Intel, Visa and More Earnings on Tap, and Just How Bad Were Humana’s Earnings? 1/25/24

0:01Live from the NASDAQ market site in the heart of New York City's Times Square, this is Fast Money. Here's what's on tap tonight. Bad intel. Shares of the chip giant sliding after its latest earnings report, despite beats in the top and the bottom line. So is this the signal to sell the semis? We'll dive into that trade. Plus, Humana humbled. Shares of the health insurer with their biggest drop in over two years after saying earnings this year would be about half street expectations. Why, one of our traders says things are way worse than just the numbers. And later, Tesla tank shares plunging after the EV company warned of a slowdown this year.

0:32The stock now down over 25 % already this year. What the analysts are saying right now about this once unstoppable stock. I'm Melissa Lee. Come to you live from Studio B at the NASDAQ on the desk tonight. Tim Seymour, Karen Feinerman, Dan Nathan, and Guy Adami. We start off with that big chip dip. Shares of Intel trading near after-hours lows after giving a less-than-seller outlook. The earnings call just getting started. Let's get the details on the numbers with Christina Parts Neblis, who joins us here on set. We don't have to worry because I just spoke to Intel before coming to set, so they gave me the lowdown as to what I was going to miss.

1:02I'm serious about that. And we were worried. Well, clearly, investors are worried. The magnitude of the guidance was a little bit larger than anticipated. They outlined to me what they'll say on the call, three reasons for that. Mobileye, reason for that is Intel owns, you know, at 90 percent of that company. So it's obviously going to impact the revenue stream. Mobileye makes the autonomous driving assisted technology, ADAS. And they announced this morning some weakness. And then the second part is the programmable solutions business, which is chips that are made for specific tasks. That was a little bit weaker across the board.

1:34And that makes sense as IT budgets shift towards more AI-type products or GPUs. And then lastly, the foundry business came in also weaker than anticipated. They said some of that has to do with packaging. So those are the three factors. If we talk about Intel's business, though, three core businesses, PCs, servers, as well as networking, there was weakness, and they do anticipate an 11 % drop in Q1. But I was told that sequentially, I mean, seasonality, that falls in line. Normally it's about 8 % to 11%, so they're going to really push that on the call. Because, you know, in December, holiday sales refresh, all this.

2:08Q1 is usually a little bit lower, and so that's what they're going to push. We knew that all, though. We knew that Q1 was a seasonally weak period for Q1. But that's going to be their argument. But yet the first quarter revenue guidance was as much as$2 billion less than what the street was expecting. So they're just going to say it's mobile eye and seasonality. Well, those three factors. That's what you're going to tell me. That's why the billions of dollars have hit with those three factors. That's what they're going to list. What about DCAI? What about data center? This is market share loss that people think just doesn't end.

2:38Did you see in Q4 data center revenue was down year over year? So it came in at four billion, which is still down 10 percent. I asked about that as well. Admitted they have lost market share. No surprise there, which we already know. But the positive thing that I guess the last sentence that they said is that for every quarter, earnings as well as revenue, they expect sequential growth and year-over-year growth for 2024, but they won't really change anything for their full fiscal year 2024 outlook or anything like that. So obviously they're trying to put a positive spin, but those are pretty big, it's a pretty negative reaction for guidance.

3:18I don't want to be the defender of intel here. And my grandmother used to say, little guy, if you have nothing nice to say. Little guy being you. And not that you were small or just a little guy? A little guy. Both. Okay. I mean, the quarter actually wasn't all that bad. Client computing is half of their business. That was up 33 % year over year. Yes, data setter down 9.9%. I get it. It's all about the guide, which is really, really bad. But again, you're saying to yourself, did Intel sort of figure this out? Now, the good news, I guess, is the quarter was good. The bad news is the stock has doubled since February of last year.

3:53going from basically 25 to 50 in a straight line on the back of all the other tech names, semi-names, which I get. I think the question you have to ask yourself is not should I necessarily be selling it, but where do I buy Intel on this sell-off? Where do you buy it? Yeah, I like that. Would you want to buy it? Well, it's interesting, right? This was a late one during the party, what, a couple months ago. And to Guy's point, I mean, obviously, it's up 100 % year over year from the lows early in 2023. But this is a stock that the street has not been behind. Like there's the lowest percentage of buy ratings on the stock that I can remember in Intel in a very long time.

4:27It's like 12 buys, 30 holds and seven sells. So the street expectations were so low, like like analyst expectations were really low. Investor expectations have been really low. I mean, to Mel's point, when you see that sort of revenue guide, you know what I mean, for the current quarter that they're already one month into, there's a good chance it comes in at the low end of that. And then the seasonality issues that you have, some of the share loss issues you have, push into the next quarter. These are not usually one quarter sort of things. So your question, guys, where do you buy it? It's probably somewhere with a three handle when it starts to look cheap on the out-year numbers, because you're almost going to have to at some point in Q2 kitchen sink 2024.

5:07So remember when semis used to be sort of cyclical, right? And they would trade at different kinds of multiples. I mean, so this one sort of the whole space obviously defied that. But Intel now, it was before today's loss in the after hours, what, 18 times what were going to be better earnings, I think. Right. So to me, I think there's still a ways to go down. To your point, I wouldn't be surprised to see a three handle. This kind of revenue miss is enormous. I'm not buying the seasonality thing. No, we've known it's going to be Christmas for a long, long hundreds, thousands of years. I mean, since the beginning of Intel history.

5:45Exactly. So, I mean, it's as you said. caught up in the whole bubble, but I think it deserves a pretty big penalty now. It's unfortunate. Back to the penalty box for them, I think. Well, the guy we're all talking about, so we should talk about it, and Mobileye should not be underestimated. And I think, again, concern on what's going on with the data center because they're losing ground. But there was nothing in this print that we didn't know. We knew client business was strong. We knew that they were ultimately going to put some kind of a drag on Mobileye into the quarter. We knew that it was up 80 percent.

6:15And I think the fact that the street's so negative. And I think investors are under underweight here. I think it's a positive. And so, look, I don't like this. I'm long Intel. I've been adding into this strength. And really, a lot of this kind of started in the mid 30s. So back to levels, you know, Dan, at least is targeting. We get to they're pointing out, you know, AI is nascent for us. I mean, they're not really I mean, this is all about global manufacturing foundry. These are the places where also this is like this is chip USA. So just be clear. This is a stock that at some point everybody's going to get behind because they have to get behind it.

6:47I'm not saying investors have to own it here, but I do think that the bigger story for Intel is going to be about re-rating, and I do think it's going to be about the broadening of their business that right now, frankly, they're losing to AMD. So just two points to that. Dan, you said that there was a lot of negativity on the street. There has been a little bit of a shift maybe towards neutrality. I have seen a tone change, so I know it's not much, maybe not suggesting buy, but it seems like a lot of people are waiting for, one, the Q1 foundry business that will be created as a standalone business in Q1, what will that bring?

7:15And then that leads me to your point about, you know, making everything in the U.S. Today, they announced they're joining forces with UMC, which is a Taiwanese foundry business. The reason why I bring this up is they're going to be focusing on mature notes, something that lacks in the United States and something that China is gaining a lot of ground on. So this could be an opportunity, but that's far out. Again, it's 2027. So are you buying into this name, holding on for several more years? Are you just going to think there's going to be more blunders just throughout the year with their product launches, etc.

7:46So that's for you guys. I don't trade it. Well, to the guy who said he would look to buy it. Little guy. No, it's true. In my family, I'm still a little guy. You know, I have aunts and uncles. I mean, nobody cares. Are they all guy? No, but I'm a little guy. But again, are they named guy or are they a little guy? Well, my father was guy. Now we're... It's an entirely different show. It's like one of those ancestry things. And your second son. Precisely. That's a whole other story. What's the level? So 25 to 50, 75, half of that 37 and a half. I think Dan said three-handle. Tim said mid-30s. That's your level.

8:17And it makes sense. And quickly, again, not to be the intel apologist here, operating margins were a lot better than the street was looking for. They came in almost 17%. The street was at 13.8 or so. And it's up significantly since last year, which should be, which was an absolute disaster. So, you know, Pat Gelsinger does his push-ups. He did one push-up on stage. Was that right? Was that my— Serious? Isn't that right? Oh, he does that. That's such a win. Not one. So sometimes, yeah, he does drop to the floor and then it's right back up. Which is, yeah, he should stop. And let's focus on it. It's a do more than one.

8:47Or do more than one. Listen, I just think we're in a market where a stock like this, and to Tim's point, it's going to come your way. There's nothing that they said, and there's nothing that they guided to, and there's nothing that's going to change in the next couple months that's going to change the story. That's just a fact, okay? I'd be focused on AMD that reports next week that's actually doubled in the last three months. Think about that. I mean, and think about the expectations. And this is not a company like NVIDIA that doubled its revenues last year from the prior years. They're supposed to have their revenues up this year.

9:16This is the inflection point up 20 percent. And you think about where that stock's trading, where the expectations are. That makes me nervous. Christina, thank you. Great to see you. Keep us posted on the call. Christina Parts and Nevelis. All right, let's get more on Intel. Bring in Fast Money friend Gene Munster. He's a managing partner of Deepwater Asset Management. Gene, what's your take? Are you as dour as some of these guys here on the desk? You know, Melissa, I was doing multitasking there. I was listening to the call and kind of picking up a little bit of negativity from the desk. So I appreciate that recap.

9:46The answer is yes, I am. And the call kicked off really talking about Intel being an AI everywhere company and also talking about this near-term weakness in March was temporary. You saw shares kind of move up a couple percent in after hours trading when they talked about that and also talked a lot about new products. And I think that that is, I think, the central point to this whole Intel story is, will their new products catch on with potential customers? And when they talk about the AI opportunity and being an AI everywhere company, the opportunity is really the sweet spot of this is in the GPU market.

10:24This is the most competitive market. We all know this. And when we think about where this company is going to go down the road to get to, they're going to grow revenue this year, I call it 15 % maybe, to get to a revenue growth rate that is going to be more AI paradigm shifting, like 25, 35 % plus, you got to get into that GPU market. And I just have questions about how you're going to compete with essentially, number one is NVIDIA, two is AMD, three is the hyperscalers. They're all making their own chips. And so they're in the fourth position trying to compete in this market. My sense is that this is Intel's growth.

11:05It's going to grow at 10 % to 15%. We're not going to get the big lift that we're hoping for with AI. So what should it be valued at if it's just going to grow 10 %? And that's the run right here. It's right now it's trading at about 27 times next year's earnings. It's kind of a surprising similar multiple that Nvidia trades at. They're about 30 times because people are looking at Nvidia, what kind of the out year is going to be a slowdown there. When you look at AMD, that trades at 46 times. So if you put all this together, Melissa, I think that this should probably trade right around where it's at and probably grow earnings right around 10%.

11:45And when I put all the pieces together, I just think there are better ways to play the AI Silicon opportunity. So Gene, you just mentioned that Intel, not only do they have to worry about catching up to, let's say, NVIDIA and AMD, but the hyperscalers, which are the big customers, right? So these big cloud players, Microsoft, Google, they've all signaled that they're, as you just said, going to be designing and making their own GPUs. Doesn't that just place these kind of second tier players that much further behind, which you're suggesting, but doesn't it pose a risk for NVIDIA and AMD as we get further into this year?

12:21And as the cost of compute is something that they are really going to have to start thinking about as they're kind of go commercializing a lot of these products, that's the hyperscalers. Yes, is the answer. I Nvidia is, they're in a great spot, but they're going to have more of a challenge. In the years to come, they've gotten just nothing but good news in the last few weeks, whether it's come from Meta or there's been rumors about how much Apple is spending with Nvidia. So this is a great time for Nvidia. But these big tech companies, they don't like spending$5 billion,$10 billion a year with Nvidia.

12:53They want to try to do that in a much more cost-effective way. We're talking about 30 % of many of these companies' capex is being spent on Nvidia chips. And so I think that there is an opportunity for these hyperscalers to do better there competitively. We'll see how that plays out. And you do see some of those street estimates going. We're talking about 300 % growth for NVIDIA this year, going to high 40s for, excuse me, high 40s this year, and next year, call it high teens. And so I think that I'm not suggesting that NVIDIA is the best way to play the silicon play. I think there are private ways to do that.

13:28Those are opportunities. So, yes, I think that the kind of untold story when it comes to silicon is related to what the hyperscalers are doing. Here's a bit of an Uncle Charlie for you, Gene, but I know you're capable. That's a curveball in layman's terms, by the way. Gene knows that as well, by the way. Thank you. I did not know that. Of course you did. You're Googling it now. I am. Understanding that Intel might actually be a bit of a homeland security play, given everything that's going on. In this political landscape, potentially what could happen in November and then new sanctions against China, could there be a re-rating on Intel just on the back of that alone?

14:05Yes. At Deepwater, we owned Intel. We owned it a year plus ago, and we gave up on it when they just kept having these issues. And one of the central reasons why we owned it was for that, is that this kind of domestic theme, I think it is a benefit for companies like Intel. I think it's in the benefit category. Unfortunately, when I put that positive and think about the other competitive dynamics and the product dynamics and also the fact that they're not only building chips, designing chips but also building them. The only other company that does that in the world is Samsung and they don't do a very good job on it.

14:43When you put all that together, I think, Guy, that is a positive but I don't think it changes the calculus on the stock. Gene, it's Karen. Thanks for being on. I want to go back to something you sort of touched on. Do you think that the street is too high for the out maybe two or three years in NVIDIA? Or could the pie grow into that? So when I think about that 2025 number, do I think it's too high? No, I think they actually probably can exceed that. Ultimately, I think they can exceed that as the answer. There is going to be more competition. Maybe that ends up happening in 2026. It's hard to do chips.

15:16We've learned that. And so there is going to be growing competition. I think the street is generally properly modeling how this NVIDIA, this massive spike is going to go up and then kind of come back down. It's actually I think analysts are doing a pretty good job of thinking about 2025. Gene, and then what's the read through to AMD on any of the negativity for Intel? Is this AMD positive? And then more broadly, we've had a month. I mean, a monster relative, even a group that moves in monstrous ways in the chip space year to date. I mean, does this make sense to you? So AMD, we have the stock and I mentioned, I don't know if I mentioned the multiple, you know, trading at a high 40s multiple.

15:56And then we also have the, you know, kind of the fundamentals and how that's going to play out. I think from a fundamental perspective, things are going to be fine for AMD. I think ultimately that they are gaining share. I think this softness that Intel is talking about, I think they talk about Mobileye. That's a little bit of an excuse in my book. I think that there's other parts of their core business that just aren't seeing the traction. They want to see it right now. I think everyone knew about Mobileye. Mobileye blew up a few weeks ago, so that shouldn't have been a surprise to any of the estimates.

16:23So to answer your question, I think the fundamentals for AMD are fine. I don't have a strong sense on the stock just given the valuation relative to what NVIDIA is trading at. It seems like NVIDIA is actually a better opportunity now. All right, Gene, thank you. Great to hear from you on Intel. Thank you. Intel shares are down about 8 % right now as a conference call gets underway. Dan. Yeah, I think what he had to say about NVIDIA is probably the most important thing. Again, you know, one of the things that I got wrong on a couple of occasions last year was just how this company was going to grow into those out year estimates, given the bump that they had in guidance and then the continued outperformance that they had.

17:00But if you look at fiscal 25 and that's going to be the quarter they're going to be in, you know, right now, they're expecting high teens earnings growth and high teens, you know, mid to high teens sales growth. It's a 74 % gross margin company that he just told us is going to have a lot more competition, not just from the upstarts that are going to compete on price, but also from their customers, right? So the story gets harder from here, even if they beat what looks like modest estimates, you know what I mean, going forward. So the NVIDIA story, to me, is going to be very interesting. And now, granted, this stock is up 25 % in a straight line in three or four weeks or so.

17:33All of their customers are going to be reporting next week. I think you want to keep a close eye on this one, too, because this could be an accident waiting to happen. A lot of enthusiasm has been pulled forward right here. Is your conviction faltering at this point? My conviction wasn't that they were doing anything near term in AI. My conviction was that pretty much every quarter this happens. And so I think the stock's going to trade where it is. I think this is an opportunity. So to be clear, I'm not as negative as everybody here. And this is weakness I'm buying. Not tomorrow. All right. We will stay tuned into the Intel call and bring you all the headlines as we have them.

18:06And we have even more earnings coming your way. shares of Visa, Capital One, T-Mobile, all on the move after results will bring you the numbers from the quarters straight ahead. But first, a huge buzzkill in the insurance space. Shares of Humana tanking after a dismal forecast for the year. One of our traders says it's hard to overstate how bad that report was. The details on why when Fast Money returns. This is Fast Money with Melissa Lee, right here on CNBC.

18:40Welcome back to Fast Money. A buzz scale on Humana. The health insurer sinking over 11 % after reporting Q4 numbers and giving full year profit guidance that was nearly half of what analysts had expected. Humana citing soaring medical costs with more patients undergoing procedures they had put off during the pandemic. The move coming just a week after the company warned costs were running higher than expected in Q4. Shares are now at their lowest level since April 2020. 20. So, wow. Yes, this is an example of a stock going down on the same thing. And it was even worse than just a couple of weeks ago.

19:12It's even worse. It's even worse than that. Had they said nothing two weeks ago and only said this, then you would have. All right. Well, OK, this is a change for sure. The one thing to understand about why earnings move so much from this medical loss ratio being two percent worse is that they operate the business at low to low to mid single digit net profitability. So if your biggest expense is 2 % off, that digs in a huge amount into your overall profitability. So that's why they missed so much. But I cannot understand why they didn't think, all right, we had a big fourth quarter, much more use of, right, so the MLR ratio, medical loss ratio was very high.

19:53And then not waiting to see, could it continue? They just, it seemed like the most innocuous cases, they thought, all right, every big rush at the end of the year, you know, get procedures, whatever the costs were. But to then, we know it takes a little while for claims to come in to not wait and see, wow, does this very dramatic trend change? Is it going to continue? That I don't understand at all. So now this looks way worse. The best is that they didn't know it was coming. The worst is that they did. Didn't know it was coming. Right? So that would be worse. Let's say that's not the case. They really just screwed up the delivery of what wasn't good news already.

20:35The flip side, though, is that the good news may be that they are assuming that these, you know, the higher usage rates are going to continue and be sort of the new normal. They're talking about a reset for the entire industry, having to either raise prices or claw back in terms of the benefits that they do offer under their plans. And so maybe it's conservative. Well, the problem with that is I think they've said that the industry is going to reprice, but they're going to grow slower than the industry. I mean, there's nothing like they're kind of like throwing it. You know, like, yeah, it's bad times and it's going to be worse for us.

21:04So I didn't like that either. Average price target is$525. So analysts are completely off sides. I think Deutsche Bank cut today down to 360, which is where the stock's trading. But Karen knows this probably. They cut their guidance in terms of EPS basically in half. They took it from$30 to$16, which is incredible in a week. I mean, to your point, that's the thing. The optics around it even make it worse. So the guide is terrible. The optics may be even worse than the guide. You're in Elevance. Right. Different businesses. Different business. Their MLR, which they came out, I don't know, a couple days ago last week, was actually a tiny beat, a little bit better than expected.

21:43The earnings were good. The stock was down minimally today. But just the delivery of that bad news is so poorly done. I mean, would you feel comfortable saying, all right, they're conservative this time? I wouldn't. And I'm sort of intrigued by cheap valuations. It's a wait and see. Coming up, more after hours action after the break. Shares of Visa dropping on results will bring you the details from the quarter next. And some key stock moves in today's session catch your traders' eyes. and equipment renter rises. The latest on Boeing's fallout and PayPal's AI upset. How to trade all these moves ahead.

22:18You're watching Fast Money live from the Nasdaq market site in Times Square. Back right after this.