Why there may be a 'mild' recession coming, prepping for Nvidia earnings: Market Domination

Stocks (^DJI,^GSPC, ^IXIC) closed mixed on Friday, with the Dow Jones Industrial Average closing above 40,000 for the first time. However, Crossmark Global Investments CEO and CIO Bob Doll is concerned a 'mild' recession could be in the cards given things like the consumer showing signs of weakness.

Looking ahead to next week, all eyes will be on Nvidia (NVDA) when it reports its first quarter results on Wednesday, May 22 after the market close. Wedbush Equity Research SVP Matt Bryson and Truist Securities Managing Director William Stein joined Market Domination to share their expectations for the report and what it may mean for the chip sector.

For more expert insight and the latest market action, click here.

This post was written by Stephanie Mikulich.

Video Transcript

Hello and welcome to market domination.

I'm Julie.

He and that shot left in life from our New York City headquarters.

We are giving you the ultimate investing playbook to help tune out the noise and make the right moves for your money.

And here's your headline blitz getting you up to speed one hour before the closing bell rings on Wall Street.

There is a lot of optimism in the market right now.

And what we've seen over the past month or so is that the narrative has sort of shifted from uh you know, a no landing narrative to one that's sort of like a soft landing narrative and that's really what's supporting the market right now.

I'm not seeing anything in the preannouncement that tells me that the business is turning around.

Uh but at least they'll raise enough cash to last another three or four years if they uh if they in fact continue to flail and try to find a new strategy.

So I admire that they're taking advantage of the opportunity.

That's, that's probably in the best interest of their longer term shareholders.

I feel sorry for the fools who buy the stock at 21 because it's worth single digits.

To me, the focus is, they've got to get a, uh, they've got to announce and in place a new CEO now that they've announced that the O Calhoun is leaving, uh, you know, they've, they've got to get the Spirit deal, uh, done with and, uh, put in the books.

Uh, thirdly they've got to get the 737 max, um, uh, authorization increased production with the fa uh increase to above 38.

We've got one hour to go until the market close.

So let's take a look at the major averages sponsored by Tasty trade.

We got a gain for the dow right now up just about 1/5 of 1% here.

Pretty tepid gain here to end the week up, about 70 points on the session, of course, touched 40,000 yesterday.

Has not gotten back to that level today.

The NASDAQ right now trading a little bit lower lower by about the same amount here off by almost 2/10 of 1%.

And if I can find the S and P 500 blindly here, but I'm going to skip that and take a look at the sectors here.

We have a little more control.

The S and P 500 is little change.

This is what represents it on this screen here.

You got tech and consumer staples under pressure.

Energy doing quite well today along with materials we are going to dive into commodities specifically metals later in the show is copper has been having quite a wild time of it.

Taking a look at the dow here to day.

You've got a pretty mixed picture as reflected in what we saw.

You just heard a little bit about Boeing up about 8/10 of 1% here.

Um On the latest from the company, we are also going to get an update on its latest shareholder meeting and the headlines that came out of that later in the show and finally the NASDAQ 100 here as we take a look.

This is also pretty mixed in video.

The big thing on deck after the bell next Wednesday, it will report earnings in today's playbook.

We will tell you how to play the chips right now going into that and beyond.

So that should be a fun conversation, Josh.

That's right, Julie us Federal Reserve, Governor Michelle Bowman.

Meanwhile has reiterated her stance that she is willing to hike rates if needed and says that inflation will remain elevated for some time.

This coming as investors had begun to feel some optimism surrounding the fed and rates for more on where this leaves the market moving forward.

Let's bring in now, Bob Dahl, Crossmark, Global Investment, Ceo and Cio Bob.

It is good to see you.

So I'm just looking at the market here, Bob, you maybe lost a bit of steam here in the last couple of sessions, but Mark is still on track, Bob here for its longest streak of weekly gains going back to February and, and you know, Bob, why not?

Right.

Decent economy, decent earnings.

What's not to love?

Yeah, it is, uh, a love affair as momentum carries the day as you point out and that goes until it doesn't anymore.

Momentum is impossible to predict when it's going to end.

Now, if you want me to pick on things I can do that, I'll pick on the, um, the, the fed and uh inflation and interest rates.

We got a couple of inflation numbers this past week.

They were ok, relative to expectations, but they're still annually between three and four.

That's nowhere near two.

I don't think we're going to two second thing.

I pick on earnings, double digits this year and double digits next year.

The US has never produced back to back double digit earnings growth unless we're coming out of recession.

So I'm skeptical there and for all that, I get to pay 21 times earnings.

So I'm a little cautious, fully invested but cautious.

Um, and Bob, let's dig a little bit more into that caution.

It's Julie here.

It's good to see you.

Um Not only are you cautious, you do think there's a chance that we'll see a recession before the end of the year.

Um What leads you to that conclusion?

Uh I do Julia, I, I'm, I'm a, I'm an old man, I guess.

Uh and have not repealed recession from, from my vocabulary.

Look, we've got the leading economic indicators today and they were down again.

We've had one month up in the last couple of years.

Uh a week ago, we got the University of Michigan Consumer Confidence Index and not only are lower end consumers struggling, but now some mid income consumers are struggling.

It's just the high end that's doing well.

And of course, inflation expectations in that same survey went up a bunch.

So I, I don't think all is as clear as we might like it to be in a market where you got to pay over 20 times earnings bob when you say recession help us quantify that.

How serious a downturn would you be looking for?

You know, our view is, uh and our predictions coming into the mild recession, there are a lot of reasons to think it's not gonna be uh uh ve very noticeable but uh I think consumption uh will begin to, is already beginning to flag a bit and we'll see that in the employment numbers before long and that'll just uh cause employers to say, hey, you know, I'm having trouble uh with my price increases, they're not being accepted like they were uh I still have cost pressures.

So I have some margin pressure, maybe I'll lay off a worker or two and you know how that goes, it becomes a, a AAA vicious cycle.

So not severe at all.

Uh and some will argue when we get through it, we had one, some will not and they'll both be right.

But I think uh a pause that refreshes is necessary.

And Bob, um, if, uh you know what you were saying that, you know, price increases aren't necessarily accepted in that kind of a scenario, you see some, uh, workers get laid off and maybe wage pressures come off as a result.

Does that mean that a recession would indeed bring lower prices or would we run the risk of seeing a sort of stagflation scenario?

I hope it will bring lower prices.

I think there's a good shot at that.

I think part of the problem with the fed arguing for 2% inflation while we're having economic growth, uh you know, at or above trend, that's really hard to accomplish getting inflation from down from 6 to 4 at the core level uh took a lot of work and, and we've done that 4 to 2 is a whole lot harder.

Uh So uh you, you hear my skepticism absent a noticeable slowdown.

So Bob, given that outlook, you wanna stay cautious, what, what does that mean, Bob, when you look at the US stock market, where do you wanna be invested, Bob?

So I I'm owning companies or trying to anyway, that have high earnings predictability, high earnings persistence and strong and growing free cash flow.

You might put over all three of those things.

The word quality.

Uh, those stocks have done just fine on the way up and if we get any kind of pull back of, uh, that lasts more than a couple of weeks, I think those stocks will go down for sure.

But go down less than the market overall.

So, lots of good stuff out there.

But you gotta do your homework.

I mean, Bob, I also wonder if you see a scenario where you maybe see a recession but if prices come down, stocks like that enough to keep going up, does that work or no or no?

Well, you know, when, where we're in the, in the throes of it, people will say, oh, I didn't expect any kind of recession.

I didn't expect earnings to be flat or down.

Uh, and so there'll be some people who run for the hills, no question.

But out of that comes a recycling and rest part of the cycle and, uh, that'll be fun, fun on the other side and maybe, maybe small cap stocks will eventually play again in that recovery.

Hey, Bob, I, I don't recall and I don't know if you've, you have it at hand, but when's the last time we had a recession start in an election year?

That's a great question.

It's been a long, long time.

I, I don't, I don't know when they typically come as, you know, uh, in the first or second year of a presidential term more than the third or the fourth.

Um And so I don't know that it's gonna start anytime real soon.

Our guess and our prediction is we'll start sometime before the end of the year.

Maybe it will be the day after the election.

Maybe it will, Bob.

Good to see you.

Have a great weekend.

All the best.

Thanks.

We're just getting started here on market domination.

Coming up.

Me, man, fading fast on Wall Street.

This time around gamestop shares are sinking for a third day in a row.

We are going to dive in the some of today's top trending t on the other side.

Plus boing shareholders re elect outgoing Ceo Dave Calhoun at least to stay on the board of directors of the company aims to stabilize production and quality more on that in the four pm hour and at 330 it's the latest edition of our series.

Goodbye or goodbye.

We will take a deep dive into two stocks to help you make the best choices for your portfolio state, more market domination after this Microsoft making strategic moves as it gears up for its build 2024 event next week and one mo move being in in its video game sales strategy.

The software company reportedly aiming to release the coming installment of Call of Duty to its subscription service for more on what's new in tech.

We have Bob o'donnell Tech analysis, research president and chief analyst.

Joining us now, Bob, it's good to see you.

So let's, let's start there, Bob, by the way, this was the journal, uh reporting this, that, yes, Microsoft is gonna add the latest installment of that powerhouse franchise Call of Duty to its game pass subscription service at lunch, Bob instead of, you know, selling it a la carte.

What did you make of that, Bob?

Uh, big deal?

No deal.

How did you see it?

Well, I mean, look, I, I think it's an evolution of what Microsoft is doing, uh on their gaming business in general, right?

And they're seeing this subscription model as we've seen in every other aspect of the tech industry, be something that they want to take advantage of.

And so not really AAA surprise.

I mean, I, it honestly, it's kind of like one of the last pieces to fall uh into this idea of a, of a subscription based model.

So I think it makes perfectly logical sense increasingly.

That's what we see.

It's almost possible to find something you can buy on its own now when it comes to software anymore.

So, not a surprise and, and it's a way for them to get more excitement around gate pass, Bob at the same time, this was something that Bobby Kodak of Activision Blizzard was resistant to right over time now, he's not there anymore.

Does this do anything to the Activision franchise to the Call of Duty franchise in terms of a hit to reputation at all?

Because they were so resistant or because you said, as you said, you know, everybody's doing it now, it's not really gonna matter.

Yeah, I don't think it hurts Activision at all.

I mean, it was gonna happen eventually whether those guys wanted it or not because the, the outside world again, everybody's moved to this kind of a model.

So, you know, I just feel like this is something that, um would, would have happened eventually and they're just making the decision to do it now and they feel like they have the opportunity, like you said, since things have changed there.

Um And again, it's all about getting more subscribers at the end of the day.

It's as simple as that.

And so what you in the same way that, you know, Netflix has got to have new shows and everybody else has got to have new content to get people to keep motivated, you know, to maintain those subscriptions.

This is the exact same thing.

And again, consumers are used to it now it's, you're not making it any different from anybody else.

No game feels better because it's not on a subscription.

I mean, I don't think people think that way anymore.

And, and Bob, you know, as we mentioned, stick with Microsoft next week is the company's big uh build conference.

I know you're gonna be watching.

Um You know, this week was open A I AND Google next week it's Microsoft's turn to talk A I and, and, and front and center there, Bob.

Certainly there's gonna be a lot of talk about copilot.

That, that's Microsoft's A I assistant and, you know, it, it, it is early days, Bob, but certainly, you know, there are investors and analysts on Wall Street who are excited about that tool and kind of the potential growth and adoption.

What, what do you think?

Well, look, I mean, Microsoft jumped out on this early on, right?

They, we saw open A I do the chat GP T thing about 18 months ago.

And within three months, all of a sudden, Microsoft was talking about integrating the open A I stuff into their tools with copilot.

So they jumped way out ahead of everybody else.

And frankly, what we've seen since then is a lot of scrambling and catching up by the Googles of the world, by the um Amazons of the world, by the metas of the world.

And now it's getting obviously significantly more competitive.

So, you know, the expectation is that they're going to continue to build on what they've done with copilot, you know, they brought it out into office.

We've seen that I expect to see that get developed further.

So, I mean, you know, they're gonna keep building on the thing that they started and integrate it and, and I think, you know, one of the big stories that's going to be interesting to watch over time for Microsoft and all these players is, hey, you know what we've been talking about, proof of concepts and all this kind of stuff.

Let's see, an actual production.

And so what I expect is that you're going to see them talking about, are there new tools potentially that can uh that companies can use to make the process of integrating this stuff into uh their environment uh easier?

Because the reality is there's a lot of companies out there who are super excited about this and they've tried some things here and there.

But to move that from, hey, we're playing around with it to actual production is much harder.

And so I think you're gonna see some of that.

They've already done some of that.

I expect we will see more.

You're gonna see their competitors do this as well.

So it's, it's gonna be interesting to see.

But, you know, this is the year where I think uh and I've said this before here, even on Yahoo Finance, this is the year when A I really starts to have an impact.

And then eventually we start to see even more of a bottom line financial impact.

We've started to see it.

I expect we're gonna be seeing more of that over the next 12 to 18 months.

Hey, Bob specifically to build.

Also, there was a Reuters report this morning that Microsoft um plans to offer this new suite of A MD chips to sort of compete with nvidia chips.

What do you, what are sort of the implications of that for everyone concerned?

Well, look, I mean, to be honest with you, I'm kind of surprised it's taken them this long.

I mean, everybody is doing this right.

I mean, everybody is looking at A MD because NVIDIA makes incredible products, people love it, but nobody likes when there's one company that completely and utterly dominates.

And so that's why you've seen so much focus on, you know, additional players and additional competitors and additional alternatives.

A MD has been out there plugging this story for a while.

They make great products and from the people who've been, you know, really diving in deep into this stuff, they're saying, look, they actually can absolutely can be competitive with NVIDIA.

So it just makes completely logical sense for Microsoft to do it again.

Their competitors are starting to do it as well.

I think this is just part of that general move towards a diversification of suppliers.

We've got Intel is going to be pushing their gouty chips.

Obviously, they're trying to get in there.

You've got all these companies building their own custom chips.

We've already seen that being announced by all the major players.

So this is that sense of look, all of this stuff is important, but we can't rely just on NVIDIA.

Yes, we're going to buy a ton of NVIDIA, but the, the growth opportunity is so big.

We need others to help us build this as well, and this a MD move just seems like another version of that Bob.

Let's switch gears, talk to Apple as well because we got this report that uh Apple is developing a significantly thinner iphone could get released.

Uh As soon as next year, Bob.

I, I don't think we know exactly how thin but thinner and according to this report, pricier, you know, let's say this report is true, Bob, I guess that's Apple then moving kind of even harder into the high end of that smartphone market.

Bob.

Well, I mean, here's the thing, Josh, I mean, I don't know about you, but I mean, honestly, how much thinner do these things need to get?

Like, do we really care?

I don't know, I, I shouldn't be so negative but you know, look, they showed what they could do with the new ipad Pros, right?

Thinnest product Apple's ever produced.

They obviously set a standard there with that.

Now, the idea is, oh, let's bring this to the iphone.

Uh There was another report that just came out today or the day before about moving to a new type of uh more dense battery because the battery is the thing that to be honest with you, that's kept these phones as thick as they are because you need a certain amount of battery life.

And therefore that implies a certain thickness of the battery.

If you can get a more efficient battery, theoretically, you can get a slimmer phone.

There we go.

We get a slimmer iphone and some people will pay the premium because they want to have the coolest latest thing in the long run.

I don't know, I'd much rather see an apple foldable.

Uh to be honest with you, excuse me than a thinner one.

But hey, you know, I guess we'll take what we can get.

Hey, Bob, who knows?

That'd be thinner and foldable.

I mean, the crazier things have happened.

Bob, thanks so much for joining us.

Appreciate it.

Thanks guys, always impress you, always time.

Now for some of the day trending tickers reddit shares.

They are surging after announcing a partnership with open A I team up to intended to enable open A ISA I tools to better understand and showcase uh Reddit content.

So companies saying in a statement here, Julie, this is gonna enable open A I's A I tools to better understand and showcase Reddit content especially on recent topics.

So this means open A I can train A I systems on Reddit data financial terms.

We don't know those did not get released.

Of course, this is sort of part of Reddit's pitch when it went public, increasing revenue through these kinds of kind of licensing agreements with A I companies and powerhouses like opening I, right.

And this is they've done, they've done a bunch of these thus far.

I think there's something like uh 200 million or so that they have signed in deals that we know about or that have been reported on.

One of them was with Google for $60 million as well.

And for open A is part it's been making these different partnerships too.

There are a lot of questions about this as you pointed out yesterday, how are reds going to feel about this?

And one story in the background that especially throws that into relief here is that open A I reportedly is now getting rid of this, what they call their super alignment team, which sort of is a curb on the development of general artificial intelligence, which is making A I that sort of is meant to mimic human intelligence and go beyond it.

That would be a curb on allowing that to overpower its creators.

Kind of like what you see in sci fi, that team is no more and that has raised some concerns, you know, this was sort of one of the things of the crux of Sam Altman's ouster from open A I and then his institution, why am I bringing it up with the Reddit story?

Well, if you're a redditor and you're worried about the use of your content that that's on Reddit being used for eventually some sort of nefarious or just purposes, you don't want it to be used for.

I I don't know, there's still a lot of questions about this whole area.

There's, you know, big questions for Reddit uh users, investors like this is one point I make.

Roth MKM is Rohit called Carney friend of the show in a note this morning.

So he, he's a fan of Reddit.

We know that he has a buy on the name says this kind of a I sentiment helps with near term momentum.

We saw that today also says he would not be surprised if Amazon now finds a way to work more deeply with Reddit too.

And remember because what he's saying there is Reddit, uh long term aws customers.

So we'll see if its right.

Yes, we will.

All right, let's talk about til brands to that company announcing at the market program to fund strategic and a creative acquisitions.

The company is planning to sell shares as it looks to prep for a US cannabis rescheduling.

What the heck does all of this mean?

Basically, the company says it is registering to sell $250 million in sales in, in shares for potential sale.

It doesn't mean it's going to means it could potentially could do this.

And it made it very clear in its statement that it's not using this money for operations that it would exclusively be for acquisitions once this from uh schedule one to schedule three gets done in the United States.

And this is coming back to the topic.

We were talking about a lot this week, Biden administration looking to reclassify marijuana as a less thing.

Just drug stock has been interesting, you know, I mean, down, obviously hard today, it's also down hard in the red this year, but also, I mean, just pulled back a bit nice pop recently.

Up about 15% in the past month.

Yes.

So they're taking advantage of that.

All right.

Finally, let's look at the gamestop A MC stocks sinking today after the me madness returned this week.

But they weren't the only stocks caught up in the crazy finances.

And as Frey is here to take a deeper look at some of the smaller names that saw some big moves this week.

It is.

Yeah, Josh.

So everybody has heard of gamestop and A MC.

But have they heard of Faraday Future?

Intelligent Electric?

Well, I hadn't either until we saw what this stock was doing.

This is a micro cab stock.

It is a company that's worth about $20 million.

Take a look there.

You're looking at it down 29% but it was up more than 100 and 20% today.

Over the past week at one point, it was up more than 7000% for the last week.

On Monday, the stock was trading at six cents.

This earlier today was trading at over $3 a share.

Now you are seeing it at over $1 a share.

It's incredible what has happened with some of these stocks.

Faraday, by the way was the third most mentioned ticker on Reddit's Sub for Wall street bets.

It was behind NVIDIA and behind spy for the Spider ETF S and P 500 ETF.

Another stock that was going crazy this week as well is called Crown Electro Kinetics.

That stock for the week is up more than 200%.

That's a fiber optics and a smart glass micro cap company.

Also green wave technology.

This is a Virginia based metal recycling company.

Sun Power.

Also this week is up for the week after a crazy uh a few days and micro cloud hologram, that's another solar play that was up today more than 6% at one point for the week.

It's up about 22%.

A theme that you see among a lot of these smaller companies is that they are very small companies and the short interest on them tend to be really high for Faraday future.

Short interest was more than 92% of the float.

So obviously any move is exacerbated guys.

Yeah, most definitely.

And a lot of these companies just like t where we just talked about like gamestop are taking advantage of the spikes in their shares to register to sell more shares.

So that's an interesting corollary to what's going on.

Thanks a lot.

Thank you.

Well, as the meme trade finishes off a wild week of price swings during trading hours, stocks like gamestop and A MC, see big gains quickly then to flip throughout the week.

But what if the traditional 6.5 hour trading day were to change.

Yahoo Finance is Josh Shaffer is joining us here with more.

So we're talking 24 hours, 24 hour trading.

Yes, I've been asking a lot of folks in the space about that over the last month now, since we had, excuse me, that report from the financial Times that the New York Stock is, was polling its investors about what it would like to see from 24 hour trading and any general interest there.

The New York Stock Exchange has not actually made an announcement on moving to that or anything like that, but sort of just speculating on what it would look like.

Right?

And one of the exchanges that we track already does have some version of 24 hour trading.

So Robin Hood has what they call 24 5 trading.

And so five days a week, you can trade for 24 hours on Robinhood, getting back to the meme stock part of this earlier this week on Monday, they said 12% of their action on gamestop came actually before the open.

So in that 24 hour session and largely it seems like that's what strategists and people that are in the exchange space think this would look like anyway, if people are still going to trade during the day, this is really a play for two different groups of people.

One would be international investors.

We have seen the companies specifically in the S and P 500.

The big companies, we talk about all the time, a large portion of their revenue is now out of the US.

And so people that live outside of the US want to invest in those companies.

The exchange has seen an opportunity to essentially appease that demand and be open during those hours.

The other flip side to this too is just you can do everything on your phone now for 24 hours and there's a younger generation of investors coming in right now, specifically the group in their twenties that has only grown up being able to do everything on their phone.

And again, as an exchange, which we should remember our businesses, right?

If there's demand for someone to trade for 24 hours, the exchanges are going to want to meet them where the customer is and they feel like that younger generation of customer is on their phone all the time and they want to be able to give them access to trading and for investors, Josh, what would be the pros and cons of this?

Yeah, I mean, the pros Josh, like I said is just more access, I think from a a institutional standpoint.

Uh The CME group had told me that they were looking at it from like a risk perspective, right?

When you see the opportunity to be able to hedge risk before the market opens, what you're looking at right now is daily volume in non US hours on the E mini NASDAQ 100 that's increased since 2019 and stayed relatively steady there.

That's been an interesting development.

People as news happens overnight being able to react to it and then sort of the drawback would be.

What if there aren't enough people in the market at 2 a.m. Eastern?

Right.

And what does that do to liquidity?

It seemed like some of the strategists I talked to thought that that won't be that big of an issue.

But I think a little bit remains to be seen because we haven't really gotten there yet of if we open this all the way up and you can trade at 1 a.m. Eastern.

What is it gonna look like?

The fear would be if there's low volume, then there's not gonna be the people that come in to buy the stock, right.

When you look to sell it at a certain price right now that spread when you have high volume is pretty narrow, that spread could widen significantly if you're trading in low volume hours.

Did they get rid of the bell at the New York Stock Exchange?

So we were talking about, I, I talked about still open at that time, I guess.

Right.

Yeah.

So maybe they don't.

And I think if we're still gonna see a lot of people trading in traditional hours, then maybe, maybe the bell still matters.

Right.

It's our, it's our time to log off if we wanna walk off.

All right, Josh, thank you.

Appreciate it coming up.

It's the latest edition of our series.

Goodbye or goodbye.

We'll take a deep dive with the two sos to help you make the best choices for your portfolio.

Stay two more market domination after this.

It's a big noisy universe of stocks out there.

Welcome to.

Goodbye or goodbye.

Our goal is to help cut through that noise, to navigate the best moves for your portfolio.

Today works examining your leisure spending dollars.

Where are they going?

Join me here to discuss it, James De Main Street Research Chief Investment Officer.

Good to see again, James.

Thanks so much for being here.

So let's get to the stock you do like first and that is booking holdings as we are still seeing people travel to some extent, the stock has done well over the past year.

So let's get to your case here.

And first of all, it starts with the growth and it starts with the profit margins, both of which are about 20%.

So 20% sales growth, revenue growth we're talking about specifically there, right?

Yeah, and 20% profit margin and a consistent profit margin and which uh in a 20% grower of earnings.

So those two consistent numbers are really one of the things that we think is so fabulous about this company based in Amsterdam.

We're global investors.

So we love looking at the US companies, but also these companies based in Europe, right?

And of course, booking also has a big business here in the US as well as well as globally, a lot in Europe as well.

Um Now there's a lot of places to travel to, to book your travel right now, right?

But you say have built a moat around the business model, explain what you mean there, they really have, you know, in the beginning when they started out, the the big competition was that Google would get in the business Amazon, right?

With this tremendous amount of cash flow and they tried, but they were unable.

And over time, uh what's happened is booking has just created what I call a moat, right?

This sort of hard to penetrate market share and the more they have this, the more it continues to be uh stronghold what's really interesting about.

Um And I think what creates that mode, it's the ease of use of their web access.

And now they have an A I trip advisor.

Of course, this thing tells you where you wanna go, what car you might at least before even your thread count of your sheets.

I mean, it's really pretty amazing.

Well, I like that filter.

I'm gonna have to click on that one the next time I book something.

Um And then finally, there's the valuation that you're looking at as well and you know that you are seeing that growth that you pointed but at what you say is a good valuation.

Yeah, I think, you know, here outside of A I and all this, if you want a consistent grower, that's not a tech stock.

This is a 22 times earnings growing at 20% a year.

I think it's just a really great consistent part of any portfolio construction.

So, as you know, we always like to talk about what could go wrong with the stock.

And in this particular case, you know, you get another pandemic and travel stops.

That's sort of something you can't control or if we do get more meaning economic slowing, that could be a risk.

Yeah, that's really the risk.

You know, anything that would cause people not to want to get out there and travel.

But right now that is not in the way and hopefully it doesn't come in the way.

Certainly the pan, right.

Knock on wood.

Seriously.

And you are a holder of booking both my family and my firm.

Got you.

Ok. We eat our own cooking.

Gotcha.

Well, it's good to good to know.

Um let's get to the sack.

You don't like.

This one is quite interesting to me.

It's Disney.

This stock has also done well over the past year in part as the pro battle has been going on.

But in terms of why you don't like it, the first reason is quite interesting to me, Bob Iger came back to the company, but you say some of the decisions made by his predecessor, Bob Chapek did.

So, you know, took the path company down such a wrong path that they can't be reversed.

What are some of those concerns?

Yeah.

And I think Bob Iger, right.

He's just a fabulous manager.

Uh, and, and he was there for so long, but I even think for him it's, it's too little, too late.

Uh, the previous manager dug a hole strategically and too much time spent and too much money spent that.

I'm not sure that Iger is really the right kind of turnaround guy here, Iger is great at building businesses and being creative.

Now, he's coming and basically trying to pick up the piece and clean it up.

I'm not really quite sure and I don't think shareholders might be either.

Of course, we have Nelson Peltz who came, came in and that made it even more difficult.

So management is the big problem there.

And I'm a real stickler for buying companies with excellent management, with visibility.

This is a bit of a mess when it comes to management and, and one of the messes you contend is what has happened with streaming and sort of the spending on content that the company has done.

Um Is it not sort of paying off for them?

Do you think, you know, it was a difficult, you know, very competitive goal to try to compete with Netflix?

I mean, the monster, not just in the US, but globally and that it was really the whole strategic idea behind, behind previous management.

Let's make Disney this very competitive streamer against Netflix.

It, it's just like sending uh the Cleveland Browns to play, you know, uh the Kansas City Chiefs.

If you're a football person, it just has not worked.

And the problem is it doesn't look like it's going to work and it's been very expensive and very time consuming.

So that is sort of something I think Iger is gonna have to wrestle with.

And the question is, you know, do they just cut their losses and move on?

Uh or they try to turn it around?

Yeah, I mean, he has sort of tried to trim down the spending and that, but you don't think he's gone far enough again.

Too little, too late.

I, I think is uh is the problem there and then valuation just like we talked about with booking, you think this stock is over value?

Yeah, it's growing at 5% a year, right?

Compared to booking at 20 but it's trading at 25 times earnings.

You know, typically you wanna have pe s equal to the growth rate.

So 25 times earnings and growing at 5% is far, far away.

Uh So that's that valuation proposition doesn't make any sense to us.

So what could go right for Disney and, and you, you pinpointed two things that could potentially go right for Disney and turn this around.

One of them is that the company changed the business strategy meaningfully and things get better.

The other reason it becomes a takeover candidate, which I, I mean, one of these seems a lot likelier than the other one to, at least, to me it's a Bahama to take over.

I mean, it would take a ton of money.

Uh and, and somebody who wants to, you know, get involved in that mess.

Uh But you know, when we think about, OK, what would make it appealing?

Yeah, take over.

Hard to imagine who the acquirer would be.

I think it's a change of strategy and a significant and dramatic one.

I'm not sure current management ir is really up for that.

It's gonna cause a lot of uh conflict.

So, but those are the two things I think that could cause I think if the stock just fell apart, like went down a lot, it could be compelling, but not at, you know, with the levels and clearly you don't own it.

No, we don't know it, ok?

Just make sure you're not sure it, we're not sure.

Ok, James, good to see you again.

Thank you so much.

Let's summarize what you're telling folks here by booking holdings.

It's a growth company that's reasonably priced.

It has a well built business model with a good moat.

On the other side, you say avoid Disney, it's falling down the rabbit hole from previous management and the stocks overvalued and it's facing drawbacks as it spent all this on streaming competition.

Thank you so much for being here.

Good to see you.

Thank you so much for watching.

Goodbye or goodbye.

Be sure to tune back in next week for all new episodes at 3:30 p.m. Eastern.

It was a busy week in the media sector.

The industry's top names, unveiling their upfront presentations to advertisers but it wasn't the shows making the big headlines.

It was the focus on advertising technology, Netflix announcing its own adtech platform and will make its ads available to programmatic buyers including the trade desk shares of TT D jumping on the news this week from on what this means for the company and its business.

We're joined now by city analyst, Yal Arroy and Yal, it is good to see you.

So what this basically means, Yal, as I understand is that the trade desk is gonna help facilitate um automated ad purchases for Netflix kind of walk us through you guys.

Just what bottom line this means for the company, you know, what kind of financial impact do you think it's gonna have?

Yeah, sure.

So look, this is a really important set of inventory for the trade desk and it was just a kind of level set trade desk is a demand size platform that essentially connects advertisers with uh with, with, with various uh digital platforms.

Uh That's a across the web collectively that could be online video and, and display ads.

But the, the fastest growing and biggest part of their business is, is a connected TV.

Uh as connected TV has become bigger, it's continue to take share from linear television and that's, that's uh really early stages and, and, and growing the, the trade desk is the largest independent demand side platform uh do playing this role within the ad tech ecosystem.

Netflix is still really early in terms of its, of its ad offering.

It's about five or 6% of total uh C TV ad dollars.

Um but opening up to the trade desk here is, is gonna be really important because Netflix is uh 20% of viewership and that ad put platform is, is expected to be.

So what that means, bottom line for the trade desk and our on our estimates, we think that the billings, the dollars that are running through the trade desk uh in in, in 2025 it's an incremental $500 million or about 3 to 4% of uh of growth that's just in 2025.

And then as Netflix gets bigger, um and C TV, uh A dollars and advertising continues to grow and 26 and beyond, it should continue to be uh a larger impact Igal.

Um Netflix didn't, it's Julie here.

It's good to see you.

Um Netflix didn't just open it to trade desk, it opened it to a couple of competitors as well.

But do you think trade desk is really best poised here to take the biggest share?

And do you think, and what are we seeing, I guess from the other streaming platforms also?

Yeah.

Hey, hey Julie.

So um it, it, it opened it up to a couple of other competitors.

So when Netflix first came out with its ads here, it was partnering with Microsoft.

Um over time, the the decision was to bring some of the the capabilities in house and then, and then expand the relationship with multiple partners, really with the ultimate goal of, of letting more ad demand coming uh come into the platform.

Um The, the trade desk and the role that it plays as the, the really the largest independent uh demand side platform to have a ton of relationships with, with large advertisers.

Um And, and they should, they'll likely play a really important role in, in bringing it in this demand.

They also partnered with, with Google and, and their demand side platform, Google is really more oriented towards um its own platforms and um and, and youtube in particular, but the trade desk, one of the biggest differentiators for them is that um they are, they are agnostic, essentially, they don't own their own inventory.

That's one of the things that advertisers like a lot um Trade desk is plugged into um a at this point really all, all the leading uh CTP platforms for youtube and, and Amazon who are really control their stack top to bottom on their own.

Don't have those outside partners.

You got, you know, you look at trade desk nice run.

Right.

It hit a, it actually hit a 52 week high just this week.

It's of about 30% this year, up around 40% over the past 12 months.

But, you know, you look at valuation, you go as an analyst is valuation still supportive here.

Yeah.

So valuation tends to be the biggest push back on the stock.

It's, but it, it's been the biggest push back on the stock really on that 40% run up um as well.

Um It, it's definitely not a cheap stock and there's a, there's a real premium to that.

It's trading at about 40 times next year's Eva do.

Um So, you know, certainly a a significant premium.

Um but, but with, I think that's justified.

We would you look at the growth rates, trade desk has been growing mid 20%.

Uh We think that there's upside to the numbers this year when you look at um the Netflix contribution next year, we think there's upside now to numbers next year.

C TV is about 40% of, of the trade desks, billings and, and it's been growing and there's C TV is in very early stages still you think about viewership, it's moved away from linear where about 5050 50% of, of viewership is on uh is on streaming, 50% is on linear, that's gonna continue to go to, to, to move.

But when you look at uh TV, ad dollars, it's about 25 30% that's on C TV versus linear television.

So the ad dollars haven't caught up yet.

Uh So the streaming platforms are pushing more and more subscribers to the ad tiers because it's more profitable.

So we're in early stages of maturity here, trade desk is, is a really dominant uh platform in, in the the role that it plays within the ecosystem.

So we see real good long term growth for the trade desk that play a really important role.

And those are the reasons why you can justify uh that kind of valuation.

Igal gonna take a little left turn here because we wanna ask you about Wayfair and this news that the company is opening a bricks and mortar location.

Um There have been other online retailers that have done this, but most of them are not necessarily in businesses that have really seen it a a physical footprint shrink like I think of bed bath and beyond, for example.

And yet here is a way for going the other direction.

What do you think of it?

Yeah, uh definitely left turn different topic here.

Um What, what's important to understand for Wayfair strategy here is that, you know, this isn't them going all in on into bricks and mortar.

Um It, it it's gonna be a slow roll out uh very strategic.

The, the, the way the the company and management talks about this is that over time they still see 50% of, of their category.

So home furnishings being done offline, right.

And they want the opportunity to capture that offline part of the market too.

Uh There's plenty of synergies that they can get between the online business that they built and, and an offline business.

I wouldn't expect them to go and launch hundreds of stores across the US within the next couple of years.

It's gonna be a slow and steady roll out.

Uh But, but there's, there's a way to, to leverage that offline and online component.

Um you know, allow some consumers that wanna shop in store and sit down on a couch for example and, and have that opportunity to give them that, that opportunity.

So, uh it, it, it's an interesting strategy.

Uh It, it could be a more meaningful part of the business.

Uh For now it's gonna be a slow roll out.

Ial Good to see you have a great weekend.

Thank you too.

We are days away from NVIDIA blockbuster earnings report.

Does the stock still have room to run?

And where else should you be in chips?

We'll discuss in our investor playbook.

On the other side, the pressure is on in video will report its first quarter results next week, expectations are high and in video stock reaction post earnings could make or break fellow chip makers and the broader market for that matter.

So can the semiconductor giant deliver to discuss?

We're joined by Matt.

We were senior vice president of Equity Research and William Stein Trues Securities, senior analyst guys.

Thanks so much for being here, Matt.

I'm going to start with you most of the research that I've been seeing out there things.

Well, even if they beat the stock might not go up.

Yeah.

II, I mean, that's what we've seen in, in a few of the recent quarters, right?

It, it's not in NVIDIA beating that moves the stock, um, stock.

It is flat down a little bit.

But having said that then what you see is momentum one week, two week, three weeks later, as people digest the news and realize that there's been absolutely no slowdown in A I spend or demand for NVIDIA uh data center.

GP us William.

Let's bring you in here as well because like, like Matt, you are uh an NVIDIA believer, you gotta buy on, on the name William when you're talking to clients.

And they ask you, you know, what's kind of all in your, uh, wall of worry for Jensen Wong's company.

What are the downside risks are?

What do you tell them, William?

Well, sure, I, I think it's pretty clear if you look at the, um, stock and the valuation at, you know, trading in the low thirties times calendar, 25 earnings, it tells you that, you know, relative to the very fast growth that we've seen for this company over the last few quarters, it suggests that there's a downturn coming and when you see lead times go from a year plus to less than half a year in a couple of quarters, that's usually an indication that a, you know, customers have double and triple ordered.

Now, perhaps we're going through a period where they get delivered and then suddenly, you know, hey, I don't need any more for the next few quarters.

And let's, you know, let's back off, we're gonna cancel orders and then you see a downturn.

I don't think that's what's gonna happen uh in the next year.

Plus, I actually don't think it's gonna happen through 24 or 25.

I argue, you know, very strongly against this view, but I think that's the worry, it's much less for this stock around.

Do they beat the quarter?

I think certainly they're gonna beat this quarter and I think they're gonna beat in the out quarter guide as well.

But I think the real question is what happens through this year and into next year's numbers.

Does the company give us an indication that we're gonna continue to see growth and very strong demand, both for units and for integrated systems where the company is getting the growth from?

Um Will, do you think there's any indication they won't uh continue to see that kind of growth?

Well, sure the indication is there.

Right.

And it's in the lead times having, uh, having, uh gone the other way, having shrunk in the last um, couple quarters.

Uh I, when I visited the company in September, they were telling us lead times were over a year.

Uh I hosted meetings with them at CE S and they were saying they're down to less than half a year that sends signals to investors that look, you know, we're, we're heading for a period of cancels and push outs and you know, potentially negative revenue growth.

We've seen that in this end, market in this data center and market twice in the last five or six years, it is certainly going to happen again.

I just don't think it's going to happen this year or next year for that matter.

That's absolutely a concern.

A and let's talk to guys too about a MD because here we have a disagreement on the panel about that name which makes things interesting.

Uh Matt start with you because you're bullish on a MD.

How come Matt if you were to bullet point that thesis, what would it be?

Uh It, it, it's simply a MD is the only alternative right now to, to NVIDIA.

So uh I, I'm basically at, at a little over 4 billion in data center GP U sales going towards uh 10 billion next year.

Um That's enough I I in my mind to support a $200 dollar valuation for the stock.

Um And, and you look at kind of the other indicators out there, like I, I see supercomputing um A as an early indicator of what trends are gonna be in the general business environment.

Um And, and there, you know, a MD is the only other choice uh other than NVIDIA.

Um So III I think they do well in A I if not as well as NVIDIA.

Um But then I also think we're starting to see a pick up in uh standard server builds.

Um I, I think they're gaining share there.

Uh I, I think that's a tailwind uh that will benefit them through 2024 to 2025 as well.

Um Will as, as uh Josh alluded to, you've got a hold rating on A MD.

Why are you not looking that as another big, you know, beneficiary of what's going on with A I demand?

Oh, This company is certainly going to generate revenue from A I uh with this M I 300 product that they're uh ramping today.

I think that's no doubt.

But when I consider the longer term prospects for this company, we've got two problems.

One is that uh in my view, X 86 the traditional core uh Intel compatible CPU market is sort of a shrinking iceberg.

And this is because of what NVIDIA is doing in the data center.

They are getting customers to buy entire NVIDIA systems.

That are displacing this X 86 standard that's been in place for many, many years.

And the other issue is that in A I world, what NVIDIA has its advantage, ha really has something to do with this chips, but not as much as one would uh would perceive the reality is that in Nvidia's position, its advantage in A I is really owing to three different things.

It's uh a culture of innovation.

It's an ecosystem of incumbency and it's a massive investment in software uh services and pre trained models.

Now it's, it's especially that services and pre and, and software bit, that's super important.

There's a massive 4 million person, large community of trained cu A developers.

These are developers that develop two NVIDIA systems.

If A MD has 400,000, 1/10 of what NVIDIA has, I would be gobsmacked.

That is the advantage NVIDIA has.

It's very, very difficult for a MD to build against that, in my opinion.

Well, we'll see how it plays out, gentlemen.

Thank you so much and have a great weekend.

Thank you.