Fast Money 5/15/25

0:03Live from the NADEC Market Site, in the heart of New York City's Times Square. This is Fast Money. Here's what's on tap tonight. An unhealthy week. Shares of UNH notching another big drop. The stock down close to 30 percent this week alone. Is this now a no-touch name? And if so, how long can the ugly sentiment hang over it? We'll debate that. Plus, not such great soulmates. Dick's Sporting Goods tripped up on its deal to buy Foot Locker. Why investors aren't lacing up on this merger. And is Foot Locker trading like another suitor would be waiting in the wings? And later, Coinbase dropping in concerns about a potential SEC investigation.

0:36President Trump bites into Apple and CEO Tim Cook. And Starbucks brewing up a fresh pot for its China business. Oh, a lot going on. So much tonight. It's a big night. I'm Melissa Lee coming to you live from Studio B at the Nasdaq. On the desk tonight, Tim Seymour, Courtney Garcia, Steve Grasso, and Guy Adami. We start off with a mixed day for the markets. He has to be notching a fourth straight day of gains while the Nasdaq ending its six-day winning streak. Meanwhile, the Dow posting a 270-point gain. but the rise would have been much more robust if not for the weakness in UnitedHealth. That saw closing down nearly 11 percent.

1:09This after the Wall Street Journal reported the DOJ is investigating whether the company committed criminal Medicare fraud. UNH has lost almost$100 billion in market cap since Monday, is now trading on April 2020 lows. UnitedHealth putting out a statement in response to the Wall Street Journal, saying the company has not been notified by the Justice Department of any investigation and that it stands by the integrity of its Medicare Advantage business. Today's drop putting the stock down 55 percent from the all-time high it hit on November 11th. It's been battered by a host of headlines since then from the murder of Brian Thompson, the CEO of its insurance unit, to a disappointing first quarter report to withdrawn guidance, plus a CEO change just earlier this week.

1:50So how long can the ugly sentiment hang over the stock? Would you trade it? Tim? First of all, welcome back, Mel. Thank you. Great to be back. You were missed, as always. And trading is what you're doing here, because I think you see an opportunity in what was two months ago, the best stock, you know, best long term chart in the market. And certainly a company that I, over the last two or three years, have really felt deserved the higher multiple. They were it was a margin story in addition to growth that was above its peers. It was a dominant position. I think you're careful here. I think what I love about trading this stock from the long side, though, is everything I have heard is at least some reaffirmation.

2:34Even if guidance is pulled, there's some sense that we're in the middle part of the 25 guide. And if we're in the middle part of the 25 guide based upon those EPS multiples, this is at around 26 bucks a share. You can now do the math. We're trading. Yesterday, I talked about it being around 12 times. Now it's about 11 times. I think you're in a very interesting place. You start to get into the headlines from today bring this into a very different place. The business we had yesterday was something where it was, to me, starting to really just be a valuation call. You never feel like you have to jump in when that falling knife is falling.

3:09But I think this is a stock I am inclined to trade from the long side. I think the sentiment seemed to have been an error of forgiveness for precisely the reason you outlined. It had been a monster, a historic run in terms of a stock. A heroic stock. Carter called it a godlike stock until April 17th, when it became clear that UNH was suffering something more UNH specific compared to its peers. And that's when that sort of forgiveness went off. Yeah. They have industry issues without question. We talked about that. They have specific company issues as well. I think we've done a good job navigating people away from this.

3:43So here's the good news, if there is any. What Tim just said, and then I'll add these three things. Three analysts made comments today about UNH. RBC maintained a$525 price target. UBS maintained thereby. Bernstein has an almost$600 price target. All said constructive things. And UNH management today said the Wall Street Journal article was quoting, deeply irresponsible. Well, for them to say that, they must have some conviction that it's deeply irresponsible. All those things in the mix, I don't think they've done a particularly good job getting in front of this. And if you go back to the March 2020 low, I think it was like$210 ,000-ish.

4:19I mean, that's where it seems headed for, despite the fact that it traded about 14 times normal volume today. Yeah. So God brings up that pandemic low. And I think that's what you have to eyeball. But how do they not know if it's a criminal charge or not? Don't you think some are they not opening their emails? How does that happen? How do we know? How are we talking about it? But they don't know. Well, they said they've not been notified. So yeah. So saying effectively that they don't they don't have one. There isn't one. Right. So if there isn't one, then you buy the stock off of this dramatic fall based on this.

4:51But I don't think to Tim's point for a bounce, I don't think to Tim's point that you have to catch a falling knife. I think if you look at it, 15 percent of their membership is Medicare Advantage. 30 percent of the revenues is Medicare Advantage. It's only second to Humana. Right now, the stock can't get out of its own way. It's had a terrible year thus far. I think you've got to wait and see. But I am looking at that level the guy's talking about. Or maybe this makes other players in the same space look that much better. A player like Elevance, for instance, which came out April 17th, saying, we don't have those same issues as UNH.

5:26Yeah, and I think when you're looking at UNH, I mean, a lot of this stuff isn't going to go away for them. So, yeah, you maybe do want to start to look at some of these other players. But the medical utilization costs are going to continue to weigh on margins, I think more so than the headlines we saw today. The fact that they lowered guidance significantly a month ago and they just cut guidance just now. I mean, that, I think, is a bigger issue that they have already had some sort of look ahead and they're really pulling back on that. So I think what that means for them moving forward, there's probably more downside to come here.

5:52So I'd probably stay away from this. To be fair, though, they could pull the guidance just to give the new CEO some room. No doubt. To kitchen sink himself. I'm not saying that all is clear that they pull guidance. I mean, who knows what's going to come out when he actually gives guidance? He's the right person, I think, without question. He was there for, what, nine or ten years and under his leadership they did extraordinarily well. So it's the right person to come back. But, you know, you mentioned other companies. Our crack staff in EC put up a Humana chart over the last six years. That stock is lower than the 2020 lows, which is remarkable if you think about it.

6:23So if you don't think UNH has more room to downside, I just don't think you're paying attention. All right. Well, our next guest sees more downside in store for UNH shares. Baird senior research analyst Michael Ha joins us here on set. Michael, great to have you with us. Welcome. You've got an outperform still on UNH? I do, and thank you for having me. So walk us through what you see in the next 12 months that makes it outperform relative to others in your coverage list. Great question. And I would say, yes, we are outperform, but tactically, very, very cautious on this outperform, especially near term.

6:55I think the question that we need an answer to is what will stop the bleed? I think there are a lot of really good points made following knife to 10. And I think right now there's very, very little that they can do to immediately stop the bleed and stop the near term sentiment. I think the immediate need is 2025 guidance. They pulled it right now. I don't believe investors are willing to jump in and buy the dip until we get visibility on that. So I think that's step number one. And that will at least stop the bleed and create some stability. But for now, it is a falling knife. And what is the bottom?

7:29I think right now investors are looking at pre-affordable care act. So 2009, 2010, nine times P.E. off of our 26 earnings. That puts us right around 228. So if you are holding, I would just caution there could be some downsides to 228, so around 15 percent. That's a lot, especially we are in a vacuum effectively in terms of guidance. I mean, they just reported earnings in April. And so the next earnings report is going to be sometime this summer. So for that long, we're going to live in a vacuum. And that's not to say even that Hemsley is going to come in and give a guidance that's even lower than before, because typically a new CEO will kitchen sink it.

8:04So it could be a rough entire back half of the year here for your outperformed stock. Absolutely. And I think what gives me even more caution is that they're not committing to give a 2025 guidance on their second quarter earnings call. So that puts everyone in this unknown, prolonged period of uncertainty. So you couple that with business risk as well. It's a tough combination, tough near term setup. Michael, that's really kind of the point, because I was, you know, you do this every day. But my speculation was we're somewhere in the midpoint of 25, which makes this evaluation like a screamer, it seems to me, based upon where it was.

8:40So in that context, help folks understand, you know, outside of today's story on investigation. And there's there's an argument, Humana. And look, you said this in your notes that there are investigations going on out there. Therefore, maybe this is just confusion around something we know is going on within the related players. But but talk about the difference between how you viewed this company before April 17th and how you view it now. And really, I'm curious where you went from your price target then to now, because it's amazing where people were at 600 are now down to 50 and what they needed to do to get there.

9:13Right. Great question. So I think the level set back in February when the stock dropped 15 percent on Bill Ackman, the X battle. It was different then because investors were willing to step in by the dip. But today, it's different. It's fundamentally driven. And we talked about the 25 guidance revision. What gives me more caution is that a lot of it comes from Optum Health. Optum Health is their crown jewel, their value-based care, what was supposed to usher in the next decade of growth, multiple expansion, margin expansion. So to see any cracks there, I would almost prefer there to be any other issue in any other part of the business.

9:47A change of health care, another cyber hack would be better. Investors would still buy the dip. But for it to be Optum Health, that makes me very cautious. And that's my focus. And you mentioned Outperform. That's what I'm looking for next, because clearly the stock is down 50 percent. I've missed the downgrade potentially. But we're looking to do more diligence on Optum Health. And our price target has come down significantly. At one point, we're over 600 now. We're right on 350-ish. You know, just listening to you, you don't sound like an analyst with an Outperform rating on this stock, saying that there's no visible catalyst in sight at all.

10:20Especially when you know that, for instance, Senator Grassley sent UNH a letter back in February. So there will probably be, I would imagine, congressional investigations of some level on top of a potential DOJ investigation. You know this from just watching other stocks in similar sort of predicaments where the sentiment is so poor, the fundamentals look terrible. a hero CEO is brought back in, but the turnaround takes much, much longer, and the trust with investors take much, much longer to build back up. Absolutely. So I think Stephen Hemsley coming back, it's a very, very big first step in the long road to building back that trust.

11:00And I am longer term, still optimistic that United will be able to fix it. It's just right now, we don't know what the earnings bottom is on 25. We don't know exactly how 26 will look. and the EPS range is incredibly wide. So that's why near term, very cautious. And we do highlight there are other attractive names, as you mentioned, Elevance, Alignment Health, names that have been caught up in this downturn in the past week, but are likely insulated from the pressures that United's seeing. So we think there's attractive opportunity there. Do those stocks gain, not only because their fundamentals look better relative to United Health, but also they actually gain from UNH's weakened position at this point?

11:40I think that could definitely play into it as well from a relative competitive advantage perspective. But right now, the way I see it is that a lot of United's cost pressures may be idiosyncratic and company specific. So it's not even just Elevance and Alignment Health. It's across the board. Humana, CVS. It's just we like Elevance and Alignment near term as a tactical play. So, Michael, when you look at it, just to piggyback on that question, when you just stay away from Medicare Advantage, Because even if this criminal DOJ issue goes away or it doesn't exist, do you just stay away from Medicare Advantage?

12:14And to your point, so you have Elevance, you have Centene, you have CVS. They all have dramatically lower Medicare Advantage. Is that what the eye on the ball is for investors should be, the Medicare Advantage exposure versus the criminal activity? That's a one-off, you would think. I think really it's a united versus the rest of the group. I think right now what we're seeing is a lot of the Medicare Advantage trends in terms of cost trends. I guess that's number one bucket. Number two is the criminal investigation. The cost trend bucket right now seemingly is just UnitedHealth, right? So everyone else seems immune.

12:48For the DOJ bucket at the moment, United is denying it. So we don't know who's right or wrong. Wall Street Journal, United, we would be cautious on that. But this is no surprise in terms of DOJ has had investigations on Medicare Advantage over the past decade. I mean, they announced one with Elevance Humana Aetna, I believe, earlier in May. Cigna, they settled with them for Medicare Advantage. How big of a deal is that, though? Because it sounds to me like, as you say, this kind of news is sort of out there for these other players. And, you know, is this UNH going through their likely kind of, you know, top on the shoulder, which should be expected?

13:23That's what I that's my suspicion. And at any given point in time, Medicare Advantage is always under scrutiny from the government. So in this news alone, if it weren't for the culmination of everything we've talked about, I don't think we would have seen the reaction we saw today. Michael, thanks so much for coming by. I appreciate it. Michael Ha of Baird. So UNH is in 91 ETFs, of which it's one of the top 1515 holdings. Everybody knows the XLV, right? So it works on the upside for these stocks and these ETFs, works equally on the downside. So what's gotten dragged down on the back of UNH? Well, pull up Johnson & Johnson over the last month.

13:59It's not surprising that stock has not performed. AbbVie is another one. And you want to throw a Merck in as well, although Merck has its own problems. Those are what you have to be looking for. The names that have gotten dragged down on the back of the ETF selling for no other reason that UNH has been a huge drag. Look, I like J &J. And J &J has had its own issues. They certainly have had their own litigation hanging over them with talc. And there's some sense that there is some conclusion there. We're kind of waiting on the final answer. But today was an interesting day for at least down the middle of the fairway pharma.

14:29And I realize that has many different definitions, but I'm talking about big cash rich companies that haven't necessarily outperformed the market. In fact, a Bristol Myers or a Pfizer or a J &J. These are stocks that actually were very defensive today on a day when I think people recognize they are safe places to be. Meanwhile, Apple shares falling for a second day in a row. It's the only MAG 7 stock still negative since President Trump's Liberation Day tariff announcements. On April 2nd, Trump calling out CEO Tim Cook over the tech giant's plans to ramp up iPhone manufacturing in India. Steve Kovacs got the details.

15:00Hey, Steve. Hey, Melissa. Yeah, here's the president from earlier today. Bringing Cook up publicly, like you said, for the third time the last four days. Take a listen to what he said. I had a little problem with Tim Cook yesterday. I said to him, Tim, you're my friend. I treated you very good. You're coming in with$500 billion, but now I hear you're building all over India. I don't want you building in India. Now, look, we already know why Apple is shifting production to India. It's, of course, to avoid the worst of Trump's tariffs on China. The eventual goal, iPhone sold in the U.S., will be sourced from India.

15:29But the president clearly wants more from Apple than he's already got, like Apple's promise, to invest$500 billion in the U.S. over the next four years. That includes a new factory in Houston to make artificial intelligence servers. So now we have this public pressure campaign from the president to get Apple to increase its manufacturing here. Of course, no indication from Apple that's going to happen. All right, Steve, thank you. Steve Kovach, we've gone through the math here before when we thought about the tariffs and what it would cost to make an iPhone here. And it would be a whole lot more than what you are paying for an iPhone at this moment in time, Courtney.

16:08And that's the reason why the production is not coming back here. Correct. And even when they were going to move production to India, I think that was another like$900 million in short term costs. and that would be excessively more if they have to use it here to the U.S. And this is really just one of many problems with Apple. I mean, they're really having issues slowing. Their AI story just hasn't really been there, right? Everybody had this super cycle upgrade that doesn't happen. They keep pushing that out. So I just don't really see when you're trading this at such a multiple to the overall market.

16:35Yeah, it's aligned with its own average, but what is going to get people to upgrade? And especially if they have to start moving production here or increase those costs, it's only going to make that worse. We think it's going to cost. it could cost a lot more. I don't know if it's going to cost double, triple, whatever that number is going to be. But when you look at it through, you know, Apple, you hear me parsing my words a little bit here? Apple virtue signals a lot. And you're manufacturing your product in China that maybe they have different regulations than we do here. So if you're going to start to adhere to USA regulations, it's going to cost more.

17:13If you want, we could always make it cost less. It's not just regulation, Steve. It's labor costs. Yeah. You would have to pay an American to assemble an iPhone. It's very different from what you would pay. If we could use, and I know this is not everybody there, but if we could use child labor here, it would be a hell of a lot. Now you're making an unfair allegation. Unfair. It's a blanket. I'm not saying that. I'm saying Apple will come out vehemently and say they do not employ. Of course they will. Of course they will. But there's a lot of regulations. Do you think that there's other regulations that they have to adhere to that make that?

17:48I'm not familiar with all the regulations. All I know is that labor costs alone are probably triple, quadruple or more than here. I think that at first the phone will be dramatically more expensive. And I think the longer you get Apple's a savvy company, they will figure out how to make it cheaper here, whether it's through automation, whether it's through using robots, they can make an affordable phone here. I don't think it's trading on tariffs at all. I mean, I think it's trading on people being really disappointed on the AI refresh cycle and the super cycle and and the valuation. Because, you know, I'm at a point here where, you know, maybe this is going to be the old reverse whammy that I don't want.

18:28But I actually think a lot of the tariffs, there's workarounds. in terms of the stock. We thought it could get back. It was a June 10th date last year. What do they call that thing? WWDC. WWDC. I went to that. It was a wrestling event. I mean, it might as well. Store. You went there. I went. You wear the belt. I did. It was fantastic. We thought. I mean, I know what I thought that day. I didn't think it was a big deal. Gene Munster came on the show, thought it was a huge deal. And it was for a while. And proceeded to go up to a 270. Well, you retraced that entire move on April 9th. We traded down to 172.

18:59Yeah, the stock is bounced. But I think it's sort of no man's land here, quite frankly, in terms of all the things we just talked about, not least of which, you know, an economy that's slowing down and a consumer that's probably a little strapped right here. Coming up, Meta's llama drama reports a social giant is postponing a key rollout of its flagship AI model, what it means for the stock. But the delay says about the hardware next. Plus, digging into copper, if the U.S. can keep up on the supply side as President Trump looks to pull back on our reliance on China's raw materials, we'll go live to a refinery outside Salt Lake City.

19:30Straight ahead. Don't go anywhere. Fast Money is back in two.

19:42Welcome back to Fast Money. We've got a news alert on some 13F filings. Leslie Picker's got the details. Leslie. Hey, Mel. Berkshire Hathaway selling down its exposure to some of the big banks here, unloading its entire billion-dollar stake in Citi, pairing back B of A by more than 7 % and Capital One by 4%. Berkshire Hathaway, on the other hand, adding to some of its consumer-facing companies, doubling its stake in Constellation Brands, as well as Pool Corp, and increasing exposure to Domino's as well. The firm, however, did not touch its$67 billion stake in Apple during the quarter. Other managers weren't so hands-off with their U.S.

20:19tech stakes, though. Appaloosa's David Tepper took a new position in Apple, worth$277 million, at the end of March, and doubled its stake in Uber. The firm also slightly increased Meta and Alphabet, but it cut in half its equity exposure to Microsoft and NVIDIA. And speaking of NVIDIA, Michael Burry's scion disclosing put options against NVIDIA with a notional value there of about$100 million. And just a reminder, guys, these positions are as of March 31st. They may have changed in the six weeks since then. I'll send it back to you, Mel. All right, Leslie, thank you. Getting rid of the entire city stake was very interesting.

20:54It's fascinating. And depending on, again, when in that quarter he did it, it might have been heroic. I mean, if you think about it, Citi was trading up near 85. It was trading at a price to book almost of one, which for Citi is like, you know, the high rent district. But Mr. Buffett has been, I think, a major advocate of banks, especially during difficult times. And it's fascinating to think that he's really taken that down. Constellation Brands, so he doubled, more than doubled his position. I think he had a 5 million share stake. Now it's up to 12. Look at the sell-off in net stocks. So he's buying at levels we probably haven't seen since 2019 almost.

21:28So that's the one that sticks out to me in addition to the banks. All right, let's get to Meta now. Shares dropping on a report from The Wall Street Journal that the tech giant is delaying the rollout of the next generation of its flagship Lama AI model. The report saying Meta's engineers are struggling to make significant improvements versus prior versions. The rollout had been slated for next month, according to this report, but now will not come out until fall at the earliest. Medica declines to comment on this report. I look for it, but Meta has nowhere ever actually given a time frame or a deadline as to when this model would be rolled out.

22:01So while it may have been expected by analysts that it would be around this AI event, there was never a firm deadline slated. So take this report with a grain of salt. And I do. And I take it as more of a market dynamic of kind of what Meta is doing as a response to that. but also, I mean, we're at a place here where this market went from being oversold to overbought. This is the kind of action you get. And we'll have more of a markets conversation, but meta-specific, this isn't why you're selling meta. I think you're selling meta on valuation at a time when it looks pricey to itself. Is it expensive, Court?