How the Mighty Have Fallen, and the Skinny on Lilly 8/7/23

23:26But here you do have this put with the public investment fund, Saudi Arabia. They are there. They seem to be willing to throw, I don't know if you call it good money or bad money, but additional money at it at every point. So this will save them, which is something that a lot of other relatively small new EV companies don't have. All right. And by the way, Elon Musk just X'd on X that he would like to thank Zach Kirkhorn for his many contributions to Tesla over the course of 13 difficult years. I thought you were saying he was on X. No. It was a drug thing. Normally known as Twitter. X. Anyway, a lot more fast money to come.

24:05Here's what we have next. No spring chicken. Shares of Tyson walking on eggshells as results disappoint investors. So is this stock a fox in your portfolio henhouse? The details next. Plus, a lily look ahead. Results out tomorrow, and all eyes are focused on weight loss. But will the stock fatten up your returns? We'll debate. You're watching Fast Money, live from the NASDAQ market site in Times Square. We're back right after this.

24:48Welcome back to Fast Money. We've got an earnings alert on Lucid Motors, the EV maker higher after hours despite our revenue miss. That conference call is just getting started in a few minutes. Let's bring in Phil Lebeau, who's got the latest. Phil. Melissa, I would call that a relief rally. Rally might be a little bit too strong. It is a case of the shares moving higher after the company released Outlook that at least let people say, OK, we know that they plan to build the 10 ,000 vehicles this year, which was their guidance. And that's really what this is all about. The outlook from Lucid after the Q2 results.

25:19The 2023 production stays at at least 10 ,000 vehicles. Liquidity of 6.25 billion. We'll talk more about that in just a little bit. And they do plan to go into SUV production with the next model, the Gravity, in late 2024. As you take a look at shares of Lucid going all the way back to its IPO, I mentioned$6.25 billion. That's how much money they have, you know, the liquidity that they have. They believe that is enough to get them into 2025, that they won't have to do a capital raise before then. With all that said, there's the question about demand. And the demand comes, it's being stemmed from the fact that the company has cut prices on its current models, including prices being cut between$5 ,000 and$12 ,500 brings the base model, the Lucid Air Pure, down to a starting price of$82 ,400.

26:09Now, CNBC did talk with executives after the earnings release today and they said we are seeing an improvement in demand. So they do believe that these price cuts, which were initiated over the weekend, have had some impact here. We'll probably get more color in the next few minutes as the conference call, as you mentioned, Melissa, it's scheduled to begin. at 530 Eastern Time. Melissa, back to you. All right. Meantime, Phil, we did see a big move in Tesla on news that the CFO is stepping down. You know, some people were saying it's a good sign that he's staying through the end of the year. So it wasn't necessarily, you know, a sign of bad blood or anything like that.

26:42But this certainly underscores sort of the key man risk because this comes as news that Elon Musk might have to have back surgery. And so if he's out of the mix, then who is your backup? The guy who's walking out the door at the end of the year. Well, there are others on the team as well, but Zach Kirkhorn gets the most attention because people have heard more from him on the conference calls after the quarterly earnings than anybody else. And he's been the CFO, what, for the last four years, has been with the company 13, 14 years. So there's a known quantity there. But he is stepping down. That's effective immediately.

27:14The chief accounting officer is going to be moved up to the CFO position. And there is a transition period where Zach Kirkhorn will still be there. I think the interesting thing here, Melissa, is that this speaks to the fact that we've seen a number of executives leave Tesla over the last several years. And I can't tell you the number of times I hear people say, oh, here we go. This person's leaving. This is a sign that they've got problems there. Their executives aren't staying around. But they have continued to do well. So you do have to give Elon Musk a little bit of credit here that he may be a tough boss.

27:45He may be very tough to work for for some people. But he has had a string of executives who have delivered in the positions that they've been put into. Phil, thank you. Phil LeBeau. You bet. Gene Munster was quoted as saying that working for Tesla for, you know, 13 years is like working at any other company for 50. That's the wear and tear on somebody reporting to Elon Musk. People in relationships with me feel this. I'm sure you feel the same way. Lucid, it's interesting. You know, back when the SPAC, they were projecting$5.5 billion of revenue this year, for this year. This is two years ago.

28:21They just had$150 million for the quarter. You can do that math. So they're nowhere near it, and the stock is reflecting that. The bounce in the after hours is just what we lost today, and it still probably trades close to, I don't know, 12, 13 times revenue. By any metric, it's still an expensive stock. This wasn't a great quarter. It's just getting back what it lost today. I mean, if Ford and GM are having difficulty in the EV space, these startups really have it stacked against them. Well, scale is everything, right? And Tesla obviously is such enormous scale. But here you do have this put with the public investment fund, Saudi Arabia.

28:53They are there. They seem to be willing to throw, I don't know if you call it good money or bad money, but additional money at it at every point. So this will save them, which is something that a lot of other relatively small new EV companies don't have. All right. And by the way, Elon Musk just X'd on X that he would like to thank Zach Kirkhorn for his many contributions to Tesla over the course of 13 difficult years. I thought you were saying he was on X. That's the no. It was a drug thing. Known as Twitter X. Anyway, a lot more fast money to come. Here's coming up next. No spring chicken. Shares of Tyson walking on eggshells as results disappoint investors.

29:38So is this stock a fox in your portfolio henhouse? The details next. Plus, a lily look ahead. Results out tomorrow, and all eyes are focused on weight loss. But will the stock fatten up your returns? We'll debate. You're watching Fast Money, live from the NASDAQ market site in Times Square. We're back right after this.

30:13Welcome back to Fast Money. Shares of Tyson Foods sinking as much as 11 % today after posting disappointing results this morning. The meat company posting a bigger than expected drop in both earnings and revenue and announcing four plant closures across the country, an effort to reduce costs amid slowing demand. The stock ended the day down nearly 4 percent. Their gluts, too, have certain proteins, chicken and pork, beef prices. Feast or famine. And this. So I was on Power Lunch. And actually, it was the exchange earlier in the year. And we were talking about how it was the summer of pork and that actually, you know, the beef dynamics were really particularly awful in terms of a drought in the southwest.

30:53And as we always say, one of the great things about commodities, there's always a supply response. So there's a supply response to lower prices and higher prices. The problem with cattle is it's a long lead time. And so the price of beef is going to continue to stay high. The price of pork is being bid up. But the cost basis for all of this is going through the roof, and it's killed Tyson. And if you look at Tyson, if you look at JBS, which is a Brazilian meatpacking company, It's one of the biggest ones in the world. You have a dynamic where their stocks have been basically at lows for the last 15 months pricing this in.

31:26I think it's getting interesting. You've priced in a lot of bad news. Eight-year low, though. I mean, this is an eight-year low for the stock, and people are trading down. We had that conversation six months ago. People are trading down from these things to what was it? Food kitchens, which is a horrible thing to say, but that's the dynamic going on here. We talk about this great economy all the time, yet when you see a report like this, it makes you wonder what's really happening below the surface. So is it interesting on valuation? Yeah, probably, but it speaks to a much bigger problem, I think.

31:54Coming up, some moves in the pharma space. Lilly gearing up for its next quarterly report as the weight loss wars take center stage. What to expect out of those results and how the options markets are setting up next. Plus, shares of United Rentals surging to all-time highs. But can the industrial strength last? We're digging into that trade when Fast Money returns.

32:17Welcome back to Fast Money. Stocks jumping to kick off the week. The Dow rallying more than 400 points as the S &P and Nasdaq both snapping. Four-day losing streaks and some after-hours movers here. Paramount jumping after a beat on the top and the bottom line. The company also announcing it will sell publisher Simon & Schuster to KKR. Beyond Meat meantime, in the red after reporting a revenue miss, cutting its outlook, and Chegg surging more than 25 % after the company's CEO said It is building its own, you know what, AI model. Of course, AI. But Paramount was really interesting in terms of the metrics they were reporting.

32:51Yeah, I mean, it was a beat. So that was good. You know, clearly they have a balance sheet issue. So anything they can do to get cash, that's good. They do have some time before the maturities are upon them. But I was just, you know, if Julie Beal were here, she would say, this was a terrible boyfriend. I'm out. I don't care if he says he's changed. I'm not going back no matter what. I just feel like it was too levered. The world has changed for streaming. They've got to make it profitable. And money is not free. And it's very competitive. A 35 % increase in viewership because of higher inventory, which I thought was pretty exciting.

33:26Even if it's a low bar, that's really maybe good news for Disney. I don't know. Look, the bar was low here. But it's interesting to this divestiture is interesting to see where the sum of the parts on a lot of these. Remember, I mean, the whole Time Warner thing was that is why it made sense for AT &T not. But but I think the media sector is undervalued. And I think this is showing that. Meantime, all eyes on Eli Lilly earnings, a company turning in its Q2 report before the market opens tomorrow. The drugmaker has become a major player in the weight loss drug race, but faces not so slim competition from rivals Novo Nordisk and Pfizer.

34:00Lilly is Alzheimer's drug, also facing some stiff competition. But one expert says Lilly is still one of the better position names in the pharma space. Jared Holes is a health care sector specialist at Mizuho Securities. Jared, it's always great to see you. You too. You say the bar is high. Valuation is high. So it's really got to knock it out of the park at this point? I think so. At least the messaging has to be really positive, right? This is trading at 50 times this year, 37-ish next year. that's three to four times what the peer group is trading at. So it's got to be pretty close to perfect, I think, just in terms of like all the dynamics with the pipeline and timing with launches and things of that nature.

34:39So it's got to be pretty great. At the same time, we are expecting the next, in the days to come, the results from the Novo Select trials, right? And that will be really key for all of these JLP1 producers. Yeah, exactly. That's going to show us basically the cardiovascular outcomes of a patient population taking the GOP-1s and those that have not, and just kind of comparing heart attack risks, stroke risks, things of that nature over a two-year period to see what the real impact is. And if the impact is significant, call it mid-teens or so percent difference, then I think that's going to obviously encourage insurance companies to pay for the drug more widely.

35:17Right now, this is basically, like we've discussed it before, I think it's much more of a vanity drug than it is a pharmaceutical drug, meaning people that are really, you know, clinically obese. But, you know, we'll have to see how those results come out. So let's say there is a 15 % reduction in cardiovascular events. Does that support the current valuation or how much more does it add on to the valuation? I think the stocks go up. I think Novo and Lilly on a mid-teens to high-teens delta, it has to, we're looking for a statistically significant. So it's tough to tell what that bar winds up being.

35:50But if it does hit statistically significant, which is probably somewhere in the range of 15 to 20 percent, then I think the stocks go up 5 to 10 percent. They are obviously pricing in a lot here. But, you know, the numbers at least appear doable. And then I think the street will likely increase their estimates, at least for the medium and long term, for what these drugs can do. So, Jared, there's been a few knocks on the story, right, of suicidal thoughts and then this idea of, okay, it's not going to be something you're going to be on for life. So that obviously changes the revenue stream. Do you factor those in your model?

36:24Do you think that's just noise? How do you think about it? I think it's mainly noise. I mean, anytime you have a drug like this, where some sell side estimates have$100 billion, there's going to be a net, like people are seeking out narratives that are negative, especially for a stock that's been so bulletproof for a number of years, but I feel like the drug has been on the market for a number of years, right? These are reformulated diabetes drugs now used for obesity. I think we probably would have heard a lot of this over the years. I feel like we're probably scratching and clawing our way to try to get some negative narrative here.

36:59And as far as like not taking the drug forever, for sure, you know, I feel like for a lot of the patient population out there, they want to lose 20 to 30 pounds, if they do it, maybe they'll start making better choices, less Coca-Cola, less Doritos, more gym. You know, that's the hope at some point that we start acting better. Like right now, I think it's like basically a Bahamas and bar mitzvah drug. And like, we'll get to a point where we can... I don't know exactly what that means, actually. Well, sure you do. Come on. And, you know, whether you're going to the Bahamas or... You want to look good when you're reading the Torah.

37:32Yeah, right, right, exactly. Yeah, you want to look good for photos, you want to look good on the beach, And then, you know, at some point you'll you don't care. You don't care. Right. And then you get off of it. Yeah, that's to Moderna because it's been an interesting six straight sessions of declines, I think, bringing it to levels not seen since the end of 2020. And you had been in it at one point. You wanted to ask Jared a question. Well, I just, you know, in terms of the market cap and the balance sheet. And this is a company we know their pipeline. We know what was priced in. We know what COVID meant for this company.

38:00And by the way, good for Moderna for everything they did for the world. But but and Dan was doing some research and, you know, my understanding is that 21 percent net of debt of the balance sheet is in cash. And at some point, why does the stock continue to get vilified when you've got that kind of a buffer? Well, I think the balance sheet dynamic is interesting and could be a bull thesis, but they're also spending at a much higher rate. Remember, the government subsidized most of the R &D for this company during COVID. So now they actually have to spend on flu and on the cancer vaccine. So the expense line for the company is very different than it was.

38:36And so I think that's the biggest change. Now it's on them to spend and get this pipeline solidified beyond the pandemic. It's almost an approved story, kind of like the Cleveland Browns there on your tie. Nice to work that out. That's right. That's right. It takes a brave person to wear a Cleveland Browns tie. To admit you're a fan. Unless you're a Modell. Give me a lot of credit. Thank you. You're welcome. I appreciate it. Well, Jerry, you're always welcome here. Thank you. Thank you. Appreciate it. I mean, Jared's been on this for a while. I think we've done a decent job. By the way, go back to last quarter.

39:11They missed last quarter. Stocks was trading 375. It's 450 now. So the company does miss. Yes, valuation is stretched, but you're still talking about a company with 32 percent earnings growth, probably 20 percent revenue growth. So it's not a ridiculous valuation. And this is one that if this stock sells off tomorrow, analysts are going to race to raise their price targets because a lot of them have missed this move. I'm going to bring back the guests. Whoa! This is talking about regaining control. Quick question. If Lilly sells off on earnings, do you then buy it ahead of the select results? I think you do.

39:45I think you do. I mean, if it sells off dramatically, you do. If it's a$5 move,$10 move, nothing to do. But down$25,$30 tomorrow, for sure. Okay. Jared, thank you again. Thank you. Again. First ever. Wow, you're going. Good for you. Was that liberating? Did that feel good? Oh, really good to break the rules. All right. Options traders are betting Lily stock could fall after its results tomorrow. Mike Coe joins us at the action. Mike. Yeah, it is one of the busier names in health care today. Traded well over two times its average daily options volume in the busiest contract with a September 450 puts.

40:16We actually saw a buyer of twenty three hundred of those paying sixteen twenty in contract. That's laying out more than three point seven million dollars in premium to make a bearish bet that it could trade down by 20 bucks or so by September expiration. or it could be a hedge, but it would be a hedge against a pretty big position because that would be insurance on about$100 million worth of the underlying. Mike, thanks. Mike Coe for more options action. Tune into the full show. That is Friday, 5.30 p.m. Eastern time. Coming up, shares of United Rentals having a red hot summer as the stock sizzles to a new all time high.

40:46Will the run continue? We'll hit that trade next. Plus, our next guest sees a big red flag in the housing market. What is brewing and how he's hoping to profit from turbulent times. We'll bring you that and much more when Fast Money returns.

41:06Welcome back to Fast Money. Shares of United Rentals topping the tape today as the stock soars nearly 4.5 % to a record close. The construction equipment maker has seen shares rise more than 35 % this year and has nearly doubled from its 52-week low. Karen has been in this stock. Yes. I mean, I don't understand why it was up today. I have no idea. I was sold off last week on earnings for what I thought was, I said, dumb. I regret having said dumb, but it didn't make sense. This is a great story. It's really, over time, they just build value, build value, build value, build market share. They're absolutely number one.

41:41The whole business has changed. People used to own their own construction equipment. Now they don't. They rent. URI is very much ahead of the pack. Their balance sheet is as good as it's been. And I like the story and then throw on infrastructure and throw on, you know, reshoring. And there's a lot to like here. I don't love it, though, when stocks go up for seemingly no reason. Shares of Till Ray meantime, jumping about four and a half percent after hours after the cannabis company announced it is buying eight beer and beverage brands from Anheuser-Busch, among the names being sold by Anheuser, Shock Top and Blue Point Brewing.

42:17Tim, you own this one. I do. It's actually a significant position in my cannabis ETF. And yet it's a company that right now has 30 percent of their revenues in non-cannabis businesses. It's one of the reasons why, you know, they had 43 million in free cash flow at the end of the last quarter. And they just announced numbers where, again, sequential gross is 27 percent. A lot of a lot of issues going on. Complex sector to be investing in. But this is a company that Irwin Simon, who's the CEO of the company, has taken a lot of heat for, you know, buying Sweetwater, buying Montauk Brewery, buying Breckenridge, buying different places because people thought it was like trying to backdoor your way and sneak your way and ultimately turn these into cannabis brands.

42:51That was about buying brands that were accreted to the balance sheet. So I like this move. Coming up, the future of real estate. Our next guest is an early stage investor who will tell us how AI is already changing the space. That's coming up in two.

43:11Welcome back to Fast Money. Wilshire Lane Capital is an early stage venture capital firm focused on real estate and technology. It recently completed its first generative AI deal with Colleen AI, a platform that helps property managers with the rent and debt collection process. For more on that deal and the future of AI in real estate, let's bring in founder and managing partner Adam Demuyacor. I knew I was going to get that messed up, Adam. Apologies. Great to have you with us. No, great to be here, Melissa. This is not an industry that you necessarily think of as being sort of a place where AI will be employed, but it makes a lot of sense.

43:45There are a lot of sort of just repetitive, monotonous processes that could probably be streamlined and maybe even wholly replaced by AI. Can you walk us through this deal? Yeah, absolutely. So when you think about technology as it pertains to real estate, historically, real estate has been a technological laggard, right? So logistics, you know, telecommunications, those are front runners when it comes to technology, but real estate is usually behind. And it's been the case with AI as well. So obviously, with the advent of AI, with OpenAI is coming out with its ChatGPT models. You've seen it impacting media entertainment, logistics, transportation, but we haven't really seen it impact real estate so much.

44:22But over the past few months, you're now seeing more of those use cases. And so, as you mentioned, there are so many monotonous, rudimentary manual processes that I don't think people realize that are happening on the back end of real estate, right? So you're looking at anything from leasing to property management to maintenance and capex, collections, These are done by people, and they're typically lower-level tasks. And now that we have generative AI models, you're able to automate a lot of these processes. And so, as you mentioned, Colleen AI, our most recent deal, is actually a company that does exactly that for the collections process.

44:56It uses large language models to generate optimal responses and outcomes in order to be able to communicate with the tenant and remind them such that they can pay their rent on time. So we're very excited about that one. Are there sub-industries that will be completely replaced by this? I think, you know, we like to look at it as an augmentation of the existing industry. So I think that, you know, you have back offices of property management companies where you have people that are, you know, filing paperwork, doing manual inputs for leasing, handling these processes on collections and maintenance.

45:34And so, you know, the people who are doing this work, there's better things they could be doing. Right. When you think about real estate property management tenants, there's higher value of higher value engagement that can occur. It doesn't have to be so transactional. And so I think that if you have automation from A.I. that flows into this, you actually can allow these people to move into higher engagement with their tenants in terms of a win win scenario for the industry. Adam, it's Tim. Thanks for joining us. You've talked a little bit in your notes about the repurposing of some of these office buildings for other things like data center.

46:06I'm just curious your thought on that. You also talk about at some point the debt component is for an industry that's worth 30 to 50 percent less than it was. I mean, do you have to start? I mean, do you think that's where this industry could be in a couple of years? Obviously, not all properties, but. Yeah, when you look at office, right, it's been it's really been, you know, shocking. right? The level of change that's occurred over the course of the pandemic initially was because of the pandemic, but now you have the stickiness of this hybrid work from home model, right? I think you're seeing a lot of companies that are determining that it's not enough just to have your workforces working completely remotely, but at the same time, there's difficulty in getting people in the office five days a week, particularly when you have unemployment rates this low.

46:46And so as a result, you know, you're seeing a lot of estimates. For example, McKinsey has the steady state occupancy of office getting to 30 % below pre-pandemic levels. And so that represents about$800 billion of value destruction in the office space. And so, you know, we have these big assets, these big buildings here. The question becomes, how can we repurpose them to their higher and best use? And so, for example, we actually have a company called Stuff Storage that goes into the basement spaces of office or underutilized spaces and converts it into self-storage facilities and operates it on the behalf of landlords.

47:21And we think that you're going to see this in a whole slew of other repurposing, right? Obviously, multifamily, you can convert some offices to apartments. You can repurpose into self-storage data centers, as you mentioned, logistics. And so I think over the next, we'll call it five years or so, you're going to see more of that repurposing and how technology can be a part of that. Adam, we'll have to have you back. Wasn't enough time. Appreciate it. No, always, always a pleasure. It's great to be here. Yes, thank you so much. Some interesting things coming out of Adam here in terms of the view on commercial real estate, repurposing.

47:52Repurposing. So AI is an all, I mean, people are terrified of it, but if it helps make their job more productive in their current jobs, that's actually a good thing, Melissa. Look at me, learning. I'm a poster child of AI. That's right. Up next, final trades.

48:13Final trade time, Tim. I still believe in this broadening, but I like the industrial sector. I like Boeing. I'm long Boeing. You had a nice move in the stock. It's actually back up near those breakout levels. Stay there. Chairwoman. I also agree in the broadening, which is why I like the value stuff, and I'm short the IGB, the high flyer. Dan. I think the relative underperformance in semis is going to remain an issue for the balance of summer, so I'm going to sell out of the SME. Guy. Gilead, led by Daniel O'Day. We called him D-Day in college. D-Day. Moving into oncology, Gilead has been moving lower left to upper right now.

48:47Did you really? Yeah, we really did. Is that really his nickname? D-Day? Daniel Day. What would you call him? D-Day. I don't know. Daniel. Yeah. Thanks for watching Fast Money. Mad Money with Jim Kramer starts right now.

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