody's news, which I'm not saying it's wrong, the timing seems very odd. It's kind of late to the game, as you pointed out, or you mentioned. And I would say that if we really are going to see the Fed reach its terminal rate for Fed funds, let's say in September, and there is no hard landing in the economy next year, then the banks are in really good shape.
30:25And so banks like M &T, which was one of the names that was downgraded today, has a proven track record of being one of the best managers through a credit cycle. And that would be certainly a name to look to to own. Another regional that was put on watch was U.S. Bancorp, another proven bank that through the cycles really has proven they can manage through these credit cycles. So I think it's kind of late to the game. I like that expression you used, Melissa. In the framework of your recommendations, Gerard, are you forecasting a recession, a soft landing recession in 2024? Because that's the Moody's scenario.
31:02Are you saying no recession at this point? Yes. From the start of the year, we've always been in the camp that the economy was slowing down to a mild recession, and we're still in that camp. Even though the cross currents today are incredible. You look at some of the hard data, like the leading economic indicators. You look at the inverted yield curve. And you have to say to yourself, you know, we should be in a recession. But then you see the real GDP numbers that we just produced for the second quarter. And we also are the growth that the economy had. The employment picture we all know is still very strong.
31:36So we're taking the view that it's still, economically speaking, over the next 12 months, it's definitely a slowdown. And then the question is, do we technically go into a recession for two consecutive quarters of slight negative growth? That's possible. And we would, again, as the credit normalizes, the banks will be able to manage through that at this point in our view. Gerard Bono and Eisen here. Thanks so much for sharing your thoughts with us. Quick question. Do you have any idea of what might have been the catalyst for the timing of this release? You mentioned that that was a bit awkward.
32:07Do you think it had anything to do with U.S. sovereign debt downgrades or am I off the mark here? Yeah, no, you're bringing up the real point, why now? Right after the Silicon Valley debacle in March, they put a bunch of banks on the watch list in April. And I would say that that was really the time. And I don't criticize the rating agencies. It's a tough job they have. But they really are trying to get out in front of this. So ideally, you know, this type of action should have been taken last November or December. And because we all thought and the economy possibly could slow down. So I don't really think it had much to do with what went on with the U.S.
32:48government debt issue. But that is, as we go forward, we all know that is going to be an increasing issue for this economy. Gerard, we've got to leave it there. Thank you so much for your time. Gerard Cassidy of RBC. I don't want to criticize the radiators. But I am. We're kind of late to the game and don't understand why. Good for him. Why not? But yes, here we are. So, Tim, what did you make of this action? I thought the action was interesting. By the way, this was on a day also when Italy announced the 40 percent windfall tax on their banks, and it destroyed European banks, too, because for obvious reasons, they finally have profitability from higher interest rates.
33:22So take an M &T. And to me, this is a company that just announced they reaffirmed their guidance for 23. They talked about a balance sheet where they've got about$208 billion in assets, well above the$100 billion threshold that's expected to be coming from regulation. I think some of the biggest issues for valuations of stocks and multiples they trade at and ultimately the follow-through from investors is, yes, there's going to be a pause in buybacks. There's going to be some elements of what was very exciting for bank investors over two years. And really, until SVB, and I know banks had underperformed a bit this year, But for the most part, banks were very investable in a different way than they'd been in a decade.
34:01And this has set them back. But I think this is an opportunity, again, at least in the world that we have right now, where we're not forecasting massive recession. Tim mentions MTB. Look at U.S. Bank today. I mean, they got put on watch. The stock traded absolutely great. You had a$4 reversal on the eye side on the name. And, you know, we've been writing in our work the last couple of weeks. The regionals have responded very differently to rates up over the last month than they did back in February and March. And I think there's one of two things going on. When rates were rising earlier this year, the curve was still flattening.
34:33As rates have risen here, the curve's actually steepened. So I think the banks are starting to respond to the realities of a steeper curve. I would also just argue, when you look at what happened in March, perhaps the banks are saying, listen, no matter how bad it gets, the Fed has our back, the administration has our back, And we're not going to go through that again. I think both of those are reasonable antidotes to why these have traded so well here. One of Gerard's points really quickly in his notes to us were that also you're now seeing banks taking those higher rates and having higher NIMS because they can reinvest at higher rates and at higher yields.
35:07Coming up, Disney on deck. What will the company say about the box office, park attendance, and Bob Iger's business plan? A preview of the earnings report next. Plus, Investopedia's Caleb Silver will join us. And he's brought along his$10 ,000 question. Where are investors stashing extra cash right now? You've got the answer and much more ahead on Fast.
35:31Welcome back to Fast Money. Disney taking higher ahead of tomorrow's earnings report. Deutsche Bank reiterating its buy call ahead of the print, but cutting its price target to 120 from 131 a share. Julia Borson joins us with more on what to expect when it reports. Julia. Well, Melissa, Disney's earnings come on the heels of this afternoon's news that ESPN is making a big move into sports betting. I would say its biggest move yet into betting with a partnership with Penn Entertainment. Shares of Penn spiking on this news. And all of this comes as Bob Iger is under pressure to deliver cost-cutting amid an advertising contraction as well as writers and actors strikes.
36:09He also is expecting to see a decline in streaming subscribers, or The Street is expecting to see a decline in streaming subscribers. Now, Disney is expected to grow its revenue 4.6 % to$22.5 billion, while earnings per share are projected to decline by 11 % to$0.97 per share. Now, another key number to watch here is losses at Disney's direct-to-consumer division. They're projected at$759 million. This after the company warned that operating losses would widen in that division by$100 million compared to last quarter. Now, Deutsche Bank, you mentioned that report. they say its lower price target is, quote, primarily driven by lower advertising revenue and underperformance at the box office, and to a lesser extent, driven by lighter parks attendance in Orlando.
36:56Plus, Melissa, there are so many looming questions, including how much Disney will have to pay to buy out Comcast, Steak, and Hulu, and also what Hulu's greater integration into Disney Plus will look like. And then, of course, there's the future of ESPN. Back over to you. Getting into betting, Julia, was something, that doesn't really fit into the Disney sort of image and was thought as something that they would never really entertain. And at this point they have. Does that underscore this notion that Bob Iger is really considering all options at this point, that that is what he has to do? I think yes and.
37:31Yes, it underscores he's considering all options. But we also have to look at the fact that sports betting is increasingly becoming legalized in so many different states. So the more that it's legalized across the country, the more it simply makes makes sense for Disney to engage in this as part of its business. I think the reality is, is that as it becomes legal, there is going to be betting on sports that people are watching on ESPN. And ESPN is saying, if it's going to happen, let's be part of it. Yep. Julia, thanks. Julia Boorstin. Of course, the other part of the story is Penn, which is seeing a big surge in the after-hours session on the news of this alliance.
38:05It's also divesting Barstool Sports, selling it back to founder David Portnoy. Bono, you've been pouring over, What do you make of this whole thing? Well, I think it definitely underscores and emphasizes Disney's pursuit of profitability. So that kind of covers the gaming or sports betting aspect. Yeah, this divestiture is pretty interesting. So kind of reading through some of the fine print, the fact that that pin still retains a 50 % clawback on any liquidation or monetization of bar stools, I think is an ace in the hole. I found that to be extremely interesting and a very strong negotiating point.
38:39I think it also underscores that ESPN essentially was going to say, if we're going to do this and perhaps go counter trim, we're going to make sure that our branding is in line with the image that we have spent all these years or perhaps a century establishing. The online sports betting has not been profitable, and it's been something that's actually been a burn for a lot of people, although I agree it's an exciting place. It's also the concept of keeping ESPN and actually there being a valuation uplift from what could be. This was at one point, people were pricing in some of the parts and the spinoff of ESPN is being very highly value creative.
39:15I think this is very good news for Disney. All right. The options traders are one option traders feeling less than optimistic about tomorrow's report. Mike Coe joins us with the action. Mike. Yeah. So Disney right now, the options market is implying a move of about five and a half percent. That's actually less than the 6 % or so that it's averaged over the last eight reported quarters. Sentiment was mixed today. Calls did edge outputs very slightly, but the biggest individual call trade was actually a sale of 2 ,500 of the August 90 calls. Those traded for$1.72. The initiating seller obviously betting that the stock is not going to rally significantly through that$90 strike price.
39:48My guess is this is somebody looking to collect a little bit of premium against a long equity position. All right, Mike, thanks. Mike Coe for more Options Action. Tune into the full show. But that's Friday, 530 p.m. Eastern Time coming up. Should I stay or should I go? The classic flash song might just perfectly summarize the conundrum facing investors right now. We're diving into Investopedia's latest sentiment survey when Fast Money returns.
40:18Welcome back to Fast Money. Markets may have been down today, but investors are feeling the most optimistic they felt all year. That is according to the latest Investopedia sentiment survey. Lower inflation and the possibility of rate cuts are slowly reigniting investor interest in stocks. Caleb Silver, Investopedia editor-in-chief, is here to help us break it down. You came to the right show with the right selling point. Should I stay or should I go? And a great band. Great rock and roll band. That's right. Individual investors channeling their inner Mick Jones and Joe Strummer here because they are kind of caught in this.
40:48We asked them, do you have a fear of missing out or do you think the best is yet to come? More people feel like the market's a little overheated here. We may have come too far too fast, about 48 percent. That said, they're still pretty optimistic and they'll buy stocks if given the chance. Yeah, I thought the breakdown in terms of what they're buying was really interesting because it looks a little bit more dispersed versus other times that you come here where they're all in stocks or they're much more in CDs. Now it's sort of even. Yeah, a little balance going on. And we have some older readers who respond to this survey and they want to preserve cash.
41:18There's also money in the bank, 4 percent. No joke when you're uncertain about the future. So CDs still pretty popular. Here are stocks, though, very close behind. ETFs, of course, a cousin. And then bonds, 24%. Crypto, way down on the list, even though Bitcoin has been one of the top-performing assets all year. Kayla, we love when you come because you kind of let us, remind us that there's other things out there than the stocks that we tend to talk about a lot. But last week, there was the Tupperware. There was the Rite Aid. There was, you know, the yellow. Are you seeing interest in that? And what does that mean to you when you see that sort of behavior at a time where the market's kind of cooled off a little bit here?
41:53Yeah, I think that's people trying to get in on something moving quickly. But our readers, by and large, pretty balanced investors here. A lot of them manage their own money or work with an advisor. They don't do a lot of chasing. But we do see these searches for how do I short that stock? And I think a lot of that was happening last year or last week. So when you see these high flyers take off the meme stocks, you see some of these investors who come to Investopedia figuring out what's the downside here? How do I take advantage of it? The$10 ,000 question, which is the question I love on your survey.
42:20What is the verdict this time around? Stocks. And it was just creeping higher the last time I was here two months ago, but now it's decidedly stocks. So while they're a little bit worried and they think there's some overvaluation going on here, they do. They would put an extra 10K in stocks, which is kind of like they're saying one thing, but they might do another with that extra money. A little cautiousness, but the appetite is strong right now. Given the results right now, do you feel like we're at an inflection point in the markets with your survey? I think so, too. I think that we've come a long way in the past year.
42:51and a lot of people took them time to warm up to the bull market. It's here in full force, even though the last week's been shaky. So a lot of people don't want to miss out on what's to come. But I think this is an appetite that we haven't seen in a while. A lot of cash been sitting on the sidelines. They'd like to put it to work. Always good to see you, Caleb. Thank you. Thank you. Up next, Final Trades.
43:12Do not miss an exclusive interview with Linda Iaccarino, the CEO of X, formerly known as Twitter. That is Thursday, 10 a.m. Eastern Time, right here on CNBC. The final trade time, Chris Verone. Long XLE. I thought energy acted great today. I expect it will keep doing so. Dan Nathan. Yeah, you know, LIFT was also in my acronym. Not doing great. When it's down near 10, I think it's a buy. Bonoan. IYR is still squarely in a long-term downtrend, and I'm not going to fight that trend. Sam Seymour. This whole energy thing. I'm with Chris. Schlumberger, we just got their numbers. We're seeing international rig demand increase.
43:47We're seeing the company getting near four-year highs. and we're seeing, I think, investor sentiment are now, they're investors, not traders, in energy. Yeah, this was a high, Chris, today you mentioned before, record high? Almost a multi-year high in Schlumberger. Multi-year high, all right. Thanks for joining us, Chris, by the way. Chris Verona, Strategas. Thanks for watching Fast Money. Mad Money with Jim Cramer starts right now.
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